Implications of Financial Distress and Macroeconomic on Stock Return With Variable Moderation of Operating Cash Flow

Abstract

Abstract. This study aims to examine the implications of the financial distress, interest rate
and exchange rate to stock returns on textile and garment companies in Indonesia, which
listed on the Indonesia Stock Exchange for the period 2012-2015. The operating cash flow
is used as a moderating variable to examine the correlation between financial distress and
stock returns. There are 15 companies that are used as samples for the study were selected
based on purposive sampling method. Meanwhile, fixed effect model of the data panel
linear regression method selected for data analysis. The quantitative data was taken from
ICMD and Capital Market Reference Center Indonesia Stock Exchange. By using
significance level of 5%, study results showed financial distress as Altman Z-score
influence positively but insignificant on stock returns and depreciation of exchange rate
influence positively and significant on stock returns. Meanwhile, increasing interest rate
impact on stock returns negatively but not significant. The study also summarize that
operating cash flow cannot moderate the correlation between financial distress and stock
returns and this variable classified as predictor moderator. The study results also showed
financial distress, interest rates and exchange rates had significant impact on stock returns
simultaneously.

Keywords: financial distress, interest rates, exchange rates, operating cash flow, return
stock, and predictor moderate.