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International Journal of Research and Review Vol.8; Issue: 1; January 2021 Website: www.ijrrjournal.com Research Paper E-ISSN: 2349-9788; P-ISSN: 2454-2237

Analysis of Earning Per on Prices with as an Intervening Variable in LQ45 Companies in Indonesia

Muhammad Fauzan Mirzaldi1, Isfenti Sadalia2, Nisrul Irawati2

1,2Master of Management Study Program, Postgraduate School of University of Sumatera Utara

Corresponding Author: Muhammad Fauzan Mirzaldi

ABSTRACT between and Stock Price. Dividend Yield capable of influencing Earning This study is conducted in The LQ45 Company Per Share up to 0.9%, whereupon Dividend on Indonesia Stock Exchange 2015 - 2019. This Yield and Earning Per Share are able to affect study aims to analyze The Effect of Dividend Stock Price up to 47.4%. Yield on Stock Price with Earning per Share as Intervening Variable in The LQ45 Company on Keywords: Dividend Yield, Earning Per Share, Indonesia Stock Exchange 2015-2019. The type Stock Price of this study is comparative causal that analyze the causal relationship between two variables or BACKGROUND more. The number of sample in this study is 22 LQ45 companies are 45 issuers that companies. In accordance with the defined have gone through a selection process with hypothesis in this study, statistical data analysis high liquidity as well as several other is measured using SmartPLS (Partial Least selection criteria. These criteria can include Square) software. Based on the result of the tests, the significance direct effect test result consideration of shows that independent variable (Dividend selected by the Indonesia Stock Exchange. Yield) has negative and significant effect on The companies listed in LQ45 are 45 dependent variable (Stock Price), however companies with the best that are the Dividend Yield has positive influence on target of . So in making the stocks intervening variable (Earning Per Share) but not contained in the LQ45 index as part of the significantly and intervening variable (Earning population and sample, research can Per Share) positively and significantly affect the describe the state of the LQ45 stock price dependent variable (Stock Price) and movements from 2015 - 2019. intervening variable (Earning Per Share) is not significant as the mediator of the correlation

Figure 1.

International Journal of Research and Review (ijrrjournal.com) 235 Vol.8; Issue: 1; January 2021 Muhammad Fauzan Mirzaldi et.al. Analysis of the effect of dividend yield on stock price with earning per share as intervening variable in the LQ45 company on Indonesia stock exchange 2015 – 2019.

LQ45 Stock Price Movement expects a stock dividend. If investors intend From Figure 1, it is known that on to sell at a later date, these investors will April 6, 2015, the LQ45 companies expect share and profits due to an experienced an increase in share prices by increase in share prices. This means that if 955.69, then September 28, 2015 the dividend yield of an efficient company experienced a decrease of 699.01 and is higher, the more likely it is that the share experienced an increase again on January price will be valued high. This will make 22, 2018 amounting to 1,120.49. investors willing to invest in the company, Furthermore, it decreased on July 2, 2018, so that the demand for these shares will amounting to 898.74. After that on February increase which in turn will cause the stock 4, 2019, the share price increased to price to rise as well. Based on the 1,030.15 and decreased on May 20, 2019 by descriptions above, this study aims to 931.48, then increased again to 1,027.27 on determine the stock price, how much July 15, 2019, then decreased again on influence the have on October 7, 2019 amounting to 937.05 and stock prices in increasing the dividend yield closed at the end of the year, namely in LQ45 companies. December 30, 2019 at 1,014.47. The development of the LQ45 share price has Stock price attracted investors to invest. Before In this study, the share price in investing, investors need to make a good question is the stock price recorded at the and accurate assessment to find out and end of each year after the closing price. The choose the company's shares. With stock price of a share at any given time will price movements that tend to fluctuate from depend on the flow an is time to time, if the stock price rises, expected to receive in the future if an investors will get a and also increase investor buys a stock. The share price is a investor confidence in the company for the reflection of the performance of a company. increase in shares. A reflection of how to In a period, the price of a stock can see the high and low levels of the company's fluctuate greatly. The price fluctuates stock price movements can use the Stock depending on the power of supply and Price Index (IHS). The Stock Price Index demand. If a stock experiences excess (IHS) serves as one of the market trends, demand, it will tend to rise, and vice versa. where the index movement describes market The end of the closing period of the stock conditions at any one time, whether the price is an appropriate reference in market is active or sluggish. comparing or analyzing a study. Earning per Share is very important because it is an income for investors and a Stock Price Indicator benchmark for investors to invest in the The stock price indicator can be seen company. The high value of Earning per from the value of the stock price, according Share (EPS) will increase investors' to Azis et al. (2015), namely: confidence to increase their 1. is the value of shares which is needed by each company. High according to the books of the issuing Earning Per Share (EPS) is a measure of a company. Book value per share is the company's ability to earn a profit, so it can net owned by by be said that the higher the profit of a owning one share. company, the higher the amount of Earning 2. Market Value is the stock price that Per Share (EPS) that will be distributed to occurs on the stock exchange at a time investors who invest it. determined by the demand and supply Any change in Dividend Yield (DY) price of shares by market participants. will affect stock prices. If these investors 3. Intrinsic Value is the actual / supposed intend to keep the stock forever, the investor value of a stock.

International Journal of Research and Review (ijrrjournal.com) 236 Vol.8; Issue: 1; January 2021 Muhammad Fauzan Mirzaldi et.al. Analysis of Earning Per Share on Stock Prices with Dividend Yield as an Intervening Variable in LQ45 Companies in Indonesia Stock Exchange.

4. The intrinsic value of an is the sum and as an investment filter. They will try to of the present value of the cash flows invest their funds in stocks that produce generated by the asset concerned. high dividend yields. Dividends are usually distributed annually and the dividend yield Dividend figure is obtained by means of the dividend Dividends are the rights of common value that will be given to the price of stockholders to receive a share of the shares currently in circulation. company's profits. Dividends are cash flow set aside for shareholders, while retained Earning Per Share earnings are one of the most important Investors will be more interested in sources of funds to finance company companies that have high earnings per growth. The size depends on the dividend share, and if the earnings per share of a policy and the results of the company's company are considered high by investors, AGM. If the company has decided to share the stock price will move up. According to the profit, then all share owners will get the Gitman and Zutter (2015), earning per share same rights according to their percentage of represents the amount of money earned per share ownership. However, the distribution number of ordinary in a of dividends for owners will certain period where if it gets higher it has be prioritized over owners. the potential to increase the amount of dividends received by shareholders. Dividend Yield It can be seen that the relationship According to Gumanti (2013), between earnings per share and share price dividend yield implies a measure that a is very close. Tandelilin (2010) argues, component of total return is contributed by Earning Per Share (EPS) can be formulated dividends. This means that in calculating the as follows: total return, investors must include the element of the amount of dividends received in addition to the difference in share prices between the beginning and the end of ownership. Meanwhile, according to Buying shares means buying the Fajrihan (2010), dividend yield is dividends prospect of a company, which is reflected in paid divided by the current price. Based on earnings per share. If the earnings per share the understanding of the experts above, it is higher, then the prospect of the company can be concluded that the dividend yield is a is better, meanwhile if the earnings per that compares the amount of share is lower it means that it is not good, cash dividends distributed to shareholders and negative earnings per share means it is with the share price, which is expressed as a not good (Samsul, 2006). percentage. Based on previous research that Rudianto's research (2019) with the has been discussed, it can be concluded that title Effect of ROA (Return on Assets), EPS dividend yield can be calculated by the (Earning Per Share), DER (Debt to formula: Ratio), PER (Price Earning Ratio), DAR (Debt to Assets Ratio) and Rupiah

DY = Exchange Rate on Prices Shares in Insurance Companies Listed on the IDX in 2014 - 2017. It is known that the EPS In general, dividend yield is a variable has a positive and significant effect measure that must be considered. This is on share prices in insurance companies because dividend yield focuses on seeing listed on the Indonesia Stock Exchange in how much profit per share is received. Some 2014 - 2017. Research by Putra et al. (2016) investors use this ratio as a measure of risk entitled The Effect of Stock Buyback,

International Journal of Research and Review (ijrrjournal.com) 237 Vol.8; Issue: 1; January 2021 Muhammad Fauzan Mirzaldi et.al. Analysis of Earning Per Share on Stock Prices with Dividend Yield as an Intervening Variable in LQ45 Companies in Indonesia Stock Exchange.

Profitability and Firm Size on Share Prices 3. Dividend yield has a significant positive in Go Public Companies on the Indonesia effect on stock prices. Stock Exchange with Dividend Yield as a 4. Earning per share has a significant Mediating Variable in the 2012 - 2014 positive effect on stock prices through Period. It is known that partially the dividend yield. dividend yield variable has a positive and significant effect on price variables stock. RESEARCH METHODS This shows that a large dividend per share The type of research used in this will make the company's shareholders feel research is comparative causal, which is to happy because of the level of profits they analyze the causal relationship between two get so as to increase the company's share or more variables. The variables used in this price. Companies that share their profits research are fundamental factors, namely each period illustrate that the company is earning per share as the independent good and can provide maximum profits for variable, and stock price as the dependent the company's shareholders. variable. The independent variable is thought to affect the dependent variable, CONCEPTUAL FRAMEWORK namely stock price, with dividend yield as Referring to research problems and the intervening variable. This research was theoretical studies regarding the analysis of conducted at the Indonesia Stock Exchange earnings per share on stock prices with representative of North Sumatra. To analyze dividend yield as an intervening variable, companies, the population for researchers in the conceptual framework proposed for this this study were all LQ45 companies on the study is as shown in Figure 2 below: Indonesia Stock Exchange (IDX) for the last 5 years in the 2015 - 2019 period, namely 45 companies. In this study, a non- probability sampling method was used with purposive sampling technique with a total sample size of 22 companies that met the criteria. The main method of analysis in this study was carried out by Structural Equation Modeling (SEM) using SmartPLS software, with the aim of knowing the relationship between variables.

Figure 2: Conceptual Framework Chart RESEARCH RESULTS AND HYPOTHESIS DISCUSSION The hypothesis proposed is based on Inner Model Evaluation (Structural the theoretical basis and conceptual Model): Significance Test of Direct Effect framework that has been made, the (Dirrect Effect) hypothesis to be tested in this study consists Furthermore, the direct effect of: significance test will be carried out. Inner 1. Earning per share has a significant model or inner measurement is also known positive effect on dividend yield. as structural model. Table 4.4 presents the 2. Earning per share has a significant path coefficient values and the P-values for positive effect on stock prices. testing the significance of the direct effect.

Table 1: Significance Test of Direct Effect Original Sample Sample Mean Standard Deviation T Statistics P Values (O) (M) (STDEV) (|O/STDEV|) Earning Per Share -> Stock Price 0.681 0.700 0.044 15.319 0.000 Earning Per Share -> Dividend Yield 0.096 0.089 0.108 0.895 0.371 Dividend Yield -> Stock Price -0.185 -0.179 0.043 4.330 0.000

International Journal of Research and Review (ijrrjournal.com) 238 Vol.8; Issue: 1; January 2021 Muhammad Fauzan Mirzaldi et.al. Analysis of Earning Per Share on Stock Prices with Dividend Yield as an Intervening Variable in LQ45 Companies in Indonesia Stock Exchange.

Based on Table 1 regarding the prices. It is known that the P-Values significance test of the direct effect, it is value is 0.000 <0.05, it is concluded that known: dividend yield has a negative and 1) The coefficient value of earning per significant effect on stock prices. share on stock price is 0.681 (original sample column), which is positive, Table 2:Coefficient of Determination R Square which means that earning per share has Dividend Yield 0.009 a positive effect on stock prices. It is Stock Price 0.474 known that the P-Values value is 0.000 <0.05, it is concluded that earning per Based on Table 4.5, it is known that share has a positive and significant the R-Square value of the Dividend Yield effect on stock prices. (DY) is 0.009, which means that Earning 2) The coefficient value of earning per Per Share (EPS) is able to affect the share on dividend yield is 0.096 Dividend Yield (DY) of 0.9%. Meanwhile, (original sample column), which is the R-Square value of the stock price is positive, which means that earning per 0.474, which means that Earning Per Share share has a positive effect on dividend (EPS) and Dividend Yield (DY) are able to yield. It is known that the P-Values affect the stock price by 47.4%. value is 0.371> 0.05, so it is concluded that earning per share has a positive Mediation Testing (Indirect Effect) effect on dividend yield, but not Furthermore, the indirect effect significant. significance test (mediation test) will be 3) The dividend yield path coefficient carried out, namely testing whether the value on the stock price is -0.185 Dividend Yield (DY) is significant in (original sample column), which is mediating the relationship between Earning negative, which means that dividend Per Share (EPS) on stock prices. yield has a negative effect on stock

Table 3: Significance Test of Indirect Effects (Mediation Testing) cc Original Sample Standard T Statistics P Sample Mean Deviation (|O/STDEV|) Values (O) (M) (STDEV) Earning Per Share -> Dividend Yield -> Stock Price -0.018 -0.018 0.022 0.817 0.414

Based on the results of the mediation means that the company is performing well test in Table 3, it is known that the indirect for investors' assessment, so it will attract effect of Earning Per Share (EPS) on stock investors to buy shares from the company prices, through Dividend Yield (DY) is - and cause the company's share price to rise. 0.018, with a P-Values value of 0.414> This is not in line with the results of 0.05, which means that the Dividend Yield research by Kusuma and Reza (2017) which (DY) is not significant as a mediator of the state that there is a positive and significant relationship between Earning Per Share relationship between earnings per share and (EPS) on stock prices. dividend yield.

Effect of Earning Per Share on Dividend Effect of Earning Per Share on Stock Yield Prices The results of hypothesis testing After processing the data, a show that the independent variable (Earning correlation coefficient of 0.681 is generated, Per Share) has a positive effect on the which is positive, which means that EPS has intervening variable (Dividend Yield) but it a positive effect on stock prices and is is not significant. A higher dividend yield significant with a P-Values value of 0.000

International Journal of Research and Review (ijrrjournal.com) 239 Vol.8; Issue: 1; January 2021 Muhammad Fauzan Mirzaldi et.al. Analysis of Earning Per Share on Stock Prices with Dividend Yield as an Intervening Variable in LQ45 Companies in Indonesia Stock Exchange.

<0.05. This value means that Earning Per investors to show how their investment Share (EPS) has a high and positive generates cash flow in the form of dividends relationship. High earning per share will or an increase in asset value by stock attract investors to own the company's appreciation. This Dividend Yield (DY) shares. This is possible because the shows how much income can be generated company's performance is considered good, by each Rupiah invested in the shares of a causing share prices to rise. Conversely, if company. In general, investors will use this the earning per share is low, it is possible Dividend Yield (DY) ratio first before that the dividends paid are also low, then the making an investment decision. Dividend stock price will be lower, so that investors Yield (DY) or investment yield can be are not interested in owning the shares. This considered as ROI (Return of Investment) is in accordance with the results of research for the income of investors who are not by Indriyani (2019) and Rudianto (2019) interested in the of a stock. This which state that Earning Per Share (EPS) ratio is very important for investors who has a significant positive effect on stock prioritize -term investment and prices. consistent returns each year. Companies that have a high dividend yield (DY) will Effect of Dividend Yield on Stock Prices generally increase their share price when Dividend Yield (DY) has a negative dividends are announced. The greater the and significant effect on stock prices. A yield, which means the greater the level of high dividend yield (DY) means that a investor returns. company pays large dividends to its Earnings Per Share (EPS) is a investors. Thus, investors get higher measure of profitability that is often quoted compensation for their investment when from financial reports. This measure is compared to companies that produce low generally also reported in the income Dividend Yield (DY). Basically, all statement in the company's . If investors want the highest possible a company issues only one type of share, Dividend Yield (DY) yield. then Earning Per Share (EPS) is calculated Dividend Yield (DY) is a portion of by dividing by the number of the total return that investors will get. ordinary shares outstanding. If preferred Usually companies that have high and common stock are outstanding, prospects will have a low Dividend Yield then net income is deducted first from the (DY), because most of the dividends will be dividend amount of the preferred stock reinvested. Then, because companies with (Warren et al., 2006). high prospects will have a high price, which means that the distribution is CONCLUSION high, the Dividend Yield (DY) for this kind Based on the results of research of company will tend to be lower (Hanafi, regarding the analysis of earnings per share 2004). The results of this study are not in on stock prices with dividend yield as an line with research conducted by Prakoso intervening variable in the LQ45 company (2016) and Putra et al. (2016) which states on the Indonesia Stock Exchange, the that dividend yield has a positive and following conclusions can be drawn: significant effect on stock prices. 1. Earning per share has a positive effect on dividend yield, but not significant. Effect of Earning Per Share on Stock 2. Earning per share has a positive and Prices through Dividend Yield significant effect on stock prices. Dividend Yield (DY) is not 3. Dividend yield has a negative and significant as a mediator of the relationship significant effect on stock prices. between Earning Per Share (EPS) and stock prices. Dividend Yield (DY) is used by

International Journal of Research and Review (ijrrjournal.com) 240 Vol.8; Issue: 1; January 2021 Muhammad Fauzan Mirzaldi et.al. Analysis of Earning Per Share on Stock Prices with Dividend Yield as an Intervening Variable in LQ45 Companies in Indonesia Stock Exchange.

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International Journal of Research and Review (ijrrjournal.com) 241 Vol.8; Issue: 1; January 2021 Muhammad Fauzan Mirzaldi et.al. Analysis of Earning Per Share on Stock Prices with Dividend Yield as an Intervening Variable in LQ45 Companies in Indonesia Stock Exchange.

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International Journal of Research and Review (ijrrjournal.com) 242 Vol.8; Issue: 1; January 2021