The effect of profitability, liquidity, and capital structure toward stock returns: A study on plantation companies listed in IDX

This study aims to analyze the effect of profitability, liquidity, and capital structure on stock returns. This study uses signaling theory as a research basis. This study uses a quantitative approach with a regression method, whose population data are plantation sub-sector companies listed on the IDX for the 2016-2021 period. The sample selection was carried out using purposive sampling and obtained as many as 90 samples from 15 companies. Based on the results using EViews 12, its indicate that profitability had a significant positive effect on stock return, liquidity did not have a significant effect on stock return, and capital structure did not have a significant effect on stock return. The implication of this study is that investors must pay close attention to the profitability ratio, as a high profitability ratio correlates to a higher rate of return. In the meantime, businesses must evaluate their use of capital in order to avoid going bankrupt, as well as assess their debt. The originality of this research is that it was undertaken in the plantation sub-sector, where few previous researchers had focused.

The effect of profitability, liquidity, and capital structure toward stock returns: A study on plantation companies listed in IDX

Introduction
Investors spend funds in stocks for stock returns.Return share is the amount of profits earned by investors from investment share (Brigham & Daves, 2014;Marpaung, Harjito, et al., 2022).Investors anticipate large returns from stock investment.High returns derived from the sale of price shares were greater than those derived from the purchase of price shares or from capital gains (difference profit).Investors desire high returns, yet high returns are associated with significant risk and uncertainty in determining stock returns.Risk This is influenced by rapid price increases and decreases.Hadiningrat et al. (2017) state that, the more the return offered on an instrument, the greater the risk will be acceptable (high return high risk).Capital loss is one of the risks that investors face.Capital loss (difference loss) refers to losses incurred as a result of a drop in the stock's market value.In order to make an informed investment decision, an investor must do a study of the share price's ups and downs.
Coconut plantation palm is one of the extant sub-sectors in the sector Goods Primary Consumers (Consumer Non-Cyclicals) and has become the focus of domestic investors of money because to its profitability and high returns.The Central Bureau of Statistics (BPS) claimed that plantation coconut palm has ratio commodity that is low and deemed more profitable than plantation other.According to Article 39 of the Constitution of the Republic of Indonesia for 2014, the plantation sector possesses great potential and plays an essential role in the national economy's development in order to realize the wealth and happiness of the people in a just manner (Globalplanet, 2021).
On the basis of this phenomena, it may be inferred that the price of a share of stock fluctuates due to a number of factors.Because of this, investors must be cautious while making investment decisions, such as selecting an investment research case study.Ratio finance is a key component utilized to analyze investment and ratio data, which is included in the finance report.due to the fact that investors are obligated to (financial report).Analysis ratio refers to the relationship between selected components of the report data finance.Utilized ratios include ratio profitability, ratio liquidity, and capital structure.
One aspect of ratio finance is ratio profitability.Ratio profitability is the measurement of a company's ability to generate profit from its sales and production (Oroh et al., 2019).Profitability ratio is the ratio of a company's ability to generate profit from its sales and production (Weygandt et al., 2016).Study conducted by Octovian and Winarsa (2021) indicate that ROA has a positive and significant impact on stock return.Nevertheless, Butar et al. (2021) state that ROA has no bearing on caught returns stock.
Liquidity is a measurement of a company's ability to pay down short-term or near-term loans (Weygandt et al., 2016).Ratio liquidity measures a company's capacity to fulfill its existing obligations and meet its predictable cash requirements (Brigham & Daves, 2014).according to study conducted by Puspitasari (2017), CR has a negative and significant impact on stock returns.However, study undertaken by Kampongsina et al. (2020) contradicts this conclusion.
The capital structure is able to offer finances for an extended length of time as long as it includes of both internal and external capital.Owned debt will affect existing profit clean for shared returns form.Study conducted by Basalama et al. (2017) showed that DER has a good and large impact on stock performance.Hasanudin et al. (2020) stated that DER has a negative and large impact on stock returns.
Previous research has found varying results on variables such as Return on Assets (ROA), Current Ratio (CR), and Debt to Equity Ratio (DER) to stock return.Differences in prior yield studies (research gaps) made this study necessary to reinvestigate.Furthermore, the distinction between the previous study and this study is that this research was conducted in plantation subsectors, whereas the previous study was conducted in manufacturer corporations.This pertains to the company's plantation returns from 2016 to 2021.Based on the foregoing history, this study will reexamine the impact of plantation firms' profitability, liquidity, and capital structure.

Signaling Theory
Signal theory was published by Spence for the first time in 1973.He stated that a signal or signal is sent by the sender (owner of the information) to the recipient of the signal (investor) regarding information that describes the condition or performance of the company, then the signal receiver will receive and utilize it as a signal to take action in accordance with the understanding received.Signal theory explains the actions taken by management in providing perceptions of the company's prospects to outsiders (Connelly et al., 2011).Submission of this information is done in order to reduce asymmetric information because the delivery of information will be important in making investor decisions.Information asymmetry is the difference in information held by management and investors regarding the performance, prospects and condition of the company and reflection by its return.
The return on an investor's stock investment is a signal that they desire.The corporation is going to spare no effort in order to boost the value of the company and pique the interest of potential investors in the hopes that they would provide financial backing.When there is a growth in the value of the company, there is also an increase in the returns that investors receive.On the other hand, the stock returns that are acquired will not be maximized if the value of the company continues to decline.As a result, a company will work to improve its credibility in order to attract investors interested in investing in the company.
One of the internal elements, specifically the fundamental factors affecting the company, can have an effect on the return on the stock itself.The fundamental factors of the company are factors that are directly related to the performance initiatives of the company, and they are typically presented in the form of financial ratios (Myers, 2001;Weygandt et al., 2016).As a result, financial criteria such as profitability ratios, liquidity, and capital structure are utilized in this research in order to investigate the signal movement that will take place on stock returns and determine whether or not it will be beneficial for investors.If the change of the ratio is consistent with the expectations that investors have for the firm, then this demonstrates that the company is sending a positive signal to investors encouraging them to invest in the company.In the opposite direction, if the change of the ratio does not match the expectations of investors, this implies that the company is providing investors a negative signal.

The effect of profitability on stock returns
Profitability is a ratio to measure how effective management is in getting profits (Brigham & Daves, 2014).The profitability indicator used is ROA.Return on Assets, also known as ROA, is a profitability ratio measuring tool that measures a company's ability to generate profits or profits by using the assets owned by the company in a certain period (Butar et al., 2021).According to signal theory, if a corporation is able to use its assets to generate maximum profit or profit for the company, this is an indication that investors should invest in the company.A high percentage of return on assets will convince investors that a company is able to manage its assets as efficiently as possible, resulting in high profits or profits and better returns for investors.Basalama et al. (2017) shown that return on assets has a positive and statistically significant effect on stock returns.Octovian and Winarsa (2021) conducted research with comparable findings about the impact of the current ratio, return on assets, and debt to equity ratio on stock returns.This study concludes that return on assets has a positive and statistically significant effect on stock returns.Thus, Nugroho (2020), who performed research on the impact of return on assets on stock returns, concluded that return on assets had an impact on stock returns.Consequently, it can be stated that the more the return on assets percentage, the greater the stock return investors gain.Based on the preceding explanation, the hypothesis for this investigation is: H1: Profitability has a positive effect on stock returns.

The effect of liquidity on stock returns
Liquidity is a ratio to measure the liquidity of a company.The liquidity indicator used is the Current Ratio (Hadiningrat et al., 2017).Current ratio or can be abbreviated as CR is a liquidity measure to measure a company's ability to meet short-term obligations (Nandani & Sudjarni, 2017).The lower the current ratio percentage, the company will be considered problematic in its liquidation.Vice versa, the higher the current ratio percentage, the company will be considered capable of paying off its short-term obligations.In accordance with the signal theory, investors want management presentations of financial statements pertaining to the company's ability to meet its short-term obligations.Investors will be interested in investing in a firm if this indicator is positive.If the company is able to pay off its short-term debt prior to maturity, this is a positive indicator for investors since it indicates that the company is able to manage its funds and generate significant returns (Kampongsina et al., 2020).
According to Ningsih and Soekotjo (2017), the current ratio positively affects stock returns.Nandani and Sudjarni (2017) studied the effect of the current ratio, return on equity, and earnings per share on stock returns and found comparable outcomes.In accordance with this, Siregar and Dewi (2019) investigated the impact of return on assets, debt to equity ratio, current ratio, and total asset turnover on stock returns.Consequently, it can be deduced that the return is greater the larger the proportion of the current ratio.Based on the preceding explanation, the study's hypothesis is as follows: H2: Liquidity has a positive effect on stock returns.

Effect of capital structure on stock returns
Capital structure is a ratio to measure the comparison of company debts, both short-term debt and long-term debt with company equity (Ningsih & Soekotjo, 2017).The capital structure indicator used is the debt to equity ratio.The debt to equity ratio , also known as DER, is a capital structure measurement tool used to assess debt equity (Basalama et al., 2017).The higher the company's DER value, the higher and greater the risk that the company is facing.Conversely, the lower the company's DER value, indicates that the company has a risk that tends to be small.A high DER value for a company will send a negative signal to potential investors, according to signal theory.Investors view management as incapable of managing funds and minimizing debt.
According to Puspitasari (2017), the debt-to-equity ratio has a negative impact on stock returns.this is consistent with the findings of Hasanudin et al. (2020) concerning the impact of the current ratio, debt to equity ratio, and net profit margin on stock returns.According to the research cited in the preceding section, the lower the DER value, the greater the expected return.Based on the preceding explanation, the hypothesis for this investigation is: H3: Capital structure has a negative effect on stock returns.

Research Design
This research uses a quantitative approach with the type of correlational research which is an inferential statistical analysis that seeks to find the influence that exists between two variables or even more.This research was used to examine three influences, namely profitability, liquidity, and capital structure on stock returns in plantation sub-sector companies listed on the IDX in the 2016-2021 period.
The population in this study are plantation sub-sector companies listed on the Indonesia Stock Exchange (IDX) in the 2016-2021 period, namely 25 companies.This research method is to use purposive sampling.Meanwhile, the samples obtained were 15 companies as seen in Table 1.The type of data processed in this study comes from the company's income statement contained in the annual financial statements of the plantation sub-sector which are listed on the IDX.The data used in this study is secondary data which is data collected by an institution and disseminated to the community.Methods of data collection in this study using the method of documentation and literature study.The documentation method is a data collection technique in the form of raw data through documentary sources of financial reports published by intermediaries such as IDX (idx.co.id) or also from the official websites of related companies.Then, a literature study is carried out by reading books, journals and sources available on the internet related to stock returns.

Dependent variable
Stock return is the rate of return and profit returns obtained by investors who invest their funds in a company (Bodie et al., 2014).

Independent variable
Puspitasari (2017) states that profitability is a ratio that will provide results in determining investment decisions.Return on assets (ROA) is a profitability ratio to measure how much profit a company gets using the assets owned by the company.Hadiningrat et al. (2017) stated that liquidity is a ratio used to see a company's ability to pay off its obligations.The liquidity ratio in this study is measured using the Current Ratio.The current ratio (CR) is a liquidity ratio to measure a company's ability to pay off its short-term obligations (Brigham & Daves, 2014).Ningsih and Soekotjo (2017) state that capital structure is a comparison of long-term debt that can be paid off with capital.The capital structure in this study is measured by the debt to equity ratio.The debt to equity ratio (DER) is a capital structure ratio to measure a company's ability to guarantee its long-term debt using the company's capital (Marpaung, Koto et al., 2022;Octovian & Winarsa, 2021).Based on Table 2, the maximum value of the stock return variable is 0.668393, while the minimum value is -0.886179.Meanwhile, the average value is -0.022483 and the standard deviation value is 0.296575.The first independent variable, namely profitability, has a maximum value of 0.732183, while a minimum value of -0.891589.Meanwhile, the average value is 0.002863 and the standard deviation value is 0.176411.The second independent variable, namely liquidity, has a maximum value of 9.572483, while a minimum value of 0.060138.Meanwhile, the average value is 1.828664 and the standard deviation value is 1.817584.The first independent variable, namely profitability, has a maximum value of 7.945362, while a minimum value of 0.050033.Meanwhile, the average value is 1.300309 and the standard deviation value is 1.192137.

Chow Test Results
The chow test was conducted to choose between the common effect model and the fixed effect model.The probability of the chi-square cross-section is 0.2323 ≥ 0.05.This indicates that H0 is accepted, which means that the common effect model is better than the fixed effect model.

Grange Multiplier Test Results
Lagrange multiplier test was conducted to choose between the common effect model and the fixed effect model.The probability of both Breusch-Pagan is 0.3106 ≥ 0.05.This indicates that H0 is accepted, which means that the common effect model is better than the random effect model.It also concludes that the common effect model is the most effective model to use in this study.

Normality Test Results
The normality test is used to test whether the data collected from the population and used has a normal distribution or not.The normality test used in this study is the Jarque-Bera statistical test with the Ordinary Least Square (OLS) method (Bougie & Sekaran, 2013).The probability value obtained is 0.227810 where the value is ≥ 0.05.This can be indicated that the sample used is normally distributed.

Multicollinearity Test Results
The multicollinearity test was carried out to find out the conditions for a correlation between independent variables (Bougie & Sekaran, 2013).The results of the multicollinearity test can be see at Table 3.Based on the results of the multicollinear test in Table 3, the independent variables in this study are free from multicollinearity symptoms because the correlation between variables is ≤ 0.9 or ≥ -0.9.

Heteroscedasticity Test Results
The heteroscedasticity test was carried out to find out whether there were differences in the variance of the variables in the regression model from one observation to another.The test was carried out using the white test method.The results of the heteroscedasticity test showed that the chi-square probability for Obs R-squared was 0.9778 ≥ 0.05.This indicates that the data used in this study did not experience heteroscedasticity problems.

Autocorrelation Test Results
The autocorrelation test was carried out to find out and see whether there was a correlation between the periods in question (Hair et al., 2007).The probability of chi-square on Obs R-squared is 0.5248 ≥ 0.05.Therefore, it can be concluded that the sample used is free from autocorrelation symptoms.

F test
The F test was conducted to determine whether the independent variables simultaneously affect the dependent variable.Probability (F-statistic) is 0.024399 ≤ 0.05.These results conclude that the three independent variables (profitability, liquidity, and capital structure) have a significant effect on the dependent variable (stock returns).In addition, these results also indicate that the model in this study is feasible and suitable for use.

Determination Coefficient Test
The coefficient of determination is carried out to determine the effect of the independent variables on the dependent variable.the coefficient of determination will provide information in the form of a percentage related to the effect of the independent variable on the dependent variable.The coefficient of determination on adjusted R-squared is 0.072 or 7.2%.This means that the independent variable can only explain the dependent variable of 7.2%, while the other 92.8% is explained by other factors outside the variables of this study.The t test analysis gives the result that the probability value on the profitability variable (X1) has a significance result of 0.0213 <0.05.In addition, Table 4 also gives the result that t count 2.346343 > t table 1.98698.It can be concluded that profitability has a positive and significant effect on stock returns so that H1 accepted.The t test analysis gives the result that the probability value on the liquidity variable (X2) has a significance result of 0.7844 > 0.05.In addition, the table above also gives the result that t count is 0.274457 <t table is 1.98698.It can be concluded that liquidity has no effect on stock returns so that it can be said to be H2 rejected.The t test analysis gives the result that the probability value on the capital structure variable (X3) gives a significance result of 0.3462 > 0.05.In addition, the table above also gives the result that t count is -0.947133 <t table 1.968698.It can be concluded that capital structure has no effect on stock returns so that it can be said H3 rejected.

Discussions The effect of profitability on stock returns
The results of this study state that proximate profitability to Return on Assets (ROA) has a significant positive effect on stock returns.Profitability can be taken into consideration by investors to invest their capital.This is because profitability can provide an overview of management performance in generating profits or net profits using the assets owned by the company.Therefore, this study concludes that profitability can be used as a benchmark to predict stock returns.Company management is required to maintain a level of profitability because in general investors will be attracted to companies that have high profit levels.If the level of profitability in a company is higher, then this indicates that the stock returns that will be received by investors will be higher.This is in accordance with the signal theory which states that management will try to maximize profits or gains so that investors are given a positive signal.In addition, a high level of profitability will increase investor interest in investing.The more investors invest, the company's ability to generate profits and profits will increase.The results of this study are in line with research conducted by Basalama et al. (2017), Octovian and Winarsa (2021), and Nugroho (2020) which states that profitability has a positive effect on stock returns.This means that if the value of profitability is higher, the stock returns obtained by investors will also be higher.

The effect of liquidity on stock returns
The results of this study state that liquidity proxied to the Current Ratio (CR) has no effect on stock returns.Therefore, this study concludes that liquidity cannot be used as a benchmark in predicting stock returns.Liquidity cannot be an important aspect to pay attention to.The level of liquidity in this study is too high and can be seen from the difference between the maximum value and the minimum value.The high level of liquidity is caused by the company's management being unwise in managing cash so that the company has a lot of idle money.The company also becomes less productive in maximizing available cash for production or other purposes in order to get maximum profit.Management should not have to hold back funds that are easy to disburse.Management can lend unused funds to other companies or can buy securities.Based on signal theory, management will use idle funds so that the company's liquidity level is not too high so that the signal given to investors is a positive signal.A high level of liquidity will also provide a high return.However, if the level of liquidity is too high, investors think that the company cannot maximize its current assets so that a lot of funds are not used.The results of this study are in line with research conducted by Hasanudin et al. (2020), Kampongsina et al. (2020), andButar et al. (2021) which state that liquidity has no effect on stock returns.Therefore, it can be concluded that the variable liquidity cannot interpret stock returns.

The effect of liquidity on stock returns
The results of this study state that the capital structure proxied to the Debt to Equity Ratio (DER) has no effect on stock returns.Therefore, capital structure cannot be used as a benchmark for predicting stock returns.Debt that is too high can be a burden for some companies in paying off these obligations.The higher the debt owned by the company, the higher the risk of liquidation in the company.However, on the other hand, debt is also used as capital and a source of funding.If the company is able to develop its business using the debt and has good prospects for the future, then investors will be interested in investing their capital.High debt levels are not a guarantee for investors to get returns .Based on signal theory, information about debt levels can only provide a neutral signal for investors because investors need to further analyze whether the debt has good prospects for business development or not.Therefore, capital structure is not an appropriate variable to be used as a factor in determining investor decision making.The results of this study are in line with research conducted by Worotikan et al. (2021) and Oroh et al. (2019) state that capital structure has no effect on stock returns.Therefore, management needs to consider the debt it has so that it doesn't have too much and avoids the company from the verge of bankruptcy even though debt is good as a source of funding.

Conclusion
Based on the research above, profitability has a positive and significant effect on stock returns in plantation sub-sector companies.Meanwhile, liquidity and capital structure have no effect on stock returns.In addition, this study has limitations such as: the sample used with the criteria is only 15 companies and the results of the coefficient of determination are only worth 7.2%.This research also has several implications that companies are expected to continue to increase company profits in each period because profitability can be used as a benchmark to be able to invest.In addition, companies need to consider using cash so that too much money is not used and evaluating debts that do not have good prospects for the development of the company's business.
Based on existing result of this study, the future study can conduct a comparative analysis of different plantation industry sub-sectors to investigate differences in the link between financial variables (ROA, CR, DER) and stock returns.This could include comparing the results of the plantation sub-sector study to those of other sub-sectors such as agriculture, forestry, or mining.
The next study in this area also can include any extra independent variables that may have an impact on stock returns in the plantation sub-sector.To improve understanding of the determinants of stock returns, characteristics such as firm size, company age, R&D investment, or environmental sustainability policies should be studied.

Table 1 .
Determination of the Research Sample

Table 4 .
Test Results t