Financial Ratio Analysis as a Prediction Tool of Bankruptcy on Banking Companies Listed in Indonesia Stock Exchange

Abstract

This study aims to analyze the financial ratios of banks to predict bank bankruptcy in Indonesia. Variables used by a number of seven bank financial ratios are CAR, LDR, NPL, BOPO, ROA, ROE and NIM. The research data is obtained by census which means the whole population is used in the research which is 40 banks in year 2017. The analysis tool used is logit regression.The results of the multivariate test showed that the LDR variable had a significant effect on the profitability of bankruptcy of banks in Indonesia at α> 5% but did not have the same sign as predicted. CAR, NPL, BOPO, ROE, and NIM variables have the same mark as the predicted but not significant. The ROA variable is not significant and has a different sign than predicted. In general, the results do not accept all Ha.

Keywords: bank, bankruptcy, bank financial ratio, bankruptcy.

DOI: 10.7176/EJBM/11-15-05

Publication date:May 31^st 2019