Title:
EFFECTS OF RISK BASED BANK RATING ON PROFIT GROWTH OF RURAL BANK: AN EMPIRICAL STUDY IN INDONESIA

Authors:
Shu-Hui Su , Hsiu-Ling Lee , Jung-Ju Chou and Hendri Chen ,Taiwan

Abstract:
The purpose of this study is to investigate the relationship between Risk Based Bank Rating (risk profile, capital, and earnings) and profit growth by examining the conventional Rural Banks with the top 50 highest assets in Indonesia. The secondary data are derived from 2014 to 2018 annual report on bank publications in Indonesia. The Profit Growth is treated as the dependent variable to represent the financial performance and a set of independent variables classified as Risk Based Bank Rating ratios. The result of this study shows that Non Performing Loan has a negative and significant effect on profit growth, Loan to Deposit ratio, Capital Adequacy Ratio, and Operating Expense to Operating Income Ratio has a negative but insignificant effect on profit growth, Return on Asset has a positive but insignificant effect on profit growth. Meanwhile Net Profit Margin and Net Interest Margin both have a positive and significant effect on profit growth. This study provides further empirical evidence in the field of risk management related to bank sector, especially for the improvement of financial performance and bank health