Determination of Return on Assets of the Foreign Exchange Banks in Indonesia

Abstract

The purpose of this research was to examine the determinants of Return on Assets (ROA) on the foreign exchange banks in Indonesia. The data used were the financial ratios of 27 foreign exchange banks in Indonesia in 2012-2016. The data were gathered from the published financial statements of the Indonesian foreign exchange banks. This research employed a Common Effect Model (CEM) as the most suitable panel regression model to analyze the data using the E-views statistical software. The findings indicate that from 2012 to 2016, the profitability of the exchange banks is largely determined by the Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR), Operating Efficiency Ratio (OER), and total debt. The findings also imply that apart from maximizing profit, it is important for the banks to abide by the regulations issued by the central bank or the Financial Services Authority in performing the banking operations. Negligence to observe the level of prudential and risk management will not only lead to profit loss, but it will also cause the failure of the banks.

The Effect of Capital Adequacy Ratio, Non-Performing Financing, Bank Size and Financing to Deposit Ratio on Sharia Banks Performance in Indonesia

“…In addition, the high CAR indicates that the bank is more resistant to macroeconomic threats that are vulnerable to occur, so that it is stronger in competing in the industry (Ho & Hsu, 2010). These results are also in line with previous studies which documented that the capital adequacy ratio had a positive and significant effect on financial performance (Syamni et al, 2018;Vernanda & Widyarti, 2016;Yusuf & Surjaatmadja, 2018).…”

“…Several previous studies have proven that CAR (Syamni et al, 2018;Yusuf & Surjaatmadja, 2018), NPF (Dodi et al, 2018;Nahar & Prawoto, 2017), SIZE (Astutiningsih & Baskara, 2019;Yatiningsih & Chabachib, 2015) and FDR (Almunawwaroh & Marliana, 2018;Pravasanti, 2018;Pritadyana et al, 2019) are factors that have a significant effect on financial performance. However, other studies have found different things, where CAR (Muchtar et al, 2021;Wibisono & Wahyuni, 2017), NPF (Muchtar et al, 2021;Widyaningrum & Septiarini, 2015), SIZE (Vernanda & Widyarti, 2016;Yusuf, 2017) and FDR (Agusto, 2021;Rohansyah, 2021) have no significant effect on financial performance.…”

Determinant of sharia banks profitability in Indonesia: The moderating effect of non performing financing

“…Profitabilitas menjadi aspek yang penting dikarenakan profitabilitas dapat merefleksikan prestasi bank dalam menjalankan operasionalnya dalam satu periode (Syamni et al, 2018). Profitabilitas juga dianggap penting karena menjadi ukuran keberhasilan kinerja secara akuntansi (Muchtar, Nor, Albra, Arifai, & Ahmar, 2018).…”

Do Capital and Business Volume Matter for Productivity of the Cooperatives in Indonesia?

“…In Equation ( 2), the subscript i is incorporated in the intercept term (α) to represent the possibility of having different intercepts in the estimated model. These differences can be due to unique features of each cooperative such as managerial style and management philosophy Hamid, Majid, & Khairunnisah, 2017;Arfan et al, 2017;Syamni, Rasyimah, Ratnasari, & Majid, 2018). In this context, the dummy variables are used to capture the varying intercepts in the GLS model.…”