Analysis of Fundamental Factors to Improve the Performance of Hospitality and Tourism Companies: Case Study of Companies Listed on IDX Before and After COVID-19

Abstract

The study aims to analyze the fundamental business factors to maximize shareholder wealth before and after COVID-19 as a representation of a normal economic environment and economic downturn. This quantitative research method uses data from 19 hospitality and tourism companies registered on the Indonesia Stock Exchange (IDX). The data used are financial statements for 2018-2020. The results provide empirical evidence that before COVID-19, the return on equity (ROE) was positively affected by the asset turnover ratio (ATO), net profit margin (NPM), and negatively affected by the current ratio (CR) and debt to equity ratio. (DER). Unexpectedly the stock return (SR) is not influenced by internal performance factors. After COVID-19, ROE was negatively affected by DER with a coefficient of -64%, and the stock return (SR) was influenced by ROE positively. The results of this study suggest, based on the experience of the COVID-19 pandemic, hotel and tourism company managers should focus more on maximizing shareholder wealth by increasing profitability (NPM) and asset productivity (ATO) as well as minimizing liquidity (CR) and avoiding excessive debt (DER). Moreover, after COVID-19, ROE was only affected by a high decrease in debt, then the stock return was affected by ROE. In short, to improve hotel and tourism companies’ performance which are heavily on assets investment, while their business is cyclical and vulnerable to economic turbulence and other external factors, maximizing profitability and minimizing risks are the two most important fundamental factors.