An Empirical Study on Influence of Specific Bank's Variables on Bank's Default Risk: The Study Case of Foreign Exchange Banks in Indonesia

11Ajeng Andriani Hapsari, 2Devy M. Puspitasari

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Abstract:

Risk management is an integral part of a sustainable foreign exchange banks in Indonesia. Purpose of this study was to conduct an empirical investigation and to determine the risk for sustainable management of foreign exchange banks in Indonesia, especially default risk. Design/methodology/approach: The method used in this article is using logit model. Goodness of fit test used to examine fit model or otherwise. Likelihood, Cox & Snell R Square and Hosmer-Lemeshow test used to verify the model. Wald statistic used to examine the effect of each independent variable on the dependent variable. Findings: The findings showed that risk on foreign exchange banks in Indonesia is influenced by specific's dan macroeconomics variables that affect the performance of foreign exchange banks. Non performing loan, credit quality, capital requirement, interest rate and inflation have an effect on the occurrence of default risk in foreign exchange banks in Indonesia. Research limitation/implications: This research uses secondary data from foreign exchange banking statistics for 68 months from July 2011 to February 2017 in Indonesia. Practical implications: This study contribute policy to mitigate risk bank (default risk) that can affect performance of foreign exchange banks in the challenge of being able to compete on a regional and international scale. Originality/value: In this study independent variable divide into the specific bank's variables (internal variables) and macroeconomics. The internal variables are non performing loan, capital requirement, credit quality and bank size. Interest rate and inflation are chosen as macroeconomics variables.

Keywords:

Risk management, Default risk, Banking sustainability

Paper Details
Month2
Year2020
Volume24
IssueIssue 2
Pages2733-2740