INCOME AND ASSET DIVERSIFICATION ON BANK STABILITY: THE MODERATING EFFECT OF SIZE AND OPERATIONAL RISK ON THE IDX

Abstrak

Capital adequacy and credit quality are not the only determinants of a bank's stability; how well a bank spreads its income streams and asset holdings matters just as much. This study investigates how income and asset diversification shape bank stability, treating bank size and operational risk as moderators of that relationship. The Z-score serves as the stability indicator, while income diversification is captured through the share of non-interest income in total operating income, and asset diversification through the ratio of non-loan earning assets to total loans. Bank size enters the model as the natural logarithm of total assets, and operational risk is proxied by the Operating Expenses to Operating Income ratio (BOPO). Drawing on a purposively selected sample of 26 conventional commercial banks listed on the Indonesia Stock Exchange from 2020 to 2025 (156 bank-year observations), the analysis applies panel data regression estimated in EViews 13 under a Fixed Effect Model, adopted after the Chow test ruled out the Common Effect Model and the Hausman test returned an invalid statistic. Estimation results indicate that both income and asset diversification exert a significant, positive influence on bank stability. Bank size significantly amplifies the stabilizing effect of income diversification, yet its moderating role on asset diversification is not statistically significant. Operational risk, meanwhile, fails to robustly moderate either diversification channel: its interaction with income diversification reaches significance in the baseline model but loses significance once cluster-robust standard errors are applied. Taken together, the evidence suggests that larger banks capture a greater stability payoff from income diversification, whereas the payoff from asset diversification holds fairly uniformly regardless of a bank's size or efficiency level—implying that diversification strategies should be calibrated to each bank's specific profile.

Kata kunci

• Asset Diversification
• Bank Size
• Bank Stability
• Income Diversification
• Operational Risk