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The Role of Firm Size on Bank Liquidity and Performance: A Comparative Study of Domestic and Foreign Banks in Indonesia

Author

Listed:
  • M. Chabachib
  • Aji Yudha
  • Hersugondo Hersugondo
  • Imang Dapit Pamungkas
  • Udin Udin

Abstract

Purpose: The purpose of this study is to find out the effects of Non-Performing Loans (NPL), Net Interest Margin (NIM), Non-Interest Income, and Loan to Deposit Ratio (LDR) to Return on Assets (ROA) with size as a control variable and to compare whether there is a difference in these effects between domestic and foreign banks in the study period. Design/Methodology/Approach: The sample of this study is 228 domestic and foreign banks listed in Indonesia Stock Exchange (IDX) in the same period. Findings: The results show that in domestic banks, NPL has a negative effect on ROA while NIM has a positive effect on ROA. In foreign banks, NPL has a negative effect on ROA, NIM has a negative effect and LDR has a negative effect on ROA also. Furthermore, when size becomes a control variable there is no difference between domestic and foreign banks. Practical Implications: The results can be used by the banking sector for policy options in foreign and domestic banks using the above mentioned indices as control variables. Originality/Value: The study makes the distinction between domestic and foreign banks examing an issue which is typical in financial analysis however the results are giving some new insights regarding liguidity and performance.

Suggested Citation

  • M. Chabachib & Aji Yudha & Hersugondo Hersugondo & Imang Dapit Pamungkas & Udin Udin, 2019. "The Role of Firm Size on Bank Liquidity and Performance: A Comparative Study of Domestic and Foreign Banks in Indonesia," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 96-105.
    • Handle: RePEc:ers:ijebaa:v:vii:y:2019:i:3:p:96-105
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    Cited by:

    1. Mochammad Chabachib & Ike Setyaningrum & Hersugondo Hersugondo & Intan Shaferi & Imang Dapit Pamungkas, 2020. "Does Financial Performance Matter? Evidence on the Impact of Liquidity and Firm Size on Stock Return in Indonesia," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 546-555, July.
    2. Bestari Dwi Handayani & Abdul Rohman & Anis Chariri & Imang Dapit Pamungkas, 2020. "Corporate Financial Performance on Corporate Governance Mechanism and Corporate Value - Evidence from Indonesia," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 16(3), pages 161-171.

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    More about this item

    Keywords

    Non-Performing Loans (NPL); Net Interest Margin (NIM); Non-Interest Income; Loan to Deposit Ratio (LDR); Return on Assets (ROA).;
    All these keywords.

    JEL classification:

    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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