i
A COMPARATIVE STUDY OF BANK FAILURE RISK IN AUSTRALIA, CHINA, INDONESIA, JAPAN, MALAYSIA, SOUTH KOREA, SPAIN,
AND THAILAND BANKING INDUSTRY
COVER PAGE
UNDERGRADUATE THESIS
Submitted to Complete the Requirement to Achieve Bachelor of Economics Degree in Sebelas Maret University
Submitted by:
ARDYNA RAHMITA DEWI NIM: F0312020
ACCOUNTING DEPARTMENT ECONOMICS AND BUSINESS FACULTY
SEBELAS MARET UNIVERSITY SURAKARTA
ii ABSTRAK
A COMPARATIVE STUDY OF BANK FAILURE RISK IN AUSTRALIA, CHINA, INDONESIA, JAPAN, MALAYSIA, SOUTH KOREA, SPAIN,
AND THAILAND BANKING INDUSTRY
Oleh:
ARDYNA RAHMITA DEWI F0312020
Penelitian ini bertujuan untuk mengetahui pengaruh Risiko Kegagalan pada Bank yang diwakili oleh variable Risk dengan Z-score, ukuran bank yang diwakili oleh Size dengan total aset pada bank, modal bank yang diwakili oleh Capital dengan rasio modal tier-1 terhadap aset tertimbang risiko, cakupan bank yang diwakili oleh Scope dengan rasio pendapatan lain-lain terhadap total pendapatan, pengambilan uang secara bersama-sama yang diwakili oleh Run dengan rasio liabilitas jangka pendek terhadap total liabilitas, dan praktek fractional-reserve yang diwakili oleh Practice dengan rasio kas terhadap total aset. Penelitian ini dilakukan di delapan negara berdasarkan GDP, yaitu Australia, Tiongkok, Indonesia, Jepang, Malaysia, Korea Selatan, Spanyol, dan Thailand. Sampel yang digunakan sebanyak 436 data annual report dari masing-masing bank yang terdaftar di bursa efek negara-negara tersebut periode 2011-2014. Hasil penelitian menunjukkan jika risiko kegagalan di bank berbeda di tiap-tiap negara, yang paling berisiko adalah Spanyol dan yang paling tidak berisiko adalah Tiongkok. Uji hipotesis menujukkan jika variabel-variabel yang mempengaruhi risiko kegagalan bank adalah ukuran bank dan pengambilan uang secara bersama-sama di bank dengan signifikansi 1% dan modal bank dengan signifikansi 10%.Variabel-variabel lain, yaitu cakupan bank dan praktik fractional-reserve tidak mempengaruhi risiko kegagalan pada bank.
iii ABSTRACT
A COMPARATIVE STUDY OF BANK FAILURE RISK IN AUSTRALIA, CHINA, INDONESIA, JAPAN, MALAYSIA, SOUTH KOREA, SPAIN,
AND THAILAND BANKING INDUSTRY
By:
ARDYNA RAHMITA DEWI F0312020
The objective of this research is to determine the effect of bank failure risk in banking industry. Bank failure risk is represented with Z-score, bank size with total assets in banks, bank capital represented with tier-1 capital to risk weighted assets ratio, bank scope represented with other operating income to total revenue ratio, bank run represented with short term debt to total debt ratio, and bank practice represented with cash to total assets ratio. This study is conducted in eight countries: Australia, China, Indonesia, Japan, Malaysia, South Korea, Spain, and Thailand. The sample used is 436 annual report data from each listed bank in each countries periods 2011-2014. This study results show that bank failure risk is different in each GDP rates, the riskier countries is Spain while the least riskier is China. The hypothesis testing show variables that affecting bank failure risk are bank size and bank run with 1% significance and bank capital with 10% significance. Other variables, bank scope and bank practice are not affecting bank failure risk.
iv
HALAMAN PENGESAHAN
A COMPARATIVE STUDY OF BANK FAILURE RISK IN AUSTRALIA, CHINA, INDONESIA, JAPAN, MALAYSIA, SOUTH KOREA, SPAIN,
AND THAILAND BANKING INDUSTRY
Created by:
ARDYNA RAHMITA DEWI NIM: F0312020
Approved and Authorized by the Examiners Team On June 2016
Chairman : Drs. Agus Budiatmanto M.Si.,Ak ________ NIP. 195912161990031001
Secretary : Ibrahim Fatwa Wijaya S.E., M.Sc ________ NIP. 198307172014041001
Supervisor : Agung Nur Probohudono, SE., M.Si., PhD, Ak, CA ________ NIP. 19830204 2008011003
Ascertain,
Head of Accounting Department
v
HALAMAN PERSETUJUAN PEMBIMBING
A COMPARATIVE STUDY OF BANK FAILURE RISK IN AUSTRALIA, CHINA, INDONESIA, JAPAN, MALAYSIA, SOUTH KOREA, SPAIN,
AND THAILAND BANKING INDUSTRY
Skripsi
Created by: Ardyna Rahmita Dewi
NIM: F0312020
Approved by Advisor On May 30th, 2016
Supervisor,
Agung Nur Probohudono, SE., M.Si., PhD, Ak NIP. 19830204 200801 1 003
Ascertain,
Head of Accounting Department
vi
NIP. 196909241994021001 STATEMENT OF ORIGINALITY
The undersigned is a student of Economics and Business Faculty, Universitas Sebelas Maret:
Name : Ardyna Rahmita Dewi Student ID : F0312020
Department : Accountancy
Skripsi Title : A Comparative Study of Bank Failure Risk in Australia, China, Indonesia, Japan, Malaysia, South Korea, Spain, and Thailand Banking Industry
Declares that this skripsi has not previously been submitted for a degree or diploma in any institution. To the best of my knowledge and belief, this skripsi contains no material previously published or written by another person except where due reference is made in this skripsi itself.
Surakarta, May 30th 2016
vii QUOTES
“Under the flower petals raining down I run, so lost in this maze. Even if I fall and hurt, I’ll endlessly run after my dreams”
(Bangtan Boys, Young Forever)
“Even when our eyes are closed, there's a whole world that exists outside
ourselves and our dreams”
(Hiromu Arakawa)
“Don't just give up, life is about getting knocked down over and over, but still
getting up each time. If you keep getting up, you win”
(Ai Yazawa)
“Fear is not evil. It tells you what you weakness is. And once you know your
weakness, you can become stronger as well as kinder”
viii DEDICATION
With all my admiration, honesty, perseverance, determination, and love, I dedicate this skripsi to all people related to me for their forbearance, attention,
support, and affection. To my parent. To my big brother.
ix
ACKNOWLEDGEMENT
Assalamualaikum Wr. Wb.
My greatest gratitude to Allah SWT for Thy blessing and hidayat so I can finish this skripsi. It was a long journey for me to come this far in my life and I cannot be more grateful for the courage Thy give to me so I can become a better person this day. After years acting like a little kid who seems like she will never grow up, here I come to my best position in 21 years of my life. It still feel like a dream for achieving this greatest part of my life.
My deepest gratitude is to my skripsi supervisor, Agung Nur Probohudono, S.E., M.Si., Ph.D., Ak., CA, I have been fortunate to have him as my supervisor and motivator for his patience and support that helped me finish this skripsi. My deepest gratitude also for my academic supervisor Mr Payamta for his advice to me in my recent 4 years as student of Faculty of Economics and Business Universitas Sebelas Maret.
I would like to acknowledge Prof. Dr. Ravik Karsidi, M.Si., Head of Universitas Sebelas Maret, Dr. Hunik Sri Runing Sawitri, M.Si., Dean of Faculty of Economics and Business Universitas Sebelas Maret, and Drs. Santosa Tri Hananto, M.Si., Ak., Head of Accounting Department Faculty of Economics and Business Universitas Sebelas Maret.
My organizations during my time here, P4M Faculty of Economics and Business Universitas Sebelas Maret. UKM Taekwondo UNS, thank you for Sabeumnim Alim Rojaya, coach of UKM Taekwondo UNS for his advice every time after practice, and all my friends who fight and learn on how to get stronger without losing our kindness. We all learn together on how to use the power not for harm others but to protect those we love. My superhero team, class A Accounting 2012, all hero comes from beneath, that’s what I learn in class. We’re not try to stand up high alone, we try together as a team and overcome every obstacles in front of us.
x
class A until the very end and some of you were leave, but it always be the same class A I ever known since my first year in accounting department.
My best friends in my life, Dyah and Yeriz for their kindness and lovely behavior, thank you for always be there for me even though I can’t be the perfect friend for all of you. A lot of things happen between us before we start to call each other ‘best friends’, we start it at our first year in UKM Taekwondo, not knowing each other and no one can predict that we can be a very good friend now.
I am indebted to my family for their patience and support. For my father, from him I learn on never let any obstacles distract my life. It is better to face on those obstacles and never be a coward who never try to challenge herself. Life is not easy for me, but so do other people. I am scared, but so do other people. Why spending time only to think of what will happen if we never going through the obstacles when try hard and fight for it is easier to do. For my mother, from her I learn on how I should keep my patience. I know that I am not a person who will wait for 3 minutes on my noodles, but she always tell me to eat well and stop eating un-cooked noodles. From her I learn on how to keep my health, since it is the second best gift I ever had in my life–the first is my family and my friends all around me. For my big brother, from him I learn on how we should care each other. Sometimes I feel like I am not a good sister because I am ignoring him too much. But the best thing is that he never ignore me. He never forget to give me snacks whenever he buys some for himself, he also will help me when I have difficulties in a lot of things. Thank you for all my family, my father, my mother, and my big brother especially.
All those who helped me during my college time that cannot be mentioned one by one. Thank you so much for your support, I really appreciate all of it. Wassalamualaikum Wr Wb.
Surakarta, Thursday 19th May 2016
xi CONTENTS
COVER PAGE ... i
ABSTRAK ... ii
ABSTRACT ... iii
HALAMAN PENGESAHAN ... iv
HALAMAN PERSETUJUAN PEMBIMBING ... v
STATEMENT OF ORIGINALITY ... vi
QUOTES ... vii
DEDICATION... viii
ACKNOWLEDGEMENT ... ix
CONTENTS ... xi
TABLE LIST ... xiv
FIGURE LIST ... xv
APPENDIX LIST ... xvi
CHAPTER I INTRODUCTION ... 1
1.1.Research Background ... 1
1.2.Research Questions ... 6
1.3.Research Objectives ... 7
1.4.Research Contribution ... 7
1.5.Research Originality ... 8
1.6.Research Systematics ... 9
CHAPTER II LITERATURE REVIEW ... 11
2.1.Prospect Theory ... 11
2.2.GDP ... 12
2.3.What is Bank? ... 13
2.3.1.Banking Industry ... 15
2.3.2.The Balance Sheet (Report of Condition) and The Income Statement ( Report of Income) ... 17
2.4.Bank Risk ... 19
xii
2.6.Bank Risk Based Capital Requirement ... 23
2.7.Bank Scope ... 24
2.8.Bank Run ... 25
2.9.Banking practice ... 25
2.10.Good Corporate Governance ... 26
2.11.Bank Financial Performance ... 27
2.12.Hypothesis Development ... 29
2.13.Research Framework ... 41
CHAPTER III METHODOLOGY ... 42
3.1.Research Design ... 42
3.2.Data Source ... 42
3.3.Research Population and Research Sample ... 44
3.4.Operational Definition and Variable Measurement ... 46
3.4.1.Operational Definition of Variable ... 46
3.4.2.Definition and Dependent Variable Measurement ... 46
3.4.3.Definition and Independent Variables Measurement ... 48
3.5.Data Testing ... 53
3.6.Data Processing ... 55
3.6.1.Descriptive Statistics ... 55
3.6.2.Data Normality Test... 56
3.6.3.Classic Assumption Tests ... 57
3.6.4.Panel Data Regression ... 59
CHAPTER IV EMPIRICAL RESULT ... 63
4.1.Data Collection Result ... 63
4.2.Descriptive Statistics ... 64
4.3.Classic Assumption Test ... 73
4.3.1.Normality Test ... 74
4.3.2.Correlation (Pair-Wise Correlation) ... 75
4.3.3.Autocorrelation (Durbin-Watson) ... 75
4.3.4.Multicollinearity (VIF Test) ... 76
xiii
4.4.Panel Data Processing ... 77
4.4.1.Chow Test ... 79
4.4.2.Hausman Test ... 80
4.5.Kruskall Wallis Test ... 81
4.6.Panel Data Regression and Hypothesis Test ... 82
4.6.1.Panel Data Regression ... 82
4.6.2.Hypothesis Test ... 90
4.7.Discussion ... 92
4.7.1.The Relationship Between Bank Size to Bank Failure Risk ... 92
4.7.2.The Relationship Between Bank Capital to Bank Failure Risk ... 93
4.7.3.The Relationship Between Bank Scope to Bank Failure Risk ... 95
4.7.4.The Relationship Between Bank with High Potential to Run to Bank Failure Risk ... 97
4.7.5.The Relationship Between Fractional-Reserve Banking Practice to Bank Failure Risk ... 99
4.7.6.The Relationship of Size, Capital, Scope, Run, and Practice with Bank Failure Risk in Each Level of GDP Country ... 102
CHAPTER V CONCLUSION ... 106
5.1Conclusion ... 106
5.2Limitation ... 109
5.3Recommendation ... 109
5.4Implication ... 111
REFERENCES ... 112
xiv TABLE LIST
Table 2.1 Risk Based Capital Ratio... 24
Table 3.1 List of Stock Exchange... 43
Table 4.1 Descriptive Statistics of Bank Risk based on Countries... 64
Table 4.2 Descriptive Statistics Comparison Each Variables Panel Data... 67 Table 4.3 Descriptive Statistics Dependent and Independent Variables Each Year... 71 Table 4.4 Correlation Matrix... 75
Table 4.5 Multicollinearity Matrix... 76
Table 4.6 Heteroscedasticity Test Result... 76
Table 4.7 Chow Test... 79
Table 4.8 Hausman Test... 80
Table 4.8.1 Kruskall Wallis Rank Each Countries... 81
Table 4.8.2 Kruskall Wallis Test Result... 81
Table 4.9 Regression Result Panel Data... 82
Table 5.0 Regression Result Transformed Panel Data... 83
Table 5.1 Regression Result Panel Data in Small GDP Countries... 84 Table 5. 2 Regression Result Transformed Panel Data in Small GDP
Countries... 85
Table 5.3 Regression Result Panel Data in Medium GDP
Countries...
86
Table 5.4 Regression Result Transformed Panel Data in Medium GDP Countries...
87
Table 5.5 Regression Result Panel Data in High GDP
Countries... 88
Table 5.6 Regression Result Transformed Panel Data in High GDP Countries...
xv
FIGURE LIST
xvi
APPENDIX LIST
Appendix 1 Data from Higher Level GDP Countries... 1
Appendix 2 Data from Medium Level GDP Countries... 6
Appendix 3 Data from Lower Level GDP Countries... 9
Appendix 4 GDP Rates... 15
Appendix 5 Currency Rates... 17
Appendix 6 Regression Panel Data... 19
Appendix 7 Regression Panel Data in Small GDP Countries... 20
Appendix 8 Regression Panel Data in Medium GDP Countries... 21
