Research Paper
Year: 2019 | Month: July | Volume: 6 | Issue: 7 | Pages: 91-104
Price Earnings Ratio as the Basis for Assessing Fair Price of LQ45 Index Stock in BEI (Indonesia Stock Exchange)
Putra Pratama Ginting1, Dr. Isfenti Sadalia2, Dr. Amlys Syahputra Silalahi2
1Postgraduate Students Master of Management University of North Sumatera, Indonesia
2Postgraduate Lecturer Master of Management University of North Sumatera, Indonesia
Corresponding Author: Putra Pratama Ginting
ABSTRACT
Basically, capital market is intended for various long term financial instruments which can be bought and sold, either in cash or in capital. It plays an important role in the economy of a country since it has two functions: a facility for financing and for getting fund from investors. The fund obtained from capital market can be used for developing a business, expansion, addition for work capital, etc. The objective of the research was to analyze and to find out some factors which influenced price earnings ratio (PER) in LQ45 Index companies from February, 2015 until January, 20018. Independent variables were return on equity (ROE), debt to equity ratio (DER), and firm size (FS). There were 30 samples, and the data were gathered from financial statement of LQ45 Index listed in BEI which met the research criteria and analyzed by using multiple linear regression analysis with e-views program. The result of the research showed that ROE had positive and significant influence on PER and DER had negative and significant influence on PER in LQ45 Index companies. It is recommended that the company’s financial manager make a policy on increasing investors’ welfare and company’s profit so that investors can have accurate decision to invest. Investors should use this research for assessment so that fair price through PER and the factors which influence PER on making decision to sell and stock in capital investment in the company.
Key words: Price Earnings Ratio, Return on Equity, Debt to Equity Ratio, Firm Size
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