Determinants of the Profits in Regional Development Banks in Indonesia

Abstract

Regional Development Banks (BPDs) should develop their regional governments' economy by increasing their performance. This study attempts to determine the effect of GCG and other variables on the banks' performance indicated by the profit. This study used 10 determiners as the independent variables such as NPL, LASSET, LTA, ETA, FBIR, TDR, LDR, NIM, DGCG, and GCGI, while the dependent variable is ROA. The data were taken from the BPD's financial reports from 2014 to 2019. There were 26 BPDs as the sample based on the stipulated criteria. The results show that NPL is an essential factor for increasing the banks' performance. Next, the time deposit ratio to total deposit also has a positive effect but not significant. The LTA ratio is negative but not significant, while GCGI has a significant effect. Therefore, NPL, and GCG are the dominant factors in determining the banks’ performance. The modeling constant values are all significant, indicated by the risk level ranging from 36-40%. It can be concluded that NPL is an important variable in determining risk for banks, so is the GCG index that can also affect the banks' performance. Therefore, BPDs should pay attention to their NPL and GCG in order to increase their performance