Determination of Return on Assets of the Foreign Exchange Banks in Indonesia

Authors

  • Ghazali Syamni Malikussaleh University
  • Rasyimah Rasyimah Malikussaleh University
  • Desy Ratnasari Malikussaleh University
  • M. Shabri Abd. Majid Syiah Kuala University

DOI:

https://doi.org/10.21512/bbr.v9i3.4872

Keywords:

return on assets, profitability, foreign exchange banks, financial performance

Abstract

The purpose of this research was to examine the determinants of Return on Assets (ROA) on the foreign exchange banks in Indonesia. The data used were the financial ratios of 27 foreign exchange banks in Indonesia in 2012-2016. The data were gathered from the published financial statements of the Indonesian foreign exchange banks. This research employed a Common Effect Model (CEM) as the most suitable panel regression model to analyze the data using the E-views statistical software. The findings indicate that from 2012 to 2016, the profitability of the exchange banks is largely determined by the Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR), Operating Efficiency Ratio (OER), and total debt. The findings also imply that apart from maximizing profit, it is important for the banks to abide by the regulations issued by the central bank or the Financial Services Authority in performing the banking operations. Negligence to observe the level of prudential and risk management will not only lead to profit loss, but it will also cause the failure of the banks.

Dimensions

Plum Analytics

Author Biographies

Ghazali Syamni, Malikussaleh University

Department of Economics, Faculty of Economics

Rasyimah Rasyimah, Malikussaleh University

Department of Economics, Faculty of Economics

Desy Ratnasari, Malikussaleh University

Department of Economics, Faculty of Economics

M. Shabri Abd. Majid, Syiah Kuala University

Department of Islamic Economics, Faculty of Economics and Business

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Published

2018-12-01
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PDF downloaded 352  .