Economic Journal of Emerging Markets
Volume 7 Issue 2, 2015

Capital adequacy of the banking industry in Indonesia

Sri Murtiyanti (Postgraduate Program in Management and Business, Institut Pertanian Bogor, Indonesia.)
Noer Azam Achsani (Postgraduate Program in Management and Business, Institut Pertanian Bogor, Indonesia.)
Dedi Budiman Hakim (Postgraduate Program in Management and Business, Institut Pertanian Bogor, Indonesia.)

Article Info

Publish Date
01 Oct 2015

Abstract

This study analyzes the relationship between credit risk and profitability on the capital adequacy ratio (CAR) of commercial banks in Indonesia. The empirical model result shows that credit risk and profitability performance altogether significantly influence the capital adequacy ratio (CAR). Partially, the variables that significantly influence the CAR are the characteristics and complexity of the bank group. This study also suggests that the pace towards the long-term balance is, in general, less than one year. Capital ratio in the banking industry is 8%, indicating the bank has set aside to anticipate the impact of external factors as well as to comply with Bank Indonesia Regulation Number 15/12/PBI/2013.

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Journal Info
Economic Journal of Emerging Markets
Website

Abbrev

JEP

Publisher

Universitas Islam Indonesia

Subject

Economics, Econometrics & Finance

Description

The Economic Journal of Emerging Markets (EJEM) is a peer-reviewed journal which provides a forum for scientific works pertaining to emerging market economies. Published every April and October, this journal welcomes original research papers on all aspects of economic development issues. The journal ...