The Effect of Firm Decision Making of Risk Preference Concerning to Debt to the Firm Performance in Indonesian Stock Exchange

How frm should act risk averse or risk taking of achieving its objective to maximize stockholder wealth is still puzzle. Firms with high fnancial performance may act risk averse, but underperforming frms act risk taking concerning to debt. This study proposes new approach of calculating frm risk preference concerning debt use variance of frm fnancial performance growth and frm leverage growth and also investigates how the effect of risk preference by the frms to the proftability i.e. earning per share (EPS). This study analyses 52 frms as sample with signifcance book value and the most active trading stocks of Indonesian Stock Exchange during 2007 to 2016. The result is frms with good fnancial performance and still act risk averse will gain increasing fnancial performance of earning per share (EPS). This study contributes new approach of calculating frm risk preference concerning debt use variance of frm fnancial performance growth and frm leverage growth. Also, it suggests that frms should always act risk averse concerning debt.