EFFECT OF INVESTMENT OPPORTUNITY SET (IOS) THROUGH BUSINESS RISKS ON STOCK RETURN IN PHARMACEUTICAL COMPANIES LISTED IN INDONESIA STOCK EXCHANGE

Abstract

ABSTRACT

Research it aims to examine the effect of investment opportunity set proxied by the Market to Book Value of Assets (MBVA), Market to Book Value of Equity (MBVE), Earning per share / Price (EPS / P) and Capital Expenditures to Book Value of Assets ( CEBVA) against business risks and the impact on returns. Stock the object of this research pharmaceutical companies listed on the exchange effect. This study usingmethod purposive sampling of sampling and research conducted over 4 years of observations in year 2013-2016 and was elected as many as 8 samples manufacturing company with 32 observations. Tests on the variables of the study carried out by using analysis Path (path analysis.)Using the classical assumption test, the correlation coefficient, regression coefficient, with residual path coefficients interpretation and analysis by F-test and test-t. The result of testing on the first track models show that proxy IOS namely Market to Book Value of Assets (MBVA) have a negative influence (-0462), Market to Book Value of Equity (MBVE) has a positive influence (0675), Earnings per share (EPS) have a positive effect (0.113) and Capital Expenditures to Book Value of Assets (CEBVA) has a positive influence (0374) on the businessrisk. In the second path analysis indirectly only, Capital Expenditures to Book Value of Assets (CEBVA) who have significant influence over the business risk on returns stockfor 0111 or 11.1%. Simultaneously and effect of 29.4% against the business risk and by 18.7% to return stock with residual value (Æ) each of 0.840 and 0.902.

Key Words: Investment Oppurtunity Set (IOS), Business Risk, Stock Return, Pharmaceutical Companies