THE DETERMINANT FACTORS OF THE BANK RETURN ON INVESTMENT (ROI): EMPIRICAL STUDY ON INDONESIAN BUKU 3 AND BUKU 4 BANKS FOR THE PERIOD OF 2008-2019

• Main Author: Bagus Kusumo, Dewanto
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/64404
• Institution: Institut Teknologi Bandung

The banking industry in Indonesia is currently developing rapidly, specifically. There are a lot of banks in all regions in Indonesia. This makes intense competition among banks. The Bank has two main business activities, namely raising funds and receiving credit / loans. From these two main activities, banks earn income or are often called interest margins. The main purpose of a bank is to make a profit. However, to make a profit is not easy because of some problems and risks faced by banks in running their business. Therefore, this study aims to reveal the relationship between aspects of bank business activities represented by Return On Assets, Bank Size, Operating Cost to Operating Income Ratio, Non-Performing Loans to Total Earning Assets Ratio, Core Capital Tier-1 to Total Assets Ratio of Return On Investment as a determinant of profitability. The data in this study were obtained from monthly reports from 16 Indonesian commercial banks categorized in Commercial Banks based on Business Activities (BUKU) 3 and BUKU 4 from 2008 to 2019. This research was conducted using panel data regression with the random effect method to find out what variables are related to Return On Investment. The results showed that Return on Assets has a positive correlation coefficient (0.044419%) and has significant effect on Return on Investment. Bank Size has significant and negative relationship with Return on Investment (0.018587%). Banks with bigger assets have greater ability to produce profits. Core Capital Tier-1 to Total Assets Ratio also has a positive correlation (0.686369%) and has significant effect on Return On Investment. If the Operating Cost to Operating Income Ratio, has negative correlation (0.001003%) and significant to Return on Investment. The last Non-Performing Loan to Total Earning Assets Ratio to Return on Investment has a negative correlation that is (2.284914%) and has significant effect. The author suggests that in order to increase the size of the bank, For commercial banks in Indonesia, it is better to improve their financial performance in order to be able to generate profits that continue to increase every period, thus attracting investors to invest their capital in the company.