ANALYSIS OF THE INFLUENCE OF FINANCIAL PERFORMANCE
AND MACROECONOMIC VARIABLES ON STOCK RETURNS OF
AGRIBUSINESS COMPANIES
Introduction:
The capital market has an important role to support the economy of a country.
Indicators of a country's economy, in addition to being measured through the growth of
Gross Domestic Product (GDP) can also be measured through the performance of the capital
market index which is an indicator of investor confidence (Rizkita 2013). The capital market
brings together fund owners with fund users for medium and long-term investment purposes.
In addition, the capital market has two functions, namely first as a means for business
funding or as a means for companies (issuers) to obtain funds from the investing public
(investors) and secondly the capital market is a means for the public to invest in financial
instruments such as stocks, bonds, mutual funds, and others (Mustofa and Cahyono 2014).
The capital market is considered important for the development of developing
countries such as Indonesia. So that stock transactions carried out by companies listed on the
Indonesia Stock Exchange have developed. This can be seen from the number or value of
issuers that continue to increase. The following is a table of stock index transactions on the
Indonesia Stock Exchange from 2008 to 2018.
Based on Table 1, the number of companies (issuers) that issued their shares continued
to increase from 2008 to 2018. The development of this capital market shows that the capital
market has prospects to help financing and funding. Capital market development continues
to grow in developing countries in line with the investment made.
One of the benchmarks of national development is economic development where the
economic sector has always been the focus of the government in carrying out both short-
term and long-term development (Amanda 2014). One sector that affects economic
development is the agricultural sector.
The agricultural sector contributes greatly to national economic development through
foreign exchange earnings, industrial raw material providers, employment providers and
poverty alleviation (Apriyani 2015). This is related to the development of agricultural
sectoral stock trading listed on the Indonesia Stock Exchange from 2015 to 2018 which has
increased, except in 2018. The following Table 2 shows data on the development of
agricultural sectoral stock trading from 2015 to 2018.
Based on the agricultural sectoral trading data in Table 2, it can be seen from 2015 to
2016 that the volume, value and market capitalization of the agricultural stock sector have
increased. However, the value and market capitalization of shares in 2017 to 2018
decreased. This indicates that investor confidence in agricultural sector companies has
increased even though in 2017 to 2018 it has decreased compared to previous years.
Within the agricultural sector, there is an agribusiness sector that has the potential to
support economic growth. The agribusiness sector is a sector that can survive in
development and economic recovery during the economic crisis in Indonesia. Agribusiness
is a broad sector where this sector itself consists of upstream to downstream systems.
Agribusiness broadly includes the agriculture, fisheries, livestock, plantation and
manufacturing sectors in the form of food and agricultural input products such as animal
feed. Issuing companies engaged in the agricultural sector are mostly companies engaged in
the plantation subsector (Amiga 2018). In the stock market, many companies belonging to
the agribusiness sector have registered themselves as go public companies, including PT
Astra Agro Lestari Tbk (AALI) which is a plantation company. PT Astra Agro Lestari Tbk
(AALI) is one of the companies that can survive the economic crisis which can cause a sharp
decline in st o c k prices. In addition, PT Astra Agro Lestari Tbk (AALI) is the highest
priced stock in the plantation sector.
Another agribusiness sector in Indonesia that has the potential to be developed is the
livestock subsector. Based on the 2011 financial report of PT Charoen Pokpand Indonesia
Tbk, that Indonesia currently has a low level of chicken meat consumption per capita when
compared to ASEAN countries that have the same economic level. Indonesia is also a
country with the largest Muslim population where chicken meat is one of the choices of
animal protein sources. These two factors indicate that there is a very large consumer market
for chicken meat that is still growing.has yet to be utilized. In addition, Indonesia is heading
into an economic era where the growth of the middle-income population is one of the fastest
in the region. This potential is a great opportunity for companies to remain in the livestock
industry and also investors to continue investing in the livestock sector. One of the
companies that can survive amid the global crisis in 2008 is PT Charoen Pokphand
Indonesia Tbk (CPIN). PT Charoen Pokphand Indonesia Tbk (CPIN) is also a company that
is the highest share price in the livestock sector in the fields of animal feed, Day Old
Chicken (DOC) and processed chicken meat.
Investors as actors in the capital market need an analytical tool to assist in making
decisions to buy and sell shares. Investors can find out information about the company's
condition by looking at the financial statements published every three months (quarters) on
the company's website and the Indonesia Stock Exchange (IDX). Companies that publish
publicly about their financial statements are companies that have gone public and are listed
to open circulation of their shares on the IDX. The company's financial statements are used
to determine the uncertainty of the risks that will be faced by looking at the financial ratios
included in the financial statements. Financial reports are often used as a benchmark for
investors to estimate the company's prospects in addition to the stock price itself.
Investors must consider financial and macroeconomic performance to value a stock.
The company's financial performance and macroeconomics provide information about the
picture to investors to determine when stock purchases are made and when the shares are
sold in order to obtain maximum profit. Financial performance includes analysis of financial
ratios that exist within the company. While macroeconomics includes the development of
stock exchange rates, capital market conditions, Indonesian interest rates, stock price
developments over time, capital gains / losses, and general economic conditions.
Fluctuations that occur in exchange rates and Indonesian interest rates will affect
investment. The depreciation of the rupiah against the US dollar indicates that investors are
more likely to invest their capital in the foreign exchange market, which tends to buy US
dollars so that the exchange rate variable affects the demand for rupiah (Sentosa 2017).
Meanwhile, the SBI interest rate affects the money market, such as the banking sector.
Company performance is influenced by the performance of the company itself and is
seen through financial performance and macroeconomic variables such as exchange rates
and Indonesian interest rates. The author feels it is important to analyze the variables that
influence financial performance and macroeconomic variables on stock returns in
companies incorporated in agribusiness companies, because stock returns are the reason for
an investor to invest. This is useful for investors in determining steps when investing and
managing portfolios using financial performance variables and macroeconomic variables as
reliable indicators.
Problem Formulation
The stock market that has been officially designated to manage the Composite Stock
Price Index (CSPI) and Sectoral Stock Price Index (IHSS) is the Indonesia Stock Exchange.
Stocks listed on the Indonesia Stock Exchange (IDX) have a sector classification which is
divided into nine sectors and within the sector there are several subsectors. Stock trading
data in the agricultural sector in Indonesia in 2018 decreased from the previous year. When
compared to the other eight sectors, the agricultural sector is still seen as underdeveloped.
Table 3 shows that the agricultural sector is the least attractive sector for investors.
This can be proven because the agricultural sector has the lowest trading volume and market
capitalization compared to other sectors. This is due to the high-risk characteristics of the
agricultural sector, such as commodity price fluctuations, crop failure, which can cause low
interest from financing institutions to fund this sector.
Investors who invest in agricultural sector companies need to have information about
the level of return that will be obtained at a high level of risk. Stocks have a fairly high level
of profit (return) and risk (risk). If the company has a high return value, usually the level of
risk that must be taken by investors is also high. If a stock has a low or even negative return,
investors will not be interested in investing because it will have an impact on losses.
Knowledge of risk and return is very important for an investor who performs in uncertain
conditions. Both investment decisions, funding decisions and dividend policies always
require expected results and the risk of not obtaining the expected results (Kodrat and
Indonanjaya 2010).
The stock movements of PT Astra Agro Lestari Tbk (AALI) and PT Charoen Pokpand
Indonesia Tbk (CPIN) experience contradictory conditions where AALI stock returns tend
to be on the zero and positive lines. While CPIN's stock return was on the zero line at first
until November 2015 fluctuated and produced a negative return. A return that is at zero
means that the company is in a break-even condition, that is, it does not experience profits or
losses. If the stock return value is positive, the company benefits from the difference
between the open and close stock prices, and if the stock return value is below the zero line,
the company experiences a loss. The following picture shows the movement of AALI and
CPIN returns from March 2014 to September 2018.
Investor decisions are strongly influenced by the value of the return received. Return
is the main indicator of the company's financial ability to create value for investors in the
form of dividend payments or capital gains. Investment always involves two things, namely
risk and return. When there is an increase in stock prices, the higher the return obtained. If a
stock has a negative return, investors will not be interested in investing because it will have
an impact on losses. Company risk can be seen from the company's resilience to economic
cycles. The economic cycle cannot immediately affect the company's financial performance
but stock prices will be affected immediately by changes in macroeconomic variables
because investors react faster. When there is a decline in the company's financial
performance and changes in macroeconomic variables, investors will calculate the impact,
either positive or negative, on the company's performance. Thus the following question will
arise:
1. What is the effect of company financial performance and macroeconomic variables
on stock returns of agribusiness companies in the short and long term?
2. How do agribusiness stock returns respond to shocks to financial performance
variables and macroeconomic variables in the long term and short term?
3. How do financial ratios and macroeconomic variables contribute to stock returns of
agribusiness companies?
Research related to the analysis of the effect of financial performance and
macroeconomic variables on stock returns has not been widely carried out by other
researchers, the objects studied are also not many that are specifically related to the
agribusiness sector. Research conducted by Trisnawati (2009) analyzed the effect of
financial performance on stock returns in all manufacturing companies that have been listed
on the Jakarta Stock Exchange for the period 2003 to 2005, Asmirantho et al (2016)
analyzed the effect of financial performance and macroeconomics on stock returns in the
food and beverage subsector for the period 2011 to 2015, Apriyani (2015) conducted
research on analyzing the effect of EPS and macroeconomic variables on stock returns of the
Jakarta Islamic Index agricultural sector from the period August 2011 to December 2014,
Sodikin (2007) analyzed macroeconomic variables that affect stock returns on the Jakarta
Stock Exchange, Firyama (2018) analyzed the influence of fundamentals and
macroeconomics on Islamic stock returns in the Jakarta Islamic Index (JII) group.
The object of research on the effect of financial performance and macroeconomic
variables on stock returns related to agribusiness is still rarely found. One of the studies on
the effect of financial performance on stock prices related to agribusiness is research
conducted by Amiga (2018) which uses the object of shares of oil palm plantation
companies. Another study that analyzes the effect of macroeconomic variables on the share
price of agribusiness companies is research conducted by Sentosa (2017) related to the effect
of macroeconomic variables on the shares of agribusiness companies. Based on this,
research is needed related to the effect of financial performance and macroeconomic
variables on stock returns of agribusiness companies in order to increase knowledge
references.
Indicators of financial and macroeconomic performance in related studies of the effect
of financial performance and macroeconomic variables on company stock returns use
different measurement methods. Some studies use a measurement method that represents the
four financial ratios, namely the liquidity ratio, activity ratio, solvency ratio and profitability
ratio. Some studies use financial ratios with different ways of measuring but precisely in one
financial ratio.
Financial performance indicators and macroeconomic variables that use
representatives of the four financial ratios and macroeconomic variables include,
Asmirantho (2016) using the independent variables Current Ratio (CR), Debt to Equity
Ratio (DER), Earnings Per Share (EPS), Return On Assets (ROE), Economic Value Added
(EVA), inventory Turnover (ITO), Price to Earning share Ratio (PER), as well as
macroeconomic variables of interest rates and inflation, Apriyani (2015) uses Earnings Per
Share (EPS) variables and macroeconomic variables which include exchange rates, money
supply, SBI interest rates and world gold prices. Other studies examine specifically by using
only one internal factor such as financial performance or external such as macroeconomic
variables. Research conducted by Naryoto (2013) uses the variables Return On Equity
(ROE), Current Ratio (CR), Debt to Equity Ratio (DER), Total Assets Turn Over (TATO)
and Earning Per Share (EPS), Sodikin (2007) used macroeconomic variables such as the
Rupiah exchange rate, interest rates and inflation. In this study using four financial ratios,
namely the liquidity ratio represented by Current Ratio (CR), the activity ratio represented
by Total Assets Turn Over (TATO), the solvency ratio represented by Debt to Equity Ratio
(DER), and the profitability ratio represented by Net Profit Margin (NPM).
The research methods used in analyzing the effect of financial performance and
macroeconomic variables on company stock returns are different. In general, the method
used in previous studies is to use panel data methods. Astuti (2006), Aryayoga and Harjito
(2009) and Trisnawati (2009) used panel data. There are only a few studies that use different
methods, such as the ARCH-GARCH method conducted by Pratama (2011) and the Vector
Error Corection Model (VECM) method in Sentosa (2017) and Amiga (2018). In this study
using the VECM method by considering the advantages and possessed by the model which
will be explained in the RESEARCH METHODS.
Theoretical Framework
In compiling the results of this research, it is necessary to be based on theories related
to the study of agribusiness financing that support this research. Based on this, the
theoretical framework of this research is as follows.
Investment
Investment according to Law No. 25 of 2007 is a form of investment activity, both
by domestic capital investors and foreign capital investors to conduct business in the
territory of the Republic of Indonesia. Investment has a broad meaning which consists of
two forms, namely investment in real assets and investment in securities. Real assets are
tangible assets such as gold, silver and art goods. Meanwhile, financial assets include
securities in the form of financial instruments such as stocks, bonds and mutual funds.
Investment in financial assets can be done in two ways, namely direct investing and indirect
investing. Direct investment is an ownership of securities directly in an entity officially and
has gone public which aims to benefit in the form of dividends or capital gains. Meanwhile,
indirect investment is an investment that involves ownership of securities that are traded
back by investment companies that function as intermediaries.
Shares
Shares are securities that show partial ownership of a company and make it possible
for companies that release shares to the capital market to obtain long-term financing. In the
capital market, two types of shares are known, namely common stock and preferred stock.
Common stock is the most widely traded stock and the owner of this stock has voting rights
during the general meeting of shareholders and get profits (capital gains). Meanwhile,
preferred stock has the same characteristics as common stock and bonds. Preferred shares
are said to be the same as ordinary shares because they do not have a set maturity date.
However, preferred shares are the same as bonds because they have a certain limit on the
amount of dividends.
Stock Return
According to Naryoto (2013), the return of a stock is the result obtained from an
investment by calculating the difference between the current period's stock price and the
previous period by ignoring dividends. In buying and selling shares, there are capital gains
and capital losses. Capital gain is the result obtained between the difference between the
purchase price and the selling price if the purchase price is lower than the selling price,
while capital loss is obtained if the purchase price is higher than the selling price (Samsul
2006). In this study, the stock return in question is capital gain or capital loss.
Demand and Supply Mechanism on the Indonesia Stock Exchange
The formation of stock prices in the capital market is similar to the formation of prices
for goods and services in the goods market. Share prices are formed from the forces of
supply and demand, namely at the price level desired by old investors to sell and at the price
level desired by new investors. If there is excess demand because there is an increase in
demand for shares while the supply of shares is fixed or the supply is reduced, the share
price will rise. Conversely, if there is excess supply (excess supply) due to an increase in
supply, or a decrease in demand, it will reduce the share price (Sentosa 2017).
Macroeconomic Theory
According to Dornbusch et al (1994) macroeconomics discusses economic behavior
and policies that affect investment and consumption, currency and trade balances,
determinants of wage and price changes, fiscal and monetary policy, national budgets,
interest rates, money supply, and national debt. Macroeconomic factors that can directly
affect stock performance as well as company performance include domestic interest rates;
foreign exchange rates; national economic conditions; a country's economic cycle; inflation
rates; tax regulations; the amount of money in circulation.
Fundamental Analysis
Kodrat and Indonanjaya (2010) state that fundamental analysis is the study of the
economy, industry and company conditions to calculate the value of company shares.
Fundamental analysis focuses on key data in the financial statements to calculate whether
the stock price has been accurately appreciated. Fundamental analysis in the form of
company financial reports which are used as a benchmark to assess the company's financial
performance in deciding on investments for potential investors. Meanwhile, shareholders
can see the dividends that will be received and see the return from the income statement.
Based on the company's financial statements, investors can conduct fundamental analysis
through financial ratio analysis. Financial ratio analysis is a method of calculating and
interpreting financial ratios that show the performance and status of a company to measure
the weakness or strength of a company in the financial field which states the mathematical
relationship between two quantities (Firyama 2018).
Financial Report
Financial statements are the final product of a series of processes for recording and
summarizing business transaction data. Financial reports are basically the result of an
accounting process that can be used as a tool to communicate financial data or company
activities to interested parties. Interested parties in the financial scope and development of
the company are company owners, managers concerned, creditors, bankers, investors and
the government. Financial reports are also used to account for the activities carried out by
the company to the owner of the company. In addition, financial reports are useful as a
medium of information about the financial position that has been achieved by the company
in a minimum period of one year.
The function of the financial statements is to measure the work efficiency and
retability of the company, to know the description of the company's business, to know the
embedded capital is used properly and to determine income tax (Hermanto and Agung
2012).
Financial Ratio Analysis
In assessing financial conditions, analysts need several benchmarks. A frequently used
benchmark is a ratio or index, which relates two pieces of financial data to one another.
Analysis and interpretation of various ratios can provide a better view of the financial
condition for skilled and experienced analysts than analysis based solely on individual
financial data that is not in the form of ratios. Analysts can compare current ratios with past
and future ratios for the same company as an internal comparison. If financial ratios are
presented in the form of a list for the period of For several years, analysts can study the
composition of the changes and determine whether there has been an improvement or
otherwise in the company's financial condition over that period of time. Financial ratios can
also be calculated based on performance or projection financial statements, and compared
with current or past ratios (Sawir 2003). Company analysis can be done by analyzing the
components of financial ratios, including:
1. Liquidity Ratio
Liquidity ratio is a ratio that describes the company's ability to meet short-term
obligations. The level of liquidity can be seen in the following ratios:
a. Current Ratio
Current Ratio is a ratio used to measure the company's ability to pay short-term liabilities.
b. Quick Ratio (Quick Ratio or Acid Test Ratio)
The quick ratio is a ratio that shows the company's ability to pay current liabilities without
taking into account the value of inventory.
2. Activity Ratio
The activity ratio is a ratio used to measure the effectiveness and efficiency of the
company in using the assets owned by the company. Ratios included in the activity ratio
include:
a. Inventory Turnover Ratio
The inventory turnover ratio is used to measure the activity or liquidity of the company's
inventory.
b. Total Asset Turn Over Ratio
The total asset turnover ratio illustrates the efficiency with which the company uses all
assets to generate sales.
3. Solvency Ratio
Cashmere (2008) explains that the solvency ratio is a ratio used to measure the extent
to which the company's assets are financed with debt and measure the company's ability to
pay all its obligations, both short and long term if the company is liquidated. Ratios included
in the solvency ratio include:
a. Total Debt to Asset Ratio
This ratio measures how much the company's assets are financed by debt or how much the
company's debt affects the management of assets.
b. Total Debt to Equity Ratio
This ratio shows the relationship between the amount of long-term debt and the amount of
equity capital provided by the company owner, to determine the amount of funds provided
by creditors with company owners.
4. Profitability Ratio
Profitability ratios are the company's ability to earn profits through all existing
capabilities and sources such as sales activities, cash, capital, number of employees, number
of branches and so on.Ratios included in the profitability ratio include:
a. Gross Profit Margin
Gross profit margin is a measure of the percentage of any residual sales after the company
has paid the cost of goods sold.
b. Operating Profit Margin
Operating profit margin is a measure of the percentage of each sale remaining after all other
costs and expenses have been deducted except interest and taxes, or the net profit generated
from each dollar of sales.
c. Net Profit Margin
Net profit margin is a percentage measure of any residual sales proceeds after deducting all
costs and expenses, including interest and taxes.
d. Return on Asset (ROA)
Return on Asset is a ratio that measures the company's overall ability to generate profits with
the total assets available in the company.
e. Return on Equity (ROE)
Return on Equity is a measurement of the income available to the owners of the company
(both common shareholders and preferred shareholders) on the capital they invest in the
company.
f. Earning Per Share (EPS)
Earning Per Share is a ratio that describes the number of dollars earned for each share of
common stock.
Financial Performance
Company performance is a description of the company's financial condition over a
certain period of time. Financial performance is measured using financial statements
supported by other non-financial data. From the financial statements, the company's
performance can be measured from the financial statements in the form of balance sheets,
profit and loss, cash flow and changes in capital. Assessment of financial performance in a
company is closely related to achieving the company's main goal, namely increasing the
value owned by the company. Financial performance assessment is carried out
systematically to determine the performance of a company and to be a means of improving
the company's poor performance. This is important to do for the company merger process
and to determine the fair value of shares offered on the stock exchange.
Conceptual Framework
Fluctuating global economic conditions can affect the condition of the Indonesian
economy. This influence will cause changes in demand and supply for the capital market.
This is important to note in the mechanism of demand and supply of stock prices which will
affect the return that will be obtained by investors. In addition, the impact will also affect
the company's performance. By Therefore, investors need to pay attention to internal factors
and external factors that will affect the stock return of a company.
Investor assessment of a company's shares includes paying attention to the
performance of the company that issued the shares. Stock returns are very important for
companies because they are used as one of the performance measures of a company. In
determining potential stocks with a high level of return and low risk, investors must be able
to analyze how the condition of these stocks when influenced by financial performance and
macroeconomic variables. The results of the analysis of this research are expected to be
information for investors for consideration in choosing and making investment decisions in
the capital market.
Research Hypothesis
Based on the framework, several hypotheses can be concluded in this study, including:
1. Liquidity ratio using Current Ratio (CR) calculation has a significant positive effect
on stock returns in the short and long term. The interpretation is that if the Current
Ratio (CR) value increases, the stock return will increase.
2. The activity ratio using the calculation of Total Assets Turn Over (TATO) has a
significant positive effect on stock returns in the short and long term. The
interpretation is that if the TATO (Total Assets Turn Over) value increases, it will
increase stock returns.
3. The solvency ratio using the calculation of Debt to Equity Ratio (DER) has a
significant negative effect on stock returns in the long term short and long term. The
interpretation is that if the Debt to Equity Ratio (DER) value increases, it will reduce
stock returns.
4. The profitability ratio using the calculation of Net Profit Margin (NPM) has a
significant positive effect in the short and long term on stock returns. The
interpretation is that if the Net Profit Margin (NPM) value increases, it will increase
stock returns.
5. SBI interest rates have a significant negative effect in the short and long term on stock
returns. The interpretation is that if the SBI interest rate value increases, it will reduce
stock returns.
6. The exchange rate has a significant positive effect in the short term and long term on
stock returns. The interpretation is that if the exchange rate increases, it will increase
stock returns.
Types and Methods of Data Collection
The type of data used is secondary data. The data is time series data consisting of
quarterly company financial report data from January 2006 to September 2018, company
stock price opening and closing data, historical Indonesian interest rate data, and exchange
rate data. Supporting data in this study were taken from several libraries in the form of
literature books, journals, theses and theses related to this research. The following is a table
of data sources from this research: The sample in this study was selected based on the
sampling technique purposive sampling with the following criteria:
1. Listed as an issuer in the plantation and livestock agribusiness sector on the Indonesia Stock
Exchange from 2006 to 2018.
2. The company publishes financial statements consecutively from 2006 to 2018.
3. The company has never experienced delisting and relisting on the Indonesia Stock Exchange
from 2006 to 2018.
4. The companies selected are companies that have the largest market capitalization in each
agribusiness subsector on the Indonesia Stock Exchange (IDX).
Data Processing and Analysis Methods
Vector Error Correction Model (VECM)
The method in this study uses the development of the Error Correction Model (ECM)
equation model, namely using the Vector Error Correction Model (VECM) approach.
Vector Error Correction Model (VECM) or called restricted VAR is a restricted form of
VAR used for nonstationary variables but has cointegration. The term VECM is used
because there is a gradual correction through short-term adjustments to the deviation of the
long-term equilibrium model (Juanda and Junaidi 2012). VECM can be used on all variables
containing unit roots but cointegrated. The VECM model is used to see the adjustment of the
short-term behavior of an economic variable with its long-term behavior.
The VECM method has several stages in the form of tests that must be carried out as a
condition for the estimated model to produce good results. Some of these tests include data
stationarity test, selection of the optimum lag length (order), VAR stability test, and
cointegration test. If the tests have been carried out and have met the criteria, it will continue
to use the VECM method. The following testing stages in the VECM model will be
explained in more detail:
1. Stationarity Test
Data stationarity is a basic assumption of time series econometrics with stationarity
test which is the first step in processing time series data. Non-stationary data will have an
unfavorable impact on the estimated model due to heteroscedasticity and autocorrelation or
can cause spurious regressions. Estimation of data stationarity can be done by looking at
data trends in the graph, using autocorrelation and correlograms and unit root tests (Juanda
and Junaidi 2012). In this study, the stationarity test was carried out using the unit root test.
If the data contains a unit root then the data is said to be non-stationary, whereas if the data
does not contain a unit root then the data is stationary. Stationarity tests are carried out at the
level, first difference and second difference using Augmented Dickey Fuller (ADF). Data can
be said to be stationary if the absolute value of t-ADF is greater than the absolute value of
MacKinnon stationary data. Data is also said to be stationary if the probability value is less
than the real level of 5 percent.
2. Selection of the optimum lag length (order)
Optimum lag is needed to accept the influence of each variable on other variables in
the VAR system. The purpose of using lag optimum is to see how long the reaction of a
variable to other variables and to eliminate autocorrelation problems in a VAR system.
Juanda and Junaidi (2012) explained that an important thing in VAR estimation is the
determination of the lag of the VAR system. Determination of the optimal lag can be
determined using LR (sequentil modified Likelihood Ratio test statistic), AIC (Akaike
Information Criterion), SC (Schwarz Information Criterion, FPE (FinalPrediction Error)
and HQ (Hannan-Quinn information criterion) criteria.
3. VAR stability test
The VAR stability test is conducted by calculating the roots of the polynomial
function. If all the roots of the polynomial function are in the unit circle or have a modulus
value of less than one then the VAR model can be said to be stable. A stable VAR model
will produce Impulse Response Function (IRF) and Forecast Error Variance Decomposition
(FEVD) values that are considered valid.
4. Cointegration test
The cointegration test aims to determine the cointegration between variables that are not
stationary before differentiation or see variables that are not stationary before differentiation
whether or not the non-stationary variables have cointegration. In econometrics, variables
that are cointegrated mean that they have a long-term relationship or are in a state of long
run equilibrium. Juanda and Junaidi (2012) explain that if there are stationary variables and
possibly spurious regression but both are cointegrated, then the regression equation
becomes meaningful and not spurious regression. Cointegration testing in this study uses the
Johansen Cointegration Test. A variable is said to be cointegrated if the Trace Statistic
value is greater than the Critical Value or the probability is less than the 5 percent real level.
Impulse Response Function (IRF)
Impulse Response Function is a method to determine the response of endogenous
variables to certain shocks. The variable shock can be assumed that the shock of the i-th
variable does not only affect the i-th variable but is transmitted to all other endogenous
variables through the dynamic structure which in this study is the lag structure in the VAR
system. The shock is given by one standard deviation of the variable. Junaidi and Juanda
(2012) explained the impulse response function (IRF) is a technique of tracing the effect of a
shock or shock of one standard deviation experienced by one variable in the system on the
values of all current variables and several future periods. In this study, the time period used
in analyzing the stock return response to financial and macroeconomic ratios is projected in
the next 60 months (five years).
Forecast Error Variance Decomposition (FEVD)
Juanda and Junaidi (2012) explained that IRF analysis is used to see the impact of
shocks from one variable on another variable while FEDV analysis is used to describe the
relative importance of each variable in the VAR system due to a shock. FEDV analysis is
conducted in the VAR model with the aim of predicting the contribution of the percentage
variance of each variable due to certain changes in the VAR system. With FEVD, the
strength and weakness of each variable can be known to affect other variables. system to the
current values of all v a r i a b l e s and several future periods. In this study, the time
period used in analyzing the stock return response to financial and macroeconomic ratios is
projected in the next 60 months (five years).
Data Processing Application
The application in data processing in this study uses Microsoft Excel 2007 and Eviews
9 software. Microsoft Excel 2007 application is used to move and collect and calculate
financial ratio data from the financial statements of agribusiness companies. Eviews 9 is
used to obtain the results of the VECM equation model estimation, IRF and FEDV results.
History of PT Astra Agro Lestari Tbk (AALI)
PT Astra Agro Lestari Tbk (AALI) is a subsidiary of PT Astra International Tbk.
which concentrates on the plantation industry. AALI started developing its company more
than 30 years ago in 1988. In the beginning, AALI developed cassava and rubber
cultivation, until today it is one of the largest palm oil companies in Indonesia. AALI has an
area of 297 011 hectares of land spread across the islands of Sumatra, Kalimantan and
Sulawesi. On December 09, 1997, AALI conducted its initial public offering (IPO) on the
Indonesia Stock Exchange. It is owned by PT Astra International at 81.68 percent or 1 254
831 088 shares. AALI has ownership of
The company's public shares amounted to 20.32 percent or 349 943 333 shares by the end of
2016.
The Company is a leader in the oil palm plantation industry. To maintain business
sustainability, in addition to managing oil palm plantations, the Company also develops
downstream industries. The Company has operated palm oil refineries in North Mamuju
Regency, West Sulawesi Province, and Dumai, Riau Province. The refined palm oil
products in the form of Olein, Stearin, and PFAD are to meet the demand of export markets
including China, Malaysia, the Philippines and South Korea. The Company has also
operated NPK fertilizer blending plants in Donggala Regency, Central Sulawesi Province
since 2016 and in Bumiharjo, Central Kalimantan Province since 2017. In addition, the
Company has also started to develop palm-cow integration business in West Kotawaringin
Regency, Central Kalimantan Province.
AALI has 46 subsidiaries and continues to build a strong business network to increase
market share. In 2017, AALI implemented the basic strategy of moving sustainably, which
was consistently executed despite changes in order to adapt to conditions in the vegetable oil
business environment that demand sustainable business practices. The palm oil sector is
heavily influenced by external factors such as global economic developments, which affect
the demand for vegetable oil products, and policies related to the palm oil sector. In addition
to the influence of these external aspects, the Company's performance is also influenced by
the strategy and implementation of productivity improvement programs launched by the
Company.
The company's 2017 financial report explains that the company has a strong
foundation in implementing productivity improvement programs, including through
mechanization and automation, as well as research and development to produce superior
seeds. In addition to increasing crop productivity (yield), increasing palm oil production is
also achieved by strengthening partnerships with communities, both through plasma and
non-plasma patterns. On the other hand, to further strengthen competitiveness, the Company
strives to achieve a cost-leader position in every line of operation.
Financial Performance of PT Astra Agro Lestari Tbk (AALI)
In general, the total assets of PT Astra Agro Lestari Tbk (AALI) have a positive trend.
At the end of 2006 the company had total assets worth 3 496 955 million Rupiah and this
continued to increase in the following years. Until December 2017 the highest total assets
owned by the company were worth 24 935 426 million Rupiah. The increase in total assets
from year to year is due to an increase in trade receivables, inventories, advances and also
prepaid taxes. In the non-current assets section, there were additions to investments, long-
term receivables, deferred tax assets, producing plantation crops, fixed assets and tax refund
receivables.
The company's total liabilities come from short-term liabilities and long-term
liabilities. AALI's total liabilities tend to increase, until in 2015 it touched the highest figure
of 9,813,584 million Rupiah and in 2016 to 2017, respectively.
dropped to 6 632 640 million Rupiah and 6 398 988 million Rupiah respectively. This
occurred because in 2015 the Indonesian economy was weakening, and the US Dollar
exchange rate strengthened sharply against most world currencies including the Rupiah. As
a result, the company's debt, which is mostly in the form of dollars, increased sharply
compared to previous years. Meanwhile, the decrease in total liabilities was due to a
decrease in long-term liabilities in 2016 amounting to IDR 2 689 673 million, which was the
result of the decrease in total liabilities originally in 2015 amounted to 6 291 451 million
Rupiah.
The company's sales and equity tend to increase from year to year. In 2016 and 2017,
AALI's equity surged compared to the previous years, totaling IDR 17 593 482 million and
IDR 18 536 438 million, respectively. In 2015 there was a considerable reduction in net
profit of 73.46 percent or IDR 1 925 591 million. This was due to the effect of the decline in
world crude oil prices which resulted in the price of most commodities decreasing,
especially palm oil or Crude Palm Oil (CPO) by 15.8 percent compared to the previous year.
Overall, the Company's net profit declined as a result of price factors as well as increased
interest on loans and foreign exchange losses which increased along with the company's
debt.
History of PT Charoen Pokpand Indonesia Tbk (CPIN)
PT Charoen Pokphand Indonesia Tbk was originally established in Indonesia under the
name PT Charoen Pokphand Indonesia Animal Feedmill Co. Limited, based on the deed of
establishment contained in Deed No. 6 dated January 7, 1972. PT Charoen Pokpand
Indonesia is a company engaged in animal feed, breeding and cultivation of broilers along
with their processing, processed food, preservation of chicken and beef including cold
storage units, sales of poultry feed, chicken and beef, and ingredients from animal sources.
PT Charoen Pokpand Indonesia Tbk was allowed by the government to invest foreign
capital in 1971, to establish an animal feed company located in Jakarta with an area of 2.4
hectares. In 1983 the foreign shareholding was owned by Charoen Pokpand Overseas
Invesment Limited. On March 18, 1991 CPIN conducted an initial public offering (IPO) of
2,500,000 shares.
The Company is a leader in the poultry agribusiness sector with 3 main businesses
namely animal feed producers, Day Old Chicken (DOC) poultry farms and processed food
producers produced by the Company and its subsidiaries. In 2017, CPIN's total sales reached
49.37 trillion, an increase of 29.04 percent from last year. Animal feed production
contributed greatly to reach
49.15 percent of total sales, followed by DOC sales which contributed 38.92 percent of total
sales. And processed food production which contributed 8.04 percent of total sales.
The Company continues to build a strong business network to increase market share.
In terms of business activities, CPIN continues to increase the capacity of its broiler
business. This business activity has started in 2016 to strengthen the Company's position in
reducing price fluctuations in all lines of business and maximizing opportunities in each
business segment.
Financial Performance of PT Charoen Pokpand Indonesia Tbk (CPIN)
In general, the total assets owned by PT Charoen Pokphand Indonesia have a positive
trend. Although at the end of 2010 CPIN's total assets decreased by 13.90 percent from the
previous year with a value of 6 518 276 million Rupiah. Where in 2015 there was an
increase in the company's total assets highest from the previous years worth 24 684 915
million Rupiah. This addition was due to an increase in cash, inventory, advances, prepaid
value added tax on current assets. While in non-current assets there is an addition of
intangible assets and also fixed assets.
The total liabilities (obligations) of PT Charoen Pokphand Indonesia Tbk (CPIN) tend
to increase from year to year. The highest increase in total liabilities occurred in 2015 worth
12 123 488 million Rupiah. The highest increase in total liabilities occurred in 2014 with a
value of 70.44 percent. Components of liabilities that have increased include short-term
bank liabilities and business liabilities in short-term liabilities, and in long-term liabilities
that have increased include employee benefit obligations and long-term bank liabilities.
Sales at PT CPIN Tbk tend to increase. This resulted in an increase in the Company's
net profit. The largest increase in the Company's net profit in 2012 amounted to 13.48
percent while The biggest decline in 2014 was 30.96 percent. The main cause of the decline
in the company's net profit in 2014 was losses from the DOC segment caused by weak DOC
prices which began to decline in the third quarter and reached its lowest point in the fourth
quarter. The second factor was due to the increase in raw materials, most of which were
imported materials, causing an increase in production costs throughout 2014. In 2015 PT
CPIN Tbk experienced an increase in net profit, but only by 4.98 percent.
Vector Error Correction Model (VECM)
In estimating the model, several tests have to be carried out. In the Vector Error
Correction Model (VECM) equation model, this research has fulfilled the tests that need to
be done. The following is an explanation of the test results that have been met:
1. Stationarity test
Based on the test results, there are several variables that are not stationary at the
level, namely the natural log variable of the exchange rate. In the PT Astra Agro Lestari Tbk
(AALI) equation model, there are also variables that are not stationary at the level stage,
namely the Debt to Equity Ratio (DER), Total Asset Turn Over Ratio (TATO) and Net Profit
Margin (NPM) variables. Furthermore, in the PT Charoen Pokphand Indonesia Tbk (CPIN)
equation model, the variables that are not stationary at the level are PT Charoen Pokphand
Indonesia Tbk stock returns, Current Asset (CR) and Net Profit Margin (NPM). This test is
seen from the ADF probability value which is greater than the real level of 5%. Therefore,
further unit root testing at the first difference level is required. After further unit root testing
at the first difference level, the test results show that there are three variables that are not
stationary in the PT Charoen Pokphand Indonesia Tbk (CPIN) equation model, namely the
Current Asset (CR), Debt to Equity Ratio (DER) and Total Asset Turn Over Ratio (TATO)
variables. Therefore, unit root testing is carried out again at the second difference level.
After all variables are tested for unit roots at the second difference level, the test results show
that all variables are stationary at the second difference level. More details regarding the
stationarity test results in Appendix 1.
2. Determination of the optimum lag (order)
Based on the results of testing the optimum lag in the PT Astra Agro Lestari Tbk
model equation, the optimum lag in this equation is at lag three. Meanwhile, the results of
testing the optimum lag in the PT Charoen Pokphan Indonesia Tbk equation model show
that the optimum lag is at lag two. The results of determining the optimum lag carried out on
Eviews 9 software can be seen in Appendix 2.
3. VAR stability test
The test results resulted in the modulus value of the PT Astra Agro Lestari Tbk
equation model in the range of 0.105324-0.950791. While the PT Charoen Pokphand
Indonesia Tbk equation model is in the range of 0.231144-0.978809. Based on the results of
the VAR stability test of the two models, it can be concluded that the VAR system of the
two models is stable because all the roots are in the unit circle or have a modulus value of
less than one. The processing output results can be seen in Appendix 3.
4. Cointegration test
Based on the Johanssen Cointegration Test results of the PT Astra Agro Lestari Tbk
stock return equation model, four equations in the model were found to have cointegration
at the 5 percent real level. While in the PT Charoen Pokphand Indonesia stock return
equation model, it is known that in the model there is one equation that is cointegrated at the
5 percent real level. The cointegration results show that all equation models in this study use
the VECM approach.
The results of the VECM estimation of PT Astra Agro Lestari Tbk (AALI) stock
returns on the financial performance variables Current Asset (CR), Debt to Equity Ratio
(DER), Total Asset Turn Over Ratio (TATO), Net Profit Margin (NPM) as well as
Indonesian interest rates and exchange rates that show the influence of variables in the long
and short term can be seen in Table 5 below.
Based on the estimation results in Table 5, it can be seen that in the short term there
are no variables that have a significant effect on the stock return of PT Astra Agro Lestari
Tbk (AALI). In line with research by Sentosa (2017), this can occur because these variables
require time (lag) to react to other variables, and generally the reaction of a variable to other
variables occurs in the long term.
Meanwhile, in the long run, the variables that affect AALI stock returns are Net Profit
Margin (NPM) and macroeconomic variables of interest rates and exchange rates. In the
long run, the NPM variable has a negative but significant effect on AALI stock returns. A
high NPM indicates the Company's better performance and efficiency in generating profits.
From 2006 to 2018, the Company's profit fluctuated with an increasing trend. The largest
profit achieved in 2008 amounted to 2 631 019 million Rupiah and in 2014 amounted to 2
621 275 million Rupiah. In line with research by Amiga (2016), it is considered to be It is
reasonable because the movement of the Company's growth rate increased but in some years
experienced a decline and even a decline in the growth rate touched a negative value
compared to net profit which increased but not as high as the increase in sales.
Meanwhile, the macroeconomic variable of Indonesian interest rate in the long run has
a negative and significant effect on AALI stock returns. This is because an increase in
interest rates will increase the company's operating expenses due to increased loan interest.
In 2015, the Company's net profit decreased by 75.3 percent to Rp 619 billion as a result of
increased loan interest. Therefore, it can be interpreted that an increase in SBI interest rate
will decrease AALI's stock return in the long run. On the other hand, the exchange rate
variable in the long run has a positive and significant effect on AALI stock returns. For
export-oriented companies such as AALI, an increase in the dollar exchange rate against the
rupiah will increase the company's sales as a result of foreign exchange gains. Downstream
products, which are palm oil derivatives such as Olein and Stearin, are destined for the
export market with destination countries such as China, India, Bangladesh, Ghana,
Malaysia, Nigeria, Pakistan, Philippines, South Korea and several countries in the European
Union. So it is natural that an increase in the exchange rate will increase AALI's stock return
in the long run.
While the results of the VECM estimation of PT Charoen Pokphand Indonesia Tbk
(CPIN) stock returns on the financial performance variables Current Asset (CR), Debt to
Equity Ratio (DER), Total Asset Turn Over Ratio (TATO), Net Profit Margin (NPM) as
well as Indonesian interest rate variables and exchange rates that show the influence of
variables in the long and short term can be seen in Table 6.
Based on the VECM estimation results on the PT Charoen Pokphand Indonesia Tbk
(CPIN) model in Table 6, it shows that in the short term the Total Asset Turn Over Ratio
performance variable has a positive and significant effect on CPIN stock returns. In the long
term, the variables that have a significant effect on CPIN stock returns are the performance
variables Debt ot Equity Ratio (DER), Total Asset Turn Over (TATO), macroeconomic
variables of interest rates and exchange rates. The performance variables Debt to Equity
Ratio (DER) and Total Assets Turn Over (TATO) and the macroeconomic variable exchange
rate have a positive effect, while the interest rate variable has a negative effect on CPIN
stock returns.
In the short and long term, TATO has a significant positive effect on CPIN stock
returns. TATO illustrates how much the company's debt affects asset management.
Throughout 2006 to 2017 the TATO value generated by the company is more than one,
which shows that the company's performance is improving because it prints a TATO value
of more than one. However, in 2009 CPIN's TATO value was 0.9 times, this can be said to
be reasonable because in 2009 Indonesia was hit by a global economic crisis which the
company was also affected. On the other hand, the company scored an increased TATO
value in 2006 of 2.2 times and in 2010 of 2.3 times. This increase in TATO value indicates
that the company has good efficiency in managing its assets. The high TATO value is also
caused by the company's increasing sales volume of products produced by the assets owned
by the company. This gives investors confidence to continue investing in the company.
The Debt to Equity Ratio (DER) value describes the ratio between total liabilities and
total equity owned by a company. In the long run, a significant positive DER value is the
reason that from 2007 to 2008 the company's assets and debts were allocated to the
expansion of the company's expansion in several regions, modifying and increasing the
company's debt increase the capacity of existing machinery, so that in the long run the value
of debt can increase the value of the company. In addition, a lot of company debt is also
carried out for long-term investment which is used to finance the construction of a factory in
Makassar. So it is considered reasonable if the increasing DER value can increase the stock
return of the CPIN company.
The macroeconomic variable of Indonesian interest rates in the long run has a negative
and significant effect on CPIN's stock return. This is because an increase in interest rates
will increase the company's operating expenses due to increased loan interest. Where in the
year there was a global economic crisis which caused an increase in loan interest. So it can
be interpreted that an increase in SBI interest rates will reduce CPIN's stock return in the
long term. While the exchange rate variable in the long term has a positive and significant
effect on CPIN's stock return. For companies that have an export orientation such as CPIN,
the increase in the Dollar exchange rate against the Rupiah will increase the Company's
sales as a result of foreign exchange gains. From 2017 to 2018 CPIN expanded its market
reach by exporting various products from processed poultry products to Day Old Chicken
(DOC) to various destination countries such as Japan, Papua New Guinea and Timor Leste.
So it is natural that the increase in exchange rate will increase AALI's stock return in the
long run.
Impulse Response Function (IRF)
Based on the results of data processing, the results of the Impulse Response Function
(IRF) on stock returns of agribusiness companies are obtained. More details are attached in
Appendix 6, and in general the comparison of IRF results will be explained in the following
figure:
When there is a shock to the Current Ratio (CR) variable of one deviation, AALI's
return will respond with a fluctuating amount in the first month to the thirtieth month and
afterwards reach an equilibrium point in the long run. While at PT Charoen Pokphand
Indonesia Tbk (CPIN) when there is a shock to the Current Ratio (CR) variable of one
deviation, CPIN's return will respond with the highest and positive amount in the third
month to the fifteenth month and finally reach a long-term equilibrium point in the twentieth
period.
If there is a shock to the Current Ratio (CR) variable by one deviation, the stock return
that responds most negatively in the l on g -t e r m equilibrium to CR shocks is the stock
return of PT Astra Agro Lestari Tbk (AALI). This is due to the value of AALI's CR ratio is
smaller than the CR ratio of PT Charoen Pokphand Indonesia Tbk (CPIN). A good ratio
value is around 2, this ratio indicates the company's ability to meet short-term obligations.
AALI's CR ratio value in 2017 was 1.5 if while CPIN's CR ratio value was 2.3. This value
makes consideration for investors with the risk of the company not being able to pay its
maturing obligations. It can be said that AALI's ability to pay off short-term obligations is
not good. The managerial implication is that AALI should maintain the optimum value of
CR at 2 so that investors are more confident and trust to invest in companies with good
financial performance indications.
When there is a shock to the Debt to Equity Ratio (DER) variable of one deviation,
AALI's return will respond with a fluctuating amount from the initial period to the end, and
in the ninth month it reaches a low point of negative 0.0036 although afterwards it reaches
an equilibrium point in the long term. While at PT Charoen Pokphand Indonesia Tbk (CPIN)
when there is a shock to the Debt to Equity Ratio (DER) variable by one deviation, CPIN's
return will respond with a negative amount in the first to fifth months, then in the tenth
month it increases by being at a positive amount of 0.1 and finally reaches a long-term
equilibrium point in the twentieth period.
If there is a shock to the Debt to Equity Ratio (DER) variable on the stock returns of
the two companies, the company that will respond most negatively in the long-term balance
is the AALI company. The value of the ratio AALI's DER is the smallest ratio value
compared to CPIN's DER value. In 2017, AALI's DER ratio value was 0.3 while CPIN's
DER value was
0.5. The change in this ratio makes investors more sensitive to AALI's performance. As a
result, if there is a shock to DER, investors will consider the decision to invest in the
company.
When there is a shock to the Total Asset Turn Over Ratio (TATO) variable of one
deviation, AALI's return will respond with a fluctuating amount in the first month to the
fiftieth month and then reach an equilibrium point in the long run. While at PT Charoen
Pokphand Indonesia Tbk (CPIN) when there is a shock to the Debt to Equity Ratio (DER)
variable of one deviation, CPIN's return will respond with the highest positive amount in the
first month to the twentieth, and reach a long-term equilibrium point in the twentieth month.
If there is a shock that occurs in the Total Asset Turn Over Ratio (TATO) variable by
one deviation, it causes different responses in the two agribusiness companies. The largest
negative response due to a shock in the TATO variable is responded negatively by AALI.
This negative response is due to the low value of the ratio between net sales and total assets
of AALI. This ratio shows the effectiveness of the company in using all its assets to generate
revenue. AALI's TATO value in 2017 was 0.6 times, which means that every 1 rupiah
invested in assets will provide revenue of only 0.6 rupiah. The small TATO value will make
investors reconsider investing in AALI because other companies still have high and more
effective TATO values.
When there is a shock to the Net Profit Margin (NPM) variable of one deviation,
AALI's return will respond with the highest fluctuating amount in the first month to the
twentieth month and then reach an equilibrium point in the long run. While at PT Charoen
Pokphand Indonesia Tbk (CPIN) when there is a shock to the Net Profit Margin (NPM)
variable by one deviation, CPIN's return will respond with the highest positive amount in
the first month to the twentieth, and reach a long-term equilibrium point in the twentieth
month.
When there is a shock to the Net Profit Margin (NPM) variable by one deviation, the
stock return that will respond most negatively in the long-term equilibrium is AALI. The
low NPM value is a consideration for investor decisions, so the demand for AALI's stock
price is low and results in a low stock return. Meanwhile, CPIN stock returns respond
positively in the long-term equilibrium.
When there is a shock to the Indonesian Interest Rate variable by one deviation,
AALI's return will respond with the highest fluctuating amount in the seventh month of
0.0067 until the fortieth month and then reach an equilibrium point in the long run. While at
PT Charoen Pokphand Indonesia Tbk (CPIN) when there is a shock to the Indonesian
Interest Rate variable by one deviation, CPIN's return will respond with the highest positive
amount in the second month of 0.06 until the twentieth month, and reach an equilibrium
point in the long term long in the twentieth month. When there is a shock to the SBI interest
rate variable by one deviation, the stock return that responds negatively is AALI. This
shows that AALI stock returns have a high level of sensitivity when there is a change in
interest rates. Meanwhile, CPIN stock returns respond positively in the long-term
equilibrium.
When there is a shock to the exchange rate variable of one deviation, AALI's return
will respond with the highest amount of positive fluctuations in the first month to the tenth
month and afterwards reach an equilibrium point in the long run. While at PT Charoen
Pokphand Indonesia Tbk (CPIN) when there is a shock to the exchange rate variable by one
deviation, CPIN's return will respond with a negative fluctuating amount in the first month
to the sixtieth month and reach a long-term equilibrium point. A shock that occurs in the
exchange rate variable of one deviation will produce the largest negative response to CPIN
stock returns. This shows that if there is a change in the value of the Rupiah against the
Dollar, it will result in a negative decrease in CPIN's stock return in the long-term
equilibrium. This is related to the use of the company's animal feed raw materials, most of
which are imported products, so that when the Rupiah depreciates against the Dollar, it will
make the company's operating costs increase which will have an impact on reducing
revenue.
Good financial performance will increase the value of the company, and good
company value will attract investors and can increase demand for shares which consequently
the share price will increase. The IRF results show that financial performance and
macroeconomic variables have different effects on agribusiness companies. The difference
in the results of the IRF of each company is indicated because the two companies have
different company orientations. It can be seen in PT Astra Agro Lestari Tbk (AALI) which
has an export orientation and PT Charoen Pokphand Indonesia Tbk (CPIN) which is
domestically oriented. Both companies show different responses to shocks that occur,
especially when there are shocks to macroeconomic variables.
Forecasting Error of Variance Decomposition (FEVD)
The results of the decomposition analysis of AALI stock returns show that all
contributing variables have the same magnitude value from year to year. In the first month,
the variable that has the largest contribution is the AALI stock return variable itself. In the
12-month period, the largest contributing variables are Current Ratio (CR) with 5.61
percent, Total Asset Turn Over Ratio (TATO) with 5.51 percent, Indonesian Interest Rate
with 4.45 percent, exchange rate with 3.72 percent, and the smallest contributing variable is
Debt to Equity Ratio (DER) with 0.62 percent to AALI stock return. Meanwhile, in the
following periods, from 24 months to 60 months, the contribution of financial ratios and
macroeconomic variables has no significant change to AALI stock returns.
The financial ratio that contributes the most to AALI stock returns is the Total Asset
Turn Over Ratio (TATO) variable, which proportionally contributes the most to AALI stock
returns TATO increased every year until in the 60th month it made the largest contribution of 6.011
percent. In 2017 AALI had a TATO value of 0.6 times. When viewed from TATO growth, AALI has
an average TATO growth of 1 time. AALI's average total assets from 2006 to 2017 grew by 20
percent. Meanwhile, AALI's net sales value has an average growth value of 15 percent. TATO
measures the effectiveness of using all assets in generating sales.
Based on the results of the decomposition analysis of CPIN stock returns, the variable
that makes the largest contribution in the first month is CPIN's stock return itself. In the next
one-year period, the variable that plays a role in CPIN's stock return is dominated by NPM
by 11.49 percent, followed by the CR variable by 5.17 percent, SBI by 2.04 percent and
DER by 1.97 percent. Furthermore, other variables that provide a small proportion are
TATO of 0.94 percent and exchange rates of 0.37 percent.For a period of 24 months (2
years) to 60 months (5 years), the contribution of financial ratio variables and
macroeconomic variables to CPIN stock returns has not changed significantly.
The financial ratio Net Profit Margin (NPM) makes the largest contribution to the
stock return of PT Charoen Pokphand Indonesia Tbk (CPIN). The contribution value of
NPM in this study reached 11.49 percent in the 60th month. The NPM value will change
when there is a decrease in the value of profit for the year against sales. This change will
have an impact on CPIN's stock return. A decrease in the NPM value will cause investors to
release their shares and the demand for CPIN shares will decrease. As a result, stock returns
decrease, and vice versa when the NPM value increases it will make a major contribution to
the increase in CPIN stock returns. CPIN's NPM value is high, which is 5.06. A high NPM
value indicates that the current year's profit generated by the company is greater than its net
sales.
Managerial Implications
Based on the processing results to see the effect of financial ratios and macroeconomic
variables on agribusiness stock returns, as a whole and comparing the magnitude of the
financial ratio values of the two companies, the results obtained are not in accordance with
the research hypothesis. As an agribusiness company that represents the largest oil palm
plantation sector and animal feed sector in Indonesia. Overall, after comparing the values of
financial ratios which are internal factors and macroeconomic variables as external factors of
the two companies, it can be said that the company's performance in facing shocks that
occur in internal and external parties is good. However, the researcher suspects that there are
other stronger things that affect the stock returns of both companies, these factors include
external factors such as other macro variables besides exchange rates and interest rates and
the volume of shares traded in the stock market.
The results of this study can be used as an indicator for investors and traders to see the
potential increase in stock returns of both companies by looking at financial ratios and
macroeconomic variables that affect AALI and CPIN stock returns. In addition, investors
and traders can utilize this research as a reference to invest in both companies, namely
AALI and CPIN. Each financial ratio and macroeconomic variable has a different influence
on the stock returns of related companies, so investors and traders should give different
treatment to each company's stock. In general, the better the financial ratios of agribusiness
companies, the higher the stock returns in the future.
Investors and traders also need to consider the number of shares outstanding in the
stock market. The fewer the number of shares outstanding In the capital market, the share
price can increase higher if there is a market demand. The number of AALI shares released
to the capital market for trading by the public amounted to 263 297 900 shares at the end of
2017. Meanwhile, the number of CPIN shares released to the capital market for trading by
the public amounted to 337 516 200 shares at the end of 2017. So it can be concluded that
AALI shares have a tendency to increase higher than CPIN shares.
In general, the management of both companies optimizes the information obtained as a
consideration of investment policies and capital sources to improve company performance.
Good company performance will result in a good financial structure as well. In particular,
PT Astra Agro Lestari, Tbk (AALI) must maintain an increasing trend in corporate profits in
order to give the impression of good prospects for the future for investors. The increase in
company profits is obtained through increasing production and reducing production costs.
Furthermore, as a company that focuses on developing the downstream sector, the company
must be able to optimize the use of industrial equipment, given the short economic life. The
development of the upstream sector, such as the expansion of plantation areas and superior
seeds needs to be maintained to meet the needs of raw materials in the plantation sector.
Meanwhile, PT Charoen Pokphand Indonesia, Tbk (CPIN) needs to maintain the company's
profit every year and carry out a production plan to increase the company's profit by
expanding the market expansion plan to export its products to several wider states. The
company also needs to monitor optimal inventory levels by entering into purchase contracts
when raw material prices are cheap to reduce the risk of raw material costs against
fluctuations in commodity prices.
The government is required to ensure the stability of the national investment climate
and Indonesia's macroeconomic factors. Supervision of companies is also necessary to
protect the interests of investors. Company policies and incentives should also be more
directed towards the agribusiness sector such as the ease of exporting company products. For
investors and potential investors who are interested in investing in agribusiness sector
companies, this research can be a basic reference and reference in assessing financial
performance conditions and macroeconomic variables on stock returns that will be obtained.
Conclusions :
In the short term, Total Assets Turn Over (TATO) has a significant effect on
increasing the stock return of PT Charoen Pokphand Indonesia Tbk (CPIN). In the long
term, the SBI interest rate and exchange rate variables significantly affect the stock returns
of the two companies. Interest rates have a significant effect on reducing the stock returns of
the two companies. While the exchange rate has an effect on increasing the stock returns of
the two companies. The performance variable NPM has a significant negative effect on
AALI stock returns. The performance variable Debt Equity Ratio (DER) Total Assets Turn
Over (TATO) is also significant has a significant positive effect on the stock return of PT
Charoen Pokphand Indonesia Tbk (CPIN). Current Ratio (CR) has the largest contribution
to AALI stock returns, followed by Total Assets Turn Over (TATO). While Net Profit
Margin (NPM) contributes the most to stock returns at PT Charoen Pokphand Indonesia
Tbk (CPIN).
