INVESTIGATING THE IMPACT OF BANKS’ SOUNDNESS AND MACROECONOMICS TOWARDS BANKS’ PERFORMANCE

Abstract

The aim of this study is to find out the influence of internal factors (CAMEL) and decile-1 external factors (GDP growth, inflation rate, Gini coefficient) towards bank performance at Indonesia commercial active bank with national coverage area for period 2011-2015. The type of data that used in this study was secondary data. Through purposive sampling, this study examined 180 observations from thirty-six commercial banks which fulfill the criteria. Internal variables were capital adequacy, asset quality, management efficiency, earning quality, liquidity and external variables were GDP growth (t-1), inflation rate (t-1), and Gini coefficient (t-1), towards return on average equity. Panel data regression was performed to find out the significance level of independent variable towards dependent variable in Indonesia commercial banks. Analysis revealed that some independent variable had a significance influence towards return on average equity which was CAR, IMPL, CINC, NIM, LDR, GDP, and INF in the commercial bank sector in Indonesia. Researcher believes that this is the first study, which applies CAMEL and decile-1 Macroeconomics factors (GDP growth, Inflation rate, and Gini coefficient) in the commercial banking sector with national coverage context.