INFLUENCE OF PROFITABILITY AND COMPANY SIZE

ON BANKING STOCK PRICES 2012-2018

Muhammad Rida Wardhana , Fifi Swandari, Ali Sadikin

Master of Management Department, Faculty of Economics and Business, ULM Banjarmasin
Email: [email protected]

ABSTRACT
Financial reports that are prepared well and accurately can provide a real picture of the results
or achievements that have been achieved by a company over a certain period of time. This
situation is used to assess financial performance. Moreover, information regarding a company's
financial performance is very useful for various parties such as investors, creditors, government,
bankers, management itself and other interested parties.
The aim of this research is to analyze the influence of Net Profit Margin (NPM), Return On
Equity (ROE), and company size on banking share prices 2012-2018, so that they can become
benchmarks for investors when investing.
This research is included in the type of comparative causal research, namely a type of research
with problem characteristics in the form of cause and effect between two or more variables.
Based on the data source, this research is included in the type of secondary research, namely
research where the researcher does not make direct observations, but only takes data presented
by other parties.
The research results showed that the Net Profit Margin (NPM) variable had a significant effect
on banking share prices. The Return On Equity (ROE) variable has a significant effect on
banking share prices. The company size variable has a significant effect on banking share
prices.
Keywords: Net Profit Margin (NPM), Return On Equity (ROE), and Company Size

INTRODUCTION
Recently, investment has become the most important factor in a country's economic
development. There are many activities related to investment, for example investing a certain
amount of funds in assets. When viewed broadly, investment is divided into two groups, namely
financial investments such as deposits, shares or bonds and real investments such as land, gold
or buildings. The investment place that is widely used by investors at this time is financial
investment, because investment in this field is considered quite easy and practical.
The author conducted research again with a different year period and object from previous
research, because of this, this research will focus on analysis using profitability ratios, company
size and also cash flow, which consists of the Net Profit Margin (NPM) ratio, Return On Equity
(ROE), as well as company scale related to banking share prices for the period 2012 to 2018.
The use of these two ratios and company scale as research variables is because these variables

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are considered to best describe banking's ability to generate profits and have an impact on share
prices.
LITERATURE REVIEW
Investment
Investment is postponing current use to be included in productive assets for a certain
period of time (Hartono, 2010). Investors can invest in real assets or in financial assets. There
are 2 types of investment in financial investment, namely direct and indirect investment. Direct
investments are financial assets of a company that are purchased directly. These assets can be
purchased on the capital market, money market or derivatives market. Meanwhile, indirect
investment is the process of purchasing shares through an investment company that has a
portfolio of financial assets from various other companies.

Capital market
The definition of the capital market is a market aimed at various kinds of long-term
financial instruments that can be bought and sold, consisting of types of debt or private capital,
which can be issued by public authorities, the government sector, or private companies. There
are various alternatives provided by the capital market for investors, such as: purchasing land,
saving in banks, various insurances, gold.

Financial Report Components

Financial reports are carried out as the final process produced by the company as a whole
and contain information addressed to internal and external parties. However, not all of this
information is reported in financial reports, because according to the FASB, some financial
information should be presented through financial reporting. According to Surya (2012:29), the
components of a complete financial report consist of the following:
1. Income statement
2. Statement of Changes in Equity
3. Balance Sheet Report
4. Cash flow statement
5. Notes to Financial Reports
Profitability Ratio
According to Kasmir (2014:196) the profitability ratio is a ratio to determine the
company's ability to gain profits. Meanwhile, according to Hery (2015:226) the profitability
ratio is defined as a measurement used to determine the level of a company's ability to gain
profits based on its normal business activities.

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Company Size
According to the Financial Accounting Standard Board (FASB) which has been quoted
by Ahmad Riahi Belkoui (2006:65), there are real differences between large and small
companies , according to Werner R. Murhadi (2013) who states that Firm Size measurements
are taken with change everything completely asset in company the become something form
natural logarithm , and (Sudarmadji and Sularto, 2012: 8) Company size is the size of the
company which is a reflection of the size of the company which appears in the value of the
company's total assets in the year-end balance sheet

Perception of Organizational Sanctions Against Cyberloafing

The greater the perceived value of organizational sanctions, the smaller the value of
employee cyberloafing , this is shown in research conducted by (Herdiati, Prahastuti, &
Hartanti, 2015) and (Ugrin & Pearson, 2013) which states that perceptions of organizational
sanctions can influence employee cyberloafing behavior. and (Sudarmadji and Sularto, 2012:
8) Company size is the size of the company which is a reflection of the size of the company
which is visible in the value of the company's total assets in the year-end balance sheet.

Share
Shares are the most popular and most frequently traded securities on the capital market.
According to Harsono (2013: 19), the definition of shares is a certificate or proof that
individuals or institutions have for the company that makes the securities. Another definition
can be defined as the participation of investors as capital providers in a company so that they
have the right to claim the income and all activities of the company.

CONCEPTUAL FRAMEWORK AND RESEARCH HYPOTHESIS

conceptual framework
The conceptual framework is useful for simplifying the flow of thinking in the research
process. This research uses 1 (one) dependent variable and 3 (three) independent variables
which can be described as follows:
1. Variable tied to research This is the share price banking
2. Variable free on research This namely NPM, ROE, and Size company .

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 Net Profit Margin
(X1)

Harga Saham
Return On Equity
(Y)
(X2)

Ukuran Perusahaan
(X3)

Conceptual Framework Drawing

Hypothesis
H1 : Net Profit Margin has a positive effect on Banking Stock Prices
2012-2018

RESEARCH METHODS
This research uses the data collection technique used in this research, namely
documentation, which is a way of obtaining data by collecting the necessary documents via the
internet, literature books and previous research journals and for research This method analysis
of the data used that is use multiple linear regression . Regression multiple in research This
mean analyze impact factors from variable free will one dependent variable (Ferdinand, 2014:
106) .
This research was conducted at Ceria Kandangan Hospital Jl. Gen. Sudirman No. 10
Sungai Raya, Hamalau, Sungai Raya, Hulu Sungai Selatan Regency, South Kalimantan 71261,
Indonesia. This research uses the unit of analysis, namely all non-medical employees of Ceria
Kandangan Hospital consisting of the general, legal, financial, IT, IPSRS, KESLING and
medical administration divisions.
The population in this study was all 73 non-medical employees of Ceria Kandangan
Hospital. In this research, the variable measurement technique used is the Likert scale. The
Likert scale according to (Sugiyono, 2010) is used to measure the attitudes, opinions and
perceptions of a person or group of people regarding various social phenomena that occur. The
research variables being measured will be translated into indicators and then these indicators
will be used as a starting point for compiling instrument items in the form of statements or
questions.

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Testing
Hypothesis testing in this research is carried out using the T test and F test and so that the
multiple regression method can be used as an unbiased estimation tool, deviations as classic
assumptions which are regression diseases need to be avoided, including multicollinearity,
heteroscedasticity, autocorrelation and normality ( Basuki & Prawoto, 2016:57) . There are
some testing as following :
1. Multicollinearity
2. Heteroskedasticity
3. Autocorrelation
4. Normality test

RESEARCH RESULTS AND DISCUSSION

Analysis Descriptive Variable
Analysis descriptive is useful statistics _ in analyze data with describe the data that has
been collected with What exists as well as No interesting applicable conclusions _ in general
and in a way general . Following This results from analysis descriptive in study This that is :
Table Descriptive Analysis

N Minimum Maximum Mean Std. Deviation

NPM 91 .00 14936.00 2135.7033 1737.59238
ROE 91 .00 7310.00 1315.8571 869.94690
UK 91 1653.00 2115.00 1914.4945 106.30683
STOCK PRICE 91 170.00 26000.00 3794.5275 4662.16639
Valid N (listwise) 91
Source : Processed Author 2019

Assumption Test Results Classic

Normality test aims to find out that something type linear regression , variable dependent
and variable free normally distributed or No . Analytical tools used _ in this test is the
Kolmogorov– Smimov test .
Normality Test Table
Unstandardiz
ed Residuals
N 91
Mean .0000000
a, b
Normal Parameters Std. 3320.655213
Deviation 34
Most Extreme Absolute .132
Differences Positive .132

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 Negative -.081
Kolmogorov-Smirnov Z 1,255
Asymp. Sig. (2-tailed) ,085
Source : Processed Author 2019

Multicollinearity It means between variable independent declared on the type regression

have close relationship _ perfect or perfect . Seen VIF (Variance Inflation Factor) and Tolerance
values , if low VIF number of 10 and Tolerance passes value 0.1 so No become multicollinearity
.
Multicollinearity Test Table
Model Collinearity Statistics
Tolerance VIF
(Constant)
NPM ,061 6,302
1
ROE ,091 1,018
UK ,883 1,132
Source : Processed Author 2019

Multicollinearity It means between variable independent declared on the type regression

have close relationship _ perfect or perfect . Seen VIF (Variance Inflation Factor) and Tolerance
values , if low VIF number of 10 and Tolerance passes value 0.1 so No become multicollinearity
.
Autocorrelation aim For know There is or not correlation between error bully in period
previously or t-1. How to do it in see There is or or not autocorrelation can done with method
Durbin-Watson (DW) testing with various condition following This :
1. DW numbers below -2 are significant autocorrelation positive .
2. The DW number is between -2 to +2, meaning No There is autocorrelation .
3. DW numbers above +2 mean There is autocorrelation negative .

Table of Autocorrelation Test Results

Model Change Statistics Durbin-
R Square F Change df1 df2 Sig. F Change Watson
Change
1 ,493 16,510 5 85 ,000 1,938
Source: Research data processed using SPSS 2 1

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 Heteroscedasticity is residual variance that does not own similarity with all over
observations in a regression model . Good regression model _ should No found
heteroscedasticity in test results .

Source : Processed Author 2019

Heteroscedasticity Test Image

Data analysis
Multiple Regression Analysis , based on the tests that have been carried out and
the comparison of the best values, in analyzing the influence of NPM, ROE and Company Size
on share prices, it is carried out using the following regression model :
Multiple Linear Regression Results Table
Model Unstandardized Standardize t Sig.
Coefficients d
Coefficient
s
B Std. Error Beta
1 (Consta 39116.253 6966.258 5,615 ,000
nt)
NPM 2,167 ,837 ,808 2,589 .011
ROE -2,754 1,374 -.514 -2,004 ,048
UK 21,037 3,605 ,480 5,836 ,000
Source : Processed Results, 2019

testing is carried out so that the results of the various hypotheses that have been
determined in this research can be known whether they are accepted or rejected statistically.
The partial test system for each independent variable will have an influence on the four
independent variables, such as NPM, ROE and Company Size on the dependent variable,
namely share prices.
Partial Regression Testing Results Table

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 Independent Variable Prob. Significant Conclusion
Net Profit Margin (X 1 ) 0.011 Significant
Return On Equity (X 2 ) 0.048 Significant
0.05
Company Size (X 3 ) 0,000 Significant
Source: Processed 2019

Discussion
The first hypothesis in this research states that it is suspected that Net Profit Margin
(NPM) influences banking share prices. The test results show a coefficient of 2,167 and partially
shows a significance level of 0.011, which shows that this value is less than Prob. 0.05 (0.011
< 0.05). From these results it can be interpreted that Net Profit Margin (NPM) has a positive
and significant influence on banking share prices.
The second hypothesis in this research states that it is suspected that Return On Equity
(ROE) has an influence on banking share prices. The test results show a coefficient of -–2,754
and partially shows a significance level of 0.048, which shows that this value is less than Prob.
0.05 (0.048 < 0.05). From this value, it can be interpreted that Return On Equity (ROE) has a
negative and significant effect on banking share prices.
The third hypothesis in this research states that it is suspected that company size has an
influence on banking share prices. The test results show a coefficient of 21,037 and partially
shows a significance level of 0.000, which shows that this value is smaller than Prob. 0.05
(0.000 < 0.05). From this value, it can be interpreted that company size has a positive and
significant effect on banking share prices.

Implications Study
Implications Theoretical
Findings study This that Net Profit Margin (NPM), Return On Equity (ROE), Company
Size can be increase price share Banking . Analysis Net Profit Margin (NPM), Return On Equity
(ROE) become important Because based on analysis the can obtained profits and big small size
company in decide For invest
Implications Managerial
Investors or potential investors are advised to carry out an analysis of financial ratios,
especially financial ratios. For investors or prospective investors who want to invest in the

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capital market, they should use Net Profit Margin (NPM), Return On Equity (ROE), Company
Size on Banking share prices as references in making investment decisions, because these
variables have a significant influence. significant impact on banking company share prices.

CONCLUSIONS AND RECOMMENDATIONS

Conclusion
The conclusions obtained from the results of the research and discussions that have been
carried out are as follows:
1. NPM shows significant impact on value _ share Banking . Related with matter the can said
that happen changes shown by Net Profit Margin are accompanied with enhancement nor
decline mark share .
2. ROE has impact significant on value share Banking . Related with matter the can seen that
happen the changes indicated by Return On Equity are accompanied with increase or
decline mark share .
3. Variable Company size shows influence in a way significant on value share Banking . That
matter indicated low its height Company size is followed by an increase nor decline mark
share .

Suggestion
In accordance with the conclusions outlined above, they are as follows:
1. For part sector banking required enhancement performance financial order prices share the
more increases , with use cost in a way effective and efficient .
2. Party Banking can give attention special to various impacting factors _ to mark share
especially NPM, ROE, Company Size . On research This own impact significant to mark
share .
3. NPM, ROE, Company Size shows significant impact _ to price shares , so should party
banking more increase ability self in manage the assets owned in order to obtain increasing
profits _ _ _ big , so interesting investors are interested in joining and investing the shares .
4. For study Next , hopefully can multiply variables factor economy possible macros _ own
influence to price share like for example at level ethnic group interest , inflation and so on
.
BIBLIOGRAPHY

Harry. 2013. Intermediate Financial Accounting . Yogyakarta : CAPS.

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Cashmere. 2010. Financial Report Analysis , Jakarta: PT. Raja Gravindo Persada.

Statement of Financial Accounting Concepts (SFAC) Number 1. 2011. Financial Accounting

Standards Board (FASB).

Sudarmadji and Sularto. 2012. The Influence of Company Size, Profitability, Leverage and Type
of Company Ownership on the Extent of Voluntary Disclosure in Annual Financial
Reports . FAST Proceedings, Vol. 2.

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