Determinants of Bank Profitability in Indonesia: Macroeconomic and Bank-Specific Factors

Abstract

The aims of this study is to analyze the effect of inflation, interest rates on Gross Domestic
Product (GDP), Non-Performing Loans (NPL), Capital Adequacy Ratio (CAR), and Loan to Deposit Ratio
(LDR) on profitability (ROA) in listed conventional commercial banks on the Indonesia Stock Exchange
(IDX). The data used in this study were obtained from the financial statements of commercial banks listed
on the Indonesia Stock Exchange (IDX) for the 2014-2018. The population in this study was 44 commercial
banks in Indonesia. Sample selection using purposive sampling method, after passing through the purposive
sampling stage there are 34 bank samples will be studied. The analysis technique which used in this research
is multiple linear regression models. The results showed that inflation, interest rates, non-performing loans
(NPL) and Capital Adequacy Ratio (CAR) had an effect on profitability. Meanwhile, Gross Domestic
Product (GDP) and Loan to Deposit Ratio (LDR) have no effect on profitability.