Liquidity and Asset Quality on Sustainable Growth Rate of Banking Sector

Ahmad Aziz Putra Pratama

Abstract: Bank focused how to increase profit. But, sustainability of growth is more important. This study examines the effect of liquidity and asset quality on sustainable growth rate in banking sector. Purposive sampling based on the criteria selected 23 banks in 2010-2017 period with 174 observations. Using panel data regression, the results showed that liquidity and bad asset quality had a significant negative effect on sustainable growth rate. This result showed that sustainable growth rate becomes important related to the bank’s strategy to continue and grow in order to expand its business maximally while maintaining funding sources.

Keywords: Sustainable growth rate, liquidity, asset quality, banking sector