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- Title
EFFECTIVENESS OF RGEC- BANK SOUNDNESS LEVEL AND INFLATION RATE IN PREDICTING POTENTIAL BANKRUPTCY OF BANKS: EVIDENCE FROM INDONESIA.
- Authors
Rizki, Anwar Syaifullah; Gunarsih, Tri
- Abstract
This study examines the effectiveness of RGEC-based bank soundness and inflation rate in predicting the potential for bankruptcy. The samples in this study are the banking sector companies listed on the Indonesia Stock Exchange (IDX) from 2016 to 2020. Using several proxies of the RGEC-based bank soundness and inflation rate, the results of this study indicate that the loan-to-deposit ratio (LDR), self-assessment of good corporate governance, and capital adequacy ratio (CAR) affect the potential of bankruptcy negatively and significantly. Furthermore, non-performing loans (NPL), return on assets (ROA), and inflation rate do not affect the potential for bankruptcy. The result shows that only two indicators, among four of RGEC-based bank soundness, effectively predict the potential bankruptcy. These results suggest that if banking management wants to predict and anticipate bankruptcy based on the bank's soundness, it can be considered to see and maintain the LDR and self-assessment of GCG and CAR.
- Subjects
INDONESIA; PRICE inflation; BANKING industry; BANKRUPTCY; NONPERFORMING loans; RETURN on assets; BANK management; CORPORATE banking
- Publication
International Journal of Business & Society, 2024, Vol 25, Issue 1, p223
- ISSN
1511-6670
- Publication type
Article
- DOI
10.33736/ijbs.6908.2024