Performance Evaluation of Indonesian Banks and Foreign Banks Operating in Indonesia Related to Classification of Capital
The public perception declared that bigger banks are more difficult to bankrupt than smaller banks, implicitly imply that bigger banks should have better performance than smaller banks. This study was undertaken to prove the perception that bigger banks have different performance from smaller banks, by testing the two main indicators, namely the bank’s Non Performing Loan (NPL) and bank’s Net Interest Margin (NIM). Bank’s Non Performing Loan (NPL) represents the performance of the bank regarding the quality of bank assets, while Bank’s Net Interest Margin (NIM) represents the performance of banks in respect of bank efficiency.
The study was conducted using secondary data obtained from Infobank. As the research variables are the banks core capital, NPL and NIM. Grouping of banks has done according to the rules of BI on commercial banks business activities (Books). In this research, there are four classifications associated banks core capital and Foreign banks, namely: Bank with core capital of less than IDR 1 trillion (Book 1), Bank with core capital of IDR 1 trillion up to below IDR 5 trillion (Book 2), Bank with core capital of IDR 5 trillion up to below IDR 30 trillion (Book 3), Bank with the core capital of more than IDR 30 trillion (Book 4) and Foreign banks.
Tests were performed using descriptive statistics, ANOVA and Post Hoc Test. Anova test results showed no significant differences were found on average NPL of all classifications bank books. Tests using ANOVA showed significant differences were found on average NIM of banks belonging to the classification of different bank books. Use of Post Hoc Test stating that the overall performance of Foreign Banks’ NIM still lower than local banks, while the performance of local banks’ NIM did not show any significant difference. Not enough evidence to conclude that bigger banks with higher core capital classification has better performance than smaller banks with lower core capital classification
Topic: Financial Management and Accounting