Post-Merger Financial Performance of Islamic Banks. Investigating the Impact of Profitability Indicators on Stock Parice Movement

This study explores the impact of financial metrics, specifically Return on Assets (ROA) and Return on Equity (ROE), on stock values in Islamic banking in Pakistan. Islamic banking in Pakistan lacks empirical research on how financial indicators like ROA and ROE affect stock values, creating a gap in understanding crucial performance metrics for investors. The study adopts a quantitative method, analyzing secondary statistics from the Pakistan Stock Exchange and Meezan Bank websites for the period 2016–2022. Linear regression in EViews is applied to assesses the relationship between ROA, ROE, and stock prices of the Bank. Results of the study indicates that the stock prices are positively influenced by returns and equity, however, impact of return on asset is statistically significant at 10 percent confidence interval. The study is limited to data from PSB and IMBS, restricting its generalizability to other banks or markets. Study suggests investors should prioritize ROA and ROE metrics when evaluating stocks in Islamic banking, as they are essential for understanding performance and making informed decisions.