Date Log
Copyright (c) 2025 Surayya Surayya, Cici Rianti K Bidin, Anisah Anisah (Author)
This work is licensed under a Creative Commons Attribution 4.0 International License.
Does Bank Health Reach the Market? Evidence from Profitability-Driven Valuation in FX Banks
Corresponding Author(s) : Surayya Surayya
Jurnal Minds: Manajemen Ide dan Inspirasi,
Vol. 12 No. 2 (2025): December
Abstract
This study examines how bank soundness translates into profitability and market valuation in foreign exchange national private commercial banks in Indonesia. Its core contribution lies in reframing risk-based bank assessment as a transmission mechanism, showing how liquidity discipline and cost efficiency shape firm value primarily through profitability rather than through isolated governance or capital indicators. Using panel data from eight banks over 2018–2023 and moderated regression analysis, the findings show that liquidity management, governance quality, and operating efficiency significantly influence return on assets, while credit risk and margin structure do not exert direct effects. Profitability, in turn, significantly enhances firm value and selectively strengthens the impact of liquidity on valuation. These results imply that market confidence rewards banks that convert balance-sheet discipline into sustained profitability, underscoring the strategic importance of efficient intermediation for investors and bank managers alike.
Keywords
Download Citation
Endnote/Zotero/Mendeley (RIS)BibTeX
- Abid, A., Gull, A. A., Hussain, N., & Nguyen, D. K. (2021). Risk governance and bank risk-taking behavior: Evidence from Asian banks. Journal of International Financial Markets, Institutions and Money, 75, 101466. https://doi.org/10.1016/j.intfin.2021.101466
- Abu, N., Hasan, H., Saputri, H., & Hasan, P. (2024). The influence of banking liquidity risk on profitability: The moderating role of capital adequacy ratio. Banks and Bank Systems, 19(2), 201–214. https://doi.org/10.21511/bbs.19(2).2024.17
- Albertazzi, U., & Gambacorta, L. (2009). Bank profitability and the business cycle. Journal of Financial Stability, 5(4), 393–409. https://doi.org/10.1016/j.jfs.2008.10.002
- Albi, R. U., Komalasari, A., & Syaipudin, U. (2025). The influence of earnings quality, banking technology, operational efficiency, and non-performing loans on firm value. Jurnal Economic Resource, 7(1), 1–15.
- Beltratti, A., & Stulz, R. M. (2012). The credit crisis around the globe: Why did some banks perform better? Journal of Financial Economics, 105(1), 1–17. https://doi.org/10.1016/j.jfineco.2011.12.005
- Berger, A. N., & Bouwman, C. H. S. (2009). Bank liquidity creation. Review of Financial Studies, 22(9), 3779–3837. https://doi.org/10.1093/rfs/hhn043
- Berger, A. N., & Bouwman, C. H. S. (2013). How does capital affect bank performance during financial crises? Journal of Financial Economics, 109(1), 146–176. https://doi.org/10.1016/j.jfineco.2013.02.008
- Berger, A. N., & DeYoung, R. (1997). Problem loans and cost efficiency in commercial banks. Journal of Banking & Finance, 21(6), 849–870. https://doi.org/10.1016/S0378-4266(97)00003-4
- Brunnermeier, M. K., & Pedersen, L. H. (2009). Market liquidity and funding liquidity. Review of Financial Studies, 22(6), 2201–2238. https://doi.org/10.1093/rfs/hhn098
- Butt, B. Z., Malik, A., Din, S., & Aziz, H. (2021). Regulatory capital is a panacea for efficiency, credit growth and reducing non-performing loans in commercial banks. Asia-Pacific Management Accounting Journal, 16(2), 193–215.
- Chen, W.-D., Chen, Y., & Huang, S.-C. (2021). Liquidity risk and bank performance during financial crises. Journal of Financial Stability, 56, 100906. https://doi.org/10.1016/j.jfs.2021.100906
- Chouhan, S., & Singhai, M. (2025). The impact of national budget and monetary policy on profitability and operational efficiency in public sector banks. International Journal for Multidisciplinary Research, 7(5), 150–165.
- Demirgüç-Kunt, A., & Huizinga, H. (1999). Determinants of commercial bank interest margins and profitability. World Bank Economic Review, 13(2), 379–408. https://doi.org/10.1093/wber/13.2.379
- Diamond, D. W., & Dybvig, P. H. (1983). Bank runs, deposit insurance, and liquidity. Journal of Political Economy, 91(3), 401–419. https://doi.org/10.1086/261155
- Dubey, A., Mehta, M., & Thakur, A. (2025). Analysis of financial performance and operational efficiency of State Bank of India using the CAMEL framework. International Journal of Research and Scientific Innovation, 12(1), 45–54.
- Gu, S., Ofori, C., Nsiah, T. K., Dwomoh, E., & Benjamin, W. (2020). Non-performing loans, capital adequacy, loan loss provision, and bank profitability. EPRA International Journal of Multidisciplinary Research, 6(10), 112–121.
- Hamad, H. (2025). Beyond IFRS 9: Examining liquidity, credit, and capital risks in banking performance. Academic Journal of International University of Erbil, 10(2), 55–78.
- Hani, F., Saputri, I. P., & Randyantini, V. (2025). Capital adequacy, credit risk, and efficiency in Islamic bank profitability. Involvement International Journal of Business, 3(1), 25–40.
- Joshi, K. K. (2024). Effect of capital adequacy ratio, non-performing loan, operation efficiency and bank size on profitability of Nepalese commercial banks. Nepalese Journal of Finance, 7(1), 1–22.
- Kashyap, A. K., Rajan, R., & Stein, J. C. (2002). Banks as liquidity providers: An explanation for the coexistence of lending and deposit-taking. Journal of Finance, 57(1), 33–73. https://doi.org/10.1111/1540-6261.00415
- Laeven, L., & Levine, R. (2009). Bank governance, regulation, and risk taking. Journal of Financial Economics, 93(2), 259–275. https://doi.org/10.1016/j.jfineco.2008.09.003
- Lee, S. (2023). Analysis of the influence of capital, income and liquidity on banking performance with fintech as a moderation. Journal Transnational Universal Studies, 1(2), 80–100.
- Mahaseth, R. K. (2024). Efficiency, net interest margin, and loan to deposit ratio on profitability of Nepalese commercial banks. Nepalese Journal of Business, 8(1), 45–63.
- Nasution, I., Erlina, & Situmeang, C. (2024). The effect of CAR, OEOI, LDR, and NPL on ROA with NIM as an intervening variable. International Journal of Research and Review, 11(1), 310–321.
- Obadire, A. M., Moyo, V., & Munzhelele, N. F. (2022). Basel III capital regulations and bank efficiency: Evidence from selected African countries. International Journal of Financial Studies, 10(3), Article 52. https://doi.org/10.3390/ijfs10030052
- Putri, M. A., & Pramesti, W. (2025). The impact of green banking disclosure and financial performance on the profitability of banks in Indonesia. Al-Kharaj: Jurnal Ekonomi, Keuangan & Bisnis Syariah, 7(2), 233–252.
- Sah, A. K., & Saud, S. (2022). Impact of financial ratios, operational efficiency, and non-performing loans on the profitability of Nepalese commercial banks. Lumbini Journal of Business and Economics, 10(1), 35–54.
- Sharma, K. P. (2024). Effects of non-performing loan and operational efficiency on profitability of Nepalese commercial banks. Resunga Journal, 3(1), 90–108.
- Sundaresan, S. M., & Xiao, K. (2024). Liquidity regulation and banks: Theory and evidence. Journal of Financial Economics, 151(1), 103747. https://doi.org/10.1016/j.jfineco.2023.103747
- Uchida, H., & Satake, M. (2009). Market discipline and bank efficiency. Journal of International Financial Markets, Institutions and Money, 19(5), 792–802. https://doi.org/10.1016/j.intfin.2009.02.003
- World Bank. (2021). Indonesia economic prospects: Boosting the recovery. World Bank Group. https://www.worldbank.org/en/country/indonesia/publication/indonesia-economic-prospects
- Yahya, P. P., & Setyono, J. (2024). The role of profitability and liquidity in meeting the feasibility standards of Sharia banking with capital adequacy as a moderating variable in Indonesia. Jurnal Ilmu Ekonomi Terapan, 9(2), 145–162.
References
Abid, A., Gull, A. A., Hussain, N., & Nguyen, D. K. (2021). Risk governance and bank risk-taking behavior: Evidence from Asian banks. Journal of International Financial Markets, Institutions and Money, 75, 101466. https://doi.org/10.1016/j.intfin.2021.101466
Abu, N., Hasan, H., Saputri, H., & Hasan, P. (2024). The influence of banking liquidity risk on profitability: The moderating role of capital adequacy ratio. Banks and Bank Systems, 19(2), 201–214. https://doi.org/10.21511/bbs.19(2).2024.17
Albertazzi, U., & Gambacorta, L. (2009). Bank profitability and the business cycle. Journal of Financial Stability, 5(4), 393–409. https://doi.org/10.1016/j.jfs.2008.10.002
Albi, R. U., Komalasari, A., & Syaipudin, U. (2025). The influence of earnings quality, banking technology, operational efficiency, and non-performing loans on firm value. Jurnal Economic Resource, 7(1), 1–15.
Beltratti, A., & Stulz, R. M. (2012). The credit crisis around the globe: Why did some banks perform better? Journal of Financial Economics, 105(1), 1–17. https://doi.org/10.1016/j.jfineco.2011.12.005
Berger, A. N., & Bouwman, C. H. S. (2009). Bank liquidity creation. Review of Financial Studies, 22(9), 3779–3837. https://doi.org/10.1093/rfs/hhn043
Berger, A. N., & Bouwman, C. H. S. (2013). How does capital affect bank performance during financial crises? Journal of Financial Economics, 109(1), 146–176. https://doi.org/10.1016/j.jfineco.2013.02.008
Berger, A. N., & DeYoung, R. (1997). Problem loans and cost efficiency in commercial banks. Journal of Banking & Finance, 21(6), 849–870. https://doi.org/10.1016/S0378-4266(97)00003-4
Brunnermeier, M. K., & Pedersen, L. H. (2009). Market liquidity and funding liquidity. Review of Financial Studies, 22(6), 2201–2238. https://doi.org/10.1093/rfs/hhn098
Butt, B. Z., Malik, A., Din, S., & Aziz, H. (2021). Regulatory capital is a panacea for efficiency, credit growth and reducing non-performing loans in commercial banks. Asia-Pacific Management Accounting Journal, 16(2), 193–215.
Chen, W.-D., Chen, Y., & Huang, S.-C. (2021). Liquidity risk and bank performance during financial crises. Journal of Financial Stability, 56, 100906. https://doi.org/10.1016/j.jfs.2021.100906
Chouhan, S., & Singhai, M. (2025). The impact of national budget and monetary policy on profitability and operational efficiency in public sector banks. International Journal for Multidisciplinary Research, 7(5), 150–165.
Demirgüç-Kunt, A., & Huizinga, H. (1999). Determinants of commercial bank interest margins and profitability. World Bank Economic Review, 13(2), 379–408. https://doi.org/10.1093/wber/13.2.379
Diamond, D. W., & Dybvig, P. H. (1983). Bank runs, deposit insurance, and liquidity. Journal of Political Economy, 91(3), 401–419. https://doi.org/10.1086/261155
Dubey, A., Mehta, M., & Thakur, A. (2025). Analysis of financial performance and operational efficiency of State Bank of India using the CAMEL framework. International Journal of Research and Scientific Innovation, 12(1), 45–54.
Gu, S., Ofori, C., Nsiah, T. K., Dwomoh, E., & Benjamin, W. (2020). Non-performing loans, capital adequacy, loan loss provision, and bank profitability. EPRA International Journal of Multidisciplinary Research, 6(10), 112–121.
Hamad, H. (2025). Beyond IFRS 9: Examining liquidity, credit, and capital risks in banking performance. Academic Journal of International University of Erbil, 10(2), 55–78.
Hani, F., Saputri, I. P., & Randyantini, V. (2025). Capital adequacy, credit risk, and efficiency in Islamic bank profitability. Involvement International Journal of Business, 3(1), 25–40.
Joshi, K. K. (2024). Effect of capital adequacy ratio, non-performing loan, operation efficiency and bank size on profitability of Nepalese commercial banks. Nepalese Journal of Finance, 7(1), 1–22.
Kashyap, A. K., Rajan, R., & Stein, J. C. (2002). Banks as liquidity providers: An explanation for the coexistence of lending and deposit-taking. Journal of Finance, 57(1), 33–73. https://doi.org/10.1111/1540-6261.00415
Laeven, L., & Levine, R. (2009). Bank governance, regulation, and risk taking. Journal of Financial Economics, 93(2), 259–275. https://doi.org/10.1016/j.jfineco.2008.09.003
Lee, S. (2023). Analysis of the influence of capital, income and liquidity on banking performance with fintech as a moderation. Journal Transnational Universal Studies, 1(2), 80–100.
Mahaseth, R. K. (2024). Efficiency, net interest margin, and loan to deposit ratio on profitability of Nepalese commercial banks. Nepalese Journal of Business, 8(1), 45–63.
Nasution, I., Erlina, & Situmeang, C. (2024). The effect of CAR, OEOI, LDR, and NPL on ROA with NIM as an intervening variable. International Journal of Research and Review, 11(1), 310–321.
Obadire, A. M., Moyo, V., & Munzhelele, N. F. (2022). Basel III capital regulations and bank efficiency: Evidence from selected African countries. International Journal of Financial Studies, 10(3), Article 52. https://doi.org/10.3390/ijfs10030052
Putri, M. A., & Pramesti, W. (2025). The impact of green banking disclosure and financial performance on the profitability of banks in Indonesia. Al-Kharaj: Jurnal Ekonomi, Keuangan & Bisnis Syariah, 7(2), 233–252.
Sah, A. K., & Saud, S. (2022). Impact of financial ratios, operational efficiency, and non-performing loans on the profitability of Nepalese commercial banks. Lumbini Journal of Business and Economics, 10(1), 35–54.
Sharma, K. P. (2024). Effects of non-performing loan and operational efficiency on profitability of Nepalese commercial banks. Resunga Journal, 3(1), 90–108.
Sundaresan, S. M., & Xiao, K. (2024). Liquidity regulation and banks: Theory and evidence. Journal of Financial Economics, 151(1), 103747. https://doi.org/10.1016/j.jfineco.2023.103747
Uchida, H., & Satake, M. (2009). Market discipline and bank efficiency. Journal of International Financial Markets, Institutions and Money, 19(5), 792–802. https://doi.org/10.1016/j.intfin.2009.02.003
World Bank. (2021). Indonesia economic prospects: Boosting the recovery. World Bank Group. https://www.worldbank.org/en/country/indonesia/publication/indonesia-economic-prospects
Yahya, P. P., & Setyono, J. (2024). The role of profitability and liquidity in meeting the feasibility standards of Sharia banking with capital adequacy as a moderating variable in Indonesia. Jurnal Ilmu Ekonomi Terapan, 9(2), 145–162.