Market Capitalisation and Financial Performance: Evidence from Banking Listed Company in Indonesia

Abstract

Market capitalization is a vital performance tool for the banking companies, the current profit and the future earnings of the banks also have an important impact on the market capitalization of the banks. This study aimed to determine Return on Equity effect, Capital Adequacy Ratio, Non Performing Loan and Firm Size on the banking sectors market capitalization listed on the Indonesia Stock Exchange 2010-2020. This research method used multiple linear regression analysis with data processing using the tools Stata 15 program. The sampling method of this research used a purposive sampling technique. The F-test results showed that simultaneously Return on Equity, Capital Adequacy Ratio, Non Performing Loan, and Firm Size had a significant effect on market capitalization with a significance value of 0,0%. The test results with the t-test show that Capital Adequacy Ratio and Firm Size has a significant positive effect on market capitalization with a significance level less than 0,0%.

Is Fintech a Sustainable Business Model for the Future? Empirical Study in Indonesia

“…Consequently, H2a is accepted and H2b is rejected as market capitalization significantly and positively affects the sustainable growth rate of the fintech banks and does not significantly influence the sustainable growth rate in conventional banks. Larger market capitalization may provide companies with increased access to capital, enabling them to pursue growth opportunities (Lee, 2020;Suresh & Thirumagal, 2020;Radivojac & Krčmar 2020;Roosmawarni et al, 2023). This aligns with the perspective from signaling theory and existing literature, where a higher market capitalization may signal greater investor confidence and attractiveness, potentially leading to favorable conditions for sustainable growth (Bhuyan et al, 2017;Chandra & Suhendah, 2023).…”

“…The relationship between market capitalization and sustainable growth is a crucial aspect for fintech banks, given the dynamic nature of the industry. Companies perceived by the market as large and stable may find it easier to garner support from investors and other stakeholders, including those committed to sustainability issues (Lee, 2020;Suresh & Thirumagal, 2020;Roosmawarni et al, 2023). Furthermore, the research by Radivojac and Krčmar (2020) suggests that the advantage of high market capitalization extends to conventional banks as well.…”