PROFITABILITY DETERMINANTS ANALYSIS (STUDY ON BANKING SECTOR COMPANIES LISTED ON INDONESIAN STOCK EXCHANGE 2016-2020)

Abstract

Banking plays a crucial role in a country's economy because of its contribution to intermediation. Banks must have excellent performances to prevent losses when carrying out their intermediation function. If a bank's performance declines, so does public credibility and trust. The existence of a research gap and the phenomenon of the gap regarding profitability fluctuations made this research still required. This study aims to provide empirical evidence regarding the effect of Capital Adequacy Ratio (CAR), Non Performing Loans (NPL), Net Interest Margin (NIM), Operating Expenses and Operating Income (BOPO), and Loan Deposit to Ratio (LDR) on profitability (ROA). The populations in this study were all conventional banking sector companies registered on the Indonesia Stock Exchange. The purposive sample method was used to collect 190 observations for the research sample. This study used secondary data with analytical techniques using multiple linear regression analysis. The study's findings provided empirical evidence regarding the positive and significant role of NIM on profitability. BOPO has a negative and significant impact on profitability. The study also provides empirical evidence regarding the negative and insignificant role of CAR, BOPO, and LDR on profitability. Simultaneously, all variables of Capital Adequacy Ratio (CAR), Non-Performing Loan (NPL), Net Interest Margin (NIM), Operating Expenses and Operating Income (BOPO), and Loan Deposit to Ratio (LDR) have an impact on profitability (ROA).