Title: Systematic risk and accounting determinants: a new perspective from an emerging market

Authors: Dian Citra Aruna; Ari Warokka

Addresses: Faculty of Economics, State University of Jakarta, Jakarta 13220, Indonesia ' Othman Yeop Abdullah Graduate School of Business, Universiti Utara Malaysia, 06010 Malaysia; MM Program, Gd. KH Dewantara, Lt. 5, Kampus A, Universitas Negeri Jakarta, Jakarta 13220, Indonesia

Abstract: This study is to test the influences of basic accounting determinants on Indonesian manufacturing industry's systematic risk in the most-recent period, 2005-2007, in order to capture the latest market's perspectives and preferences. By using current ratio, debt to total asset ratio, Long-term Debt to Total Asset (LDTA) ratio, firm size, and growth as the proxies for accounting determinants and beta as the proxy for systematic risk, we investigated 15 top and most-traded Indonesian manufacturing firms' stocks. The results revealed a striking and surprising phenomenon, which no accounting determinants influence at all the systematic risk. It demonstrated the market behaviour that paid less attention to the financial statement information, and seemed to focus more on technical analysis in making an investment decision. It implicitly highlighted on how to manage a market that seemingly is sensitive to non-fundamental factors, i.e., market sentiment and macroeconomic rumours, the main drivers of technical analysis.

Keywords: systematic risk; accounting determinants; manufacturing industry; emerging markets; Indonesia; financial statements; technical analysis; investment decisions.

DOI: 10.1504/JGBA.2013.053476

Journal for Global Business Advancement, 2013 Vol.6 No.1, pp.24 - 37

Available online: 25 Apr 2013 *

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