Title: Banking efficiency and performance: a test of banking characteristics in an emerging market

Authors: M. Yasser Arafat; Ari Warokka; Agung D. Buchdadi; Suherman

Addresses: Faculty of Economics, State University of Jakarta, Jakarta 13220, Indonesia ' Othman Yeop Abdullah Graduate School of Business, Universiti Utara Malaysia, 06010 Malaysia; MM Program, Gd. KH Dewantara, Lt. 5, Kampus A, Universitas Negeri Jakarta, Jakarta 13220, Indonesia ' Faculty of Economics, State University of Jakarta, Jakarta 13220, Indonesia ' Faculty of Economics, State University of Jakarta, Jakarta 13220, Indonesia

Abstract: This study is to test the performance of Indonesian banks in the most-stable considered period, 2005-2007, after having the worst crisis in the Indonesian banks' history, the Asian Financial Crisis 1997-1998. By using Return on Asset (ROA), Return on Equity (ROE), and Net Interest Income to Total Asset (NIITA) as the proxies for bank performance and Non Performing Loan (NPL) as the proxy for bank efficiency, we investigated 25 Indonesian banks for three consecutive years and applied multivariate regression analysis to test the proposed hypotheses. The results revealed the bank characteristics play important roles to determine the bank's performance measurement; however, those variables have less influence on the bank efficiency measurement. This empirical phenomenon has opened an interesting analysis on the behaviour of banking industry in the emerging markets, which differs from the common findings in the developed markets.

Keywords: banking industry; bank efficiency; bank characteristics; ROA; return on assets; ROE; return on equity; NPL; non performing loans; bank performance; NIITA; emerging markets; Indonesia; performance measurement.

DOI: 10.1504/JGBA.2013.053475

Journal for Global Business Advancement, 2013 Vol.6 No.1, pp.13 - 23

Available online: 25 Apr 2013

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