Bank Stock Returns in Responding the Contribution of Fundamental and Macroeconomic Effects

Journal of Economics and Policy Vol. 9 No. 1. Pages 134-149, (2016)

16 Pages Posted: 15 Aug 2016

See all articles by Ridwan Nurazi

Ridwan Nurazi

Department of Management, Faculty of Economics and Business, University of Bengkulu - Indonesia

Berto Usman

Department of Management, University of Bengkulu - Indonesia; University of Padua - Italy

Date Written: March 23, 2016

Abstract

This study attempts to examine the effect of financial fundamentals information using CAMELS ratios and macroeconomics variables surrogated by interest rate, exchange rate, and inflation rate toward stock return. By employing panel data analysis (Pooled Least Squared Model), the results reveal that several financial ratios perform a bit contrary to the theory, in which the ratio of CAR shows positive sign but insignificantly contributes to stock returns. Also, the ratio of NPL does not affect the return. In fact, ROE and LDR positively and significantly contribute toward banks’ stock return. Meanwhile, NIM and BOPO show negative signs. The other macroeconomic variables, interest rate (IR), exchange rate (ER) and inflation rate (INF) are consistent with the a priori expectation, in which those variables negatively and significantly contribute to stock return of 16 banks, for the observation period from 2002 to 2011 in the Indonesian banking sector.

Keywords: CAMELS, Interest rate, Exchange rate, Inflation, Bank stock return.

JEL Classification: G02, C51

Suggested Citation

Nurazi, Ridwan and Usman, Berto, Bank Stock Returns in Responding the Contribution of Fundamental and Macroeconomic Effects (March 23, 2016). Journal of Economics and Policy Vol. 9 No. 1. Pages 134-149, (2016), Available at SSRN: https://ssrn.com/abstract=2822943

Ridwan Nurazi

Department of Management, Faculty of Economics and Business, University of Bengkulu - Indonesia ( email )

Jln. Wr. Supratman, Kandang Limun 38121
Bengkulu, ID Bengkulu 38121
Indonesia
+62736 21170 (Phone)
+62736 22105 (Fax)

HOME PAGE: http://www.unib.ac.id

Berto Usman (Contact Author)

Department of Management, University of Bengkulu - Indonesia ( email )

Jln. Wr. Supratman, Kandang Limun 38121
Bengkulu, ID Bengkulu 38121
Indonesia
+62736 21170 (Phone)
+62736 22105 (Fax)

HOME PAGE: http://www.unib.ac.id

University of Padua - Italy ( email )

Via del Santo, 33
Padova, Padova 35123
Italy
+39 366 975 0964 (Phone)

HOME PAGE: http://www.economia.unipd.it/en/

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