THE INFLUENCE OF CREDIT RISK AND LIQUIDITY RISK ON BANK STABILITY
This research analyzes two fundamental risks that affect the bank stability, such as credit risk and liquidity risk. We used sample, taken from 28 conventional banks in Indonesia during 2013-2017 to analyze the effects of credit risk, liquidity risk and their interaction to the default probability and the reciprocal relationship between these two risks. The results of this study using panel data regression showed that credit risk had a negative effect on default probability, while liquidity risk and the interaction of credit risk and liquidity risk had positive effect on default probability. Through the simultaneous equation models showed that credit risk and liquidity risk did not influence each other, or there was no reciprocal relationship.Keywords: bank stability; credit risk; liquidity risk; control variables; default probability.
Acharya, V. V, & Mora, N. (2015). A Crisis of Banks as Liquidity Providers. Journal of Finance, 70(1), 1–43. https://doi.org/10.1111/jofi.12182.This
Ayomi, S., & Hermanto, B. (2013). Mengukur risiko sistemik dan keterkaitan finansial perbankan di indonesia. Buletin Ekonomi Moneter Dan Perbankan, 103–126.
BBC News. (2014). Kilas Balik Kasus Bank Century. Retrieved January 31, 2019, from www.bbc.com
Berger, A. N., & Bouwman, C. H. S. (2013). How does capital affect bank performance during financial crises ? Journal of Financial Economics, 109(1), 1–31. https://doi.org/10.1016/j.jfineco.2013.02.008
Boyd, J. H., & Graham, S. L. (1986). Risk, Regulation, and Bank Holding Company Expansion into Nonbanking. Federal Reserve Bank of Minneapolis, 10(2).
Bryant, J. (1980). A model of reserves, bank runs, and deposit insurance*. Journal of Banking and Finance, 4, 335–344.
Casu, B., Girardone, C., Molyneux, P., & Molyneux, P. (2006). Introduction to Banking. Edinburgh: Pearson Education.
Cecchetti, S. G., & Schoenholtz, K. L. (2015). Money , Banking , and Financial Markets Fourth Edition (4th ed.). New York: McGraw-Hill Education.
Deyoung, R., & Torna, G. (2013). Nontraditional banking activities and bank failures during the financial crisis. Journal of Financial Intermediation, 22(3), 397–421. https://doi.org/10.1016/j.jfi.2013.01.001
Diaconu, R., & Oanea, D. (2014). The Main Determinants of Bank ’ s Stability . Evidence f rom Romanian Banking Sector. Procedia Economics and Finance, 16, 329–335. https://doi.org/10.1016/S2212-5671(14)00810-7
Diamond, D. W., Dybvig, P. H., Journal, T., Jun, N., Diamond, D. W., & Dybvig, P. H. (1983). Bank Runs , Deposit Insurance , and Liquidity. Journal of Political Economy, 91(3), 401–419.
Diamond, D. W., & Rajan, R. G. (2005). Liquidity Shortages and Banking Crises. Journal of Finance, LX(2), 615–647.
Djalilov, K., & Piesse, J. (2016). Determinants of bank profitability in transition countries : What matters most ? Research in International Business and Finance, 38, 69–82. https://doi.org/10.1016/j.ribaf.2016.03.015
Freixas, X., & Rochet, J.-C. (1999). Microeconomics of Banking. Cambridge: Massachussets Institute of Technology.
Ghenimi, A., Chaibi, H., Ali, M., & Omri, B. (2017). The effects of liquidity risk and credit risk on bank stability : Evidence from the MENA region. Borsa Istanbul Review, 17(4), 238–248. https://doi.org/10.1016/j.bir.2017.05.002
Goetz, M. R. (2017). Competition and Bank Stability. Journal of Financial Intermediation. https://doi.org/10.1016/j.jfi.2017.06.001
Greuning, H. van, & Bratanovic, S. B. (2009). Analyzing Banking Risk (3rd ed.). Washington DC: The World Bank.
Hardanto, S. S. (2006). Manajemen Risiko bagi Bank Umum. Jakarta: Gramedia.
He, Z., & Xiong, W. E. I. (2012). Rollover Risk and Credit Risk. Journal of Finance, LXVII(2).
Imbierowicz, B., & Rauch, C. (2014). The relationship between liquidity risk and credit risk in banks. Journal of Banking and Finance, 40, 242–256. https://doi.org/10.1016/j.jbankfin.2013.11.030
Kahane, Y. (1977). Capital Adequacy and The Regulation of Financial Intermediaries. Journal of Banking and Finance, 1, 207–218.
Kolari, J., Glennon, D., Shin, H., & Caputo, M. (2002). Predicting large US commercial bank failures. Journal of Economics & Business, 54(October 1999), 361–387.
Louati, S., Abida, I. G., & Boujelbene, Y. (2015). Capital adequacy implications on Islamic and non-Islamic bank’s behavior: Does market power matter? Borsa Istanbul Review. https://doi.org/10.1016/j.bir.2015.04.001
Mercieca, S., Schaeck, K., & Wolfe, S. (2007). Small European banks : Benefits from diversification ? Journal of Banking and Finance, 31(March 2006), 1975–1998. https://doi.org/10.1016/j.jbankfin.2007.01.004
Nikomaram, H., Taghavi, M., & Diman, S. K. (2013). Management Science Letters, 3, 1223–1232. https://doi.org/10.5267/j.msl.2013.02.025
Prasetyo, W. B. (2018). Bailout Century antara Kekhawatiran Berlebih dan Berdampak Sistemik. Retrieved from https://www.beritasatu.com/ekonomi/488458/bailout-century-antara-kekhawatiran-berlebih-dan-berdampak-sistemik
Shim, J. (2019). Loan Portfolio Diversification, Market Structure and Bank Stability. Journal of Banking and Finance, 104. https://doi.org/10.1016/j.jbankfin.2019.04.006
Statistik Perbankan Indonesia. (2019) (Vol. 17). Jakarta.
Suseno, & Astiyah, S. (2009). Inflasi. Jakarta: PPSK Bank Indonesia.
Tran, V. T., Lin, C., & Nguyen, H. (2016). Liquidity creation , regulatory capital , and bank profitability. International Review of Financial Analysis, 48, 98–109. https://doi.org/10.1016/j.irfa.2016.09.010
Tursoy, T. (2018). Risk Management Process in Banking Industry. Munich Personal RePEc Archieve.
- There are currently no refbacks.