METODE PENGUKURAN PROBABILITAS KEBANGKRUTAN BANK DAN ANALISIS HUBUNGANNYA DENGAN DIVERSIFIKASI SUMBER PENDAPATAN: KASUS PERBANKAN INDONESIA

Bank's probability of default measurement method is one of the classic research problem. The measurementmethods using discriminant analysis and logit models such as Altman's Z score and Ohlson Model do nothave adequate financial theoretical foundation because variables in the models are chosen arbitrarily anddepend heavily on the data used in estimation. Merton's model of default probability is a measurement modelthat is widely recognized as a model that has a strong theoretical basis but has its own problems in itsimplementation because it uses unobservable variables. Default probability itself is influenced by the levelofincome diversification. Some research resulted in conflicting conclusions. We show that in Indonesianbanking industry, relationship between these two variables are quadratic (U shape) which show naturaldiversification can reduce the bank's probability of default, until reach a infelction point that too highdiversification would encourage the probability of default to be increased