THE INFLUENCE OF FEE-BASED INCOME, LEVERAGE, AND CAPITAL ADEQUACY ON THE FINANCIAL PERFORMANCE OF CONVENTIONAL BANKS

Abstract

The objective of this research is to investigate the impact of capital adequacy, leverage, and fee-based income on financial performance. This investigation employs secondary data sources, specifically annual banking reports obtained from the bank's official website. The research population that will be observed is comprised of all 46 institutions that are listed on the Indonesia Stock Exchange, with the observation being conducted from 2018 to 2022. The number of observations over a five-year period is 145, as the purposive sampling technique employed in this research is limited to 29 institutions that satisfy the criteria. The regression analysis technique employs robust panel data, and the t-test is employed for hypothesis testing. Empirical evidence indicates that financial performance is significantly and positively impacted by partially fee-based income. Financial performance is significantly and adversely affected by leverage. Financial performance is not significantly impacted by capital adequacy. This research demonstrates that the financial performance of a bank can be significantly influenced by the management of fee-based income, leverage, and capital adequacy. It also offers practical advice to investors in the process of selecting potential banks to invest in the banking sector.