Effect of the Konjunktutforschungstelle Index of Globalization, Bank Specific Characteristic and Macro Economics on the Performance of Banking Companies in Indonesia

Abstract

This study aims to analyze the effect of globalization, bank specific characteristics and macroeconomics on the performance of banking companies in Indonesia which is assessed based on ROE (return on equity). The variables used in the globalization dimension are the Kof Economic Globalization Index, the Kof Social Globalization Index, and the Kof Political Globalization Index. The variables used in the bank specific characteristic dimensions are bank size and EQASS (equity to asset ratio). While the variables used in the macroeconomic dimension are the inflation rate, GDP (Gross Domestic Product) per capita growth rate, and FDI (Foreign Direct Investment) Inflows part of GDP. This study uses secondary data taken from annual reports published by banking companies from 2010 to 2019. The panel data processing model chosen in this study is the REM (Random Effect Model) model. The results of the analysis of the REM model show that the Kof Economic Globalization Index, the Kof Political Globalization Index, bank size, inflation rate, and GDP (Gross Domestic Product) per capita growth rate have a significant positive effect on ROE (return on equity). Meanwhile, the Kof Social Globalization Index and FDI (Foreign Direct Investment) Inflows part of GDP have a significant negative effect on ROE (return on equity). The variable EQASS (equity to assets ratio) has no significant negative effect on ROE (return on equity). Keywords: Kof Economic Globalization Index, Kof Social Globalization Index, Kof Political Globalization Index, bank size, EQASS (equity to asset ratio), inflation rate, GDP per capita growth rate, FDI Inflows part of GDP