Impact of Corporate Governance, Capital Structure, and Liquidity on Regional Bank Profitability in Indonesia
DOI:
https://doi.org/10.33062/ajb.v10i02.114Keywords:
profitability, corporate governance, capital structure, liquidity, regional development banksAbstract
Profitability indicates a bank's capacity to produce revenue from its assets and activities. Robust corporate governance facilitates prudent decision-making and risk management, whereas larger entities may leverage economies of scale to improve profits. Conversely, excessive leverage amplifies financial risk and can diminish profits, while too conservative liquidity management, although stabilizing, may restrict income possibilities. This study analyzes the impact of corporate governance, leverage, and liquidity on the profitability of regional development banks in Indonesia. The study employs secondary data from the annual reports of 26 regional development banks and utilizes multiple regression analysis. The results indicate that corporate governance does not significantly influence profitability, while leverage and liquidity negatively affect bank profitability. The findings indicate that corporate governance processes are typically effectively executed and monitored; yet, substantial debt commitments and significant cash reserves are likely to diminish profitability due to heightened interest expenses and reduced income production.
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