Background: This study seeks to explore the connection between profitability and stock returns, specifically investigating how past stock returns influence profitability and how profitability impacts future stock returns. The research focuses on banking companies listed in the IDX Finance index during the 2020-2023 period.

Objective: This study aims to offer empirical evidence regarding the impact of past stock returns on profitability and the impact of profitability on future stock returns.

Research Methods: This study utilizes a quantitative approach, focusing on a sample of 37 conventional banks that exists on the Indonesia Stock Exchange (IDX) Finance in 2020 – 2023. Data analysis was performed using the PLS-SEM method, with the assistance of SmartPLS 4.0 software.

Research Results: The study findings revealed that past stock returns significantly enhance the net interest margin (NIM), which in turn positively influences the return on assets (ROA). Consequently, ROA plays a vital role in driving future stock returns upward.

Research Originality/Novelty: This research provides fresh perspectives by examining the connection between profitability and stock returns, both historically and prospectively, within the context of Indonesia's banking sector. Additionally, it highlights the factors that impact stock returns and the profitability of banking institutions.

A. Ross, S., W. Westerfield, R., Jaffe, J., D. Jordan, B., & Shue, K. (2021a). Profitability & ROA. In Corporate Finance: Vol. e (13th ed., pp. 52–53).

Abdillah, Willy dan Jogiyanto. 2015. Partial Least Square (PLS) Alternatif Structural Equation Modeling (SEM) dalam Penelitian Bisnis. Ed.1. Yogyakarta: ANDI

Almira, N. P. A. K., & Wiagustini, N. L. P. (2020). Return On Asset, Return On Equity, Dan Earning Per Share Berpengaruh Terhadap Return Saham. E-Jurnal Manajemen Universitas Udayana, 9(3), 1069. https://doi.org/10.24843/ejmunud.2020.v09.i03.p13

Atukalp, M. E. (2021). Determining the relationship between stock return and financial performance: an analysis on Turkish deposit banks. Journal of Applied Statistics, 48(13–15), 2643–2657. https://doi.org/10.1080/02664763.2020.1849056

Aprilia, A., & Setiawan, T. (2022). Pengaruh Corporate Social Responsibility, Millennial Leadership, Gender Diversity terhadap Nilai Perusahaan.:(Studi Empiris Perusahaan Index LQ-45 Periode 2017-2020). Owner: Riset dan Jurnal Akuntansi, 6(3), 3261-3269.

Ayu, D. D. N., & Suarjaya, A. A. G. (2021). The Effect Of Profitability On Stock Return. American Journal of Humanities and Social Sciences Research, 5(1), 695–703. www.ajhssr.com

Blaylock, B., Lawson, B. P., & Mayberry, M. A. (2020). Taxable income, future profitability, and stock returns. Journal of Business Finance and Accounting, 47(7–8), 858–881. https://doi.org/10.1111/jbfa.12448

Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management 15e. In Cengage Learning. Cengage Learning.

Cakici, N., Chatterjee, S., Tang, Y., & Tong, L. (2021). Alternative profitability measures and cross-section of expected stock returns: international evidence. Review of Quantitative Finance and Accounting, 56(1), 369–391. https://doi.org/10.1007/s11156-020-00897-7

Dang, H. N., Vu, V. T. T., Ngo, X. T., & Hoang, H. T. V. (2019). Study the Impact of Growth, Firm Size, Capital Structure, and Profitability on Enterprise Value: Evidence of Enterprises in Vietnam. Journal of Corporate Accounting and Finance, 30(1), 144–160. https://doi.org/10.1002/jcaf.22371

Dewi, I. G. A. A., Gunadi, I. G. N. B., & Suarjana, I. W. (2020). Pengaruh Rasio Pasar Dan Rasio Profitabilitas Terhadap Return Saham Pada Perusahaan Perbankan Yang Terdaftar di Bursa Efek Indonesia. VALUES, 1(3), 64–72.

Doralitha, F., Langgeng Wijaya, A., & Devi, H. P. (2023). Pengaruh Likuiditas, Profitabilitas Terhadap Return Saham Dengan Kebijakan Deviden Sebagai Variabel Moderasi Di Perusahaan Perbankan. www.idx.co.id

Fama, E. F. (1998). Market efficiency, long-term returns, and behavioral finance. Journal of Financial Economics, 49(3), 283–306. https://doi.org/10.1016/S0304-405X(98)00026-9

Ginting, A. M. P., & Gularso, K. (2023). The Effect Of Exchange Rate Towards On Stock Returns Mediated By Fundamental Factors (Study On Stocks Of Telecommunications Sub-Sector Companies Listed On The Indonesia Stock Exchange). Journal Research of Social Science, Economics, and Management, 3(3), 770-797.

Gressy, G., & Setiawan, T. (2024). Perkembangan Penelitian Corporate Social Responsibility (CSR) Di Indonesia Selama 15 Tahun (Perspektif Studi Literatur). Jesya (Jurnal Ekonomi dan Ekonomi Syariah), 7(1), 987-911.

Gustiansyah, P., & Pratomo, D. (2023). The Influence Of Profitability, Third Party Funds, And Company Size On Stock Return (Case Study on Banking Sub-Sector Companies Listed on the Indonesia Stock Exchange in 2016-2020). E-Proceeding of Management, 10(2), 1334–1342.

He, S., & Narayanamoorthy, G. (Gans). (2020). Earnings acceleration and stock returns. Journal of Accounting and Economics, 69(1), 101238. https://doi.org/10.1016/J.JACCECO.2019.101238

Herlina, Sitompul, F., & Muslih, M. (2020). Pengaruh Tata Kelola Perusahaan, Remunerasi Direksi, Dan Ukuran Perusahaan Terhadap Kinerja Perusahaan Dimoderasi Oleh Komite Audit Pada Bumn Bidang Keuangan Non Publik. Jurnal Kewirausahaan, Akuntansi, Dan Manajemen TRI BISNIS, 2(2), 141–159.

Kurniati, S. (2019). Stock returns and financial performance as mediation variables in the influence of good corporate governance on corporate value. Corporate Governance (Bingley), 19(6), 1289–1309. https://doi.org/10.1108/CG-10-2018-0308

Lim, B., Sotes-Paladino, J., Wang, G. J., & Yao, Y. (2024).The value of growth: Changes in profitability and future stock returns. Journal of Banking and Finance,158. https://doi.org/10.1016/j.jbankfin.2023.107036

Lin, Q., & Lin, X. (2019). Expected profitability and the cross-section of stock returns. Economics Letters, 183. https://doi.org/10.1016/j.econlet.2019.108547

Natarajan, R., Sivakavitha, S., & Vasani, S. A. (2020). Relationship Between Stock Return And Firms’ Financial Performance In Bse Listed Companies. European Journal of Molecular & Clinical Medicine, 7(3). https://www.researchgate.net/publication/347945690

Nurazizah, D. R., Hermuningsih, S., & Maulida, A. (2022). Pengaruh profitabilitas, likuiditas, dan solvabilitas terhadap return saham pada perusahaan perbankan yang terdaftar di bursa efek Indonesia. Jurnal Ekonomi Dan Manajemen, 19(2), 327–337. https://doi.org/10.29264/jkin.v19i2.10960

Obeid, R. (2024). Factors affecting net interest margin in the banking sector: Evidence from the Arab region. Journal of Governance and Regulation, 13(1), 214–222. https://doi.org/10.22495/jgrv13i1art19

Ramadanti, F., & Setyowati, E. (2022). Pengaruh NPL, LDR, BOPO dan Nim Terhadap Roa Pada PT. Bank Mandiri (Persero) Tbk Tahun 2013-2021). Jurnal Ekombis Review, 10(2), 695–706. https://doi.org/10.37676/ekombis.v10i12

Ringle, Christian M., Wende, Sven, & Becker, Jan-Michael. (2024). SmartPLS 4. Bönningstedt: SmartPLS. Retrieved from https://www.smartpls.com

Sanny, B. I., & Dewi, R. K. (2020). Pengaruh Net Interest Margin (NIM) Terhadap Return on Asset (ROA) Pada PT Bank Pembangunan Daerah Jawa Barat Dan Banten Tbk Periode 2013-2017. 4(1), 78–87. https://doi.org/10.37339/jurnal

Setiawan, T., & Venona, V. (2023). Pengaruh Kinerja Keuangan Dan Kepemilikan Terhadap Nilai Perusahaan Untuk Saham Terindeks LQ 45. Owner: Riset dan Jurnal Akuntansi, 7(2), 1137-1148.

Setyarini, A. (2019). Analisis Pengaruh CAR, NPL, NIM, BOPO, LDR TERHADAP ROA (Studi Pada Bank Pembangunan Daerah Di Indonesia Periode 2015-2018). 4(1).

Silva, P. da P. (2021). Market efficiency and the capacity of stock prices to track a firm’s future profitability. Borsa Istanbul Review, 22(3), 452–464. https://doi.org/10.1016/j.bir.2021.06.010

Susilawati, S., & Nurulrahmatiah, N. (2021). Pengaruh Non-Performing Loan (NPL) dan Loan to Deposit Ratio (LDR) terhadap Return on Asset (ROA) dengan Net Interest Margin (NIM) sebagai Variabel Mediasi pada Bank BUMN yang Terdaftar di BEI. Jurnal Maksipreneur: Manajemen, Koperasi, Dan Entrepreneurship, 11(1), 69. https://doi.org/10.30588/jmp.v11i1.833

Spence, M. (1973). Job Market Signaling. In Source: The Quarterly Journal of Economics (Vol. 87, Issue 3).

Tambun, M. I. Y., Dharmawan, A. B., & Siregar, M. E. S. (2024). Pengaruh Rasio Nilai Pasar Dan Profitabilitas Terhadap Harga Dan Return Saham Perbankan Yang Terdaftar Di BEI Pada Masa Pandemi Covid-19. Jurnal Revenue, 4(2), 814–828. https://doi.org/10.46306/rev.v4i2

Trisnowati, Y., Achsani, N. A., Sembel, R., & Andati, T. (2022). The Effect of ESG Score, Financial Performance, and Macroeconomics on Stock Returns during the Pandemic Era in Indonesia. International Journal of Energy Economics and Policy, 12(4), 166–172. https://doi.org/10.32479/ijeep.13212

Wata, I., & Gularso, K. (2023). The Influence of Dividend Policy, Company Size, and Managerial Ownership on Company Value Mediated by Profitability in Non-Cyclical Consumer Companies Listed on the Indonesia Stock Exchange (BEI). Jurnal Indonesia Sosial Sains, 4(10), 1058-1074.

https://market.bisnis.com ,2023. Menyibak Pentingnya Literasi Keuangan sebagai Investor Pasar Modal. [serial online] [accessed on 22 June 2024 from https://market.bisnis.com/read/20231002/7/1700030/menyibak-pentingnya-literasi-keuangan-sebagai-investor-pasar-modal].

https://www.idx.co.id ,2023. Tambah Alternatif Acuan Investasi Sub-Sektor Bank, BEI dan PEFINDO Luncurkan Indeks IDX-PEFINDO Prime Bank. [serial online] [accessed on 22 June 2024 from https://www.idx.co.id/id/berita/siaran-pers/2028].

https://www.pefindo.com ,2023. Siaran Pers IDX-PEFINDO Prime Bank | PEFINDO - PT Pemeringkat Efek Indonesia. [serial online] [accessed on 22 June 2024 from https://www.pefindo.com/media/press-release-idx-pefindo-prime-bank].

https://www.cnbcindonesia.com ,2022. Ini Saham Sektoral yang Jadi Favorit Investasi Anak Muda. [serial online] [accessed on 22 June 2024 from https://www.cnbcindonesia.com/market/20220414133554-17-331731/ini-saham-sektoral-yang-jadi-favorit-investasi-anak-muda].

https://www.cnbcindonesia.com ,2021. Deretan Skandal Lapkeu di Pasar Saham RI, Indofarma-Hanson! - Halaman 3. [serial online] [accessed on 22 June 2024 from https://www.cnbcindonesia.com/market/20210726191301-17-263827/deretan-skandal-lapkeu-di-pasar-saham-ri-indofarma-hanson/3].

https://www.cnbcindonesia.com ,2021. Jumlah Investor RI Capai 6,43 Juta, Didominasi Kaum Milenial. [serial online] [accessed on 22 June 2024 from,https://www.cnbcindonesia.com/market/20211012151533-17-283326/jumlah-investor-ri-capai-643-juta-didominasi-kaum-milenial].