: Determinants of Efficiency: Asset Diversification, Risk, Bank Size,
and Liquidity

: Determinants of Efficiency: Asset Diversification, Risk, Bank Size,
and Liquidity

Asset diversification; Bank size; Efficiency; Liquidity; Risk.

Banking plays an important role in the economy both micro and macro. In addition, it is crucial for a
country to have a strong and robust banking system. To realize a strong and robust banking banks need
to maintain their efficiency. Therefore, it is necessary to identify the factors that affect efficiency,
including asset diversification, risk, bank size and bank liquidity. The sample of this research are
conventional banks with a total of 10 banks that have the largest share of assets in Indonesia. In this
study to identify the effect of asset diversification, bank risk, bank size, and bank liquidity on bank
efficiency used multiple linear regression analysis methods were used. This study concludes that asset
diversification actually reduces bank efficiency. The increased bank risk, the better efficiency. Then, the
size of the bank and liquidity have no effect on efficiency. Therefore, banks need to review the
diversification strategy, ensure that the risks associated with each asset and portfolio as a whole are
well-identified and look for opportunities to automate repetitive processes and reduce overall
operational costs.

Citra Rahayu Indraswari, Kartika Sari

https://jurnal.unmer.ac.id/index.php/jkdp/

Department of Finance and Banking, Faculty of Economics and Business, Universitas Brawijaya

2023-06-15

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