The effects of Tier-1 capital, risk management, and profitability on performance of Indonesian Commercial Banks

Sari, Erna; Suhadak, *; Rahayu, Sri; Solimun, .

doi:10.1108/ijlma-05-2017-0109

Cited by 3 publications

(2 citation statements)

References 26 publications

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“…Regulators set minimum capital requirements to ensure banks can withstand financial distress. Sari et al (2018) discovered that tier-1 capital had a negative impact on profitability while having no effect on firm performance. This indicated that banks maintaining and increasing tier-1 capital could limit loan portfolio expansion, subsequently impacting firm performance.…”

Section: Bank Capital Adequacy Ratio On Firm Valuementioning

confidence: 99%

Does Sustainable Finance Work on Banking Sector in ASEAN?: The Effect of Sustainable Finance and Capital on Firm Value with Institutional Ownership as a Moderating Variable

Perdana,

Sudiro,

Ratnawati

et al. 2023

JRFM

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Management in the banking industry is not solely focused on financial performance but also on the sustainability of their portfolios. To achieve this, banks need to incorporate sustainable finance into their balance sheet. In addition, a global phenomenon has emerged where investors have demanded the inclusion of sustainable finance in portfolios. This financial instrument served to support the global agreement on climate change, which they were committed to making a reality. The impact of sustainable finance on firm value remains a question. Therefore, this study aimed to examine the effect of sustainable finance and capital on firm value within the banking industry, focusing on entities listed on the ASEAN stock market from 2015 to 2021. To assess investor demand for involvement in sustainable finance, a moderating variable was included in the model. Furthermore, this study used a quantitative design and a purposive sampling technique with panel data regression analysis for the hypothesis testing. The results showed that sustainable finance and capital had a significant effect on firm value. Institutional ownership moderated the relationship between sustainable finance and firm value, although it did not moderate the link between capital and firm value. This indicated that banks prioritized sustainable finance due to its positive impact on their operations, ultimately leading to an improvement in firm value. Furthermore, institutional ownership influenced the relationship between sustainable finance and firm value, as banks strived to comply with international society or enhance firm value. This study incorporated profitability ratios and firm size as the control variables.

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Section: Bank Capital Adequacy Ratio On Firm Valuementioning

confidence: 99%

Does Sustainable Finance Work on Banking Sector in ASEAN?: The Effect of Sustainable Finance and Capital on Firm Value with Institutional Ownership as a Moderating Variable

Perdana,

Sudiro,

Ratnawati

et al. 2023

JRFM

View full text Add to dashboard Cite

show abstract

“…Many previous studies focussed on the relationship between bank-specific characteristics and performance in different countries (Tan et al , 2017; Al-Homaidi et al , 2018; Almaqtari et al , 2018; Bouzgarrou et al , 2018; Al-Harbi, 2019). In Indonesia Sari et al (2018) and Jumono (2019) analyzed the determinants of bank profitability but did not investigate differences between bank types. Atahau and Cronje (2014), Atahau (2015), Atahau and Cronje (2017), (2019) and Atahau et al (2019) have addressed the differences between bank-ownership types, however the studies focussed on the loan portfolios and returns of different ownership type banks in Indonesia.…”

Section: Introductionmentioning

confidence: 99%

What drives the performance of different bank-ownership types in Indonesia? The pre- and post-GFC analysis

Atahau

Cronje

2021

IJPPM

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PurposeThe Indonesian banks play crucial roles in the economy, especially because of less developed bond and stock markets. It has undergone drastic changes in bank-ownership composition over time. This paper aims to analyze the impact of bank-specific characteristics on the performance of different bank-ownership types in Indonesia to determine whether their profitability drivers differ.Design/methodology/approachFixed-effect panel data regression is applied to 1,649 bank-year observations (97 banks throughout 2003–2019). It encompasses the pre- and post-global financial crisis (GFC) period.FindingsThe findings show that age, liquidity, equity and credit risk are significant determinants of bank performance. The significance of these effects differs for each bank-ownership type and show changes between the pre-GFC and post-GFC periods.Research limitations/implicationsNotwithstanding the merit of this paper, the results are not without limitations. This paper only focuses on one country. Furthermore, the prominence of banks relative to bond and stock markets with consideration of the GDP of countries may result in different findingsPractical implicationsThese findings provide the owners and managers of banks with information that can be applied to compare and assess own bank drivers and performance to enhance their own efficiency. The findings also inform bank authorities and regulators about differences in performance drivers that could be considered in changes to policies aimed at improving the performance of different bank-ownership types.Originality/valueThis paper is a pioneer study that focuses on the drivers of bank performance for different ownership types during the pre- and post-GFC periods in a country where the financial market is overall small and bank credits dominate capital supply.

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The nexus between interest rate and bank profitability: Does bank prudential capital matter?

Shahin

Khalil

Sallam

2022

Banks and Bank Systems

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The credit expansion policy and banking regulations have attracted widespread attention of bank regulators and policymakers over the last few years. This research aims to examine how the interest rate, prudential capital, and their interaction impact banking profitability in emerging economies like Egypt. The final sample of banks registered by the Central Bank of Egypt comprises 22 banks during the period of 2011–2020. The cross-sectional time-series Generalized Least Squares (GLS) regression approach is used to estimate the panel data. The findings confirm that low-interest rates indeed harm banks’ profitability. In addition, higher prudential capital enhances the profitability of banks. Importantly, the impact of low-interest rates on bank profitability can be diminished only when banks are maintaining higher prudential capital. Based on the findings, it is recommended that bank managers and policymakers in Egypt as well as in similar emerging economies shall promote the application of the Basel Capital Accord to increasingly strengthen the profitability of banks, which in turn reinforces the performance of the banking sector, especially during low-interest rate times. The findings also reveal that bank-specific characteristics such as large bank size, increased efficiency, and less concentrated market enhance banks’ profitability. Overall, the findings of this research are highly relevant since improved profitability is one of the main objectives of bank supervisors and regulators. AcknowledgmentsThe authors are grateful to Mr. Ali Shaker and Amira Ragab for their valuable support.

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The effects of Tier-1 capital, risk management, and profitability on performance of Indonesian Commercial Banks

Cited by 3 publications

References 26 publications

Does Sustainable Finance Work on Banking Sector in ASEAN?: The Effect of Sustainable Finance and Capital on Firm Value with Institutional Ownership as a Moderating Variable

Does Sustainable Finance Work on Banking Sector in ASEAN?: The Effect of Sustainable Finance and Capital on Firm Value with Institutional Ownership as a Moderating Variable

What drives the performance of different bank-ownership types in Indonesia? The pre- and post-GFC analysis

The nexus between interest rate and bank profitability: Does bank prudential capital matter?

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