The Illomata International Journal of Management IJTC Ilomata International Journal of Tax & Accounting P-ISSN: 2714-9838; E-ISSN: 2714-9846 Vol. 1 No. 3 July 2020 pp.145-151 https://www.ilomata.org/index.php/ijtc 145 | Ilomata International Journal of Tax & Accounting Vol. 1 No. 3 July 2020 The Effect Of Capital Adequacy Ratio On Return On Assets With Problem Credit Ratio Moderation Case Study In The Sub-Sector Of The National Private Foreign Exchange National Bank Listed On The Indonesia Stock Exchange In 2014-2018 Deni Sunaryo Faculty of Economics and Business University of Serang Raya Correspondent: denisunaryomm@gmail.com Submitted : June 24, 2020 Revised : July 14, 2020 Published : July 30, 2020 ABSTRACT The study aims to determine the effect of Capital Adequacy Ratio on Return On Asset with the moderatiom of Non-Performing Loan sub sector of national foreign exchange private banks listed on the Indonesian stock exchange (IDX) in 2014-2018 with a population of 22 banks. The analysis technique used are simple Linear Regression and Moderated Regression Analysis (MRA). The result showed that the Capital Adequacy Ratio has a positive and significant effect on Return On Asset. While the Capital Adequacy Ratio of Non-Performing Loan is not able to moderate the Capital Adequacy Ratio with Return On Asset. Keywords : Return On Asset, Capital Adequacy Ratio, Non-Performing Loan. INTRODUCTION The existence of financial intermediaries institution namely banks, is very important in a modern economic system. As an intermediary institution, banks must have good financial performance, because with good financial performance, banks will more easily get the trust of their customers. One of the main objectives of bank operations is achieving maximum profitability. Profitability is the most important indicator to measure the performance of a bank. The ratio commonly used to measure profitability performance is the Return on Asset (ROA). ROA is important for banks because ROA is used to measure the effectiveness of the company in generating profits by utilizing its assets. The greater the Return On Assets (ROA) of a bank, the greater the level of profit achieved by the bank and the better the bank's position in terms of the use of its assets. The effort to increase the growth of a bank can be seen from the bank's financial performance that can affect the Return On Assets (ROA) in terms of financial ratios, such as Capital Adequacy Ratio (CAR), and Non-Performing Loans (NPL). According to Kuncoro and Suhardjono (2011: 519) Capital Adequacy Ratio is the capital adequacy ratio that shows the ability of banks to identify, measure, monitor, and control risks that arise that can affect the amount of bank capital. The issue of capital adequacy is an important thing in the banking business. Banks that have a good level of capital adequacy, show indicators as a healthy bank. Based on Bank Indonesia regulations, the minimum capital adequacy requirement for each bank is 8% (PBI No.15 / 12 / PBI / 2013 Concerning the Minimum Capital Requirement for Commercial Banks). https://www.ilomata.org/index.php/ijtc mailto:denisunaryomm@gmail.com The Effect Of Capital Adequacy Ratio On Return On Assets With Problem Credit Ratio Moderation Sunaryo 146 | Ilomata International Journal of Tax & Accounting Vol. 1 No. 3 July 2020 In achieving optimal ROA, banks are faced with various risks including credit risk. Credit risk can be seen from the amount of Non-Performing Loans (NPL). The amount of NPL will affect ROA and CAR, because the greater the credit risk faced by banks will increase the formation of Allowance for Earning Asset Losses (PPAP) from owned equity, so that the reduced share of equity which is a component of capital adequacy. Some previous studies show inconsistent results. This encourages this research. Judging from the background of these problems, then a study entitled "The influence of the Capital Adequacy Ratio (CAR) on Return On Assets with the Moderation of Problematic Credit Ratios". Based on the background described above, it can be concluded the formulation of the problem from this study: (1) How the effect of the Capital Adequacy Ratio (CAR) on Return on Assets (ROA) on Private Commercial Banks listed on the Indonesia Stock Exchange for the period 2014- 2018? (2) How does Non-Performing Loans (NPL) moderate the effect of Capital Adequacy Ratio (CAR) with Return On Assets (ROA) on Private Commercial Banks listed on the Indonesia Stock Exchange for the 2014-2018 period? Findings from previous studies regarding factors that affect the profitability of the banking sector show inconsistent results. Research conducted by Sri Septiarini and I wayan Ramantha (2014) shows that CAR has a positive and not significant effect on profitability proxied by ROA. This study is in line with the results of research of Riski Agustiningrum (2014) shows that CAR has no significant effect on ROA. However, this is different from the results of Putu Agus Atmaja and Ketut Sujana (2014) research that shows that CAR has a positive and significant effect on profitability proxied by ROA. The results of Gusti Ayu Dwi A and Nyoman Abundanti (2018) showed that CAR had a positive and significant effect on ROA. This study is in line with the research results of Samsurizal and Astohar (2016) and shows that CAR has a positive and significant effect on profitability (ROA). Research conducted by Sri Septriani and IW Ramantha (2014) shows that NPL has a positive effect and significant effect on the relationship between CAR and ROA. Research conducted by Wayan Suardita and M. Asri Dwija Putri shows that credit risk has a significant effect on CAR's relationship with profitability. This study is not in line with the results of Putu Agus and Ketut Sujana's (2014) research showing that NPL results have a negative effect on the relationship between CAR and Profitability. Based on these results, the research hypothesis is: Hypothesis-1: It is suspected that the Capital Adequacy Ratio has a positive and significant effect on Return On Assets. Hypothesis-2: t is suspected that the Non-Performing Loans can moderate the influence of Capital Adequacy Ratio with Return On Assets. METHOD The population in this study is the National Private Foreign Exchange Bank in 2014-2018 using data collection methods used are secondary data, namely financial statements from 2014- 2018 by accessing www.idx.co.id The determination of the sample is done by Purposive Sampling with the following sample criteria: 1) Public Private National Bank Foreign Exchange Public listed on the IDX; 2) Having the most complete and published financial statements from 2014-2018; 3) Present the audited annual financial statements for the 2014-2018 period; 4) Present information in the financial statements relating to the research variables; 5) Presenting in full the ratio data needed in this study during the 2014-2018 periods. Based on these criteria, the sample used in this study were 10 banks http://www.idx.co.id/ The Effect Of Capital Adequacy Ratio On Return On Assets With Problem Credit Ratio Moderation Sunaryo 147 | Ilomata International Journal of Tax & Accounting Vol. 1 No. 3 July 2020 from 22 banks with five years of observation. The variables used: 1) the independent variable is the Capital Adequacy Ratio; 2) The independent variable is the Troubled Credit Ratio; 3) The moderating variable is Return On Assets. Hypothesis testing in this study was conducted using Simple Linear Regression and Moderated Regression Analysis (MRA). MRA is a special application of linear multiple regression where the regression equation contains an interaction element (Ghozali, 2011: 223). According to (Sugiyono, 2010: 270) The equation of a simple linear regression model is: Y = a + bX .....................................................................................................(1) Information : Y = subject in the predicted dependent variable (ROA) X = independent variable that has a certain value to be predicted (CAR) a = price of Y if X = 0 (constant price) b = direction number or regression coefficient, which shows the number of increase or decrease in the dependent variable based on the independent variable. If b (+) then rises, and if (-) there is a decrease. While the Moderated Regression Analysis model equation. Y= a + 𝑏1𝑋1 + 𝑏2𝑀1 + 𝑏3𝑋1𝑀1 + e .................................................................(2) Information : Y = Dependent Variable Return on Assets (ROA) a = constant b = Regression Coefficient X_1 = Independent Variable Capital Adequacy Ratio (CAR) M_1 = Variable Problem Ratio (NPL) Moderation e = confounding variable Linear regression test is done after the data is free from the classic assumption test, that is, a normality test is performed to test whether in the regression model the independent variable and the dependent variable have a normal distribution or not (Ghozali, 2012: 160), the heteroscedasticity test aims to test whether in the regression model there is an inequality of variance from the residuals of one observation to another. According to (Ghozali, 2012: 110) the autocorrelation test aims to test whether in a linear regression model there is a correlation between the interruption error in the t period and the confounding error in the t-1 period (before). RESULT AND DISCUSSION Table 1 Source: SPSS data processing results 23 Descriptive Statistics N Minimum Maximum Mean Std. Deviation ROA 50 .24 3.86 1.6336 .84859 CAR 50 15.17 35.12 21.2324 4.93967 NPL 50 .34 6.11 2.6440 1.10158 INTERACTION 50 5.59 126.08 55.9674 24.92706 Valid N (listwise) 50 The Effect Of Capital Adequacy Ratio On Return On Assets With Problem Credit Ratio Moderation Sunaryo 148 | Ilomata International Journal of Tax & Accounting Vol. 1 No. 3 July 2020 In Table 1, the minimum ROA value is 0.24 obtained by CIMB Niaga Bank, the maximum value is 3.86 obtained by Mestika Dharma Bank, and the mean (average) ROA value is 1.6336 and the standard deviation is 0, 84859. Standard deviation values that are smaller than the average value indicate that ROA data are normal. The smaller the standard deviation the better, because the small standard deviation indicates a small deviation. The Capital Adequacy Ratio shows that the minimum value of 15.17 obtained by Bank Maybank Indonesia, the maximum value of 35.12 obtained by Bank Mestika Dharma, and the mean (average) CAR value of 21.2324 and the standard deviation of 4, 93967, Standard deviation values smaller than the mean indicate that the data from the CAR are normal. The Non-Performing Loan Ratio shows the result that the minimum value of 0.34 obtained by Capital Indonesia Bank, the maximum value of 6.11 obtained by Bank Artha Graha International, the mean value (average) of NPL of 2.6440 and the standard deviation of 1, 10158. Standard deviation values that are smaller than the average value indicate that the data from the NPL is normal. The interaction between the Capital Adequacy Ratio and the Non-Performing Loan shows that the minimum value is 5.59, the maximum value is 126.08, the average value is 55.9674 and the standard deviation value is 24.92706. The standard deviation of interactions between the Capital Adequacy Ratio and the Non-Performing Loan is smaller than the average, indicating that the CAR and NPL data are normal. Tabel 2 Normality Test Results Source: SPSS data processing results 23 Based on the results of the classic assumption test value Kolmogrov Smirnov test, it can be seen that the Asymp value. Sig (2-tailed) of 0,200. Asymp Value Sig that exceeds the level of significant (0.05), shows that there is no centralization or grouping of data at one point, so that it can be said that the residual data in this study are normally distributed. Figure 1 Heteroscedasticity Test Results Source: SPSS data processing results 23 One-Sample Kolmogorov-Smirnov Test Unstandardized Residual N 50 Normal Parametersa,b Mean ,0000000 Std. Deviation ,64833365 Most Extreme Differences Absolute ,072 Positive ,072 Negative -,046 Test Statistic ,072 Asymp. Sig. (2-tailed) ,200c,d The Effect Of Capital Adequacy Ratio On Return On Assets With Problem Credit Ratio Moderation Sunaryo 149 | Ilomata International Journal of Tax & Accounting Vol. 1 No. 3 July 2020 Based on the picture above it can be seen that the residual data in the two regression models spreads both above and below the 0 point and does not form a specific pattern. Thus the regression model proposed in this study does not occur symptoms of heteroscedasticity. Table 3 Autocorrelation Test Results Model Summaryb Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson 1 ,522a ,273 ,241 ,58475 1,844 a. Predictors: (Constant), lag_interaksi, lag_X1 b. Dependent Variable: lag_Y Source: SPSS data processing results 23 Based on the D-W table, obtained dU = 1.5849 and dL = 1.5035. Value of dU 1.5849 t table. So it can be concluded that in terms of Capital Adequacy Ratio has a significant effect on Return On Assets. So the first hypothesis can be accepted. The second hypothesis states that Non-Performing Loans are able to moderate the effect of Capital Adequacy Ratio with Return on Assets. Persistently obtained t count of -1.062 and a significance of 0.294. These results indicate that the Non-Performing Loan has a negative effect on the relationship between the Capital Adequacy Ratio and the Return On Asset or the Credit Ratio is not able to moderate the relationship between the Capital Adequacy Ratio to the Return On Asset. CONCLUSION Based on the results of testing and discussion that has been done, it can be concluded that: 1) Capital Adequacy Ratio has a significant effect on Return On Assets. So the first hypothesis can be accepted; 2) Non-Performing Loans negatively affect the relationship between Capital Adequacy Ratio and Return on Assets or Credit Ratio is not able to moderate the relationship between Capital Adequacy Ratio to Return on Assets. 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