Probability of default as the early warning system for the Indonesian banking sector
Journal Title: Jurnal Keuangan dan Perbankan - Year 2019, Vol 23, Issue 2
Abstract
Early Warning System for banks is used to predict default risk. This research is to test the probability of defaults with the probability of default in the real condition of banks. The probability of default risk is measured by KMV-Merton Model and the probability of default in the real condition of banks is bank’s performance based on whether there are bank’s actions that cause changes in the bank's financial statements report. This study using banks listed in the Indonesian Stock Exchange (IDX) from 2010-2015. This study analysis probability of default with financial condition based from 4 commercial bank categories and BUKU (Commercial Bank Based on Business Activities) categories. The results of this study are the probability of default with Merton model give a strong signal against the default of bank for one bank only but for banks in BUKU 4 give a strong signal that banks in this category do not default. Since for other banks and for other BUKU categories do not represent the real condition from the probability of default. It can be concluded that the Merton model is not generated sufficient enough model to predict the probability of default since it assumes that the market is in under efficient condition, and it just considers firm-specific risk.
Authors and Affiliations
Ari Christianti
Keywords
Related Articles
- EP ID EP661709
- DOI 10.26905/jkdp.v23i2.2856
- Views 140
- Downloads 0
TVA, Abnormal Return, and Investor Perception on Changing of Tick Size 2 May 2016
The objective of this study was to analyze the market reaction to the changing of the capital market's tick size regulation on May 2, 2016. The main goal of the regulation was to increase the capital market liquidity, th...
The differences between family firms and non-family firms: Evidence in Indonesia
A family firm is a firm controlled by members of a family through their ownership in the management. This study aimed to observe the presence of differences in gender diversity, cash holding, and financial performance on...
Board Characteristics and Accounting Performance in Banking Industry: The Indonesian Experience
This paper examines the effect of board characteristics on accounting return in the Indonesian banking industry. The conceptual framework borrows from agency theory claiming that the board is held liable for monitoring r...
Determinants of the Credit Quality Decision on Retail Consumer
The aim of this study was to study the retail customers’ 4C (character, capacity, collateral, and capital) that affected credit quality on finance companies. This study focused on the financing of used motorcycles from 2...
KINERJA INVESTASI JASA PENGUJIAN TABLEWARE UNTUK PRODUK KREATIF KERAMIK PADA BTIKK-BPPT
The aims of this research were to analyze the tableware testing service investment, especially on ceramic glaze for eating and drinking equipment at BTIKK-BPPT. The analysis techniques used were payback period, net prese...