Beyond Market Return: Determinants of Jensen’s Alpha in Indonesian F&B Firms

Abstract

The Objectives – This study examines whether Indonesian food and beverage (F&B) firms generated returns above those implied by market risk during 2021–2025, and investigates whether profitability, leverage, inflation, and the policy interest rate help explain risk-adjusted performance as measured by Jensen’s Alpha. The Methods/approaches – Annual Jensen’s Alpha was calculated for six F&B issuers listed on the Indonesia Stock Exchange (30 firm-year observations, 2021–2025) and regressed on return on assets, the debt-to-equity ratio, inflation, and the Bank Indonesia 7-Day Reverse Repo Rate, controlling for firm size, using a preliminary pooled OLS model ahead of a full panel-data estimation. The Results – Average Jensen’s Alpha across the sample was −6.82 percent, with only 2022 recording a positive industry-wide alpha. The pooled model explained little of the variation (R² = 0.231) and none of the five predictors was statistically significant, while variance inflation factors indicated severe multicollinearity. The Research Implications – The findings suggest F&B stocks did not consistently outperform risk-adjusted benchmarks, challenging the assumption of intrinsic defensive alpha in the sector. A panel-data strategy with fixed- and random-effects estimation is outlined to refine these estimates and support more cautious, risk-adjusted evaluation of consumer-staples equities