EFFECTIVENESS OF RGEC- BANK SOUNDNESS LEVEL AND INFLATION RATE IN PREDICTING POTENTIAL BANKRUPTCY OF BANKS: EVIDENCE FROM INDONESIA

Authors

  • Anwar Syaifullah Rizki Faculty of Business & Humanities, Universitas Teknologi Yogyakarta, Indonesia
  • Tri Gunarsih Faculty of Business & Humanities, Universitas Teknologi Yogyakarta, Indonesia

DOI:

https://doi.org/10.33736/ijbs.6908.2024

Keywords:

Bankruptcy, CAR, GCG, inflation rate, LDR, NPR, RGEC, ROA

Abstract

This study examines the effectiveness of RGEC-based bank soundness and inflation rate in predicting the potential for bankruptcy. The samples in this study are the banking sector companies listed on the Indonesia Stock Exchange (IDX) from 2016 to 2020. Using several proxies of the RGEC-based bank soundness and inflation rate, the results of this study indicate that the loan-to-deposit ratio (LDR), self-assessment of good corporate governance, and capital adequacy ratio (CAR) affect the potential of bankruptcy negatively and significantly. Furthermore, non-performing loans (NPL), return on assets (ROA), and inflation rate do not affect the potential for bankruptcy. The result shows that only two indicators, among four of RGEC-based bank soundness, effectively predict the potential bankruptcy. These results suggest that if banking management wants to predict and anticipate bankruptcy based on the bank’s soundness, it can be considered to see and maintain the LDR and self-assessment of GCG and CAR.

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Published

2024-04-04

How to Cite

Anwar Syaifullah Rizki, & Tri Gunarsih. (2024). EFFECTIVENESS OF RGEC- BANK SOUNDNESS LEVEL AND INFLATION RATE IN PREDICTING POTENTIAL BANKRUPTCY OF BANKS: EVIDENCE FROM INDONESIA. International Journal of Business and Society, 25(1), 223–241. https://doi.org/10.33736/ijbs.6908.2024