THE EFFECT OF RETURN ON EQUITY (ROE) AND DIVIDEND POLICY ON STOCK RETURNS IN PROPERTY AND REAL ESTATE COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE PERIOD 2020–2024

Resti Alfatin; Rakha Rajendra; R. Aryanti Ratnawati; Kusmadi Kusmadi

doi:10.61397/mfc.v3i3.518

Authors

Resti Alfatin Universitas Sangga Buana YPKP
Rakha Rajendra Universitas Telkom Bandung
R. Aryanti Ratnawati Universitas Sangga Buana YPKP
Kusmadi Kusmadi Universitas Sangga Buana YPKP

DOI:

https://doi.org/10.61397/mfc.v3i3.518

Keywords:

Stock Return, Return on Equity, Dividend Payout Ratio

Abstract

This study aims to analyze the effect of Return on Equity (ROE) and Dividend policy projected by Dividend Payout Ratio (DPR) on Stock Returns in property and real estate sector companies listed on the Indonesia Stock Exchange (IDX). The data used in this study are quarterly panel data from 7 companies during the period 2020Q1 to 2024Q4, resulting in a total of 140 observations. The analysis method used is panel data regression with the Chow test and Hausman test stages for model selection. Classical assumption tests (normality, multicollinearity, heteroscedasticity, and autocorrelation) are also conducted to ensure the validity of the model. The results of this study indicate that the Fixed Effect Model (FEM) is the chosen model based on a series of tests. The classical assumption test indicates that the model residuals are normally distributed, proven to be free from multicollinearity, heteroscedasticity, and autocorrelation problems. Simultaneously, ROE and dividend policy (DPR) have a significant effect on stock returns. Partially, Return on Equity (ROE) is found to have a negative and significant effect on Stock Return, while Dividend Payout Ratio (DPR) has a positive and significant effect on Stock Return. These findings provide implications for investors in making investment decisions and for company management in formulating financial policies.

References

Alawiyah, A., Prasetyo, G., & Fatimah, S. (2022). The effect of leverage and liquidity on dividend policy: Evidence from Indonesia. Journal of Business and Finance Research, 7(3), 145–159.

Ananda, R. (2023). Profitability, liquidity, and stock returns in emerging markets: A comparative analysis. International Journal of Economics and Financial Research, 9(4), 112–126.

Andini, K., & Megawati, S. (2024). ROE and CR impact on stock returns of LQ45 companies. Asian Journal of Financial Studies, 12(2), 77–88.

Brigham, E. F., & Houston, J. F. (2019). Fundamentals of financial management (15th ed.). Cengage Learning.

Cahyandari, A., Rahmawati, E., & Nurul, S. (2021). Financial performance measurement and value-based management: Empirical evidence from Indonesian corporations. Journal of Business Studies, 14(3), 210–223.

Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The Journal of Finance, 25(2), 383–417.

Febrianty. (2023). Financial management and corporate performance analysis. Deepublish.

Gordon, M. J. (1963). Optimal investment and financing policy. The Journal of Finance, 18(2), 264–272.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3(4), 305–360.

Kasmir. (2019). Analisis laporan keuangan. Raja Grafindo Persada.

Lintner, J. (1962). Dividends, earnings, leverage, stock prices, and the supply of capital to corporations. The Review of Economics and Statistics, 44(3), 243–269.

Masyiyan, R., & Isynuwardhana, D. (2020). Comparative study of EVA, FVA, and MVA in mining sector firms: Evidence from Indonesia. Jurnal Akuntansi dan Bisnis Indonesia, 22(1), 101–115.

Ningsih, S., & Maharani, R. (2020). Dividend policy as a signaling mechanism for investors: Evidence from Indonesia. Jurnal Akuntansi dan Keuangan Indonesia, 17(2), 189–203.

Purba, A. (2022). The role of economic value added in assessing corporate value creation in ASEAN markets. International Journal of Accounting Research, 11(2), 56–68.

Ross, S. A. (1977). The determination of financial structure: The incentive-signalling approach. The Bell Journal of Economics, 8(1), 23–40.

Saselah, R., Tania, R., & Nugroho, A. (2020). The role of profitability in determining stock returns on the IDX. Jurnal Ekonomi dan Manajemen Bisnis Indonesia, 5(1), 45–58.

Suci, R. (2022). The effect of ROA and ROE on stock returns: A case study in Indonesian banking. Jurnal Ekonomi dan Bisnis Modern, 10(3), 205–218.

Sudana, I. M. (2019). Manajemen keuangan perusahaan: Teori dan praktik. Erlangga.

Waskito, W. (2021). The relationship between ROE and stock performance in emerging markets: Evidence from Indonesia. Journal of Financial Research and Policy, 8(4), 55–69.

Wati, R., Nugroho, S., & Ummah, N. (2024). Strategic financial decision-making and firm value in emerging markets. Global Journal of Business and Management Studies, 13(1), 99–116.