EFFECT OF EARNINGS VOLATILITY ON COST OF DEBT

Pongrangga, Goldia Liku Sirupang (2019) EFFECT OF EARNINGS VOLATILITY ON COST OF DEBT. S1 thesis, UAJY.

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Abstract

The research empirically tests the relationship between earnings volatility and cost of debt. The population of this research consist of all industries listed in Indonesian Stock Exchange and ICMD from 2012-2016 year period. Sampling method chosen is purposive sampling and there are 1,100 samples obtained from eight industries sector in Indonesia. The researcher used multiple regressions analysis to test the hypothesis. The research results shows that EBIT and EBITDA as the proxies for measuring earnings volatility have positive effect on the cost of debt. Firms’ profitability, liquidity and solvency are the three control variable where profitability has a negative influence on cost of debt but liquidity and solvency have non-significant influence on cost of debt. Furthermore, the results of the study indicate that there is a difference in the effect of earnings volatility on cost of debt that occurs in each industrial sector in Indonesia based on the Jakarta Stock Industrial Classification (JASICA) classification. Based on the results, the industrial sector which has a significant effect between earnings volatility and cost of debt is agriculture and miscellaneous sector.

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