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Determinant Of Capital Ratio: A Panel Data Analysis On State-Owned Banks In Indonesia

Author

Listed:
  • Pamuji Gesang Raharjo
  • Dedi Budiman Hakim
  • Adler Haymans Manurung
  • Tubagus Nur Ahmad Maulana

Abstract

Capital plays important role to support the operational of the banks and to create a sound banking system in aggregate. For this reason, the banks are required to have a sufficient amount of capital, both to support its business expansion as well as a buffer to prevent and to absorb any unexpected losses. This paper analyzes determinants of capital ratio of the state-owned banks in Indonesia. Using panel data regression model, the result shows that the capital ratio of these state-owned banks is affected by the size of the bank, the bank’s leverage, the quality of management, and the interest rate risk. Contrary to the existing literatures, this paper does not support the effect of management capability to generate income on the bank’s capital ratio.

Suggested Citation

  • Pamuji Gesang Raharjo & Dedi Budiman Hakim & Adler Haymans Manurung & Tubagus Nur Ahmad Maulana, 2014. "Determinant Of Capital Ratio: A Panel Data Analysis On State-Owned Banks In Indonesia," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 16(4), pages 369-386, April.
    • Handle: RePEc:idn:journl:v:16:y:2014:i:4j:p:369-386
    DOI: https://doi.org/10.21098/bemp.v16i4.451
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    References listed on IDEAS

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    3. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    4. Stiglitz, Joseph E, 1969. "A Re-Examination of the Modigliani-Miller Theorem," American Economic Review, American Economic Association, vol. 59(5), pages 784-793, December.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Capital structure; state-owned banks; panel estimation.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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