BANK CHARACTERISTICS, FIRM CHARACTERISTICS, BANK FUNDING STRUCTURE AND BANK LENDING DURING LIQUIDITY CRISIS USING A DYNAMIC PANEL MODEL (Study on Manufacturing Firms Listed on IDX 2011 – 2014)

Abstract

This study aimed to see the behaviour of bank lending to manufacturing companies. The behaviour of bank lending is examined from the supply side, demand side and the structure of bank funding especially under a liquidity crisis. This study emphasize that less wholesale funding will be more beneficial for banks when there is a liquidity crisis. This study will also examine the effect of bank size, bank capital, bank credit risk, and the lender’s characteristics (firm size, firm value and firm leverage) on bank lending to manufacturing sector. The sample of this study is manufacturing companies listed in Indonesian Stock Exchange in 2011 until 2014. This study collected the long-term bank debt of manufacturing companies, the assets, CAR, NPL of the debtors and the assets, Tobin’s Q, DER of the lenders. The Arellano-Bond linear dynamic panel data method is used to analyse the determinants of bank lending. This study found that bank capital, firm leverage and firm value do not have significant influence on bank lending. On the other side, the interaction of bank funding structure and liquidity crisis, bank size and the first lagged value of bank lending have a positive and significant effect on bank lending while bank NPL and firm size have a negative and significant effect on bank lending.