The dynamic of bank stock price and its fundamentals: Evidence from Indonesia

Hendrik Widjaja; Moch. Doddy Ariefianto

doi:10.1080/23322039.2022.2107766

Cogent Economics & Finance (Dec 2022)

The dynamic of bank stock price and its fundamentals: Evidence from Indonesia

Hendrik Widjaja,
Moch. Doddy Ariefianto

Affiliations

Hendrik Widjaja: Accounting Department, School of Accounting - Master Accounting, Bina Nusantara University, Jakarta, 11480, Indonesia
Moch. Doddy Ariefianto: Accounting Department, School of Accounting - Master Accounting, Bina Nusantara University, Jakarta, 11480, Indonesia

DOI: https://doi.org/10.1080/23322039.2022.2107766
Journal volume & issue: Vol. 10, no. 1

Abstract

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This study examines the relationship between bank stock price and its selected fundamentals, namely, profitability, credit risk, and liquidity risk. Using the dynamic common correlated effect (DCCE) technique, we discover a mechanism error-correction between the stock price and the selected fundamentals. We estimate that the equilibrating process of stock price takes between 2.62 and 3.22 months. This study also provides significant support for hypotheses of the positive role of profitability (proxied by ROE and NIM) to bank stock price. Credit and liquidity risk measures do not significantly affect stock price.

Published in Cogent Economics & Finance

ISSN: 2332-2039 (Online)
Publisher: Taylor & Francis Group
Country of publisher: United Kingdom
LCC subjects: Social Sciences: Finance; Social Sciences: Economic theory. Demography
Website: https://www.tandfonline.com/journals/oaef

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