THE INFLUENCES OF RISK MANAGEMENT AND FIRM SIZE TOWARD INDONESIA CONVENTIONAL BANKS PROFITABILITY

Abstract

This research objective is to empirically prove the influence of capital adequacy ratio, loan to deposit ratio, net interest margin, non-performing loan and firm size towards return on asset. This study has applied the purposive sampling method and panel data where the data was collected from the official websites of every bank and Indonesia Stock Exchange. This study had 98 observations from seven banks in 2017Q1-2020Q2. This research adopted quantitative research with random effect model and those data have been tested by normality, autocorrelation, multicollinearity, and heteroscedasticity test. Empirical evidence of this research indicates that CAR, NIM, and Firm Size has a positive significant influence on ROA. However, LDR has a positive insignificant influence on ROA, while NPL has a negative significant influence on ROA. Simultaneously, all of the independent variables have a significant effect on profitability which described by the value of 56.98%, and the remain 43.02% is explained by another factor that excluded in this research. Furthermore, NIM was chosen as the most significant factor that influences the profitability proxied by return on assets.