The Determinants of Successful Bank Profitability in Indonesia : Empirical Study for Provincial Government’s Banks and Private Non-Foreign Banks
AbstractThe purpose of this research is to investigate factors that determine Commercial Bank’s Performance and Profitability, especially among Provincial Government’s Banks and Private Non-Foreign Exchange Banks in Indonesia for the period of 1993-2000. Return on Assets and Return on Equity were used as the proxies for the profitability. This research applies cross sectional and pooled data. Data was obtained from Indonesia Banking Directory which was published by Bank Indonesia. This paper studies some financial ratios particularly used in banking Industry and some macroeconomic indicators which are hypothesized significantly affecting the profitability. Macroeconomic Indicators are also used to assess the degree of relationship among variables and their fluctuations. Statistics and econometrics are employed to find the fittest model. The result of this research has shown that TETA (Total Expenses to Total Assets and CRTA (Capital and Reserves to Total Assets) dominantly and consistently affect ROA and ROE. In General, it can be concluded that cost management, capital adequacy, and assets and liabilities management are the most important factors that determine the bank’s profitability.
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Bibliographic InfoPaper provided by Department of Management and Business, Padjadjaran University in its series Working Papers in Business, Management and Finance with number 200601.
Length: 11 pages
Date of creation: Jan 2006
Date of revision: Jan 2006
profitability; ROA; ROE;
Find related papers by JEL classification:
- G0 - Financial Economics - - General
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