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The Effect of CAR, NPL and Good Corporate Governance on Banking Financial Performance in Indonesia

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According to Indonesian Banking Statistics 2015, there was an increasing source of funds as deposit and distribution of funds as credit in Banks in Indonesia from year 2010 until year 2015. But on the other side, the banking financial performance as measure by Return On Asset (ROA) tend to decrease year to year. In 2014, the banking financial performance 2,85% (decrease 7.4% from 2013) and it continue to decrease 19.2% in 2015. So this study seeks to investigate what factors give an impact to the ROA. The factors are CAR, NPL and Institutional Ownership. The sample of this study is 30 Banks that quoted from Indonesian Stock Exchange for period of 2010–2015 by applying panel data regression analysis. After done, Common Effect Model is chosen as the most suitable for our data. As a result, CAR and NPL each partially has a statistically significant effect on ROA, otherwise the institutional ownership has an effect on ROA but not statistically significant.
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Keywords: Bank; CAR; Institutional Ownership; NPL; ROA

Document Type: Research Article

Affiliations: 1: Management Department, Faculty of Economics and Business, University of Sumatera Utara (USU), Indonesia 2: Accounting Department, Faculty of Economics and Business, University of Sumatera Utara (USU), Indonesia

Publication date: July 1, 2018

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  • ADVANCED SCIENCE LETTERS is an international peer-reviewed journal with a very wide-ranging coverage, consolidates research activities in all areas of (1) Physical Sciences, (2) Biological Sciences, (3) Mathematical Sciences, (4) Engineering, (5) Computer and Information Sciences, and (6) Geosciences to publish original short communications, full research papers and timely brief (mini) reviews with authors photo and biography encompassing the basic and applied research and current developments in educational aspects of these scientific areas.
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