Main Effects and Interaction Effects of Bank Ownership Types and Bank Core Capital Category to The Bank NPL Performance

Credit management capability is seen as a crucial aspect for banks sustainability. The variable that is directly related to bank credit risk is a non-performing loan (NPL) which is commonly used to assess the asset quality of a bank. The purpose of this research is to analyze main effects and interaction effects of bank ownership types and bank core capital category (BUKU) to the bank NPL performance. The study was conducted using secondary data obtained from bank quarterly reports from the Financial Services Authority (OJK) through the website ojk.go.id, bank �inancial reports, and infobank magazine. Bank’s performance in the classi�ication of bank ownership types and bank core capital category were evaluated with respect to bank’s NPL which in this case is used as indicator of the bank’s performance. Tests were performed using TWO WAY ANOVA and Post Hoc Test. The �indings of this study found that the main effect type of bank ownership had a signi�icant effect on the performance of NPLmanagement, themain effect of banks’ BUKU had no signi�icant effect on the performance of NPL management and the interaction effect of bank type and banks’ BUKU had a signi�icant effect on the performance of NPL management. INTRODUCTION As a developing country, Indonesia needs banks as facilitators in channeling funds. The role of banks as �inancial intermediaries is very important so that credit distribution grows stably (Gurley, Shaw & Enthoven, 1960; Diamond D, 1984)). Banks are crucial institutions for turning the wheels of the economy (Global Association of Risk Professionals, 2005; Global Association of Risk Professionals, 2006). Indonesian credit distribution grew by an average of 7.09% for Commercial Banks with the latest Main Effects and Interaction Effects of Bank Ownership Types and Bank Core Capital Category to The Bank NPL Performance Fongnawati Budhijono Universitas Prasetiya Mulya, DKI Jakarta 12430, Indonesia Copyright © 2021 Authors. This is an open access article distributed under the Creative Commons Attribution License (CC-BY-SA 4.0) which permits use, distribution and reproduction in anymedium, provided the original work is properly cited & ShareAlike terms followed.


INTRODUCTION
As a developing country, Indonesia needs banks as facilitators in channeling funds. The role of banks as �inancial intermediaries is very important so that credit distribution grows stably (Gurley, Shaw & Enthoven, 1960;Diamond D, 1984) Keuangan, 2019c). The provision of credit by banks has also experienced an even development in terms of the proportion of credit disbursed. As much 46.48% of the total credit was used for working capital, 27.64% for consumption, and the rest for investment (Otoritas Jasa Keuangan, 2019c). The proportion of credit used has also experienced mixed growth over the last 5 years, but it has continued to score growth of above 10% and shows the rise of aggregate credit growth since 2018. Credit growth of 10% on average in the last 5 years is a glimpse of the potential of Indonesian people who are not all familiar with bank institutional instruments (Otoritas Jasa Keuangan, 2019e).
With the strategic role of the bank, in order to maintain its survival banks must have a good performance (SE BI No. 13/24/DPNP). The survival of the bank has received serious attention from all stakeholders, especially because most of the fund assets in the bank come from third party funds or funds originating from the deposits of their customers. Bank failure could affect depositors, and cause spillovers both domestic and international markets (Sugiarto, 2016;Sugiarto, Nursiana Adinoto, Budhijono Fongnawati, 2018).
As an industry that inherently carries risks that cannot be eliminated as a whole, banks operating in Indonesia are closely monitored by Bank Indonesia (BI) and the Indonesian Financial Services Authority (OJK), which are the agencies appointed by the Indonesian government to maintain the stability of the banking industry.
In relation to its function as an intermediary institution, the survival of a bank is highly dependent on its risk management performance (SE BI No.13/23/DPNP/2011 Professionals, 2006).However, the quantitative risk pro�ile only covers credit risk, liquidity risk and market risk, so the risk pro�ile assessment section contains aspects of asset quality, liquidity aspects , and aspects of economic risk factors. Credit risk is undeniably getting serious attention because weak credit management will result in the emergence of liquidity risk and market risk.
Poor credit management will impact on the low ability of banks to generate pro�its. Thus, credit management capability is seen as a crucial aspect for bank sustainability (Diamond, D., & Rajan, R. (2001).
The variable that is directly related to credit risk is a non-performing loan (NPL) which is commonly used to assess the asset quality of a bank (Sugiarto, 2016;Sugiarto, 2017a;. NPL can be used as a proxy for asset quality to be a variable that affects pro�itability because it shows the risk of �inancing, where the high value of the NPL indicates that there is a lot of bad �inancing that affects the pro�itability of the bank Sugiarto & Karnadi Suryadi, 2018;Kohlscheen, Et.al, 2018). A bank will be indicated as a bank with a lot of non-performing loans if it has a high NPL ratio. This needs to be a concern because of the potential for default by credit customers. Asset quality measurement can assess the collectability level of the bank, current, doubtful, or loss. The three levels of collectability are used to measure and prepare the lower limit of reserves that need to be prepared by the bank to be responsible for losses from credit risk.  (Crystal, J.S., Dages G., Goldberg, L.S., 2001;Claessens, S., Demirgüc, -Kunt, A., & Huiinga, H., 2001;Manlagnit, Maria Chelo V., 2011;Lardy, N. R., 2001). With much lower operating costs, foreign banks have been shown to provide lower spreads compared to local banks. Pressure caused by low spreads and operating costs caused local banks to be cornered to seek new sources of income that did not come from lending activities. Capital loans in foreign currencies made through foreign banks give the country a big advantage (Crystal, Dages, & Goldberg, 2001). This indirectly allows countries to obtain foreign exchange capital from international markets (Claessens, S., Demirgüc, -Kunt, A., & Huiinga, H., 2001). The presence of foreign banks can add product variety to the �inancial system and banking transactions with increased competition. Banks that are classi�ied as foreign bank, mixed bank, regional development banks (BPD Bank), state-owned commercial banks (BUMN Bank) and private bank also have their respective characteristics with advantages and disadvantages as well as operating complexities that differ from one another (PBI No. 14/26/PBI/ 2012). The difference in the types of bank ownership will allegedly affect their performance in managing NPL ( Boby, 2019). It is in its own interest to discuss because each level of BUKU has limitations on banking activities that can be carried out. This has an impact on the performance of banks operating in Indonesia as well as their competitive position (Sugiarto, 2017a;Sugiarto, 2017b). The public perception declared that major banks is more dif�icult to bankrupt than smaller banks, implicitly imply that big banks should have better performance than smaller banks, including in their ability to manage non-performing loans (Sugiarto. 2016).
Variations in types of bank ownership and variations in the classi�ication of Commercial Banks based on Business Activities (BUKU) may interact to bring about speci�ic performance including in the management of banks' NPL. Analysis of the interaction of the variable types of bank ownership and the variable classi�ication of commercial banks based on business activities will be novelty in this research.
In the Indonesian laws and regulations governing banking, namely article 5 of Law No. 10 of 1998 (Undang-undang Republik Indonesia Nomor 10 Tahun 1998), there are two types of banks, namely Commercial Banks and Rural Banks (BPR). This research focuses on commercial banks and does not discuss BPR. Related to the �ive types of bank ownership, in this study the researcher used four categories in which banks with foreign and mixed ownership were classi�ied into one category.
The purpose of this research is to analyze the effect of bank classi�ication based on types of bank ownership, the effect of bank classi�ication based on core capital category (BUKU), and the effect of the interaction of types of bank ownership and the category of core capital (BUKU) to the bank NPL performance. This research problem formulation are as follows: 1. Does the classi�ication of the bank based on types of bank ownership affect the performance of the bank's NPL? 2. Does the classi�ication of the bank based on the category of core capital (BUKU) affect the banks NPL performance? 3. Does the interaction of types of bank ownership and the category of core capital (BUKU) affect the bank NPL performance?

LITERATURE REVIEW Financial Intermediary
The main function of a bank is as a �inancial intermediary (Gurley, Shaw & Enthoven, 1960). As a �inancial intermediary, a bank can act as a licensed agent to deposit funds in order to achieve better economies of scale (Leland & Pyle, 1977;Diamond, 1984). Gurley, Shaw & Enthoven (1960) say that this theory was born due to high transaction costs, lack of information when needed, and regulatory methods. The theory deviation from the perfect market as well as the difference in objectives and information between the agent (the person who carries out) and the principal (the person who owns it) can explain transactions that are more expensive than what is triggered in the perfect market theory so that the formation of this intermediary �inancial theory helps at least to explain high transaction costs. The existence of this Financial Intermediary theory produces a solution by establishing an intermediary institution that can provide relevant information when needed with clear regulations and relatively cheaper costs.
In resolving information imbalances, banks can mediate between depositors and borrowers to ensure that the principal deposit is safe and can make a pro�it, while the borrower can receive relatively cheap and fast �inancing against liquidity risk (Leland H., & D. Pyle, 1977); Diamond D. 1984;Otoritas Jasa Keuangan, 2019a). This can reduce liquidity risk based on the selection process for borrowers who have the ability and willingness to repay.
Based on the high transaction cost approach, Fama (1980) argues that in the description of high transaction costs, it is not only transfer costs for other countries' currencies, but there are research and development efforts in changing the nature of assets into opportunities for asset diversi�ication. The approach questions the existence of a method to regulate the circulation of money in economic storage and �inancing that affects the health of the bank, its ability to extend credit and make provisions (Diamond & Rajan, 2001).

Non Performing Loan
A healthy bank is not only measured by pro�itability indicators because the bank itself is a medium facility for people who want to borrow and save so that they have the obligation to handle third party funds responsibly. For the same reason, the banking industry is bound by many regulations. In the banking world, there are several ratios that are commonly used in the banking world, including CAR, NPL, NIM, COR, and LDR (Hutagalung, E.N. Djumahir. & Ratnawati, K.,2013) which comes from published �inancial reports so that management can make judgments related to decision making ( Jonathan Batten & Xuan Vinh Vo.,2019; Kohlscheen, et.al. , 2018).
Non Performing Loan (NPL) is a bank indicator that is useful for assessing the asset quality of a bank. Non Performing Loans (NPL) is the ratio of total non-performing loans to total loans extended by banks. A bank will be indicated as a bank with a lot of non-performing loans if it has a high NPL ratio. This needs to be a concern because of the potential for default by credit customers. Asset quality measurement can assess the collectability level of the bank, current, doubtful, or loss. The three levels of collectability are used to measure and prepare a lower limit of reserves that the bank needs to prepare to be responsible for losses from credit risk. NPL is a credit channeled that is said to be problematic if the repayment is late compared to the planned schedule, or not even at all. The bad impact of this NPL is supported by the �inding that large amounts of non-performing loans can have an unfavorable impact both for the lending bank, the banking industry in general, as well as on the economic life or the country's monetary condition (Prasetyo, W, 2015). NPL is one of the key indicators to assess whether a bank is performing well or not. High NPL on the bank indicates a problem in the bank that if they do not immediately get a solution would jeopardize the bank's condition. With the higher NPL ratio of banks, the level of bank liquidity against third party funds will be lower. Regardless of any factors that cause high NPLs, the bank's inability to manage the NPL indicates the ability of bank management is not promising (Sugiarto, 2016;Sugiarto & Karnadi Suryadi. 2018).

Bank Ownership in Indonesia
The Indonesian banking industry classi�ies the Indonesia recognizes four categories of BUKU Banks, namely BUKU 1, BUKU 2, BUKU 3, and buku 4. A bank categorized as a BUKU 1 is a bank with a core capital of up to IDR 1 trillion, or in other words a bank categorized as a BUKU 1 is a bank with a minimum core capital. A bank that is categorized as a BUKU 2 is a bank that has a core capital of between IDR 1 trillion and IDR 5 trillion.
Bank BUKU 3 has a core capital of between IDR 5 trillion and IDR 30 trillion. Bank BUKU 4 has a core capital of over IDR 30 trillion (SE BI No. 14/37/DPNP/2012). With higher amount of core capital or BUKU classi�ication, a bank will get the right to carry out more business activities, thus creating new opportunities for banks to generate pro�itability (PBI No. 14/26/PBI/2012). Damayanti, P., & Savitri, D. A. M. (2018) found that the bank size and capital adequacy ratio (CAR) has positive effect on the bank pro�itability performance, the higher the capital adequacy ratio (CAR), the better the bank's pro�itability performance. However, the capital adequacy under their study has not been classi�ied into banks BUKU. Growing perception in the community that the large banks go bankrupt more dif�icult than smaller banks, implicitly imply the view that big banks should have better performance than smaller banks, included in the NPL management capacity (Sugiarto. 2016). However Sugiarto (2016) found not enough evidence to conclude that bigger banks with higher core capital classi�ication have better performance than smaller banks with lower core capital classi�ication after the bank's core capital has been classi�ied in banks BUKU.

Hypothesis Development
In this study, three hypotheses were developed to be tested. 1. The classi�ication of the bank based on types of bank ownership affect the performance of the bank's NPL 2. The classi�ication of the bank based on the category of core capital (BUKU) affect the banks' NPL performance 3. The interaction of types of bank ownership and the category of core capital (BUKU) affect the banks' NPL performance

RESEARCH METHOD
The study was conducted using secondary data obtained from bank quarterly reports from the Financial Services Authority (OJK) through the website ojk.go.id, bank �inancial reports, and infobank magazine. In this research, there are four classi�ications related bank core capital (BUKU), namely: • Core capital of less than IDR 1 trillion (BUKU 1) code 1 • Core capital of IDR 1 trillion up to below IDR 5 trillion (BUKU 2) code 2 • Core capital IDR 5 trillion up to below IDR 30 trillion (BUKU 3) code 3 • Core capital more than IDR 30 trillion (BUKU 4) code 4 In this research, there are 13 classi�ications related to interaction of bank ownership types and bank core capital (BUKU), as shown in Table  1 below.

RESULTS AND DISCUSSIONS
The test results have gone through ful�illing the assumptions of the analytical tools used. Table 2 below presents descriptive statistics of bank ownership types and bank BUKU.

Fongnawati Budhijono / Main Effects and Interaction Effects of Bank Ownership Types and Bank Core Capital Category to The Bank Npl Performance / 39 -50
In Table 3, the results of Two Way ANOVA are presented.
From the results of the two way ANOVA test, it was found that at a signi�icant level of 0.10 the main effect of bank ownership types had a signi�icant effect on the performance of NPL management. From Table 3, it was found that the main effect of banks' BUKU had no signi�icant effect on the performance of NPL management. This �inding is in line with the �indings of Sugiarto who found not enough evidence to conclude that bigger banks with higher core capital classi�ication has better performance than smaller banks with lower core capital classi�ication (Sugiarto. 2016).
In contrast to the �indings of Damayanti, P., & Savitri, D. A. M. (2018) who found that the bank size and capital adequacy ratio (CAR) has a positive effect on the bank pro�itability performance, the �indings of this study after core capital were classi�ied into banks BUKU did not �ind signi�icant effect of banks BUKU on NPL performance. As an explanation, it can be argued that in the same class of banks BUKU there are variations in the amount of core capital and variations in the type of bank ownership that cause a mutual effect on the NPL performance.
The effect of mutual closure can be broken down through an analysis of the interaction effect of the amount of core capital and the type of bank ownership. Another argument that can be put forward is that banking industry inherently carries risks that cannot be eliminated as a whole. Banks operating in Indonesia are closely monitored by BI and OJK. The supervisory authority enforces a uniform level of rigorous supervision of all banks operating in Indonesia, especially on the performance of banks' NPL which play a major role in the stability of the banking industry.
The results in Table 3 also show that at a signi�icant level of 0.10 the interaction effect of bank ownership type and banks' BUKU had a signi�icant effect on the performance of NPL management.
For NPL performance, a lower NPL value indicates a better NPL management ability. From the descriptive statistics, it was found that the highest NPL management performance was foreign and mixed banks with a mean NPL of 0.01254201.
Besides showing the lowest mean NPL, the performance of NPL management of foreign and mixed banks was more stable than banks belonging to other types. The standard deviation of NPL of 0.011260081 is the smallest compared to the standard deviation of NPLs of banks belonging to other types.
The post hoc test results using the level of signi�icance 0.1 with LSD test as shown in Table  5 show that the performance of NPL management of foreign and mixed banks is signi�icantly different from private banks, but not signi�icantly .044647503 .010895022 .109704680 .131286368 .04801162 .01951667 .01459148 .01882500 .02402412 Total different from banks classi�ied as BPD and BUMN. Further investigation of the post hoc test found that the performance of banks classi�ied as BPD banks was also signi�icantly different from private banks. In the conditions of the rigor of testing enhanced by Tukey HSD test, there was no signi�icant difference in the NPL management ability of the four bank ownership types of banks studied.
Descriptive statistics of the interaction of bank ownership types and banks' BUKU are presented in Table 6 below.
Descriptive statistics of the interaction of bank ownership types and banks' BUKU that have been sorted on the basis of the mean NPL from the smallest to the largest values are shown in Table 7.
The results of the NPL management performance ranking for the interaction of bank ownership type and banks' BUKU show that the interaction with code 3, namely foreign and mixed banks in the classi�ication of BUKU 3 has the best rating. However, not all banks classi�ied as foreign and mixed types have a signi�icantly better NPL performance than the interaction of other bank types and banks' BUKU. The types of foreign and mixed banks in the buku classi�ication 1 (code 1) and 2 (code 2) have no better performance even when compared to banks classi�ied as BPD and BUMN types. The lowest NPL management performance is found in private-type banks classi�ied in Buku 1.
More detailed search results using the post hoc test using both the Tukey test and the LSD test as can be seen in Table 8 strengthen the indications obtained from descriptive statistics. Although not all Tukey and LSD test results show the same results, there are many similarities in the results of the two tests which generally indicate that the interaction performance with Code 10, which in this case is a private bank in the classi�ication of BUKU 1, is worse than other interactions with codes 2,3,4,5 and 6 for Tukey's test and worse than other interactions with codes 2, 3,4,5,6,7,8,9,11,12 and 13 for LSD test. The performance of banks which are included in the interaction with code 10 is only not signi�icantly different from banks with code 1, namely foreign and mixed banks which are classi�ied in the classi�ication of BUKU 1. Although the performance of foreign and mixed banks NPL management, those classi�ied in the classi�ication of BUKU 1 are better than interaction performance with code 10 but the difference in performance shown has not been able to show a signi�icant difference at the level of con�idence 0.1. Thus, the status as a foreign and mixed bank does not guarantee that it will have a better NPL management capability compared to banks of other ownership types. On closer inspection, it seems that the role of core capital in the ability to manage bank NPLs is evident. However, an increase in core capital is indicated to increase the ability of banks to manage their NPLs. Foreign and mixed banks with higher core capital are better able to manage their NPL than those with lower core capital, even though the difference in NPL management  Table 9.
From Table 9, It is known that banks classi�ied as having large core capital for each type of bank, except for private banks have better NPL management stability than those with smaller core capital. The �irst rank that shows the best NPL management stability are banks classi�ied as state-owned banks with core capital classi�ied in BUKU 4. The next rank is banks classi�ied as foreign and mixed with BUKU 3 which in this case is the highest BUKU for the category of foreign and mixed banks. The third rank is occupied by BPD banks with core capital classi�ied in BUKU 3 which in this case is the highest book for the BPD bank category. An unexpected condition was found in banks classi�ied as private bank with BUKU 4 in fact having an unsatisfactory performance in NPL management stability because they were only better than private banks with BUKU 1 which showing the worst risk management performance stability. ranking for the interaction of bank ownership type and banks' BUKU show that foreign and mixed banks in the classi�ication of BUKU 3 has the best rating. Banks classi�ied as having large core capital for each type of bank, except for private banks have better NPL management stability than those with smaller core capital. The status as a foreign and mixed bank does not guarantee that it will have a better NPL management capability compared to banks of other types. On closer inspection, it seems that the role of core capital in the ability to manage bank NPLs is evident.