Prediction of Bankruptcy in Islamic Banking in Indonesia: Modified Altman Z-Score Method Approach Surepno1, Er

Islamic banking as an entity requires an annual financial performance evaluation to ensure the health and sustainability of the company. This study aims to assess the level of soundness and bankruptcy prediction of Islamic banking using the modified Altman ZScore analysis method. This study uses a quantitative approach. The sample used is 12 Islamic Commercial Banks in Indonesia. The data used to measure the health and bankruptcy of banks is the financial statements of Islamic commercial banks for the 20172019 period. The results show that the health level of 11 Islamic commercial banks is in a safe area position or it can be said that the company is in a healthy condition (not bankrupt) during the 2017-2019 period and 1 Islamic commercial bank, namely Panin Dubai Syariah Bank, is in a cautious position (gray area). ). This is because the 11 Islamic commercial banks have a Z-Score >2.6 and 1 Islamic bank has a Z-Score 1.10 <Z<2.6.


Introduction
The era of globalization causes the boundaries of the country's economy to be inseparable. This makes the world economy intertwined with each other. No exception when a crisis occurs in a country, the big or small impact will have an effect on other countries. M. Zidny Nafi' (2019) revealed that the indirect impact of the crisis was a decrease in liquidity, soaring interest rates and a weakening capital market. The financial crisis also had an impact on reducing the supply of liquidity in the financial sector due to the bankruptcy of several global financial institutions, especially investment banks, which ultimately affected the cash flows of companies in Indonesia.
Even though during this crisis, Islamic banks were able to survive and overcome the problems that existed in their business activities, but Islamic banks as institutions that were also profit-oriented would of course still face various risks that could threaten their existence (Oktarina, 2017). This proves that bankruptcy is a problem that can threaten the existence of Islamic banks. Bankruptcy itself is the result of the negative performance of Islamic banks. This is evidenced by the emergence of the Muammalat bank case which indicated that it was experiencing financial problems.
Bankruptcy conditions in a company experiencing financial distress, is a condition where the financial condition of a company during a certain period generates negative net profit for several years which will eventually result in bankruptcy and the company's operating cash flow cannot be sufficient to take corrective action to prevent bankruptcy. Financial distress is the stage of declining financial conditions experienced by the company and occurs before the occurrence of bankruptcy or liquidation (Anak Agung and AANgurah Bagus, 2019).
Corporate bankruptcy is a phenomenon that often occurs in the business world, whether it is influenced by internal indicators or external indicators of the company (Kadim & Sunardi, 2018). The problem of bankruptcy in a company, including for Islamic banking, is a risk that cannot be avoided, but this risk can be minimized or prevented. To anticipate the occurrence of bankruptcy, the company must have early preparations to prevent this from happening.
Analysis of the condition of the company that is in good or bad condition can be seen from the level of the company's health. Financial distress analysis can use several models, namely the Altman, Springate, and Zmijewski models (Rahayu, 2016). According to Rita Martini et al (2021), the Altman method (Sari, 2018) has the highest bankruptcy calculation accuracy rate of 92% compared to the Springate and Zmijewski methods which have 77% and 85% accuracy, respectively. No company is predicted to be unhealthy, so the most accurate analysis model is the Z-Score (Raharja, 2017).The advantages of the Altman Z-Score model can be seen from the equation, the Altman Z-Score model equation connects liquidity, solvency, and Volume 9 Nomor 2 Ed. Juli -Desember 2021: hal. 152-167 p-ISSN: 2356-4628 e-ISSN : 2579 company profitability with bankruptcy. In addition, the advantages of this model can be used for all companies, whether public, private, manufacturing, or service companies of various sizes.
The development of the Altman Model can be seen starting from the first, namely the first Altman Z-Score model that can be used to predict the bankruptcy of a public manufacturing company. After finding the first bankruptcy model, Altman then revised the bankruptcy model into a model that can be used to predict the probability of bankruptcy for private and public manufacturing companies, this model is called the revised Altman model or Z'-Score. Furthermore, Altman modified the model which is also called the Modified Altman Z-Score model (not using the sales turnover ratio). This model is designed to be applied to non-manufacturing companies, both public and private companies. (Dian Purnamasari, 2018) Previous research was conducted by Endri (2009) who analyzed the accuracy of the revised Altman Z-Score model in predicting bankruptcy at Islamic Commercial Banks for three years from 2005-2007. The variables used by the Altman Z-Score model for companies that have not gone public are the ratio of working capital/total assets (X1), retained earnings/total assets (X2), EBIT (Earning Before Interest&Tax)/total assets (X3), book value shares/book value of debt (X4), and Sales/total assets (X5). The result is that the Revised Altman Z'-Score Model is not appropriate to predict bankruptcy in Islamic banking. This is because the Revised Altman Z-Score model should only be used to analyze manufacturing companies.
Other research has also been carried out by Prabowo and Wibowo (2015) who tried to compare the Altman Z-Score, Zmijewski, and Springate models in Predicting Bankruptcy of Delisting Companies on the IDX for the 2008-2013 period. From these results, it was found that there were differences in test results between one model and another. The results of this study stated that the Altman Z-Score model was the best predictor method compared to Zmijewski and Springate. Based on the research gap, this study will re-examine the prediction of Islamic banking bankruptcy using the Modified Altman Z-Score Model.

Agency Theory
In agency theory, the principal employs the agent to perform tasks for the benefit of the principal, including the delegation of decision-making authorization from the principal to the agent. This theory has the assumption that each individual is solely motivated by their respective interests so that if the agent does not act according to the interests of the principal, it will cause a conflict of interest between the principal and the agent which is called an agency conflict. The conflict of interest is in the form of information asymmetry. Conflicts of interest that occur between the agent and the principal can cause agency problems. To monitor and reduce the conflict, the principal and agent agree to bridge the conflict with a third party, namely by using an auditor (Bahana Takbir Aljana, 2017).
With a third party, the principal can control and supervise the agent in terms of managing the company so as to create good corporate governance. The management of good corporate governance can minimize manipulation so that sharia good governance can be realized. Good corporate governance will have an impact on improving the financial performance of an entity. Improved financial performance will also make the company avoid the threat of bankruptcy.

Bankruptcy
Firdausi (2017) explains that Bankruptcy is a severe liquidity difficulty which causes a company to no longer be able to run the company's operations properly.
Bankruptcy is also defined as the failure of the company in carrying out the company's operations to be able to generate profits. In addition, bankruptcy is also often called the liquidation of the company or the closure of a company. The key factor in identifying whether a company is in a state of bankruptcy is the company's inability to fulfill its obligations. Bankruptcy is a condition where the company experiences negative net operating income for several years and for more than one year has not made dividend payments, terminated employees or eliminated dividend payments.

Altman Z-Score Model Analysis
Altman Z-Score model is an indicator to measure the potential for bankruptcy of a company. A number of studies have been conducted to determine the usefulness of In this study using the modified Altman Z Score analysis method. In this type of analysis, Altman makes adjustments so that it can be used in various types of company industries, such as manufacturing, non-manufacturing, and bond issuing companies in developing countries. In this model, Altman eliminates the X5 variable (sales to total assets) because this ratio varies greatly in industries with different asset sizes (Hery, 2017). The modified Z-Score equation is as follows: a. If the Z value <1.1 then the company is classified as bankrupt (financial distress) b. If the value is 1.1 < Z < 2.6 then it is included in the gray area (cannot be determined whether the company is classified as healthy or bankrupt) c. If the Z value > 2.6, it is a company that has not experienced bankruptcy (safe area)

Methods
This type of research is an evaluation research. In this study using the modified Z-Score (Altman) analysis method. The research approach is a quantitative approach.
This study uses a saturated sample that uses all Islamic banking in the form of Islamic Commercial Banks. The total sample used is 12 Islamic banking. This study uses two variables, namely the dependent and independent. In this model the independent variables are (Working Capital/Total Assets), (Retained Earnings/Total

Analysis of BNI Syariah's Modified Z-Score Results
The results of the calculation of the BNI Syariah Z-Score in the 2017-2019 period are as follows:  Based on the table above, it shows that for 3 consecutive years BNI Syariah is in a safe area position or it can be said that the company is in good health. This can be seen from the Z-Score value > 2.6. Although the Z-Score value is in the healthy category, the Z-Score value has decreased from 5,858 in 2017 to 5,478 in 2018, and in 2019 it fell again to 5,237. A decrease in the Z-Score from year to year in a company can indicate that the company's financial performance is declining, if it is not addressed immediately, there is a possibility that this decline will continue.

Analysis of the results of the Z-Score Modification of Bank Mega Syariah
The results of the calculation of the Z-Score of Bank Mega Syariah in the 2017-2019 period are as follows: The table above shows that Bank Mega Syariah for 3 consecutive years is in a safe area position or it can be said that the company is in a healthy condition. This can be seen from the Z-Score value > 2.60. In 2017 the Z-Score value of 28,306 then increased in 2018 which was 43,683. However, the Z-Score value decreased in 2019 to 6,368.

Analysis of Modified Z-Score Results of Bank Muamalat Indonesia
Bank Muamalat Z-Score calculation results for the 2017-2019 period are as follows:

Prediction of Bankruptcy in Islamic Banking in Indonesia:
Modified Altman Z-Score Method Approach Surepno dan Er Melinda Swissa The table above shows that Bank Muamalat Indonesia has been in a safe area for 3 years in a row or it can be said that the company is in a healthy condition. This can be seen from the Z-Score value > 2.60. The Z-Score value increased from 4.755 in 2017 to 5.072 in 2018, and in 2019 it decreased again to 4,793. A decrease in the company's Z-Score can indicate that the company's financial performance is declining, if it is not addressed immediately, there is a possibility that this decline will continue.

Analysis of Modified Z-Score Results of Bank Syariah Mandiri
The results of the calculation of the Z-Score of Bank Syariah Mandiri in the 2017-2019 period are as follows: The table above shows that for 3 consecutive years, Bank Syariah Mandiri is in a safe area position or it can be said that the company is in good health. This can be seen from the Z-Score value > 2.60. Although in 2018 the Z-Score value increased from 5,784 to 5,905. However, in 2019 the Z-Score value decreased from the previous 5,905 to 5,674.

Analysis of the Results of the Modified Z-Score of BCA Syariah
The results of the calculation of the BCA Syariah Z-Score in the 2017-2019 period are as follows: The table above shows that for 3 consecutive years BCA Syariah is in a safe area position or it can be said that the company is in good health. This can be seen from the Z-Score > 2.60. However, the Z-Score value has decreased from year to year, namely from 2017 which was 7,189, in 2018 it was 7,122 then in 2019 it was 6,762.

Analysis of BRI Syariah Modified Z-Score Results
The results of the calculation of the BRI Syariah Z-Score in the 2017-2019 period are as follows: The table above shows that for 3 consecutive years BRI Syariah is in a safe area position or it can be said that the company is in good health. This can be seen from the Z-Score > 2.60. The Z-Score value has increased from year to year. In 2017 the Z-Score value was 5.258, then in 2018 it was 5.325. In 2019, it increased again to 5,457.

Analysis of Modified Z-Score Results of Bank Jabar Banten Syariah
The results of the calculation of the BJB Syariah Z-Score in the 2017-2019 period are as follows:

Prediction of Bankruptcy in Islamic Banking in Indonesia:
Modified Altman Z-Score Method Approach Surepno dan Er Melinda Swissa Based on the table above shows that for 3 consecutive years Bank Jabar Banten Syariah is in a safe area position or it can be said that the company is in good health. This can be seen from the Z-Score > 2.60. However, for 3 consecutive years the company has also experienced a decrease in the Z-Score value, as seen in 2017 the Z-Score value of 7,820, in 2018 the Z-Score value of 6.732 then fell back to 6.677 in 2019.

Analysis of the Modified Z-Score Results of the Panin Dubai Sharia Bank
The results of the calculation of the Z-Score of Bank Panin Dubai Syariah in the 2017-2019 period are as follows: The table above shows that for 3 consecutive years Panin Dubai Syariah is in the gray area position or it can be said that the company is in a state of caution. It can be seen from the Z-Score1.10<Z<2.6. The Z-Score value has increased from year to year, namely in 2017 it was 1.364, in 2018 it was 1.653 then in 2019 it was 1.681. The table above shows that for 3 consecutive years Bukopin Syariah Bank is in a safe area position or it can be said that the company is in good health. This can be seen from the Z-Score > 2.60. For three consecutive years the company has also shown a significant increase, as evidenced in 2017 the Z-Score value was in the position of 5.544 until in 2019 it became 6.232.

Victorian Sharia Bank
The results of the calculation of Bank Victoria Syariah Z-Score in the 2017-2019 period are as follows: Based on the table above, it shows that for 3 consecutive years, Bank Victoria Syariah is in a safe area position or it can be said that the company is in good health.
This can be seen from the Z-Score > 2.60. Although the Z-Score value had decreased in 2018, the Z-Score value increased again in 2019, which was 7,248.

Prediction of Bankruptcy in Islamic Banking in Indonesia:
Modified Altman Z-Score Method Approach Surepno dan Er Melinda Swissa

Indonesia
The results of the calculation of the Z-Score of the Sharia National Pension Savings Bank for the 2017-2019 period are as follows: Based on the table above, it shows that for 3 consecutive years the Sharia National Pension Savings Bank is in a safe area position or it can be said that the company is in good health. This can be seen from the Z-Score > 2.60. The Z-Score value from year to year has increased from the previous 6,861 to 7,159, and in 2019 it increased again to 7,444.

Analysis of Modified Z-Score Results of Bank Aceh Syariah
The results of the calculation of the Z-Score of Bank Aceh Syariah in the 2017-2019 period are as follows: Based on the table above, it shows that for 3 consecutive years, Bank Aceh Syariah is in a safe area position or it can be said that the company is in good health. This can be seen from the Z-Score > 2.60. Although the Z-Score value had decreased in 2018, the Z-Score value increased again in 2019, which was 6,328.
The first variable used is the ratio of working capital to total assets (working capital to total assets). In this ratio, companies that experience operating losses will continuously shrink the number of current assets related to total assets, such Volume 9 Nomor 2 Ed. Juli -Desember 2021: hal. 152-167 p-ISSN: 2356-4628 e-ISSN : 2579 as the results of research on BTPN Syariah where for three years the value of X1 has decreased, namely in 2017 by 5.708, in 2018 by 5.409 and in 2019 amounted to 5,280. Among the assessments of the liquidity ratio, this ratio is the most important because it assesses the ratio of total assets as the best indicator.
The second variable used is the ratio of retained earnings to total assets (Retained Earnings to Total Assets). In this ratio, the new company may show a low ratio of retained earnings to total assets because it does not have time to increase cumulative profits. Therefore, it can be proven that newly established companies are likely to be classified in the bankrupt category relatively higher. In this study, Islamic Commercial Banks (BUS) whose Z-Score values continue to increase are BRI Syariah, Bank Bukopin Syariah, BTPN Syariah and Bank Panin Syariah. Meanwhile, those whose Z-Score has decreased for three consecutive years are BNI Syariah, BCA Syariah, and Bank Jabar Banten Syariah.
Sharia Commercial Banks (BUS) whose Z-Score values tend to increase in the 2017-2019 period are expected to be able to maintain financial performance stability by monitoring and improving their performance so that they can obtain even better results in the coming period. For Islamic Commercial Banks (BUS) whose Z-Score values fluctuate or even experience a decline, it is necessary to be careful in making policies that can have an impact on the company's financial performance and companies must try to make better use of their assets to gain profits. This decline in performance does not recur in the next period.
For investors, it is hoped that it can be a reference in making investment decisions at Islamic Commercial Banks (BUS) in Indonesia. Although in this study there is only one Islamic commercial bank that is in the gray areas category, caution is still needed in choosing to invest the funds they have in order to minimize losses that may occur in the future. This study only uses 3 financial reporting periods, so for further research it is expected to be able to increase the number of financial reporting periods studied. Volume 9 Nomor 2 Ed. Juli -Desember 2021: hal. 152-167 p-ISSN: 2356-4628 e-ISSN : 2579