ANALYSIS OF DEBT TO EQUITY RATIO AND RETURN ON ASSETS AND ITS EFFECT TO CLOSING PRICE OF THE MINING INDUSTRY LISTED IN BEI
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Date
2011-06-22
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Publisher
ASEAN Conference Scientific and Social Science Research, Universiti Teknologi Mara Malaysia
Abstract
The impact of global financial crisis has lowered the financial performance some of mining industries in Indonesia.
On the first quarter of 2009, some of them experienced 80% decreased in profit due to the decrease in price and sales of its
product. The need for fresh capital to improve the financial performance has led these industries to restructure their sources
of capital.
One of the ways to obtain new capital is engaging in stock market. The combination of debt to equity ratio (DER) and return
on asset (ROA) reflected on the price of stocks. The research analyzed and investigated the debt to equity ratio, return on
asset and the effect of them on stock prices measured by the closing price. The investigations employed the regression method
and test the result with the classical assumption test and using purposive sampling method to obtain the data of mining and
mining service industries listed in Indonesia Stock Exchange (Bursa Efek Indonesia or BEI) for 2005-2009 period.
The findings showed that the debt to equity ratio, return on assets and stock prices showed fluctuative moves. Both of the
debt to equity ratio (DER) and return on asset (ROA) variables simultaneously showed a significant effect to the closing
prices of the stocks of mining industries, but individually only return on asset has positive and significant effect to the closing
prices of mining industries during the investigation.
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Keywords
debt to equity ratio, return on assets, closing price, mining industry