Determinant of Capital Adequacy Ratio (CAR) in Indonesia

Abstract

This study aims to examine and analyze the effect of the Bond Index, Stock Market Liquidity, NIM, LDR, NPL, Bank Inefficiency, Previous CAR, Economic Growth, Fed Fund Rate, and Oil Price on Capital Adequacy Ratio. The sample used in this research is conventional banks listed on the Indonesia Stock Exchange for the period 2010 – 2020, which totals 23 banks. The independent variables in this study are Bond Index, Stock Market Liquidity, NIM, LDR, NPL, Bank Inefficiency, Previous CAR, Economic Growth, Fed Fund Rate, Oil Price, and the dependent variable Capital Adequacy Ratio. The sampling method is the census. The data analysis method uses the panel data regression method which examines and analyzes the influence of the independent variables Bond Index, Stock Market Liquidity, NIM, LDR, NPL, Bank Inefficiency, Previous CAR, Economic Growth, Fed Fund Rate, and Oil Price on the dependent variable Capital Adequacy Ratio. Bank Inefficiency, Bank Risk, and GDP Growth have a negative and significant effect on Capital Adequacy Ratio (CAR). Previous CAR, Fed Fund Rates, and Oil Prices have a positive effect on CAR. Bond Index, Loan Deposit Ratio (LDR), and Non-Performing Loans (NPL) do not affect the Capital Adequacy Ratio (CAR). Banks can increase CAR when the Fed Rate and Oil Price decrease. Banking can increase CAR when Bank Inefficiency, Bank Risk, and GDP Growth decrease.