Understanding the Significance of Yield to Maturity

Oct 13, 2025 by talynt.org 110 views

The Influence of Bonds, Maturity, Liquidity, Profitability on Yield to Maturity Bonds with Company Size as Moderating Variables

In the world of investment, bonds are one of the most widely considered financial instruments by investors. The assessment of bonds involves various factors, including bond ratings, maturity, liquidity, and profitability from bond-issuing companies. This article discusses the effect of these factors on bonds' yield to maturity (YTM), as well as how the company's size acts as a moderating variable.

Understanding the Significance of Yield to Maturity

Yield to maturity is the rate of return expected by investors if the bonds are held to maturity. YTM describes the potential benefits of bonds, making it essential for investors to understand the factors that influence YTM. In this study, the focus was on BUMN (State-Owned Enterprises) companies listed on the Indonesia Stock Exchange during the 2018-2022 period.

The Importance of Yield to Maturity in Investment Decisions

Yield to maturity is a crucial factor in investment decisions, as it determines the potential returns on investment. Investors need to understand the factors that influence YTM to make informed decisions. The study aimed to investigate the effect of bond ratings, maturity, liquidity, and profitability on YTM, as well as the moderating role of company size.

Analysis of the Effect of Factors on Yield to Maturity

Bond Rating: A Crucial Factor in YTM

This study shows that the bond rating has a significant positive influence on YTM. A higher ranking indicates a lower risk, so investors will expect lower yields. Conversely, a low ranking causes YTM to increase because investors demand higher rewards for greater risk. The study found that a higher bond rating is associated with a lower YTM, indicating that investors are willing to accept lower returns for lower-risk investments.

Maturity: A Key Factor in YTM

The results of the study also revealed that maturity has a positive and significant effect on YTM. Bonds with a longer period of time usually offer a higher yield because there is a greater uncertainty related to changes in interest rates and the risk of default over time. The study found that longer maturity bonds are associated with higher YTM, indicating that investors are willing to accept higher returns for longer-term investments.

Liquidity: A Factor that Influences YTM

Liquidity, which measures how easy an asset can be traded without affecting price, also has a positive effect on YTM. A more liquid bond allows investors to enter and exit the market more easily, which usually encourages lower returns. However, the results showed that the company's size did not play a significant role in the moderation of the effect of liquidity on YTM. The study found that more liquid bonds are associated with lower YTM, indicating that investors are willing to accept lower returns for more liquid investments.

Profitability: A Factor that Influences YTM

Interestingly, profitability shows a negative effect on YTM. This can be interpreted that more profitable companies tend to provide lower yields, given the lower risk for investors. The study found that more profitable companies are associated with lower YTM, indicating that investors are willing to accept lower returns for lower-risk investments.

Company Size as Moderating Variables

The company's size turns out to play an important role as a moderating variable. This study found that the company's size significantly influenced the relationship between:

Bond Ranking and YTM: Larger companies tend to have better bond ratings, thereby increasing yields. The study found that larger companies with better bond ratings are associated with higher YTM, indicating that investors are willing to accept higher returns for lower-risk investments.
Maturity and YTM: Large companies with long bond periods offer higher YTM, reflecting better stability and growth potential. The study found that larger companies with longer maturity bonds are associated with higher YTM, indicating that investors are willing to accept higher returns for longer-term investments.

However, the size of the company is unable to moderate the effect of liquidity on YTM. This shows that liquidity can remain an important factor that stands alone in influencing bond yields. On the other hand, the company's size succeeded in moderating the effect of profitability on YTM, indicating that large companies with high profitability can offer lower yields.

Conclusion

From the results of this study, it can be concluded that the ranking of bonds, maturity, liquidity, and profitability affect the yield to maturity of bonds in state-owned companies in Indonesia. The company's size also has a significant moderating role in several relationships, which indicates the importance of considering the company's size in bond investment analysis. With this understanding, investors can make more informed and measurable investment decisions.

Implications of the Study

The study has several implications for investors, policymakers, and regulators. Firstly, the study highlights the importance of considering the company's size in bond investment analysis. Secondly, the study suggests that investors should consider the bond rating, maturity, liquidity, and profitability when making investment decisions. Finally, the study implies that policymakers and regulators should consider the company's size when designing policies and regulations related to bond issuance and investment.

Limitations of the Study

The study has several limitations that should be addressed in future research. Firstly, the study only considered state-owned companies listed on the Indonesia Stock Exchange. Secondly, the study only considered the 2018-2022 period. Finally, the study only considered a limited number of factors that influence YTM.

Future Research Directions

Future research should aim to address the limitations of the study. Firstly, future research should consider a broader range of companies, including private companies. Secondly, future research should consider a longer period of time. Finally, future research should consider a wider range of factors that influence YTM.

By understanding the factors that influence YTM, investors can make more informed and measurable investment decisions. The study highlights the importance of considering the company's size in bond investment analysis and suggests that investors should consider the bond rating, maturity, liquidity, and profitability when making investment decisions.
Frequently Asked Questions (FAQs) about the Influence of Bonds, Maturity, Liquidity, Profitability on Yield to Maturity Bonds with Company Size as Moderating Variables

In this article, we will answer some of the most frequently asked questions about the influence of bonds, maturity, liquidity, profitability on yield to maturity bonds with company size as moderating variables.

Q: What is yield to maturity (YTM)?

A: Yield to maturity is the rate of return expected by investors if the bonds are held to maturity. YTM describes the potential benefits of bonds, making it essential for investors to understand the factors that influence YTM.

Q: What are the factors that influence YTM?

A: The factors that influence YTM include bond ratings, maturity, liquidity, and profitability. These factors can affect the yield to maturity of bonds, making it essential for investors to consider them when making investment decisions.

Q: How does bond rating affect YTM?

A: Bond rating has a significant positive influence on YTM. A higher ranking indicates a lower risk, so investors will expect lower yields. Conversely, a low ranking causes YTM to increase because investors demand higher rewards for greater risk.

Q: How does maturity affect YTM?

A: Maturity has a positive and significant effect on YTM. Bonds with a longer period of time usually offer a higher yield because there is a greater uncertainty related to changes in interest rates and the risk of default over time.

Q: How does liquidity affect YTM?

A: Liquidity has a positive effect on YTM. A more liquid bond allows investors to enter and exit the market more easily, which usually encourages lower returns.

Q: How does profitability affect YTM?

A: Profitability shows a negative effect on YTM. This can be interpreted that more profitable companies tend to provide lower yields, given the lower risk for investors.

Q: What is the role of company size as a moderating variable?

A: The company's size plays an important role as a moderating variable. This study found that the company's size significantly influenced the relationship between bond ranking and YTM, maturity and YTM, and profitability and YTM.

Q: How does company size affect the relationship between bond ranking and YTM?

A: Larger companies tend to have better bond ratings, thereby increasing yields. The study found that larger companies with better bond ratings are associated with higher YTM, indicating that investors are willing to accept higher returns for lower-risk investments.

Q: How does company size affect the relationship between maturity and YTM?

A: Large companies with long bond periods offer higher YTM, reflecting better stability and growth potential. The study found that larger companies with longer maturity bonds are associated with higher YTM, indicating that investors are willing to accept higher returns for longer-term investments.

Q: How does company size affect the relationship between profitability and YTM?

A: The company's size succeeded in moderating the effect of profitability on YTM, indicating that large companies with high profitability can offer lower yields.

Q: What are the implications of this study for investors, policymakers, and regulators?

A: The study highlights the importance of considering the company's size in bond investment analysis. It also suggests that investors should consider the bond rating, maturity, liquidity, and profitability when making investment decisions. Finally, it implies that policymakers and regulators should consider the company's size when designing policies and regulations related to bond issuance and investment.

Q: What are the limitations of this study?

A: The study only considered state-owned companies listed on the Indonesia Stock Exchange. It also only considered the 2018-2022 period. Finally, it only considered a limited number of factors that influence YTM.

Q: What are the future research directions?

A: Future research should aim to address the limitations of this study. It should consider a broader range of companies, including private companies. It should also consider a longer period of time. Finally, it should consider a wider range of factors that influence YTM.