Can Lending Factors Have an Impact on Firm Value When Profitability is Reinforced With?

Abstract

One of the banking industry's key sources of income is credit financing. Several aspects impact the soundness of the banking industry including the number of non-performing loans (NPL) and the prime lending rate issued (BLR). The fact is that a decrease in the NPL value will give a signal to investors that the company can generate increased profitability because a decreased number of NPLs indicates an increase in productive assets. Meanwhile, an increase in the BLR value gives a signal to investors that companies can record higher profits through increased interest income on loans disbursed. This is evidenced by the results of research conducted on the BUMN financial industry over 10 years from 2010 to 2019 which shows that there is a negative and significant impact if there is a decrease in company value if NPLs increase, but it will be good when BLR increases. ROA itself which is a reinforcement of the two variables shows the same thing. Through the SPSS analysis description, this study aims to provide an overview to investors in determining the selection of profitable investments by fundamental analysis of debt variables managed by the financial industry.

Keywords: Non-performing loans, Base Lending Rate, Profitability, Firm Value

DOI: 10.7176/RJFA/14-12-01

Publication date:June 30^th 2023