Liquidity, asset quality, and efficiency to sustainable growth rate for banking at Indonesia Stock Exchange

Abstract

The focus of the bank to increase profit. However, the increase in profit is not important to focus on because the sustainability of growth is more important. Measure the level of sustainable growth is an important factor that needs attention as a reflection for the performance of a bank. The measurement uses the concept of growth called the Sustainable Growth Rate (SGR). This study aims to provide empirical evidence on the effect of liquidity proxy Loan to Funding Ratio (LFR), asset quality proxy by Non-Performing Loan (NPL) and efficiency proxy by Operating Cost to Operating Income (BOPO) toward SGR. The sampling technique is purposive based on the criteria so that the selected 22 banks with the study period 2012-2107. Unit analysis as much as 132 observations. The analysis of data using panel data regression. The findings of the study showed that LFR, NPL, and BOPO had a significant negative effect on SGR. The implications of research that SGR becomes important as it relates to the bank's strategy to continue to grow and continue in order to expand its business maximally while maintaining internal and external funding sources.

Does Asset Quality Matter in Relationship Between Bank Capital on Lending Growth?

“…Earlier empirical investigations in Indonesia concerning determinant of bank loan (Satria & Subegti, 2010), the effect of bank capital on performance (Raharjo, 2014; Subandi & Ghozali, 2013; Thalib, 2016), bank risk (Kamaludin, Darmansyah, & Usman, 2015) and sustainability growth rate (Junaidi et al, 2019). Previous research only examined the effect of bank capital on lending, but did not recognized moderating effect of asset quality on lending growth.…”

“…The biggest source of income for a bank business comes from the contribution of the large number of loans extended (Berger & Bouwman, 2013;Moussa & Chedia, 2016). Banks in Indonesia still use the credit business sector as their main source of income (Junaidi, Sulastri, Isnurhadi, & Adam, 2019;Raharjo, 2014;Setiawan & Pratama, 2019;Subandi & Ghozali, 2013;Thalib, 2016). Better value of income margins can be obtained through effective and efficient management (Raharjo, 2014;Rivai et al, 2013).…”

Capital and lending growth of banking sector in Indonesia: Study on the BUKU category

“…When a bank gives some credit, it will be exposed to risk (Satria & Subegti, 2010). Banks in their operational activities have a lot to do with risk, so banks are institutions known as risk-taking entities ( Raharjo, 2014;Junaidi et al, 2019).…”

“…The most significant source of income for a bank business comes from the contribution of a large number of loans extended (Berger & Bouwman, 2013;Moussa & Chedia, 2016). Banks in Indonesia still use the credit business sector as their primary source of income (Subandi & Ghozali, 2013;Raharjo, 2014;Thalib, 2016;Junaidi et al, 2019;Setiawan & Pratama, 2019). As an intermediary institution, banks must be able to manage the availability of owned capital so that there is no shortage of funds in carrying out their business activities (Kim & Sohn, 2017;Atahau & Cronje, 2019).…”

“…Prior study in Indonesia concerning determinant of bank loan (Satria & Subegti, 2010), the effect of bank capital on performance (Subandi & Ghozali, 2013;Raharjo, 2014;Thalib, 2016), bank risk (Kamaludin et al, 2015) and sustainability growth rate (Junaidi et al, 2019). Previous research only examined the effect of bank capital on credit growth but did not measure detail how it affected each bank category according to Commercial Banks based on Business Activities (BUKU).…”