THE IMPACT OF GEOPOLITICAL RISK, EXCHANGE RATE, AND PROFITABILITY ON THE STOCK RETURNS OF COAL SUB SECTOR COMPANIES LISTED ON THE IDX

Abstract

This study aims to examine the impacts of geopolitical risk, exchange rate and profitability (Return on Asset) on the stock returns of coal subsector companies listed on the Indonesia Stock Exchange during the 2021–2025 period. The study adopts a quantitative causal research design using quarterly panel data collected from 35 coal subsector companies throughout the observation period. The data were analyzed using Panel Data Regression with the Common Effect Model (CEM). The simultaneous test results indicate that geopolitical risk, exchange rate, and profitability jointly have a significant impact on the stock returns of coal subsector companies. Partially, geopolitical risk has a negative and significant impact, indicating that heightened geopolitical uncertainty reduces investor confidence and consequently lowers stock returns. In contrast, the Rupiah exchange rate represented by JISDOR does not have a statistically significant impact on stock returns, suggesting that the positive impact of Rupiah depreciation on export revenues is offset by increasing economic uncertainty and higher corporate operating costs. Meanwhile, profitability, proxied by the lagged Return on Assets (ROA), has a positive and significant impact on stock returns, indicating that companies with stronger financial performance tend to generate higher returns for investors. The explanatory power of the research model in explaining variations in the stock returns of coal subsector companies is reflected by an Adjusted R² of 3.8%, while the remaining variation is explained by other factors outside the scope of this study.