THE EFFECT OF FINANCIAL LEVERAGES AND MARKET SIZE ON STOCK RETURNS

This paper examines the effect of leverages and market size on stock returns of Malaysian public listed companies. This study attempts to investigate the impact and relationship of financial leverages and market size on stock returns. A random sample of top 19 Malaysian companies based on market capitalisation been selected covering a period from 2010 to 2017. This study focused on stock returns as dependent variable with three independent variables which are debt-to-equity ratio, debt ratio and market size. The methods used included random and fixed effect estimators as well as correlation analysis. The most appropriate model that has been adopted is Random Effect Model. The finding shows that only market size resulted in significant inverse relationship with stock returns, in the other hand, the debt-to-equity and debt ratio show no relationship with stock returns. As for the investors, although the stock market is mainly influenced by economic effects and announcements, the investors can now consider the market size as a factor that will affect the stock returns. (C) 2020 Published by European Publisher.