The Impact of Profitability Ratios on Islamic Bank Stock Prices

Evidence from the Indonesia Stock Exchange

Abstract

This study investigates the effect of profitability ratios on the stock prices of Islamic banks listed
on the Indonesia Stock Exchange (IDX) during the period 2018–2020. The research employs a
quantitative approach using secondary financial data derived from the annual reports of three
Islamic banks, namely Bank BRI Syariah, Bank Panin Dubai Syariah, and Bank BTPN Syariah.
Profitability is measured through Return on Assets (ROA), Return on Equity (ROE), and Earnings
per Share (EPS), while stock price serves as the dependent variable. Data are analyzed using
multiple linear regression and classical assumption tests to ensure the validity of results. The
findings reveal that EPS has a positive and significant influence on stock prices, whereas ROA
and ROE show positive butstatistically insignificant effects. Simultaneously, all three profitability
indicators collectively exert a significant impact on the stock prices of Islamic banks. These
results suggest that investors in Indonesia’s Islamic capital market place greater emphasis on
earnings information as a reliable signal of firm performance. The study contributes to the
growing literature on Islamic finance by offering empirical evidence from emerging market
conditions and provides insights for investors, bank managers, and policymakers seeking to
enhance financial transparency and market confidence in the Islamic banking sector