The Influence of Solvency and Liquidity Ratios on the Profitability of Commercial Banks in Indonesia

Sesi Kirani; Robith Hudaya

doi:10.55927/ijbae.v4i2.56

Authors

Sesi Kirani Universitas Mataram
Robith Hudaya Universitas Mataram

DOI:

https://doi.org/10.55927/ijbae.v4i2.56

Keywords:

Commercial Bank, Solvency, Liquidity, Profitability

Abstract

The goal of this study is to find out how solvency and liquidity ratios affect the ability of private banks in Indonesia to make money from 2021 to 2023. The study examines the correlation among solvency, liquidity, and profitability within Indonesia's banking system, offering insights for regulators and bank executives to optimize financial frameworks and enhance efficiency. What makes this research unique are the combined solvency and liquidity ratios (DER and CR) that were used. The independent variables consist of solvency ratios, liquidity ratios, and their composite, whilst the dependent variable is the profitability ratio. Analysis of 40 banks listed on the OJK utilizing the FEM model indicates that solvency and liquidity ratios have an insignificant impact on profitability, evidenced by a R² of 7.85%.

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