Determinants of Bank Profitability of Indonesian Banks Based on Core Capital Size in Category 3 and 4

Karen Santoso, Sekolah Bisnis dan Ekonomi -Universitas Prasetiya Mulya BSD City Kavling Edutown I.1 , Jl. BSD Raya Utama, BSD City, Tangerang 15339, Weindytha Patrizia Wibowo, Sammy Kristamuljana, Rathria Arrina Rachman, Sekolah Bisnis dan Ekonomi -Universitas Prasetiya Mulya BSD City Kavling Edutown I.1 , Jl. BSD Raya Utama, BSD City, Tangerang 15339, Sekolah Bisnis dan Ekonomi -Universitas Prasetiya Mulya BSD City Kavling Edutown I.1 , Jl. BSD Raya Utama, BSD City, Tangerang 15339, Sekolah Bisnis dan Ekonomi -Universitas Prasetiya Mulya BSD City Kavling Edutown I.1 , Jl. BSD Raya Utama, BSD City, Tangerang 15339
2020 Studi Akuntansi dan Keuangan Indonesia  
Indonesian banks are categorized into four classes based on core capital size that determines the scope of banks' business activities. This research aimed to identify the determinants of profitability of banks with the core capital size of IDR 5-30 trillion (called "Buku 3" category) and banks with the core capital size of more than IDR 30 trillion (called "Buku 4" category). The data sample was 27 conventional commercial banks listed on the Indonesia Stock Exchange (BEI) from 2009 to 2018.
more » ... m 2009 to 2018. These banks are divided into three different sample classes namely Buku 3 only, Buku 4 only, and Buku 3 and Buku 4 categories. By applying a panel regression model, the results showed that net interest margin (NIM) positively affected profitability of the banks in Buku 3, banks in Buku 4, as well as banks in Buku 3 and Buku 4 category. Moreover, operating expense to operating income ratio (BOPO) and non-performing loans (NPL) negatively affected profitability of those banks in the three sample classes. However, loan to deposit ratio (LDR) and capital adequacy ratio (CAR) have negative relationships with profitability for banks in the Buku 4 category only. Accordingly, this study finds that banks in different sizes of core capital categories have different factors affecting profitability in the Indonesian banking sector.
doi:10.21632/saki.3.1.100-119 fatcat:gyratzv54bdslhumauat6v7uvy