ABSTRACT

The size effect anomaly was first discovered by Banz (1981), and it involved establishing a relationship between company size and stock returns. This concept has been studied in several world capital markets based on two streams. The first observes a premium return from the Size Effect while the second is focused on the absence of its anomaly in global capital markets research. There is limited research on the persistent existence of size effect anomalies in the capital market, and not much has been conducted in Indonesia to explain the source of this anomaly through the use of business risk and financial distress. Therefore, the findings of this study were expected to confirm the existence of an anomalous size effect in Indonesia’s capital market.