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Bank-Specific and Industry-Characteristic Determinants of Commercial Bank Profitability: Empirical Study for Indonesia

Author

Listed:
  • Abdul Manap Pulungan

    (Supervisory Board of Bank Indonesia)

  • Ahmad Erani Yustika

    (Supervisory Board of Bank Indonesia)

Abstract

This study discusses the influence of a series of bank-specific factors such as CAR (Capital Adequacy Ratio), OEOI (Operations Expences to Operations Income), NPL (Non Performing Loan), and FBI (Fee-based Income) on ROA as a profitability proxy. Also studied whether commercial banks probability affected by the concentration (Structure Conduct Performance, SCP) or efficiency (Efficiency Hypothesis, HE). Share of Third Party Funds (STPF) is variable proxy of SCP, while the OEOI proxy of HE. By using panel data procedures of the 111 commercial banks during 2005 to 2011, this research concludes that CAR and FBI have significant effect with positive sign on ROA, while OEIO and NPL significant with negative sign. STPF does not significantly affect on ROA so SCP theory as a proxy for the concentration is rejected, on the other hand, this research accepts the HE theory that focuses on the efficiency.

Suggested Citation

  • Abdul Manap Pulungan & Ahmad Erani Yustika, 2014. "Bank-Specific and Industry-Characteristic Determinants of Commercial Bank Profitability: Empirical Study for Indonesia," Proceedings of International Academic Conferences 0702522, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iacpro:0702522
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    File URL: https://iises.net/proceedings/12th-international-academic-conference-prague/table-of-content/detail?cid=7&iid=113&rid=2522
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    More about this item

    Keywords

    profitability; structure conduct performance; efficiency hypothesis;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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