The findings arrive at a critical moment for Indonesia’s banking industry. Over the past decade, regulators have encouraged mergers and acquisitions to strengthen the financial sector and improve global competitiveness. Large banks, digital banking platforms, and foreign-backed institutions have increasingly expanded through acquisitions. However, financial integration has often brought new operational costs, technology investments, restructuring expenses, and organizational adjustments that reduce short-term profitability.
According to the study, profitability in post-acquisition banks depends less on how much capital a bank owns and more on how effectively management controls operational expenses. The research highlights efficiency as the missing link connecting capital adequacy, liquidity management, and financial performance.
Banking Expansion Does Not Guarantee Higher Profits
The study examined 14 banks listed on the Indonesia Stock Exchange that experienced acquisitions during the 2021–2024 period. Financial data were collected from audited annual reports and analyzed using panel data and path analysis models.
The research focused on four major banking indicators:
- Capital Adequacy Ratio (CAR) to measure capital strength
- Loan to Deposit Ratio (LDR) to measure liquidity
- BOPO ratio to measure operational efficiency
- Return on Assets (ROA) to measure profitability
The results showed that stronger capital adequacy significantly improved operational efficiency. Banks with higher CAR ratios were generally better at controlling operating expenses. Statistical analysis revealed a negative and significant relationship between CAR and BOPO, with a coefficient value of -0.0912 and a significance level of 0.0046.
In contrast, liquidity levels measured through LDR did not significantly affect operational efficiency. Researchers found that banking strategies differed widely across institutions. Traditional banks tended to maintain more stable liquidity positions, while digital banks often recorded aggressive lending expansion supported by technology-based business models.
The study also reported that the average LDR among sampled banks reached 1.14, exceeding the ideal range recommended by Indonesia’s Financial Services Authority (OJK), which stands between 78 percent and 92 percent. This suggests that many banks pursued aggressive credit expansion after acquisitions.
Meanwhile, the average BOPO efficiency ratio stood at 0.79, while the average ROA reached 0.0357, indicating moderate profitability across the banking sample. Digital banks frequently recorded higher BOPO ratios because of substantial investments in technology infrastructure and digital transformation.
Profitability Influenced by More Than Capital
One of the study’s most important findings is that capital adequacy, liquidity, and operational efficiency did not show a statistically significant direct effect on profitability. Although the direction of the relationships aligned with financial theory, the impact was not strong enough to confirm a direct causal link.
CAR showed a positive relationship with profitability, while LDR and BOPO showed negative relationships with ROA. However, profitability was influenced more strongly by external and operational factors such as asset quality, revenue diversification, and internal cost structures.
The research explained only 17.2 percent of ROA variation through CAR, LDR, and BOPO variables. The remaining 82.8 percent came from other factors outside the research model.
According to Heru Purwanto, the findings demonstrate that post-acquisition success depends on operational integration rather than financial expansion alone. The study argues that banks cannot rely solely on fresh capital injections or aggressive liquidity strategies to improve performance. Instead, management efficiency becomes the central factor determining whether acquisitions produce sustainable profits.
Implications for Regulators, Investors, and Digital Banks
The study provides several practical implications for Indonesia’s banking industry and financial regulators.
For bank management, the findings suggest that newly acquired banks should prioritize operational integration and cost control during the transition phase. Strong capital reserves become valuable only when converted into efficient business operations and sustainable earnings.
For regulators such as Indonesia’s Financial Services Authority, the research highlights the need to monitor operational efficiency alongside capital adequacy. Many digital banks currently hold strong capital positions but continue to face high operational expenses because of technology investments, platform development, and digital infrastructure expansion.
For investors, the research sends a warning that high capital ratios alone should not be treated as proof of acquisition success. Operational efficiency trends may offer a more reliable indicator of long-term banking performance and sustainability.
The study also contributes to academic discussions on banking consolidation in emerging markets. Unlike many previous studies, this research positioned operational efficiency as a mediating variable between capital structure, liquidity, and profitability. The approach offers a new framework for understanding how post-acquisition restructuring affects bank performance in Indonesia.
Limitations and Future Research
The study focused only on banks listed on the Indonesia Stock Exchange during the 2021–2024 acquisition period, meaning the findings may not fully represent the entire Indonesian banking sector. The research also did not include variables such as non-performing loans, net interest margins, macroeconomic conditions, or organizational culture after acquisitions.
Future research could expand the sample to regional and non-listed banks while incorporating qualitative interviews with banking executives to better understand operational integration challenges.
Author Profile
Heru Purwanto is an academic researcher from Sekolah Tinggi Ilmu Administrasi (STIA) specializing in banking management, financial efficiency, corporate consolidation, and profitability analysis within Indonesia’s financial sector.
Source
DOI: https://doi.org/10.55927/fjbes.v2i2.635
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