DETERMINANTS OF LOAN LOSS PROVISION USING BANK-SPECIFIC VARIABLES AND MACROECONOMIC FACTORS: CASE STUDY ON 19 COMMERCIAL BANKS IN INDONESIA PERIOD 2008-2017

• Main Author: Fauziyah (19015058), Dini
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/26692
• Institution: Institut Teknologi Bandung

Increasing the standards of living is a factor in supporting the national development programs. Banking as a financial institution who plays a role in improving the standardsof living.. Bank inf distributing loans are inseparable from the risk of impairment and uncollectible, therefore banks must anticipate these risks by preparing a some funds, known as Loan Loss Provision (LLP). The increase or decrease of LLP during the period of 2008 to 2017 can indicate a problem that can affect the sustainability of the banking industry and even further the country. Therefore, this research was conducted with the aim to figure out the variables that influence the increase and decrease in Loan Loss Provision. In this research, the independent variables used were Bank Size, Non-Performing Loan, Loan Ratio to Deposit, Capital Adequacy Ratio, Inflation and Growth of Gross Domestic Product. The data used in this research are the financial report of 19 banks which categorized in the BACB 3 and BACB 4 that obtained from the Financial Services Authority (OJK) and macroeconomic data obtained from Bank Indonesia during the first quarter of 2008 to the fourth quarter of 2017. The method used in this study is the EGLS Panel (cross-section weight). Regression results for 6 independent variables showed that 2 of those variables are not significant to Loan Loss Provision, namely Loan Ratio to Deposit and Growth of Gross Domestic Product. Non-Performing Loan, Capital Adequacy Ratio and Inflation have a significant positive impact on Loan Loss Provision, while Bank Size has a significant negative impact on Loan Loss Provision. This research provides recommendations to the banking industry to pay attention to independent variables that have a significant relationship with the Loan Loss Provision. Intercept analysis was also carried out with results showing that Bank BTN, Bank Bukopin and Bank Mega had the lowest intercepts, therefore these three banks had to pay more attention to the Loan Loss Provision.