Analysis of Financial Ratios and Economic Condition Impact on Islamic Bank Stock Price: Study Case in Malaysia

Carissa Aulia Raisa; Siti Raihan; Alvi Rahmawati; Arie Febriyansyah; Elis Ratna Wulan

doi:10.31004/riggs.v5i1.7809

Authors

Carissa Aulia Raisa UIN Sunan Gunung Djati Bandung
Siti Raihan UIN Sunan Gunung Djati Bandung
Alvi Rahmawati UIN Sunan Gunung Djati Bandung
Arie Febriyansyah UIN Sunan Gunung Djati Bandung
Elis Ratna Wulan UIN Sunan Gunung Djati Bandung

DOI:

https://doi.org/10.31004/riggs.v5i1.7809

Keywords:

Capital Adequacy, Economic Conditions, Financial Ratios, Islamic Banking, Stock Prices

Abstract

This research is motivated by the rapid development of the Islamic capital market as a key pillar in promoting a sustainable and sharia-compliant financial system, where Islamic banking plays a dominant role in asset contribution and integration with the capital market. Despite this growth, the performance of Islamic bank stocks remains vulnerable to macroeconomic shocks such as the COVID-19 pandemic and economic slowdowns, making it crucial to understand the factors that influence them. Therefore, this study aims to analyze the influence of financial ratios and economic conditions on the stock prices of Islamic banks in Malaysia. This study uses a quantitative explanatory approach with secondary data from 2011–2023 analyzed using multiple linear regression with the help of SPSS and supported by classical assumption tests. The results show that Return on Assets (ROA) has a positive and significant effect on stock prices, confirming that profitability is a strong signal for investors, in line with signaling theory. Meanwhile, Capital Adequacy Ratio (CAR), Gross Domestic Product (GDP), and inflation showed positive and negative effects but were not significant partially, although simultaneously they had a significant effect on stock prices based on the F test. This finding indicates that internal financial performance is more dominant than macroeconomic factors in determining the stock prices of Islamic banks in Malaysia. The implication of this study is that investors should prioritize profitability indicators in decision-making, while policymakers and bank management need to improve financial performance and institutional resilience to maintain stock market stability and growth.

Downloads

Download data is not yet available.

References

H. Askari, “Islamic capital markets and products,” in Research Handbook on Global Capital Markets Law, Edward Elgar Publishing, 2023.

Abdullah, Fadli Daud, Mohamad Athoillah, and Yoyok Prasetyo. ‘Perkembangan Pasar Saham Syariah di Indonesia: Kategori Saham, Indeks Saham, dan Standarisasi.’ Al-Bay’: Journal of Sharia Economic and Business 2.2 (2023): 141-154.

F. Balli, M. Billah, H. O. Balli, and A. De Bruin, “Spillovers between Sukuks and Shariah-compliant equity markets,” Pacific-Basin Financ. J., vol. 72, p. 101725, 2022, doi: 10.1016/j.pacfin.2022.101725.

I. F. S. Board, “Islamic Financial Services Industry Stability Report 2023,” 2023. [Online]. Available: http://www.ifsb.org

B. L. Monia, “Stock returns in Islamic and conventional banks,” J. Islam. Account. Bus. Res., vol. 11, no. 3, pp. 629–646, 2020, doi: 10.1108/JIABR-03-2016-0033.

W. Al Salamat, M. Q. M. Momani, and K. Batayneh, “Firm-specific, macroeconomic factors and stock price risk for Jordanian banks,” Banks Bank Syst., vol. 16, no. 3, pp. 166–172, 2021, doi: 10.21511/bbs.16(3).2021.15.

F. Mubarok, A. Nurhasanah, N. D. Fajarwati, and S. Salsabila, “Assessing Islamic Banking Equity: A Synthesis of Financial Ratios and Economic Conditions,” WADIAH, vol. 8, no. 2, pp. 191–215, 2024, doi: 10.30762/wadiah.v8i2.1336.

Z. A. Wahid, N. C. Yahya, S. N. M. Rashid, M. A. Karim, and A. M. Khalid, “Macroeconomic Forces Affecting Islamic Performance Indices,” Inf. Manag. Bus. Rev., vol. 16, no. 3S(I)a, pp. 979–990, 2024, doi: 10.22610/imbr.v16i3S(I)a.4185.

L. Layaman, A. M. A. Wadud, A. Jaelani, and Z. Mawaddah, “Macroeconomic Determinants of Islamic Stock Market Performance: An Analysis of Interest Rates, Inflation, Exchange Rates and Gold Prices,” Li Falah J. Stud. Ekon. Dan Bisnis Islam, vol. 9, no. 1, p. 15, 2025, doi: 10.31332/lifalah.v1i1.10773.

M. M. Aminy and A. Sauqi, “The Determinants of Islamic Banks’ Stock Prices Volatility: Evidence From the GCC Countries,” Al-Amwal J. Ekon. Dan Perbank. Syari’ah, vol. 12, no. 2, p. 227, 2020, doi: 10.24235/amwal.v12i2.7050.

I. Mutmainah and A. Apriliantika, “The mediating effect of Islamic ethical identity disclosure on financial performance,” Asian J. Islam. Manag., pp. 69–82, 2023, doi: 10.20885/AJIM.vol5.iss1.art5.

A. Samad, “Performance of Interest Free Islamic Banks vis-à-vis Interest-Based Conventional Banks of Bahrain,” IIUM J. Econ. Manag., vol. 12, no. 2, pp. 1–15, 2004.

M. Safiullah and A. Shamsuddin, “Risk-adjusted efficiency and corporate governance: Evidence from Islamic and conventional banks,” J. Corp. Financ., vol. 55, pp. 105–140, 2019, doi: 10.1016/j.jcorpfin.2018.08.009.

R. M. Yusof and M. S. A. Majid, “Macroeconomic Variables and Stock Returns in Malaysia: An Application of the Ardl Bound Testing Approach,” Savings Dev., vol. 4, pp. 1–22, 2007.

M. K. Hassan and A.-H. M. Bashir, “Determinants of Islamic Banking Profitability,” in Islamic Perspectives on Wealth Creation, Edinburgh University Press, 2005, pp. 118–140. doi: 10.3366/edinburgh/9780748621002.003.0008.

A. A.-N. Abdallah and A. K. Ismail, “Corporate governance practices, ownership structure, and corporate performance in the GCC countries,” J. Int. Financ. Mark. Institutions Money, vol. 46, pp. 98–115, 2017, doi: 10.1016/j.intfin.2016.08.004.

M. Y. M. Hussin, F. Muhammad, M. F. Abu, and S. A. Awang, “Macroeconomic Variables and Malaysian Islamic Stock Market: A Time Series Analysis,” J. Bus. Stud. Q., vol. 3, no. 4, pp. 1–13, 2012.

S. A. Mustafa, R. Ramlee, and S. H. Kassim, “Behaviour of the Islamic Stock Market in a Prolonged Downturn in the Global Market: Empirical Evidence from Malaysia,” J. Islam. Financ., vol. 4, no. 2, 2015.

S. M. H. Abdullah, M. R. Mohamad, and M. Ismail, “The Long-run Relationship between Islamic Stock Market and Macroeconomic Variables,” J. Entrep. Bus., vol. 6, no. 2, pp. 24–30, 2018, doi: 10.17687/JEB.0602.03.

S. A. Srairi, “Cost and profit efficiency of conventional and Islamic banks in GCC countries,” J. Product. Anal., vol. 34, no. 1, pp. 45–62, 2010, doi: 10.1007/s11123-009-0161-7.

T. Nursyamsiah, “Macroeconomic Determinants of Islamic Banking Financing,” Islam. Financ. Bus. Rev., vol. 11, no. 2, pp. 145–164, 2017.

P. S. Rose, Bank management & financial services. 2013.

J. Millie, Ed., Hasan Mustapa: Ethnicity and Islam in Indonesia. Monash University Publishing, 2016.

H. Ahmed, M. Mohieldin, J. Verbeek, and F. Aboulmagd, “On the Sustainable Development Goals and the Role of Islamic Finance,” 2015. doi: 10.1596/1813-9450-7266.

A. A. Rahman, N. Zahirah, M. Sidek, and F. H. Tafri, “Macroeconomic determinants of Malaysian stock market,” African J. Bus. Manag., vol. 3, no. 3, pp. 95–106, 2009, [Online]. Available: http://www.academicjournals.org/AJBM