IDEAS home Printed from https://ideas.repec.org/a/rbs/ijfbss/v12y2023i2id2759.html

Banking Risk, Third-Party Fund And Performance

Author

Listed:
  • Fadhila Rahma
  • Sutrisno Sutrisno

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.

Suggested Citation

  • Fadhila Rahma & Sutrisno Sutrisno, 2023. "Banking Risk, Third-Party Fund And Performance," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 12(2), pages 47-54, June.
    • Handle: RePEc:rbs:ijfbss:v:12:y:2023:i:2:id:2759
    DOI: 10.20525/ijfbs.v12i2.2759
    as

    Download full text from publisher

    File URL: https://ssbfnet.com/ojs/index.php/ijfbs/article/view/2759
    File Function: Abstract page
    Download Restriction: no
    File URL: https://ssbfnet.com/ojs/index.php/ijfbs/article/download/2759/1927
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.20525/ijfbs.v12i2.2759?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. repec:eme:jbsed0:jbsed-01-2021-0003 is not listed on IDEAS
    2. E. Chuke Nwude & Chinedu Okeke, 2018. "Impact of Credit Risk Management on the Performance of Selected Nigerian Banks," International Journal of Economics and Financial Issues, International Journal of Economics and Financial Issues, vol. 8(2), pages 287-297.
    3. Abdelkader Derbali, 2021. "Determinants of the performance of Moroccan banks," Journal of Business and Socio-economic Development, Emerald Group Publishing Limited, vol. 1(1), pages 102-117, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Buu Kiem Dang & Duc Toan Vo & Nguyen Tuyet Minh Ha, 2025. "The impact of economic uncertainty and institutional quality on bank profitability: global evidence," International Economics and Economic Policy, Springer, vol. 22(3), pages 1-29, July.
    2. Mustansar, Talreja, 2023. "Financial innovation, technological improvement and bank’ profitability," OSF Preprints 8wy95, Center for Open Science.
    3. Oritsegbubemi Kehinde Natufe & Esther Ikavbo Evbayiro-Osagie, 2023. "Credit Risk Management and the Financial Performance of Deposit Money Banks: Some New Evidence," JRFM, MDPI, vol. 16(7), pages 1-23, June.
    4. Henry Inegbedion & Bello Deva Vincent & Eseosa Obadiaru, 2020. "Risk Management and the Financial Performance of Banks in Nigeria," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 115-128, October.
    5. Hani EL-Chaarani & Yahya Skaf & Fabiana Roberto & Allam Hamdan & Ruaa Omar Binsaddig, 2025. "Assessing the Direct and Moderating Effect of COVID-19 on the Performance of the Banking Sector in the MENA Region," FIIB Business Review, , vol. 14(4), pages 507-520, August.
    6. Samuel Opoku & Kingsley Opoku Appiah & Prince Gyimah, 2024. "Can We Predict the Financial Distress of Banks in Sub-Saharan Africa?," SAGE Open, , vol. 14(3), pages 21582440241, August.
    7. Joseph Ato Forson, 2025. "Does financial innovation have an asymmetric effect on sustainability: insights from Ghana," SN Business & Economics, Springer, vol. 5(5), pages 1-26, May.
    8. Omobolade Stephen Ogundele & Lethiwe Nzama, 2025. "Risk Management Practices and Financial Performance: Analysing Credit and Liquidity Risk Management and Disclosures by Nigerian Banks," JRFM, MDPI, vol. 18(4), pages 1-15, April.
    9. Charles Ayodele JEGEDE & Yusuf Aina SOYEBO & Segun Kamoru FAKUNMOJU & Olajide Idowu OKUNBANJO, 2021. "Financial Risk Management and Financial Performance of International Authorisation Quoted Deposit Money Banks (DMBs) in Nigeria," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 178-185.
    10. Sayyed Sadaqat Hussain Shah & Muhammad Asif Khan & Masood Ahmed & Daniel F. Meyer & Judit Oláh, 2024. "A Micro-Level Evidence of how Investor and Manager Herding Behavior Influence the Firm Financial Performance," SAGE Open, , vol. 14(1), pages 21582440231, January.
    11. Olajide Solomon Fadun & Peter Silwimba, 2023. "Does credit risk management impact the financial performance of commercial banks?," International Journal of Business Ecosystem & Strategy (2687-2293), Bussecon International Academy, vol. 5(2), pages 55-66, April.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rbs:ijfbss:v:12:y:2023:i:2:id:2759. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hasan Dincer (email available below). General contact details of provider: https://edirc.repec.org/data/ssbffea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.