Determinants of Efficiency: Asset Diversification, Risk, Bank Size, and Liquidity

Citra Rahayu Indraswari, Kartika Sari

Abstract


Banking plays an important role in the economy both micro and macro. In addition, it is crucial for a country to have a strong and robust banking system. To realize a strong and robust banking banks need to maintain their efficiency. Therefore, it is necessary to identify the factors that affect efficiency, including asset diversification, risk, bank size and bank liquidity. The sample of this research are conventional banks with a total of 10 banks that have the largest share of assets in Indonesia. In this study to identify the effect of asset diversification, bank risk, bank size, and bank liquidity on bank efficiency used multiple linear regression analysis methods were used. This study concludes that asset diversification actually reduces bank efficiency. The increased bank risk, the better efficiency. Then, the size of the bank and liquidity have no effect on efficiency. Therefore, banks need to review the diversification strategy, ensure that the risks associated with each asset and portfolio as a whole are well-identified and look for opportunities to automate repetitive processes and reduce overall operational costs.


DOI : 10.26905/jkdp.v27i3.11235



Keywords


Asset Diversification; Efficiency; Liquidity; Risk; Size

Full Text:

PDF

References


Acharya, V. V., Afonso, G., & Kovner, A. (2017). How do global banks scramble for liquidity? Evidence from the asset-backed commercial paper freeze of 2007. Journal of Financial Intermediation, 30, 1–34. https://doi.org/10.1016/j.jfi.2016.02.002

Achmady, M., Andriana, I., & Thamrin, K. M. H. (2021). The Analysis of Liquidity and Its Effect on Profitability, Sales and Working Capital Policy in Manufacturing Companies Listed on Indonesia Stock Exchange. Jurnal Manajemen Dan Bisnis Sriwijaya, 18(4), 243–254. https://doi.org/10.29259/jmbs.v18i4.12201

Adjei-Frimpong, K., Gan, C., & Hu, B. (2014). Cost efficiency of Ghana’s banking industry: A panel data analysis. The International Journal of Business and Finance Research, 8(2), 69–86.

Allen, F. (2017). How Should Bank Liquidity Be Regulated? SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2956304

Amer, H. H. M. (2011). Determinants of Operating Efficiency for Lowly and Highly Competitive Banks in Egypt.

Anggraeni, A., & Saputri, I. A. (2020). Diversifikasi Aset, Risiko Bank, Ukuran Bank, dan Likuiditas Bank terhadap Efisiensi Bank Syariah dengan Metode SFA. Journal of Business and Banking, 10(1), 129. https://doi.org/10.14414/jbb.v10i1.2182

Assaf, A. G., Berger, A. N., Roman, R. A., & Tsionas, M. G. (2019). Does efficiency help banks survive and thrive during financial crises? Journal of Banking & Finance, 106, 445–470. https://doi.org/10.1016/j.jbankfin.2019.07.013

Azizah, S. (2018). Analisis Faktor-Faktor Yang Mempengaruhi Efisiensi Bank Pembiayaan Rakyat Syariah di Pulau Sumatra Dengan Pendekatan Stochastic Frontier Approach (SFA).

Belas, J., Cipovová, E., & Demjan, V. (2014). Current Trends in Area of Satisfaction of Bank Clients in the Czech Republic and Slovakia. Transformations in Business & Economics, 13(3).

Belas, J., Cipovova, E., Novak, P., & Polách, J. (2012). Impacts of the foundation internal ratings based approach usage on financial performance of commercial bank. E+ M Ekonomie a Management.

Bolek, M., & Wolski, R. (2012). Profitability or Liquidity: Influencing the Market Value-The Case of Poland. International Journal of Economics and Finance, 4(9), p182. https://doi.org/10.5539/ijef.v4n9p182

Candra, S., & Yulianto, A. (2015). Analisis Rasio Keuangan Terhadap Tingkat Efisiensi Bank Umum Syariah (Two Stage SFA). Accounting Analysis Journal, 4(4).

Castiglionesi, F., Feriozzi, F., & Lorenzoni, G. (2019). Financial Integration and Liquidity Crises. Management Science, 65(3), 955–975. https://doi.org/10.1287/mnsc.2017.2841

Chen, Z., & Lu, A. (2019). A Market-Based Funding Liquidity Measure. The Review of Asset Pricing Studies, 9(2), 356–393. https://doi.org/10.1093/rapstu/ray007

Curi, C., Lozano-Vivas, A., & Zelenyuk, V. (2015). Foreign bank diversification and efficiency prior to and during the financial crisis: Does one business model fit all? Journal of Banking & Finance, 61, S22–S35. https://doi.org/10.1016/j.jbankfin.2015.04.019

Defung, F., Salim, R., & Bloch, H. (2016). Has regulatory reform had any impact on bank efficiency in Indonesia? A two-stage analysis. Applied Economics, 48(52), 5060–5074. https://doi.org/10.1080/00036846.2016.1170934

Doaei, M., Ahmad Anuar, M., & Ismail, Z. (2015). Corporate diversification and efficiency of manufacturing firms listed in Bursa Malaysia. Iranian Journal of Management Studies, 8(4). https://doi.org/10.22059/ijms.2015.55000

Eldomiaty, T., Fikri, A., Mostafa, W., & Amer, H. H. M. (2015). The Financial Determinants of Operating Efficiency for Lowand High Competitive Banks in Egypt. Journal of Finance and Bank Management, 3(2). https://doi.org/10.15640/jfbm.v3n2a2

Elsas, R., Hackethal, A., & Holzhäuser, M. (2010). The anatomy of bank diversification. Journal of Banking & Finance, 34(6), 1274–1287. https://doi.org/10.1016/j.jbankfin.2009.11.024

Fathony, M. (2013). Analisis Efisiensi Perbankan Nasional Berdasarkan Ukuran Bank: Pendekatan Data Envelopment Analysis. 15(1).

Fernando, J. M. R., & Nimal, P. D. (2014). Does Ownership and Size Influence Bank Efficiency? Evidence from Sri Lankan Banking Sector. 1(1).

Fiordelisi, F., Marques-Ibanez, D., & Molyneux, P. (2011). Efficiency and risk in European banking. Journal of Banking & Finance, 35(5), 1315–1326. https://doi.org/10.1016/j.jbankfin.2010.10.005

Fitri, H. Y., & Marlius, D. (2019). Analisis Rasio Likuiditas Pada Pt. Bank Perkreditan Rakyat (Bpr) Nagari Kasang [Preprint]. Open Science Framework. https://doi.org/10.31219/osf.io/bcs73

Fong, K. Y. L., Holden, C. W., & Trzcinka, C. A. (2017). What Are the Best Liquidity Proxies for Global Research?*. Review of Finance, 21(4), 1355–1401. https://doi.org/10.1093/rof/rfx003

Guerrieri, V., & Lorenzoni, G. (2017). Credit Crises, Precautionary Savings, and the Liquidity Trap*. The Quarterly Journal of Economics, 132(3), 1427–1467. https://doi.org/10.1093/qje/qjx005

Hadad, M. D., Hall, M. J. B., Kenjegalieva, K. A., Santoso, W., & Simper, R. (2011). Banking efficiency and stock market performance: An analysis of listed Indonesian banks. Review of Quantitative Finance and Accounting, 37(1), 1–20. https://doi.org/10.1007/s11156-010-0192-1

Hasibuan, A. N. (2023). Financial performance analysis using value for money concept. Journal of Management Science (JMAS), 6(1), 25–29.

Iskandar, M., & Zulhilmi, M. (2021). Pengaruh Likuiditas dan Ukuran Perusahaan Terhadap Kinerja Keuangan Bank Umum Syariah di Indonesia. Journal of Sharia Economics, 2(1), 59–78.

Jha, S., Hui, X., & Sun, B. (2013). Commercial Banking Efficiency in Nepal: Application of DEA and Tobit Model. Information Technology Journal, 12(2), 306–314. https://doi.org/10.3923/itj.2013.306.314

Lagos, R., Rocheteau, G., & Wright, R. (2017). Liquidity: A New Monetarist Perspective. Journal of Economic Literature, 55(2), 371–440. https://doi.org/10.1257/jel.20141195

Margono, H., Sharma, S. C., & Melvin, P. D. (2010). Cost efficiency, economies of scale, technological progress and productivity in Indonesian banks. Journal of Asian Economics, 21(1), 53–65. https://doi.org/10.1016/j.asieco.2009.06.001

Marqués-Ibáñez, D., Fiordelisi, F., Molyneux, P., & others. (2010). Efficiency and risk in european banking.

Nassir Shaari, J. A., Khalique, M., & Isa, A. H. bin M. (2011). Ranking of public and domestic private sector commercial banks in Pakistan on the basis of the intellectual capital performance. KASBIT Business Journal, 4, 61–68.

Nguyen, T. L. A. (2018). Diversification and bank efficiency in six ASEAN countries. Global Finance Journal, 37, 57–78. https://doi.org/10.1016/j.gfj.2018.04.004

Nigmonov, A. (2010). Bank performance and efficiency in Uzbekistan. Eurasian Journal of Business and Economics, 3(5), 1–25.

Othman, F. M., Mohd-Zamil, N. A., Rasid, S. Z. A., Vakilbashi, A., & Mokhber, M. (2016). Data envelopment analysis: A tool of measuring efficiency in banking sector. International Journal of Economics and Financial Issues, 6(3), 911–916.

Rahmi, C. L. (2014). Pengaruh Risiko Kredit, Risiko Likuiditas Dan Risiko Tingkat Bunga Terhadap Profitabilitas (Studi Empiris pada Perusahaan Perbankan Terdaftar di Bursa Efek Indonesia). Jurnal Akuntansi, 2(3).

Schwarz, K. (2019). Mind the Gap: Disentangling Credit and Liquidity in Risk Spreads*. Review of Finance, 23(3), 557–597. https://doi.org/10.1093/rof/rfy034

Sparta, S. (2016). Risiko Kredit dan Efisiensi Perbankan di Indonesia. MIX: Jurnal Ilmiah Manajemen, 6(1), 153289.

T. Funso, K., R. Kolade, A., & M. Ojo, O. (2012). Credit Risk And Commercial Banks’ Performance In Nigeria: A Panel Model Approach. Australian Journal of Business and Management Research, 02(02), 31–38. https://doi.org/10.52283/NSWRCA.AJBMR.20120202A04

Wahab, W. (2015). Analisis faktor-faktor yang mempengaruhi efisiensi bank umum syariah di indonesia dengan pendekatan two stage stochastic frontier aproach (studi analisis di bank umum syariah). Economica: Jurnal Ekonomi Islam, 6(2), 57–76.

Zhang, T., & Matthews, K. (2012). Efficiency convergence properties of Indonesian banks 1992–2007. Applied Financial Economics, 22(17), 1465–1478. https://doi.org/10.1080/09603107.2012.663468




DOI: https://doi.org/10.26905/jkdp.v27i3.11235

Refbacks

  • There are currently no refbacks.


Bookmark and Share


Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: -
Email: [email protected]

This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0