Abstract
The purpose of this research was to analyze those influence of financial ratios towards earnings per share with soundness level of banks as an intervening variable based on risk-based bank rating method at BUKU IV Banks in Indonesia for the period of 2015-2019. The six banks are PT Bank Mandiri Tbk, PT Bank Rakyat Indonesia Tbk, PT Bank Negara Indonesia Tbk, PT Bank Central Asia Tbk, PT Bank CIMB Niaga Tbk and PT Bank Danamon Indonesia Tbk. This research used secondary data with quantitative approach. Data analysis technique used panel data regression by purposive sampling. The results showed that NPL & GCG had significant negative influence on soundness level of banks and NPL had significant negative impact on EPS. GCG had significant positive influence against EPS, and ROA & CAR did not have significant positive impact towards soundness level of banks & EPS, while soundness level of banks were not found to have significant negative affect to EPS, and soundness level of banks did not mediate NPL, GCG, ROA and CAR in affecting EPS
Highlights
The economic crisis which occurred in Asian countries including Indonesia has caused banking sector to experience downturn and difficult times that are marked by the depreciation of rupiah exchange rate against USD dollar, the tight liquidity which resulted in bank having difficulties in obtaining fresh fund and the increasing number of non-performing loans
5) Test results from fifth hypothesis showed that Non-Performing Loan (NPL) had significant impact on Earning Per Share (EPS) with negative regression coefficient, so NPL had significant negative influence on EPS. 6) Test results from sixth hypothesis showed that Good Corporate Governance (GCG) had significant impact on EPS with positive regression coefficient, so GCG had significant positive effect towards EPS
Suggestion To contribute towards these research results, several recommendations could be presented as follows: 1) To anticipate the tendency of increasing Non Performing Loans (NPL) or the risk of nonperforming loans, banks should be more prudent and selective in providing and expanding credit in addition to taking steps for the non-performing loans settlement in order to reduce the cost of provision for non-performing loans, which in the end would lead to improvement in financial performance and soundness level of banks
Summary
The economic crisis which occurred in Asian countries including Indonesia has caused banking sector to experience downturn and difficult times that are marked by the depreciation of rupiah exchange rate against USD dollar, the tight liquidity which resulted in bank having difficulties in obtaining fresh fund and the increasing number of non-performing loans With this condition, it has resulted in a crisis of customer's faith and the poor Interbank Money Market. The measurement of bank soundness level by modernized risk rating method, which consists of four factors, namely risk profile, good corporate governance (GCG), earnings and capital Those existence from this case proved that how important the role of banks and the strategic role in intermediation process which has a major impact on the economy. Banks were required to maintain and retain the soundness level of banks by applying the prudent principle and risk management in carrying out bank business activities with the provisions of capital adequacy, asset quality, management quality, liquidity, profitability and solvency
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