Research Paper
Year: 2020 | Month: September | Volume: 7 | Issue: 9 | Pages: 242-252
The Effect of Return on Equity, Net Interest Margin, Loan to Funding Ratio, Capital Adequacy Ratio, Debt to Equity Ratio and Non Performing Loan on Price to Book Value in Banking Industry Listed on the Indonesia Stock Exchange
Freddy1, Nagian Toni2
1,2Universitas Prima Indonesia, Indonesia
Corresponding Author: Nagian Toni
ABSTRACT
The banking industry is an industry in the financial sector which greatly influences the economic development and financial stability of a country. The poor performance of banking in a country can also have a negative impact on the economy of a country, this makes the Banking Industry the industry that is most watched and monitored by all parties. In banking business activities and to encourage banking activities for Indonesia, banking institutions need to increase company value by increasing shares. Firm value can be measured using the price to book value ratio. There are several factors that need to be considered by banking institutions that cause the rise and fall of the price to book value, the ratios that need to be considered include return on equity, net interest margin, loan to funding ratio, capital adequacy ratio, debt to equity ratio and non performing loan. This research was conducted to examine the effect of return on equity, net interest margin, loan to funding ratio, capital adequacy ratio, debt to equity ratio and non performing loan on price to book value simultaneously and partially in the banking industry listed on the Indonesia Stock Exchange, 2016-2018 period. The study used 26 banks with 78 research samples and the data were processed using SmartPLS v.3. The results showed that the return on equity, net interest margin, loan to funding ratio, capital adequacy ratio, debt to equity ratio and non performing loan simultaneously effect to price to book value. Return on equity and capital adequacy ratio partially have a positive and significant effect on price to book value. The loan to funding ratio partially has a negative and significant effect on price to book value. Net interest margin, debt to equity ratio and non performing loan have no significant effect on price to book value.
Keywords: Return on Equity, Net Interest Margin, Loan to Funding Ratio, Capital Adequacy Ratio, Debt to Equity Ratio, Non Performing Loan, Price to Book Value
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