FACTORS INFLUENCING PROFIT EFFICIENCY OF BANKING IN INDONESIA

This
study intends to test, analyze, and verify the influence of bank size, capital
adequacy, liquidity, credit risk, and market power on commercial banks
profitability. Quantitative research methods applied in this study are
explanatory method, which aims to analyze the influence of independent
variables on dependent variable and descriptive method to describe the object
studied. The study also applies Stochastic Frontier Analysis (SFA) approach to
estimate the technical efficiency of commercial banks. The results show that
bank size, capital adequacy (CAR), liquidity (LDR), credit risk (NPL) and
market power significantly affect the profitability of commercial banks in
Indonesia in the period of 2010-2016.The result of yearly financial report of each
bank is caused by the fact that: 1). some banks are in the process of mergers;
2). the allowance for impairment losses on financial assets and non-financial
assets increased primarily with banks in the merger process; 3). banks have
credits in default status and under special surveillance with an increasing
amount of credits from year to year.