THE EFFECT OF MARKET RATIO ON BOND RATINGS ON MANUFACTURING COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE

Abstract

The capital market plays an important role in the economy of a country. Various policies were issued by a company to advance the capital market. One of the investments in the capital market is bond investment. The market value ratio is used to predict the company's bond rating. Market value ratio is a ratio that measures the market price relative to book value. Market value ratio is calculated by Price Earnings Ratio (PER). PER is a function of expected future income. Annas (2015) states that a high PER indicates a good stock price and investors will prefer to invest in stocks rather than bonds and the market will respond that these bonds are high risk and low rated. This study aims to provide empirical evidence of the effect of market value ratios on bond ratings. This research is expected to provide input for decision making in investing in bonds in relation to bond ratings in order to avoid the risk of default. This type of research is causative research. The population in this study are all publicly listed companies that issue bonds and these companies are listed on the Indonesia Stock Exchange (IDX) and listed on the bond rating issued by PT. PEFINDO. The results of this study indicate that market ratios have no effect on bond ratings.

 Keywords: Bonds, Market Ratio, Bond Rating, Price Earnings Ratio, Market Value Ratio