Determinants of Return on Equity in Indonesian Cosmetic and Household Goods Companies: Evidence from a Sharia Economics Perspective

Abstract

Introduction/Main Objectives: This study examines the effects of liquidity, solvency, and firm size on Return on Equity (ROE) in cosmetics and household goods companies listed on the Indonesia Stock Exchange during 2021–2024 from an Islamic economics perspective. Research Methods: A quantitative approach was used to analyze secondary financial statement data from seven purposively selected companies. Panel data regression was conducted using the Random Effect Model (REM). Finding/Results: Liquidity, solvency, and firm size had no significant effects on ROE, either individually or simultaneously. The model explained only 1.56% of the variation in ROE, indicating that other factors largely influence profitability. Conclusion:  Profitability in this subsector is more likely shaped by operational efficiency, sales growth, asset turnover, and innovation, while Sharia-based financial management should also emphasize accountability, transparency, prudence, and sustainable value creation.