Analysis of the Effect of Camel Ratio on the Stock Prices of Banking Companies on the Indonesia Stock Exchange

Oct 13, 2025 by talynt.org 100 views

Analysis of the Effect of Camel Ratio on the Stock Prices of Banking Companies on the Indonesia Stock Exchange

Introduction

The banking sector plays a vital role in the economy of any country, and the stock prices of banking companies are a crucial indicator of the overall health of the sector. In Indonesia, the banking sector is one of the largest and most dynamic sectors, with numerous banking companies listed on the Indonesia Stock Exchange (IDX). The stock prices of these companies are influenced by various factors, including financial ratios, macroeconomic conditions, and government policies. This study aims to explore the influence of several financial ratios known as Camel on the stock prices of banking companies listed on the IDX.

Background

The Camel ratio is a set of financial ratios that are used to assess the health and stability of a bank. The ratios include Capital Adequacy Ratio (CAR), Loan-to-Deposit Ratio (LDR), Non-Performing Loan (NPL), Return on Equity (ROE), and Dividend Per Share (DPS). These ratios are widely used by regulators, investors, and other stakeholders to evaluate the financial performance and stability of banks. The CAR ratio is an important measure of a bank's capital health, while the DPS ratio reflects the company's dividend policy. The LDR ratio is an indicator of a bank's lending capacity, while the NPL ratio reflects the bank's credit risk. The ROE ratio is an indicator of a bank's profitability.

Methodology

This study used secondary data from 28 banking companies listed on the IDX during the period 2009 to 2011. The data was collected from various sources, including the IDX, the Indonesian Financial Services Authority (OJK), and the banks' annual reports. The study applied multiple linear regression methods to analyze the relationship between the Camel ratios and stock prices. The regression analysis was used to identify the significant factors that influence stock prices.

Results

The results of the study showed that the CAR and DPS ratios had a significant influence on stock prices, while the LDR, NPL, and ROE ratios did not show significant effects. This finding suggests that the market considers capital stability and return of dividends as a top priority for investors. The CAR ratio is an important measure of a bank's capital health, and a higher CAR ratio is usually associated with increased investor confidence. The DPS ratio reflects the company's dividend policy, and companies that are able to provide consistent dividends are usually considered more stable.

Discussion

The findings of this study have several implications for investors and related parties. Firstly, the study highlights the importance of attention to the CAR and DPS ratios in investment decision making. These two variables contribute to creating value for investors, and investors should consider these ratios when making investment decisions. Secondly, the study suggests that the market does not give adequate weight to the LDR, NPL, and ROE ratios in determining stock prices. This may be due to various factors, including macroeconomic conditions or government policies that have an impact on the banking industry as a whole.

Conclusion

In conclusion, this study provides valuable insights for investors and related parties in understanding the factors that affect stock prices in the banking sector. The study highlights the importance of attention to the CAR and DPS ratios in investment decision making and suggests that the market does not give adequate weight to the LDR, NPL, and ROE ratios in determining stock prices. The study provides a foundation for further research in the same field and is a reference for stakeholders who want to understand the dynamics of the Indonesian capital market.

Recommendations

Based on the findings of this study, the following recommendations are made:

Investors should consider the CAR and DPS ratios when making investment decisions.
Regulators and policymakers should consider the importance of the CAR and DPS ratios in evaluating the financial performance and stability of banks.
Further research should be conducted to explore the relationship between the Camel ratios and stock prices in other countries.
The study should be replicated using more recent data to see if the findings are consistent over time.

Limitations

This study has several limitations. Firstly, the study used secondary data from 28 banking companies listed on the IDX during the period 2009 to 2011. The data may not be representative of the entire banking sector in Indonesia. Secondly, the study applied multiple linear regression methods to analyze the relationship between the Camel ratios and stock prices. The regression analysis may not capture the complex relationships between the variables. Finally, the study did not consider other factors that may influence stock prices, such as macroeconomic conditions or government policies.

Future Research Directions

This study provides a foundation for further research in the same field. Some potential future research directions include:

Exploring the relationship between the Camel ratios and stock prices in other countries.
Investigating the impact of macroeconomic conditions and government policies on stock prices in the banking sector.
Developing a more comprehensive model that captures the complex relationships between the variables.
Conducting a case study of a specific banking company to explore the relationship between the Camel ratios and stock prices in more detail.

Conclusion

Q: What is the Camel ratio and how is it used in the banking sector?

A: The Camel ratio is a set of financial ratios that are used to assess the health and stability of a bank. The ratios include Capital Adequacy Ratio (CAR), Loan-to-Deposit Ratio (LDR), Non-Performing Loan (NPL), Return on Equity (ROE), and Dividend Per Share (DPS). These ratios are widely used by regulators, investors, and other stakeholders to evaluate the financial performance and stability of banks.

Q: What are the key findings of the study on the effect of Camel ratio on stock prices?

A: The study found that the CAR and DPS ratios had a significant influence on stock prices, while the LDR, NPL, and ROE ratios did not show significant effects. This suggests that the market considers capital stability and return of dividends as a top priority for investors.

Q: Why is the CAR ratio important in evaluating a bank's capital health?

A: The CAR ratio is an important measure of a bank's capital health because it reflects the bank's ability to withstand losses and meet its financial obligations. A higher CAR ratio is usually associated with increased investor confidence.

Q: What is the significance of the DPS ratio in evaluating a bank's dividend policy?

A: The DPS ratio reflects the company's dividend policy and is an important indicator of a bank's ability to provide consistent dividends. Companies that are able to provide consistent dividends are usually considered more stable and attractive to investors.

Q: Why did the study find that the LDR, NPL, and ROE ratios did not have a significant effect on stock prices?

A: The study suggests that the market may not give adequate weight to the LDR, NPL, and ROE ratios in determining stock prices. This may be due to various factors, including macroeconomic conditions or government policies that have an impact on the banking industry as a whole.

Q: What are the implications of the study for investors and related parties?

A: The study highlights the importance of attention to the CAR and DPS ratios in investment decision making. Investors should consider these ratios when making investment decisions, and regulators and policymakers should consider the importance of these ratios in evaluating the financial performance and stability of banks.

Q: What are the limitations of the study and potential future research directions?

A: The study has several limitations, including the use of secondary data from 28 banking companies listed on the IDX during the period 2009 to 2011. The study also applied multiple linear regression methods to analyze the relationship between the Camel ratios and stock prices, which may not capture the complex relationships between the variables. Potential future research directions include exploring the relationship between the Camel ratios and stock prices in other countries, investigating the impact of macroeconomic conditions and government policies on stock prices in the banking sector, and developing a more comprehensive model that captures the complex relationships between the variables.

Q: What are the key takeaways from the study for stakeholders in the banking sector?

A: The study provides valuable insights for stakeholders in the banking sector, including investors, regulators, and policymakers. The study highlights the importance of attention to the CAR and DPS ratios in investment decision making and suggests that the market does not give adequate weight to the LDR, NPL, and ROE ratios in determining stock prices. The study also provides a foundation for further research in the same field and is a reference for stakeholders who want to understand the dynamics of the Indonesian capital market.

Q: How can the findings of the study be applied in practice?

A: The findings of the study can be applied in practice by investors, regulators, and policymakers who are interested in evaluating the financial performance and stability of banks. The study highlights the importance of attention to the CAR and DPS ratios in investment decision making and suggests that the market does not give adequate weight to the LDR, NPL, and ROE ratios in determining stock prices. By considering these ratios, stakeholders can make more informed decisions about investment and regulatory policies.