Abstract: This study addresses the challenge of understanding the factors driving stock price dynamics in the Saudi Islamic banking sector, focusing on the role of bank profitability. It hypothesizes that return on assets [ROA] and return on equity [ROE] significantly influence stock prices, with bank size and dividends per share [DPS] moderating this relationship. The objective is to analyze the impact of these profitability measures on stock prices while considering the effects of key control variables. The study employs panel data analysis to examine the financial performance of Saudi Islamic banks, and their stock price trends over a defined period. The findings show that investors view profitability metrics as critical indicators of financial stability, with ROA exerting a stronger influence on stock prices than ROE, particularly when factoring in DPS. Larger banks are associated with higher stock prices, and dividends amplify the relationship between profitability and stock prices, reflecting investor preferences for stable returns. These results provide valuable insights for policymakers, bank managers, and investors, emphasizing the importance of optimizing profitability and dividend policies to enhance stock market performance. The study recommends further research into additional influencing factors and comparative analyses with other emerging markets to deepen understanding of Islamic bank stock price dynamics.

Keywords: Profitability Indicators, Stock Prices, Financial Performance, Return on Assets [ROA], Return on Equity [ROE], Islamic Banking, Islamic Finance, Saudi Banking Sector, Saudi Arabia

Pages: 1491-1505