Banking Industry Specific and Macroeconomic Determinant of Credit Risk

Hazimi Bimaruci Hazrati Havidz, William Obeng-Amponsah

Credit risk, Non-performing loans, Macroeconomic factor, bank-specific factor, panel data.

This study analyzes the determinants of bank’s credit risk from macroeconomic and bank-specific perspective in Indonesia. The analysis use panel data analysis by employing fixed effect, different GMM and system GMM approach to accommodate lagged determinant variable used in the model. The use of lagged variable in the study is used to analyze the delayed response of bank’s credit risk to its determinant because of the persistence nature in bank’s credit risk. The result shows that bank-specific variable have stronger influence to credit risk compare to macroeconomic variable. Additionally, the study found that banks in this study maintain a prudent management in managing its credit risk thus further explain why bank-specific variable have higher significant compare to macroeconomic variable resulting to bank have more resistance to macroeconomics changes.

10.22161/ijaers.71.1