Title:
Size, Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR), and Operating Expenses/operating Income (BOPO) Increase ROE in KBMI 1 in Indonesia Banks?

Authors:
Elvita Salju, Herman Ruslim*, Andi Widjaja, Indonesia

Abstract:

Aim/purpose – This study examines the effects of Size, Operating Expenses/Operating Income (BOPO), Loan to Deposit Ratio (LDR), and capital adequacy ratio (CAR) on the return on equity (ROE) of bank category KBMI 1 in Indonesia. Since the bank KBMI 1 has a capital requirement of only Rp 6 Triliyon. The survival of banks with small capital will be challenged by economic conditions. In this study, the sample used only 7 banks listed in the BEI Jakarta. The study utilizes secondary data obtained from the secondary data, audit financial reports, or annual reports published during the period from 2019 to 2024 with a panel data regression analysis technique, chosen model with Chow test and Hausman test of witch model is efficient to be employed either Fixed Effect Model (FEM) or Random effect model (REM), from the test of the model, specifically a Fixed Effects Model (FEM), was chosen.  Findings – This study found that Size has a positive and significant but Operating Expenses/ Operating Income (BOPO) has a negative and significant impact on ROE. Loan to Deposit Ratio (LDR) and Capital Adequacy Ratio (CAR) have no significance in increasing the profitability during the period of study; most of the banks suffer losses in the COVID-19 period. However, simultaneously, the size, Operating Expenses/Operating Income (BOPO), Loan to Deposit Ratio (LDR), and capital adequacy have a significant in increase the Return on Equity of banks in the core capital bank category one (KBMI 1) in Indonesia.

DOI: http://dx.doi.org/10.51505/ijaemr.2026.11234