THE INFLUENCE OF MARKET RISK TOWARDS FINANCIAL PERFORMANCE OF FOREIGN EXCHANGE BANKS IN INDONESIA

Abstract

The banking sector in Indonesia always continues to experience ups and downs. One of the factors that influence the decrease in banking performance is the increase in risk, such as market risk. This study aims to analyse how the market risk affects the financial performance of foreign exchange banks listed on Indonesia Stock Exchange. This study uses a quantitative approach by taking secondary data from 39 foreign exchange banks’ annual reports from 2009 to 2019. The result of this study shows that market risk has a positive and significant effect on foreign exchange banks’ financial performance which measured by net interest margin. The result also shows that the other control variables such as dividend payout ratio, capital adequacy ratio, operating income to operating expenses, and return on asset positively significantly affect the net interest margin of foreign exchange banks in Indonesia.