Effects of capital ratio, quality of receivables, liquidity, and gearing ratio on profitability: A study financial institutions’ governance

Abstract

This study aims to examine the effects of capital ratio, quality of receivable, liquidity, and gearing ratio on profitability in financial companies for the 2017–2020 period. This research data was obtained from the websites of companies registered with the Financial Services Authority (Otoritas Jasa Keuangan, OJK) using the purposive sampling method, which uses certain criteria, the number of samples used is 15 financing companies. The analytical method used in this study is multiple regression analysis using STATA 16. The results of this study show that the ratio of capital, the quality of receivables, liquidity, and gearing ratio (GR) simultaneously have a positive and significant effect on profitability. Based on the results of the t-test that has been carried out in this study, it can be concluded that the capital ratio has a negative and significant effect on profitability, the quality of receivables and gearing ratio has a negative and insignificant effect on profitability, and liquidity has a positive and insignificant effect on profitability. This research is consisting three conclusions, firstly, the capital ratio partially has a negative and significant effect on profitability. Secondly, the quality of receivables partially has a negative and insignificant effect on profitability. Thirdly, liquidity partially has a positive and insignificant effect on profitability. Fourthly, the gearing ratio has a negative and insignificant effect on profitability.