Effect of capital structure changes on stock return performance of LQ-45 stocks listed in Jakarta stock exchange pre and post financial crisis

Hukubun, Novi Firsyana (2005) Effect of capital structure changes on stock return performance of LQ-45 stocks listed in Jakarta stock exchange pre and post financial crisis. Bachelor thesis, Petra Christian University.

Abstract

This research examines the relationship of capital structure and stock return by trying to observe the effect of capital structure changes towards stock return performance of LQ-45 companies? pre and post financial crisis. This study employs a simple regression model By using statistical package for social science (SPSS), the result for this study indicates that there is linear relationshtp between capital structure and stock return performance pre financial crisis. The result is consistent with modem theory of capital structure by Modigliani and Miller (1958). which states that capital structure does affect the value of the company. The value of coefficient of determination (R?) 0.069 implies that only 6.9% of the variation in stock return performance of LQ-45 companies during the period of pre financial crisis can be explained by changes in capital structure. While for the period post financial crisis, the result shows that there is no linear relationship between capital structure and stock return performance. This means stock return is highly affected by other factors beside capital structure itself. The possible factors that affect stock return are macroeconomic factors such as inflation. interest rate, exchange rate, political situation and other internal factors such as management team capability, etc. These all factors should be combined with capital structure in order to better explain stock return performance.

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