The Effect of Profitability and Solvency on Stock Prices

(Empirical Study On Company Sector Property and Real Estate Listed in Indonesia Stock Exchange
Periode 2016-2018)

Muhamad Rizky
Program Studi S1 Akuntansi Fakultas Ekonomi dan Bisnis
Universitas Widyatama Bandung
Mrizky22797@yahoo.com

Summary
The purpose of this study is to find solutions to the phenomena that occur and determine the effect of
financial factors on stock prices on property and real estate companies listed on the Indonesia Stock
Exchange in 2016-2018. The dependent variable in this study is the stock prices, while the independent
variables are Profitability and Solvency. The population in this study amounted to 34 property and real
estate companies, while the sampling technique used was purposive sampling. So that the sample for this
study amounted to 12 property and real estate companies listed on the Indonesia Stock Exchange in 2016-
2018. The type of data used in this study is secondary data. Multiple regression analysis was used with a
significance level of 5%. The results of hypothesis testing indicate that partially Profitability and
Solvency affect the stock price. Simultaneously Profitability and Solvency effect on stock prices.
Keywords: Profitability, Solvency, Stock Prices

Preliminary
The property and real estate sector is
attractive because the business prospects of
these companies are quite convincing because it
is certain that they will never die because
housing is a basic human need and land prices
will tend to increase because demand will
always be large due to the increasing population.
Property and real estate companies are
companies that in addition to owning ownership
also sell (marketing) their ownership. Marketing
here can include selling or renting.
PT. Lippo Cikarang Tbk in 2016 has a
share price value of Rp. 3,140 and in 2017 have
a share price value of Rp. 1,475 so that PT.
Lippo Cikarang Tbk has decreased its share
price. Value of NPM of PT. Lippo Cikarang Tbk
in 2016 had a value of 25.54 and in 2017 had a
value of 161.89 so that PT. Lippo Cikarang Tbk
has increased its NPM value. Value of DER of
PT. Lippo Cikarang Tbk in 2016 had a value of
0.60 and in 2017 it had a value of 0.25 so that
PT. Lippo Cikarang Tbk has decreased its DER
value. From this explanation, it can be seen that
there is a difference between the theory and the
fact that the theory states that if the NPM value
increases, the stock price will increase while PT.
Lippo Cikarang Tbk had an increase in NPM in
2017 but experienced a decrease in share prices.
The theory states that if the DER is low or
decreases, the stock price will increase while PT.
Lippo Cikarang Tbk in 2017 experienced a
decrease in DER but experienced a decline in
share prices.
In the last three years, the Property & Real
Estate Index movement has tended to move
stagnant. Until mid-December 2017, the
movement of property and real estate stocks was
even corrected by 7 percent, from the level of
523.96 to 486.89 on December 17, 2017.
 The share price of CTRA as of December
11, 2017 was recorded at IDR 1,175 per share.
This figure is down 10 percent from the share
price as of January 1, 2017 of IDR 1,305 per
share.
Throughout 2017, BSDE's share price
tended to decline. As of December 11, 2017,
BSDE's share price was recorded at Rp1,585 per
share, a 14 percent drop from the share price of
January 5, 2017, which was valued at Rp1,845
per share.
Throughout 2017, the trend of LPKR's
stock movement tended to decline. On 11
December 2017, LPKR's price was at the level
of IDR570 per share, down 27 percent from the
share price as of 5 January 2017 of IDR 780 per
share.
According to Hans Kwee, Director of
Investa Saran Mandiri, property stocks are still a
bit difficult to look at. Moreover, with the
increase in interest rates and also a slowdown in
growth in the property sector, its share valuation
also decreased.
Loosening the loan to value (LTV) property
credit did not necessarily make shares in the
property sector promising. Especially with the
selling price of property which is now quite
expensive and is not matched by people's
purchasing power. According to Hans, middle to
lower class property and Transite Oriented
Development (TOD) projects are now more in
demand.
Hans sees, 2016 and 2017 were bad years
for property and in 2018 property showed
growth but was quite slow. According to Hans,
shares in this sector should be held for a long
period of time until property conditions fully
recover.
Theoretical basis
1. Profitability
Kasmir (2017: 96), the ratio to assess the
company's ability to seek profit. This ratio also
Table 1
provides a measure of the level of management
effectiveness of a company. This is indicated by
the profit generated from sales and investment
income. The use of profitability ratios can be
done by using comparisons between the various
components in the financial statements,
especially financial statements and income
statements.
2. Solvency
Kasmir (2017: 151), the ratio used to
measure the extent to which the company's
assets are financed with debt. This means how
much debt burden the company bears compared
to its assets. In a broad sense, it is said that the
leverage or solvency ratio is used to measure a
company's ability to finance all of its liabilities,
both short and long term, if the company is
dissolved (liquidation).
3. Stock Prices
Musdalifah Azis (2015: 80), prices on the
real market, and is the price that is easiest to
determine because it is the price of a share in the
ongoing market or if the market is closed, then
the market price is the closing price.
Research Methodology
The research method used descriptive
research type to collect data related to
profitability ratios, solvency ratios, and stock
prices in property and real estate companies
listed on the Indonesia Stock Exchange from
2016 to 2018. This type of explanatory research
is used to explain or prove the relationship
between the variables of profitability, solvency,
and share prices in property and real estate
companies listed on the Indonesia Stock
Exchange from 2016 to 2018.
Research Result
Model Test
Analysis of Panel Data Regression Model
1. Chow Test
 Chow test
Redundant Fixed Effects Tests
Equation: Untitled
Test cross-section fixed effects
Effects Test Statistic d.f. Prob.
Cross-section F 14.792059 (11,22) 0.0000
Cross-section Chi-square 76.599320 11 0.0000
Judging from the chow test shown in table indicates that H0 is rejected so that in this chow
1, the resulting Chi-square cross-section is test it uses the Fixed Effect Model and does not
0.0000. This value is less than 0.05. This figure continue to other regression tests.
Table 2
Regression Results Fixed effect model
Dependent Variable: Y
Method: Panel Least Squares
Date: 03/04/20 Time: 17:15
Sample: 2016 2018
Periods included: 3
Cross-sections included: 12
Total panel (balanced) observations: 36
Variable Coefficient Std. Error t-Statistic Prob.
C 1.811604 0.168107 10.77649 0.0000
X1 0.165307 0.066308 2.492999 0.0207
X2 0.267995 0.125349 2.137986 0.0439
Based on table 2 the results of the positive, meaning that every 1 (one) unit
regression test explain the effect of NPM and increase in Profitability (NPM), while other
DER on stock prices in the regression equation independent variables such as Solvency
as follows: (DER) are considered constant with a value
Share Price (Y) = 1.811604 + 0.165307 of 0 (zero), predictable prices shares as the
NPM + 0.267995 DER + 0.168107 dependent variable increased by 0.165307.
From this model it can be explained that: 3. The regression coefficient value for
1. The value of α = a constant of 1.811604 Solvency (DER) is 0.267995 and is positive,
shows the average value of the company's meaning that every 1 (one) unit increase in
stock price if the Profitability (NPM) and Solvency (DER), while other independent
Solvency (DER) variables are considered to variables such as Profitability (NPM) are
be worth 0 (zero). considered constant with a value of 0 (zero),
2. The regression coefficient value for predictable prices shares as the dependent
Profitability (NPM) is 0.165307 and is variable increased by 0.267995.
Classic Assumption Test
1. Normality Test

Figure 1 Normality test results

Based on Figure 1, the results of the data or 5%. So it can be concluded that in this study
normality test show that the Jarque-Bera value is the data used are normally distributed and meet
0.256675 which is less than JB 2 and the the requirements for regression testing.
probability value is 0.879556 greater than 0.05 2. Multicollinearity Test

Table 3
Multicollinearity Test Results
Variance Inflation Factors
Date: 03/04/20 Time: 17:25
Sample: 1 36
Included observations: 36
Variable Coefficient Uncentered Centered
Variance VIF VIF

C 0.027910 21.90108 NA
X1 0.008398 12.06768 1.210326
X2 0.006685 5.538645 1.210326
Based on Table 3, the multicollinearity test independent variables are free from
results show that the Centered Variance Inflation multicollinearity symptoms or there is no
Factor for each of the X1 variables is 1.210326 significant correlation.
and X2 1.210326, which means less than the 3. Autocorrelation Test
value of 10. So it can be concluded that the
Table 4
Autocorrelation Test Results
Cross-section fixed (dummy variables)
R-squared 0.904538 Mean dependent var 2.267222
 Adjusted R-squared 0.848129 S.D. dependent var 0.232313
S.E. of regression 0.090534 Akaike info criterion -1.680887
Sum squared resid 0.180320 Schwarz criterion -1.065074
Log likelihood 44.25597 Hannan-Quinn criter. -1.465952
F-statistic 16.03529 Durbin-Watson stat 1.868581
Prob(F-statistic) 0.000000
Based on Table 4, the results of the concluded that this means free from
autocorrelation test using the Durbin Watson autocorrelation symptoms.
Test (DW) indicate that the value of d = 4. Heteroscedasticity Test
1.868581 that du <d <4 - du. So it can be
Table 5
Heteroscedasticity Test Results
Heteroskedasticity Test: White
F-statistic 1.187540 Prob. F(5,30) 0.3387
Obs*R-squared 5.947993 Prob. Chi-Square(5) 0.3113
Scaled explained SS 3.666938 Prob. Chi-Square(5) 0.5983
Based on table 5, the results of the can be concluded that there are no symptoms of
heteroscedasticity test show that the probability heteroscedasticity in the regression model.
value is 0.3387 or 33.87%, greater than 5%, so it
Partial Hypothesis Test (t test)
Table 6
Partial Hypothesis Test Results (t test)
Variable Coefficient Std. Error t-Statistic Prob.
C 1.811604 0.168107 10.77649 0.0000
X1 0.165307 0.066308 2.492999 0.0207
X2 0.267995 0.125349 2.137986 0.0439
Based on table 6 the results of the partial (0.0207 <0.05). In addition, it can also be seen
hypothesis test (t test) are as follows: from the comparison between t count and t table
1. Testing the Profitability Hypothesis (NPM) which shows the tcount value of 2.492999 which
(X1) is greater than t table of 2.03452, it can be
H01 = Profitability has no effect on stock concluded that Ha1 is acceptable and H01 is
prices rejected, meaning that partially Profitability
Ha1 = Profitability has an effect on stock (NPM) affects the price. stock.
prices 2. Testing the Solvency Hypothesis (DER)
Based on the results of the t test (partial) in (X2)
the regression model, the profitability value H02 = Solvency has no effect on stock
(NPM) was obtained of 0.0207, so 0.0207 is prices
smaller than the significance value of 0.05
 Ha2 = Solvency has an effect on stock which shows the tcount value of 2.137986 is
prices greater than t table of 2.03452, it can be
Based on the results of the t test (partial) in concluded that Ha2 is acceptable and H02 is
the regression model, it is found that the rejected, meaning that partially Solvency (DER)
Solvency (DER) is 0.0439, which is smaller than affects the price. stock.
the significance value of 0.05 (0.0439 <0.05). In
addition, it can also be seen from the results of Simultaneous Hypothesis Test (Test F)
the comparison between t count and t table
Table 7
Simultaneous Hypothesis Test Table (F Test)
R-squared 0.904538 Mean dependent var 2.267222
Adjusted R-squared 0.848129 S.D. dependent var 0.232313
S.E. of regression 0.090534 Akaike info criterion -1.680887
Sum squared resid 0.180320 Schwarz criterion -1.065074
Log likelihood 44.25597 Hannan-Quinn criter. -1.465952
F-statistic 16.03529 Durbin-Watson stat 1.868581
Prob(F-statistic) 0.000000
Table 7 shows the results of simultaneous greater than the tcount of 3.28, it can be
hypothesis testing (F test) which obtained a concluded that Ha3 is acceptable, meaning
significant regression model value of 0.000000, jointly or simultaneously the Profitability
this value is smaller than the significance level variable (NPM) and Solvency (DER) affects the
of 0.05 (5%), which means 0.000000 <0.05. In stock price.
addition, it can also be seen from the results of
the comparison between Fcount and Ftable Test of the coefficient of determination (R2)
which shows the t-table result of 16.03529 is
Table 8
Coefficient of Determination
R-squared 0.904538 Mean dependent var 2.267222
Adjusted R-squared 0.848129 S.D. dependent var 0.232313
S.E. of regression 0.090534 Akaike info criterion -1.680887
Sum squared resid 0.180320 Schwarz criterion -1.065074
Log likelihood 44.25597 Hannan-Quinn criter. -1.465952
F-statistic 16.03529 Durbin-Watson stat 1.868581
Prob(F-statistic) 0.000000

Based on the test results of the coefficient variability of the dependent variable, namely the
of determination in table 8, it shows that the R2 stock price can be explained by the independent
value is 0.904538, which means that the variable, namely the Net Profit Margin (NPM)
and Debt to Equity Ratio (DER) variables in this
study. amounted to 90.45%, while the rest is
influenced by other factors.
Discussion
The Effect of Profitability and Solvency on
Stock Prices On Company Sector Property
and Real Estate Listed in Indonesia Stock
Exchange Periode 2016-2018.
In this study, profitability and solvency are
measured using Net Profit Margin (NPM) and
Debt to Equity Ratio (DER). The results of
statistical analysis for the NPM and DER
variables simultaneously obtained a regression
model significance value of 0.000000, this value
is smaller than the significance level of 0.05
(5%) which means 0.000000 <0.05. In addition,
it can also be seen from the comparison between
Fcount and Ftable which shows that the Fcount
value of 16.03529 is greater than Ftable of 3.28
which explains that NPM and DER
simultaneously have an influence on share prices
in property and real estate companies listed in
Indonesia Stock Exchange in the 2016-2018
period.
The magnitude of the contribution of the
stock independent variable is seen from the R-
squared column of 0.904538 or 90.45%, which
means that simultaneously Net Profit Margin
(NPM) and Debt to Equity Ratio (DER) have an
effect of 90.45% on stock prices. While the
remaining 9.55% is the contribution of other
variables not examined outside of Net Profit
Margin (NPM) and Debt to Equity Ratio (DER).
The results of this study state that
profitability as measured using Net Profit
Margin (NPM) has an effect on stock prices
which is supported by Arini's theory (2015)
which states that the indicator that can be used
as a measure of company profitability is Net
Profit Margin (NPM) which is the indicator
used. to measure net income per revenue.
Companies with high NPM will automatically
have the ability to protect themselves in difficult
times and can increase the company's share price
because investors can be attracted to invest in
the company due to the company's good
performance. Then the solvency which is
measured using the Debt to Equity Ratio (DER)
has an effect on stock prices which is supported
by the theory of cashmere (2017) which states
that the DER ratio is used to assess debt to
equity. This ratio is useful for knowing the
amount of funds provided by the borrower
(creditor) and the company owner. In other
words, this ratio serves to determine each rupiah
of own capital that is used as debt collateral.
Some investors consider that the higher DER
reflects the high level of corporate debt, thereby
increasing the risk received by investors as a
result of the debt interest expense the company
has. This makes investors not want to invest in
the company which causes the stock price to
decline.
Conclusions and Suggestion
Conclusion
Based on the phenomena, hypotheses,
testing and research results regarding
Profitability and Solvency on the Share Prices of
property and real estate companies listed on the
Indonesia Stock Exchange in the 2016-2018
period, the researchers took the following
conclusions:
1. Profitability as measured using Net Profit
Margin (NPM) affects the stock prices of
property and real estate companies listed on
the Indonesia Stock Exchange in the 2016-
2018 period. Profitability is considered by
investors. This is because the higher the
NPM value, the company's ability or
performance is fairly good so that if the
NPM value is high it will have a good
impact on the company's stock price.
2. Solvency as measured using the Debt to
Equity Ratio (DER) affects the stock prices
of property and real estate companies listed
on the Indonesia Stock Exchange in the
 2016-2018 period. Solvency is something
that investors pay attention to. This is
because a company that has a low DER will
have a good impact on the company's stock
price, on the other hand, if the company has
a high DER, it will have a bad impact or
experience a decrease in stock prices.
3. Profitability and solvency as measured using
Net Profit Margin (NPM) and Debt to
Equity Ratio (DER) together have an
influence on the share prices of property and
real estate companies listed on the Indonesia
Stock Exchange in the 2016-2018 period.
The increase in NPM and DER jointly
affects the increase or decrease in the share
price of property and real estate companies
on the Indonesia Stock Exchange in the
2016-2018 period.
Suggestion
1. For the company
Researchers hope that the company can
improve the company's financial performance in
order to attract the attention of investors.
Companies can pay attention to financial ratios,
especially profitability and solvency, because in
this study NPM and DER have an influence on
stock prices. This is because the stock price will
increase if many investors invest in a company
that has good financial performance.
2. For investors
We recommend that investors who are going
to invest in property and real estate companies
on the Indonesia Stock Exchange, researchers
suggest that they first conduct an analysis of
company performance, especially with regard to
profitability and solvency. Especially the value
of NPM and DER in the financial statements as
that in making investment decisions, because
these ratios are proven to have an effect on stock
prices according to this study or investors can
carry out analysis using other financial ratios
that are not used as independent variables in this
study as material. stronger consideration in
making decisions in investing in stocks.
3. For further researchers
It is recommended that for further research,
it is possible to add variables that have not been
included in this research model as independent
variables, because there are still other financial
ratios that can affect stock prices besides
profitability and solvency. Then add the number
of research samples so that there are no sample
limitations in the study.
References
Azis, M. (2015). Manajemen Investasi:
Fundamental, Teknikal, Perilaku Investor
dan Return Saham. Yogyakarta:
Deepublish.
Kasmir. (2017). Analisis Laporan Keuangan.
Jakarta: PT Rajagrafindo Persada
Kontan. (2018, Agustus 12). Bisnis properti
masih melambat, analis sarankan hold
saham emiten properti.
Diambil kembali dari Kontan.co.id:
https://investasi.kontan.co.id/news/bisnis-
properti-masih-melambat-analis- sarankan-
hold-saham-emiten-properti
Tirto. (2018, Januari 3). Apakah Saham Properti
Masih Layak Dikoleksi di 2018? Diambil
kembali dari tirto.id: https://tirto.id/apakah-
saham-properti-masih- layak-dikoleksi-di-
2018-cCCM