The Effect of Company Size and Financial Ratios on the Level of Financial Distress in Banking Sector
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Abstract
Banking is an essential sector that improves a country's economy. The world economy has been shaken since the onset of the COVID-19 pandemic, along with global conflicts, which have caused many problems for banks. Banks in Indonesia also feel the impact, so banks need to survive well so as not to experience losses that lead to financial difficulties. This study uses financial ratios and company size to measure the effect of financial distress using the Altman Z-Score. The sample used is a bank listed on the Indonesia Stock Exchange from 2018 – 2022. Data processing using multiple regression with the help of SPSS statistical software. The results of this study found that the ratio of BOPO, ROA, and SIZE had a significant effect on financial distress. In contrast, the NPL, LDR, and BETA ratios did not have a significant effect. The following study can include environmental, social, and governance variables or ESG so that the application of sustainability activities can be measured in relation to financial distress.
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How to Cite
Endarto, E. A. P., & Mulyono, M. (2024). The Effect of Company Size and Financial Ratios on the Level of Financial Distress in Banking Sector . ProBisnis : Jurnal Manajemen, 15(4), 492–499. Retrieved from https://ejournal.joninstitute.org/index.php/ProBisnis/article/view/596
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Bashatweh, A. D., & Ahmed, E. Y. (2020). Financial Performance Evaluation of the commercial banks in Jordan: Based on the CAMELS Framework. International Journal of Advanced Science and Technology, 29(5), pp 985 - 994.
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Fadoua, J., & Brahim, D. (2020). Financial stability of Islamic and conventional banks of the MENA region: post and pre-crisis of CAMELS framework. International Journal of Islamic Banking and Finance Research, 4(2), pp 38 - 48.
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Wangsih, I. C., Yanti, D. R., Yohana, Y., Kalbuana, N., & Cahyadi, C. I. (2021). Influence of leverage, firm size, and sales growth on financial distress. International Journal of Economics, Business and Accounting Research (IJEBAR), 5(4).
Waqas, H., & Md-Rus, R. (2018). Predicting financial distress: Importance of accounting and firm-specific market variables for Pakistan’s listed firms. Cogent Economics & Finance, 6(1), 1545739.
Yuhasril, Y. T. W. S., & Dwiarti, S. R. (2020). The Effect of Camel Ratio in Predicting Financial Distress Conditions in Banking Companies Registered in Indonesia Stock Exchange (BEI), European Journal of Business and Management, Vol.12, No.18, pp 90 – 96.
Altman, E. I., Iwanicz‐Drozdowska, M., Laitinen, E. K., & Suvas, A. (2017). Financial distress prediction in an international context: A review and empirical analysis of Altman's Z‐score model. Journal of International Financial Management & Accounting, 28(2), pp 131 - 171.
Balasubramanian, S. A., Radhakrishna, G.S., Sridevi, P, & Natarajan, T. (2019). Modeling corporate financial distress using financial and non-financial variables: The case of Indian listed companies. International Journal of Law and Management, 61(3/4), pp 457 - 484.
Bashatweh, A. D., & Ahmed, E. Y. (2020). Financial Performance Evaluation of the commercial banks in Jordan: Based on the CAMELS Framework. International Journal of Advanced Science and Technology, 29(5), pp 985 - 994.
Condello, S., Del Pozzo, A., Loprevite, S., & Ricca, B. (2017). Potential and limitations of DEA as a bankruptcy prediction tool in the light of a study on Italian listed companies. Applied Mathematical Sciences, 11(44), pp 2185-2207.
D. J. Lutfie, Harrie. dan Priansa, (2019) Manajemen Bisnis Perbankan Kontemporer. CV Pustaka Setia, Bandung.
Fadoua, J., & Brahim, D. (2020). Financial stability of Islamic and conventional banks of the MENA region: post and pre-crisis of CAMELS framework. International Journal of Islamic Banking and Finance Research, 4(2), pp 38 - 48.
Ferdiansyah, F., & Widyarti, E. T. (2022). Analysis of CAMEL ratio on financial distress banking companies in Indonesia. Diponegoro International Journal of Business, 5(1), pp 47 - 56.
Galán, J. (2021). CREWS: a CAMELS-based early warning system of systemic risk in the banking sector. Banco de Espana Occasional Paper, 2132.
Handriani, E., Ghozali, I., & Hersugodo, H. (2021). Corporate governance on financial distress: Evidence from Indonesia. Management Science Letters, 11(6), pp 1833 - 1844.
Hasas Yehaneh, Y., Habibi, R., & Nazi, B. (2018). Impact of Asset Quality on Financial Distress in Banks. Quarterly Studies in Banking Management and Islamic Banking, 3(6,7), pp 25 - 58.
Ikpesu, F. (2019). Firm specific determinants of financial distress: Empirical evidence from Nigeria. Journal of Accounting and Taxation, 11(3), pp 49 - 56.
Kowanda, D., Pasaribu, R., & Firdaus, M. (2015). Financial distress prediction on public listed banks in Indonesia stock exchange. Interdisciplinary Behavior and Social Sciences, pp 333 - 338.
Kurniasari, R. (2017). Analisis Biaya Operasional Dan Pendapatan Operasional (BOPO) Terhadap Return on Assets (ROA). Perspektif: Jurnal Ekonomi dan Manajemen Akademi Bina Sarana Informatika, 15(1), pp 71 - 78.
Malhotra, N. K. (2020). Marketing research: an applied prientation. Pearson.
Paidar, A., Shafiee, M., Avazzadeh, F., & Valipour, H. (2021). Predicting Banks' Financial Distress by Data Envelopment Analysis Model and CAMELS Indicators. Journal of System Management, 7(3), pp 213 - 240.
Paul, T. (2023, August 15). Why is inflation so high? An economist explains why everyday essentials cost more. CNBC. https://www.cnbc.com/select/why-is-inflation-so-high/
Purwanti, T. (2022, November 9). 4 bank Aman, 19 Lainnya "Terancam" Merger atau Likuidasi. CNBC Indonesia. https://www.cnbcindonesia.com/market/20221109081010-17-386238/4-bank-aman-19-lainnya-terancam-merger-atau-likuidasi
Purwanto, S., Perkasa, D. H., & Abadi, F. (2023). Assessment of Banking Conditions on Financial Distress During the Period of COVID-19 in Indonesia. WSEAS Transactions on Business and Economics, 20, pp 467 - 474.
Quoc Trung, N. K. (2021). Determinants of bank performance in Vietnamese commercial banks: an application of the camels model. Cogent Business & Management, 8(1), 1979443.
Rachman, A. (2023, June 7). Awas Krisis Perbankan 2023, Negara Maju Bisa Bangkrut! CNBC Indonesia. https://www.cnbcindonesia.com/news/20230607101642-4-443720/awas-krisis-perbankan-2023-negara-maju-bisa-bangkrut
Rowland, T. Setiawan, and A. Fitriningrum, (2021) Jurnal Bisnis dan Akuntansi Unsurya Rasio Keuangan dan Umur Bank (Studi Pada Perbankan Yang Terdaftar di BEI 2016 - 2019) Jurnal Bisnis dan Akuntansi Unsurya, Jurnal Bisnis dan Akuntansi Unsurya, vol. 6, no. 2, pp 82 – 93.
Saeed, H., Shahid, A., & Tirmizi, S. M. A. (2020). An empirical investigation of banking sector performance of Pakistan and Sri Lanka by using CAMELS ratio of framework. Journal of Sustainable Finance & Investment, 10(3), pp 247 - 268.
Wangsih, I. C., Yanti, D. R., Yohana, Y., Kalbuana, N., & Cahyadi, C. I. (2021). Influence of leverage, firm size, and sales growth on financial distress. International Journal of Economics, Business and Accounting Research (IJEBAR), 5(4).
Waqas, H., & Md-Rus, R. (2018). Predicting financial distress: Importance of accounting and firm-specific market variables for Pakistan’s listed firms. Cogent Economics & Finance, 6(1), 1545739.
Yuhasril, Y. T. W. S., & Dwiarti, S. R. (2020). The Effect of Camel Ratio in Predicting Financial Distress Conditions in Banking Companies Registered in Indonesia Stock Exchange (BEI), European Journal of Business and Management, Vol.12, No.18, pp 90 – 96.