Determining the Effect of Return on Equity (ROE) on Price Earnings Ratio (PER) and Price to Book Value (PBV) in LQ45 companies, Indonesia

BADRUZAMAN, JAJANG and FADILAH, ADIL RIDLO and ABDURRAHMAN, FAUZI Determining the Effect of Return on Equity (ROE) on Price Earnings Ratio (PER) and Price to Book Value (PBV) in LQ45 companies, Indonesia. WSEAS TRANSACTIONS on BUSINESS and ECONOMICS.

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Abstract

This research was conducted to determine the effect of Return on Equity (ROE) on Price Earnings Ratio (PER) and Price to Book Value (PBV) in LQ45 companies listed on the Indonesia Stock Exchange (BEI). The data studied were financial reports published by 37 companies for four periods, namely 2015 to 2018. The data processing program uses the Eviews 9 program. The contribution of this article is to support investment decisions. The processing results show that ROE has a positive and significant effect on PER. and ROE has a positive and significant effect on PBV. Both are shown by the results of data processing in a positive correlation coefficient and beta coefficient. This correlation shows that in investors making investment decisions, ROE is used to make investment decisions. Then ROE will have an impact on company value. The higher the ROE, the higher the firm value will be. Furthermore, other factors influence PER and PBV, namely dividend playout ratio, return on assets, profit margin, inflation, interest rates, economic conditions, and company competition, both similar and different. Keywords: Return on Equity, Price Earnings Ratio (PER), Price to Book Value

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