The Effects of Credit Risk and Financial Performance to Financial Distress Prediction of Listed Banks in Indonesia

摘要

This study aims to look at the effects of credit risk and financial performance on the bank financial distress prediction, in which the bank as a financial institution in the scope of its business of fundraising and lending to debtors is exposed to several risks; the main one discussed in this study is credit risk. In addition to credit risk, the bank's financial performance becomes a barometer that needs to be maintained, in which banks, especially conventional commercial banks that are listed on the Indonesia Stock Exchange (IDX) (which are the study population) have responsibilities both to customers and the public as stockholders. In Indonesia, the Financial Services Authority (OJK) has an important role as a regulator in overseeing and regulating several regulations to maintain the financial quality of banks to avoid defaults. Both credit risk and financial performance can have an impact on a condition that causes bankruptcy (financial distress) of a bank. In this study, the researchers used the CAMEL rating as an indicator of financial distress predictions. The data used are secondary data obtained through the OJK website in the form of financial reports and financial ratios reported by each bank periodically. In this study, the researchers conducted an analysis of several banks in several periods (cross section and time series). This research used the panel data regression method to see the effect between these variables. The researchers also added several control variables to neutralize their effects on the dependent variable. From the data collected and successfully analyzed, it was found that the NPL indicator in the credit variable and ROE financial performance has a significant influence on the prediction of financial distress, but the ROA variable has no significant effect. While the control variable consisting of bank size and liquidity has a significant effect, time period does not have a significant effect on financial distress predictions as the dependent variable in this study.