scholarly journals Determining Force behind Value Premium: The Case of Financial Leverage and Operating Leverage

2020 ◽  
Vol 13 (9) ◽  
pp. 196
Author(s):  
Hafiz Muhammad Zia ul haq ◽  
Muhammad Sohail Shafiq ◽  
Muhammad Kashif ◽  
Saba Ameer
Keyword(s):  
Stock Returns ◽  
Financial Distress ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Theoretical Models ◽  
Value Premium ◽  
Financial Leverage ◽  
Investment Activity ◽  
Book To Market Ratio ◽  
Operating Leverage

The determining force behind the value premium is the matter of debate among the researchers. Some are of the opinion that the financial distress risk determines value premium whereas other theorize that value premium is basically the compensation for operating leverage (investment activity risk). This research provides empirical evidence on this theoretical contradiction by investigating the relationships of financial leverage (FL) and operating leverage (OL) with stock returns, the book to market ratio (B/M), and systematic risk on non-financial sector firms trading at the Pakistan stock exchange (PSE). This research empirically finds significant and direct influence of operating leverage on stock returns, the book to market ratio, and systematic risk respectively. Overall findings provide support for the theoretical models which have a linked book to market effect with operating leverage. Thus, we conclude that investment activity risk seems to be the major factor that determines value premium.

scholarly journals The effect of financial distress on stock returns, through systematic risk and profitability as mediator variables

Accounting ◽  
2021 ◽  
Vol 7 (7) ◽  
pp. 1717-1724 ◽  
Author(s):  
Mulyanto Nugroho ◽  
Donny Arif ◽  
Abdul Halik
Keyword(s):  
Stock Returns ◽  
Indirect Effect ◽  
Financial Distress ◽  
Latent Variables ◽  
Stock Exchange ◽  
Systematic Risk ◽  
P Value ◽  
Moderating Variables ◽  
The Impact ◽  
The Relationship

This study aims to determine the relationship between financial distress and systematic risk, the relationship between financial distress and profitability, the relationship between systematic risk and stock returns, the relationship between profitability and stock returns, and the indirect effect between financial distress and stock returns through systematic risk and company profitability. by collecting data on the Indonesia Stock Exchange on chemical companies and the element industry in 2018-2020. This study was conducted to find out the answers to the impact caused by the global economic turmoil. Using the PLS-SEM method and four latent variables, which are divided into one endogenous variable, two moderating variables and one exogenous variable, it is hoped that it can provide value for the statistical calculation activities carried out. This study uses a quantitative descriptive method with two moderating variables that link financial distress and stock returns. This study produces a specific indirect effect; the financial distress variable significantly impacts Stock Return through systematic risk and profitability variables with a p-value < 0.05. The main finding of this study is the significant impact of world economic turmoil that must be faced by creating systematic risk to convince. Investors and provide education to potential investors.

scholarly journals Analisis Pengaruh Beta Saham, Debt To Equity Rasio (DER) terhadap Return On Asset (ROA) Perusahaan di Bursa Efek Indonesia

2019 ◽  
Vol 28 (02) ◽  
pp. 198-212
Author(s):  
Muhammad Ikhsan ◽  
Eko Budi Santoso
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Net Income ◽  
Financial Leverage ◽  
Return On Equity ◽  
Market Index ◽  
Sample Data ◽  
Equity Ratio ◽  
Excess Stock Returns

Perhitungan rasio keuangan penting bagi perusahaan.. Investor dapat melihat kinerja perusahaan apakah perusahaan berkinerja baik dibandingkan dari rata-rata industri. Rasio adalah ukuran perbandingan antara pos dalam laporan keuangan dengan pos lainnya. Misalnya rasio profitabilitas yaitu Return on Asset makin tinggi ROA makin baik karena Net income makin tinngi. Demikian juga Debt to Equity ratio yaitu  berapa batasan berhutang yang ideal yaitu financial leverage berapa ukuran maksimal sehingga net income maksimal.Resiko sistematis atau Beta saham didapat dari slope hasil regresi antara ekses return saham dengan ekses pasar adalah ukuran resiko juga dalam berinvestasi saham . Resiko adalah hal yang menyimpang dari target yang kita inginkan atau sesuatu pencapaian yangberbeda dari hal atau sesuatu yang kita inginkan atau harapkan. Contoh Resiko berinvestasi adalah jika kita menderita kerugian atau kehilangan pokok yang kita tanankan. Resiko yang mempengaruhi saham di bursa yaitu bisa resikosistematik atau bisa juga resiko unsistematis atau resiko di dalam perusahaan misalnya manajemennya. Resiko sistematisjuga disebut resiko pasar yang menimpa semua saham seperti pengaruh dari luar yaitu inflasi, kurs mata uang atau kebijakan pemerintah.Penelitian ini akan membahas apakah ada pengaruh Debt to equity ratio dan beta saham/ resiko sistematis terhadap nilai ROA karena bagi perusahaan net income adalah penting juga bagi investor untuk membeli saham.Sampel datayang diambil penulis sebanyak 35 macam saham dengan cara mengambil secara acak saham-saham yang ada di Bursa efek Indonesia. Data sampel akan diolah dengan statistik menjadi informasi dalam menjawab permasalahan  dengan  Aplikasi SPSS edisi 19. Hasil penelitian ini yaitu secara bersama-sama variabel Debt to Equity ratio dengan Beta saham mempunyai pengaruh yang signifikan terhadap Return on Equity (ROA) perusahaan di Bursa Efek Indonesia Calculation of finance ratios is important for the company. Investors can view the performance of the company if the company performs well compared to the average industry. The ratio is a measure of the ratio between account in the financial statements with another accounts. For example profitability ratios Return on Assets( ROA) higher is better because Net income increasing. Likewise with Debt to Equity ratio, is how much restriction ideal loanlikethe ideal size of financial leverage to maximum net income. Beta is a systematic risk obtained from the slope of the regression results between excess stock returns with excess return of the capital market index. This is a measure of risk in stock investing. Risk is something that deviates from the target that we want or something less achievement from thing or something we want or expect. Examples of investment risk is if we suffer any loss of money  that we invest. Risks of invest stocks is a systematic risk or a unsystematis risk for examplelike a management in the company. Systematic risk is also called market risk hapend to all shares like outside influence,for example inflation, foreign exchange rates or government policy. This research will address the influence Debt to equity ratio and beta stocks / systematic risk to the value of Return of Asset (ROA) because for the company's net income is important for investors to decide buy shares. Sample data is retrieved author as many as 35 kinds of stocks by taking random stocks that exist in the Indonesian Stock Exchange. The sample data will be processed with statistical information in the answer problems with SPSS applications editions 19. Results of this research is jointly variable Debt to Equity ratio with Beta stocks have a significant influence on Return on Equity (ROA) companies in Indonesia Stock Exchange

scholarly journals The Influence of Financial Distress Using Altman Z-Score, The Beta of Stocks and Inflation To The Stock Return

2017 ◽  
Vol 2 (2) ◽  
pp. 21-27
Author(s):  
Mathius Tandiontong ◽  
Margaretha Sitompul
Keyword(s):  
High Risk ◽  
Stock Returns ◽  
Financial Distress ◽  
Stock Return ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Sampling Technique ◽  
Jel Classification ◽  
Z Score ◽  
Panel Data Regression

Objective - Stock is one securities among other securities, as a high risk instrument. Stock classified as high risk due to reflection in the uncertainty of the rate of return to be received by investors in the future. The purpose of this research is to examine of financial distress as measured by the Altman Z-Score, systematic risk as measured by beta stocks and macroeconomic measured by inflation on stock returns Manufacturing Company listed on the Stock Exchange 2008-2012 period Methodology/Technique - From 133 companies listed, 75 companies are taken as sample by using purposive sampling technique. Panel data regression analysis shows that the overall effect of variables is equal to 28.7%. Findings - Partially, the variables that affect the stock returns are financial distress with Altman Z-Score, beta stocks and inflation. Novelty - Financial distress with the measurement using the Altman Z-Score. Type of Paper: Empirical Keywords: Stock return; Financial distress; Altman Z-Score; Systematic risk; Beta stocks and Inflation JEL Classification: E44, F14, G01.

scholarly journals On the causality analysis of the correlation between financial leverage and systematic risk: evidence from Indonesian Stock Exchange

2017 ◽  
Vol 14 (4) ◽  
pp. 73-89
Author(s):  
Ibnu Qizam
Keyword(s):  
Stock Exchange ◽  
Systematic Risk ◽  
The Other ◽  
Causality Analysis ◽  
Financial Leverage ◽  
Long Run ◽  
Financial Decision ◽  
Long Run Risks ◽  
Operating Leverage ◽  
Variable Impact

This research is aimed at analyzing the causality puzzle on the correlation between financial leverage and systematic risk (beta). Financial leverage and beta are usually considered as two proxies of risk derived from different domains: one ends at financial decision outcome, and the other points to market. Cross-sectionally, this result does not support the moderating-variable impact of size on the relation between financial leverage and systematic risk. On the other hand, however, the moderating-variable impact of industry and operating leverage (to some extent) on the relation between financial leverage and systematic risk were well documented. Inter-temporally, financial leverage is significantly and symmetrically related to beta, not moderated by size and operating leverage. This means that the two variables show bidirectional causality. This study contributes to the new insight that financial leverage and beta are the two variables with bidirectional causality, showing that in the long run, risks from fundamental (financial/micro-economy) and from market (macro-economy) are tightly linked to each other inter-temporally.

scholarly journals Is Bankruptcy Risk a Systematic Risk? Evidence from Pakistan Stock Exchange

ETIKONOMI ◽  
2020 ◽  
Vol 19 (1) ◽  
pp. 51-62
Author(s):  
Imran Umer Chhapra ◽  
Iffat Zehra ◽  
Muhammmad Kashif ◽  
Raja Rehan
Keyword(s):  
Asset Pricing ◽  
Stock Returns ◽  
Financial Distress ◽  
Default Risk ◽  
Stock Price ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Cross Sectional ◽  
Bankruptcy Risk ◽  
Distressed Firms

This study empirically investigates the relationship between default risk and cross-section of stock returns in the Pakistan Stock Exchange (PSX). Stock price data from all listed and delisted companies use to calculate monthly returns from 2001-2016. Ohlson's O-score is employed to measure exposure of firm to systematic deviation within bankruptcy risk. Besides, asset-pricing models like the Capital Asset Pricing Model (CAPM) and Fama French (FF) models are employed. Portfolios are sorted in deciles by default probability. This result finds that stocks of firms significantly exposed to not diversified Default Risk yield higher returns. Besides that, the FF models explain cross-sectional stock returns since factors incorporate information on financial distress and default. After that, the book-to-market equity factor is not significant in elucidating returns of distressed firms because of market inefficiency. Results have practical implications for portfolio managers and investors of an emerging economy in developing diversified portfolios during periods of uncertainty and market volatility.JEL Classifications: G12, G15, G33How to Cite:Chhapra, I. U., Zehra, I., Kashif, M., & Rehan, R. (2020). Is Bankruptcy Risk a Systematic Risk? Evidence from Pakistan Stock Exchange. Etikonomi: Jurnal Ekonomi, 19(1), 51 – 62. https://doi.org/10.15408/etk.v19i1.11248.

Research of Building Intelligent Investment Decision Mode for Investment Portfolio — Using Taiwan Electronic Stock as an Example

2010 ◽  
Vol 13 (04) ◽  
pp. 621-645 ◽  
Author(s):  
Wen-Rong Jerry Ho ◽  
C. H. Liu ◽  
H. W. Chen
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Exchange ◽  
Investment Decision ◽  
Investment Strategy ◽  
Return Rate ◽  
Selection Strategy ◽  
Stock Selection ◽  
Taiwan Stock Exchange ◽  
Book To Market Ratio

This research uses all of the listed electronic stocks in the Taiwan Stock Exchange as a sample to test the performance of the return rate of stock prices. In addition, this research compares it with the electronic stock returns. The empirical result shows that no matter which kind of stock selection strategy we choose, a majority of the return rate is higher than that of the electronics index. Evident in the results, the predicted effect of BPNN is better than that of the general average decentralized investment strategy. Furthermore, the low price-to-earning ratio and the low book-to-market ratio have a significant long-term influence.

scholarly journals ANALISIS PENGARUH CAPITAL/LABOUR INTENSIVE, INVESTASI, KEPEMILIKAN MANAJERIAL, LEVERAGE OPERASI DENGAN VARIABEL MEDIASI KEBIJAKAN DIVIDEN DAN LEVERAGE KEUANGAN TERHADAP NILAI PERUSAHAAN

2017 ◽  
Vol 1 (1) ◽  
pp. 1-21 ◽  
Author(s):  
Robi Nugraha
Keyword(s):  
Path Analysis ◽  
Firm Value ◽  
Stock Exchange ◽  
Financial Sector ◽  
Managerial Ownership ◽  
Financial Leverage ◽  
Panel Data Regression ◽  
Data Regression ◽  
Result Show ◽  
Operating Leverage

ABSTRACT The purpose of this study was to analyze the influence of capital labour intensive, investment, managerial ownership, operating leverage, dividen and financial leverage on the firm value of Indonesia non financial sector companies, the influence of capital labour intensive, investment, managerial ownership, operating leverage variable on dividen and financial leverage of Indonesia non financial sector companies, and the influence of capital labour intensive, investment, managerial ownership, operating leverage variable on the firm value through dividen and financial leverage as intervening variable. The research data was collected using purposive sampling method to the data of non financial sector companies listed on the Indonesian Stock Exchange during the period 2003-2012. Based on the criteria of the study obtained 310 samples were then analyzed Using the panel data regression and path analysis. The results show that the capital labour intensive, investment, managerial ownership, operating leverage, dividen and financial leverage have significant influences on the firm value of Indonesia non financial sector companies. The capital labour intensive, investment, managerial ownership, operating leverage variable do not have significant influences on dividen. The capital labour intensive, investment, managerial ownership, operating leverage variable have significant influences on financial leverage. With path analysis, the result show the The capital labour intensive, investment, managerial ownership, operating leverage variable do not have significant influence on the firm value of Indonesia non financial sector companies with dividen and financial leverage as intervening variable. Keywords: Capital Labour Intensive, Investment, Managerial Ownership, Operating Leverage, Dividen and Financial Leverage, Firm Value.

scholarly journals Systematic illiquidity, characteristic illiquidity, and stock returns: Timeseries analysis

2022 ◽  
Vol 9 (2) ◽  
pp. 72-80
Author(s):  
Soltane et al. ◽  
Keyword(s):  
Emerging Markets ◽  
Stock Returns ◽  
Stock Prices ◽  
Stock Price ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Timeseries Analysis ◽  
The Relationship

The objective of this research is to investigate the relationship between illiquidity and stock prices on the Tunisian stock exchange. While previous researches tended to focus on one form of illiquidity to examine this relationship, our study unifies three forms of illiquidity at the same time. Indeed, we simultaneously consider illiquidity as systematic risk, as a characteristic of the market, and as a characteristic of the stock. The aggregate illiquidity of the market is the average of individual stock illiquidity. The illiquidity risk is the sensitivity of the stock price to illiquidity shocks. Shocks of market illiquidity are estimated by the innovations in the expected market illiquidity. Results show that investors on the Tunisian stock exchange do not require higher returns when they expect a rise of market illiquidity, whereas investors on U.S markets are compensated for higher expected market illiquidity. In addition, shocks of market illiquidity provoke a fall in stock prices of small caps, while large caps are not sensitive to market illiquidity shocks. This differs slightly from results based on U.S. data where illiquidity shocks reduce all stock prices but most notably those of small caps. Robustness tests validate our findings. Our results are consistent with previous studies which reported that the “zero-return” ratio predicts significantly the return-illiquidity relationship on emerging markets.

scholarly journals Cash to Price Ratio & Stock Returns: Evidence from Emerging Markets

2017 ◽  
Vol 9 (11) ◽  
pp. 153
Author(s):  
Nudrat Fatima ◽  
Muhammad Waqas ◽  
Rameez Hassan ◽  
Ahmad Fraz ◽  
Muhammad Arif
Keyword(s):  
Stock Returns ◽  
Stock Return ◽  
Positive Relationship ◽  
Stock Exchange ◽  
Equity Markets ◽  
Value Premium ◽  
Size Premium ◽  
Market Premium ◽  
Relationship Of ◽  
India And China

This study examines the impact of size premium and value premium on average return in emerging economies i.e. Pakistan, India and China equity markets for the period from June 2000 to June 2015 by using three factors model. This study predicts the significance and positive relationship between value premium(C/P Ratio) and stock return for all non-financial companies listed on Karachi stock exchange, Bombay stock exchange and Shanghai stock exchange on the basis of market Capitalization. The regression results of the study illustrate that size premium predict returns more for small firms than big firms while market premium found significantly positive with stock returns in Pakistan, India, and China. Value premium is found positive for all created portfolios. Therefore, it can be concluded that value effect is present in three emerging markets. High C/P ratio outperforms the low C/P ratio stocks. In this study C/P ratio (value premium) integrated with size and market premium to check whether it can predict stock returns of small and large firms for high or low C/P ratio. The finding is similar that the positive relationship of value premium and stock return and the negative relationship of size premium and stock return. The explanatory power of Fama and French three-factor model is greater than CAPM for all three equity markets, so, the asset pricing model can facilitate investors in efficient portfolio diversification for getting enhanced returns.

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