Abstract
This study aims to analyze the effect of interaction between non-performing loans (NPL) and Operating Expenses to Operating Income (OEOI) ratios on capital adequacy ratio (CAR) as moderated by return on equity (ROE). A quantitative approach was used in this research. The data in this research were secondary ones and they were obtained from the annual financial statements for 2018-2020 period from commercial banks listed on Indonesian stock exchange (IDX). As many as 42 commercial banks served as the research population. From this number, using the requirement of having complete financial statements for 2018-2020 period as the criteria, 30 commercial banks were sampled purposively. The data were analyzed using multiple linear regression and moderating regression analysis (MRA). This study found that both NPL and operating expenses had a negative effect on CAR. However, while the former’s effect was significant, that of the latter was not. From the moderation regression analysis, it was revealed that ROE could not moderate the NPL’s effect on CAR, yet it could moderate the impact of OEOI on CAR.
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