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

Catur Wahyu Irjayanto and Zaenal Arifin
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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

International Journal of Research and Scientific Innovation, 2020, vol. 7, issue 8, 195-203

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.

Date: 2020
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