BUSINESS RISK, FINANCIAL RISK AND FIRM PERFORMANCE AN EMPIRICAL STUDY OF INDONESIAN MANUFACTURING SECTOR
Introduction: This paper empirically examines the impact of degree of operating leverage (DOL) and degree of financial leverage (DFL) to firm performance by using size as control variable. Firm performances used are return on equity (ROE) and market to book ratio (MTB). Methods: Statistical tool...
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| Format: | Article |
| Language: | English |
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Fakultas Ekonomi dan Bisnis, Universitas Airlangga
2020-09-01
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| Series: | Jurnal Ekonomi dan Bisnis Airlangga |
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| Online Access: | https://e-journal.unair.ac.id/JEBA/article/view/22325 |
| _version_ | 1797272089758007296 |
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| author | Utami Prasetiawati |
| author_facet | Utami Prasetiawati |
| author_sort | Utami Prasetiawati |
| collection | DOAJ |
| description |
Introduction: This paper empirically examines the impact of degree of
operating leverage (DOL) and degree of financial leverage (DFL) to firm
performance by using size as control variable. Firm performances used
are return on equity (ROE) and market to book ratio (MTB).
Methods: Statistical tool used is pooled regression while sample used is
all Indonesian manufacturing firms listed in Indonesia Stock Exchange
from 2009-2013.
Results: The findings revealed that high fixed asset firms pose higher DOL
compared to those of lower ones; and highly financial leveraged firms
pose significantly higher DFL compared to those of lower financial
leveraged ones. Further, both DOL and DFL impacting ROE in negative
manner but only DOL is statistically significant, while all variables (DOL,
DFL and Size) impacting MTB in negative manner but only size is
statistically significant.
Conclusion and suggestion: The finding shows that Indonesian stock
market investors do not regard risks as important elements in making
investment decisions. The findings, however, pose a quite low R squared
value of 1.39% for ROE and 2.4% for MTB. This means only those
percentage of ROE and MTB can be explained from the variables used in
this research. Thus, the author encourge more variables should be
included in the future research, including macro economic variables, as it
is one of the key component in firm performance.
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| first_indexed | 2024-03-07T14:20:37Z |
| format | Article |
| id | doaj.art-9be0c0e1dcb342d3b92c5a1606c34386 |
| institution | Directory Open Access Journal |
| issn | 2338-2686 2597-4564 |
| language | English |
| last_indexed | 2024-03-07T14:20:37Z |
| publishDate | 2020-09-01 |
| publisher | Fakultas Ekonomi dan Bisnis, Universitas Airlangga |
| record_format | Article |
| series | Jurnal Ekonomi dan Bisnis Airlangga |
| spelling | doaj.art-9be0c0e1dcb342d3b92c5a1606c343862024-03-06T09:25:09ZengFakultas Ekonomi dan Bisnis, Universitas AirlanggaJurnal Ekonomi dan Bisnis Airlangga2338-26862597-45642020-09-0129110.20473/jeba.V29I12019.64-7810813BUSINESS RISK, FINANCIAL RISK AND FIRM PERFORMANCE AN EMPIRICAL STUDY OF INDONESIAN MANUFACTURING SECTORUtami Prasetiawati0Sekolah Pascasarjana Universitas Airlangga Introduction: This paper empirically examines the impact of degree of operating leverage (DOL) and degree of financial leverage (DFL) to firm performance by using size as control variable. Firm performances used are return on equity (ROE) and market to book ratio (MTB). Methods: Statistical tool used is pooled regression while sample used is all Indonesian manufacturing firms listed in Indonesia Stock Exchange from 2009-2013. Results: The findings revealed that high fixed asset firms pose higher DOL compared to those of lower ones; and highly financial leveraged firms pose significantly higher DFL compared to those of lower financial leveraged ones. Further, both DOL and DFL impacting ROE in negative manner but only DOL is statistically significant, while all variables (DOL, DFL and Size) impacting MTB in negative manner but only size is statistically significant. Conclusion and suggestion: The finding shows that Indonesian stock market investors do not regard risks as important elements in making investment decisions. The findings, however, pose a quite low R squared value of 1.39% for ROE and 2.4% for MTB. This means only those percentage of ROE and MTB can be explained from the variables used in this research. Thus, the author encourge more variables should be included in the future research, including macro economic variables, as it is one of the key component in firm performance. https://e-journal.unair.ac.id/JEBA/article/view/22325Degree of operating leverage(DOL)Degree of financial leverage(DFL)sizeReturn on equity (ROE)and Market to book (MTB) |
| spellingShingle | Utami Prasetiawati BUSINESS RISK, FINANCIAL RISK AND FIRM PERFORMANCE AN EMPIRICAL STUDY OF INDONESIAN MANUFACTURING SECTOR Jurnal Ekonomi dan Bisnis Airlangga Degree of operating leverage(DOL) Degree of financial leverage(DFL) size Return on equity (ROE) and Market to book (MTB) |
| title | BUSINESS RISK, FINANCIAL RISK AND FIRM PERFORMANCE AN EMPIRICAL STUDY OF INDONESIAN MANUFACTURING SECTOR |
| title_full | BUSINESS RISK, FINANCIAL RISK AND FIRM PERFORMANCE AN EMPIRICAL STUDY OF INDONESIAN MANUFACTURING SECTOR |
| title_fullStr | BUSINESS RISK, FINANCIAL RISK AND FIRM PERFORMANCE AN EMPIRICAL STUDY OF INDONESIAN MANUFACTURING SECTOR |
| title_full_unstemmed | BUSINESS RISK, FINANCIAL RISK AND FIRM PERFORMANCE AN EMPIRICAL STUDY OF INDONESIAN MANUFACTURING SECTOR |
| title_short | BUSINESS RISK, FINANCIAL RISK AND FIRM PERFORMANCE AN EMPIRICAL STUDY OF INDONESIAN MANUFACTURING SECTOR |
| title_sort | business risk financial risk and firm performance an empirical study of indonesian manufacturing sector |
| topic | Degree of operating leverage(DOL) Degree of financial leverage(DFL) size Return on equity (ROE) and Market to book (MTB) |
| url | https://e-journal.unair.ac.id/JEBA/article/view/22325 |
| work_keys_str_mv | AT utamiprasetiawati businessriskfinancialriskandfirmperformanceanempiricalstudyofindonesianmanufacturingsector |