Overview

Original Research

ANALYSIS OF INFLUENCE OF BANK SPECIFIC FACTORS ON THE INTRINSIC VALUE A CASE STUDY ON BANKING IN INDONESIA

ELFI HERLINA 1, KHAIRA AMALIA FACHRUDDIN 2, and RINA BR BUKIT 3.

Vol 19, No 04 ( 2024 )   |  DOI: 10.5281/zenodo.11071123   |   Author Affiliation: Student, Master of Property Management and Valuation, Universitas Sumatera Utara, Indonesia 1; Lecturer, Master of Property Management and Valuation, Universitas Sumatera Utara, Indonesia 2; Lecturer, Master of Property Management and Valuation, Universitas Sumatera Utara, Indonesia 3.   |   Licensing: CC 4.0   |   Pg no: 629-640   |   Published on: 26-04-2024

Abstract

This study aimed to determine the factors that affect the intrinsic value of banks in Indonesia. The intrinsic value in this study is determined using the discounted method of free cash flow to equity (FCFE). The population in this study were 39 banking companies listed on the Indonesia Stock Exchange during the research period 2015 - 2019. Panel data regression is conducted as a statistical testing tool. The test results in this study indicate that credit risk, profitability, and bank leverage insignificant effect on the intrinsic value of banks in Indonesia. However, cost-efficiency and bank stability negatively affect intrinsic value, while bank size positively affects intrinsic value. This study's findings confirm that banks' intrinsic value is strongly influenced by the managerial ability to perform cost-efficiently and preserve bank stability. The results of this study are valuable for banking practitioners and regulators to identify factors that influence the intrinsic value of banks.

Keywords

Credit Risk, Bank Stability, FCFE, Intrinsic Value, Fixed Effect.