The Influence of Bank Size, Operating Expenses and Operating Revenue (OER), Credit Risk, Inflation, and Gross Domestic Product (GDP) on the Performance of Commercial Banks in Indonesia

Abstract

Introduction: Commercial bank performance is one of the main indicators of a country's economic stability. Bank performance is influenced by various internal and external factors, including bank size, operational efficiency as measured by the Operating Expenses to Operating Revenue (OER) ratio, credit risk, and macroeconomic conditions such as inflation and Gross Domestic Product (GDP).

Objectives: This study aims to identify and analyze the influence of these variables on the performance of commercial banks in Indonesia, considering their important role in the national financial system.

Methods: This research uses the quantitative method and will use the secondary data obtained from quarterly report statements and financial statements published by each bank on their website. The data will be analyzed using E-Views 10.0.

Results: The results of panel data regression show that all independent variables (bank size, inflation, gross domestic product, operating expenses and operating income, and credit risk) have a significant effect on the dependent variable (performance). All independent variables have an influence of 97.70% on the dependent variable, Performance in commercial banks in Indonesia. Then, the remaining 2.30% is influenced by other variables not included in this study. Furthermore, the relationship between Credit Risk, Gross Domestic Product (GDP), and Operating Expenses and Operating Income (BOPO) on Performance has a positive and significant effect. However, the variables Bank Size and Inflation have a significant and negative effect on Performance.

Conclusions: Based on the research that has been conducted on performance in commercial banks in Indonesia, it can be concluded that the results of this study answer the research objectives. Furthermore, the study also answers the research questions and hypothesis about the relationship between Bank Size, Operating Expenses and Operating Revenue (OER), Credit Risk, Inflation, Gross Domestic Product (GDP), relationship with Performance.