Title: Financial performance of telecommunications companies and their stock price movements in the Indonesian stock market

Authors: Diena Aziza, Eno L. Inanga

Addresses: Bappeda Kabupaten Lampung Tengah, Jl. Hanura No. 2 Gunung Sugih, 34161, Lampung Tengah, Indonesia. ' Maastricht School of Management, Endepolsdomein 150, 6229 EP Maastricht, Post bus 1203, 6201 BE Maastricht, The Netherlands

Abstract: This study examines, critically, the relationship between movements in stock prices of a sample of Indonesian telecommunications companies listed on the Indonesians Stock Exchange and the nature of their relationship, if any, to company financial performance. It analyses 23 financial reports over the period 2005 to 2009, the first five financial years of each of the study companies in the sample. The study uses four independent variables to analyse the financial performance of each company, namely: earnings per share (EPS), return on assets (ROA), and return on equity (ROE), and debt to equity ratio (DER). Stock price was used as the dependent variable. The study disclosed simultaneous significant relationships between all the independent variables and the stock price movements. The multiple correlation coefficient (R) was 0.943, indicating a strong relationship among the variables. However, for individual independent variables, only EPS ratios had significant relationship with the stock price movements.

Keywords: financial performance; stock price; earnings per share; EPS; return on assets; ROA; return on equity; ROE; debt to equity ratio; DER; fundamental analysis; Indonesia; telecommunications companies; stock markets; firm performance.

DOI: 10.1504/IJEA.2011.041896

International Journal of Economics and Accounting, 2011 Vol.2 No.3, pp.255 - 281

Published online: 21 Oct 2014 *

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