BANK-SPECIFIC DETERMINANTS ON CREDIT RISK: EMPIRICAL EVIDENCE FROM STATE-OWNED COMPARED TO JOINT VENTURE BANKS IN INDONESIA
One of the core business activities of bank is to provide loans. Inevitably, bank will be imposed to the uncertainty of loan borrowers’ ability to repay the loan or otherwise called credit risk. As bank gain most of its income from interest income, higher amount of credit issued by a bank will likel...
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| Format: | Final Project |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/78806 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | One of the core business activities of bank is to provide loans. Inevitably, bank will be imposed to the uncertainty of loan borrowers’ ability to repay the loan or otherwise called credit risk. As bank gain most of its income from interest income, higher amount of credit issued by a bank will likely to increase its income. However, high number of credit will impose higher credit risk to a bank. Thus, effective risk management is essential in banking business.
This research is aimed to find the determinants of credit risk in Indonesian banks, specifically state-owned and joint venture banks. Particularly, bank-specific variables will be used as the determinants and to find out whether bank-specific variables that influence the level of credit risk differ based on bank ownership structure. To meet the aim of this research, panel data regression for 11 commercial banks is employed. This research makes use of annual financial report from selected state-owned and banks in Indonesia from 2002 until 2012.
It is discovered that influencing bank-specific determinants on credit risk differ based on the type of bank ownership. There are more bank-specific determinants that are being considered in this research that influence the credit risk level in joint venture banks, i.e. bank size, profitability, capital adequacy, credit growth, liquidity and operating efficiency. However, only 3 variables that account for the credit risk level in state-owned banks, i.e. profitability (ROE), capital adequacy, and operating efficiency. |
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