The analysis of the effects of Bank Soundness Rate, Inflation and Indonesian Bank Rate on the Profit Growth of Regional Development Banks

Yuyun Khatirina (), Luk Luk Fuadah and Azwardi
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Yuyun Khatirina: Sriwijaya University, Palembang, Indonesia
Luk Luk Fuadah: Sriwijaya University, Palembang, Indonesia
Azwardi: Sriwijaya University, Palembang, Indonesia

Oblik i finansi, 2021, issue 2, 95-106

Abstract: Regional Development Banks (BPD in Indonesian) are a type of bank in Indonesia that is established by the local provincial government. Its purpose is to boost regional development and provide initial capital to the province that private banks would not risk giving, as well as giving basic financial services for the general provincial population. RDBs support not only the economic growth in their respective regions but also Indonesia's macroeconomic growth. The purpose of this study is to provide empirical evidence on the impact of the bank soundness rate, inflation and Indonesian Bank rate (BI Rate) on the profit growth of Regional Development Banks. In this study, the authors use data for 2014-2019. The sample of the study is represented by 26 regional development banks in Indonesia, which are registered with the Bank Indonesia and the Financial Services Authority. The authors identified five regions of Indonesia that are being analyzed: Java (including Bali), Sumatra, Kalimantan, Sulawesi and Irian Jaya (including Nusa Tenggara). The authors use for analysis the secondary data obtained from quarterly and annual financial statements of banks. Hypothesis testing was performed using multiple regression analysis, data processing was performed in the SPSS Statistics program. It was found that the components of bank soundness (Capital Adequacy Ratio (CAR), Net Interest Margin (NIM), Non-Performing Loans (NPL), Loan to Deposit Ratio (LDR), Good Corporate Governance (GCG)), inflation and the BI Rate do not affect the profits growth of regional development banks. However, such a variable as the Operational Efficiency (known in Indonesia as BOPO) has little effect on the profits growth of regional development banks in Sumatra. For other regions, such an effect is not observed.

Keywords: bank soundness level; Regional Development Bank; inflation; Indonesian Bank rate; bank profits (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:iaf:journl:y:2021:i:2:p:95-106

DOI: 10.33146/2307-9878-2021-2(92)-95-106

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