Analysis of Macroeconomic Influence Return on Assets Banking Study on Conventional Commercial Banks in Indonesia for the Year 2018–2020

Abstract

This study aims to analyze the effect of macroeconomic variables on the return on banking assets. The data processing method used by the researcher is using the Vector Error Correction Model (VECM) as a data analysis tool and this study confirms that the extent to which it examines the positive and significant influence between macroeconomic variables on the return on banking assets. The data obtained is secondary data based on financial statements within a period of 3 years using monthly time series data. The results of this study indicate that there is a positive and significant effect on the exchange rate and CPI variables while it is negative and significant on the inflation, interest rate and IPI variables resulting from the long-term VECM estimation. While the results show that there is a positive and significant effect on the interest rate and CPI variables and a significant negative on the inflation variable, positive and insignificant on the exchange rate variable, negative and insignificant on the IPI variable on the ROA of the short-term VECM estimation results. The results of the measurement of the composition or contribution of the influence of the independent variable on the dependent variable show the interest rate variable with a value of 4.11% in the 10th period obtained through the results of the decomposition variance (VD) test on the return on assets (ROA) of banking studies at Conventional Commercial Banks in Indonesia.

Examining the Factors Affecting the Profitability of Commercial Banks

“…However, the macroeconomic variable CPI exhibits a beta coefficient of 0.0032 (significant at a 5 percent level), suggesting Nepali commercial banks can boost their profitability when inflation rises. This result contrasts with those of Ongore [22] and Tegar [41] and is comparable to those of Anshu [2]. Similarly, another essential macroeconomic variable, IR, has a coefficient of 0.0705 (significant at 1 percent).…”

Effect of Credit Risk on Profitability of Nepalese Commercial Banks

“…The financial performance of commercial banks is affected by so many external factors (Loto, 2018;Anshu & Gakhar, 2019;Prasetya & Thamrin, 2021) and internal factors (Yesmine & Bhuiyah, 2015;Teshome, 2018;Siddique et al, 2021). GDP, interest rate, money supply, trade balance, and gold price, etc.…”