Abstract
This study examines the effect of credit risk, market risk, operational risk, and liquidity risk on profitability of banks listed on the Indonesia Stock Exchange in 2010-2014. The method used is descriptive and verification methods, with a sample of 30 banks and using multiple regression analysis. The results showed that credit risk does not partially affect profitability. Market risk, operational risk, and liquidity risk partially have positive effect on profitability. It simultaneously shows that credit risk, market risk, operational risk and liquidity risk have effect on the profitability of banks amounted to 67.1%. Improvement of Non-Performing Loan, Net Interest Margin, Operating Expenses to Operating Income Ratio, and Loan to Deposit Ratio will increase the Profitability.
Highlights
Bank is a sector strictly regulated by authorized institution, because it involves many parties, namely collecting funds from the public and distribute to the public in the form of credit
Research on the effect of market risk proxied by Net Interest Margin (NIM) on profitability proxied by Return on Assets (ROA) conducted by Mawardi (2005), Margaretha (2013), Widyastuti and Mandagie (2010), as well as Ponttie (2007) showed that credit risk had a positive effect on profitability
Research on the effect of liquidity risk proxied by the Loan to Deposit Ratio (LDR) to profitability proxied by ROA conducted by Attar (2014), Kusuma (2013), Smith (2013), Khoirul (2013), indicated that liquidity risk had a positive effect on profitability while research by Goddess (2014), Widyastuti and Mandagie (2010), and Ponttie (2007) showed that the liquidity risk had a negative effect on profitability
Summary
Bank is a sector strictly regulated by authorized institution, because it involves many parties, namely collecting funds from the public and distribute to the public in the form of credit. Research on the effect of credit risk (proxied by Net-performing loans/NPL) to profitability (proxied by Return On Assets / ROA) conducted by Attar (2014), Kusuma (2013), Goddess (2014), Nawaz, et al (2012), and Mawardi (2005) showed that credit risk negatively affected profitability. Research on the effect of market risk proxied by Net Interest Margin (NIM) on profitability proxied by Return on Assets (ROA) conducted by Mawardi (2005), Margaretha (2013), Widyastuti and Mandagie (2010), as well as Ponttie (2007) showed that credit risk had a positive effect on profitability. Research on the effect of liquidity risk proxied by the Loan to Deposit Ratio (LDR) to profitability proxied by ROA conducted by Attar (2014), Kusuma (2013), Smith (2013), Khoirul (2013), indicated that liquidity risk had a positive effect on profitability while research by Goddess (2014), Widyastuti and Mandagie (2010), and Ponttie (2007) showed that the liquidity risk had a negative effect on profitability. The problems of this study are (1) What the condition of credit risk (NPL), market risk (NIM), operational risks (OEOI), liquidity risk (LDR), and profitability of banks listed on the Indonesia Stock Exchange Period 20102014 are, (2) How much the effect of credit risk, market risk, operational risk, liquidity risk simultaneously and partially on profitability of banks listed on the Indonesia Stock Exchange Period 2010-2014 is
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