The Effect of Diversification of Income towards the Performance of Banks Listed in the Indonesia Stock Exchange

Abstract

This study aims to analyze the effect of income diversification on bank performance. The independent variable in this study is income diversification, with the control variables are CAR, LDR, NPL and the dependent variable is bank performance (SHROA and SHROE). The sample used in this study is a company engaged in banking companies listed on the Indonesia Stock Exchange (IDX) for the period 2015-2019. The number of samples used in this study amounted to 30 banking companies using purposive sampling. The results of the study show that the income diversification and NPL variables have a significant negative effect on bank performance (SHROA and SHROE). The LDR variable has a significant positive effect on bank performance (SHROA and SHROE). While CAR and Bank Size variables have no significant effect on bank performance. Managerial Implications: Banking companies are expected to minimize the use of income diversification to reduce the level of risk, increase the level of credit distribution and monitor credit disbursement so as not to cause credit failures.