RISK RELEVANCE OF COMPREHENSIVE INCOME: EVIDENCE FROM NON-FINANCIAL INDONESIA COMPANIES

Abstract

Purpose of the study: This study aims to examine the effects of net income volatility, other comprehensive income volatility, and comprehensive income volatility on stock return volatility.
 Methodology: This study employed a quantitative method with multiple linear regression. The sample is all non-financial companies listed on the Indonesia Stock Exchange from 2012 to 2017. Data used in this study are panel data sourced from www.idx.co.id and www.finance.yahoo.com. The sample selection in this study used a purposive sampling method with a total sample of 246 observations.
 Results: This study suggests that net income volatility is not associated with stock return volatility. However, other income volatility and comprehensive income volatility are positively associated with stock return volatility.
 Implications: Future studies can employ data from other developing country companies and developed countries to be able to compare the results of this study. Based on the result findings, the existing and potential investors must improve their ability and understanding of IFRS-based financial accounting standards. The Accounting Standard Board, especially in Indonesia, is expected to be able to improve the rules of financial accounting standards as well as the access to the availability of financial accounting standards for financial statements users, primarily related to the disclosure policies.
 Novelty: This study calculates risk-relevant, which is different from the previous studies, namely annual stock return volatility and annual comprehensive income components volatility. Annual stock return volatility is calculated based on the standard deviation of monthly stock return volatility, which is multiplied by √12. Besides, the annual comprehensive income components volatility is generated from the standard deviation of comprehensive income components generated every three months divided by the market value of equity at the beginning of the period, and multiplied by √4.