Abstract :
This study examines the effects of profitability, liquidity, company size, price-to-book value, and leverage on stock returns of companies in the Miscellaneous Industry Sector listed on the Indonesia Stock Exchange during the 2022–2024 period, grounded in signalling theory. The study employed a quantitative approach using purposive sampling, selecting 40 companies with a total of 120 observations across three years. Data were analysed using multiple linear regression, preceded by classical assumption testing including normality, multicollinearity, heteroscedasticity, and autocorrelation tests.
The results show that all independent variables simultaneously exert a significant effect on stock returns (F = 12.267; p < 0.001), with the model explaining 32.1% of the variation in stock returns. Partially, profitability measured by Return on Assets has a positive and significant effect on stock returns, while price-to-book value emerges as the most dominant predictor with a standardised coefficient of 0.605 and a p-value below 0.001. In contrast, liquidity measured by the current ratio, company size measured by total assets, and leverage measured by the debt-to-equity ratio show no significant effect on stock returns.
These findings suggest that investors in this sector respond more strongly to signals of profitability and market valuation than to liquidity, asset scale, or debt structure. This study contributes to the literature on financial signal-based investment decision-making in developing country capital markets and reinforces the practical relevance of signalling theory in emerging market contexts. Company management should prioritise improving profitability and managing stock market value to attract investor interest and sustain stock return growth.
Keywords :
Company Size, leverage, Price to Book Value., profitability, Signalling Theory., Stock ReturnReferences :
- .Iltüzer, Z. (2023). Predicting stock returns with financial ratios: A new methodology incorporating machine learning techniques to beat the market. Asia-Pacific Journal of Accounting & Economics, 30(3), 619–632. https://doi.org/10.1080/16081625.2021.2007408
- Akhtaruzzaman, M., Chiah, M., Docherty, P., & Zhong, A. (2021). Betting against bank profitability. Journal of Economic Behavior & Organization, 192, 304–323. https://doi.org/10.1016/j.jebo.2021.10.012
- Alaali, H. M. H. (2025). The impact of liquidity on capital structure in UAE-based companies listed on the Dubai financial market. Journal of Economic and Administrative Sciences. https://doi.org/10.1108/JEAS-05-2025-0328
- Allahverdiyev, E., Rao, X., & Trujillo-Barrera, A. (2025). Farm liquidity and business risk from the risk balancing perspective: evidence from selected US states. Journal of Economics and Finance, 49(3), 710–732. https://doi.org/10.1007/s12197-025-09722-0
- Almustafa, E. S. M. A. T. (2025). Profitability Indicators and Stock Price Dynamics: Insights from the Saudi Islamic Banking Sector [2014–2023]. WSEAS Transactions on Business and Economics, 22, 1491–1505. https://doi.org/10.37394/23207.2025.22.120
- Amin, S. I. M., Abdul-Rahman, A., & Karim, B. A. (2024). The Size Effect in Malaysia’s Stock Returns. In Z. Abdul Karim, R. Abdul Rahim, W. Y. Wong, & S. F. D. Zakaria (Eds.), Contemporary Issues in Finance, Investment and Banking in Malaysia. Springer, Singapore. https://doi.org/10.1007/978-981-99-5447-6_4
- Badruzaman, J., Fadilah, A. R., & Abdurrahman, F. (2022). Determining the Effect of Return on Equity (ROE) on Price Earnings Ratio (PER) and Price to Book Value (PBV) in LQ45 companies, Indonesia. WSEAS Transactions on Business and Economics, 19(2), 1564–1575. https://doi.org/10.37394/23207.2022.19.141
- Bansal, S., & Singh, G. (2023). Multiple Linear Regression Based Analysis of Weather Data: Assumptions and Limitations. In R. N. Shaw, M. Paprzycki, & A. Ghosh (Eds.), Advanced Communication and Intelligent Systems (Vol. 1920). Springer, Cham. https://doi.org/10.1007/978-3-031-45121-8_19
- Budhathoki, P. B., Bhattarai, G., & Dahal, A. K. (2024). The impact of liquidity on common stocks returns: Empirical insights from commercial banks in Nepal. Banks and Bank Systems, 19(1), 148–159. https://doi.org/10.21511/bbs.19(1).2024.13
- Connelly, B. L., Certo, S. T., Reutzel, C. R., DesJardine, M. R., & Zhou, Y. S. (2025). Signaling theory: State of the theory and its future. Journal of Management, 51(1), 24–61. https://doi.org/10.1177/01492063241268459
- Damani, A. D., Nadar, D. S., Navalkha, N. R., & Nair, P. R. (2021). An Empirical study of the Financial Ratios of the Indian Information Technology Sector by applying Factor Analysis and substantiation of the results using Cluster Analysis. Finance India, 35(1), 1–23.
- Dewi, H. P., Uzliawati, L., Lestari, T., & Ibrani, E. Y. (2024). CSR as a mediating to company characteristic, corporate governance, and firm value. Edelweiss Applied Science and Technology, 8(6), 4235–4246. https://doi.org/10.55214/25768484.v8i6.2923
- Du, D., & Hu, O. (2021). Pricing Liquidity in the Stock Market. In Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning (pp. 4119–4148). https://doi.org/10.1142/9789811202391_0121
- Fan, S., & Zhou, Y. (2026). Earnings predictability or truthfulness? Which one investors care more about. Journal of Financial Reporting and Accounting, 24(1), 536–550. https://doi.org/10.1108/JFRA-11-2023-0642
- Ghardallou, W. (2022). Capital structure decisions and corporate performance: Does firm’s profitability matter. Journal of Scientific & Industrial Research, 81(08), 859–865. https://doi.org/10.56042/jsir.v81i08.59697
- Hasibuan, A. N., Ilham, R. N., & Sinta, I. (2025). Formulating an Investment Strategy in The Indonesian Capital Market: Jakarta Automated Transaction System Next Generation. Quality-Access to Success, 26(205). https://doi.org/10.47750/QAS/26.205.12
- Imamah, N., Worokinasih, S., Firdayani, Z., & Hung, J. H. (2023). Financial Performance and Corporate Governance: Its Effect on Market Performance. Emerald Publishing Limited. https://doi.org/10.1108/S1571-03862023000033B002
- Indupurnahayu, Walujadi, D., Lysandra, S., Hurriyaturrohman, & Endri, E. (2023). Determinant of firm value: Evidence of oil palm plantation companies. Corporate & Business Strategy Review, 4(2), 124–131. https://doi.org/10.22495/cbsrv4i2art11
- Jabeen, A., Yasir, M., Ansari, Y., Yasmin, S., Moon, J., & Rho, S. (2022). An empirical study of macroeconomic factors and stock returns in the context of economic uncertainty news sentiment using machine learning. Complexity, 2022(1), 4646733. https://doi.org/10.1155/2022/4646733
- Jadallah, O. M., Haddad, F. S., & Al Tarawneh, A. H. (2023). The Value Relevance of Accounting and Financial Information in Stock Returns: The Case of Jordanian Commercial Banks. Jordan Journal of Business Administration, 19(4). https://doi.org/10.35516/jjba.v19i4.1427
- Janse, R. J., Hoekstra, T., Jager, K. J., Zoccali, C., Tripepi, G., Dekker, F. W., & Van Diepen, M. (2021). Conducting correlation analysis: important limitations and pitfalls. Clinical Kidney Journal, 14(11), 2332–2337. https://doi.org/10.1093/ckj/sfab085
- Jia, C., Pan, W., & Li, L. (2021). Two branch risk factors model for stock prediction. 2021 International Symposium on Electrical, Electronics and Information Engineering, 361–366. https://doi.org/10.1145/3459104.3459163
- Karthikeyan, M., Singh, N., Siddiqui, S., Krishnamoorthi, M., Jagadeesh, K. K., & Ahamed, F. (2025). The Impact of Financial Leverage on Shareholders Return and Profitability—An Evidence from Indian Textile Sector. In M. Al Mubarak (Ed.), Sustainable Digital Technology and Ethics in an Ever-Changing Environment (Vol. 236). Springer, Cham. https://doi.org/10.1007/978-3-031-86712-5_31
- Khan, S., Shoaib, A., Aftab, R., Yasir, M., & Saeed, M. B. (2025). Financial frictions and stock return: A novel least minus more frictional factor for asset pricing models in emerging economies. PLOS ONE, 20(7), e0325917. https://doi.org/10.1371/journal.pone.0325917
- Khoza, F. (2025). The Impact of Liquidity and Leverage on the Financial Performance of the Johannesburg Stock Exchange-Listed Consumer Goods Firms. Journal of Risk and Financial Management, 18(9), 510. https://doi.org/10.3390/jrfm18090510
- Khusna, L. M., & Rahadian, D. (2025). How fintech companies’ capital structure influences their financial performance. Edelweiss Applied Science and Technology, 9(5), 851–858. https://doi.org/10.55214/25768484.v9i5.7035
- Kuppenheimer, G., Shelly, S., & Strauss, J. (2023). Can machine learning identify sector-level financial ratios that predict sector returns? Finance Research Letters, 57, 104241. https://doi.org/10.1016/j.frl.2023.104241
- Kyriazos, T., & Poga, M. (2023). Dealing with Multicollinearity in Factor Analysis: The Problem, Detections, and Solutions. Open Journal of Statistics, 13, 404–424. https://doi.org/10.4236/ojs.2023.133020
- Malchev, B., & Lazarevska, Z. B. (2024). Exploring the Determinants of Stock Prices in Macedonian Banks: The Role of Audit Opinion, ROA, and EPS. In D. Procházka (Ed.), Financial Markets and Corporate Reporting under Geopolitical Risks. Springer, Cham. https://doi.org/10.1007/978-3-031-62998-3_4
- Memon, M. A., Thurasamy, R., Ting, H., & Cheah, J. (2024). Purposive Sampling: A Review and Guidelines for Quantitative Research. Journal of Applied Structural Equation Modeling, 9(1). https://doi.org/10.47263/JASEM.9(1)01
- Nguyen, T. H. P., & Bao, H. H. G. (2025). Economic and political uncertainty and firm-level stock returns in Vietnam: The moderating role of leverage. The Economics and Finance Letters, 12(1), 143–157. https://doi.org/10.18488/29.v12i1.4165
- Nofal, M., Nurdin, D., Mahardiana, L., & Hatma, R. (2024). Financial Signaling and Stock Return Movements: New Evidences in Indonesian Stock Markets after Covid-19. Journal of Ecohumanism, 3(6), 2087–2099. https://doi.org/10.62754/joe.v3i6.4162
- Rahim, M. M., Hassan, M. S., & Mohiuddin, M. (2023). Impacts of profitability and growth on stock returns of the listed manufacturing companies at Dhaka stock exchange in Bangladesh. International Journal of Managerial and Financial Accounting, 15(3), 372–392. https://doi.org/10.1504/IJMFA.2023.131763
- Ross, S. A. (1977). The Determination of Financial Structure: The Incentive-Signalling Approach. The Bell Journal of Economics, 8(1), 23–40. https://doi.org/10.2307/3003485
- Rukpanichsiri, V., & Soonthornphisaj, N. (2024). A study of relationship between business performance and stock prices using machine learning techniques. Proceedings of the 2024 6th Asia Conference on Machine Learning and Computing, 14–19. https://doi.org/10.1145/3690771.3690779
- Seo, J., & Choi, M. (2025). How do investors respond to ESG rating changes? Evidence from Korean institutional and retail investors. Applied Economics, 1–20. https://doi.org/10.1080/00036846.2025.2540606
- Siska, E., Duraipandi, O., & Widodo, P. (2023). Determinants of Indonesian stock market development: Implementation of an ARDL bound testing approach. Investment Management and Financial Innovations, 20(4), 69–82. https://doi.org/10.21511/imfi.20(4).2023.07
- Sosa, M., Cabello, A., & Ortiz Calisto, E. (2024). Impact of leverage, solvency and size effect on Mexican capital market firms returns. Revista Mexicana de Econom{\’\i}a y Finanzas, 19(2). https://doi.org/10.21919/remef.v19i2.1017
- Suidarma, I. M., Suardana, I. B. R., & Utomo, D. F. (2025). The effect of economic value added, profitability, and leverage on stock returns with company value serving as an intervening variable. International Journal of Management and Sustainability, 14(3), 828–847. https://doi.org/10.18488/11.v14i3.4415
- Sulewski, P., & Stoltmann, D. (2026). Parameterized Kolmogorov–Smirnov Test for Normality. Applied Sciences, 16(1), 366. https://doi.org/10.3390/app16010366
- Tan, X., & Chen, X. (2022). Research on Equity Financing Valuation Model of Growth Enterprises Under Data Mining Technology. In J. C. Hung, N. Y. Yen, & J. W. Chang (Eds.), Frontier Computing (Vol. 827). Springer, Singapore. https://doi.org/10.1007/978-981-16-8052-6_179
- Veeramani, R., & Edalatpanah, S. A. (2022). Neutrosophic DEMATEL approach for financial ratio performance evaluation of the NASDAQ Exchange. https://doi.org/10.5281/zenodo.7135415
- Yin, L., Wei, Y., & Han, L. (2020). Firms’ profit instability and the cross-section of stock returns: Evidence from China. Research in International Business and Finance, 53, 101203. https://doi.org/10.1016/j.ribaf.2020.101203
- Yin, L., & Yang, Z. (2022). The profitability effect: Insight from a dynamic perspective. International Review of Financial Analysis, 80, 102059. https://doi.org/10.1016/j.irfa.2022.102059
- Zavalii, T., Zhyhlei, I., Ivashko, O., & Kornatka, A. (2025). Does size determine financial performance of advertising and marketing companies? Evidence from Western Europe on SDGs. Sustainability, 17(13), 5812. https://doi.org/10.3390/su17135812

