Essay Example on Regression Analysis to see the Relationship Between the Variables

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The research uses regression analysis to see the relationship between the variables that would be conducted in Stata application ROA and ROE measure profitability of the Indonesian property companies Those two profitability measurements are affected by firm s size and capital structure Firm s size is measured by natural log of sales and natural log of assets Meanwhile capital structure is measured by debt to equity ratio After evaluating the relationship between profitability capital structure and firm s size ROA and ROE will be regressed by debt and equity that are used by property companies in each respective year to find the best finance resources among two choices for Indonesian property and real estate companies Therefore the analysis will be divided into 2 parts to clearly distinguish the purpose of the analysis First part analyzes about the relationship between independent variables on dependent variable firm s size and capital structure are regressed on profitability However there will be 2 measurement for firm s size and 2 measurements also for profitability which will be resulted in 4 regressions to be analyzed

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The model of regression for part 1 analysis will be Profitability a b Capital Structure b Firm s Size e Where a is the constant of regression b is the coefficient of independent variables and e is the error term of the regression Meanwhile part 2 of analysis will regress debt and equity as financial source on profitability as following this model Profitability a b Debt b Equity e The same rule will be applied as the previous one where a is the constant of regression b is the coefficient of variables and e is the error term of regression As already said above there will be 4 regressions in analysis part 1 which are ROA is regressed on log natural of sales and debt to equity ROE is regressed on log natural of assets and debt to equity ROA is regressed on log natural of assets and debt to equity and ROE is regressed on log natural of sales and debt to equity Meanwhile in analysis part 2 ROA and ROE are separately regressed on debt and equity to find the best financing source for Indonesian property and real estate companies The diagram of the analysis part 1 and 2 are available below to make it clearer to understand 1 Analysis part 1 Illustration 1 Source adapted from Khoiro Suhadak and Handayani n d P 4 2 Analysis part 2 Illustration 2 Source adapted from Khoiro Suhadak and Handayani n d P 4 b Target population The research is targeted at property and real estate companies in Indonesia that are listed on Indonesian Stock exchange market There are 58 companies that have been listed on the stock exchange with 55 of them have accessible data c Sample and sampling procedure Since the population data is only 58 companies there is no need to do sampling process Therefore all 58 companies will be taken as the data that will be processed on this research However not all companies can be accessed to get their data thus this analysis will have only 55 companies The list of companies name will be available in the appendix d Required data and resources In order to do the analysis some important data are needed from each Indonesian property companies The data then will be processed to measure dependent and independent variables

The data that needed are total sales total assets debt equity and net income All of those data are gathered from each company's income statement that can be downloaded in Indonesian Stock Exchange website The analysis wants to see the relationship between variables in the newest condition therefore the data are gathered from the last 3 years which is 2014 205 and 2016 e Data gathering procedure Most of data that needed are only secondary data Those data are taken from each Indonesian property companies income statements that are published online on Indonesian stock exchange market in Internet f Data analysis procedure After the data gathered from the Indonesian stock exchange market website IDX those data then are converted into some ratios as variables measurement such as debt to equity ratio natural log of sales natural log of assets ROA and ROE They are then regressed by using Stata application to find their relationship with each other Since the analysis will be in two parts first analysis aims to find the relationship between variables It is intended to find the effect of firm's size and capital structure on profitability of Indonesian property companies Thus it will focus on the value of r squared and p value of each independent variables While at the same time it is also looking on the sign of each variable s coefficient if the sign is positive it means a positive relationship and the higher the number will result in higher profitability Meanwhile it means vice versa if the sign of the coefficient is negative In the second part of the analysis the same rules as the first part will be applied The differences are the second part is intended to find the best financing sources that will increase Indonesian property companies profitability The analysis also relies on the r squared and p value of each variable while at the same time looking at the coefficient of independent variables A negative coefficient means that independent variables have an inverse relationship to profitability therefore a negative coefficient of a variable means bad financing sources to Indonesian property and real estate companies profitability and vice versa

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