An Empirical Study on Regional Government-Owned Bank and Local Government Fund in Indonesia

Abstract

Purpose: The aim of this study is to examine which factors give impact on BPD performance as Regional Development Bank that still relies on Local Government Fund. Theoretical framework: Research on BPD performance so far without looking at special conditions where the bank's performance is experiencing very good performance and without mentioning the dependence of BPD on local government funds, so this research was conducted Design/methodology/approach: The study collects data from 25 Indonesian Regional Development Banks (BPD) in period 2013-2017. Data analysis technique in this research uses multilinear regression. Findings: The results of this research show that Growth of Third Party Fund (GTPF) has no effect on ROA. CAR and LDR have a positive and significant effect on ROA. Meanwhile, NPL and QAP have a negative and significant effect on ROA. Research, Practical & Social implications: The implication of this study indicates that management of bank needs to conduct a better strategy to maximize the profit from third party funds. Also, local government should consider other private bank as an alternative to deposit their fund. So that, Regional Government-owned bank may compete to other banks and it becomes independent. Originality/value: This study highlights the performance of BPD banks specifically in periods where the bank's performance is still very dependent on local government funds.