Factors Influencing Non-Performing Loans: An Empirical Study on Commercial Banks in Indonesia
Abstract
This study examines the factors that determine non-performing loans at commercial banks listed on the Indonesia Stock Exchange (IDX). The research variables used are non-performing loans as the dependent variables, with return on assets, net interest margin, loan-to-deposit ratio, and bank size as independent variables. To test the effect of return on assets, loan-to-deposit ratio, net interest margin, and bank size on non-performing loans, 25 commercial banks were taken with 144 N samples. We used the purposive sampling method and analyzed the data using path analysis. The results of the analysis show empirical evidence that the net interest margin has a positive effect on return on assets, while the loan-to-deposit ratio and bank size have no effect. Return on assets and loan-to-deposit ratio have a negative effect on non-performing loans, while net interest margin and bank size have no effect. The novelty of this research is to place the return on assets as an intermediate variable that plays a double role as the dependent and independent variable. By placing ROA as the mediating variable, it is found that the effect of net interest margin on non-performing loans is not a direct effect but through ROA.
Keywords: bank size, loan-to-deposit ratio, net interest margin, non-performing loan, return on asset.
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