Sustainable Growth Rate as A Mediator of Financialand Macroeconomic Effects on The Stock PricePerformance in Islamic Firms

This study examines the impact of firm‐specific financial factors and macroeconomic conditions on the stock price performance of Islamic ‎firms listed on the Indonesia Stock Exchange by incorporating the Sustainable Growth Rate (SGR) as a mediating variable. The inclusion of ‎SGR addresses an important gap in prior Islamic finance literature, which has largely emphasized direct relationships between financial ‎indicators and stock prices while overlooking the internal growth mechanism that links corporate policies to market valuation. Given the ‎Sharia‐based restrictions on excessive leverage and speculative activities, sustainable internal growth is expected to play a central role in ‎shaping stock performance in Islamic capital markets. This research employs an explanatory quantitative design using panel data from 20 ‎non‐financial Sharia‐compliant firms over the 2019–2024 period. Capital structure, dividend policy, profitability, operational efficiency, firm ‎size, inflation, and gross domestic product (GDP) are specified as independent variables, while stock price performance is proxied by the ‎Price to Book Value (PBV). Panel data regression analysis is conducted using the Random Effects Model (REM), selected based on the ‎Chow test, Hausman test, and Lagrange Multiplier test. The mediating role of SGR is subsequently evaluated through Sobel testing.‎ The empirical findings indicate that dividend policy, profitability, and operational efficiency have a positive and statistically significant effect ‎on stock price performance, confirming the dominant role of internal financial fundamentals in Islamic equity valuation. In contrast, capital ‎structure, firm size, inflation, and GDP do not exhibit significant direct effects, suggesting limited short‐term transmission of leverage and ‎macroeconomic conditions into market prices. Mediation analysis further reveals that SGR significantly mediates the influence of capital ‎structure and dividend policy on stock price performance, while no mediating effect is observed for profitability, efficiency, firm size, ‎inflation, or GDP. Overall, this study concludes that internal financial policies and sustainable growth capacity are more decisive ‎determinants of Islamic stock price performance than external macroeconomic factors. The findings contribute to the literature by extending ‎sustainable growth theory within an Islamic finance framework and provide practical implications for managers, investors, and regulators ‎seeking to enhance long‐term value creation and financial resilience in Sharia‐compliant capital markets‎.