The Effects of Capital Structure, Liquidity, Asset Quality, and Esg Scores on Profitability

Abstract

This study examines the effects of capital structure, liquidity, asset quality, and Environmental, Social, and Governance (ESG) scores on the profitability of banking companies listed on the Indonesia Stock Exchange during 2021–2025. A quantitative causal-explanatory design was employed using secondary data from annual reports and ESG disclosures. Purposive sampling selected 10 banks from a population of 48 companies, producing 50 firm-year observations. Profitability was measured by Return on Assets, while capital structure, liquidity, and asset quality were represented by DAR, LDR, and NPL, respectively. Data were analyzed using descriptive statistics, classical assumption tests, multiple linear regression, partial t-tests, an F-test, and the coefficient of determination with SPSS 26. The results show that capital structure, liquidity, and ESG scores do not significantly affect profitability, whereas asset quality has a positive and significant effect. Simultaneously, the four independent variables significantly influence profitability, with an R-square of 0.216. These findings indicate that asset quality remains the most important internal determinant of profitability, while other financial and sustainability factors contribute collectively to banking performance and should therefore be managed within an integrated strategic framework.