The Effect of Credit Risk on Profitability: Evidence from Indonesian Private Banks Using VECM

Tri Putri Kurniawati, Triana Septiani, Yuaninda Ajeng

Abstract


This research explores how five categories of financial risk influence the profitability of banks, with Return on Assets (ROA) serving as the performance indicator. The risks under examination are operational cost efficiency (BOPO), capital adequacy (CAR), liquidity (LDR), market conditions (NIM), and credit quality (NPL). Adopting a descriptive quantitative design, the study draws its sample from 44 banking institutions listed on the Indonesia Stock Exchange (IDX), narrowing the focus to 32 banks that consistently released their annual reports between 2015 and 2019, based on purposive sampling criteria. The study utilizes secondary data obtained from those reports. The empirical results indicate that BOPO, CAR, NIM, and NPL significantly reduce ROA, while LDR shows a positive association with profitability but lacks statistical significance.


Keywords


Banking; NPL; ROA

rticle

References


Abbassi, P., & Linzert, T. (2012). The effectiveness of monetary policy in steering money market rates during the financial crisis. Journal of Macroeconomics, 34(4), 945–954. https://doi.org/10.1016/j.jmacro.2012.06.004

Agustian, R., & Priyanto, A. A. (2022). Pengaruh LDR Dan NPL Terhadap ROA Pada PT. Bank Mega Tbk Periode Tahun 2010 – 2019. Jurnal Sekuritas, 5(2), 129–144.

Albertazzi, U., & Gambacorta, L. (2009). Bank profitability and the business cycle. Journal of Financial Stability, 5(4), 393–409. https://doi.org/10.1016/j.jfs.2008.10.002

Arcand, J. L., Berkes, E., & Panizza, U. (2015). Too much finance? Journal of Economic Growth, 20(2), 105–148. https://doi.org/10.1007/s10887-015-9115-2

Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. The Review of Economic Studies, 58(2), 277. https://doi.org/10.2307/2297968

Berger, A. N., & DeYoung, R. (1997). Problem loans and cost efficiency in commercial banks. Journal of Banking & Finance, 21(6), 849–870. https://doi.org/10.1016/S0378-4266(97)00003-4

Choi, I. (2001). Unit root tests for panel data. Journal of International Money and Finance, 20(2), 249–272. https://doi.org/10.1016/S0261-5606(00)00048-6

Çifter, A. (2014). Bank concentration and non-performing loans in Central and Eastern European countries. Journal of Business Economics and Management, 16(1), 117–137. https://doi.org/10.3846/16111699.2012.720590

Dimitrios, A., Helen, L., & Mike, T. (2016). Determinants of non-performing loans: Evidence from Euro-area countries. Finance Research Letters, 18, 116-119.

Engle, R. F., & Granger, C. W. J. (1987). Cointegration and error correction: Representation, estimation, and testing. Econometrica, 55(2), 251–276. https://doi.org/10.2307/1913236

Faizi, M. F., DIRSECIU, P., Robinson, J. R., DIRSECIU, P., Freund, H., Bergbau-, V. B. B., DIRSECIU, P., Aqüicultura, P. D. E. P. E. M., Donalek, J. G., Soldwisch, S., Coesão, E. D. E., Moreira, M. A., Fernandes, R. F., Federal, U., Catarina, D. S. E. S., Gerais, D., Silva, S. da, Learning, B. T., Baxto, W., … Jose Perona, J. (2017). No 主観的健康感を中心とした在宅高齢者における 健康関連指標に関する共分散構造分析Title. مجلة اسيوط للدراسات البيئة, (43), 1. https://doi.org/10.1017/CBO9781107415324.004

Ghosh, A. (2015). Banking-industry specific and regional economic determinants of non-performing loans: Evidence from US states. Journal of Financial Stability, 20, 93–104. https://doi.org/10.1016/j.jfs.2015.08.004

Holtz-Eakin, D., Newey, W. K., & Rosen, H. S. (1988). Estimating vector autoregressions with panel data. Econometrica, 56(6), 1371–1395. https://doi.org/10.2307/1913103

Kauko, K. (2012). External deficits and non-performing loans in the recent financial crisis. Economics Letters, 115(2), 196–199. https://doi.org/10.1016/j.econlet.2011.12.018

Klein, P. O., & Weill, L. (2018). Bank profitability and economic growth.

Kossoh, A. M., Mangantar, M., & W.J.Ogi, I. (2017). Pengaruh Non Performing Loan (NPL), Capital Adequancy Ratio (CAR), Loan To Deposits Ratio (LDR) Terhadap Profitabilitas Pada Bank Pembangunan Daerah (BPD) Se-Indonesia Tahun 2011-2015. Jurnal EMBA: Jurnal Riset Ekonomi, Manajemen, Bisnis Dan Akuntansi, 5(3), 2721–2730.

Levin, A., Lin, C.-F., & Chu, C.-S. J. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108(1), 1–24. https://doi.org/10.1016/S0304-4076(01)00098-7

Pedroni, P. (1999). Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics, 61(S1), 653–670. https://doi.org/10.1111/1468-0084.0610s1653

Podpiera, J., & Weill, L. (2008). Bad luck or bad management? Emerging banking market experience. Journal of Financial Stability, 4(2), 135–148. https://doi.org/10.1016/j.jfs.2008.01.005

Priatna, H. (2017). Non Performing Loan (Npl) Sebagai Resiko Bank Atas Pemberian Kredit. Jurnal Ilmiah Akuntansi, 8(1), 22–33.

Ristianti, D. F., & Purwadi, J. (2019). Implementasi Metode VECM (Vector Error Corection Model) dalam Menganalisis Pengaruh Kurs Mata Uang, Inflasi dan Suku Bunga terhadap Jakarta Islamic Indeks (JII). Jurnal Ilmiah Matematika, 6(1), 13. https://doi.org/10.26555/konvergensi.v6i1.19544

Rusnaini, S., Hamirul, H., & M, A. (2019). Non Performing Loan (Npl) Dan Return on Asset (Roa) Di Koperasi Nusantara Muara Bungo. Jurnal Ilmiah Manajemen, Ekonomi, & Akuntansi (MEA), 3(1), 1–18. https://doi.org/10.31955/mea.vol3.iss1.pp1-18

Shao, X. (2010). The dependent wild bootstrap. Journal of the American Statistical Association, 105(489), 218–235. https://doi.org/10.1198/jasa.2009.tm08744

Shao, X., Rho, Y., & Taylor, A. M. R. (2021). Bootstrap-assisted unit root testing with piecewise locally stationary errors. Econometric Theory, 37(1), 142–166. https://doi.org/10.1017/S0266466618000038

Weill, L. (2003). Banking efficiency in transition economies: The role of foreign ownership. Economics of Transition, 11(3), 569–592. https://doi.org/10.1111/1468-0351.00155

Wheelock, D. C., & Wilson, P. W. (2000). Why do Banks Disappear? The Determinants of U.S. Bank Failures and Acquisitions. Review of Economics and Statistics, 82(1), 127–138. https://doi.org/10.1162/003465300558560

Widiantari, S., & Iswara, K. A. Y. (2021). Pengaruh Current Account Saving Account (Casa), Loan To Deposit Ratio (Ldr), Dan Net Performing Loan (Npl) Terhadap Laba Bersih Perusahaan Perbankan Yang Terdaftar Di Bei Periode 2016-2020. Jurnal Ilmiah Akuntansi Dan Bisnis, 6(2), 76–89. https://doi.org/10.38043/jiab.v6i2.3236

Wijaya, O. H. (2021). Analisis Efek DPK, CAR, NPL, Suku Bunga Kredit Terhadap ROA Perusahaan Bank Umum Kegiatan Usaha (B.U.K.U.) Empat (4) Tahun 2014–2019. Jurnal SEKURITAS (Saham, Ekonomi, Keuangan Dan Investasi), 4(2), 157. http://www.openjournal.unpam.ac.id/index.php/SKT/article/view/8878

Williams, J. (2004). Determining management behaviour in European banking. Journal of Banking & Finance, 28(10), 2427–2460. https://doi.org/10.1016/j.jbankfin.2003.09.010

Zhou, Z. (2013). Heteroscedasticity and autocorrelation robust structural change detection. Journal of the American Statistical Association, 108(502), 726–740. https://doi.org/10.1080/01621459.2013.787184




DOI: https://doi.org/10.20961/bfde.v3i2.109712

Refbacks

  • There are currently no refbacks.


Copyright (c) 2025 Bulletin of Fintech and Digital Economy

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.