Discriminant Analysis of Insurance Companies in Indonesia

Bagoes Harsono () and Imo Gandakusuma
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Bagoes Harsono: Universitas Indonesia, Magister Manajemen
Imo Gandakusuma: Universitas Indonesia, Magister Manajemen

A chapter in Proceedings of the 7th Global Conference on Business, Management, and Entrepreneurship (GCBME 2022), 2024, pp 26-35 from Springer

Abstract: Abstract This study aims to identify a financial distress condition for insurance companies using existing methods such as the Altman Z-score and Ohlson O-score and also approach a new discriminant model using the data from 2017 to 2021. In order to improve the quality of estimation and forecasting of the financial state of insurance companies in Indonesia, a discriminant model should take account into the local characteristic of the insurance business. The discriminant model uses existing variables from the Altman model with an additional three variables employed by the Indonesian regulations in order to identify the financial state. The research included 124 Indonesian insurance companies. The research finds a discriminant model of insurance companies in Indonesia with three dominant variables net working capital, return on total assets, and current ratio. The application of the model allows you to determine whether the insurance company in Indonesia has a satisfactory or unsatisfactory financial condition. To the author’s best knowledge, previous research using sharia insurance companies’ data finds the alternative discriminant model with the same variable as the Altman model.

Keywords: Discriminant Analysis; Financial distress; Insurance companies (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-234-7_4

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DOI: 10.2991/978-94-6463-234-7_4

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