EMPIRICAL STUDIES ON EVA AND PROFITABILITY RATIOS ASSOCIATION WITH ANNUAL STOCK RETURN FOR INDONESIA COMPANIES

Doan Siscus Kaldianto Lingga (Alumni of BINUS BUSINESS SCHOOL, BINUS UNIVERSITY, JWC Campus, Jl. Hang Lekir I No. 6, Senayan, Jakarta 12120)
Junius Tirok (Faculty of BINUS BUSINESS SCHOOL, BINUS UNIVERSITY, JWC Campus, Jl. Hang Lekir I No. 6, Senayan, Jakarta 12120)

Journal of Applied Finance & Accounting
Vol. 4 No. 2 (2012): Publish on June 2012

This research analyzes the influence of Economic Value Added (EVA) and profitability ratios measurement on Indonesian public companies stock returns. The companies are firms that are listed in the Indonesia Stock Exchange (IDX) and that take part in the LQ45 group. The profitability ratios that are used in this research are profit margin (PM), return on sales (ROS), return on equity (ROE), and return on assets (ROA). The aim of this research is to prove the claim that EVA is associated more with company annual stock return rather than profitability ratios. The methodology that is used in this research is a multiple regression test to measure the significance between EVA, profit margin (PM), return on sales (ROS), return on equity (ROE), and return on assets (ROA) with the company annual stock returns. The research result shows that in the end the research prove that EVA does not influence profitability ratios in association with company stock returns. The evidence indicates that profitability ratios are closely associated with company stock returns with the highest significance. More specificly, return on equity (ROE) is the most associated profitability ratio with stock returns followed by return on assets (ROA).