Banking Risk, Third-Party Fund And Performance

Abstract

Banks are a high-risk industry, which is regulated by the government through the Financial Services Authority (FSA), so bank management must be very careful in managing banks so that risks can be controlled. The purpose of this study was to examine the effect of bank risk and third party funds on bank performance. Bank performance is measured by return on assets (ROA), while bank risk consists of operating risk which is measured by operating expenses to operating income ratio (EIR), liquidity risk is measured by loan to deposit ratio (LDR), capital risk is measured by capital adequacy ratio (CAR), and credit risk is measured by non-performing loans (NPL), and third party funds (TPF) are measured by the natural log of total credit. The research population consisted of 46 banks listed on the Indonesia Stock Exchange with a sample of 24 banks taken using a purposive sampling technique. The data collection period is four years with quarterly data (2019-2022). To test the hypothesis used panel data regression. After testing the model with the Chow-test and Hausman-test, the best regression model is the fixed effect model. The results of research using the fixed effect model show that operating risk (EIR) has a significant and negative effect on bank performance, while liquidity risk (LDR) has a significant positive effect on bank performance. Meanwhile, the capital adequacy ratio (CAR), non-performing loans (NPL), and third party funds (TPF) have no effect on bank performance.