THE IMPACT OF COVID-19 ON THE PROFITABILITY OF PUBLIC BANKS LISTED IN INDONESIA

Authors

  • Gracia S. Ugut Magister Manajemen, Universitas Pelita Harapan, Indonesia
  • Emir Fauzi Magister Manajemen, Universitas Pelita Harapan, Indonesia
  • Tri Oktavia Saraswati Magister Manajemen, Universitas Pelita Harapan, Indonesia

DOI:

https://doi.org/10.29040/ijebar.v6i3.5291

Abstract

Covid-19 has had a significant impact on the economy, especially the financial industry in developing countries such as Indonesia. This study attempted to investigate the effect of the Covivirus-19 pandemic on the profitability of Indonesian public banks. The sample consists of 41 banks registered on the Indonesian stock exchange between January 1, 2019 and December 31, 2021. The profitability of a bank is reflected by Return On Assets (ROA), Return On Equity (ROE), Net Interest Margin (NIM), and TOBINs' Q. Return On Assets (ROA), Return On Equity (ROE), Net Interest Margin (NIM), and TOBINs'Q are used as dependent variables in this study. The independent variables are asset size, deposits, and leverage from bank determinant factors, and exchange rates, interest rates, Gross Domestic Product (GDP), and new cases of Covid-19 per month from macroeconomic variables. The analysis revealed that Covid-19 has a negative impact on bank profitability, but only profitability as evaluated by NIM has a statistically significant negative impact. This study demonstrates that bank size or asset size, as well as interest rate, have a significant positive effect on the profitability of Indonesian banks that are publicly listed.

References

Abid, L., Ouertani, M. N., & Zouari-Ghorbel, S. (2014). Macroeconomic and bank-specific determinants of household’s non-performing loans in Tunisia: A dynamic panel data. Procedia Economics and Finance, 13, 58–68.

Acaravci, S. K., & Çalim, A. E. (2013). Turkish banking sector’s profitability factors. International Journal of Economics and Financial Issues, 3(1), 27–41.

Adelopo, I., Lloydking, R., & Tauringana, V. (2018). Determinants of bank profitability before, during, and after the financial crisis. International Journal of Managerial Finance, 14(4). https://doi.org/10.1108/IJMF-07-2017-0148

Albulescu, C. T. (2015). Banks’ Profitability and Financial Soundness Indicators: A Macro-level Investigation in Emerging Countries. Procedia Economics and Finance, 23. https://doi.org/10.1016/s2212-5671(15)00551-1

Al-Homaidi, E. A., Tabash, M. I., Farhan, N. H. S., & Almaqtari, F. A. (2018). Bank-specific and macro-economic determinants of profitability of Indian commercial banks: A panel data approach. Cogent Economics and Finance, 6(1). https://doi.org/10.1080/23322039.2018.1548072

Almaqtari, F. A., Al-Homaidi, E. A., Tabash, M. I., & Farhan, N. H. (2019). The determinants of profitability of Indian commercial banks: A panel data approach. International Journal of Finance and Economics, 24(1). https://doi.org/10.1002/ijfe.1655

AL-Omar, H., & AL-Mutairi, A. (2008). The Relationship Between the Kuwaiti Banks Share Prices and Their Attributes. Scientific Journal of King Faisal University (Humanities and Management Sciences), 9(1).

Anbar, A., & Alper, D. (2011). Bank specific and macroeconomic determinants of commercial bank profitability: Empirical evidence from Turkey. Business and Economics Research Journal, 2(2), 139–152.

Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money, 18(2), 121–136.

Barua, B., & Barua, S. (2021). COVID-19 implications for banks: evidence from an emerging economy. SN Business & Economics, 1(1). https://doi.org/10.1007/s43546-020-00013-w

Basuki & Yuliadi. (2015). Ekonometrika Teori & Aplikasi. Mitra Pustaka Nurani.

Basuki, A. T., & Yuliadi, I. (2015). Ekonometrika Teori & Aplikasi. Yogyakarta: Mitra Pustaka Nurani.

Boateng, K. (2018). Determinants of bank profitability: A comparative study of Indian and Ghanaian banks. Journal of Emerging Technology and Innovative Research, 5(5).

Bose, S., Saha, A., Khan, H. Z., & Islam, S. (2017). Non-financial disclosure and market-based firm performance: The initiation of financial inclusion. Journal of Contemporary Accounting and Economics, 13(3). https://doi.org/10.1016/j.jcae.2017.09.006

Brainard, W. C., & Tobin, J. (1968). Pitfalls in Financial Model Building. The American Economic Review, 58(2).

Cakranegara, P. A. (2020). Effects of Pandemic Covid 19 on Indonesia Banking. Ilomata International Journal of Management, 1(4). https://doi.org/10.52728/ijjm.v1i4.161

Chowdhury, M. A. F., & Rasid, M. E. S. M. (2016). Determinants of performance of Islamic banks in GCC countries: Dynamic GMM approach. In Advances in Islamic finance, marketing, and management. Emerald Group Publishing Limited.

Curak, M., Poposki, K., & Pepur, S. (2012). Profitability Determinants of the Macedonian Banking Sector in Changing Environment. Procedia - Social and Behavioral Sciences, 44. https://doi.org/10.1016/j.sbspro.2012.05.045

Damak, M., Cohen Freue, C., Chugh, G., Yalovskaya, N., Tan, M., Tan, I., Garibian, S., Lysenko, T., & Rosen, E. O. (2020). Banks in Emerging Markets. Standard & Poor’s Financial Services. https://www.spglobal.com/_assets/documents/ratings/research/2020-05-26-banks-in-emerging-markets-15-countries-three-covid-19-shocks.pdf

de Mendonça, H. F., & Silva, R. B. da. (2018). Effect of banking and macroeconomic variables on systemic risk: An application of ΔCOVAR for an emerging economy. North American Journal of Economics and Finance, 43. https://doi.org/10.1016/j.najef.2017.10.011

Devi, S., Warasniasih, N. M. S., & Masdiantini, P. R. (2020). The Impact of COVID-19 Pandemic on the Financial Performance of Firms on the Indonesia Stock Exchange. Journal of Economics, Business, & Accountancy Ventura, 23(2). https://doi.org/10.14414/jebav.v23i2.2313

Elnahass, M., Trinh, V. Q., & Li, T. (2021). Global banking stability in the shadow of Covid-19 outbreak. Journal of International Financial Markets, Institutions and Money, 72. https://doi.org/10.1016/j.intfin.2021.101322

Garcia, M. T. M., & Guerreiro, J. P. S. M. (2016). Internal and external determinants of banks’ profitability: The Portuguese case. Journal of Economic Studies, 43(1). https://doi.org/10.1108/JES-09-2014-0166

Ghosh, B. N., Dogra, P., Sharma, N. K., Alam, N. M., Singh, R. J., & Mishra, P. K. (2016). Effects of Resource Conservation Practices on Productivity, Profitability and Energy Budgeting in Maize–Wheat Cropping System of Indian Sub-Himalayas. Proceedings of the National Academy of Sciences India Section B - Biological Sciences, 86(3). https://doi.org/10.1007/s40011-015-0492-2

Ghosh, R., & Saima, F. N. (2021). Resilience of commercial banks of Bangladesh to the shocks caused by COVID-19 pandemic: an application of MCDM-based approaches. Asian Journal of Accounting Research, 6(3). https://doi.org/10.1108/AJAR-10-2020-0102

Gregory, R. P. (2021). Why ROE, ROA, and Tobin’s Q in regressions aren’t good measures of corporate financial performance for ESG criteria. Available at SSRN 3775789.

Growe, G., DeBruine, M., Lee, J. Y., & Maldonado, J. F. T. (2014). The profitability and performance measurement of US regional banks using the predictive focus of the “fundamental analysis research.†In Advances in management accounting. Emerald Group Publishing Limited.

Gujarati, D. N., & Porter, D. C. (2004). Basic econometrics, 4th edn, the MacGraw Hill. New York.

Gul, S., Irshad, F., & Zaman, K. (2011). Factors affecting bank profitability in Pakistan. The Romanian Economic Journal, 39.

Hadiwardoyo, W. (2020). Kerugian ekonomi nasional akibat pandemi Covid-19. Baskara: Journal of Business and Entrepreneurship, 2(2), 83–92.

Haron, S. (1996). Competition and Other External Determinants of the Profitability of Islamic Banks. Islamic Economic Studies, 4(1).

Hoechle, D. (2007). Robust standard errors for panel regressions with cross-sectional dependence. Stata Journal, 7(3). https://doi.org/10.1177/1536867x0700700301

Istiningrum, A. A. (2014). Perbandingan Kinerja Keuangan Perusahaan Jasa Yang Terdaftar Di BEJ Sebelum Dan Selama Krisis Moneter. Jurnal Pendidikan Akuntansi Indonesia, 4(1). https://doi.org/10.21831/jpai.v4i1.1776

Katusiime, L. (2021). COVID 19 and Bank Profitability in Low Income Countries: The Case of Uganda. Journal of Risk and Financial Management, 14(12). https://doi.org/10.3390/jrfm14120588

Kohlscheen, E., Murcia Pabón, A., & Contreras, J. (2018). Determinants of bank profitability in emerging markets.

Ktari, N., Smaoui, S., Trabelsi, I., Nasri, M., & ben Salah, R. (2014). Chemical composition, techno-functional and sensory properties and effects of three dietary fibers on the quality characteristics of Tunisian beef sausage. Meat Science, 96(1). https://doi.org/10.1016/j.meatsci.2013.07.038

Laeven, L., Ratnovski, L., & Tong, H. (2016). Bank size, capital, and systemic risk: Some international evidence. Journal of Banking and Finance, 69. https://doi.org/10.1016/j.jbankfin.2015.06.022

Le, T. D., & Ngo, T. (2020). The determinants of bank profitability: A cross-country analysis. Central Bank Review, 20(2). https://doi.org/10.1016/j.cbrev.2020.04.001

Lee, J. Y., & Kim, D. (2013). Bank performance and its determinants in Korea. Japan and the World Economy, 27, 83–94.

Maroof Hussain, S. (2011). Foreign Exchange Risk Management in Commercial Banks of Pakistan. Business School, The University of Lahore, Master’s Thesis.

Masood, O., & Ashraf, M. (2012). Bank-specific and macroeconomic profitability determinants of Islamic banks: The case of different countries. Qualitative Research in Financial Markets, 4(2–3). https://doi.org/10.1108/17554171211252565

Menicucci, E., & Paolucci, G. (2016). The determinants of bank profitability: empirical evidence from European banking sector. Journal of Financial Reporting and Accounting, 14(1). https://doi.org/10.1108/jfra-05-2015-0060

Narwal, K. P., & Pathneja, S. (2016). Effect of bank-specific and governance-specific variables on the productivity and profitability of banks. International Journal of Productivity and Performance Management.

OECD. (2020). Global economy faces a tightrope walk to recovery. OECD. https://www.oecd.org/newsroom/global-economy-faces-a-tightrope-walk-to-recovery.htm

OJK. (2019). 2019 4th Quarter of Banking Industry Profile Report.

Ongore, V. O., & Kusa, G. B. (2013). Determinants of financial performance of commercial banks in Kenya. International Journal of Economics and Financial Issues, 3(1).

Ozili, P. K. (2021). BANK PROFITABILITY DETERMINANTS: COMPARING THE UNITED STATES, NIGERIA AND SOUTH AFRICA. International Journal of Banking and Finance, 16(Number 1). https://doi.org/10.32890/ijbf2021.16.1.4

Park, C.-Y., Villafuerte, J., Abiad, A., Narayanan, B., Banzon, E., Samson, J., Aftab, A., & Tayag, M. C. (2020). An updated assessment of the economic impact of COVID-19. ADB Briefs, 133.

Pasiouras, F., & Kosmidou, K. (2007). Factors influencing the profitability of domestic and foreign commercial banks in the European Union. Research in International Business and Finance, 21(2). https://doi.org/10.1016/j.ribaf.2006.03.007

Rahman, M. M., Hamid, Md. K., & Khan, Md. A. M. (2015). Determinants of Bank Profitability: Empirical Evidence from Bangladesh. International Journal of Business and Management, 10(8). https://doi.org/10.5539/ijbm.v10n8p135

Ramlan, H., & Adnan, M. S. (2016). The Profitability of Islamic and Conventional Bank: Case Study in Malaysia. Procedia Economics and Finance, 35. https://doi.org/10.1016/s2212-5671(16)00044-7

Rani, D. M. S., & Zergaw, L. N. (2017). Bank Specific , Industry Specific and Macroeconomic Determinants of Bank Profitability in Ethiopia. International Journal of Advanced Research in Management and Social Sciences, 6(3).

Rashid, A., & Jabeen, S. (2016). Analyzing performance determinants: Conventional versus Islamic Banks in Pakistan. Borsa Istanbul Review, 16(2). https://doi.org/10.1016/j.bir.2016.03.002

Romadhon, A. (2022). The Role Of Directorate General Of Customs And Excise In Handling Covid-19 Pandemic As A Trade Facilitator And Industrial Assistance In Indonesia. MARGINAL : Journal Of Management, Accounting, General Finance And International Economic Issues, 1(2), 53–58. https://doi.org/https://doi.org/10.55047/marginal.v1i2.133

Saona, P. (2016). Intra- and extra-bank determinants of Latin American Banks’ profitability. International Review of Economics and Finance, 45. https://doi.org/10.1016/j.iref.2016.06.004

Stievany, G. M., & Jalunggono, G. (2022). Analysis Of The Effect Of Inflation, Exports And Imports On Indonesia’s Economic Growth. Marginal : Journal of Management, Accounting, General Finance and International Economic Issues, 1(3), 1–14. https://doi.org/https://doi.org/10.55047/marginal.v1i3.140

Sudja’i, & Mardikaningsih, R. (2021). Correlation Of Worker Welfare And Industrial Relations. CASHFLOW : Current Advanced Research On Sharia Finance And Economic Worldwide, 1(1), 29–32.

Sufian, F., & Habibullah, M. S. (2009). Determinants of bank profitability in a developing economy: Empirical evidence from Bangladesh. Journal of Business Economics and Management, 10(3). https://doi.org/10.3846/1611-1699.2009.10.207-217

Tabash, M. I., Yahya, A. T., & Akhtar, A. (2017). Financial Performance Comparison of Islamic and conventional banks in the United Arab Emirates (UAE). International Conference on Advances in Business, Management and Law (ICABML) 2017, 1(1). https://doi.org/10.30585/icabml-cp.v1i1.39

Tan, Y., Floros, C., & Anchor, J. (2016). Review of Accounting and Finance The profitability of Chinese banks: impacts of risk, competition and efficiency. Finance Journal of Financial Reporting and Accounting Journal of Economic Studies Universiti Utara Malaysia At, 1633(06).

Tarus, D. K., Chekol, Y. B., & Mutwol, M. (2012). Determinants of Net Interest Margins of Commercial Banks in Kenya: A Panel Study. Procedia Economics and Finance, 2. https://doi.org/10.1016/s2212-5671(12)00080-9

Titko, J., Skvarciany, V., & JureviÄienÄ—, D. (2015). Drivers of bank profitability: Case of Latvia and Lithuania. Intellectual Economics, 9(2). https://doi.org/10.1016/j.intele.2016.02.003

Vogelsang, T. J. (2012). Heteroskedasticity, autocorrelation, and spatial correlation robust inference in linear panel models with fixed-effects. Journal of Econometrics, 166(2). https://doi.org/10.1016/j.jeconom.2011.10.001

Widarjono, A. (2007). Ekonometrika: teori dan aplikasi untuk ekonomi dan bisnis. Yogyakarta: Ekonisia.

Yang, B., & Gan, L. (2021). Contingent capital, Tobin’sq and corporate capital structure. The North American Journal of Economics and Finance, 55, 101305.

Zampara, K., Giannopoulos, M., & Koufopoulos, D. N. (2017). Macroeconomic and industry-specific determinants of Greek bank profitability. International Journal of Business and Economic Sciences Applied Research, 10(1), 3–22.

Downloads

Published

2022-09-30

How to Cite

Ugut, G. S., Fauzi, E., & Saraswati, T. O. (2022). THE IMPACT OF COVID-19 ON THE PROFITABILITY OF PUBLIC BANKS LISTED IN INDONESIA. International Journal of Economics, Business and Accounting Research (IJEBAR), 6(3), 2614–2623. https://doi.org/10.29040/ijebar.v6i3.5291

Issue

Vol. 6 No. 3 (2022): IJEBAR, Vol. 6 Issue 3, September 2022

Section

Articles

Citation Check

License

Authors who publish with IJEBAR agree to the following terms: Authors retain copyright and grant the IJEBAR right of first publication with the work simultaneously licensed under a Creative Commons Attribution License (CC BY-SA 4.0) that allows others to share (copy and redistribute the material in any medium or format) and adapt (remix, transform, and build upon the material) the work for any purpose, even commercially with an acknowledgement of the work's authorship and initial publication in IJEBAR. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in IJEBAR. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).