Bank Competition, Credit Risk, and Foreign Bank Penetration: Empirical Evidence from Indonesia

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Olivia Nuralyza
Niluh Putu Dian Rosalina Handayani Narsa
Dewi Sriani


This study examines the relationship between bank competition and credit risk with foreign bank penetration as a moderating variable. The research sample used was 79 commercial banks listed in the Indonesian Banking Directory published by the Financial Services Authority (OJK) during the 2014-2019 period with a total of 474 observations. The results of this study indicate that the higher the bank's competition, the higher the bank's credit risk, which is in accordance with the competition-fragility theory. Furthermore, from the results of the Moderated Regression Analysis, the results show that foreign bank penetration has not been able to moderate the relationship between bank competition and bank credit risk, however, if it stands as an independent variable on its own, foreign bank penetration will reduce bank credit risk. The results of this study contribute to providing useful information for parties in the banking industry that increasing foreign bank penetration can reduce bank credit risk.

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Author Biographies

Olivia Nuralyza, Department of Accounting, Faculty of Economics and Business, Universitas Airlangga

Olivia Nuralyza is a graduated student from Universitas Airlangga majoring in Accounting.

During her active years as a student, she was a member of Paduan Suara Universitas Airlangga for a few years, and was an active member of the Accounting Major. She is interested in cost accounting, management accounting and banking, and thus the topic for her research paper is in the field of banking and its market. Currently she is working in accounting and finance department at a manufacturing company in West Java.

Dewi Sriani, Department of Accounting, Faculty of Economics and Business, Universitas Airlangga

Dewi Sriani is a lecturer at Department of Accounting, Universitas Airlangga since 2019. She earned her master degree at Universitas Indonesia and Vrije Universiteit Amsterdam, Netherlands. Her research interest is in the area of sustainability reporting, integrated reporting, and financial reporting.  Currently, she also involves in sustainability research project. She already published some articles in  international reputable journals, such us, Heliyon and have joint research collaboratively with foreign scientist.


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