Stock valuations in Indonesia’s consumer non-cyclical sector are influenced more by historical investor perception than by corporate fundamentals. The conclusion was presented by together with in a study published in 2026 by the Indonesian Journal of Business Analytics. The research analyzed 58 consumer non-cyclical companies listed on the Indonesia Stock Exchange between 2018 and 2024 to examine the factors shaping corporate market valuation.
The consumer non-cyclical sector consists of companies that provide products considered essential regardless of economic conditions. Food and beverage firms, household product manufacturers, tobacco companies, and primary retail businesses are among the industries included in this defensive sector. Researchers noted that many of these businesses remained resilient during the COVID-19 pandemic through digital transformation and changing consumer behavior.
Despite its reputation for stability, the study identified a strong phenomenon known as “valuation persistence.” This means that company valuations are driven more by historical market perceptions and previous valuation momentum than by current corporate fundamentals.
The research used a quantitative approach with the dynamic System Generalized Method of Moments (System GMM). The analysis covered 58 firms with a total of 406 financial observations over seven years. Researchers evaluated several accounting-based indicators, including the Altman Z-Score, Piotroski F-Score, Mohanram G-Score, and Beneish M-Score, to measure financial health, fundamental strength, growth potential, and possible earnings manipulation.
The findings showed that previous valuation levels were the strongest predictors of current market value. The coefficient of the previous year’s Price to Book Value (PBV) on current PBV reached approximately 0.70 and was statistically highly significant.
In contrast, most corporate fundamentals showed limited influence on market valuation:
- Altman Z-Score had no significant effect on PBV
- Piotroski F-Score showed no significant influence on PBV
- Mohanram G-Score was also statistically insignificant
- Beneish M-Score showed a limited negative effect related to earnings manipulation risk
According to the researchers, these results indicate that investors in defensive sectors rely more heavily on historical perception and market momentum than on deep analysis of financial fundamentals. The phenomenon is associated with the psychological anchoring effect, where investors use previous stock prices or valuations as the primary reference point for future investment decisions.
The study also found that the market remains sensitive to signals of financial statement manipulation. Companies showing indications of earnings manipulation tend to receive negative risk adjustments from investors, although the effect remains weaker than the influence of historical valuation momentum.
and stated that the findings demonstrate how Indonesia’s capital market, particularly the consumer non-cyclical sector, is still strongly influenced by investor psychology and market inertia. They argued that historical market perception often outweighs short-term accounting signals in shaping stock valuation.
The findings are considered important for investors, regulators, and public companies. Investors are encouraged not to rely solely on stock price momentum, but also to evaluate the quality of corporate fundamentals and financial reporting integrity. Meanwhile, regulators such as the Financial Services Authority (OJK) and the Indonesia Stock Exchange are urged to strengthen oversight related to transparency and earnings manipulation risks in order to reduce information asymmetry in the capital market.
Author Profiles
- Mukti Soma- Telkom University
- Mas Mochamad Shohifuddin- Telkom University
Research Source:
“Anchoring Effects and Valuation Persistence in the Indonesian Consumer Non-Cyclical Sector: A Dynamic System GMM Approach,” Indonesian Journal of Business Analytics, Vol. 6 No. 2, 2026.
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