Interest Margin, Operational Efficiency, Liquidity, and Bank Profitability: Does Firm Size Matter?

Abstract

Purpose: This study examines the effects of net interest margin (NIM), the operational efficiency (BOPO), and the loan to deposit ratio (LDR) on return on assets (ROA), and tests whether firm size significantly moderates these relationships among Indonesian conventional banks listed on the Indonesia Stock Exchange during 2020-2024.

Design/methodology/approach: The study uses a balanced panel of 25 conventional banks listed on the Indonesia Stock Exchange from 2020 to 2024, yielding 125 firm-year observations selected through purposive sampling. Fixed-effects panel regression and moderated regression analysis were estimated using EViews 12.

Findings: NIM does not significantly affect ROA, whereas BOPO has a significantly affect ROA and LDR has a significantly affect ROA. The interaction terms between firm size and NIM, BOPO, and LDR are all statistically insignificant. The baseline model explains 87.08% of the variation in ROA, while the moderated model explains 87.48%.

Practical implications: Bank managers should prioritize disciplined operating-cost control and prudent, productive lending rather than relying on asset growth alone to improve profitability.

Originality/value: The study evaluates firm size as a boundary condition for bank profitability during the pandemic and post-pandemic adjustment period across a broad sample of listed Indonesian conventional banks.

Paper type: Empirical research paper