The Impact of Macroeconomic Factors and Financial Performance on Stock Prices: Evidence from Indonesia

Abstract

This study aims to test and analyze the effect of inflation, interest rates, and Earnings Per Share (EPS) on the stock prices of companies listed on the Small-Mid Cap Liquid Index of the Indonesia Stock Exchange (IDX). Utilizing annual data from 2020 to 2023, obtained from company annual reports and official economic indicators, the study employs purposive sampling to select 192 companies meeting specific criteria from an initial population of 252. Panel data regression analysis is conducted using the Random Effect Model (REM), incorporating control variables such as Return on Assets (ROA), Firm Size (FS), and Debt to Equity Ratio (DER). Guided by Signaling Theory, the results indicate that inflation has a significant negative effect on stock prices, interest rates have no significant effect, and EPS has a significant positive effect. The model explains 56.54% of the variation in stock prices (R? = 0.5654). These findings contribute to the understanding of how macroeconomic factors and company performance influence stock valuations in emerging markets, providing valuable insights for investors and policymakers.