Utilization of Market Risk

Oct 13, 2025 by talynt.org 2 views

Analysis of the Effect of Operations Efficiency, Credit Risk, and Market Risk on Bank Performance in Indonesia

Introduction

The banking industry in Indonesia is a crucial sector that plays a significant role in the country's economic growth. The performance of banks in Indonesia is influenced by various factors, including operating efficiency, credit risk, and market risk. This study aims to analyze and determine the effect of these factors on bank performance in Indonesia. The study uses panel data design with descriptive analysis and data panel regression using e-views.

Methodology

The data used in this study is secondary data in the form of an annual bank report listed on the Indonesia Stock Exchange (IDX). The data covers the period of 2019-2021. The analysis technique used is data panel regression using e-views. The study uses a panel data design to analyze the effect of operating efficiency, credit risk, and market risk on bank performance.

Results

The results of this study show that there is no significant influence between operational efficiency on bank performance in conventional banks registered in the IDX 2019-2021. Likewise, there is no significant effect between credit risk on the performance of conventional banks listed on the IDX in the same period. However, there is a positive and significant influence between market risk on the performance of conventional banks listed on the IDX for the 2019-2021 period. This shows that increased market risk has a positive impact on bank performance.

Deeper Analysis

Operational Efficiency

The results of this study indicate that operational efficiency has no significant influence on bank performance in Indonesia. This may be caused by several factors, such as:

Efficiency Standards: There may be efficiency standards that have been achieved by banks in Indonesia, so that increasing efficiency no longer has a significant impact on performance.
Internal Factors: Internal factors such as organizational structure, information technology systems, and organizational culture that are not optimal can hamper increased efficiency.
Market Conditions: Competitive and uncertain market conditions can also affect the effectiveness of the efficiency strategies implemented by banks.

Credit Risk

The success of credit risk in influencing bank performance can be caused by several things, such as:

Credit Assessment System: Inadequate credit assessment system can cause banks to provide credit to customers with high risk.
Risk Management: Lack of comprehensive and effective risk management strategies can cause banks to suffer losses due to bad loans.
Economic Conditions: Unstable economic conditions can increase credit risk and affect bank performance.

Market Risk

The positive and significant influence of market risk on bank performance shows that banks in Indonesia can take advantage of opportunities that arise in financial markets. This may be caused by:

Investment Strategy: Banks can take advantage of investment opportunities in financial markets to obtain greater profits.
Risk Management: Bank has an effective risk management strategy to minimize the negative impacts of financial market fluctuations.
Adaptability: Bank has a good ability to adapt to changes in market conditions and take advantage of opportunities that arise.

Implications for Banks

The results of this study have important implications for banks in Indonesia:

Increasing Efficiency: Although operational efficiency does not have a significant influence, banks must still try to increase efficiency to remain competitive and reduce operational costs.
Credit Risk Management: Banks must continue to improve the credit assessment system and implement a comprehensive risk management strategy to minimize losses due to bad loans.
Utilization of Market Risk: Banks must take advantage of opportunities that exist in the financial markets by implementing the right investment strategy and managing risk well.

Suggestion

Further research is needed to examine other factors that can affect bank performance in Indonesia.
Banks in Indonesia need to conduct internal and external analysis to identify factors that hinder bank efficiency and performance.
Banks must continue to innovate in developing products and services that are in accordance with market needs and be able to face increasingly fierce competition.

Resource

Indonesia Stock Exchange (BEI). (N.D.). Retrieved from https://www.idx.co.id/
EViews. (N.D.). Retrieved from https://www.eviews.com/

Conclusion

This study aims to analyze and determine the effect of operating efficiency, credit risk, and market risk on bank performance in Indonesia. The results of this study show that there is no significant influence between operational efficiency on bank performance in conventional banks registered in the IDX 2019-2021. However, there is a positive and significant influence between market risk on the performance of conventional banks listed on the IDX for the 2019-2021 period. The study also provides implications for banks in Indonesia to increase efficiency, manage credit risk, and utilize market risk.
Q&A: Analysis of the Effect of Operations Efficiency, Credit Risk, and Market Risk on Bank Performance in Indonesia

Q: What is the main objective of this study?

A: The main objective of this study is to analyze and determine the effect of operating efficiency, credit risk, and market risk on bank performance in Indonesia.

Q: What type of data was used in this study?

A: The data used in this study is secondary data in the form of an annual bank report listed on the Indonesia Stock Exchange (IDX).

Q: What is the time period covered by the data?

A: The data covers the period of 2019-2021.

Q: What analysis technique was used in this study?

A: The analysis technique used in this study is data panel regression using e-views.

Q: What are the results of this study?

A: The results of this study show that there is no significant influence between operational efficiency on bank performance in conventional banks registered in the IDX 2019-2021. However, there is a positive and significant influence between market risk on the performance of conventional banks listed on the IDX for the 2019-2021 period.

Q: What are the implications of this study for banks in Indonesia?

A: The results of this study have important implications for banks in Indonesia, including:

Increasing efficiency to remain competitive and reduce operational costs
Continuing to improve the credit assessment system and implement a comprehensive risk management strategy to minimize losses due to bad loans
Taking advantage of opportunities that exist in the financial markets by implementing the right investment strategy and managing risk well

Q: What are the limitations of this study?

A: The limitations of this study include:

The use of secondary data, which may not be comprehensive or up-to-date
The focus on conventional banks, which may not be representative of all types of banks in Indonesia
The use of a single analysis technique, which may not capture all the complexities of the relationships between operating efficiency, credit risk, and market risk

Q: What are the suggestions for future research?

A: The suggestions for future research include:

Examining other factors that can affect bank performance in Indonesia
Conducting internal and external analysis to identify factors that hinder bank efficiency and performance
Continuing to innovate in developing products and services that are in accordance with market needs and be able to face increasingly fierce competition

Q: What are the resources used in this study?

A: The resources used in this study include:

Indonesia Stock Exchange (BEI)
EViews

Q: What are the conclusions of this study?

A: The conclusions of this study are that operating efficiency does not have a significant influence on bank performance in Indonesia, but market risk has a positive and significant influence. The study also provides implications for banks in Indonesia to increase efficiency, manage credit risk, and utilize market risk.

Q: What are the recommendations of this study?

A: The recommendations of this study are that banks in Indonesia should:

Increase efficiency to remain competitive and reduce operational costs
Continue to improve the credit assessment system and implement a comprehensive risk management strategy to minimize losses due to bad loans
Take advantage of opportunities that exist in the financial markets by implementing the right investment strategy and managing risk well