<![CDATA[By merging banks with one another, the government hopes to improve the general
condition or quality of banks. However, after these mergers there are twenty banks
that have been liquidated, and only nineteen remain operation. The aim of this paper
is to construct a model in order to predict the failure of merged banks in Indonesia,
based on financial ratios.
The object of research consists of the financial ratios of either liquidated or
successful ones. The data are collected from a published financial reports of those
banks which have been audited and processed as financial ratios. These financial
ratios are analysed by way of logistic regression. The research hypothesis proposed
is that financial ratios can be turned into prediction models to establish the degree to
which mergers have failed in Indonesia.
The results show that the financial standard of performance of failed banks is
indeed inferior to that of successful ones The results from the statistical test also
indicate that the combination of RR and ROA financial ratios are the most significant
ones to pass the compatibility or âproper and fitnessâ test to predict the extent of
failure of mergers between banks in Indonesia. The outcome of research may be
exploited by society at large, observers of the banking world, and Bank Indonesia by
way of an early warning system concerning the failure of mergers between banks in
Indonesia.
Keywords: Financial ratios, banking performance analysis, merger]]>
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