Do CAMEL and Sustainability Influences a Bank Performance?

Abstract

This research investigates the influence of sustainability reports and CAMEL ratios on Indonesian banks performance, utilizing secondary data from Indonesia’s publicly listed banks.The main purpose of this study is to identify the relationship between sustainability reports and CAMEL ratios in terms of impact on the performance of banks. Specifically, it aims to explore how sustainability practices affect bank performance, considering factors such as share price, profit per share, and overall growth. The relevance of this study is due to the development of the banking sector, in which factors that go beyond financial indicators, such as sustainable development, are becoming increasingly important. Assessment of the impact of sustainability practices along with established financial ratios, such as CAMEL, on bank performance provides novel insights into the contemporary evaluation of banking institutions. The examination of the Indonesian banking sector offers a unique perspective due to its dynamic economic and environmental context. This research uses a quantitative approach. Secondary data from the financial statements, annual reports and sustainability reports of several Indonesian banks were analysed. The study utilizes statistical analysis to explore correlations between sustainability disclosures, CAMEL ratios, and various performance indicators. The conclusions of this study confirm the pivotal role of sustainability reporting in influencing banks’ performance. Notably, environmental disclosures emerge as a crucial aspect positively associated with financial performance metrics. The alignment of sustainable practices with financial prudence is indicative of a proactive risk management approach adopted by banks, thereby contributing to their overall soundness and growth potential.

Keywords

• bank performance
• camel
• growth
• soundness
• sustainability
• ratio