The Study of Risk-Weighted Assets on the Affecting of Loan Exposure Valuation toward Credit Default

Abstract

The objective of this research is to build a theoretical and an empirical model of Risk-weighted assets in banking industry. This study is very important for the banks because in uncertainty of environment, the banks must prudently when lend the money to the counterparty, so the default risk could be minimized. This study also wanted to investigate and test empirically direct and indirect effects of; first, Exposure Valuation to Credit Default, second, Loan Exposure Valuation to the Risk-weighted assets, third, the Risk-weighted assets to Credit Default at the local bank that listed on Indonesia Stock Exchange period 2008 – 2012.The Structural Equation Modeling by Amos Software 21.00 used to analysis data which result have a high goodness of fit, and the test of simultaneous and individual test proved significant with coefficient < 0.05 and the variation of the dependent variable could be explained or estimated by the independent variables with coefficient adjusted R Square > 0.60. The result of analysis shows that; first, Loan Exposure valuation not significantly positive influence to Credit Default, second, Loan Exposure valuation significantly positive influence to Risk-weighted assets, third, the Risk-weighted assets significantly positive influence to Credit Default, So the mediating effect of Risk - weighted assets on the affecting of Loan Exposure valuation toward Credit Default more strength than direct effect of Exposure Valuation to Credit Default.This study recommends about the importance of Valuation Exposure of Loan precisely such as; realized of credit, investment, placement, and to manage or control Risk-weighted assets to obtain a low risk that a low credit default also. Keywords: Loan, Exposure, Valuation, Risk, Default