Non Linearity Determination Factors of Profitability Banks in Indonesia

Abstract

The banking sector is a key sector in national development, serving as a financial intermediary between those with excess funds and those in need of funds. This study was conducted to determine the significant impact of the Loan-to-Asset Ratio (LAR), Equity-to-Total -Asset Ratio (ETA), Net Interest Margin (NIM), Firm Size (SIZE), and Return on Assets (ROA) on the profitability of conventional commercial banks in Indonesia listed on the Indonesia Stock Exchange during the 2011–2015 period. This study is an associative study using a quantitative approach. The data analysis technique employed is panel regression using the fixed-effects method (Fixed-Effect Method) with the Eviews 6 program. The research sample consists of 20 conventional commercial banks selected using purposive sampling. The research data are secondary data collected through documentation from the Indonesia Stock Exchange via the website www.idx.co.id. The results of this study indicate the influence of Return on Assets (ROA), Loan-to-Asset Ratio (LAR), Equity-to-Total-Asset Ratio (ETA), Net Interest Margin (NIM), and Firm Size (SIZE) on the profitability of conventional commercial banks in Indonesia.