INFLUENCE OF SIZE, GROWTH AND PROFITABILITY OF COMPANY TO EARNINGS RESPONSE COEFFICIENT.

Abstract

Earnings contain the information reflected in the stok price and investors will react over the information published by the entity. The response of the market over the financial statement information can be measured by earning response coefficient. Some of the factors that affect the earning's response are the company's size , the company's growth and profitability. This research aims to conduct empirical testing against the influence of the company's size, the company's growth and profitability against earnings response coefficient on manufacturing companies listed on the Indonesia stock exchange (IDX) the period of 2013-2015. The sampling techniques used by using purposive sampling. Testing is done using multiple linear regression. The regression results show that influential company profitability significantly to earnings response coefficient, but the size and growth of the company has not shown significant effects earnings response coefficient .The financial statements are a reflection of the company's financial condition because the financial statements contain the profit information needed by stakeholders. One indicator that an accounting information is relevant is the reaction of investors at the time of the announcement of financial statements of stock price movements (Naimah and Utama, 2006). Because profits are used as a basis for measuring company performance over a certain period, and can be used to predict future cash flows. The use of earnings information, can reduce the uncertainty of financial performance of the company in the future, so the quality of decision making will increase. The accounting profit is related to the valuation of the company presented with the stock price. Vahini and Putra (2015) conduct research event study, market response to the issuance of financial statements. Research is done by looking at stock price movements several days before and after the issuance of financial statements. The results of this study indicate different stock price fluctuations between days around the issuance of financial statements with other days before the period. These fluctuations represent the market response to stock prices as the basis for understanding the Earning Response Coefecient (ERC). ERC is a variation of the relationship between stock return and profit.