Their
research reveals that several financial indicators are negatively correlated
with stock trading activity. This finding is important because stock trading
volume reflects investors’ direct responses to information disclosed by companies.
While stock prices indicate v aluation,
trading volume represents the intensity of market reaction.
Defensive Sector Under Economic
Pressure
Between 2020 and 2024, Indonesia’s
capital market experienced significant turbulence. The pandemic disrupted
supply chains, global inflation surged, and monetary tightening increased
financial pressure. Despite these challenges, food and beverage companies were
generally considered defensive because consumer demand for essential goods
tends to remain stable across economic cycles.
However, sector stability did not automatically translate into uniform investor behavior. Trading volume varied considerably among companies within the same subsector. This pattern prompted Romadhoni and Wuryani to examine how financial performance indicators and market risk are interpreted by investors and translated into trading decisions.
Research Design: 120 Firm-Year
Observations
The study applied a quantitative
approach using secondary data obtained from annual reports published on the
Indonesia Stock Exchange and stock market data from Yahoo Finance.
From an initial population of 131
companies, 24 firms met all selection criteria, including continuous listing
status, no trading suspension, and complete financial statements from 2020 to
2024. With a five-year observation period, the researchers analyzed 120
firm-year observations.
The variables examined included:
- Liquidity
(Current Ratio)
- Solvency
(Debt to Equity Ratio)
- Activity
(Total Asset Turnover)
- Profitability
(Return on Equity)
- Earnings
Growth
- Market
Risk (Stock Beta)
Multiple linear regression analysis was conducted using SPSS version 25.
Key Findings: Investors Respond
Selectively
The results reveal a selective
investor response to financial and risk signals.
· Liquidity
shows a significant negative effect.
Higher liquidity is associated with lower trading volume. Extremely high
liquidity may signal inefficient asset utilization rather than strong financial
health.
· Solvency
shows no significant effect.
Leverage levels among the sampled firms were relatively homogeneous and did not
meaningfully differentiate investor decisions.
· Activity
has a significant positive effect.
Companies that efficiently utilize assets to generate sales attract more
trading activity. Operational efficiency appears to be a strong positive
signal.
· Profitability
has a significant negative effect.
Although profitability is typically seen as favorable, fluctuating and
sometimes negative Return on Equity weakened investor confidence during the
observation period.
·
Earnings
growth has no significant effect.
High volatility in earnings growth reduced its reliability as a consistent
signal for investors.
· Market
risk has a significant negative effect.
Higher stock beta, indicating greater sensitivity to market movements, leads to
lower trading volume. Investors tend to reduce trading activity in higher-risk
stocks.
· Simultaneously, all independent variables significantly influence trading volume. However, the model explains only 25.5 percent of the variation, indicating that other factors—such as investor sentiment and macroeconomic conditions—also play substantial roles.
Implications: Stability and Efficiency
Matter More Than Profit Figures
The study suggests that during periods
of economic uncertainty, investors prioritize operational efficiency and
stability over short-term profitability growth. Market risk also plays a
decisive role in shaping trading intensity.
According to Novita Romadhoni,
financial indicators function as signals only when they are perceived as stable
and credible. In volatile conditions, investors become more cautious and
selective in interpreting financial information.
For corporate managers, the findings emphasize the importance of maintaining asset efficiency and consistent performance rather than focusing solely on short-term profit expansion. For investors, the study highlights the need to evaluate both internal financial metrics and external market risk before making trading decisions. For policymakers, the research provides insight into how information efficiency in Indonesia’s capital market could be strengthened, particularly during crisis periods.
Author Profiles
Novita Romadhoni, is a
lecturer and researcher at the Faculty of Economics and Business, Universitas
Negeri Surabaya, specializing in financial management and capital market
studies.
Eni Wuryani is a senior academic at the same faculty with expertise in financial accounting, corporate performance, and capital market research.
Research Source
Title: The Effect of Financial
Performance and Market Risk on Stock Trading Volume
Authors: Novita Romadhoni and Eni Wuryani
Journal: Formosa Journal of Multidisciplinary Research, Vol. 5 No. 2, 2026, pp.
695–712
DOI/URL: https://doi.org/10.55927/fjmr.v5i2.19
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