The Influence of Internal and Macroeconomic Factors on Credit Risk of Conventional Banks Listed on the IDX

Abstract

The purpose of this study is to explore the main determinants of non-performing bank loans in emerging markets, especially in Indonesia. The independent variables in this study are bank size, capital adequacy ratio, bank performance, credit growth, bank inefficiency, concentration of ownership, bank diversification, GDP growth, inflation, unemployment, and concentration. While the dependent variable is non-performing credit risk. This research was conducted by collecting data from 37 banks listed on the Indonesia Stock Exchange over a period of 4 years (2018-2021) and using a panel data regression model in its testing.The results of the research conducted explained that the capital adequacy ratio, credit growth, concentration of ownership, gross domestic product growth, inflation, unemployment, and competition have no significant effect on non-performing loans. The variables of bank size, bank performance, bank inefficiency, and bank diversification are known to have a significant negative effect on bad loans. The implication of the research that has been carried out is to provide direction for financial managers regarding the consideration of internal and macroeconomic factors that affect the risk of problem loans and also regarding the diversification of bank income to reduce the risk of non-performing loans. For investors, investors should choose a bank that has high operating costs, large assets, high performance, and diversified income other than high interest.