The Effect of Return on Assets, Debt to Equity Ratio, and Current Ratio on Stock Prices of Banking Sub-Sector (KBMI 3 and KBMI 4) Listed on the Indonesia Stock Exchange for the 2020–2024 Period

Muhammad Neza Qatrunada; Wiwin Aminah

doi:10.55681/economina.v5i6.2581

Authors

Muhammad Neza Qatrunada Accounting Study Program, Faculty of Economics And Business, Telkom University, Indonesia
Wiwin Aminah Accounting Study Program, Faculty of Economics And Business, Telkom University, Indonesia

DOI:

https://doi.org/10.55681/economina.v5i6.2581

Keywords:

Return on Assets (ROA), Debt to Equity Ratio (DER), Current Ratio (CR), Stock Price, Banking Sector, Indonesia Stock Exchange.

Abstract

Financial sub-sector businesses listed on the Indonesia Stock Exchange between 2020 and 2024 will be the focus of this research, which seeks to analyse the impact of ROA, DER, and CR on stock prices. Following the COVID-19 epidemic, there were stock price movements in the banking industry that did not necessarily correspond with changes in the underlying financial statistics of the firms, which prompted this investigation. Further research is needed to fill a research gap caused by inconsistent findings in previous studies on the impact of ROA, DER, and CR on stock prices. Because of its central position in the country's financial system and its hegemony over financial services assets in Indonesia, the banking industry was chosen for this study. A quantitative technique based on the associative causal approach is used in this investigation. Secondary data, such as KBMI 3 and KBMI 4 banking businesses' yearly financial statements and closing stock prices from 2020 to 2024, are used. Businesses that fulfilled the study's criteria were selected using a purposive sampling strategy. Using EViews 13's panel data regression, we evaluated the data. A battery of tests were run, including F-tests for simultaneous and partial testing, evaluations of coefficients of determination, and classical assumption tests. The results of this research show that from 2020 to 2024, the stock prices of financial institutions KBMI 3 and KBMI 4 that were listed on the Indonesia Stock Exchange were greatly affected by Return on Assets (ROA), Debt to Equity Ratio (DER), and Current Ratio (CR) all at once. Although there is no correlation between DER and CR, there is a positive and statistically significant one between ROA and stock prices. These results show that when deciding to invest in a banking firm, investors care more about the profitability of the business than about the solvency and liquidity ratios. Theoretically, this research should help advance Agency Theory and fundamental analysis inside Indonesia's stock market. Investors may use this study's findings to inform their investment choices, and business leaders may use them to boost their companies' capital market value by enhancing financial performance.

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