The banking sector is an integral part of the economic system in a country. Moreover, banking industry performance is significant to the economic growth of a nation. Then, each tries to improve its financial performance by inspecting all banks that exist. Bank profitability is one way to measure bank performance. Previous research examined these determinants of bank profitability. Follow previous research by Sufian and Chong (2008) this research purpose is to find out how bank size, credit risk, the efficiency of management, capital management, inflation and market capitalization could affect bank profitability in South Korea and Indonesia.
This research collect data and provide the empirical results of the determinant of bank profitability in South Korea and Indonesia in 2000-2017. The sample consists of 30 and 29 commercial banks in South Korea and Indonesia respectively. Some banks merged or acquired by another bank and some banks established in the middle of the period studied make unbalance panel data.
The author applies the OLS regression process from E-Views 8 statistical package. In order to keep the best linear unbiased estimator (BLUE) of the coefficients, we do classical assumption tests for panel data. The empirical result analysis consists of T-test, F-Test and adjusted R-squared. Based on the model, the independent variables employed could explain around twenty percent of bank profitability.
The findings show a positive relationship between bank size and bank profitability in both countries. A Larger bank may earn more Return on Asset and Net Interest Margin than the small one. Because bank size is related to market power, a large bank may pay less for the inputs. Besides, the increasing returns through the allocation of fixed costs over high volume services. However, bank size negatively related to Return on Equity because it is related to the capital structure of a bank. The result shows banks in both countries have strong capital structure. It will provide additional strength to face financial turmoil. As a result, it may rise trust level from depositors.
In line with the previous study, management banks already anticipate the inflation changes. They monitor its changes and prepare many things in advance before it officially happened to make this variable is positively related to bank profitability at all measures. Low bank profitability can be explained by higher credit risk and low efficiency. Meantime, market capitalization result varies. The stock market in South Korea is quite developed and offer substitution possibility. On the other hand, Indonesia stock market still underdevelop makes not significant results.

The banking sector is an integral part of the economic system in a country. Moreover, banking industry performance is significant to the economic growth of a nation. Then, each tries to improve its financial performance by inspecting all banks that exist. Bank profitability is one way to measure bank performance. Previous research examined these determinants of bank profitability. Follow previous research by Sufian and Chong (2008) this research purpose is to find out how bank size, credit risk, the efficiency of management, capital management, inflation and market capitalization could affect bank profitability in South Korea and Indonesia.
This research collect data and provide the empirical results of the determinant of bank profitability in South Korea and Indonesia in 2000-2017. The sample consists of 30 and 29 commercial banks in South Korea and Indonesia respectively. Some banks merged or acquired by another bank and some banks established in the middle of the period studied make unbalance panel data.
The author applies the OLS regression process from E-Views 8 statistical package. In order to keep the best linear unbiased estimator (BLUE) of the coefficients, we do classical assumption tests for panel data. The empirical result analysis consists of T-test, F-Test and adjusted R-squared. Based on the model, the independent variables employed could explain around twenty percent of bank profitability.
The findings show a positive relationship between bank size and bank profitability in both countries. A Larger bank may earn more Return on Asset and Net Interest Margin than the small one. Because bank size is related to market power, a large bank may pay less for the inputs. Besides, the increasing returns through the allocation of fixed costs over high volume services. However, bank size negatively related to Return on Equity because it is related to the capital structure of a bank. The result shows banks in both countries have strong capital structure. It will provide additional strength to face financial turmoil. As a result, it may rise trust level from depositors.
In line with the previous study, management banks already anticipate the inflation changes. They monitor its changes and prepare many things in advance before it officially happened to make this variable is positively related to bank profitability at all measures. Low bank profitability can be explained by higher credit risk and low efficiency. Meantime, market capitalization result varies. The stock market in South Korea is quite developed and offer substitution possibility. On the other hand, Indonesia stock market still underdevelop makes not significant results.

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IMF Worldbank http://www.imf.org/en/Data
Indonesia Central bank https://www.bi.go.id/en/Default.aspx
South Korea Central Bank http://efisis.fss.or.kr/fss/fsiview/indexw.html