Rivan, Rivan
(2018)
Non-performing loans, financial leverage, and financial performance of the banking industry in Indonesia.
Bachelor thesis, Universitas Pelita harapan.
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Abstract
In this paper, the writer will talk about the effect of non-performing loans and financial leverage towards the financial performance of the banking firm in Indonesia. Financial performance in this case itself will be describe as the annual return on asset of each banks. Financial leverage is also divided into the short term liability and long term liability. The purpose of this study is to find out the effect of non-performing loans, short term liabilities and long term liabilities might affect return on assets. The data itself will be gathered from 38 banks in Indonesia through the years 2006-2015. Not only that, the writer will also include several other control variables such as cost to income ratio, loan to deposit ratio as well as the bank size. Research itself will be done using the panel data analysis method on an unbalanced data. Results suggest that both non-performing loans, and long term liabilities towards total assets do not have a significant negative impact towards return on asset on the banking industry in Indonesia. Short term liabilities towards total assets on the other hand do have a significant negative effect towards return on asset on the banking industry in Indonesia.
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