International Business Management

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Merton Models: Mapping Default of Government Bank in Indonesia

Agus Munandar
Page: 532-535 | Received 21 Sep 2022, Published online: 21 Sep 2022

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Abstract

The objective of Basel II is to strengthen the financial system security by emphasizing on risk-based calculation of capital. Driven by Basel II, this study investigates the probability of default of government banks in Indonesia in the period of 2002-2010 using annually-published report of central bank (Bank Indonesia) with 4 government banks as the sample of research. The probability of default is measured by using Merton Model. The findings that measurement results using merton approach are empirically confirmed. In 2004, PT Bank Rakyat Indonesia Tbk which gets the lowest probability of default was announced as “The Best National Bank” in Indonesia by Bisnis Indonesia award. In 2008, the government banks have high probability default because financial crisis of 2008 (probability default >30%).

How to cite this article:

Agus Munandar. Merton Models: Mapping Default of Government Bank in Indonesia.
DOI: https://doi.org/10.36478/ibm.2015.532.535
URL: https://www.makhillpublications.co/view-article/1993-5250/ibm.2015.532.535