THE EFFECT OF CREDIT AND LIQUIDITY RISK ON BANK PROFITABILITY AND CAPITAL ADEQUACY RATIO AS MEDIATION VARIABLES IN INDONESIA

This study aims to determine the relationship between credit and liquidity risk to profitability through the capital adequacy ratio as a mediating variable. The population in this study was 43 Indonesian banks listed on the Indonesia Stock Exchange. The method in determining the sample uses purposive sampling and obtained 26 banking companies that meet the sample criteria. Data in the study are secondary data. The data analysis technique used is Path Analysis. The results of this study found that credit risk has a negative and significant effect on profitability, liquidity has a positive and significant effect on profitability, credit risk has a negative and significant effect on the capital adequacy ratio, liquidity has a positive and insignificant effect on the capital adequacy ratio, capital adequacy ratio has a positive and not significant to profitability. As well as the capital adequacy ratio is not able to mediate the effect of credit and liquidity risk on profitability. This research can provide information to be considered by banks in Indonesia to maintain the standard provisions for financial ratios that have been implied by Bank Indonesia. KEY WORDS Credit risk, liquidity, capital adequacy ratio, profitability