The Effect of Capital Adequacy Ratio (CAR), Non Performing Loan (NPL), Operational Efficiency (BOPO), Net Interest Margin (NIM), and Loan to Deposit Ratio (LDR), on Return on Assets (ROA)

Yuhasril Yuhasril

doi:10.7176/rjfa/10-10-19

Abstract

This study aimed to examine the effect of Capital Adequacy Ratio (CAR), Non- Performing Loan (NPL), Operating Efficiency (BOPO), Net Interest Margin (NIM), and Loan to Deposit Ratio (LDR) on Return on Assets (ROA).The population used in this study was Private Foreign Exchange National Bank in Indonesia that listed on Indonesia Stock Exchange (IDX) in 2013-2016. By using Purposive Sampling method, it could be obtained 44 samples of 15 banking companies which observed in 2013-2016. The analysis technique employed was Panel Data Regression. Research findings indicated that Capital Adequacy Ratio (CAR), Non-Performing Loan (NPL), Operational Efficiency (BOPO), Net Interest Margin (NIM), and Loan to Deposit Ratio (LDR) simultaneously had effect on Return on Assets (ROA). Then, partial test of each variables were CAR and LDR had not significant effect on ROA, while NPL, BOPO, and NIM have significant effect on ROA. Keywords: ROA, CAR, NPL, BOPO, NIM, and LDR DOI : 10.7176/RJFA/10-10-19 Publication date :May 31 st 2019

Highlights

Background of the Research The economy restriction growth, banking industries have resistance, supported by sustainable credit risk, and strong capital adequacy ratio
The Capital Adequacy Ratio (CAR) that Bank Indonesia has set is 8%, so banks with a CAR below 8% indicates that the bank is not able to absorb losses arising from the business of the bank, but if the CAR owned by the bank is more than 8%
Based on the findings, discussion and conclusion have been proposed of the research, it can be delivered suggestions below: 1) CAR ratio had not significant effect on bank profitability

Summary

Introduction

Background of the Research The economy restriction growth, banking industries have resistance, supported by sustainable credit risk, and strong capital adequacy ratio. In October 2016, Capital Adequacy Ratio (CAR) was still high, 22,9 %, it was far above minimum standard, 8%. This condition represented the quite high banking endurance to tackle pressure and fluctuation in economy. In 2016, the performance of banking industry has slow growth as domestic economic growth. Banking industry has preserved profitability in positive growth. Credit growth in 2016 was decelerated to be 7,46% or lower than compared to 10,27% in December 2015. The consequence of the decelerated, Return on Assets (ROA) has decreased, it was still in quite high level

Objectives

Methods

Findings

Conclusion