The Influence of Corporate Governance and Credit Risk on Bank Profitability in Indonesia

Abstract

This study aims to analyze the influence of Corporate Governance and Credit Risk on the Profitability of banks listed on the Indonesia Stock Exchange (IDX) in 2023. A quantitative research method was applied using secondary data obtained from the annual financial statements of 19 banks. The variables used include Return on Assets (ROA) as a measure of profitability, Non-Performing Loan (NPL) as an indicator of credit risk, and the number as well as proportion of commissioners as indicators of Corporate Governance. Data analysis employed multiple linear regression using SPSS software to test both partial and simultaneous relationships between the variables. The results reveal that Corporate Governance and Credit Risk do not have a significant effect on bank profitability. The coefficient of determination (R²) of 0.054 indicates that only 5.4% of the variation in profitability can be explained by the two variables, while 94.6% is influenced by other factors. These findings suggest that elements such as operational efficiency, asset utilization, capital structure, and macroeconomic stability may have a stronger impact on banking profitability in Indonesia.