How to cite:
Hiendrawati, Arifuddin Mas'ud, Ummy Kalsum, Muh. Nur (2024) The Effect of Inflation, Interest
Rates and Exchange Rates on Company Value (Case Study on Registered Banking Institutions on
the Indonesia Stock Exchange), (06) 06, https://doi.org/10.36418/syntax-idea.v3i6.1227
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Ridwan Institute
THE EFFECT OF INFLATION, INTEREST RATES AND EXCHANGE RATES ON
COMPANY VALUE (CASE STUDY ON REGISTERED BANKING INSTITUTIONS
ON THE INDONESIA STOCK EXCHANGE)
Hiendrawati, Arifuddin Mas'ud, Ummy Kalsum, Muh. Nur
Sekolah Tinggi Ilmu Ekonomi Enam Enam Kendari, Indonesia
Email: [email protected], [email protected], [email protected],
[email protected]
Abstract
This research aims to determine the effect of inflation, interest rates and exchange rates on
company value using data from the financial reports of companies listed on the Indonesia
Stock Exchange for the 2019-2023 period. The type of data used is quantitative data. The data
source used is secondary data. The analytical tool used in panel data linear regression is
EViews version 10. Simultaneous research results of the variables Inflation, Interest Rates and
Exchange Rates have no influence on Company Value. Meanwhile, in partial testing, the
variables inflation, interest rates and exchange rates have no effect on company value in
banking institutions listed on the Indonesian Stock Exchange for the 2019-2023 period.
Keywords: Inflation, Interest Rates, Exchange Rates, Company Value
INTRODUCTION
The global economy in 2020 was marked by the Covid-19 pandemic which had an
extraordinary impact on health, humanity, the economy and financial system stability. Health
efforts to tackle the spread of the Covid-19 pandemic have led to limited mobility and
economic activities, increasing financial market uncertainty and contradictory waves of
economic growth in the world. The global economy contracted in the first semester of 2020
and slowly improved in the second semester of 2021, driven by progress in handling the
Covid-19 pandemic, increased mobility, and the impact of policy stimulus that is integrated
and synergistic between authorities and countries. The Covid-19 pandemic also raises three
important lessons in the global economy on the international trade system, the international
monetary system and the world financial system that deserve attention to increase global
economic resilience in the future.
The implementation of health policies to reduce the spread of the Covid-19 pandemic
has caused turmoil in financial markets and economic activities. To reduce the impact of the
spread of the Covid-19 pandemic evenly and quickly, health protocols and policies to limit
mobility.
Banking institutions are one of the institutions affected by the Covid-19 pandemic. The
regulatory and supervisory authority of the financial sector, namely the Financial Services
Authority (OJK), said that the Covid-19 pandemic had dealt a heavy blow, one of which was
for the Composite Stock Price Index (JCI). From the beginning of 2020 to March 20, 2020,
JOURNAL SYNTAX IDEA
p–ISSN: 2723-4339 e-ISSN: 2548-1398
Vol. 6, No. 07, Juli 2024
The Effect of Inflation, Interest Rates and Exchange Rates on Company Value (Case Study on
Registered Banking Institutions on the Indonesia Stock Exchange)
Syntax Idea, Vol. 6, No. 06, Juni 2024 2887
the JCI landslide from the level of 6,300 to 3,900. Transaction volumes also declined. If in
2019, the transaction volume was 36,534,971,048, in 2020 it dropped to 27,495,947,445. This
reflects most of the behavior of investors to wait and see because investors are worried about
future market conditions.
Conditions in Indonesia itself are experiencing many problems in the economic aspect
due to the Covid-19 pandemic. In 2020, economic development in Indonesia is predicted to
grow negatively. The impact of the Covid-19 pandemic has also had an extraordinary effect
on the capital market sector.
The capital market carries out two functions, namely the economic function and the
financial function. The economic function is carried out by efficiently allocating funds from
those who have excess funds as capital owners (investors) to companies listed on the capital
market (issuers). Meanwhile, the financial function of the capital market is indicated by the
possibility and opportunity to get returns for fund owners or investors in accordance with the
investment to be chosen.
The Indonesia Stock Exchange first launched the LQ45 Index in February 1977. This
index selects several companies on the stock exchange with predetermined criteria and has
since become one of the important indicators in the world of stock investment in Indonesia.
The selection applied by the LQ45 Index is based on criteria such as high liquidity, market
capitalization, company fundamental conditions, growth prospects and several other criteria.
The main purpose of the formation of the LQ45 Index is to complement the Composite Stock
Price Index (JCI) into an objective indicator to help monitor stock price movements for
investors, financial analysts, market observers and investment managers.
The performance of LQ45 shares on the Indonesia Stock Exchange declined during the
Covid-19 pandemic that occurred in Indonesia. This situation causes many companies to
suffer losses.
External factors influence the increase or decrease in company performance either
directly or indirectly. According to (Suriyani & Sudiartha, 2018) hen there is a change in
external factors, investors will calculate the impact, both positive and negative on the
company's performance in the next few years and then make a decision to buy or sell shares.
According to (Muhammad & Rahim, 2015) two factors can be used as a guideline for
investors in estimating the stock returns that will be obtained, namely economic and non-
economic factors. Economic factors are divided into two, namely microeconomic factors and
macroeconomic factors.
Microeconomic factors or internal factors of the company are in the form of liquidity
ratio, profitability ratio, lavarage ratio and activity ratio. Meanwhile, macroeconomic factors
or external factors of a company that affect stock returns are a global or comprehensive
situation regarding the Indonesian economy that can affect the stock price of a company, such
as the rupiah exchange rate, interest rates, inflation, gross domestic product (GDP) and the
amount of money in circulation. In this study, we will discuss external or macroeconomic
factors including inflation, interest rates and exchange rates.
Inflation is a continuous increase in prices that extends to the increase in the price of
other goods. Permata, Nurlaela, & Wahyuningsih, (2018) states that in economics, inflation is
a process of increasing prices in general and is continuously associated with market
mechanisms that can be caused by various factors, including an increase in public
consumption, excess liquidity in the market that triggers consumption, or even speculation, as
well as for the 3 causes of unsmooth distribution of goods. High inflation results in a decline
in company sales, which ultimately lowers the company's profit. This results in a decrease in
stock demand, thus causing the stock price to decrease. So it is expected that inflation will
Hiendrawati, Arifuddin Mas'ud, Ummy Kalsum, Muh. Nur
2888 Syntax Idea, Vol. 6, No. 06, Juni 2024
have a positive and significant effect on the company's value. Research conducted by
(Hendayana & Riyanti, 2019) states that inflation has a significant positive effect on company
value. Another study by PERMANA, (2019) hows that inflation has a significant positive
effect on company value. In contrast to research conducted by (Hamidah, Yusra, & Sudrajat,
2015) stated that inflation has a negative effect on the value of companies. As well as research
by Permata et al., (2018) states that inflation does not have a significant effect on company
value.
According to (Chasanah, 2018) stated that inflation has a positive effect on stock
returns. Increasing inflation will encourage the government to increase the SBI interest rate to
maintain monetary stability. The increase in interest rates in banks has resulted in people
preferring to keep money in banks in the form of deposits or savings, which has resulted in a
decrease in investment in the stock market. A decrease in investment levels will reduce stock
returns. So it can be concluded that there is an influence between the inflation rate and stock
returns in banking companies. Meanwhile, according to Ramadhani, (2018) inflation has a
negative effect on stock returns. This shows that the rise and fall of inflation has no effect on
investors in investing their capital. The inflation that occurs is not able to affect stock returns
so that it is not able to influence investors in investing their capital in banks.
According to (Devi & Artini, 2019), the exchange rate has a positive effect on stock
returns. The occurrence of a positive influence between the dollar exchange rate and returns
when the dollar exchange rate increases indicates that the rupiah currency is depreciating.
When the rupiah depreciates, investors will try to exchange foreign currency into rupiah and
invest it in the form of stocks and increase stock returns. According to Budiani et al., (2018)
the exchange rate has a negative effect on stock returns. If the exchange rate increases and the
company's profit decreases, investors' expectations will decrease and the stock price will also
decrease and can result in a decrease in stock returns. Another possibility with this exchange
rate is very influential on companies, especially companies engaged in exports and imports.
Thus, it can be said that changes in the rupiah exchange rate are negatively related to stock
returns because stock returns are determined by the rate of change in stock prices and
company profits. A weakening exchange rate can result in capital market profits so that the
stock market will provide attraction to investors.
Table 1 Exchange Rate Data from 2019 – 2023
NO
PERIOD
Year 2019
Year 2020
Year 2022
1
Januari
14.072
13.662
14.381
2
Februari
14.062
14.234
14.371
3
March
14.244
16.367
14.349
4
April
14.215
15.157
14.418
5
May
14.385
14.733
14.544
6
June
14.141
14.302
14.848
7
July
14.026
14.653
14.958
8
Agust
14.237
14.554
14.875
9
Spetember
14.174
14.918
15.247
10
Oktober
14.008
14.690
15.542
11
November
14.102
14.128
15.737
12
December
13.901
14.105
15.731
Based on the formulation of the above problem, the purpose of the research to be
achieved is to find out and analyze the influence of Inflation, interest rates and exchange rates
on the value of companies in banking institutions listed on the Indonesia Stock Exchange.
The Effect of Inflation, Interest Rates and Exchange Rates on Company Value (Case Study on
Registered Banking Institutions on the Indonesia Stock Exchange)
Syntax Idea, Vol. 6, No. 06, Juni 2024 2889
Effect of Inflation on the value of companies in banking institutions listed on the Indonesia
Stock Exchange The effect of interest rates on the value of companies in banking institutions
listed on the Indonesia Stock Exchange. Effect of Exchange Rate on Company Value in
Banking Institutions Listed on the Indonesia Stock Exchange.
RESEARCH METHOD
This study uses a qualitative descriptive research method, namely finding deeper
meanings, in describing data in the form of words factually and accurately (Kriyantono,
2020). Data collection that can provide a detailed description of a situation or circumstance is
called descriptive data collection. The purpose of this descriptive research is to describe in
detail the methods and approaches used. Research is carried out intensively, and researchers
participate directly and make detailed and detailed reports are characteristic of qualitative
research methods (Sugiyono, 2020). This research focuses on the communication strategy
used by the Palangka Raya City Communication Informatics, Statistics and Cryptography
Office to socialize the Commu
nity Information (KIM) program (Sugiyono, 2019).
Direct observation of the activities that occur at the research site is the data collection
procedure used in this study. The next step is for the author to interview the informants using
questions related to the communication tactics of the Community Information Program (KIM)
in conducting socialization. The one who provided the information was Mrs. Iin Carolina,
S.Kom JFT Public Relations Institution who served at the Communication Informatics,
Statistics and Cryptography Office of Palangka Raya City, Mrs. Desiwati she is the Chairman
of KIM Humbang Bahijau and Mr. Adi as the people of Palangka Raya City. Books, archives,
literature, reports, and notes from the research site to suffice the data. Data reduction, data
presentation, and conclusion/verification are the data analysis methods used in this study.
RESULT AND DISCUSSION
Uji Asumsi Klasik
The model chosen is REM (Random Effect Model), therefore classical assumption
testing must be carried out. According to (Basuki & Yuliadi, 2014; Veridaus Napitupulu,
2019) Classical assumption tests used for multicollinearity and heteroscedasticity.
Tabel 2 Hasil Uji Multikolinearitas
X1
X2
X3
X1
1
0.4543079932960841
0.6034594201288571
X2
0.4543079932960841
1
0.1870802108810198
X3
0.6034594201288571
0.1870802108810198
1
Koefisien korelasi X1 dan X2 sebesar 0,45 < 0,85, X1 dan X3 sebesar 0.60 < 0,85 serta
X2 dan X3 sebesar 0.18 < 0,85. (Veridaus Napitupulu, 2019) Maka dapat disimpulkan bahwa
terbebas dari gejala multikolinearitas atau lolos uji multikolineritas.
Hiendrawati, Arifuddin Mas'ud, Ummy Kalsum, Muh. Nur
2890 Syntax Idea, Vol. 6, No. 06, Juni 2024
-10
-5
0
5
10
15
20
25
1 - 19
1 - 20
1 - 21
1 - 22
1 - 23
2 - 19
2 - 20
2 - 21
2 - 22
2 - 23
3 - 19
3 - 20
3 - 21
3 - 22
3 - 23
4 - 19
4 - 20
4 - 21
4 - 22
4 - 23
5 - 19
5 - 20
5 - 21
5 - 22
5 - 23
Y Residuals
Gambar 1 Hasil Uji Heteroskedastisitas
From the test results above, the residual graph (blue color) does not cross the boundary
(500 and -500), meaning that the residual variant is the same. According to (Reizkey
Napitupulu, Ndruru, Waruwu, & Sipahutar, 2021) Therefore, it can be concluded that there
are no symptoms of heteroscedasticity or pass the heteroscedasticity test.
Analysis and Testing
Tabel 3 Hasil Analisis Regresi Data Panel
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
-16.05938
60.04692
-0.267447
0.7917
X1
-0.244884
1.833294
-0.133576
0.8950
X2
-2.242071
1.612791
-1.390181
0.1790
X3
0.002199
0.004224
0.520755
0.6080
Effects Specification
S.D.
Rho
Cross-section random
4.537343
0.3271
Idiosyncratic random
6.507123
0.6729
Weighted Statistics
R-squared
0.112838
Mean dependent var
2.719413
Adjusted R-squared
-0.013900
S.D. dependent var
6.462366
S.E. of regression
6.507123
Sum squared resid
889.1957
F-statistic
0.890328
Durbin-Watson stat
2.980777
Prob(F-statistic)
0.462351
Based on the results of the panel data regression analysis above, the panel data
regression equation is obtained as follows :
Y = -16.0593772645 - 0.244883747013*X1 - 2.24207078131*X2 +
0.00219942802137*X3 + [CX=R]
a. A constant value of -16.05 means that with the inflation value, interest rate, and rupiah
exchange rate, the company's value has decreased by 16.05
The Effect of Inflation, Interest Rates and Exchange Rates on Company Value (Case Study on
Registered Banking Institutions on the Indonesia Stock Exchange)
Syntax Idea, Vol. 6, No. 06, Juni 2024 2891
b. An inflation coefficient of -0.24 means that for one unit of inflation increase, the value of
the company decreases by -0.24 and vice versa. The assumption is that if interest rates and
rupiah exchange rates are constant
c. An interest rate coefficient of -2.24 means that for one unit of interest rate increase, the
value of the company increases by -2.24 and vice versa. The assumption is that inflation
and the rupiah exchange rate are constant
d. The rupiah exchange rate coefficient of 0.002 means that for one unit of rupiah exchange
rate increase, the company's value increases by 0.002 and vice versa. The assumption is
that inflation and interest rates are constant
Hypothesis Testing
Tabel 4 Hasil Uji t (Parsial)
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
-16.05938
60.04692
-0.267447
0.7917
X1
-0.244884
1.833294
-0.133576
0.8950
X2
-2.242071
1.612791
-1.390181
0.1790
X3
0.002199
0.004224
0.520755
0.6080
From the analysis output in Table 4, the influence of each exogenous variable on
endogenous variables can be described as follows:
1. The result of the Inflation output (X1) shows a prob value of 0.89 greater than 0.05, so H1
is not proven to be true. This means that inflation does not have a significant effect on the
value of companies partially.
2. The output of the Interest Rate (X2) shows that the prob value of 0.17 is greater than 0.05,
so H2 is not proven to be true. This means that the Interest Rate does not have a significant
effect on the company's value partially.
3. The output of the Rupiah Exchange Rate (X3) shows that the prob value of 0.60 is greater
than 0.05, so H3 is not proven to be true. This means that the rupiah exchange rate does not
have a significant influence on the value of companies partially
Uji F (Simultan)
Table 5 Test Results F (Simultaneous)
F-statistic
0.890328
Prob(F-statistic)
0.462351
From the analysis output in Table 5.8, the F-statistic prob value is 0.46 > 0.05, which
shows that the inflation variables, interest rates, and rupiah exchange rates simultaneously do
not have a significant effect on the value of banking companies listed on the Stock Exchange
for the period 2019-2023.
Hiendrawati, Arifuddin Mas'ud, Ummy Kalsum, Muh. Nur
2892 Syntax Idea, Vol. 6, No. 06, Juni 2024
Uj Coefficient of Determination (R
2
)
Table 6 Uj Coefficient of Determination (R
2
)
R-squared
0.112838
Adjusted R-squared
-0.013900
From the analysis output in Table 6, the R-squared value is 0.112 (11.2%), meaning that
11.2% of the company's value variables can be represented by exogenous variables (inflation,
interest rate rate, and rupiah exchange rate) and the remaining 88.8% (100% - 11.2% =
88.8%) is influenced by other variables that are not calculated in this analysis.
The Effect of Inflation, Interest Rates, and Rupiah Exchange Rate on the Value of
Companies in Banking Institutions Listed on the Indonesia Stock Exchange
During the research period, simultaneously the variables of inflation, interest rates, and
rupiah exchange rates did not have a significant effect on the value of companies with a prob
value of F-statistics of 0.89 > 0.05, so the 1st hypothesis was not proven to be true. In the
results of this study, when inflation increases, interest rates increase and the rupiah exchange
rate cannot directly affect the value of companies.
Understand that inflation, interest rates, and rupiah exchange rates are external factors
that can not directly affect the Company's value. Although these factors are not under the
direct control of the company, the company's management must take them into account in
strategic planning and decision-making. By understanding how these external factors can
affect a company's operations and performance, management can take appropriate steps to
protect and increase the company's value in the long run.
In relation to signal theory, (Banerjee, 2015) states that the value of a company is very
important because a high value of a company will be followed by a high prosperity of
shareholders. The higher the share price, the higher the value of the company. A high
company value is one of the goals of company owners, because a high value shows an
increase in the prosperity of shareholders. The wealth of shareholders and companies is
presented by the rise and fall of the stock market price which is a reflection of investment
decisions, financing, and asset management. According to (Kusumadilaga, 2010) the value of
a company is the value of expected future profits which is recalculated with the right interest
rate. Price to Book Value (PBV) describes how much the market appreciates the book value
of a company's stock. The higher this ratio, the more the market believes in the company's
prospects.
Inflation is one of the economic problems in many countries. Inflation is the process of
increasing the general prices of goods continuously. So, inflation will only occur if the
general price of goods is continuous during a period, although it may not be concurrent. Price
increases are measured using price indices.
The increase in interest rates will encourage people to save, and be lazy to invest in the
real sector. The increase in interest rates will also be borne by investors, namely in the form of
an increase in interest costs for the company. People do not want to risk making high-cost
investments, as a result of which investment does not develop. Companies have a lot of
difficulty maintaining their lives, and this causes the company's performance to decline. A
The Effect of Inflation, Interest Rates and Exchange Rates on Company Value (Case Study on
Registered Banking Institutions on the Indonesia Stock Exchange)
Syntax Idea, Vol. 6, No. 06, Juni 2024 2893
decline in a company's performance can result in a decrease in the stock price, which means
that the company's value will also decrease. The deterioration of external factors, namely high
inflation rates, high interest rates and low exchange rates, caused the company's cash flow to
be disrupted so that the stock price declined.
The weakening of the rupiah exchange rate against the US dollar also has an impact on
the increase in the cost of importing raw materials and equipment needed by companies,
resulting in an increase in production costs, or in other words, the weakening of the rupiah
exchange rate against the US dollar has an impact on the national economy which ultimately
reduces the performance of stocks in the stock market and stock prices decrease.
During this research period, judging from the results of the R-square, economic factors
can only affect 11.2%, the remaining is influenced by internal factors of the banking
operations. This influence can come from internal factors that directly affect the value of the
company of each bank that is the research sample.
Based on the description above, it can be concluded that inflation, interest rates and
exchange rates have no effect on the value of the company. This research is in line with
previous research conducted by (Linggi, Pompeng, & Pagiu, 2024) which explained that
inflation, interest rates, and the rupiah exchange rate do not affect the Company's Value.
The Effect of Inflation on the Value of Companies in Banking Institutions Listed on the
Indonesia Stock Exchange
During the research period, the Inflation variable partially did not have a significant
effect on the Value of Companies in Banking Institutions Listed on the Indonesia Stock
Exchange for the 2019-2023 period with a prob value of 0.89 > 0.05, so the 2nd hypothesis
was not proven to be true. This study found a coefficient of -0.24 which means that if inflation
increases but the value of companies decreases, which means that inflation does not have a
significant effect. This condition is due to the high price that is considered large does not
necessarily indicate inflation.
An increase in inflation describes an increase in goods, an increase in prices so that the
value of money in circulation decreases, and a decrease in the level of wealth. When inflation
increases and is accompanied by an increase in interest rates, it will affect the public in
distributing their funds to the bank, which ultimately has an impact on the bank's profit.
Rising credit interest rates result in a small amount of profit obtained from the credit sector.
Interest rate hikes aimed at increasing inflation have a direct impact on third-party funding
sources (DPK). In this case, increased inflation does not necessarily affect the increase in the
Company's Value. Before the Covid-19 pandemic, inflation arose due to the increase in the
price of non-subsidized fuel oil (BBM), but this did not have an impact. The emergence of
inflation during the Covid-19 pandemic has resulted in a decrease in people's purchasing
power. The pandemic also interferes with people's economic activities on bank operations, for
example, people prefer to set aside money to be kept privately rather than entrusting money
(saving) to banks. The congestion of credit payment activities by customers also cannot
increase the profitability of banks.
Hiendrawati, Arifuddin Mas'ud, Ummy Kalsum, Muh. Nur
2894 Syntax Idea, Vol. 6, No. 06, Juni 2024
According to (Fahmi, 2015) inflation is a situation where the price of a good increases
systematically and the value of a currency in a country decreases. The high inflation rate will
have an impact on investors' decisions to invest. This is because in general, investors want
inflation rates to be in line with expectations. According to (Kuncoro & Suryaputri, 2019) in
relation to signal theory, the inflation rate can be a positive signal that will be received by
investors who will invest in buying stocks because this inflation rate describes the
macroeconomic situation in a country in a certain period.
Not only that, the Large-Scale Social Restrictions (PSBB) regulations cause the
economic level to decline. The company also carried out Termination of Employment (PHK)
due to not being able to pay the wages that should have been and the company went bankrupt
or went out of business, so those who usually invest their capital in banks choose to wait for a
normal situation.
According to Irving Fisher in (Sukirno, 2000) the increase in general prices or inflation
is caused by three factors, namely the amount of money in circulation, the speed of money
circulation, and the number of goods traded. According to him, inflation is a process of
increasing the price of general goods that applies in the economy. This does not mean that the
prices of the various goods go up by the same percentage. The important thing is that there is
a continuous increase in the general prices of goods for a certain period. An increase that
occurs only once (even with a large percentage) is not inflation.
Based on this, it can be concluded that if inflation occurs, it will reduce the Company's
Value, especially in banking institutions listed on the Indonesia Stock Exchange. The results
of this study are in line with previous research conducted by (Japhar, Mangantar, &
Baramuli, 2020; Nursalim, Van Rate, & Baramuli, 2021; Suzulia & Saluy, 2020) which
explained that inflation has increased but has not been able to increase the Company's Value
itself.
The Effect of Interest Rates on the Value of Companies in Banking Institutions Listed
on the Indonesia Stock Exchange
During the research period, the interest rate variable partially did not have a significant
effect on the company's value because the prob value was 0.17 > 0.05, so the 3rd hypothesis
was not proven to be true. The increase in interest rates has no direct effect on the value of the
company. If the BI Rate increases are followed by an increase in bank interest rates, the
increase will not affect banks directly.
Interest rates determine a person when investing or saving or lending to banks, so that it
is able to increase the profitability of a bank. When interest rates increase, it will affect
investors' interest in investing in banks. However, during the Covid-19 pandemic where
community activities decreased, such as the enactment of Large-Scale Social Restrictions
(PSBB) regulations and companies that carry out Termination of Employment (PHK) so that
the income obtained by the community decreased. The high interest rate also affects the
public in taking credit from a bank, if the bank offers a large interest, the customer is not
interested in the credit system, but if the bank gives a small interest, the customer is interested
in crediting.
The Effect of Inflation, Interest Rates and Exchange Rates on Company Value (Case Study on
Registered Banking Institutions on the Indonesia Stock Exchange)
Syntax Idea, Vol. 6, No. 06, Juni 2024 2895
In relation to the signal theory, according to (Jogiyanto, 2010) when the information is
announced and all market participants have received the information, market participants first
interpret and analyze the information as good news or bad news. In this condition, the public
will be more critical in responding to the company's situation. If the interest rate on third-
party funds is increased without an increase in lending rates, it will directly affect the decrease
in net interest income (margin). If the direct fund interest rate policy is followed by a policy
of increasing credit rates, then the impact may also be worse because the interest costs that
will be borne by bank debtors increase and there is a possibility that debtors will not be able
to bear it and eventually can pose a risk of bad credit. This will of course affect revenue and
have an impact on the value of the company itself.
Based on the explanation above, it can be concluded that if there is an increase in the
Interest Rate, it will reduce the Company's Value. This research is also in line with research
conducted by (Iffada & Darmawan, 2024; Linggi et al., 2024; Yudha & Ulnisa, 2024) which
stated that it does not have a significant effect on the company's value. The reason that can
explain this condition is that many investors in Indonesia are happy to take profits on stocks.
This is done to be able to take as many profits as possible for investors. Profit taking itself is
buying shares and selling them when the price is rising and at short periods of buying and
selling such as per week or even per day. Meanwhile, interest rate data (BI Rate) will appear
per month in an uncertain period of time.
The Effect of Exchange Rate on the Value of Companies in Banking Institutions Listed
on the Indonesia Stock Exchange
During the research period, the rupiah exchange rate partially did not have a significant
effect on the value of companies with a prob value of 0.60 > 0.05, so the 4th hypothesis was
not proven to be true. Changes in the rupiah exchange rate, both appreciation and
depreciation, do not affect the company's value. This ability causes investor confidence to be
maintained and not decline due to macroeconomic shocks or the impact of exchange rates. In
addition, some investors consider that the impact of rupiah exchange rate fluctuations is only
temporary so that it does not have a significant effect on the Company's Value itself.
During the Covid-19 pandemic, the rupiah exchange rate against the USD depreciated.
This shows the weak rupiah exchange rate in foreign currencies. The weakening of the value
of money is due to price fluctuations during the pandemic so that companies will reduce
export activities and have an impact on banking revenues in the export-import sector. This
condition has an impact on the difficulty of the public in crediting banks and the profit income
earned by banks will decrease. With crediting activities, banks will make profits, but on the
other hand, if credit is congested, bank revenue will also decrease. The low rupiah exchange
rate has eliminated public interest in investing in the capital market. Entering 2022, the rupiah
exchange rate weakened by 9.31%, so that this situation hampered activities in the economic
sector, both domestic and international. The weakening of the rupiah exchange rate is also a
result of the high interest rate set by the United States central bank, The Federal Reserve (The
Fed). The international market responded to the Fed's policy, including Indonesia, weakening
the rupiah exchange rate. Then, the central bank seeks to recover the rupiah exchange rate.
Hiendrawati, Arifuddin Mas'ud, Ummy Kalsum, Muh. Nur
2896 Syntax Idea, Vol. 6, No. 06, Juni 2024
In signal theory, it is said that all signals conveyed to the market will result in a reaction
of market participants. The reaction of these market participants is reflected in the company's
share price. As a country whose capital market is classified as an emerging market, changes
in the market will be easily affected by the existence of events that cause changes in the
economy, for example changes in the exchange rate. The increase in this exchange rate will be
responded to by the market so that it will result in an increase or decrease in the company's
share price. In addition to macroeconomic factors such as exchange rates, the rate of change
in stock prices in Indonesia is also influenced by an event that causes a shock to the market.
The relationship between the signal theory and the exchange rate is that if the rupiah
exchange rate against foreign currencies weakens, it will make the foreign debt structure
increase, because the interest burden also increases. The larger the debt, the risk that the
company will not be able to pay off its obligations in the future. With these signals or
information, it is hoped that it will affect investors' decisions to invest so that later it will have
an impact on stock returns.
Determining the rupiah exchange rate against foreign exchange is important for capital
market participants in Indonesia. Because the foreign exchange rate greatly affects the amount
of costs that must be incurred, and the amount of costs that will be obtained in stock and
securities transactions on the capital market exchange. Unstable exchange rate fluctuations
will be able to reduce the level of foreign investors' confidence in the Indonesian economy.
This will certainly have a negative impact on stock trading in the capital market, for foreign
investors will tend to withdraw capital so that Capital of Flow occurs.
Based on the description above, it can be concluded that the exchange rate has no effect
on the value of the company. This research is also in line with research conducted by (Iffada
& Darmawan, 2024; Linggi et al., 2024; Yudha & Ulnisa, 2024) which stated that it does not
have a significant effect on the company's value. If the BI Rate rises is followed by an
increase in bank interest rates, so the increase does not affect banks directly.
CONCLUSSION
Based on the results of the research and analysis discussed earlier, the conclusion
obtained is that the Inflation Variable (X1), Interest Rate (X2) and Exchange Rate (X3)
simultaneously have no effect on the Value of Companies in Banking Institutions Listed on
the Indonesia Stock Exchange for the 2019-2023 Period. The Inflation Variable (X1) partially
has no effect on the Value of Companies in Banking Institutions Listed on the Indonesia
Stock Exchange for the 2019-2023 Period. The Interest Rate Variable (X2) partially has no
effect on the Value of Companies in Banking Institutions Listed on the Indonesia Stock
Exchange for the 2019-2023 Period. The Exchange Rate Variable (X3) partially has no effect
on the Value of Companies in Banking Institutions Listed on the Indonesia Stock Exchange
for the 2019-2023 Period.
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Hiendrawati, Arifuddin Mas'ud, Ummy Kalsum, Muh. Nur (2024)
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