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The Effect of Financial Architecture, Cash Holding, and Goodwill on Stock Return with the Approach Five-Factor Models

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  • Catur Wahyu Irjayanto

    (Department of Business and Economics, Universitas Islam Indonesia)

  • Zaenal Arifin

    (Department of Business and Economics, Universitas Islam Indonesia)

Abstract

This study examines the effect of financial architecture, cash holding and goodwill on stock returns using a 5-factor model approach. The financial architecture variables consist of corporate governance (Board of Commissioners, Board of Directors, and board process), capital structure, and ownership structures (managerial and institutional holdings). Testing was conducted using Weighted Least Square Method (WLS) in 25 companies from 2015-2018 selected in purposive sampling at the group of Compass 100 Index in Indonesia Stock Exchange. The calculation of the stock return in this study uses an abnormal return and as a comparison is also a test using models with expected return and actual return. The results of this study show the Board Process and the capital structure have a significant effect on stock return in the regression model with abnormal return. The results on the model with expected return show that managerial ownership has a significant effect and the model with actual return shows that only cash holding has a significant effect. In addition, the variables of the Board of Commissioners, the Board of Directors and institutional ownership in the comparison model show results that consistently do not have a significant effect on stock returns.

Suggested Citation

  • Catur Wahyu Irjayanto & Zaenal Arifin, 2020. "The Effect of Financial Architecture, Cash Holding, and Goodwill on Stock Return with the Approach Five-Factor Models," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 7(8), pages 195-203, August.
    • Handle: RePEc:bjc:journl:v:7:y:2020:i:8:p:195-203
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    References listed on IDEAS

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