Determinants of Bond Performance (Study of Companies Listed on the Indonesian Stock Exchange)

Andarwati Andarwati

doi:10.23887/ijssb.v8i4.82928

Authors

Andarwati Andarwati Management Department, Faculty of Economics and Business, Universitas Brawijaya, Indonesia

DOI:

https://doi.org/10.23887/ijssb.v8i4.82928

Keywords:

Bond Prices, Profitability, Liquidity, Leverage, Bond Rating

Abstract

Bond ratings are critical for firms that issue them, as they reflect the company's risk level. A higher bond rating typically leads to lower costs for the company. Most investors tend to avoid bonds with poor credit ratings. This research aims to examine how profitability, liquidity, and leverage influence bond prices, using bond ratings as a key variable. The study population comprises all firms listed on the Indonesian stock market from 2019 to 2021, totaling 116 entities. Through purposive sampling, the research focused on 72 companies that met specific criteria: firms that issued reports in rupiah, generated profits, and were rated by PT Pefindo. The study employed path analysis to test the hypotheses. The findings reveal that profitability, liquidity, and leverage have minimal impact on bond ratings. Furthermore, changes in liquidity and leverage do not affect bond prices. However, profitability and bond ratings significantly influence bond prices. The study also shows that bond ratings do not mediate the effects of liquidity and leverage on bond prices. Nonetheless, bond ratings reflect the yield of bond prices. In conclusion, this study finds that while profitability, liquidity, and leverage do not significantly affect bond ratings, bond prices are influenced by profitability and bond ratings. The practical implications suggest that bond ratings and bond prices play a pivotal role in enhancing company performance, particularly in terms of managing liquidity to meet interest and installment obligations and leveraging strategies to boost income.

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