The Influence Of Capital Adequacy Ratio, Loan To Deposit Ratio, Non -performing Loans, Net Interest Margin, And Operational Efficiency Ratio On Stock Prices With Return On Assets As Intervening Variables In Banking Companies Listed On The Indonesian Stock Exchange

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The Influence of Capital Adequacy Ratio, Loan to Deposit Ratio, Non-Performing Loans, Net Interest Margin, and Operational Efficiency Ratio on Stock Prices with Return on Assets as Intervening Variables in Banking Companies Listed on the Indonesian Stock Exchange

Introduction

Banking companies play a vital role in a country's economy, and their performance can be reflected in various financial ratios that show efficiency and profitability. This study examines the effect of several financial ratios, namely Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR), Non-Performing Loan (NPL), Net Interest Margin (NIM), and Operational Efficiency Ratio (BOPO), against stock prices at banking companies listed on the Indonesia Stock Exchange (BEI). In addition, this research also tests the role of Return on Assets (ROA) as an intervening variable in the relationship between financial ratios and stock prices.

Background of the Study

Banking companies are essential for a country's economic growth, and their performance can be reflected in various financial ratios. The Capital Adequacy Ratio (CAR) is a measure of a bank's ability to absorb potential losses, while the Loan to Deposit Ratio (LDR) measures a bank's lending activity. Non-Performing Loans (NPL) are loans that are not being repaid, and the Net Interest Margin (NIM) measures a bank's ability to generate profits from its lending and investment activities. The Operational Efficiency Ratio (BOPO) measures a bank's ability to manage its costs and generate profits. Return on Assets (ROA) measures a bank's ability to generate profits from its assets.

Methodology

This study used secondary data from 44 banking companies registered on the IDX in the 2014-2018 period. Purposive sampling techniques were applied in selecting samples, so that 25 banking companies were selected as research objects. The analysis method used was multiple linear regression and path analysis.

Results

The results showed that NIM, NPL, and BOPO have a direct influence on ROA. That is, increased NIM, decreased NPL, and decreased BOPO contribute to increased ROA. However, CAR and LDR have no direct influence on ROA. This indicates that although CAR and LDR are important in maintaining bank stability and liquidity, both do not directly affect the ability of banks to generate profits.

Furthermore, NIM, NPL, BOPO, and ROA are proven to have a direct influence on stock prices. Along with the increase in NIM, decreased NPL, decreased BOPO, and increased ROA, stock prices tend to increase. However, CAR and LDR have no direct effect on stock prices.

It is important to note that CAR, NIM, and BOPO have an indirect effect on stock prices through ROA. That is, the influence of CAR, NIM, and BOPO on stock prices mediated by ROA. Meanwhile, LDR and NPL have no influence on stock prices through ROA.

Implications

These findings have important implications for investors, regulators, and bank management. Investors can use the results of this study to evaluate the performance of banking companies and make more appropriate investment decisions. Regulators can use the results of this study to formulate policies that support bank performance and profitability improvement. Bank management can use the results of this study as a material consideration in taking strategic steps to increase profitability and company value.

Limitations

This research has several limitations, namely:

  • This research uses secondary data collected from the company's financial statements. The data may not reflect the actual condition and can be influenced by other factors that are not considered in this study.
  • This research only focuses on certain financial ratios. There is a possibility of other financial ratios that also affect stock prices.
  • This research is only conducted in the Indonesian banking sector. The results of this study may not apply in other sectors or in other countries.

Conclusion

Although there are several limitations, this research has made a significant contribution to the understanding of the relationship between the financial ratio and share price in the Indonesian banking sector. The results of this study can be used as a material consideration in making investment decisions and policies in the banking sector.

Recommendations

Based on the findings of this study, the following recommendations are made:

  • Investors should consider the financial ratios of banking companies when making investment decisions.
  • Regulators should formulate policies that support bank performance and profitability improvement.
  • Bank management should use the results of this study as a material consideration in taking strategic steps to increase profitability and company value.

Future Research Directions

This study has several limitations, and future research can build on this study by:

  • Using primary data to collect more accurate and reliable data.
  • Focusing on other financial ratios that may also affect stock prices.
  • Conducting the study in other sectors or countries to see if the results are generalizable.

By addressing these limitations and expanding the scope of the study, future research can provide more comprehensive insights into the relationship between financial ratios and stock prices in the banking sector.
Frequently Asked Questions (FAQs) about the Influence of Capital Adequacy Ratio, Loan to Deposit Ratio, Non-Performing Loans, Net Interest Margin, and Operational Efficiency Ratio on Stock Prices with Return on Assets as Intervening Variables in Banking Companies Listed on the Indonesian Stock Exchange

Q: What is the main objective of this study? A: The main objective of this study is to examine the effect of several financial ratios, namely Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR), Non-Performing Loan (NPL), Net Interest Margin (NIM), and Operational Efficiency Ratio (BOPO), against stock prices at banking companies listed on the Indonesia Stock Exchange (BEI).

Q: What is the significance of this study? A: This study is significant because it provides insights into the relationship between financial ratios and stock prices in the Indonesian banking sector. The findings of this study can be used as a material consideration in making investment decisions and policies in the banking sector.

Q: What are the limitations of this study? A: This study has several limitations, namely:

  • This research uses secondary data collected from the company's financial statements. The data may not reflect the actual condition and can be influenced by other factors that are not considered in this study.
  • This research only focuses on certain financial ratios. There is a possibility of other financial ratios that also affect stock prices.
  • This research is only conducted in the Indonesian banking sector. The results of this study may not apply in other sectors or in other countries.

Q: What are the implications of this study for investors? A: Investors can use the results of this study to evaluate the performance of banking companies and make more appropriate investment decisions.

Q: What are the implications of this study for regulators? A: Regulators can use the results of this study to formulate policies that support bank performance and profitability improvement.

Q: What are the implications of this study for bank management? A: Bank management can use the results of this study as a material consideration in taking strategic steps to increase profitability and company value.

Q: What are the future research directions? A: Future research can build on this study by:

  • Using primary data to collect more accurate and reliable data.
  • Focusing on other financial ratios that may also affect stock prices.
  • Conducting the study in other sectors or countries to see if the results are generalizable.

Q: What are the key findings of this study? A: The key findings of this study are:

  • NIM, NPL, and BOPO have a direct influence on ROA.
  • CAR and LDR have no direct influence on ROA.
  • NIM, NPL, BOPO, and ROA are proven to have a direct influence on stock prices.
  • CAR, NIM, and BOPO have an indirect effect on stock prices through ROA.

Q: What are the practical implications of this study? A: The practical implications of this study are:

  • Investors should consider the financial ratios of banking companies when making investment decisions.
  • Regulators should formulate policies that support bank performance and profitability improvement.
  • Bank management should use the results of this study as a material consideration in taking strategic steps to increase profitability and company value.

Q: What are the theoretical implications of this study? A: The theoretical implications of this study are:

  • The study provides insights into the relationship between financial ratios and stock prices in the Indonesian banking sector.
  • The study contributes to the understanding of the role of financial ratios in determining stock prices.

Q: What are the policy implications of this study? A: The policy implications of this study are:

  • The study provides evidence that financial ratios are important in determining stock prices.
  • The study suggests that regulators should focus on improving bank performance and profitability.

Q: What are the future research directions in this area? A: Future research can build on this study by:

  • Using primary data to collect more accurate and reliable data.
  • Focusing on other financial ratios that may also affect stock prices.
  • Conducting the study in other sectors or countries to see if the results are generalizable.