The Impact of Firm Financial Fundamentals on Stock Performance: An Empirical Evidence on Indonesian Telecommunication Sector

Abstract

The rapid development and market rivalry eventually posed massive challenges in determining the future development trend of organizations to become market winners. Several types of research were conducted exploring the factors affecting investment in telecommunication companies. One has found significant relevance in financial management, which consists of financing, investment, and dividend decisions in private sector mobile telecom businesses. This study aimed to examine the impact of financial performance on the stock price of telecommunication companies listed on the IDX (Indonesia Stock Exchange) in the period of 2014-2020. The financial fundamentals used are current ratio (liquidity), return on asset (profitability), total asset turnover ratio (activity), and debt to asset ratio (solvency). This research applies qualitative data method. The population in this study is nine telecommunication companies listed on the IDX (Indonesia Stock Exchange) for seven-year period, and the sample selection technique used was purposive sampling. It resulted in 63 samples in total being obtained in this study. Moreover, the data type of this research uses secondary data, which is the annual financial report. The data analysis method in this study is descriptive analysis, classical assumption test, and multiple linear regression analysis processed using e-views 12. This research result is based on the fixed-effect method run since it is more suitable for the model of this research. The result shows that the financial fundamentals variables mutually have a significant impact on the stock performance. Yet, not all variables are significant individually.