Investment cash flow is not a major indicator of stock returns

Oct 13, 2025 by wbrum.org 87 views

The Effect of Cash Flow Components, Accounting Profit, and Company Size on Stock Returns in Manufacturing Companies Listed on the Indonesia Stock Exchange in 2012-2015

In the world of investment, one of the most crucial factors that can influence investor decisions is stock returns. The Indonesia Stock Exchange (IDX) is a significant platform for investors to buy and sell shares of various companies. However, with the vast number of companies listed on the exchange, investors often face challenges in making informed decisions. This study aims to explore the effect of cash flow components, accounting profits, and company size on stock returns in manufacturing companies listed on the IDX during the 2012-2015 period.

Research Methodology

This study employs a non-probability sampling approach, specifically Purposive sampling, where sampling is carried out not randomly but based on certain considerations. This criterion allows researchers to choose companies that are relevant to the research objectives, so that the results obtained can further describe the actual conditions. The research sample consists of 20 manufacturing companies in the consumer goods industry sector that meet certain criteria of the population of 33 companies.

Research Result

Based on data analysis, the results showed several important findings regarding the effect of each variable:

Cash Flow from Operating Activities: The results show that the cash flow of operating activities has a significant effect on stock returns. This can be seen from the value of tcount which is greater than ttable (-2.761> -1.992), and a significance value that is less than 0.005 (0.007 <0.05). This means, an increase in cash flows from operating activities can increase the return received by investors. Operational cash flow is a key indicator of a company's ability to generate sustainable income, and investors pay more attention to this aspect when making investment decisions.
Cash Flow from Investment Activities: Unlike the cash flow of operating activities, cash flows from investment activities do not show a significant effect on stock returns. With a significance value of more than 0.05 (0.849> 0.05), meaning that this variable does not contribute to changes in stock returns. Investment cash flow is not a major indicator of stock returns, and investors may not consider this aspect when making investment decisions.
Cash Flow from Funding Activities: The significance value obtained is 0.202 (0.202> 0.05), indicating that funding activity does not play a role in determining stock returns. Funding cash flow is not a significant indicator of stock returns, and investors may not consider this aspect when making investment decisions.
Accounting Profit: This research also found that accounting profits did not affect stock returns. The significance value of accounting profit reaches 0.186 (0.186> 0.05), which means that accounting profit information is not strong enough to influence investment decisions related to stock returns. Accounting profit is not a major indicator of stock returns, and investors may not consider this aspect when making investment decisions.
Company Size: Finally, the company's size also does not show a significant effect on stock returns with a significance value of 0.680 (0.680> 0.05). This shows that the size of the company's size is not a major indicator in predicting stock returns. Company size is not a significant indicator of stock returns, and investors may not consider this aspect when making investment decisions.

Analysis and Conclusion

From the results of this study, we can draw the conclusion that the cash flow of operating activities is the only variable that has a significant influence on stock returns on the companies under study. This shows that investors pay more attention to operational cash flows that can reflect the company's ability to generate sustainable income. Operational cash flow is a key indicator of a company's ability to generate sustainable income, and investors pay more attention to this aspect when making investment decisions.

Meanwhile, other variables such as cash flow from investment, cash flow from funding, accounting profits, and company size have no significant effect on stock returns. This provides insight for investors to focus more on managing operational cash flow in investment decision making.

Thus, this research underlines the importance of attention to the operational cash flow components in predicting the performance of the company's shares in the manufacturing sector. This is a strategic consideration for investors in formulating more informational and data-based investment policies.

Implications of the Study

The findings of this study have several implications for investors, policymakers, and company managers. Firstly, investors should focus more on operational cash flow when making investment decisions. This is because operational cash flow is a key indicator of a company's ability to generate sustainable income. Secondly, policymakers should consider the importance of operational cash flow when formulating policies related to the manufacturing sector. Finally, company managers should prioritize managing operational cash flow to improve the performance of their company's shares.

Limitations of the Study

This study has several limitations that should be noted. Firstly, the study only focuses on manufacturing companies listed on the IDX during the 2012-2015 period. Secondly, the study only considers a limited number of variables, such as cash flow components, accounting profits, and company size. Finally, the study uses a non-probability sampling approach, which may not be representative of the entire population of companies listed on the IDX.

Future Research Directions

This study provides several avenues for future research. Firstly, future studies should consider a larger sample size and a longer time period to increase the generalizability of the findings. Secondly, future studies should consider additional variables, such as market capitalization, dividend yield, and earnings per share, to provide a more comprehensive understanding of the factors that affect stock returns. Finally, future studies should use a probability sampling approach to increase the representativeness of the sample.

Conclusion

In conclusion, this study provides insight into the effect of cash flow components, accounting profits, and company size on stock returns in manufacturing companies listed on the IDX during the 2012-2015 period. The findings of this study show that operational cash flow is the only variable that has a significant influence on stock returns. This provides a strategic consideration for investors, policymakers, and company managers to focus more on managing operational cash flow in investment decision making.
Q&A: The Effect of Cash Flow Components, Accounting Profit, and Company Size on Stock Returns in Manufacturing Companies Listed on the Indonesia Stock Exchange in 2012-2015

In our previous article, we explored the effect of cash flow components, accounting profits, and company size on stock returns in manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2012-2015 period. In this Q&A article, we will answer some of the most frequently asked questions related to this study.

Q: What is the significance of this study?

A: This study is significant because it provides insight into the factors that affect stock returns in manufacturing companies listed on the IDX. The findings of this study can help investors, policymakers, and company managers make more informed decisions.

Q: What are the key findings of this study?

A: The key findings of this study are that operational cash flow is the only variable that has a significant influence on stock returns. This means that investors should focus more on operational cash flow when making investment decisions.

Q: Why is operational cash flow important?

A: Operational cash flow is important because it reflects a company's ability to generate sustainable income. Companies with strong operational cash flow are more likely to be profitable and have higher stock returns.

Q: What are the implications of this study for investors?

A: The implications of this study for investors are that they should focus more on operational cash flow when making investment decisions. This means that investors should look for companies with strong operational cash flow and avoid companies with weak operational cash flow.

Q: What are the implications of this study for policymakers?

A: The implications of this study for policymakers are that they should consider the importance of operational cash flow when formulating policies related to the manufacturing sector. This means that policymakers should encourage companies to prioritize managing operational cash flow to improve the performance of their company's shares.

Q: What are the implications of this study for company managers?

A: The implications of this study for company managers are that they should prioritize managing operational cash flow to improve the performance of their company's shares. This means that company managers should focus on improving operational efficiency, reducing costs, and increasing revenue to generate strong operational cash flow.

Q: What are the limitations of this study?

A: The limitations of this study are that it only focuses on manufacturing companies listed on the IDX during the 2012-2015 period. Additionally, the study only considers a limited number of variables, such as cash flow components, accounting profits, and company size.

Q: What are the future research directions?

A: The future research directions are to consider a larger sample size and a longer time period to increase the generalizability of the findings. Additionally, future studies should consider additional variables, such as market capitalization, dividend yield, and earnings per share, to provide a more comprehensive understanding of the factors that affect stock returns.

Q: What are the practical implications of this study?

A: The practical implications of this study are that investors, policymakers, and company managers should focus more on operational cash flow when making investment decisions. This means that they should prioritize managing operational cash flow to improve the performance of their company's shares.

Q: What are the theoretical implications of this study?

A: The theoretical implications of this study are that it provides a new perspective on the factors that affect stock returns. The study shows that operational cash flow is a key indicator of a company's ability to generate sustainable income, which is a critical factor in determining stock returns.

Q: What are the policy implications of this study?

A: The policy implications of this study are that policymakers should consider the importance of operational cash flow when formulating policies related to the manufacturing sector. This means that policymakers should encourage companies to prioritize managing operational cash flow to improve the performance of their company's shares.

Q: What are the future research directions in this area?

A: The future research directions in this area are to consider a larger sample size and a longer time period to increase the generalizability of the findings. Additionally, future studies should consider additional variables, such as market capitalization, dividend yield, and earnings per share, to provide a more comprehensive understanding of the factors that affect stock returns.