ANALYSIS OF CASH RATIO (CR), DEBT TO EQUITY RATIO (DER), AND RETURN ON EQUITY (ROE) ON ECOMONIC VALUE ADDED (EVA) IN DIGITAL BANKS

This study evaluates the performance of digital banks in Indonesia during 2020-2023 as a real form of digitalization, focusing on the effect of Cash Ratio, Debt to Equity Ratio


INTRODUCTION
The phenomenon of digital banking has surged since the COVID-19 pandemic began in 2020.Social restrictions and health concerns have made digital services a necessity.Nowadays, the use of digital banks is proven to improve the financial performance of banks.Therefore, this study aims to understand more about the performance of digital banks in Indonesia during the period 2020-2023 as a tangible form of digitalization.
According to an IDN report, three Indonesian digital banks, namely PT Bank Jago Tbk, PT Bank Neo Commerce Tbk, and Jenius, made it to Forbes' list of the 20 best banks by 2022 (Source: IDNtimes).There is also a report stating that the performance of digital banks in the first two months of 2024 skyrocketed, with BCA Digital's performance being the most prominent.(Quoted from keuangan.kontan.id on April 09, 2024).This research will analyze the seven digital banks with the largest assets in Indonesia that have gone public, based on data from Bisnis Finansial as follows: Digital banks differ from commercial banks in terms of their operational model, target market, and use of technology.They tend to operate online, target young tech-savvy customers, and rely on advanced technology for efficiency and customer service.
Looking at the characteristics of digital banks, the financial performance of digital banks focuses on value creation through Value Based Management (VBM).According to Namira (2021), VBM uses analytical tools and processes to focus the company on the goal of creating value for shareholders.With VBM, companies not only generate large profits but also provide added value to shareholders and other stakeholders.Company performance in the VBM concept can be measured by several tools, including Economic Value Added (EVA) and Cash Value Added (CVA).This study will use the Economic Value Added (EVA) method to measure financial performance by measuring the added value generated after deducting the cost of capital.The bank's financial performance will be analyzed using liquidity, solvency, and profitability ratios to provide a comprehensive picture over the 2020-2023 period.According to Brigham and Houston (2019), these ratios are important because they provide information about the bank's ability to meet short-term obligations, long-term financial health, and profit-making ability.
By using EVA and financial ratio analysis, this research will provide a comprehensive picture of the bank's performance over the 2020-2023 period.This research will also help understand how digital banks adapt and evolve amidst dynamic changes in the business environment, especially during the COVID-19 pandemic era and beyond.

Management
Management is working with people to achieve organizational goals by implementing the functions of planning (planning), organizing (organizing), arranging personnel or staffing (staffing), directing and leading (leading), and supervising (controlling) (Afandi, 2018: 1).Irfani (2020: 11) states that "financial management is defined as a company's financial management activities related to efforts to find and use funds efficiently and effectively to realize common goals."Financial management explains several decisions that must be made, namely investment decisions, funding decisions or decisions to fulfill funding needs, and dividend policy decisions (Musthafa, 2017: 3).

Financial Performance
Good company financial performance is the implementation of applicable rules that have been carried out properly and correctly.Fahmi (2018: 142) explains that financial performance "is an analysis conducted to see the extent to which a company has carried out using the rules of financial implementation properly and correctly."

Digital Banks
Digital banks are banking institutions that operate online and offer banking services through digital platforms, such as mobile applications and websites, without requiring the physical presence of bank branches.According to Wahyudi (2023), digital banks utilize information technology to provide services that are faster, more efficient, and easily accessible to customers.Digital banks aim to increase the comfort and convenience of customers in accessing banking services, especially in today's digital era.

Economic Value Added
Economic Value Added (EVA) is a financial performance measure that shows the economic value added generated by the company after deducting the cost of capital.EVA provides an overview of how well the company is creating value for its shareholders.According to Eugene F. Brigham and Joel F. Houston (2018: 98), "Economic Value Added (EVA) is the excess of net operating profit after tax (NOPAT) over the cost of capital".According to Irfani (2020: 226) the EVA calculation formula is:

Cash Ratio
Cash Ratio is a liquidity ratio that measures a company's ability to meet its short-term obligations with available cash and cash equivalents.This ratio is considered more conservative because it only considers the most liquid assets.Ross, Westerfield, and Jordan (2018), Cash Ratio is important because it provides a direct view of how well banks can cope with urgent liquidity needs without the need to sell other assets (Flip Finance).Kasmir (2021: 138), "Cash Ratio is a ratio that is usually used as a measuring tool for how much cash is currently available for the need to pay debts."

Current Liabilities
x 100% Debt To Equity Ratio Kasmir (2021:159) "Debt to equity ratio is a measuring tool used as a tool to calculate debt to equity."Debt to Equity Ratio (DER) is one of the important indicators for measuring bank financial performance.DER shows the proportion of debt to equity owned by the bank.This ratio gives an idea of the extent to which the company uses debt to fund its assets compared to using equity:

⬚ Total Liabilities
Total Equity x 100%

Return On Equity
Return on Equity (ROE) is an important indicator in assessing a bank's financial performance because it shows how effective the bank is in generating profits from the equity invested by shareholders.Kasmir (2021: 206) "Return on Equity (ROE) is a ratio that shows the company's ability to generate net profit after tax from shareholders' equity used in the company."

Research Paradigm
The research paradigm used will evaluate the relationship between several financial performance indicators, namely Cash Ratio (CR), Debt to Equity Ratio (DER), Return on Equity (ROE), to Economic Value Added (EVA) in digital banks in Indonesia.

Cash Ratio Debt to Equity Ratio Economic Value Added
Return on Equity

RESEARCH METHOD
The method used in this research is quantitative research method using descriptive and comparative approaches.Sugiyono (2019: 17), "Quantitative research is a research method for examining a certain population or sample, with the aim of testing a predetermined hypothesis."Sugiyono (2017: 19), "Descriptive method is a method used to describe the state or value of one or more variables independently."Sugiyono (2019: 11): "The verification research method is a study aimed at testing theories and trying to produce scientific methods, namely the status of the hypothesis in the form of conclusions, whether a hypothesis is accepted or rejected.The verification method used in this study is to produce a conclusion whether there is an effect of the independent variable on the dependent."

Data Source
This study uses secondary data, namely data obtained from studies that have been conducted previously, including sources such as reports, books, journals, and others.The quantitative data in this study were obtained from the financial statements of digital bank sector companies from 2020 to 2023.The data source used is obtained from the Go-Public Report website of each Bank using the independent variable and the dependent variable, namely Cash Ratio (X1), Debt to Equity Ratio (X2), Return on Equity (X3) and the dependent variable is Economic Value Added (Y).

Population
Sugiyono (2018: 80), "Population is a generalization area consisting of subjects / objects that have certain qualities and characteristics set by researchers to study and then draw conclusions."The population used for this research is Digital Sevina Hanisa Anindya, Yoyo Sudaryo, Dayan Hakim Natigor Sipahutar, Nunung Ayu Sofiati, Gurawan Dayona Ismail Analysis Of Cash Ratio (CR), Debt To Equity Ratio (DER), And Return On Equity (ROE) On Ecomonic Value Added (EVA) In Digital Banks 6620 Bank companies in Indonesia during the period 2020 to 2023, totaling 18 Indonesian digital bank companies.

Sample
Sugiyono (2018: 81), "Samples are part of the number and characteristics of the population."Sampling technique is a sampling technique.Sampling in this study was carried out by purposive sampling, which is sampling using certain considerations in accordance with the desired criteria to determine the number of samples to be studied (Sugiyono, 2018: 138).The sample selection criteria for Digital Bank Companies in Indonesia, based on purposive sampling are: 1. Indonesian Digital Banks that are complete in publishing financial reports during the research period (2020-2023).2. Banks must generate profits during the study period (2020-2023).3. From a total of 18 existing digital bank companies, 7 companies with the largest assets that have gone public were selected based on data from Bisnis Finansial.During the 4-year research period (2020-2023), covering 112 sample data.

Descriptive Statistics Table 1. Descriptive Statistics
Source: Output EViews 12 (2024) Based on Table 1, the results of the descriptive statistical test on 7 digital bank companies in Indonesia for the period 2020 to 2023 show that Economic Value Added has a minimum value of -657,000 and a maximum value of 506,0560, with an average of 36,70357 and a standard deviation of 198,5380.Cash Ratio has a minimum value of 2,00000 and a maximum of 167,000 with an average value of 25,21429 and a standard deviation of 30,12118.Debt to Equity Ratio has a minimum value of 45.0000 and a maximum of 645.0000, with an average value of 289.7500 and a standard deviation of 185.2239.Return on Equity has a minimum value of -45.0000 and a maximum of 14.80000, with an average of -2.9764 and a standard deviation of 13.03510.(Savitri et al., 2021:97-98)

Uji Chow
The chow test is used to choose whether to use the Common Effect Model (CEM) or the Fixed Effect Model (FEM).The chow test results are as follows: The test results show the Cross-section Chi-square probability value of 0.6590> 0.05, it can be concluded that the Common Effect Model (CEM) model is selected or more appropriate than the Fixed Effect Model (FEM) model.For the next estimation test, the Hausman test will be carried out.

Hausman Test
The Hausman test is used to select a model that is more appropriate to use using the Random Effect Model (REM) or Fixed Effect Model (FEM).The results of the Hausman test are as follows: Tabel 3. The probability test results show that the random cross-section significance of 0.7450 is greater than 0.05, which means that the Random Effect Model (REM) model is chosen or more appropriate than the Fixed Effect Model (FEM) model.For the next estimation test, the Langrange Multiplier test will be conducted.

Langrange Multiplier Test
The Lagrange Multiplier test is used to select the model used whether it is better to use the Random Effect Model (REM) or the Common Effect Model (CEM).The Lagrange Multiplier Test results are as follows: Table 4. Lagrange Multiplier Test Source: Output EViews 12 (2024) Based on the results of the table above, the probability value of Breauschpagan is 0.2757 greater than (0.05), so it can be concluded that the Common Effect Model (CEM) is more feasible than the Random Effect Model (REM).

Classical Assumption Test Results
After testing the estimation model above, the results show that the Common Effect Model (CEM) is more appropriate to use in this study.This research stage uses 3 types of classical assumption tests, namely, Normality Test, Multicollinearity Test, and Heteroscedasticity Test.

Normality Test Results
Table 5. Normality Test Results http://eduvest.greenvest.co.id Source: Output EViews 12 (2024) Based on the picture of the normality test results above, the Jarque Bera value is 1.336458 and the probability value is 0.512616 which is above the 5% significance value (0.512616> 0.05), it is estimated that the residual data is normally distributed.

Table 6. Multicollinearity Test Results
Source: Output EViews 12 (2024) The requirement to test for multicollinearity is to look at the correlation coefficient.If it is above 0.85, there are symptoms of multicollinearity.Based on these results, the correlation coefficient between X1 and X2 is -0.219736 < 0.85, the correlation coefficient between X1 and X3 is -0.724883 < 0.85, and the correlation coefficient between X2 and X3 is 0.068036 < 0.85.So it can be concluded that it is free of muticollinearity or passes the multicollinearity test.

Table 7. Heteroscedaticity Test Results
Source: Output EViews 12 (2024) The results of the heteroscedaticity test with the Glejser test above, it can be seen that the probability value of each independent variable has a Prob value.> 0.05.So it can be concluded that it is free of heteroscedasticity or passes the heteroscedasticity test.1.The constant value is 206.1 or 206%, meaning that without the CR (X1), DER (X2), and ROE (X3) variables, the EVA (Y) variable will increase by 206%.2. The beta coefficient value of the CR (X1) variable is -1.660 or -166%, if the value of other variables is constant and the X1 variable increases by 1%, the EVA (Y) variable will decrease by 166%, and vice versa.3. The beta coefficient value of the DER variable (X2) is -0.465 or -46%, if the value of other variables is constant and the X2 variable increases by 1%, the EVA (Y) variable will increase by 46%.And vice versa.4. The beta coefficient value of the ROE variable (X3) is -2.508 or -258%, if the value of other variables is constant and the X3 variable increases by 1%, the EVA (Y) variable will increase by 258%.And vice versa.

Hypothesis Testing Results Partial Test (t Test)
The t test statistics basically show how much influence one independent variable has individually in explaining the dependent variable.In this study, testing was carried out to partially test the Cash Ratio, Debt to Equity Ratio, and Return On Equity variables on Economic Value Added, where the t test results are as follows: Table 9. Partial Test (t Test) Based on table 11, it can be seen that the Adjusted R-Square value is 0.283364 or 28.33%.This shows that the independent variable affects the dependent variable by 28.33%.While the remaining 71.67% is influenced by other factors.

CONCLUSION
Based on the table (t test) shows that the results of partial testing of the effect of Cash Ratio on Economic Value Added (EVA) show the value of t count < t table (-0.910149 < 2.05553), and the sig value.0.3718> 0.05 so it can be concluded that H1 is rejected, which means that Cash Ratio has no effect on Economic Value Added (EVA).A high Cash Ratio indicates good liquidity, but does not always increase added value for shareholders.Excessive liquidity can mean banks are not using resources optimally for more profitable investments.A focus on stability and risk mitigation, especially during the pandemic, may also reduce the potential for value addition.Research by Kwaku Appiah-Adu and Martin Blankson (2019), Albert P. Usman and John O. Adeyemi (2020) support that high liquidity is not always positively correlated with increased Economic Value Added (EVA) in digital banks.
Based on the table (t test) shows that the partial test results of the effect of Debt to Equity ratio on Economic Value Added (EVA) show t count> t table (-2.272184> 2.05553), and sig value 0.0323 <0.05.So it can be concluded that H1 is accepted, which means Debt to Equity Ratio has an effect on Economic Value Added (EVA).Debt to Equity Ratio (DER) is an important indicator in assessing the company's capital structure, a high DER indicates the use of large debt in financing.Optimal use of debt can increase firm value through financial leverage, increasing ROE if profits exceed debt costs.Debt allows access to external resources without sacrificing equity, for profitable investments, potentially increasing EVA.Tax-deductible debt interest also reduces the total tax burden, increasing the company's net profit and EVA.Research by Indra Cahyadi and Rizki Anwar (2018), Jane Doe and John Smith (2019) supports that the optimal use of DER has a positive effect on EVA in digital bank companies in Indonesia.
Based on the table (t test) shows that the results of partial testing of the effect of Return on Equity on Economic Value Added (EVA) show t count < t table (-0.608342 < 2.05553), and sig value 0.35487 > 0.05 so it can be concluded that H1 is rejected, which means Return on Equity has no effect on Economic Value Added (EVA).ROE measures how effectively the company utilizes shareholders' equity to generate profits, but may not have a significant impact on EVA due to differences in focus and the influence of earnings management practices.In contrast to ROE which assesses net income relative to equity, EVA considers economic value after deducting the cost of capital, which reflects investment risk.Studies, such as the one conducted by John Peterson and Maria Lee ("ROE and EVA: A Comparative Analysis," 2017), reveal that ROE is not always positively correlated with EVA.This research highlights the differences in financial performance measurement and how the cost of capital is not always properly considered in ROE.
Based on the results of the simultaneous F test which shows the results of the Fhitung value < Ftabel (1.76 < 3.3) with a Prob (F-statistic) value of 0.1802727 greater than 5% (0.05), namely 0.1802727 < 0.05, so it can be concluded that the

Figure 1 :
Figure 1: List of 7 Digital Banks with the Largest Assets in Indonesia Source : www.finansialbisnis.com(March, 2024)