Factors That Influence Banking Performance With Third Party Funds As Moderating Variables In Banking Companies Listed On The Indonesia Stock Exchange

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Factors Affecting Banking Performance with Third Party Funds as Moderating Variables

Introduction

The banking industry plays a vital role in the economic growth and development of a country. In Indonesia, the banking sector is one of the largest and most dynamic industries, with numerous banks operating in the country. However, the banking industry is not immune to challenges and risks, and banks must constantly strive to improve their performance to remain competitive. This study aims to analyze the factors that influence banking performance in banking companies listed on the Indonesia Stock Exchange (IDX) during the 2007 to 2018 period.

Background

The banking industry is subject to various factors that can affect its performance. These factors can be internal or external, and they can have a significant impact on a bank's ability to achieve its goals. Some of the key factors that can affect banking performance include capital adequacy, company size, non-performing loans (NPLs), loan to deposit ratio (LDR), loan to asset ratio (Lar), and operating expense to operating income (OEOI). Additionally, third-party funds (DPK) can also play a moderating role in the relationship between these factors and banking performance.

Methodology

This study uses secondary data from 22 banking companies listed on the IDX during the 2007 to 2018 period. The data are analyzed using multiple linear regression and interaction moderation test, which is assisted by EViews software. The study aims to examine the relationship between the factors mentioned above and banking performance, as well as the moderating effect of DPK on these relationships.

Results

The results of this study show that several factors have a significant impact on banking performance. First, the Capital Adequacy Ratio (CAR) ratio has a significant negative effect on banking performance, indicating that a low level of capital adequacy can affect the effectiveness and operational efficiency of a bank. Second, the company's size has no significant effect on banking performance, suggesting that the size of a bank does not always guarantee its good performance. Third, non-performing loans (NPLs) have a significant negative effect, indicating that increasing NPLs can harm bank performance.

Furthermore, the Loan to Deposit Ratio (LDR) shows an insignificant positive effect on banking performance, suggesting that although LDR reflects bank liquidity, its effect on performance has not been seen clearly. Likewise, the loan to asset ratio (Lar) shows an insignificant negative impact. On the other hand, Operating Expense to Operating Income (OEOI) has a significant negative influence, indicating that operational cost efficiency is very important to maintain bank performance.

Moderating Effect of DPK

The results also show that DPK can moderate the relationship between Lar and banking performance, indicating that in a certain context, DPK involvement can improve bank asset management. However, DPK has no effect on moderation of OEOI, emphasizing that control over operational costs remains the main thing in achieving good performance.

Conclusion

This study provides several important findings related to banking performance. First, it highlights the importance of managing the CAR ratio, NPL reduction, and operational efficiency to improve banking performance. Second, it emphasizes the need to understand the dynamics of DPK in the context of relationships with Lar to optimize banking performance in Indonesia. This is an important record for bank management and other stakeholders in formulating the right strategy to face challenges in the banking industry.

Recommendations

Based on the findings of this study, several recommendations can be made. First, banks should focus on managing their CAR ratio to ensure that they have sufficient capital to meet their obligations. Second, banks should prioritize NPL reduction to minimize the risk of default and improve their performance. Third, banks should strive to improve their operational efficiency by reducing their OEOI. Finally, banks should understand the dynamics of DPK and its relationship with Lar to optimize their asset management and improve their performance.

Limitations

This study has several limitations. First, the study uses secondary data, which may not be comprehensive or up-to-date. Second, the study focuses on a specific period (2007 to 2018), which may not be representative of the current banking industry. Third, the study uses a limited number of variables, which may not capture the complexity of the banking industry.

Future Research

This study provides several avenues for future research. First, researchers can examine the impact of other factors on banking performance, such as interest rates, inflation, and economic growth. Second, researchers can investigate the moderating effect of DPK on other relationships between variables. Third, researchers can explore the dynamics of DPK and its relationship with Lar in more detail.

Conclusion

In conclusion, this study provides several important findings related to banking performance. It highlights the importance of managing the CAR ratio, NPL reduction, and operational efficiency to improve banking performance. It also emphasizes the need to understand the dynamics of DPK in the context of relationships with Lar to optimize banking performance in Indonesia. This study provides a valuable contribution to the existing literature on banking performance and provides several recommendations for bank management and other stakeholders.
Q&A: Factors Affecting Banking Performance with Third Party Funds as Moderating Variables

Introduction

In our previous article, we discussed the factors that influence banking performance in banking companies listed on the Indonesia Stock Exchange (IDX) during the 2007 to 2018 period. We also examined the moderating effect of third-party funds (DPK) on these relationships. In this article, we will answer some of the most frequently asked questions related to this topic.

Q: What are the key factors that affect banking performance?

A: The key factors that affect banking performance include capital adequacy, company size, non-performing loans (NPLs), loan to deposit ratio (LDR), loan to asset ratio (Lar), and operating expense to operating income (OEOI).

Q: How does capital adequacy affect banking performance?

A: Capital adequacy has a significant negative effect on banking performance, indicating that a low level of capital adequacy can affect the effectiveness and operational efficiency of a bank.

Q: What is the impact of company size on banking performance?

A: Company size has no significant effect on banking performance, suggesting that the size of a bank does not always guarantee its good performance.

Q: How do non-performing loans (NPLs) affect banking performance?

A: NPLs have a significant negative effect, indicating that increasing NPLs can harm bank performance.

Q: What is the role of third-party funds (DPK) in banking performance?

A: DPK can moderate the relationship between Lar and banking performance, indicating that in a certain context, DPK involvement can improve bank asset management.

Q: How can banks improve their banking performance?

A: Banks can improve their banking performance by managing their CAR ratio, reducing NPLs, and improving their operational efficiency.

Q: What is the importance of understanding the dynamics of DPK in the context of relationships with Lar?

A: Understanding the dynamics of DPK and its relationship with Lar is important to optimize banking performance in Indonesia.

Q: What are the limitations of this study?

A: This study has several limitations, including the use of secondary data, a limited number of variables, and a specific period of analysis.

Q: What are the avenues for future research?

A: Future research can examine the impact of other factors on banking performance, investigate the moderating effect of DPK on other relationships between variables, and explore the dynamics of DPK and its relationship with Lar in more detail.

Conclusion

In conclusion, this Q&A article provides answers to some of the most frequently asked questions related to the factors that affect banking performance with third-party funds as moderating variables. We hope that this article will provide valuable insights and information for bank management, researchers, and other stakeholders in the banking industry.

Frequently Asked Questions

  • What are the key factors that affect banking performance?
  • How does capital adequacy affect banking performance?
  • What is the impact of company size on banking performance?
  • How do non-performing loans (NPLs) affect banking performance?
  • What is the role of third-party funds (DPK) in banking performance?
  • How can banks improve their banking performance?
  • What is the importance of understanding the dynamics of DPK in the context of relationships with Lar?
  • What are the limitations of this study?
  • What are the avenues for future research?

Answers

  • The key factors that affect banking performance include capital adequacy, company size, non-performing loans (NPLs), loan to deposit ratio (LDR), loan to asset ratio (Lar), and operating expense to operating income (OEOI).
  • Capital adequacy has a significant negative effect on banking performance, indicating that a low level of capital adequacy can affect the effectiveness and operational efficiency of a bank.
  • Company size has no significant effect on banking performance, suggesting that the size of a bank does not always guarantee its good performance.
  • NPLs have a significant negative effect, indicating that increasing NPLs can harm bank performance.
  • DPK can moderate the relationship between Lar and banking performance, indicating that in a certain context, DPK involvement can improve bank asset management.
  • Banks can improve their banking performance by managing their CAR ratio, reducing NPLs, and improving their operational efficiency.
  • Understanding the dynamics of DPK and its relationship with Lar is important to optimize banking performance in Indonesia.
  • This study has several limitations, including the use of secondary data, a limited number of variables, and a specific period of analysis.
  • Future research can examine the impact of other factors on banking performance, investigate the moderating effect of DPK on other relationships between variables, and explore the dynamics of DPK and its relationship with Lar in more detail.