The Direct & Indirect Effect of Profitability Drivers on Share Price Performance in Saudi Banks

The purpose of this research is to determine the effect of profitability drivers on firm value using profitability as a mediating variable. This research was carried out in the Saudi banking sector between 2011 and 2020. Profit margin, asset turnover, and equity multiplier were used to measure profitability drivers in the study, while return on equity was used to measure profitability and stock price performance was used to measure firm value. For the purpose of data analysis, simple and multiple regression of panel data, path analysis, and the Sobel test were used in the analysis indirect effect According to the analysis' findings, all profitability drivers have a positive and significant effect on profitability, and profitability serves as a complete mediator between the profit margin, the equity multiplier, and stock price performance, as well as a partial mediator between asset turnover and stock price performance. This study fills a gap in the literature in this field, as I have not found a study that tests the relationship between these variables within this measurement model, particularly in Saudi Arabia.