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http://dx.doi.org/10.13106/jafeb.2021.vol8.no3.0319

The Role of Non-Performing Asset, Capital, Adequacy and Insolvency Risk on Bank Performance: A Case Study in Indonesia  

HERSUGONDO, Hersugondo (Department of Management, Faculty of Economics and Business, Diponegoro University)
ANJANI, Nabila (Department of Management, Faculty of Economics and Business, Diponegoro University)
PAMUNGKAS, Imang Dapit (Department of Accounting, Faculty of Economics and Business, Universitas Dian Nuswantoro)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.3, 2021 , pp. 319-329 More about this Journal
Abstract
The study examines the impact of bank-level factors like non-performing assets, capital adequacy, and insolvency risk on bank performance. This study employs a quantitative method with panel data regression. The data was taken from the annual financial statements of state-owned commercial banks and private commercial banks in Indonesia from 2015 to 2019 using a purposive sampling method with a total sample of 470 observations. The result of the study shows that non-performing assets (NPA) have a significant negative impact on bank performance. Capital adequacy has a significant negative impact on bank performance. Insolvency risk for a bank means it cannot repay its depositors because its liabilities are greater than its assets; therefore, it has a significant impact on bank performance. This study is expected to help banks to understand how to manage the risks they face and to maintain their performance. This study uses 'size' and 'age of bank' as control variables and for credit risk and insolvency risk, Z-Score is used.
Keywords
Bank Performance; Non-Performing Asset; Capital Adequacy; Insolvency Risk;
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