Leverage, profitability, firm size, exchange rate, and systematic risk: Evidence from the manufacturing industry in Indonesia

Enjelin Rosari Wiyono, Agus Widodo Mardijuwono

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

Systematic risk, a type of manageable risk for firms, enables business management to perceive and take necessary actions to counter market risks. This study looked into leverage, profitability, firm size, exchange rate, and systematic risk. This study analysed secondary data retrieved from 369 manufacturing companies listed on the Indonesia Stock Exchange (IDX) from 2016 to 2018. The multiple linear regression analysis was adopted to test the hypotheses, while SPSS was applied to perform data analysis. The study outcomes revealed that leverage had a significantly negative relationship with systematic risk, while profitability and firm size displayed a significantly positive relationship with systematic risk, and exchange rate did not exhibit any significant relationship with systematic risk. The study offers managerial implications that leverage should be managed well to understand systematic risk, mainly because high leverage generates more risk for a firm. Firm profitability and firm size offer good understanding about firm-level systematic risk. Study limitations and future research endeavours end this paper.

Original languageEnglish
Pages (from-to)442-448
Number of pages7
JournalCuadernos de Economia (Spain)
Volume43
Issue number123
DOIs
Publication statusPublished - Sept 2020

Keywords

  • Exchange Rate
  • Firm size
  • Leverage
  • Profitability
  • Systematic Risk

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