Building Persistent Financial Performance

Abstract

Objective - The purpose of this study is to analyze profit persistence and the factors that influence it using secondary data from 39 banks listed on the Indonesian Stock Exchange in the form of pooled data, from 2008 to 2014. Methodology/Technique - This study uses a purposive sampling technique, resulting in a sample of 31 banks. Variable profit persistence of each bank reflects sustainable earnings towards the industry in the future. The model determinant factors of persistence profit were analyzed by normalization models as reference models, average models and growth models as exploration models. Findings - As a result, the persistence profit of banks listed on the Indonesian Stock Exchange tends to vary. Some banks have positive profit persistence (lambda) that reflects a competitive advantage in the long run. Other banks have a negative profit persistence, which reflects long-term competitive weakness. Novelty – The ability to access capital and funding has a significant effect on profit persistence, although the direction of its influence is negative. Other variables, namely the capability to access public funds, the ability to innovate and industrial factors, namely credit market share, have a significant effect on persistent profits, while the ability to maintain asset quality and efficiency has no significant effect on profit persistence in banks listed on the Indonesian Stock Exchange. Type of Paper - Empirical. Keywords: Financial capability, Innovation, profit persistence JEL Classification: G24, G32, G39. DOI: https://doi.org/10.35609/jfbr.2019.4.1(3)