Indonesian Journal of Law and Economics Review
Vol 19 No 3 (2024): August
Finance Management

Return on Assets, Return on Equity, and Net Profit Margin Affect Stock Prices in Indonesia
Return on Assets, Return on Equity, dan Net Profit Margin Berpengaruh Terhadap Harga Saham di Indonesia


  • Aurelia Pawulandari,
  • Nurasik Nurasik*
Aurelia Pawulandari
Universitas Muhammadiyah Sidoarjo, Indonesia
Nurasik Nurasik
Universitas Muhammadiyah Sidoarjo, Indonesia *

(*) Corresponding Author
Picture in here are illustration from public domain image or provided by the author, as part of their works
DOI: https://doi.org/10.21070/ijler.v19i3.1237
Published August 25, 2024
Keywords
  • Return on Assets,
  • Return on Equity,
  • Net Profit Margin,
  • Stock Prices,
  • Investment Strategies
How to Cite
Pawulandari, A., & Nurasik, N. (2024). Return on Assets, Return on Equity, and Net Profit Margin Affect Stock Prices in Indonesia. Indonesian Journal of Law and Economics Review, 19(3), 10.21070/ijler.v19i3.1237. https://doi.org/10.21070/ijler.v19i3.1237

Copyright (c) 2024 Aurelia Pawulandari, Nurasik Nurasik

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

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Abstract

Abstract: This study investigates the influence of Return on Assets (ROA), Return on Equity (ROE), and Net Profit Margin (NPM) on stock prices within the context of the consumer goods manufacturing sector in Indonesia. The general background emphasizes the significance of financial indicators in shaping investor perceptions and market dynamics. The specific background reveals a gap in existing literature regarding the varying impacts of these financial metrics on stock prices, particularly in emerging markets. The aims this study investigates the correlations between ROA, ROE, NPM, and stock prices in 68 manufacturing companies listed on the IDX from 2019-2022 using a quantitative methodology. The results indicate that both ROA and ROE have a positive and significant impact on stock prices, highlighting the attractiveness of firms with higher asset and equity returns. Conversely, NPM exhibits a negative and significant effect on stock prices, suggesting that it reflects operational inefficiencies across various departments. The novelty of this study lies in its detailed examination of these relationships in an Indonesian context, contributing to a deeper understanding of how financial metrics influence investor behavior. The implications This research underscores the need for investors to exercise caution in their investment strategies, especially in light of potential financial reporting manipulations affecting firm value.

Highlights:

 

  1. ROA and ROE positively affect stock prices, attracting investors.
  2. NPM negatively impacts stock prices, indicating inefficiencies.
  3. Results guide investor strategies and risk management decisions.

 

Keywords: Return on Assets, Return on Equity, Net Profit Margin, Stock Prices, Investment Strategies

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