Macroeconomic and Firm-Level Determinants of Bank Stock Returns: The Role of Interest Rates, Inflation, Profitability, and Firm Size

Steven Adelia; Anggraini Syahputri; Harry Setiawan; Giriati; M. Ridwan Ristyawan

doi:10.61987/jemr.v5i3.2021

Authors

Steven Adelia Universitas Tanjungpura
Anggraini Syahputri Universitas Tanjungpura
Harry Setiawan Universitas Tanjungpura
Giriati Universitas Tanjungpura
M. Ridwan Ristyawan Universitas Tanjungpura

DOI:

https://doi.org/10.61987/jemr.v5i3.2021

Keywords:

BI Rate, Inflation, Stock Returns

Abstract

This research examines the influence of the BI Rate, inflation, profitability (ROA), and firm size on banking stock returns. The analysis applies a quantitative approach using panel data regression with the Common Effect Model (CEM). The sample consists of 39 banking companies selected through purposive sampling, with observations covering the 2021–2024 period. Secondary data were analyzed using EViews 12 to evaluate the relationship between macroeconomic indicators and firm characteristics on stock returns. The results show that the BI Rate and inflation have a negative and significant effect on stock returns, while firm size has a positive and significant effect. In contrast, profitability (ROA) does not have a significant effect on banking stock returns. Simultaneously, all independent variables significantly influence stock returns, indicating that both macroeconomic conditions and firm characteristics jointly shape investor responses in the capital market. These findings imply that interest rate policy and inflation dynamics are important macroeconomic signals that influence investor behavior, while firm size reflects stability that can attract investment interest. Therefore, investors should consider macroeconomic trends and company scale when making investment decisions, while bank management needs to strengthen financial credibility and transparency to improve market confidence.

References

Acharya, V. V, Engle, R., Jager, M., & Steffen, S. (2024). Why did bank stocks crash during COVID-19? The Review of Financial Studies, 37(9), 2627–2684.

https://doi.org/10.1093/rfs/hhae028

Akhsan, I. M., Maharani, A. S., & Baity, I. N. (2025). Monetary Policy Analysis in Indonesia: The Dynamic Relationship Between the BI Rate, Inflation, and the Rupiah Exchange Rate. Proceedings of The International Conference on Data Science and Official Statistics, 2025(1), 1016–1031.

https://doi.org/10.34123/icdsos.v2025i1.689

Al Amin, E. M. N. (2020). Kebijakan Pemerintah Mempertahankan BI 7-Day Reverse Repo Rate Sebesar 4,50%. IQTISHADUNA: Jurnal Ilmiah Ekonomi Kita, 9(2), 125–135. https://doi.org/10.46367/iqtishaduna.v9i2.238

Amelia, R., & Kuswanto, R. (2025). The Impact of BI 7-Day Reverse Repo Rate Announcements on the IDX80 Index During 2023 to 2024. Journal of Business and Entrepreneurship, 13(1), 1–12. https://doi.org/10.46273/jobe.v13i1.517

Anam, F. A., & Amir, F. (2024). Analysis of the Effect of Inflation, Exchange Rate, BI Rate on Islamic Insurance in 2018–2022. Jurnal Ekonomi, 13(02), 1522–1534.

Apriyana, G. Y. P., & Hakim, A. D. M. (2025). The Influence of Rupiah Exchange Rate, Bank Interest Rate, Inflation, and Profitability on Stock Prices: An Empirical Study on Companies Listed in the IDX30 Index on the Indonesia Stock Exchange. Jurnal Multidisiplin Sahombu, 5(5), 1487–1498.

Bedi, A., & Singh, B. (2024). Exploring the impact of carbon emission disclosure on firm financial performance: moderating role of firm size. Management Research Review, 47(11), 1705–1721. https://doi.org/10.1108/MRR-01-2023-0015

Conti, R., De Matos, M. G., & Valentini, G. (2024). Big data analytics, firm size, and performance. Strategy Science, 9(2), 135–151. https://doi.org/10.1287/stsc.2022.0007

Febriyanti, A., & Sulistyowati, E. (2021). Pengaruh Firm Size, Sales Growth dan Return on Equity Terhadap Firm Value Pada Perusahaan Manufaktur. Jurnal Maneksi, 10(1). https://doi.org/10.31959/jm.v10i1.661

Herman, B. M., & Azansyah. (2024). Pengaruh Variabel Makro Ekonomi Terhadap Return Saham Pada Bank Bumn di Bursa Efek Indonesia. Ekuitas, 6(2), 67–75. https://doi.org/10.47065/ekuitas.v6i2.6333

Hong, Y., Jiang, F., Meng, L., & Xue, B. (2025). Forecasting inflation using economic narratives. Journal of Business & Economic Statistics, 43(1), 216–231. https://doi.org/10.1080/07350015.2024.2347619

Indrajaya, D. (2022). Relationship of Inflation, BI Rate and Deposit Interest Rate. Ekonomi, Keuangan, Investasi dan Syariah (EKUITAS), 3(3).

https://doi.org/10.47065/ekuitas.v3i3.1108

Jannati, A. S., & Hasibuan, H. T. (2025). The impact of earnings per share, dividend payout ratio, BI rate, and inflation on stock price volatility. E-Jurnal Akuntansi, 35(2). https://doi.org/10.24843/EJA.2025.v35.i02.p05

Lamothe, P., Delgado, E., Solano, M. A., & Fernández, S. M. (2024). A global analysis of bank profitability factors. Humanities and Social Sciences Communications, 11(1), 1–12. https://doi.org/10.1057/s41599-023-02545-6

Muhammad, K., Saleh, A., Bello, U. M., Tule, J. M., John, E. A., Edet, J. E., Ohiaeri, I., & Eneanya, C. N. (2024). Inflation and stock return volatility in selected African countries: A GARCH-MIDAS approach. Scientific African, 25, e02307. https://doi.org/10.1016/j.sciaf.2024.e02307

Pham, T. P., Pavelkova, D., Popesko, B., Hoang, S. D., & Huynh, H. T. (2024). Relationship between fintech by Google search and bank stock return: a case study of Vietnam. Financial Innovation, 10(1), 123.

https://doi.org/10.1186/s40854-023-00576-1

Ramadhan, D. I., & Mujiyati. (2023). Effect of Profitability, Leverage, Company Size, Dividend Policy and Free Cash Flow on Stock Returns Free Cash Flow Terhadap Return Saham. Management Studies and Entrepreneurship Journal, 4(4), 3854–3859.

Safitri, N. S., Indrawati, N. K., & Champaca, M. (2025). Profitability, Leverage, and Dividend Policy: Determinants of Stock Return Levels of Indonesian Banks. Jurnal Ilmiah Akuntansi Kesatuan, 13(4), 765–778.

https://doi.org/10.37641/jiakes.v13i4.3839

Sengupta, S., Chakraborty, T., & Singh, S. K. (2025). Forecasting CPI inflation under economic policy and geopolitical uncertainties. International Journal of Forecasting, 41(3), 953–981. https://doi.org/10.1016/j.ijforecast.2024.08.005

Simatupang, A., & Naibaho, E. A. B. (2025). Monetary Policy and Bank Performance: An Empirical Study of BI Rate Transmission in the Indonesian Banking Sector. JURISMA: Jurnal Riset Bisnis & Manajemen, 15(1). https://doi.org/10.34010/jurisma.v15i1.15891

Singh, R., Gupta, C. P., & Chaudhary, P. (2024). Defining Return on Assets (ROA) in empirical corporate finance research: a critical review. Empirical Economics Letters.

Son, P. V. H., & Duong, L. T. (2024). Research on applying machine learning models to predict and assess return on assets (ROA). Asian Journal of Civil Engineering, 25(5), 4269–4279.

https://doi.org/10.1007/s42107-024-01046-4

Sopi, S.-. (2024). Pengaruh Inflasi, Nilai Kurs dan Suku Bunga Terhadap Return Saham Pada Perusahaan Perbankan Yang Terdaftar di Bursa Efek Indonesia. Jurnal Capital: Kebijakan Ekonomi, Manajemen dan Akuntansi, 5(2), 16–28. https://doi.org/10.33747/capital.v5i2.194

Stantcheva, S. (2024). Why do we dislike inflation? Brookings Papers on Economic Activity, 2024(1), 1–46. https://doi.org/10.1353/eca.2024.a943913

Suwifania, J., Nurwani, N., & Sugianto, S. (2026). The Influence of BI Rate and Exchange Rate on Income From Profit Sharing (Case Study on Bank Mega Syariah). JHSS (Journal of Humanities and Social Studies), 9(2).

Wasita, M. W. M., Artini, L. G. S., & Dana, I. M. (2022). The Effect of Bank Indonesia 7-Day Reverse Repo Rate on Profitability and Banking Capital in Indonesia. European Journal of Business and Management Research, 7(2), 90–95. https://doi.org/10.24018/ejbmr.2022.7.2.1338

Wijono, D., Dwiyanto, B. S., Risdwiyanto, A., & Jemadi, J. (2023). Pengaruh ROA, NIM, dan BOPO terhadap Harga Saham Perbankan LQ20 di Bursa Efek Indonesia Periode 2016–2022 Menggunakan Analisis Data Panel. Jurnal Maksipreneur: Manajemen, Koperasi, dan Entrepreneurship, 12(2), 632.

https://doi.org/10.30588/jmp.v12i2.1558