Determinant of earnings response coefficient on the Indonesian and Singaporean stock exchanges during the COVID-19 pandemic

Abstract

Earnings response coefficient (ERC) is one of the important things for companies and investors, as it reflects a company’s good value. The COVID-19 pandemic, which is happening globally, has greatly affected capital market conditions and companies in general. It is necessary to examine what factors affect ERC significantly to provide an overview to the company while maintaining the good name of the company. This study aims to analyze the effect of firm growth, leverage, information asymmetry, and systematic risk on ERC with dividend payout ratios as moderating on the Indonesia Stock Exchange and Singapore Stock Exchange. The study uses a quantitative approach with secondary data in the form of companies’ annual reports. Population was made up of food and beverage and tobacco manufacturing companies in 2018–2020. It consists of 38 JASICA index companies on IDX, and 33 SGX index companies on SGX. The results showed that, firstly, leverage and systematic risk had a significant negative effect on ERC. Second, firm growth and information asymmetry have no effect on ERC. Third, dividend payout ratio can weaken a positive influence of information asymmetry on ERC. Fourth, dividend payout ratio failed to moderate a positive effect of firm growth and a negative effect of leverage and systematic risk on ERC. All variables have no significant statistical difference between the two stock exchanges. These results indicate that a company must improve the performance and quality of information; pay attention to obligations, mitigate and manage risk to obtain optimal ERC.

Keywords

• dividend payout ratio
• earnings response coefficient (ERC)
• firm growth
• IDX
• JASICA
• leverage