DETERMINANTS OF THE Z-SCORE MODEL IN PREDICTING FINANCIAL DISTRESS USING THE RGEC COMPONENT (EMPIRICAL STUDY OF ISLAMIC COMMERCIAL BANKS IN INDONESIA FROM 2012 TO 2023)

Zakira Amelia Rizki; Rosyid Nur Anggara

doi:10.14421/aawvdy46

Authors

Zakira Amelia Rizki Program Studi Perbankan Syariah, Universitas Islan Negeri Sunan Kalijaga Yogyakarta, Yogyakarta, Indonesia.
Rosyid Nur Anggara

DOI:

https://doi.org/10.14421/aawvdy46

Keywords:

Financial Distress, RGEC, Z-Score, Islamic Commercial Banks, Bank Health, Banking Risk

Abstract

Purpose: The purpose of this study is to examine the effect of RGEC components, as proxied by the variables NPF, FDR, GCG, ROA, and CAR, on the financial distress of Islamic commercial banks during the period 2012-2023 using the Z-score method.

Design/methodology/approach: The type of data used is quantitative data collected using purposive sampling techniques with balanced panel data regression analysis, classical assumption tests, T-tests, and F-tests. The sample in this study consisted of seven Islamic commercial banks in Indonesia for the period 2012–2023, with a total of 84 data points.

Findings: The results of this study indicate that simultaneously, all independent variables have an effect on financial distress. Meanwhile, partially, the results show that the CAR variable has a significant positive effect on financial distress, the GCG variable has a significant negative effect on financial distress, while the NPF, FDR, and ROA variables have no effect on financial distress.

Theoretical Contribution/Originality: This study provides a theoretical contribution by integrating RGEC components and the Z-score method of Čihák and Hesse (2010) in predicting financial distress in Islamic Commercial Banks in Indonesia for the period 2012–2023. The uniqueness of this study lies in the use of a Z-score model that is more relevant to the banking sector and a long observation period.

Research limitation and implication: This study is limited by the relatively small sample size and the use of secondary data. The implication is that the results of this study emphasize the importance of strengthening corporate governance and capital adequacy as measures to prevent financial distress and can be taken into consideration by Islamic banking management and regulators.

Keywords: Financial Distress, RGEC, Z-Score, Islamic Commercial Banks, Bank Health, Banking Risk

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