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ABSTRACT
The purpose of this research is to examine the influence of firm size, profitability, degree of leverage, and CSR disclosure on Earnings Response Coefficient (ERC). The populations in this research are manufacturing companies that listed on the Indonesia Stock Exchange (IDX) from the period of 2012 to 2014 and samples are determined using purposive sampling method. Total populations used in this research are 141 companies with total samples of 56 companies. The data used in this research are secondary data and the hypotheses are tested using multiple regression analysis models. The result of this research showed that firm size, and profitability have significant positive effect on Earnings Response Coefficient (ERC), but leverage and CSR disclosure do not have significant negative effect.
JEL Classification: G10; G14; M40; M41.
Keywords: Earnings Response Coefficient (ERC); Firm Size; Profitability; Leverage; CSR Disclosure.
(ProQuest: ... denotes formulae omitted.)
1.INTRODUCTION
Income statement contains information about the company's profit or loss. Income statement is a report that assesses the performance of management. Income statement can estimate the ability of representative profit in the long term, it forecast earnings, and assess risks in investment or credit. High corporate earnings will get a positive response from investors. Investors expect returns and dividends from each stock investment (Adaoglu & Katircioglu, 2013; Shaeri & Katircioglu, 2018; Shaeri et al., 2016). On the other hand, creditors require a company's income statement for taking lending decisions. Ball and Brown (1968) explains that the companies share price able to respond to the content of the information in the financial statements. One of the content of the information contained in the financial statements can be measured by earnings response coefficients. Earnings response coefficient (ERC), which is used to view the content of the information contained in the financial statements and to be an indication of the earnings quality. Cho and Jung (1991) defines the earnings response coefficient is the effect of any currency unexpected earnings on stock returns. Earnings response coefficients are usually measured by the slope of the regression coefficients abnormal stock returns and unexpected earnings. Beaver (1989) defines earnings response coefficient as the "sensitivity of changes in the stock price to changes in accounting profit". Earnings response coefficient (ERC) of each stock has a magnitude different...