DETERMINANTS OF FACTORS AFFECTING DISTANCE TO DEFAULT BANKING IN INDONESIA
DETERMINANTS OF FACTORS AFFECTING DISTANCE TO DEFAULT BANKING IN INDONESIA

Summary/Abstract: This study develops a model that examines bank performance and macroeconomic variables on the distance to default of the banking industry in Indonesia. Furthermore, this study also looks at the effect of individual banks and bank groups (based on bank ownership and bank capital) on the distance to default of the banking industry. This study uses secondary data in the form of financial statement data (monthly) from 91 banks in the period January 2007 to November 2016. The analysis method uses the OLS model to determine the factors that affect the distance to default of the banking industry based on the results of previous studies, in a world crisis situation that begins with changes in macroeconomic variables that have an impact on microeconomic variables in various countries in the world. The results of the study show that the bank's performance variables, particularly those that measure financial performance: capitalization (EQTA) and total asset size (SIZE), capital (CAR), have a positive impact and have a significant effect on the distance to default of the banking industry. Return on Asset (ROA) and Net Interest Margin (NIM) based on empirical results have a positive impact, but the effect is not significant. The Probability of Default (PD), Loan to Deposit Ratio (LDR), and Non-Performing Loans (NPL) show a negative impact and significant influence on the banking industry. On the other hand, macroeconomic variables such as interest rates (SBI) and exchange rates (KURS) reveal negative and significant impact. Moreover inflation (INF) has a negative without showing significancy. Meanwhile, economic growth (GGDP), has a positive impact, but not significant on the formation of distance to default of the banking industry.

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