Factor Affecting the Capital Adequacy Ratio of Banks Listed in Indonesia Stock Exchange

The purpose of this study is to conclude the factors that affect bank capital adequacy ratios. The sample used is 42 banks listed on the Indonesia Stock Exchange in 2015-2019. The analysis method used was panel data regression and using purposive sampling for the sampling technique. The independent variables in this study are loan loss reserves, return on equity, bank size liquidity ratio and loan ratio, and capital adequacy ratio is the dependent variable. The results show that bank size and the return on equity have a positive effect on capital adequacy ratio, while loan ratio has a negative effect on capital adequacy ratio. The liquidity ratio and loan loss reserve have no effect on the capital adequacy ratio. It is expected that the results of this study will provide a reference for companies to understand the factors that affect capital adequacy. Managerial implications: Banking companies are expected to increase the total number of assets held, increase return on equity and reduce bank loan ratios to avoid the risk of bad credit.

FEATURES OF THE FORMATION AND VALUATION OF INSURANCE RESERVES

The purpose of the paper is research of practice of making insurance reserves of the insurance companies in Ukraine and summarizes the ways of improvement of methods for their calculation with the purpose of increasing management efficiency of an organization. The article addresses the characteristics and economic nature of certain types of technical reserves of insurance organizations in particular the unencumbered premiums reserve, the loss reserve and the catastrophe reserve, and the characteristics of their formation. Major methods for calculating the reserve of unencumbered premiums reviewed and recommended adjustment to method 1/36 , and use of the reserve calculation method of unencumbered premiums, which takes into account inflation ratio. The method of calculation and formation of the loss reserve is considered as well as the characteristics of the reserve for past but undeclared losses and reserves for asserted but unresolved losses. The system of indicators of sufficiency of insurance reserves of insurance organizations was analyzed; the calculation formulae and recommended values are given. Insurance reserves sufficiency ratios refers to the status of insurance reserves and determine the adequacy of insurance reserves to the risks taken into insurance. Sufficiency ratio (based on premiums) and sufficiency ratio (based on payments) determine, respectively, the upper and lower limits of insurance reserves. For conducting research and substantiation of relevant conclusions, the indicators of dynamics and structure of insurance reserves of insurance company JSC IC “INGO” are analyzed. Sufficiency ratios for insurance reserves of JSC IC “INGO” are also calculated and Evaluation of the company’s insurance reserves has been performed. The results of the study can be applied by the heads of the financial divisions of insurance companies for the development of tactical and strategic decisions that allows to yield optimal condition of insurance reserves and their reliable valuation of insurance company and to perform the quick analysis of the state of insurance reserves of insurance company.

Property-Liability Insurers’ Discretionary and Nondiscretionary Loss Reserve Error: Relation with Investor Sentiment

We examine whether investor sentiment is associated with loss reserve estimates of property-liability (P/L) insurers. Using the Michigan Consumer Confidence Index as a proxy for sentiment, we find that the level of investor sentiment is negatively associated with discretionary component of loss reserve error. In contrast, our evidence does not suggest a similar relationship hold for investor sentiment and nondiscretionary loss reserve error. Further analysis indicates that stock insurers are more sensitive to investor sentiment than mutual insurers, in terms of discretionary component of loss reserves. The results are consistent with our hypothesis that P/L insurers cater to investors’ optimism (pessimism), driven by investor sentiment, via discretionary loss reserve claims. For robust test, we also measure investor sentiment by using two alternative proxies: the Conference Board Consumer Confidence Index, and the index in the stock market developed by Baker and Wurgler (2006, 2007). The results are consistent. Our study discovers a new rationale for why insurers may use discretion over their loss reserves.

FAKTOR-FAKTOR YANG MEMPENGARUHI PROFITABILITAS PERBANKAN SYARIAH DI INDONESIA DAN MALAYSIA (Meta-Analisis Penelitian di Indonesia dan Malaysia Tahun 2010-2016)

This study focuses upon the influence between banking internal factors and economic macro on the Islamic banking profitability in Indonesia and Malaysia of the last seven years researches to determine profitability predictor variables of them. Meta-analysis techniques developed by Hunter et al. (1982) were performed to some existing studies. Profit and loss sharing financing and interest rates of BI have a significant correlation to the Indonesia Islamic banking profitability, while the Capital Adequacy Ratio (CAR), Non Performing Financing (NPF), Financing to Deposit Ratio (FDR), and inflation have nosignificant correlation. Meta-analysis result of Islamic banking in Malaysia shows that total asset, loan to total asset, equity to total asset, expenses management, loan loss reserve to gross loan, and money supply (M2) have a significant correlation to the profitability of Malaysia Islamic Banking, whilst liquidity (liq) and GDP have no significant correlation.