Non-Interest Income Ratio, Non-Performing Loans, Operating Efficiency, and Bank Profitability: The Moderating Role of Bank Size in Conventional Banks Listed on the Indonesia Stock Exchange (IDX)

This paper asks whether the non-interest income ratio (NII), non-performing loans (NPL), and operating efficiency (BOPO) explain the profitability of conventional banks, and whether bank size changes the strength of each link. The sample is 43 conventional banks listed on the Indonesia Stock Exchange (IDX) from 2021 to 2025, yielding 215 bank-year observations. The analysis draws on signaling theory and the efficient structure hypothesis. A moderated panel regression was estimated after the Chow and Hausman tests pointed to a fixed effect model, with predictors mean-centered. Tests showed groupwise heteroskedasticity and first-order autocorrelation, so standard errors are clustered by bank. Higher BOPO reduces return on assets (ROA) sharply, while larger banks earn more. NII and NPL have no significant direct effect on ROA. Size softens the damage done by a high BOPO but does not condition the effect of NII or NPL. For listed Indonesian banks, profitability therefore depends chiefly on keeping costs under control, and scale offers some protection against inefficiency without offsetting weak credit quality or improving a poor revenue mix. Managers and regulators should therefore prioritize cost efficiency over fee-income expansion.

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Publication Details

Journal
PENG Jurnal Ekonomi dan Manajemen
Published
2026-11-01
DOI
https://doi.org/10.62710/5zrgvn81
Primary Topic
Banking Sector Performance and Management
Type
article
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article

Non-Interest Income Ratio, Non-Performing Loans, Operating Efficiency, and Bank Profitability: The Moderating Role of Bank Size in Conventional Banks Listed on the Indonesia Stock Exchange (IDX)

Maat Pono, Andi Ratna Sari Dewi, Arlin MP Gatti
2 links
PENG Jurnal Ekonomi dan Manajemen
Banking Sector Performance and Management
article

Non-Interest Income Ratio, Non-Performing Loans, Operating Efficiency, and Bank Profitability: The Moderating Role of Bank Size in Conventional Banks Listed on the Indonesia Stock Exchange (IDX)

Maat Pono, Andi Ratna Sari Dewi, Arlin MP Gatti
article en

Abstract

This paper asks whether the non-interest income ratio (NII), non-performing loans (NPL), and operating efficiency (BOPO) explain the profitability of conventional banks, and whether bank size changes the strength of each link. The sample is 43 conventional banks listed on the Indonesia Stock Exchange (IDX) from 2021 to 2025, yielding 215 bank-year observations. The analysis draws on signaling theory and the efficient structure hypothesis. A moderated panel regression was estimated after the Chow and Hausman tests pointed to a fixed effect model, with predictors mean-centered. Tests showed groupwise heteroskedasticity and first-order autocorrelation, so standard errors are clustered by bank. Higher BOPO reduces return on assets (ROA) sharply, while larger banks earn more. NII and NPL have no significant direct effect on ROA. Size softens the damage done by a high BOPO but does not condition the effect of NII or NPL. For listed Indonesian banks, profitability therefore depends chiefly on keeping costs under control, and scale offers some protection against inefficiency without offsetting weak credit quality or improving a poor revenue mix. Managers and regulators should therefore prioritize cost efficiency over fee-income expansion.

PENG Jurnal Ekonomi dan ManajemenVol. 3(4)
Hasanuddin University (ID)
Decent work and economic growth
Openalex Percentile: Top 4%
Banking Sector Performance and Management
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