Operational Efficiency and Non-Performing Loans: The Mediating Role of Net Interest Margin

DOI

10.2991/978-94-6463-508-9_18How to use a DOI?

Keywords

Operational Efficiency Ratio; Non-Performing Loans; Net Interest Margin

Abstract

This study investigates the relationship between the level of bank operational efficiency ratio (OER) and Non-Performing Loans (NPL) while considering Net Interest Margin (NIM) as a mediating variable. The research findings reveal that OER has a positive influence on NPL, indicating that high bank operational costs can increase credit risk and NPL. Additionally, OER also negatively impacts NIM, emphasizing the importance of controlling operational costs in maintaining the bank’s profitability. Furthermore, the study finds that a higher NIM contributes to an increase in NPL, suggesting that banks may be making efforts to boost interest income by extending loans to riskier borrowers. Moreover, NIM mediates the relationship between OER and NPL, affirming that OER affects NPL not only directly but also through its influence on NIM. Despite providing valuable insights, this research has limitations in its use of secondary data and regression models. Therefore, further research could explore additional variables, consider moderating factors, and expand the sample of banks for more generalized results. The outcomes of this research can assist banks in developing effective credit risk management strategies, optimizing operational cost control, and achieving a balance between profitability and sound credit risk management.

Copyright

© 2024 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - I Kadek Bagiana
AU  - I Gede Cahyadi Putra
AU  - Kadek Indah Kusuma Dewi
AU  - Luh Putri Mas Mirayani
AU  - R. R. Maria Yulia Dwi Rengganis
PY  - 2024
DA  - 2024/09/19
TI  - Operational Efficiency and Non-Performing Loans: The Mediating Role of Net Interest Margin
BT  - Proceedings of the Twelfth International Conference on Entrepreneurship and Business Management 2023 (ICEBM 2023)
PB  - Atlantis Press
SP  - 217
EP  - 224
SN  - 2667-1271
UR  - https://doi.org/10.2991/978-94-6463-508-9_18
DO  - 10.2991/978-94-6463-508-9_18
ID  - Bagiana2024
ER  -