The influence of profitability ratio, market ratio, and solvency ratio on the share prices of companies listed on LQ 45 Index

This research aims to analyze the influence of profitability ratio, market ratio, and solvency ratio on the share price of companies listed on LQ 45 Index. The independent variables used in this research is Return on Assets (ROA), Return on Equity (ROE), Earning per Share (EPS), Price to Book Value (PBV), Debt to Equity Ratio (DER), and Debt to Assets Ratio (DAR), while the dependent variable used is share price. The samples of this study are companies listed on LQ 45 Index in Indonesia Stock Exchange from 2010 to 2014. The samples are selected by using purposive sampling method and obtained 15 companies that fulfill the criteria specified. Data are processed using Multiple Regression Analysis and statistical test. The results of this study show that Return on Assets (ROA), Return on Equity (ROE), Debt to Equity Ratio (DER), and Debt to Assets Ratio (DAR) have no effect on share price, while Earning per Share (EPS) and Price to Book Value (PBV) have an effect on share price.


INTRODUCTION
Investment is the commitment of a number of funds or other resources done at a certain time, to obtain profit in the future, Tandelilin (2010).In analyzing and selecting the share, investors need relevant and adequate information through the company's financial statements.Therefore, the information contained in the financial statements is very useful for the parties who have an interest in the company.The management, as the internal party of the company, uses financial statements as the basis for measuring the company's performance.The external parties, such as investors, also use the financial statements to assist the investment activity in the capital market.The analysis of the company"s financial performance relies heavily on the information provided by the company in the form of financial statements and as one of the important sources of information related to the information about industry, economic conditions, company"s market share, management quality and other information in measuring the company"s performance.
In fundamental analysis, there are several financial ratios to reflect the company"s financial condition and performance.There are 5 financial ratios, namely liquidity ratio, profitability ratio, solvency ratio, activity ratio, and market ratio.Financial ratios are used to explain the strengths and weaknesses of a company's financial condition as well as to predict stock returns in the capital market.The ratios used in this study include profitability ratio, market ratio and solvency ratio.The main attraction for the company owners (shareholders) in a company is profitability.In this context, profitability is the results obtained through the efforts of the management on the funds invested by the company owners.Researches relating to the effect of financial ratios on the stock price have been done by some researchers.And the research results obtained have different conclusions.The different research results are the reason for the researchers to re-examine in order to know more about the effect of profitability ratio, market ratio, and solvency ratio on the share price of the companies listed on LQ 45 Index.LQ 45 Index is a stock index that is promising in investing because the position is on the TOP 95% of the total average annual value of stock transactions in the regular market.Jogiyanto (2008) states that the information published as an announcement will give a signal to investors in making investment decisions.If the announcement contains a positive signal, it can be expected that the market react as the announcement is received by the market.Signaling theory is based on the assumption that the information received by each party is not the same.In other words, signaling theory is associated with information asymmetry.

THEORETICAL FRAMEWORK AND HYPO-THESIS Signaling Theory
The information received by the investor is first translated as good news (good signal) or bad news (bad signal).If the earnings reported by the company increased, then the information can be categorized as a good signal because it indicates the good condition of the company.Conversely, if the earnings reported decreased, the company is not in good condition so it is considered as a bad signal.Van (2005) stated that financial ratios are tools used to analyze the financial condition and performance of a company.According to Mamduh M. Hanafi and Abdul Halim (2005), the purpose of financial ratios analysis is to help financial managers to understand what need to be done by the company based on the limited information derived from financial statements.

Financial Ratios
This research used three financial ratios: profitability ratio, market ratio, and solvency ratio.The following is the description of the three ratios related to this research:

Profitability Ratio
According to Mamduh and Abdul Halim (2005: 85), profitability ratio measures the company's ability to generate certain returns on assets and capital stock.The higher the profitability ratio is, the better the ability of the company to generate high profit.This can attract investors and ultimately the company's stock price will also increase.
The profitability ratios used in this study are: a.Return On Assets (ROA) This ratio measures the company's ability to generate net income based on a certain level of assets.This ratio can be formulated as follows: b.Return On Equity (ROE) This ratio measures the company"s ability to generate profits based on a certain capital stock.This ratio can be formulated as follows: (2)

Market Ratio
Market ratio or stock ratio is the ratio used to measure the value of stock.Sihombing (2008: 95) states that Price to Book Value (PBV) is a value that can be used to compare whether a share is more expensive or cheaper than the other shares.According to Ratnasari (2003), the higher the value of the Price to Book Value (PBV) indicates the higher the market price of the share.If the market price of the share is higher, the capital gain (actual return) will also be higher.The company that has good performance, the value of its PBV is usually above one.It indicates that the share market value is higher than its book value.Market value is the share price occurring in the share market at a certain time which is determined by market participants, ie by the demand and supply of the relevant shares in the share market.The book value per share shows the net assets owned by shareholders by owning one share.Since the net assets are equal to total shareholders' equity, the book value per share is total equity divided by number of shares outstanding.The book value (BV) can be formulated as follows: (5)

Solvency Ratio
Solvency ratio indicates the company's ability to meet all obligations by using all its assets when the company is liquidated.Solvency ratio has an effect on the company"s financial performance, so this ratio has a relationship with the company's share price.a. Debt to Equity Ratio Debt to Equity Ratio illustrates the extent to which the capital owners cover the entire debt (both current liabilities and long-term debt) to external parties and as the ratio that measures the extent to which the company is financed by debt.This ratio is also called leverage ratio.
The formula to calculate Debt to Equity Ratio is: (6) Sofyan (2013: 303) states that smaller Debt to Equity Ratio is better.And for external security, the best ratio is when the amount of capital is greater, or at least the same, as the amount of debt.

b. Debt to Assets Ratio
This ratio is the ratio between total debt and total assets.So, this ratio indicates the extent to which the debt can be covered by the assets.According to Agnes (2008: 13), Debt to Assets Ratio is a ratio that shows the proportion of liabilities held and all assets owned.The formula to calculate Debt to Assets Ratio is: The higher the value of debt ratio, the greater the company"s financial risk or failure risk in re-paying the loan.And vice versa, the smaller the debt ratio, the smaller the company"s debt, which means that the company"s financial risk to repay the loan is getting smaller.

Share Price
Shares are securities that show the ownership of a company, so the shareholders have the right to claim on the dividends or other distributions done by the company to its shareholders, including the right to claim the company's assets with the priority after the claim rights of the holders of other securities are met in case of liquidity.According to Kieso et.al (2014: 705), shares show the ownership of an entity.The share price is the price of a share that is going on in the share market at a certain time, which is determined by market participants and by the demand and supply of shares concerned on the capital market, Jogiyanto (2008: 167).Sartono (2003: 70) states that the market price of a share is formed through the mechanism of demand and supply in the capital market.The share price is one of the indicators of the company's management.The success in generating profits will give satisfaction to rational investors.The high share price will be profitable, in the form of both capital gains and better image for the company, thus making it easier for the management to obtain funds from outside of the company.

LQ 45 Index
LQ 45 Index is created and published by the Indonesia Stock Exchange (www.idx.co.id).This index consists of 45 stocks, with high liquidity, selected through several selection criteria.In addition to an assessment of liquidity, the selection of these stocks also considers market capitalization.According to Jogiyanto (2008), LQ 45 Index shares have the criteria to have been listed on the Indonesia Stock Exchange (IDX) of at least 3 months, and included in the top 60 of the total share transactions in the regular market, which are ranked based on the average market capitalization for 12 months.This Index will continually be reviewed every six months to ensure that the shares still meet the existing criteria.

Research Hypothesis
The research framework is shown Figure 1.

Data Analysis Technique
The data were analyzed using a quantitative approach with statistical tool of SPSS version 22.0.The data processing performed in this study includes classical assumption test using normality test; hypothesis test consisting of F test, determination coefficient (Adjusted R Square), t test; descriptive analysis.

DATA ANALYSIS AND DISCUSSION Normality Test
This analysis was used to measure whether the data have a normal distribution or not.The variables used include Return on Assets (ROA), Return on Equity (ROE), Earning Per Share (EPS), Price to Book Value (PBV), Debt to Equity Ratio (DER), Debt to Assets Ratio (DAR) and share price per sheet.
The results of One Sample Kolmogorov-Smirnov test state that the data were not distributed normally.It can be seen from the significant value of 0.030.This value is much below 0.05 that becomes the reference that the data are normal.However, Ghozali (2007) states that the regression model can still be used if normality is treated in a certain way.The way is to find outlier data and dispose of such data.There are two outlier data in the 75 samples, because the value of ZSR (Z-Score Standardized Residual) ≥ 2.5, i.e.PT Indo Tambangraya Tbk. in 2010 and 2013.The data is omitted because it has extreme value of the other samples, bringing the total of 73 samples.After being retested using normality test without outlier data, the result indicates the significant value of 0.087, which is above 0.05 as a reference for normal data.So, the data is declared normally distributed.

Multiple Linear Regression Test
To test the hypothesis, the statistical analysis used in this study is Multiple Regression Analysis (MRA).This analysis is used to examine the influence of independent variables, consisting of Return on Assets (ROA), Return on Equity (ROE), Earning Per Share (EPS), Price to Book Value (PBV), Debt to Equity Ratio (DER), and Debt to Assets Ratio (DAR), on dependent variable, consisting of Share Price.F test results show the value of R2 is 0.562, which means that 56.2% of the share price variance can be explained by changes in the six independent variables, namely ROA, ROE, EPS, PBV), DER, and DAR.The remaining (100% -56.2% = 43.8%) is explained by other factors outside the model.The significance value is 0.00, or less than 0.05, so it can be explained that the regression model fits to the data of the study.Then, partial test (t test) is conducted with the aim to test whether there is an effect partially between independent variables (ROA, ROE, EPS, PBV, DER, and DAR) and dependent variable (company"s share price).The test is conducted using Multiple Regression Analysis, with the test results as follows: Hypothesis Testing on ROA Based on t test in Table 6 on companies listed on the LQ 45 Index, the value of t count is -1.096 ≤ t table with a significance level of 0.277> 0.05.So, it can be stated that H0 is accepted, which means that variable of Return on Assets (ROA) has no effect on the share price.

Hypothesis Testing on ROE
Based on t test in Table 6 on companies listed on the LQ 45 Index, the value of t count is 1.433 ≤ t table with a significance level of 0.157 > 0.05.So, it can be stated that H0 is accepted, which means that variable of Return on Equity (ROE) has no effect share price.

Hypothesis Testing on EPS
Base on t test in Table 6 on companies listed on the LQ 45 Index, the value of t count is 6.714 > T table with a significance level of 0.00 > 0.05.So, it can be stated H0 is rejected, which means that variable of Earnings per Share (EPS) has an effect on share price.The fifth descriptive analysis is on the variable of Debt to Equity Ratio (DER) which is measured by dividing the total liabilities to the total equity held.The minimum value of DER variable is 0.13 acquired by PT.Indocement Tunggal Prakasa Tbk.(INTP) in 2014, while the maximum value of 2.02 is acquired by PT.Unilever Indonesia Tbk.(UNVR) in 2012.The mean value of the variable of Debt to Equity Ratio (DER) of the entire samples is 0.713, with the standard deviation of 0.46526.

Hypothesis Testing on PBV Based on t test in
The Sixth descriptive analysis sixth is on Debt to Assets Ratio (DAR) which is measured by dividing the total liabilities to total assets.The minimum value of DAR variable is 0.12 acquired by PT.Indocement Tunggal Prakasa Tbk.(INTP) in 2012.The maximum value of 0.67 is acquired by PT.Unilever Indonesia Tbk.(UNVR) in 2012.The mean value of the variable of Debt to Assets Ratio of the entire samples is 0.3770, with the standard deviation of 0.15290.
The last descriptive analysis is on the variable of share price, as the dependent variable.In this study, the share price is using company"s share market prices listed in the index.The share price used as the sample is the closing share prices per December 31 that have been adjusted.According to the Table 7, it can be explained that the average price of shares of the companies listed in LQ 45 Index during 2010-2014 was IDR 11,274.8219,while the highest share price in the period of the study is achieved by PT.Indo Tambangraya Tbk.(ITMG) in 2012 amounted to IDR 41,550.This means the ITMG has been able to convince investors that the company has a good performance.Lowest share price is owned by PT.Kalbe Farma Tbk.(KLBF) in 2010 amounted to IDR 650.This means that KLBF is less able to convince investors in the achievement of the performance done in the period.

Discussion
The summary of the results of the test can be seen in Table 8.Based on the test results of Multiple Regression Analysis (MRA), the variables of Return on Assets (ROA), Return on Equity (ROE), Earning per Share (EPS), Price to Book Value (PBV), Debt to Equity Ratio (DER) and Debt to Assets Ratio (DAR) simultaneously have an influence on the share price of the companies listed in the LQ-45 Index.Based on the value of R2, it can be seen that the variables of Return on Assets (ROA), Return on Equity (ROE), Earning per Share (EPS), Price to Book Value (PBV), Debt to Equity Ratio (DER), and Debt to Assets Ratio (DAR) have a contribution of 56.2%, the remaining 43.8% is influenced by other variables that are not included in the regression model.Other variables that are known to affect the share price are Net Profit Margin (NPM) and Dividend per Share (DPS).These results support the findings of the research conducted by Hutami (2012) entitled "The effect of Dividend per Share, Return on Equity and Net Profit Margin on the Share Market", which shows that DPS, ROE, and NPM simultaneously have an influence on share price.
ROA is the ratio used to measure the net profits derived from the use of the assets.The first hypothesis testing shows that Return on Assets has no  6,699.42.This is possibly caused by many spare parts that were damaged from too long in storage, so that the assets owned by the company cannot be used optimally to gain the profit.These results are consistent with the research conducted by Noer Sasongko and Nila Wulandari (2006) stating that the variable of Return on Assets has no effect on share prices.However, these results are in contrast to the research conducted by Susilawati (2012) stating that Return on Assets has an effect on share price.
In this study, ROE is not proved to have an effect on share price.This means that changes in ROE do not affect the value of share price.For example, PT.Astra Agro Lestari Tbk., a company engaging in plantation, in 2012 had a total equity of 9,365,411, generating a profit of 2,520,266, and the share price of 18,826.In 2013, PT.Astra Agro Lestari Tbk. got an increase in equity to 10,267,859, but there was a decline in profits to 1,903,088, with the share of 23,761.This means that PT.Astra Agro Lestari Tbk.(ASII) cannot use the equity held to generate profits well.This can occur due to changes in extreme climate and difficult to predict, so there are a lot of crop failures.The results of this research, therefore, cannot support the research conducted by Hutami (2012), but in line with the research conducted by Noer Sasongko and Nila Wulandari (2006).
The third hypothesis testing states that Earning per Share (EPS) has an effect on share prices.These results indicate that EPS information, which reflects its association with the number of shares, becomes valuable information for investors.For example, PT.Unilever Indonesia (UNVR) in 2010 had EPS of 443.9 and the share price worth 16,500.In 2011, PT.Unilever Indonesia (UNVR) had an increase in EPS to 545.66 and followed by an increase in share price to 18,800.In this case, the higher the EPS, the greater the company"s EPS.This will allow investors to gain greater profit sharing.This is certainly good news for investors.Such conditions seem to support the increasing demand for the shares that offer greater profit.These results are consistent with the research conducted by Atika Jauharia Hatt and Bambang Sugeng Dwiyanto (2012) stating that the variable of Earning per Share has an effect on share prices.
The fourth hypothesis testing states that Price to Book Value (PBV) has an effect on share prices.The positive and significant results of the variable of Price to Book Value are cause by the existence of interest of an investor using ratio analysis of Price to Book Value.For example, PT.Telekomunikasi Indonesia (TLKM) in 2011 had the value of PBV of 2.33 and the share value of 1,410.In 2012, PT.Telekomunikasi Indonesia (TLKM) got an increase in the value of PBV of 2.72, and followed by an increase in share price to 1,810.By looking at the book value of a company, an investor can find out the good and bad condition of the company which will be used as a place for investment.When there are many investors who invest in the company, the company's book value will increase.The size of the company"s book value will affect the Price to Book Value.This implies that the company value will be fully taken into account by investors in the purchase of shares.This can be explained that the greater the Price to Book Value, the better the growth of the company, so investors also find that the condition of the company will be profitable for investment.This, in turn, will increase the company's share price.The results of this research are consistent with the study conducted by Permana (2009) stating that the Price to Book Value has an effect on stock prices.
The fifth hypothesis testing finds that Debt to Equity Ratio (DER) has no effect on share prices.That is, the magnitude of DER does not affect the decline in share price.This is evidenced by the DER value of 0.65 acquired by PT.Telekomunikasi Indonesia Tbk.(TLKM) in 2013, with the share price of 2,150.In 2014, the DER of PT.Telekomunikasi Indonesia Tbk.(TLKM) increased to 0.71, with share price of 2,865.This can occur because of the good name of PT Telkom in the eyes of investors.So, the great amount of the company"s DER is not a barometer of the company's share price.These results are consistent with the research conducted by Malintan (2012) stating that the variable of Debt to Equity Ratio (DER) has no effect on share prices.
The sixth hypothesis testing proves that Debt to Assets Ratio (DAR) has no effect on share prices.This means that the magnitude of DAR does not affect the decline in the company's share price.This is evidenced that the DAR calculation of PT.Unilever Indonesia Tbk.(UNVR) in 2013 was 0.38, with the share price of 26,000.Meanwhile, in 2014, PT.Unilever Indonesia Tbk.(UNVR) got an in-crease in DAR calculation to 0.64, with the share price of 32,300.This can happen because PT.Unilever Indonesia Tbk. has an ability to manage its assets well, so PT.Unilever Indonesia Tbk.gains confidence from investors who will buy the company's shares.These results are consistent with the study conducted by Malintan (2012) stating that DAR has no effect on share prices.
From the testing on the effect of the variables of Return on Assets (ROA), Return on Equity (ROE), Earning per Share (EPS), Price to Book Value (PBV), Debt to Equity Ratio (DER), and Debt to Assets Ratio (DAR) on the share price, it can be seen from the fundamental analysis that the variables of Earning per Share (EPS) and Price to Book Value (PBV) have a significant positive effect on share prices.An investor should give priority more on the variables of Earning per Share (EPS) and Price to Book Value (PBV) in purchasing company"s shares than on the variables of Return on Assets (ROA), Return on Equity (ROE), Debt to Equity Ratio (DER), and Debt to Assets Ratio (DAR) which have no effect on share prices.

CONCLUSION, IMPLICATION, SUGGES-TION, AND LIMITATIONS
In general, it can be concluded that, partially, Earnings per Share (EPS) and Price to Book Value (PBV) have significant positive effect on share prices.This means that the investors take into account more on Market Ratios than on Profitability Ratios and Solvency Ratios in making investment decision in the market.
The limitations of this study as follows: 1.There are some data that are not normally distributed, with a total initial sample as many as 75 data.2. The discovery of 2 data outliers in the sample studied.3. The existence of profitability ratios which have no effect on the company's share prices, namely the variables of Return on Assets (ROA) and Return on Equity (ROE).
Researchers realize that there are still several limitations in this study.Therefore, the researchers suggest that for further research, the researchers should consider all parties, especially for those who will conduct similar research such as the following: 1.Further researches are expected to expand the sample to another index.2. Further researches are also advised to use other fundamental factors eg, Net Profit Margin (NPM) and Dividend per Share (DPS).

APPENDICES
Figure 1 Framework Table 6 on companies listed in the LQ 45 Index, the value of t count is 2.151 > T table with a significance level of 0.35 < 0.05.So, it can be stated that H0 is rejected, which means that variable of Price to Book Value (PBV) has an effect on share price.Based on t test in Table 6 on companies listed in the LQ 45 Index, the value of tcount is 0.016 ≤ T table with a significance level of 0.987 > 0.05.So, it can be stated that H0 is accepted, which means that variable of Debt to Equity Ratio (DER) has no effect on share price.The mean value of the variable of earning per Share (EPS) is IDR 826.9993, with the standard deviation of 924.54279.The fourth descriptive analysis is on the variable of Price to Book Value (PBV) which is measured using the division of BV ratio by the number of shares outstanding.The minimum value of PBV variable is 0.81 acquired by PT.Adaro Energy Tbk. (ADRO) in 2014.The maximum value of 45.03 x is acquired by PT.Unilever Indonesia Tbk.(UNVR) in 2010.The mean value of the variable of Price o Book Value (PBV) of the entire samples is 5.6058 with the standard deviation of 8.29975.

Table 8 Summary of Test Results Based on Hypothesis
on share prices.This could happen because manufacturing companies, such as PT.Astra International Tbk.(ASII) in 2013, has assets as much as IDR 213.994 million, with the amount of profit generated as much as IDR 22.297 million, and the share price of IDR 5,916.In 2014, PT.Astra International Tbk.(ASII) experienced an increase in assets to IDR 238.029 million, but the profits decreased to IDR 22.125 million, and the share price increased to IDR effect

Table 1 One-Sample Kolmogorov-Smirnov Test with Data Outlier Unstandardized Residual
c. Lilliefors Significance Correction.