PROFITABILITY IMPACT ON COMPANY SHARE PRICES: A CASE STUDY INDONESIAN

Authors

  • Bustanul Ulum, Rusdiyanto , Mochamad Syafii* , Dwi Inggarwati Rahayu , Dini Ayu Pramitasarisari

Abstract

This paper intends to evaluate the effect of profitability with measurement indicators
using Return On Equity, Return On Assets and Net Profit Margin on stock prices of banking sector companies
on the Indonesian Stock Exchange. Design / methodology / approach: This paper uses a quantitative
approach with a theory testing process using numerical data as a generalization tool to test hypotheses.
Indicators for measuring the Profitability variable using Return On Equity, Return On Assets and Net Profit
Margin are obtained from company financial statements and the website of the Indonesia Stock Exchange
www.idx.co.id, www.ojk.go.id, www.bi.go.id dan www.yahoofinance.com. Finding: The findings prove that
Return on Assets has a positive effect on share prices, so that these findings can be used by investors to analyze
relevant information. Meanwhile, Return On Equity, Net Profit Margin has no effect on share prices, meaning
that Return On Equity, Net Profit Margin tends not to have value relevance to banking share prices on the
Indonesia Stock Exchange. Practical Implications: The findings are recommended for banking employees
to improve the effectiveness and efficiency of banking performance and to contribute to the banking literature.
Originality: Previous research was conducted to test the profitability of share prices, the findings concluded
that profitability has an effect on share prices. The novelty in this study, the researcher added control variables
as variables to strengthen the results of this study.

Published

2020-02-28

Issue

Section

Articles