The Effect of Working Capital Management and Credit Management Policy on Financial Performance of Banking Companies Listed on the Indonesian Stock Exchange in 2019 -2022
DOI:
https://doi.org/10.47747/fmiic.v1i1.2177Abstract
The high dividends paid by banking sector companies to capital market investors have led the OJK as a regulator to take action to regulate the portion of banking companies dividends which is considered excessive and could jeopardize bank stability. This study examines the role of Working Capital Management and Credit Management Policy as independent variables that influence bank Financial Performance. Using panel data from 34 Indonesian banks listed on the Indonesian Stock Exchange from 2019 to 2022, We investigate the effect of various WCM components (i.e., Bank Size (BS), Debt Ratio (DR), Current Ratio (CR), and CMP (i.e., Equity Ratio to Risky Assets (ERRA), Rate of A Bank's Ability to Return Deposits (RBARD), and Average Collection Period (ACP)) on the company's financial performance by looking Return on Assets (ROA). Multiple regression analysis was performed using Stata 14 software to evaluate the hypothesis. The findings revealed that WCM and CMP were only able to explain about 11.96% of changes in the dependent variable. The outcomes of this study suggest that banks should pay attention to capital resource allocation because excessive amounts of capital incur substantial costs. If equity is dominated by debt and shares, excess capital will have a detrimental impact on the company's profit growth. In addition, as determined by the ACP variable, longer receivable terms may result in increased credit risk and decreased bank profits.
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