MODERATING ROLE OF FOREIGN BANK PENETRATION IN BANK COMPETITION, CAR, LDR AND CREDIT RISK
DOI:
https://doi.org/10.55197/qjssh.v6i4.750Keywords:
foreign bank penetration, credit risk, bank competition, Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR)Abstract
This study aims to analyze the influence of interbank competition, Capital Adequacy Ratio (CAR), and Loan to Deposit Ratio (LDR) on credit risk in national commercial banks in Indonesia during the period 2019-2023, as well as to examine the moderating role of foreign bank penetration in these relationships. The data used are secondary data obtained from the financial statements of banks listed on the Indonesia Stock Exchange (IDX). This research adopts a quantitative approach using Moderated Regression Analysis (MRA). The results show that bank competition and CAR have a significant effect on credit risk, while LDR does not exhibit a significant effect. However, foreign bank penetration is found to moderate the relationship between LDR and credit risk. These findings offer important implications: the higher the loan disbursement (high LDR), the greater the potential for non-performing loans. Therefore, bank management should formulate liquidity strategies that balance fund mobilization and loan disbursement, while maintaining a liquidity buffer to anticipate fluctuations in credit demand and potential defaults.
References
[1] Abid, L., Ouertani, M.N., Zouari-Ghorbel, S. (2014): Macroeconomic and Bank-specific Determinants of Household’s Non-performing Loans in Tunisia: A Dynamic Panel Data. – Procedia Economics and Finance 13: 58-68.
[2] Annas, M., Humairoh, H., Endri, E. (2024): Macroeconomic and bank-specific factors on non-performing loan: evidence from an emerging economy. – Quality-Access to Success 25(199): 155-161.
[3] Boyd, J.H., De Nicolo, G. (2005): The theory of bank risk taking and competition revisited. – The Journal of Finance 60(3): 1329-1343.
[4] Chen, M., Wu, J., Jeon, B.N., Wang, R. (2017): Do foreign banks take more risk? Evidence from emerging economies. – Journal of Banking and Finance 82: 20-39.
[5] Dilvin, F., Yeşilova, T. (2019): The Impact of Financial Crises on The Commercial Bank Net Interest Margins: Evidence From The Turkish Banking Industry. – International Journal of Contemporary Economics and Administrative Sciences 2: 428-442.
[6] Endut, R., Syuhada, N., Ismail, F., Mahmood, W.M.W. (2013): Macroeconomic implications on non-performing loans in Asian Pacific Region. – World Applied Sciences Journal 23(23): 57-60.
[7] Hawtrey, K., Liang, H. (2008): Bank interest margins in OECD countries. – North American Journal of Economics and Finance 19(3): 249-260.
[8] Keeley, M.C. (1990): Deposit insurance, risk, and market power in banking. – The American Economic Review 80(5): 1183-1200.
[9] Lee, C.C., Hsieh, M.F., Yang, S.J. (2016): The effects of foreign ownership on competition in the banking industry: The key role of financial reforms. – Japan and the World Economy 37: 27-46.
[10] Lins, K.V., Servaes, H., Tufano, P. (2010): What drives corporate liquidity? An international survey of cash holdings and lines of credit. – Journal of Financial Economics 98(1): 160-176.
[11] Martinez-Miera, D., Repullo, R. (2010): Does competition reduce the risk of bank failure? – The Review of Financial Studies 23(10): 3638-3664.
[12] Natsir, M., Soedarmono, W., Yudhi, W.S.A., Trinugroho, I., Warokka, A. (2019): Foreign penetration, competition, and credit risk in banking. – Borsa Istanbul Review 19(3): 249-257.
[13] Nuralyza, O., Narsa, N.P.D.R.H., Sriani, D. (2022): Bank Competition, Credit Risk, and Foreign Bank Penetration: Empirical Evidence from Indonesia. JBMP (Jurnal Bisnis, Manajemen dan Perbankan) 8(1): 7-24.
[14] Ofori-Sasu, D., Abor, J.Y., Mensah, L. (2019): Funding structure and technical efficiency: A data envelopment analysis (DEA) approach for banks in Ghana. – International Journal of Managerial Finance 15(4): 425-443.
[15] Pham, Q.V., Nguyen, M.T. (2020): Possible Impact From Foreign Bank Presence to The Performance of Local Commercial Banks In Vietnam. – International Journal of Economics and Financial Issues 10(2): 216-221.
[16] Siagian, A.O., Manurung, A.H., Machdar, N.M. (2023): Analisis Persaingan Bank, Risiko Kredit, dan Penetrasi Bank Asing dengan Bukti Empiris dari Indonesia. – Jurnal Ekonomi, Akuntasi dan manajemen Indonesia (JEAMI) 2(01): 77-88.
[17] Siagian, S.H., Sihotang, R.B., Rinendy, J. (2024): The Moderating Role BOPO of CAR, NPL, NIM and LDR on Banking Stock Returns on the Indonesian Stock Exchange. – International Journal of Business, Law, and Education 5(1): 964-982.
[18] Usman, B., Syofyan, S., Nugroho, L., Soeharjoto. (2018): Foreign Bank Penetration and Its Impact on Banking Industries. – Eurasian Journal of Economics and Finance 6(1): 64-83.
[19] Wibowo, B., Siantoro, A.P. (2018): Tingkat Persaingan Bank dan Risiko Sistemik Perbankan: Kasus Indonesia. – Jurnal Manajemen Teknologi 17(3): 166-179.
[20] Yin, H. (2021): Foreign bank entry and bank competition: Cross-country heterogeneity. – Global Finance Journal 48: 14p.
Downloads
Published
Issue
Section
License
Copyright (c) 2025 ANNISA INTAN NOORANI, ANDI WIJAYANTO
This work is licensed under a Creative Commons Attribution 4.0 International License.
