Factor Affecting the Capital Adequacy Ratio of Banks Listed in Indonesia Stock Exchange

Setiawan, Abdurrahman; Muchtar, Susy

doi:10.24912/je.v26i1.733

Cited by 6 publications

(4 citation statements)

References 13 publications

(42 reference statements)

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“…Signifikansi total capital ratio pada bank stock price memiliki implikasi manajerial bahwa kecukupan modal penting untuk menjamin likuiditas bank. Manajemen bank diharapkan untuk memiliki dan menjaga indikator yang baik dalam hal kinerja, likuiditas, dan ukuran bank (Keqa, 2021) dengan meningkatkan jumlah aset yang dimiliki, meningkatkan return on equity, dan mengurangi pinjaman bank untuk mengurangi risiko kredit macet (Susy Muchtar, 2021).…”

Section: Pembahasanunclassified

Are Financial Ratios Able to Predict Bank Stock Prices During the COVID-19 Pandemic?

Kristiono

2024

Owner

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Fundamental analysis, such as financial ratios, is important to ensure capital markets move efficiently. This analysis represents 69% of the variation in stock prices in the capital market. However, fundamental analysis has not been widely carried out because expertise is needed to analyze qualitative and quantitative data from company characteristics that underlie the movement of a stock. In 2020 – 2022, bank performance experienced fluctuations due to the Covid-19 pandemic which caused bank share prices to also fluctuate. On the other hand, banks have an important role as intermediary institutions or intermediaries to support the funding needs of the real sector or the business world. However, previous research on fundamental analysis largely excluded companies in the financial sector. Therefore, this article aims to find out whether financial ratios are able to predict bank share prices during the Covid-19 pandemic. There are five financial ratios used in this research, namely loan loss provision ratio, total capital ratio, profit margin ratio, current ratio, and solvency ratio. The population in this study are financial companies listed on the Indonesia Stock Exchange for the period 2020 - 2022. The sample was selected using a purposive sampling method and obtained 38 companies and 114 observations. The results of multiple regression analysis show that the loan loss provision ratio has a significant negative effect and the total capital ratio has a significant positive effect on bank share prices. Meanwhile, the net profit margin ratio, current ratio and solvency ratio do not have a significant effect on bank share prices. This research has implications for encouraging banks to improve disclosure policies and encouraging investors to hone fundamental analysis skills to reduce mispricing and make markets more efficient.

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Section: Pembahasanunclassified

Are Financial Ratios Able to Predict Bank Stock Prices During the COVID-19 Pandemic?

Kristiono

2024

Owner

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“…CAR is a measure of capital adequacy that evaluates a bank's ability to anticipate and manage risks that could potentially impact the health of the banking industry. A high CAR ratio indicates that a bank possesses a strong capacity to mitigate credit risks and risks associated with other productive assets, thereby contributing to improved banking performance (Setiawan & Muchtar, 2021;Kepramareni et al, 2022).…”

Section: Capital Adequacy Ratiomentioning

confidence: 99%

Do financing models in Islamic bank affect profitability? Evidence from Indonesia and Malaysia

Addury

2023

J. Islam. Econ. Lariba

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IntroductionPrevious literature discussed financing's impact on performance without separating the financing model. Additionally, previous research has used financing in the form of Loans to Total Assets (LTA); a proxy used to assess bank liquidity.ObjectivesThis study aims to analyze the influence of financing models on Islamic Banks’ performance in Indonesia and Malaysia. MethodThe study used Indonesia and Malaysia banks for its pioneering efforts in establishing Islamic banking in Southeast Asia. The study collects data from five Indonesian and four Malaysian Islamic banks, with an observation period of 2011–2020. The data analysis used in this study was the Generalized Method of Moment (GMM).ResultsIn Indonesia, debt financing has a positive and significant impact on Return on Assets (ROA), while equity financing has a negative and significant impact on ROA; debt financing significantly affects Return on Equity (ROE), while equity financing does not have a significant impact on ROE. In Malaysia, equity financing has a positive and significant impact on ROA, while debt financing does not significantly affect ROA; debt financing has a positive and significant impact on ROE, while equity financing has a negative and significant influence on ROE. ImplicationsThe results highlight the importance of considering the specific characteristics of each country's Islamic banking industry when formulating financing strategies.Originality/NoveltyThis study highlights unique aspect of financing that contribute to Islamic banks profitability in Indonesia and Malaysia.

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“…The GDP ratio and the interest rate ratio were challenging for them to explain. Setiawan and Muchtar (2021) tested banks listed on the Indonesia Stock Exchange. They looked into factors affecting the capital adequacy ratio.…”

Section: Literature Reviewmentioning

confidence: 99%

Factors effecting the Capital Adequacy Ratio of banking system of Bosnia and Herzegovina and Croatia

Alihodžić¹,

Nadžaković²

2022

Industrija

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The importance of minimum capital adequacy ratios in preventing banks from going bankrupt and losing depositor money is underscored by their ability to absorb a reasonable amount of losses. This work contributes to the literature on bank capital and, in particular, delivers a thorough analysis of bank capital in Bosnia and Herzegovina and Croatia contexts. This analysis refers to the strand of literature on non-performing loans and bank capital that has been of continuous interest to researchers. It is a relevant area of research because it discusses the most important part of the banking business, especially in the context of increasing global competition and crises. In this scientific area, we inquire whether and how leverage rate, gross domestic product rate, and return on equity affect the capital adequacy ratio. In this respect, this study advances the literature of effects on bank capital that have not been analysed by other scholarly contributions, especially as it discusses the impact of leverage rate, gross domestic product rate, and return on equity in the context of the entire banking systems of Bosnia and Herzegovina and Croatia. The study is limited to a six-year period from 2016 to 2021. Empirical evidence based on the application of a model suggests that both countries resulted in different correlations between countries. Modelling was done to determine the relationship between the independent variables LR, GDP Growth, ROE, and effect on CAR. In addition, the capital adequacy ratio proves to be more and more important for banks.

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Factor Affecting the Capital Adequacy Ratio of Banks Listed in Indonesia Stock Exchange

Cited by 6 publications

References 13 publications

Are Financial Ratios Able to Predict Bank Stock Prices During the COVID-19 Pandemic?

Are Financial Ratios Able to Predict Bank Stock Prices During the COVID-19 Pandemic?

Do financing models in Islamic bank affect profitability? Evidence from Indonesia and Malaysia

Factors effecting the Capital Adequacy Ratio of banking system of Bosnia and Herzegovina and Croatia

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