REVENUE DIVERSIFICATION, PERFORMANCE, AND BANK RISK: EVIDENCE FROM INDONESIA
UNDERGRADUATE THESIS Compiled to Fulfill the Requirements to Achieve Bachelor of Economics Degree in Universitas Sebelas Maret
By: MUTIARA NUR HAFIDIYAH F0212075
FACULTY OF ECONOMICS AND BUSINESS UNIVERSITAS SEBELAS MARET SURAKARTA 2016
REVENUE DIVERSIFICATION, PERFORMANCE, AND BANK RISK: EVIDENCE FROM INDONESIA
UNDERGRADUATE THESIS Compiled to Fulfill the Requirements to Achieve Bachelor of Economics Degree in Universitas Sebelas Maret
By: MUTIARA NUR HAFIDIYAH F0212075
FACULTY OF ECONOMICS AND BUSINESS UNIVERSITAS SEBELAS MARET SURAKARTA 2016
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ABSTRAK REVENUE DIVERSIFICATION, PERFORMANCE, AND BANK RISK : EVIDENCE FROM INDONESIA Oleh: MUTIARA NUR HAFIDIYAH F0212075 Penelitian ini bertujuan untuk menguji pengaruh diversifikasi pendapatan bank pada kinerja bank dan risiko bank konvensional di Indonesia. Data dalam penelitian ini menggunakan data sekunder dari laporan keuangan bank yang dipublikasi oleh Bank Indonesia. Sample data yang digunakan adalah data keuangan bank pada tahun 2010-2014, kecuali 1) bank yang melakukan merger dan akuisisi, 2) bank yang memiliki informasi tidak komplit, dan 3) bank yang memiliki ekuitas negatif. Jumlah sample sebanyak 101 bank dengan jumlah observasi sebanyak 505 observasi. Hasil dari penelitian ini dapat disimpulan bahwa: 1) diversifikasi pendapatan menurunkan kinerja bank. Masing-masing sumber pendapatan nonbunga bank tidak terbukti meningkatkan kinerja bank. Hanya bank campuran yang mendapat manfaat dari diversifikasi pendapatan bank, 2) diversifikasi pendapatan meningkatkan risiko bank. Pendapatan lainnya terbukti menurunkan risiko bank. Bank BUMN menunjukkan penurunan risiko ketika diversifikasi pendapatannya meningkat dan bank campuran menunjukkan peningkatan risiko dibandingkan dengan bank lainnya ketika diversifikasi pendapatannya meningkat.
Keywords: revenue diversification, bank performance, bank risk, conventional bank
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ABSTRACT REVENUE DIVERSIFICATION, PERFORMANCE, AND BANK RISK: EVIDENCE FROM INDONESIA By: MUTIARA NUR HAFIDIYAH F0212075 This study examines the effect of revenue diversification to bank performance and bank risk by conventional commercial banks in Indonesia. This study uses data banks’ financial statements, which is published by Bank Indonesia. Our sample consists of 101 banks over the period of 2010-2014, except 1) banks that have been merged and acquired, 2) banks with incomplete information, and 3) banks with negative equity. It results in 505 bank year obeservations. The results show that: 1) revenue diversification decrease bank performance but each revenue source do not contribute to increasing bank performance, and only joint venture banks that can get benefit from revenue diversification, 2) revenue diversification increases bank risk. Moreover, other revenue contributes to the decrease bank risk. Furthermore, state-owned banks shows risk reducing when they are more diversified, while joint venture banks is more risky than other bank in Indonesia when they are diversified. Keywords: revenue diversification, bank performance, bank risk, conventional bank
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HALAMAN MOTTO
Sesungguhnya sesudah kesulitan itu ada kemudahan. Maka apabila kamu telah selesai (dari suatu urusan). Kerjakanlah dengan sungguh-sungguh (urusan) yang lain. Dan hanya kepada Tuhanmulah kamu berharap. (Q.S Al Insyirah: 6-8)
Pendaki yang sampai ke puncak hanyalah yang tangguh. Pejuang yang sampai ke kesuksesan, hanyalah yang sabar. Dan kita diberi pilihan, menjadi manusia yang mudah rapuh oleh tantangan, atau justru menghebat seiring hebatnya rintangan. Percayalah, badai selalu menyisakan pohon-pohon terkuat (Ahmad Rifa’i Rif’an)
Do the best and Allah will do the rest (Mutiara) I can do it, because i believe that i can do it (Mutiara)
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DEDICATIONS
1. To my beloved parents 2. My little brother and my little sister 3. My best supervisor, Mr Irwan Trinugroho, S.E., M.Sc, PhD. Thank you for giving me a chance to upgrade my self
4. My future husband 5. ECLIPSE crew (especially Sari, Giza, Rahmi) 6. My gengs ONA (Ana, Lusi, Ganta, Lia, Arik, Dan Aan) 7. My friends in Kos Bidadari (Lita, Andra, Vita) 8. My sister in Kos Tazkia (Arum, Fatia, Sonia, Widya) 9. Kos Ira Permai crew (Olif, Mbak Fatma, Mbak Ranti, Lia) 10. My sister and dan my best partner Stasionerita Purna Cita, keep fighting! We can achieve our dream.
11. My special friends Dhita Sari, Stasionerita Purna Cita, Talita Failasufa, Fatimah Savira, and Sugeng Riyadi.
12. My friends Tri Brother (Adit, Oscar, Bepe) 13. My friend in Finance class of 2012, Management B 2012, and Management 2012
14. My team in PSM “Bank Key” 15. All my partner in business plan competition, business case competition, and other competition. Keep productive
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16. HRD KEI 2013 crew (Mbak Sheilla, Mas Anam, Mas Hafid, Mas Ari, Mas Tito, Puji)
17. PHT KEI 2014 crew (Mas Fahmi, Mas Fathoni, Mas Widodo, Mas Jodi, Mas Haris, Mas Novandri, Mas luthfi, Ucup, Uzlif, Ishmah, Febriana, Tami, Rosita, Cita, Dwi)
18. PP KEI 2014 crew (Mas Widodo, Mas Sena, Iman, Kemal, Dika, Fitri, Aina, Aini)
19. My friends in HMJM 2013, Kajian Ekonomi Islam 2013 dan 2014, and BPPI 2014
20. My AAI mentor AAI Mbak Sofi, Mbak Vety, and Mbak Sisca. Thank you for always reminds me about the goodness
21. My family in KKN Nitikan (Yusro, Gading, Karina, Dewi, Yuli, Saras, Sukma)
ACKNOWLEDGEMENT First of all, many thanks to Allah SWT for His blessing and guidance, I can do better than yesterday. I also always thank to Muhammas SAW (PBUH) who has guide us to a better living. I really grateful that His blessing is the reason I never give up. Finishing this thesis is my greatest work. I have received help and support from many people. Specially, my extremely grateful to my supervisor, Dr. Irwan Trinugroho for his guidance, help, patience, and encouragement. I also express my gratitude to Mr. Muh Juan Suam Toro, S.E, M.Si, who has guide me and suggest me during my study here. I also express my gratitude to Mrs. Siti Khoiriyah, S.E, M.Si for her support on my business plan competition and gave permission for an internship. I also express my gratitude to Mr. Reza Rahadian, S.E, M.Si for every help. I am indebted to my senior Aldy Fariz Aschanta and Putra Pamungkas for their help who has kindly answer any question and helps when i needed. I would also thank to my fellow Hanin, Agista, Dewanti, and Bima who always be my side through hard times. I am very happy that we make a friendship during a great time doing this undergraduate thesis. Thank you for making a mission about graduate together, Stasionerita Purna Cita. I also thank to her who always remind me about my vission and mission, encourage me, and accompanying me during my hard times.
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This thesis would not have been possible without all wish and support from my parents, my little brother, and my little sister. This thesis and my graduation will be the best birthday gift for my father and my self. My gratitude also goes to Mr. Didit Widiatna and team (DSB 4, DSSK, Indonesia Central Bank) who give me a chance to practice and learn about the stability of financial system and trusting me to doing weekly and quarterly bank surveillance report. All your assignment during my internship period give me an insight before I compiled this thesis. My gratitude also goes to many people that I can not mentioned one by one. Finally, I would like to thank my institution, the Faculty of Economics and Business, Universitas Sebelas Maret Indonesia. I have made the best choice to study here.
Surakarta, 21 Maret 2016
Author
TABLE OF CONTENTS Pages COVER ............................................................................................................... i ABSTRAK ............................................................................................................ ii ABSTRACT ......................................................................................................... iii PAGE OF APPROVAL ........................................................................................iv PAGE O LEGALIZATION .................................................................................. v PAGE OF AUTHENTICITY DECLARATION ........................................................vi PAGE OF MOTTO ............................................................................................. vii PAGE OF DEDICATION ................................................................................... viii ACKNOWLEDGEMENT .................................................................................... x TABLE OF CONTENT ........................................................................................ xii TABLE LIST........................................................................................................xv FIGURE LIST .................................................................................................... xvi APPENDIX LIST .............................................................................................. xvii CHAPTER I INTRODUCTION.............................................................................. 1 1.1 Research Background ...................................................................... 1 1.2 Research Question .......................................................................... 7 1.3 Research Objectives ........................................................................ 7
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1.4 Research Contribution...................................................................... 7 CHAPTER II LITERATURE REVIEW ............................................................... 8 2.1 Related Literature ............................................................................. 8 2.2 Research Framework ..................................................................... 11 2.3 Hypothesis ..................................................................................... 12 CHAPTER III RESEARCH METHODOLOGY ................................................ 15 3.1 Variables ........................................................................................ 15 3.2 Definition of Variables .................................................................... 15 1. Revenue Diversification ............................................................ 15 2. Bank Performance .................................................................... 17 3. Bank Risk ................................................................................. 17 4. Control Variables ...................................................................... 17 3.3 Sample and Populations ................................................................ 18 3.4 Empirical Model.............................................................................. 19 3.5 Hypothesis Testing ......................................................................... 20 CHAPTER IV ANALYSIS AND DISCUSSION ................................................ 21 4.1 Data Descriptive ............................................................................. 21 4.2 Statistics Descriptive ...................................................................... 21 4.3 Classical Assumption Test ............................................................. 28
4.4 Hypothesis Testing ......................................................................... 33 4.5 Robustnes Check ........................................................................... 38 4.6 Discussion...................................................................................... 41 CHAPTER V CONCLUSION .......................................................................... 46 5.1 Conclusion ................................................................................ 46 5.2 Limitation .................................................................................... 47 5.3 Recommendation ....................................................................... 47 5.4 Implication .................................................................................. 47 REFERENCES .................................................................................................. 49 APPENDIX
TABLE LIST Pages Tabel I.1 Income Source of Indonesian Bank........................................................5 Tabel I.2 Bank Net Income (in Million Rupiah).......................................................6 Tabel IV.1 Statitics Descriptive .......................................................................... 22 Tabel IV.2 Statistics Descriptive Banks based on Ownership ............................ 25 Tabel IV.3 Correlation Matrix ............................................................................. 28 Tabel IV.4 Autocorrelation Test Result (The Value of Durbin-Watson) ............... 30 Tabel IV.5 Heteroskedasticity Test Result (Park Test) ....................................... 31 Tabel IV.6 Data Normality .................................................................................. 32 Tabel IV.7 Regression Result ............................................................................ 33 Tabel IV.8 Regression Result with the breakdown of Revenue Sources ............ 35 Tabel IV.9 Regression Result based on the type of ownership .......................................................................................................................... 37 Tabel IV.10 Robustness Test ............................................................................. 39 Tabel IV.11 Regression Result using Laeven and Levine Proxy for measure the Revenue Diversification ..................................................................................... 40
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FIGURE LIST Pages Figure 1. Research Framework ........................................................................11
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APPENDIX LIST
Appendix 1. Table of Statistics Descriptive Appendix 2. Table of Assumsion Classic test Appendix 3. Table of Regression Result Appendix 4.Table of Robustness Test Appendix 5. Raw Data Appendix 6. Eviews Output
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