Non-Performing Loan and its Impact on Stock Price Index Through Return on Equity in the Banking Industry
DOI:
https://doi.org/10.56070/ibmaj.v2i3.55Keywords:
Non-Performing Loans, Return On Equity, Stock Price IndexAbstract
This research aims to examine and analyze the influence of non-performing loans on the stock price index through return on equity in the banking industry listed on the Indonesia Stock Exchange. The study employs secondary data from 30 banking industries obtained from ICMD (Indonesia Capital Market Directory) for the period 2016 to 2020, as well as data from the Central Bureau of Statistics, Bank Indonesia, Jakarta Stock Exchange website, and Bank Indonesia. The data is analyzed using path analysis with AMOS version 7 to test the data and analyze the hypotheses. The research findings indicate the following: 1) Non-performing loans have a significant negative influence on return on equity, meaning that lower non-performing loan values in an industry lead to higher profitability levels measured by return on equity; 2) Return on equity has a significant positive influence on the stock price index, explaining that higher profits for banks, as measured by return on equity, correspond to higher stock prices as measured by the stock price index; 3) Non-performing loans have a significant negative influence on the stock price index through return on equity. This suggests that investors are more responsive to changes in non-performing loans rather than waiting for financial performance information, as measured by return on equity, to assess stock price developments.
Downloads
References
Almahadin, H. A., Kaddumi, T., & Qais, A. K. (2020). Banking soundness-financial stability nexus: empirical evidence from Jordan. Banks and Bank Systems, 15(3), 218-227. https://doi.org/10.21511/bbs.15(3).2020.19
Azeem, A., & Amara (2014). Impact of Profitability on Quantum of Non Performing Loans. International Journal of Multidisciplinary Consortium (IJMC), 1(1), 1-14.
Bekaert, G., Harvey, C. R., & Lundblad, C. (2005). Does financial liberalization spur growth?. Journal of Financial economics, 77(1), 3-55. https://doi.org/10.1016/j.jfineco.2004.05.007
Cao, S., Nie, L., Sun, H., Sun, W., & Taghizadeh-Hesary, F. (2021). Digital finance, green technological innovation and energy-environmental performance: Evidence from China's regional economies. Journal of Cleaner Production, 327, 129458. https://doi.org/10.1016/j.jclepro.2021.129458
Edem, D. B. (2017). Liquidity management and performance of deposit money banks in Nigeria (1986–2011): An investigation. International Journal of Economics, Finance and Management Sciences, 5(3), 146-161. https://doi.org/10.11648/j.ijefm.20170503.13
Gul, F. A., Kim, J., & Qiu, A. (2007). Ownership Concentration, Foreign Shareholding, Audit quality and Firm-specific Return Variation : Evidence from China, Hong Kong Politechnic University-School of Accounting and Finance and Citigroup Japan Inc, Working Paper Series, 1- 37. https://doi.org/10.2139/ssrn.984142
Halim, A. (2005). Analisis Investasi . Salemba Empat.
Higgins, R. C. (1992). Analysis for Financial Management, Irwin, Inc.
Johnson, R. B., & Christensen, L. (2014). Educational Research : Quantitative, Qualitative and Mixed Approaches. SAGE Publications, Inc.
Joseph, S. J., & Carter, David A., 2000. Evidence on the Financial Characteristic of Banks that Do and Do Not Use Derivatives, the Quarterly Review of Economics and Finance, 40(4), 431-449.
Paul, S. C., Bhowmik, P. K., Islam, M. R., Kaium, M. A., Masud, A. A. (2013). Profitability and Liquidity of Conventional Banking and Islamic Banking in Bangladesh: A Comparative Study. European Journal of Business and Management. 5(24), 113-123.
Ranciere, R., Tornell, A., & Westermann, F. (2006). Decomposing the Effect of Financial Liberalization: Crisis vs. Growth, Journal of Banking and Finance, 30(12), 3331-3348. https://doi.org/10.1016/j.jbankfin.2006.05.019
Rusdianti, I. S., Irmadariyani, R., & Kustono, A. S. (2022). E-Finance: Mitigation of Fraud Tendency in Indonesia. IJEBD International Journal Of Entrepreneurship And Business Development, 5(3), 581-589. https://doi.org/10.29138/ijebd.v5i3.1857
Setiawan, A., & Muchtar, S. (2021). Factor affecting the capital adequacy ratio of banks listed in Indonesia Stock Exchange. Jurnal Ekonomi, 26(1), 153-169. https://doi.org/10.24912/je.v26i1.733
Suzuki, Y. and Sohrab Uddin, S.M. (2014), Islamic Bank Rent : A Case Study of Islamic Banking in Bangladesh. International Journal of Islamic and Middle Eastern Finance and Management, 7(2), 170-181. https://doi.org/10.1108/IMEFM-11-2013-0119
Van der Linden, R. W., & Łasak, P. (2023). The Future Sino-US Financial Coupling or Decoupling Accompanied by Their Fierce Rivalry with Different National Approaches. In Financial Interdependence, Digitalization and Technological Rivalries: Perspectives on Future Cooperation and Integration in Sino-American Financial Systems (pp. 119-128). Cham: Springer Nature Switzerland. https://doi.org/10.1007/978-3-031-27845-7_10
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Zakaria, Khusnul Khotimah, Saling, Abdul Rasyid
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
