Capital Adequacy Ratio Mediates the Effect of Non-Performing Loan on Returns on Assets in Public Commercial Banks

ABSTRACT : The purpose of this study is to analyze the effect of non-performing loans on return on assets with a capital adequacy ratio as a mediator. This research is conducted at banking companies listed on the Indonesia Stock Exchange, with a total sample of 24 banks. Collecting data by observing the company’s financial statements. The analysis technique used is path analysis. The results show that there is a negative and significant relationship between non-performing loans and capital adequacy ratio. The capital adequacy ratio has a positive and significant relationship with return on assets. Non-performing loan has a negative and significant relationship with return on assets. Based on the research results, it is proven that the Capital Adequacy Ratio mediates the effect of non-performing loans on return on assets.
Keywords: non-performing loan, return on asset, capital adequacy ratio.