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Determining Credit Risk Using Contingent Claim Model Approach (Merton Model); A Case Study of Indonesian Digital Banks

In: Proceedings of the 20th International Symposium on Management (INSYMA 2023)

Author

Listed:
  • Renea Shinta Aminda

    (Universitas Ibn Khaldun Bogor)

  • Muhammad Jiddan Aziz

    (IPB University Darmaga)

  • Titing Suharti

    (Universitas Ibn Khaldun Bogor)

  • Jani Subakti

    (Universitas Ibn Khaldun Bogor)

  • Sigit Wibowo

    (Universitas Ibn Khaldun Bogor)

  • Anuraga Kusumani Subakti

    (Universitas Ibn Khaldun Bogor)

Abstract

The Covid-19 pandemic in Indonesia has an unfavorable influence on the banking sector; not only economic and financial policies in adjusting conditions significantly affect companies, but people are also currently turning to the digital era with a relatively high number of customer increases. Thus, this study aims to measure credit risk at digital banks in Indonesia using the 1974 Merton model to assess the company’s bankruptcy and see the influence between BOPO, NIM, and LDR in it. The sample used was the five best digital banks according to the Bank Indonesia report in 2021, using the 1974 Merton model measurement method, standard deviation, calculating the distance to the default of each company, calculating the default probability using the distance to default, and empirical tests (influence). The results obtained are default withdrawals on digital banks in Indonesia, in general, it can be in say it is not good enough in terms of the effect of the empirical test results that have been carried out regarding the relationship between BOPO, NIM, and LDR on the default probability, the results of the BOPO variable coefficient are negative, the NIM variable coefficient is positive, and the LDR variable coefficient is negative.

Suggested Citation

  • Renea Shinta Aminda & Muhammad Jiddan Aziz & Titing Suharti & Jani Subakti & Sigit Wibowo & Anuraga Kusumani Subakti, 2024. "Determining Credit Risk Using Contingent Claim Model Approach (Merton Model); A Case Study of Indonesian Digital Banks," Advances in Economics, Business and Management Research, in: Werner Ria Murhadi & Dudi Anandya & Noviaty Kresna Darmasetiawan & Juliani Dyah Trisnawati & Putu An (ed.), Proceedings of the 20th International Symposium on Management (INSYMA 2023), pages 74-79, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-244-6_14
    DOI: 10.2991/978-94-6463-244-6_14
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