Mediating Role of Profitability Relating Financial Leverage and Stock Returns

Empirical Study of Telecommunication Companies Listed on IDX 2021-2023

Abstract

This study analyzes the role of profitability mediation in the relationship between financial leverage and stock returns in telecommunication companies listed on the Indonesia Stock Exchange (IDX) for the 2021-2023 period. The independent variables used are debt to equity ratio and debt to assets ratio, with return on assets as the mediating variable, and stock return as the dependent variable. Using path analysis, the results show that DER and DAR have a significant influence on stock returns, with DAR showing a stronger influence. ROA has proven to play an effective role as a mediator in the relationship. The direct influence of DER on stock returns is 0.851 (p=0.015), while DAR shows a direct influence of 1.098 (p=0.003). The total influence, including the ROA mediating effect, was 0.388 for DER and 0.537 for DAR. These findings highlight the importance of considering both leverage and profitability ratios in the analysis of investment and financial management of telecommunications companies in Indonesia