International Journal of Technical Research and Applications e-ISSN: 2320-8163, www.ijtra.com Volume 5, Issue 1 (Jan-Feb 2017), PP.47-55 47 | Page THE INFLUENCE OF FINANCIAL PERFORMANCE AND FINANCIAL DISTRESS ON STOCK RETURN (Empirical Study on the Private Non-Devisa Banks which Go Public and Are Listed in Indonesia Stock Exchange in the Period of 2010-2014) Joseph M J Renwarin Institut Teknologi dan Bisnis Kalbis (Kalbis Institute), Jakarta, Indonesia joseph.renwarin@kalbis.ac.id Abstract - This journal is aimed at analyzing and knowing the influence of Debt to Asset Ratio, Return on Asset, Operating Expense to Operating Income (BOPO), and Loan to Deposit Ratio variables on stock return experienced by the Private Non-Devisa Banks which go public and listed in Indonesia Stock Exchange in the period of 2010-2014. The method of data analysis uses multilinear regression analysis with secondary data. The results of this research show that DAR does not significantly influence stock return, ROA does not significantly influence stock return, BOPO does not significantly influence stock return, LDR does not significantly influence stock return and simultaneously DAR, ROA, BOPO and LDR variables do not significantly influence stock return. Based on the coefficient of determination, the ability of the independent variables to explain the variation in the dependent variable is 47.9%, and the rest of 52.1% is explained by other variables. Keyword- Debt to Asset Ratio, Return on Asset, Operating Expense to Operating Income, Loan to Deposit Ratio, and Stock Return. I. INTRODUCTION Capital market is a market which trades securities like stock, bond, warrant, right, and various derivative products such as option, futures, forward, and others. Capital market is one of the institutions that mobilize public funds by providing facilities or a place to confront buyers and sellers. In this case, capital market has an economic function to provide facilities or media which confront two interests, namely those who have more funds and those who need funds. One of the most popular capital market instruments is stock. Stock is a title deed over the assets of the company issuing it. The companies issuing their stocks in the capital market are called go public companies. The go public companies comprise various types of companies classified into certain sector based on their businesses. One of the sectors is banking. Based on this statement, it is necessary to study the interest of investors to invest in the banking sector. Investors are surely interested in investing their funds in the industries that can give high stock return (profit). Stock return is the gain from the investment in stock. The return can be realized return, i.e. the return that has occured, or expected return, i.e. the return that is expected to occur in the future (Jogiyanto, 2003:109). To obtain high return, of course, there are factors that must be paid attention and considered by the investors. The companies that sell their stocks to public (investors) intend to increase their working capital, to expand their business and product diversification. In order to attract investors, they must be able to show their financial performance. Investors are interested in the stocks that have positive and high return because this will increase their prosperity. Investors will firstly analyze the financial performance using financial ratios as the measurement, so that the financial performance related to a company’s stock return can be known. Stock return is a factor that influences the investor’s interest to make an investment in a company. A high return indicates a good performance that makes investors believe it will give a positive effect to the fund they have invested in the capital market. One of the popular securities in the capital market is stock. Stock is a security that indicates someone’s or an institution’s ownership of a company (Syahyunan, 2013). A good stock can provide realized return not so far from the expected return. Basically the return value of every security differs from each other. Not all securities will give the same return to the investors. The return of a security is determined by many things such as the company’s performance and its strategy in managing profit. A company is considered as having a financial failure if it is not able to pay its liabilities on maturity dates although the total assets are more than its total liabilities. The condition making investors and creditors worry is when the company faces a financial distress that leads to bankruptcy. If a company signals a financial failure, it can not give profitable return to the investors and finally its stock price will decline. The gain from investment in stock, called return, may be dividend and capital gain. Dividend is the income from the profit that is distributed whereas capital gain is gained from the difference of stock prices. If the price difference is negative, it means the investor experiences a capital loss and vice versa. Frequently, investors want an immediate profit, so they like a profit in the form of capital gain rather than dividend. In the capital market, uncertain return will force an investor to choose the investment alternatives carefully. Not every stock of a company having good profiles will provide good return to the investors, so a deeper analysis on it is needed. A company may face a fluctuative return at any time due to micro and macro factors. A. Phenomenon Gap Banking industry is chosen as the population of this research because there are many banking companies listed in the Indonesia Stock Exchange and it is predicted to have a big influence on the stock return. The following are the stock returns of private non- devisa banks that go public during the period of 2010-2014.