23
2.3.3 Relations between growth and stock return
Firms that experiencing rapid growth by equity or debt offering often reported
to have low stock return. On the other hand, firms that are predicted in having high
future returns tend to experience contraction via spinoffs, share repurchases, and debt.
These statements are supported by previous study by Cooper, Gulen, & Schill (2008).
Cooper, Gulen, & Schill (2008) did a research about the impact
of asset
growth on stock return, by using cross sectional and time-series analysis. They found
a positive, but insiginificant relationship between companies’ total asset growth and
stock return.
Hence, based on the prior research and supporting theories above, the fourth
hypothesis is developed :
H4: Growth has positive relationship with stock return
2.3.4 Relations between leverage and stock return
Leverage is related to the ability of companies in paying debts. Ulupui (2007)
examined about the impact of liquidity, leverage, and profitability on stock return. In
this case, leverage, as on of the variables, used debt to equity ratio formula in
calculation. The finding of this research denoted there is a positive relationship
between leverage and stock return, but not significant.
Thus, the annotation above lead to the development of the fifth hypothesis :
H5: Leverage has positive relationship with stock return
 |