THE EFFECT OF GREEN BANKING AND CREDIT RATIOS ON RETURN ON EQUITY IN INDONESIAN BANKING SECTOR (2022-2024)
Keywords:
Green Banking, NPL, LDR, ROE, Bank Financial PerformanceAbstract
This research examines how Green Banking practices, Non-Performing Loan (NPL), and Loan to Deposit Ratio (LDR) affect Return on Equity (ROE) among banking firms registered on the Indonesia Stock Exchange throughout the 2022–2024 observation window. A quantitative associative design is applied, drawing on secondary data sourced from financial statements and sustainability disclosure reports. The sample comprises 35 banks with a total of 105 observations gathered through purposive sampling. The analytical framework employs Partial Least Squares Structural Equation Modeling (PLS-SEM) executed via SmartPLS software. Empirical findings reveal that Green Banking exerts a positive and statistically significant influence on ROE, whereas NPL produces a significant negative effect. LDR demonstrates a positive and significant relationship with ROE. The model accounts for 63.8% of the variance in ROE, signifying robust explanatory capacity. These outcomes affirm that banking profitability is shaped by sustainability-oriented practices, credit risk exposure, and liquidity management efficiency.
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