DETERMINANTS AFFECTING PROFITABILITY AND STOCK RETURNS FOR SMALLER BANKS LISTED ON THE INDONESIA STOCK EXCHANGE

Abstract

In running businesses and their operations, banks are required to earn profits. Profits earned by banks provide an added value for banks, especially for shareholders if the stock price increase. This research was conducted at 18 banks in BUKU II bank categories that already listed on the Indonesia Stock Exchange or Go Public. The purpose of this study was to determine factors influence profitability and stock returns banks in groups of BUKU II Go public. The study was conducted using secondary data from January 2014 to December 2018. In order to analyze the factors that influence firms’ profitability and stock returns, data processed using panel data regression analysis. The results showed that significant factor affects profitability were total assets, non-performing loans (NPL), capital adequacy ratio (CAR), net interest margin (NIM), and the number of employees. Furthermore, a significant factor that affects stock returns is good corporate governance (GCG) and the number of electronic banking variations that are owned. The resulting research has managerial implications for the banks in maintaining several important financial ratios such as CAR, NPL, NIM, and also developing electronic banking and implementing GCG in every business process carried out.

Keywords: determinant factors, go public, panel data regression, profitability, stock return