Capital Ratio Research Articles

Pengaruh Rasio Keuangan Terhadap Return on Asset dengan Capital Adequacy Ratio sebagai Variabel Moderating pada Bank Perkreditan Rakyat di Kepulauan Riau

Technological developments, especially with the emergence of the internet and digital devices, have brought major changes to the world of banking. People's Credit Banks (BPR) have an important role in supporting community businesses, especially at the local or regional level. The following are some of the main roles played by BPR Banks in supporting community businesses. Research carried out at people's credit banks (BPR) in the Riau Islands registered with the OJK throughout 2019-2023. In this research, the author used the purposive method technique, which is a technique chosen by the researcher to achieve the researcher's objectives with the criteria that have been set so that there are 17 companies that meet the criteria. Based on the processed data obtained in the field, the final research results were found to be non- Performing Loans (NPL) have a direct significant effect on Return on Assets (ROA), Loan To Deposit Ratio (LDR) do not have a direct significant effect on Return on Assets (ROA) at Rural Banks (BPR) Batam City, Operational Costs Operational Income (BOPO) has a direct significant effect on Return On Assets (ROA) at Rural Banks (BPR) in Batam City, Capital Adequacy Ratio (CAR) does not significantly moderate between Net Performing Loans (NPL) and Loan To Deposit Ratio (LDR) on Return on Assets (ROA) at Rural Banks (BPR) in Batam City and the Capital Adequacy Ratio (CAR) significantly moderate the relationship between Operational Costs and Operating Income (BOPO) against Return On Assets (ROA) at Rural Credit Banks (BPR).

The Influence of DPK, CAR, NPF, FDR, and BOPO on the Profitability of Sharia Banks Listed on the Indonesia Stock Exchange in 2018-2022

In the modern era, the banking industry is one of the key sectors that make a significant contribution to the economy of a country, including Indonesia. With the enactment of Law No. 10 of 1998 on banking which was later updated into Law No. 21 of 2008 on Islamic banking, the Indonesian banking industry has received a positive response. This study aims to examine the contribution of several factors to the financial performance of banks. These factors are Third Party Deposits (DPK), Capital Adequacy Ratio (CAR), Non-Performing Financing (NPF), Financing to Deposit Ratio (FDR), and Operating Expenses Operating Income (BOPO). The descriptive statistical analysis method is used in this study, involving the incorporation of each variable with the average value, minimum value, maximum, and standard deviation. The results of the analysis show that deposits have a negative impact on profitability, CAR has a positive and significant impact on profitability, NPF has a positive and significant impact on profitability, FDR has a negative and significant impact on profitability, and BOPO has a negative and significant impact on profitability. Using Signal Theory, this study highlights the importance of management actions in conveying information to investors to reduce information inequality between management and external parties. This study has limitations such as the use of secondary data that has been published with time series data for only five years (2018-2022), and only involves five independent variables.

Decoding Financial Performance: The Role of Leverage and Market Risk in Indonesia's LQ45

This study examines the determinants of financial performance in LQ45 Index companies from 2018–2022. It focuses on factors such as equity multiplier, interest coverage, financial leverage, fixed charge coverage, debt to EBITDA, capitalization ratio, and market risk. Control variables include company age, sales growth, and firm size. Using multiple regression analysis on data from 48 companies, the study finds that interest coverage, fixed charge coverage, market risk, company age, and sales growth positively impact financial performance, while financial leverage, debt to EBITDA, capitalization ratio, and firm size have a negative effect. The equity multiplier shows no significant influence. The findings suggest maintaining high interest and fixed charge coverage ratios and effective risk management to enhance financial performance. Careful management of high debt to EBITDA levels is necessary to prevent negative impacts. Investors should consider these factors when assessing a company's financial health.

Performance Evaluation of Select RRBs in Maharashtra State: A Comparative Study Using Capital Adequacy Ratio’s of Camel Model

The performance evaluation of Vidharbha Konkan Gramin Bank (VKGB) and Maharashtra Gramin Bank (MGB) operating in Maharashtra state is carried out. A comparative evaluation is also performed between them by using Capital Adequacy of CAMEL Model Hence, this chapter embodies different ratios under Capital Adequacy of CAMEL model. The banking sector is a critical component of the financial system and cornerstone of the global economic system. Banks are one of the oldest financial institutions in the financial system, which play a vital role in the mobilization of deposits and the disbursement of credit among the different sectors of the economy. A sound banking system acts as a fuel injection that stimulates economic productivity and industrial development by mobilizing savings and investing them in high return endeavors. Various research reports show that countries with a well-developed banking system have high GDP rate and higher economic growth. In the recent past, banking regulators and policy makers have proposed banking regulation by using the CAMEL (Capital adequacy, Asset quality, Management efficiency, Earnings and Liquidity) rating model to evaluate and assess the performance and financial soundness of the bank. CAMEL rating system is an important internal supervisory method to assess and distinguish financial institutions. The Federal Financial Institutions Oversight Board of USA was introduced CAMEL model for the first time in 1979. Regulations of the banking sector always monitors the performance of the banks to ensure efficient financial system based on CAMEL ratios.

Does government dual-target management affect local bank credit structure? Evidence from China

This study empirically examines the impact of government dual-target management of economic growth and environmental constraints on bank credit structure, by taking 231 local commercial banks in China from 2008 to 2022 as the sample. It was found that although economic growth target increases the similarity of bank loans’ industrial structure, the introduction of environmental constraint target significantly weakens this impact. Mechanism analysis suggests that the implicit guarantee role of the government and intensifying competition among banks are important influencing mechanisms. Furthermore, the effect exhibits heterogeneity due to differences in economic cycles, city development levels, and bank capital adequacy ratios. The findings have important implications for government target setting and management, as well as for preventing banking financial risks.

ANALYSIS OF THE RELATIONSHIP BETWEEN THE ISLAMIC SOCIAL RESPONSIBILITY AND FINANCIAL PERFORMANCE IN SHARIA BANKS IN INDONESIA AND MALAYSIA 2018-2022

This research discusses the influence of the Islamic Social Responsibility on financial performance in Islamic banks in Indonesia and Malaysia. This research covers five years of observation, from 2018 to 2022 using panel regression data. The independent variable used in this research is the Islamic Social Responsibility (ISR) and Islamicity Performance Ratio which consists of Profit Sharing Financing Ratio (PSR), Zakat Performance Ratio (ZPR), Equitable Distribution Ratio (EDR), and Director-employee Welfare Ratio (DER). Then the dependent variable used is the financial performance of Islamic banks which is measured using ROA. And the control variable is Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR), bank size, and Non Performing Financing (NPF). Data collected from annual reports and sustainability reports were analyzed using the Fixed Effect Model to see how ISR affect profitability in sharia banks. The research results show that ZPR and EDR have a significant effect on ROA. Meanwhile, ISR, PSR, DER, CAR, FDR, size, and NPF do not have a significant effect on ROA as a measurement of the financial performance of Islamic banks.

Preventing Price-Mediated Contagion Due to Fire Sales Externalities: Strategic Foundations of Macroprudential Regulation

In economics and finance, most game theoretic frameworks are “classical” in that actors do not face any constraints. In this paper, we consider the case of banks that are financial institutions subject to capital ratio constraints. After an adverse shock, when the capital ratio of a given bank is lower than its minimum regulatory requirement, a bank will typically try to restore its capital ratio back above the minimum required by selling assets such as stocks and bonds. When the value of each asset decreases with the quantity sold, something called price impact in Finance, the capital ratio constraint of a given bank depends upon the asset sale of other banks. The deleveraging problem (asset sale) thus becomes a generalized game. We both consider the case of a generalized game under individual constraints (microprudential regulation) but also under shared constraint, interpreted as a macroprudential regulation from a financial point of view.

Assessing China’s bank risk-taking: a study from the microeconomic and macroeconomic perspectives

On the basis of the unbalanced panel financial data of Chinese commercial banks from 2007–2021, this paper first conducts an identification test of the bank risk-taking channel for China’s monetary policy transmission. Then, it tests the impact of bank microcharacteristics and macroeconomic fluctuations on bank risk-taking in monetary policy transmission. The empirical results reveal the presence of the risk-taking channel for China’s monetary policy transmission. China’s bank risk-taking in monetary policy transmission is asymmetric because of the heterogeneity of bank microcharacteristics and macroeconomic fluctuations; i.e., the larger the asset size is, the greater the capital adequacy ratio is, the greater the return on net assets is, the greater the risk-taking level is, and the lower the risk-taking level of banks with poorer liquidity and higher branch coverage is. The impact of macroeconomic fluctuations is reflected in the fact that the higher the economic growth rate is, the greater the risk-taking level of banks. Therefore, it is necessary to enhance the transparency of monetary policy, strengthen the supervision of commercial banks, stabilize the macroeconomic environment, match the risk-taking level of banks with monetary credit and economic growth, and improve the effect of monetary policy transmission.

The Possibility of Financial Distress and Its Determinants: Evidence from the Banking Sector of Bangladesh

The banking sector of Bangladesh has shown poor performance for over a decade now. The non-performing loans increased over the years. This prompts the question of whether the banks are capable of maintaining financial stability and continue as a going concern. This is further fueled by the number of financial scandals which took place over the years, such as the Hallmark scandal, irregularities in Islami Bank Bangladesh Ltd., BASIC Bank Limited etc. that further highlights the signs of possible financial distress. These incidents call for an investigation of bank-specific determinants that might have a significant effect in leading a bank towards bankruptcy. This study has used the data of 30 listed commercial banks in Bangladesh, from the year 2014 to 2020. The bankruptcy risk is measured using the Altman Z-score, which has been extensively used as a suitable bankruptcy risk measurement tool. Statistical analysis has been conducted, using random-effects regression model and correlation, to test the relationship and impact of bank-specific factors. Capital adequacy ratio has shown significantly positive impact on the bankruptcy risk, while age has shown significantly negative impact on bankruptcy risk. Non-performing loan has also shown negative relationship with Z-score, which is contrary to the conventional belief.

Impact of COVID-19 on the Relationship between Credit Risk and Financial Performance of Commercial Banks in Kenya

The study sought to establish the impact of COVID-19 on the relationship between credit risk and the financial performance of commercial banks in Kenya. A descriptive research design that targeted all commercial banks in Kenya was adopted and focused on two eras, pre and post-COVID-19 and sought to find out the impact it had on the variables under study. The results indicated the existence of a positive and significant correlation between the Capital adequacy ratio and return on assets. It also established a moderately strong positive relationship between liquidity ratio and return on assets among the banks reviewed. It further established a weak positive relationship between the total assets held by the banks and the return on assets. On the other hand, the study established a negative slope and significant correlation between Non-Performing Loans ratio and Return on assets. Subsequently, the study established that Capital adequacy ratio, Liquidity ratios and Total assets had a significantly positive relationship with the Return on Assets of the identified banks operating within Kenya. In this regard, the study recommends further studies, especially on mobile loan products, in view of how well banks perform. One key area would be the impact of mobile loans on the credit risk to banks.

Pengaruh Kecukupan Modal, Risiko Kredit, Risiko Likuiditas dan Pengelolaan Aset Produktif Terhadap Profitabilitas : Studi Keuangan pada Bank Umum Swasta Nasional yang Terdaftar di Bursa Efek Indonesia Periode 2019-2022

A bank's profitability is an important indicator of its financial health and future aspirations. Increasing profitability requires effective, efficient management and building public trust. The aim of this research is to determine the effect of Capital Adequacy Ratio, Non Performing Loans, Loan to Deposit Ratio, and Net Interest Margin on Returns on Assets for the period 2019 to 2022. The population in this research is financial reports on the Indonesia Stock Exchange (BEI). The objects of this research are Capital Adequacy Ratio (X1), Non Performing Loans (X2), Loan to Deposit Ratio (X3), Net Interest Margin (X4) and Return On Assets (Y). The research method used is descriptive and associative with a quantitative approach. The data analysis techniques used in this research are statistical and descriptive. Which uses a number of tests such as the classic assumption test which consists of normality test, multicollinearity, heteroscedasticity, multiple linear regression analysis, multiple correlation coefficient, coefficient of determination, hypothesis test (t test) and (f) test using the SPSS application. The research results show that from the t test (partial) the Capital Adequacy Ratio partially shows a result of 0.019 where tcount is 0.019<ttable 2.021 with a significance value of 0.019, next for Non Performing Loans shows Tcount<Ttable (0.145<2.021) with a significance value of 0.145, then for Loan to Deposit Ratio shows a Tcount of 0.035<Ttable 2.021 with a significance value of 0.035 and Net Interest Margin shows a Tcount of 0.001<Ttable 2.021 with a significance value of 0.001. The conclusion is that CAR, NPL, LDR partially have no influence on Return On Assets, while NIM partially has an influence on profitability.

The impact of policy uncertainty and risk taking on the credit resource allocation of urban commercial banks

This paper investigates the impact of policy uncertainty and risk-taking on the credit resource allocation of urban commercial banks, using data from 30 urban commercial banks over the period 2012-2022 as a sample. The empirical results show that policy uncertainty reduces the allocation of credit resources by urban commercial banks; risk-taking is positively correlated with the allocation of credit resources by urban commercial banks; capital adequacy ratio plays an intermediary role in the relationship between risk-taking and credit resource allocation; the impacts of policy uncertainty and risk-taking on credit resource allocation among urban commercial banks with different equity natures exhibit variabilities. Specifically, policy uncertainty has a more pronounced effect on credit resource allocation in urban commercial banks controlled by local governments, whereas risk-taking exerts a more significant influence on credit resource allocation in those controlled by non-local governments; the impact of risk-taking on the allocation of credit resources by urban commercial banks exhibits a threshold effect, showing different characteristics as the size of the bank changes.

The Influence of Intellectual Capital, GCG, and ROA on Bank Performance

The purpose of this study is to analyze the influence of Intellectual Capital, Good Corporate Governance (GCG), and Capital Adequacy Ratio (CAR) on financial performance. This research adopts a quantitative approach with panel data regression analysis. The theoretical foundation is established through a review of relevant literature from journal articles and books. The study utilizes numerical data derived from secondary sources, specifically financial reports obtained through the official website of the Indonesia Stock Exchange (IDX). The study population comprises Islamic commercial banks listed on the IDX from 2017 to 2022. Using a purposive sampling technique, 54 samples from 9 Islamic commercial banks were selected. Data analysis was conducted using EViews 10 software, applying the Random Effect Model (REM). The findings reveal that Intellectual Capital, GCG, and CAR significantly impact the financial performance of Islamic commercial banks listed on the IDX between 2017 and 2022. This study provides valuable insights into the financial health of banks, categorized into safe, gray, or distressed zones, thereby offering practical implications for Islamic commercial banks.

Nothing special about an allowance for corporate equity: Evidence from Italian banks

This paper analyzes the impact of reduced tax incentives for equity financing on banks' regulatory capital ratios under the Basel III regime. We are particularly interested in a recent interest rate cut in the Italian corporate equity allowance, which reduces the relative tax advantage of equity financing. The results show that banks respond to this increased tax disparity by significantly reducing their regulatory capital while at the same time reducing their risk-taking. The decline in capital is more pronounced for small banks and outweighs the initial capital gains from the introduction of this tax instrument. Our results challenge the use of equity allowances, in that financial stability gains persist only as long as costly tax subsidies remain intact and diminish as the size of the subsidy is reduced.

An Empirical Investigation on the Determinants of Interest Rate Spread of Commercial Banks in Bangladesh

This paper aims to investigate the determinants or factors affecting the interest rate spread of private commercial banks in Bangladesh from 2013 to 2022. For the purpose of the study, the interest rate spread (IRS) of banks has been considered as a dependent variable while bank-specific factors and macroeconomic factors have been considered independent variables. Bank-specific factors are credit risk, bank size, operating cost ratio, liquidity risk, net interest income as a ratio of total income, capital adequacy ratio, and loan to deposit ratio while macroeconomic factors are Inflation and GDP. The Pooled Ordinary Least Square method (OLS), the Fixed Effect method (FE), the Random Effect method (RE), and the Generalized Least Square method (GLS) have been used to investigate the impact of the factors on interest rate spread. The results exhibit that bank-specific factors such as net interest income as a ratio of total income, and capital adequacy ratio are found to be statistically significant and positively impact the interest rate spread. In contrast, the results also exhibit that bank-specific factors such as bank size, operating expense ratio, and loan to deposit ratio are statistically significant and negatively impact the interest rate spread. Again, the results determine that the macroeconomic factor which is inflation found to be statistically significant and positively impacts the interest rate spread. The study’s findings will assist the banks’ regulatory body in formulating and developing strategies to maintain a satisfactory level of interest rate spread.

Determinant of Earnings Management Pre and Post PSAK 109 in Indonesian Banks

This study aims to determine the differences in Earnings Management and the effect of Institutional Ownership, Managerial Ownership, Audit Committee Competencies, Capital Adequacy Ratio (CAR), and Nonperforming Loan (NPL) on Earnings Management proxied by Discretionary Loan Loss Provision (DLLP) pre and post-PSAK 109 implementation in Indonesian bank listed on the Indonesian Stock Exchange (IDX). This study uses Ordinary Least Square (OLS) regression and Wilcoxon signed-rank test to test the hypothesis. The study used the period pre and post implementation of PSAK 109. We traced each bank's financial report listed on the IDX from 2017 to 2020 to anticipate early implementation. Using purposive sampling, we obtained 40 pre-PSAK 109 and 40 post-PSAK 109 bank samples. This study found no difference in earnings management pre and post-PSAK 109. Institutional Ownership, Managerial Ownership, and Audit Committee Competencies do not affect Earnings Management pre and post-PSAK 109. NPL is positively related to Earnings Management pre and post-PSAK 109, and CAR is positively related to Earnings Management pre-PSAK 109 but has no effect on Earnings Management post-PSAK 109. This study provides additional information for standard setters and OJK regarding monitoring earnings management practices in banking pre and post-PSAK 109.

Pengaruh Kecukupan Modal dan Inefisiensi terhadap Profitabilitas Bank Pembangunan Daerah di Indonesia

The purpose of this study is to examine whether capital adequacy and inefficiency affect the profitability of regional development banks in Indonesia for the period 2015-2022. The data analysis technique uses panel data regression. The population used is 26 Regional Development Banks listed in the Regional Development Bank Association. The sample consisted of 24 BPD banks with 192 observation data, which were carried out by purposive sampling. In this study, capital adequacy is measured using Capital Adequacy Ratio (CAR), Inefficiency is measured by Operating Expenses Operating Income (BOPO) and profitability is measured using Return On Asset (ROA). The results showed that capital adequacy has a significant positive effect on profitability, and inefficiency has a significant negative effect on profitability

Financial Performance Analysis Of Uluway Village In Mengkendek Sub-District, Tana Toraja Regency For The 2018-2022 Period

The aim of this research is a descriptive quantitative type of research with the aim of analyzing the financial performance of Uluway Village, Kec. Mentengkan District. Tana Toraja. The sample used is financial report data for the Uluway village, subdistrict. Mengkedek District, Tana Toraja in 2018-2022. Data collection is carried out by observation and requesting financial reports. In this research, the data source used in data collection is secondary data. Research result The performance of the Uluway Village Government when viewed from the Regional Financial Independence Ratio during 2018-2022, can generally be said to be very low and includes an instructive relationship pattern. Based on the Regional Original Income Effectiveness Ratio during 2018-2022, in general, it can be said to be effective. Based on the Shopping Efficiency Ratio during 2018-2022, generally, it can be considered inefficient. If we look at the PADes Growth Ratio and Total Income Growth Ratio during 2018-2022, in general, it can be said that the PADes growth ratio and total income of Uluway Village is low. If we look at the Operating Expenditure Ratio, it is classified as quite good and the average value of the capital expenditure ratio is in the good category. This means that the Uluway Village Government in allocating its funds for capital expenditure is relatively good. This shows that the village government has paid attention to the use of its funds for village development

Does the growth of Fintech Start-ups influence the Bank’s Financial Performance in ASEAN-5 countries?

The ASEAN (Association of South-East Asian Nations), established in 1967, comprises ten member countries, including Indonesia, Malaysia, the Philippines, Singapore, and Thailand (ASEAN-5), which represent 66% of the region's population. The banking sector, a crucial element in economic growth, has been significantly influenced by the rise of Fintech start-ups, which offer new technologies and business models such as digital payments and peer-to-peer lending. This study examines the impact of Fintech on the financial performance of banks in the ASEAN-5 countries from 2019 to 2022, considering factors such as government regulations, technological advancements, and the COVID-19 pandemic. The research explores how Fintech growth has affected key financial performance indicators, including Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM). It highlights the fluctuations in ROE across ASEAN-5 countries and discusses the mixed impacts of Fintech on bank performance, with some studies indicating negative effects due to disruptive innovation and others showing positive impacts through financial inclusion and automation. The study also investigates internal factors like company size and capital ratio, which influence bank performance. Company size, measured by total assets, and the capital ratio, reflecting equity to assets, are analyzed to understand their effects on financial performance. Additionally, external factors such as GDP and inflation are considered as control variables to isolate their impact on bank performance. By evaluating these variables, the research aims to provide insights into how banks in ASEAN-5 can adapt to the evolving financial landscape shaped by Fintech innovations and external economic conditions.

Analysis of factors influencing banks' profitability using panel data models

The banking sector, as one of the fundamental pillars of the financial industry, being in a healthy condition is of paramount importance not only from an individual perspective but also for firms and governmental administrations. Banks support sustainable economic conditions in all economies by facilitating investments and channeling idle funds into the economy. In this study, the analysis of micro and macro-level variables affecting the return on assets and return on equity of 24 banks operating in the Turkish banking sector from 2016 to 2023 has been investigated using panel data models. According to the results obtained from the analysis, it was found that there is a positive and significant relationship between return on assets and capital adequacy ratio, a negative and significant relationship with non-performing loans, a positive and significant relationship with BIST100 (Borsa Istanbul 100 Index), and a negative and significant relationship with bond yields. Additionally, a negative and significant relationship was found between return on equity and non-performing loans, and a positive and significant relationship with the BIST100 index.