Which Financial Signals Drive Stock Returns the Most? Evidence from Indonesia’s Miscellaneous Industry Sector 2022–2024

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.