Factors That Affect Profitability at the Conventional Bank of Indonesia

Abstract

This study aims to analyze the loan to deposit ratio, interest rates, inflation, and intellectual capital on profitability at the Indonesian Conventional Bank. This study uses panel data regression using three models: Common Effect, Fixed Effect, and Random Effects. The Chow and Hussman test results show that the best model is using the random effect model. The random effect model results show that the loan to deposit ratio and inflation effects, but interest rates and intellectual capital have no impact on profitability. This means that investors consider net income and pay attention to such as Loan to Deposit Ratio and Intellectual Capital. The company's performance in managing capital to be more effective and efficient, thereby increasing added value for companies and investors.

The comparison of islamic and conventional banking in ownership structure and interest rates in Indonesia

“…The value of conventional banking companies focuses on serving the public by implementing an attractive system in their operational activities, generally operating by issuing products to absorb public funds, through savings, time deposits, current accounts, and further channeling available funds, including investment loans, working capital, and consumer loans (Wardhani, 2020;Sutikno, 2017) . While the value of Islamic banking focuses on providing products and services by sharia (Islamic Law) which strictly prohibits not only excessive riba (interest costs) such as additional costs from borrowing, but also prohibits unethical involvement such as speculation and gambling (Aisyah,…”

Pengaruh Loan to Deposit Ratio, Non Performing Loan Dan Net Interest Margin Terhadap Profitabilitas

“…Sementara ketika rasio LDR bank melebihi 92% mengindikasikan bahwa total kredit yang disalurkan oleh bank melebihi dana yang dihimpun. Oleh karena itu, perlu menjaga Loan to Deposit Ratio (LDR) agar tidak terlalu rendah ataupun terlalu tinggi (Wardhani, 2020). Berdasarkan pernyataan tersebut maka dapat dikatakan bahwa LDR memiliki hubungan positif dengan profitabilitas.…”

“…BPD Bali. Hasil penelitin ini mendukung penelitian Wardhani (2020) yang menyimpulkan bahwa LDR berpengaruh positif dan signifikan terhadap profitabilitas. Penelitian lainnya oleh Setiawan dan Hermanto (2017) juga menemukan bahwa LDR berpengaruh positif signifikan terhadap profitabilitas.…”

The Internal and External Determinants of Rural Banks’ Profitability

“…Many research has been conducted in this realm. However, most research focus on commercial banks (Fahrul & Rusliati, 2016;Herdhayinta & Supriyono, 2019;Octavio & Soesetio, 2019;Serly, 2021;Sofie, Manurung, Usman, & Trisakti, 2020;Suryanto, 2017;Usman, 2019;Wardhani, 2020;Widyastuti, Dedi, & Zulaihati, 2017;Wulandari, Anggraeni, & Andati, 2016). Some researches investigated the profitability of Islamic rural banks (Sanusi, 2019;Warninda & Hosen, 2015;Widarjono, Mifrahi, & Perdana, 2020).…”

“…He posited that although banking environments are different, some fixed effects remained. Wardhani (2020) used panel regression to investigate factors affecting profitability. LDR, interest rate, and inflation posited random effect on profitability.…”