Analyzing CAR, BOPO, ROA, and GCG Toward The Firm Value of Banks on The Indonesia Stock Exchange

Abstract

This study examines whether capital adequacy (CAR), operational efficiency (BOPO), profitability (ROA), and good corporate governance (GCG) explain firm value proxied by price-to-book value (PBV) for banks listed on the Indonesia Stock Exchange. The question matters because prior Indonesian evidence emphasizes financial ratios, while governance is often treated separately; integrating them can clarify which levers the market actually rewards. Using a quantitative, causal–explanatory design, we assemble a bank–year panel for 2021–2023 from public disclosures and estimate a fixed-effects model with bank and year effects, clustered inference, and robustness checks. Results show that ROA and GCG are positively and statistically significant predictors of PBV (β=0.263, p<0.01; β=0.079, p<0.05), BOPO is negative and significant (β=−0.048, p<0.01), and CAR is positive but not significant (β=0.012, p=0.296). The model exhibits a strong fit (within-R2=0.71; F=19.43, p<0.001). These findings answer the research problem by indicating that, in normal conditions, the market prices earnings capacity, credible governance, and cost discipline more than regulatory capital once minimum thresholds are broadly satisfied. The study’s value lies in providing governance-augmented valuation evidence for Indonesia, demonstrating the independent pricing power of GCG beyond traditional ratios. Without overstating generality, we suggest future work extend the time horizon, incorporate macro-financial controls, and test alternative governance proxies to assess stability across regimes.