DETERMINANT OF CAPITAL ADEQUACY RATIO USING INTERVENING VARIABLE RETURN ON ASSETS

Abstract

This research is intended to analyze the influence of inflation variables, Loan to Deposit Ratio (LDR) on the Return On Assets (ROA) profitability ratio and on the Capital Adequacy Ratio (CAR). This is based on the phenomenon of inconsistencies in various studies from what is happening in reality, thus encouraging researchers to carry out research again. This research is a type of quantitative descriptive research with multiple regression analysis method for panel data using 9 cross section samples and 6 years as a time series. This research formula is to maximize the value of the CAR through ROA as an intervening variable using the research object of banking sector companies on the Indonesia Stock Exchange. Two research models were developed and integrated into one research model, each of which went through the model selection test stages, Chow Test, Hausman Test, and Lagrange Multiplier Test. The results of the first research model; that inflation can explain the impact on ROA with a negative correlation where these results confirm the applicable theory. Another result in the second research model is that the LDR can significantly explain its influence on the CAR with a negative correlation and this result is also in accordance with the applicable theory. The other variables cannot explain their influence on the endogenous variable ROA in the first model and the CAR in the second model. It is hoped that these results can help as a guide for banking practitioners in Indonesia to be able to maximize the CAR.