Profitability and Financial Factors on The Indonesia Stock Exchange (IDX)

Abstract

This study aims to analyze the influence of Earnings Asset Quality, Non-Performing Loan (NPL), and Capital Adequacy on Return On Assets (ROA) of commercial banks indexed at the Indonesia Stock Exchange (IDX). The method used in this research is the descriptive verification method with a quantitative approach. The type of data used is the annual financial statements of commercial banks for 2019-2021. The results of the study partially show that the variable earnings asset quality and non-performing loans had a significant adverse effect on ROA, which shows that a decrease follows the increasing earnings asset quality and non-performing loans in ROA, the capital adequacy variable has a significant positive effect on ROA means that an increase will follow capital adequacy in ROA. This condition shows that changes in ROA can occur due to factors that influence it, indicated by every increase in the quality of earnings assets will reduce asset returns, every increase in non-performing loans will reduce return on assets and every increase in capital adequacy ratio will increase return on assets. Furthermore, they were expected to solve problems at the level of bank ratios in Return On Assets, Non-Performing Loans, Earnings Asset Quality, and Capital Adequacy. The implications of this research are expected to be complementary to the banking literature in Indonesia. Practitioners and banking regulators are also expected to take advantage of the results of this study to design measures for the management of Non-Performing Loans by paying attention to factors including the management of Asset Quality Earnings, Capital Adequacy Ratio of the impact on bank Profitability.