The Impact of Book Value per Share and Earnings per Share on Stock Prices: Evidence from the Indonesian Banking Sector

Abstract

Stock prices of banking sector companies listed on the Indonesia Stock Exchange (IDX) have fluctuated in recent years, indicating an inconsistency between theory and empirical evidence. Theoretically, the growth of Book Value per Share (BVS) and Earnings per Share (EPS) is expected to positively influence stock prices. However, empirical findings suggest that BVS and EPS may have no effect or even a negative effect on stock prices. This study aims to examine and analyse the extent to which BVS and EPS affect the stock prices of banking companies listed on the IDX. The research employs a quantitative approach using secondary data obtained from the official IDX website. The sampling technique is purposive sampling, focusing on banking companies categorized as KBMI 4 over a 10-year observation period from 2012 to 2021. The data used are panel data. Data analysis is conducted using panel data regression with the Lagrange Multiplier test to determine the appropriate model. The results indicate that the random effect model is the most suitable for this study. The findings reveal that BVS and EPS simultaneously have a significant effect on stock prices. Partially, both variables also show a significant influence. Overall, BVS and EPS explain 60% of the variation in stock prices, while the remaining 40% is influenced by other variables outside the research model.