THE IMPACT OF INTERNAL FACTORS ON BANK PROFITABILITY IN CHINA

Abstract

The purpose of this study is to analyze the influence of internal factors towards the profitability of commercial bank in China. In recent years, china commercial bank profitability appear downtrend. So this study analyzed the influence of internal factors in the profitability of commercial banks in China. The researcher uses quantitative method and secondary data to do this study. The factor of return on asset will be measure bank profitability in this study. There are four independent variables (bank loans, liquidity risk, capital adequacy ratio, bank size) and one depend variable (return on asset) in this study. The analysis is based on the data of commercial banks in China published in the period 2012-2016. The sample of commercial banks from listed in Shanghai stock exchange and Hong Kong stock exchange. The researcher uses multiple regression and hypothesis to analyze independent variable (bank loans, liquidity risk, capital adequacy ratio, bank size) influence towards dependent variable (return on asset) through SPSS 22.0. From the analysis result, the researcher finds bank loans and capital adequacy ratio have significantly influence on return on asset. The liquid risk and bank size does not significantly influence on return on asset. The researcher believe that this is the first study, which analyze independent variable (bank loans, liquidity risk, capital adequacy ratio, bank size) influence towards dependent variable (return on asset) in China. The findings of the study proved that commercial banks in China could enlarge their profitability by increasing the level of bank loaning and capital adequacy ratio.