Liquidity, Financial Leverage, and Asset Growth Effects on Banking Profitability

Abstract

This study examines the influence of liquidity, financial leverage, and asset growth on profitability among banking companies listed on the Indonesia Stock Exchange (2019–2023). Employing saturated sampling, 46 banking companies were analyzed through secondary data from financial statements. Liquidity was measured by Current Ratio (CR), financial leverage by Debt to Asset Ratio (DAR), asset growth by percentage change in total assets (AG), and profitability by Return on Assets (ROA). Multiple linear regression results indicate that liquidity and financial leverage demonstrate negative but insignificant effects on profitability, whereas asset growth exhibits positive and significant influence. Simultaneously, all three variables collectively affect profitability significantly. The adjusted R-squared value of 0.185 indicates these variables explain 18.5% of profitability variation, with the remaining 81.5% attributable to other unexplored factors.