THE DETERMINANT OF HERFINDAHL-HIRSCHMAN INDEX AND BANK SPECIFIC VARIABLS FOR LOAN TO DEPOSIT RATIO (CASE STUDY: 19 LARGEST BANKS IN INDONESIA PERIODE 2008-2014)

• Main Author: Anggun Angginani, Nanja
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/72430
• Institution: Institut Teknologi Bandung

Bank plays an important role to support economic development. Its main function is taking deposits from people who have surplus money (savers) and convert them to loans to lend those who do not have enough money (borrowers). Bank activities that distribute funds to productive economic sector have a positive impact on investment growth, business expansion, and public consuming. Studies of bank intermediary are important to ensure that bank have been able to serve its function and maintain a balance between liquidity level, and profitability as well as the fulfilment of capital requirements. Loan to Deposit Ratio (LDR) indicates bank as a financial intermediary, it shows the relationship between third party funds and loans. Related to the issue above, the author examined the determinant of Capital Adequacy Ratio (CAR), Net Interest Margin (NIM), Non- Performing Loan (NPL), Bank Size, Less Risky Liquid Asset, Risky Liquid Asset, Herfindahl- Hirschman Index (HHI) towards LDR as the representative of bank as financial Intermediary, during the period of 2008-2014. Research limitation was by using only 19 banks that have capital above 5 trillion, which dominate the bank industry by 75% in assets and classified in BACB (Business Activity of Commercial Banks) 3 and BACB 4. The research used multi-linear regression. In order to has a good assumption, the regression model should match with the characteristic of BLUE test (Best Linear Unbiased Estimate). The test consists of multicollinearity test, heteroscedasticity test, autocorrelation test, and normality test, through Eviews 6 program as the statistical tool. The research found that NIM (Net Interest Margin) has positive significant relation to LDR. CAR (Capital Adequacy Ratio), HHITPF (Herfindahl-Hirschman Index of Third Party Funds), LRLA (Less Risky Liquid Asset), NPL (Non Performing Loan), RLA (Risky Liquid Asset) have negative significant relation to LDR, while LNSIZE (Bank Size) have positive but not significant relation to LDR. The model has coefficient of determinant (R2) is 62.38% while the rest 37.62% is explained with other variables.Moreover, the author suggested a recommendation Bank plays an important role to support economic development. Its main function is taking deposits from people who have surplus money (savers) and convert them to loans to lend those who do not have enough money (borrowers). Bank activities that distribute funds to productive economic sector have a positive impact on investment growth, business expansion, and public consuming. Studies of bank intermediary are important to ensure that bank have been able to serve its function and maintain a balance between liquidity level, and profitability as well as the fulfilment of capital requirements. Loan to Deposit Ratio (LDR) indicates bank as a financial intermediary, it shows the relationship between third party funds and loans. Related to the issue above, the author examined the determinant of Capital Adequacy Ratio (CAR), Net Interest Margin (NIM), Non- Performing Loan (NPL), Bank Size, Less Risky Liquid Asset, Risky Liquid Asset, Herfindahl- Hirschman Index (HHI) towards LDR as the representative of bank as financial Intermediary, during the period of 2008-2014. Research limitation was by using only 19 banks that have capital above 5 trillion, which dominate the bank industry by 75% in assets and classified in BACB (Business Activity of Commercial Banks) 3 and BACB 4. The research used multi-linear regression. In order to has a good assumption, the regression model should match with the characteristic of BLUE test (Best Linear Unbiased Estimate). The test consists of multicollinearity test, heteroscedasticity test, autocorrelation test, and normality test, through Eviews 6 program as the statistical tool. The research found that NIM (Net Interest Margin) has positive significant relation to LDR. CAR (Capital Adequacy Ratio), HHITPF (Herfindahl-Hirschman Index of Third Party Funds), LRLA (Less Risky Liquid Asset), NPL (Non Performing Loan), RLA (Risky Liquid Asset) have negative significant relation to LDR, while LNSIZE (Bank Size) have positive but not significant relation to LDR. The model has coefficient of determinant (R2) is 62.38% while the rest 37.62% is explained with other variables.Moreover, the author suggested a recommendation.