DETERMINANT OF CAPITAL RATIO: A PANEL DATA ANALYSIS ON STATE-OWNED BANKS IN INDONESIA

Pamuji Gesang Raharjo (), Dedi Budiman Hakim, Adler Haymans Manurung and Tubagus Nur Ahmad Maulana

Bulletin of Monetary Economics and Banking, 2014, vol. 16, issue 4, 369-386

Abstract: Capital plays important role to support the operational of the banks and to create a sound banking system in aggregate. For this reason, the banks are required to have a sufficient amount of capital, both to support its business expansion as well as a buffer to prevent and to absorb any unexpected losses. This paper analyzes determinants of capital ratio of the state-owned banks in Indonesia. Using panel data regression model, the result shows that the capital ratio of these state-owned banks is affected by the size of the bank, the bank’s leverage, the quality of management, and the interest rate risk. Contrary to the existing literatures, this paper does not support the effect of management capability to generate income on the bank’s capital ratio.

Keywords: Capital structure; state-owned banks; panel estimation. (search for similar items in EconPapers)
JEL-codes: C23 G21 G32 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:16:y:2014:i:4j:p:369-386

DOI: 10.21098/bemp.v16i4.451

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