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Growing Science » Accounting » The effect of loan-loss provision, non-performing loans and third-party fund on capital adequacy ratio

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Accounting

ISSN 2369-7407 (Online) - ISSN 2369-7393 (Print)
Quarterly Publication
Volume 7 Issue 4 pp. 943-950 , 2021

The effect of loan-loss provision, non-performing loans and third-party fund on capital adequacy ratio Pages 943-950 Right click to download the paper Download PDF

Authors: Mulyanto Nugroho, Donny Arif, Abdul Halik

DOI: 10.5267/j.ac.2021.1.013

Keywords: Loan-Loss Provisions, Non-Performing Loans, Third Parties Fund, Capital Adequacy Ratio, Banking

Abstract: This research was conducted in connection with the effective enactment of International Financial Accounting Standard IFRS 2020 to improve the concept of hedging accounting as well as basic measurement and classification of financial instruments. IFRS carries the concept of Expected loss backup which begins to acknowledge losses if there is a potential failure to pay even though it has not really happened, allowing the bank to form a larger loan-loss provision. The loan-loss provision is formed based on the number of failed pays in credits indicated by the ratio of Non-Performing Loans (NPLs). Fund distribution can be regulated by the Third-party Fund (TPF). The increasing number of loan-loss provisions and NPLs are feared to affect capital conditions for the bank. Therefore, the study aims to determine the partial and simultaneous influence of the loan-loss provision, Non-Performing Loans (NPLs), and third-party Fund (TPF) against the bank's capital adequacy ratio (CAR). The samples in this study are central government-owned banks, namely Bank Mandiri, Bank Negara Indonesia, Bank Rakyat Indonesia, and Bank Tabungan Negara period from 2011 to 2018. Data taken is a data time series of the quarterly financial statements published by the respective online website of the bank. The analysis used is a multiple linear regression analysis using SPSS Tools version 21 and Microsoft Excel. The results showed that a partial loan-loss provision had no significant effect on the bank's capital adequacy ratio, while the Non-Performing Loans (NPLs) and the Third-party Fund (TPF) were partially influential of the bank's capital adequacy ratio. Simultaneously the three independent variables have a significant effect on the dependent variable capital adequacy ratio (CAR).

How to cite this paper
Nugroho, M., Arif, D & Halik, A. (2021). The effect of loan-loss provision, non-performing loans and third-party fund on capital adequacy ratio.Accounting, 7(4), 943-950.

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Journal: Accounting | Year: 2021 | Volume: 7 | Issue: 4 | Views: 4089 | Reviews: 0

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