Abstract
The purpose of this study is to provide empirical evidence regarding the effect of capital structure, company, size, earnings quality on stock returns with stock liquidity as an intervening variable. The method used in this study is descriptive and verification methods. This study uses 17 listed firms in Indonesia Stock Exchange as the sample specifically for the textile and garment industry over the period of 2014 to 2018 and analyzed by path analysis. The results show that capital structure, firm size, and earnings quality have significant and positive effects directly on stock returns and indirectly through stock liquidity. These findings imply that capital structure, firm size, earnings quality, and stock liquidity shall form positive information to investors under condition high trust of investors as the impact of decreasing asymmetric information. Consistent with signaling theory, this study proves that positive information on investors will be formed if there is an increase in investor confidence as a result of reduced information asymmetry.
Highlights
Stocks are one of the most attractive capital market instruments for investors because they offer attractive returns
The result of sub-structure 2 analysis shows that: (1) the tcount value of 2.277 is greater than 1.66388 with a significance of 0.037 less than 0.05 so that H4 is accepted in the sense that capital structure has a positive and significant effect on stock returns; (2) the tcount value of 2.567 is greater than 1.66388 with a significance of 0.032 less than 0.05 so that H5 is accepted in the sense that firm size has a positive and significant effect on stock returns; and (3) tcount value of 1.979 or greater than 1.66388 with a significance of 0.046 greater than 0.05 so that H6 is accepted in the sense that earnings quality has a positive and significant effect on stock returns
Empirical evidence shows that capital structure, firm size, earnings quality, and stock liquidity have a direct influence on stock returns
Summary
Stocks are one of the most attractive capital market instruments for investors because they offer attractive returns. The aim of investors to invest is to maximize stock return income (Budiarso & Pontoh, 2019). Stock returns are the benefits that investors get from investment policies with long or short term characteristics (Brigham & Ehrhardt, 2017:242). Investors generally expect a positive rate of return on shares. One of the industries that are of concern to investors is the textile and garment sub-sector.
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