The Effect of Debt to Equity Ratio, Return on Assets, and Working Capital Ratio on Stock Prices with Earnings per Share as a Mediating Variable: Evidence from Property and Real Estate Companies
DOI:
https://doi.org/10.38035/dijdbm.v7i5.7257Keywords:
Debt to Equity Ratio, Return on Assets, Working Capital Ratio, Earnings per Share, Stock Price, Path AnalysisAbstract
The property and real estate sector plays an important role in Indonesia's economic development through its contribution to investment and infrastructure. However, the sector has experienced declining stock prices in recent years, reflecting increased investor concern over corporate financial performance. This study examines the effects of Debt to Equity Ratio (DER), Return on Assets (ROA), and Working Capital Ratio (WCR) on stock prices, with Earnings per Share (EPS) as a mediating variable. A quantitative explanatory approach was applied using cross-sectional data from 31 property and real estate companies listed on the Indonesia Stock Exchange (IDX) in 2025. The sample was selected through purposive sampling based on the availability of audited financial statements and complete market data. Path Analysis based on multiple linear regression was used to estimate direct and indirect effects, while the mediating role of EPS was assessed using the bootstrap method. The results show that ROA positively affects EPS, EPS has a positive and significant effect on stock prices, and EPS mediates the relationship between ROA and stock prices. However, EPS does not mediate the effects of DER or WCR on stock prices. These findings support Signaling Theory by demonstrating the role of profitability in transmitting financial information to investors
References
Baker, M., Bloom, N., & Davis, S. J. (2021). Measuring economic policy uncertainty. The Quarterly Journal of Economics, 131(4), 1593–1636.
Brigham, E. F., & Houston, J. F. (2022). Fundamentals of financial management (16th ed.). Cengage Learning.
Chen, L., Danbolt, J., & Holland, J. (2021). Stock price reactions to earnings announcements: Evidence from emerging markets. Journal of International Financial Markets, Institutions and Money, 71, 101282.
Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. (2021). Signaling theory: A review and assessment. Journal of Management, 47(1), 239–267.
Dang, V. A., Li, Q., & Yang, C. (2022). Corporate leverage and firm performance: Evidence from international data. Journal of Corporate Finance, 72, 102161.
Gitman, L. J., Juchau, R., & Flanagan, J. (2022). Principles of managerial finance (8th Asia-Pacific ed.). Pearson.
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2021). Multivariate data analysis (8th ed.). Cengage Learning.
Hayes, A. F. (2022). Introduction to mediation, moderation, and conditional process analysis: A regression-based approach (3rd ed.). Guilford Press.
Lee, J., & Kim, S. (2023). The impact of financial ratios on firm performance: Evidence from Asian markets. Asia-Pacific Journal of Financial Studies, 52(2), 145–167.
Nguyen, T. T., Nguyen, H. T., & Tran, Q. T. (2023). Profitability and stock price dynamics: Evidence from emerging markets. Finance Research Letters, 52, 103456.
Pham, H. T., Hoang, T. N., & Nguyen, D. T. (2023). Firm performance and stock price volatility: Empirical evidence from ASEAN countries. Journal of Asian Economics, 84, 101553.
Riduwan, & Kuncoro, E. A. (2017). Cara menggunakan dan memaknai path analysis (Analisis jalur). Alfabeta.
Ross, S. A., Westerfield, R. W., Jordan, B. D., Lim, J., & Tan, R. (2022). Fundamentals of corporate finance (13th ed.). McGraw-Hill Education.
Sheng, Y., Qu, Y., & Ma, D. (2024). Stock price crash prediction based on multimodal data machine learning models. Finance Research Letters, 62, 105195.
Sitepu, N. S. (1994). Analisis jalur (Path analysis). Unit Pelayanan Statistika, Jurusan Statistika, Fakultas Matematika dan Ilmu Pengetahuan Alam, Universitas Padjadjaran.
Spence, M. (1973). Job market signaling. The Quarterly Journal of Economics, 87(3), 355–374.
Tran, D. T., Nguyen, P. T., & Le, Q. H. (2021). Liquidity and firm performance: Evidence from developing markets. Emerging Markets Review, 47, 100789.
Vo, X. V., & Ellis, C. (2022). Financial development and firm performance: Evidence from emerging markets. Research in International Business and Finance, 60, 101559.
Wang, Y., Zhang, X., & Li, J. (2022). The mediating role of earnings in financial performance and stock price relationships. Economic Modelling, 108, 105738.
Zhang, L., Chen, Y., & Zhou, G. (2022). Capital structure and firm performance: Evidence from panel data analysis. Journal of Banking & Finance, 134, 106305.
Downloads
Published
Issue
Section
License
Copyright (c) 2026 Iwan Darmawan
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish their manuscripts in this journal agree to the following conditions:
- The copyright on each article belongs to the author(s).
- The author acknowledges that the Dinasti International Journal of Digital Business Management (DIJDBM) has the right to be the first to publish with a Creative Commons Attribution 4.0 International license (Attribution 4.0 International (CC BY 4.0).
- Authors can submit articles separately, arrange for the non-exclusive distribution of manuscripts that have been published in this journal into other versions (e.g., sent to the author's institutional repository, publication into books, etc.), by acknowledging that the manuscript has been published for the first time in the Dinasti International Journal of Digital Business Management (DIJDBM).
