Capital Adequacy, Profitability, Credit Risk, and Operational Efficiency in Indonesian Banks' Price to Book Value

This study examines the associations between capital adequacy, profitability, credit risk, and operational efficiency and Price to Book Value (PBV) among 15 listed Indonesian conventional banks classified as Kelompok Bank Berdasarkan Modal Inti (KBMI) 3 and KBMI 4 during 2021–2024. PBV is the substantive valuation measure, whereas its natural logarithm, ln(PBV), is the dependent variable in the regression analysis. The balanced panel comprises 60 bank-year observations reconstructed from the source thesis. The original pooled regression is retained as a benchmark and compared with bank fixed-effects and random-effects specifications. Model diagnostics support controlling for bank heterogeneity and common year effects. In the preferred bank and year fixed-effects model with bank-clustered standard errors, Capital Adequacy Ratio (CAR) is positively associated with ln(PBV) (B = 0.0596, p = 0.0007), while Return on Assets (ROA) (B = 0.2454, p = 0.0600), Non-Performing Loan (NPL) (B = −0.0689, p = 0.4613), and Operating Expenses to Operating Income Ratio (BOPO) (B = 0.0098, p = 0.3846) are not statistically significant at 5%. Wild cluster bootstrap inference corroborates support only for CAR (p = 0.0020). The benchmark positive NPL coefficient (B = 0.122, conventional p = 0.040) is therefore specification-sensitive and does not establish that credit deterioration improves valuation. The theoretical contribution is to distinguish financial signals and separate pooled between-bank patterns from conditional within-bank associations. These observational findings qualify uniform signaling predictions without identifying investor beliefs or causal effects.