The Impact of Industry Concentration on Stability: The Case of Indonesian Islamic-Commercial Banks
This study aims at investigating the impact of the banking industry’s concentration on the stability of Islamic commercial banks in Indonesia. This study used a single country setting of 14 Islamic-commercial banks in Indonesia from 2011 to 2020. The data utilized in this study comprised all Islamic...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Universitas Muhammadiyah Yogyakarta
2023-08-01
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| Series: | International Journal of Islamic Economics and Finance |
| Subjects: | |
| Online Access: | https://journal.umy.ac.id/index.php/ijief/article/view/17892 |
| _version_ | 1797657942880681984 |
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| author | Teguh Santoso Egi Arvian Firmansyah Militcyano Samuel Sapulette Maman Setiawan |
| author_facet | Teguh Santoso Egi Arvian Firmansyah Militcyano Samuel Sapulette Maman Setiawan |
| author_sort | Teguh Santoso |
| collection | DOAJ |
| description | This study aims at investigating the impact of the banking industry’s concentration on the stability of Islamic commercial banks in Indonesia. This study used a single country setting of 14 Islamic-commercial banks in Indonesia from 2011 to 2020. The data utilized in this study comprised all Islamic-commercial banks' assets in Indonesia, excluding commercial banks with Islamic business units. The influence of concentration level on the stability of Islamic-commercial banks was investigated using a panel data model. According to Hausman's test, the fixed-effect model is more suitable than the random-effect model. The findings indicate that the “concentration-stability” hypothesis was supported-robust using two concentration level measurements: CR4 and HHI. It is implied that banks tended to be more stable at the higher competition level. From the bank’s specific characteristics, only the cost-to-income ratio significantly influenced the bank's stability, as expected. Other bank-specific characteristics, such as bank size, credit risk, and income diversity, had no substantial influence on observed bank stability. A robustness check was performed by estimating new models that included multiple control variables that did not change the effect of concentration level on the bank’s stability. This study adds to the literature by demonstrating the “concentration-stability” hypothesis in the Indonesian Islamic-commercial banking industry. Moreover, this study’s results confirm the previous study’s findings using different methods and measures of industry concentration. In addition, this study is relevant in the context of the merger action of three large Islamic commercial banks. |
| first_indexed | 2024-03-11T17:51:51Z |
| format | Article |
| id | doaj.art-4ee7b92d6bb54d3ab8147517ce2b0661 |
| institution | Directory Open Access Journal |
| issn | 2622-3562 2622-4372 |
| language | English |
| last_indexed | 2024-03-11T17:51:51Z |
| publishDate | 2023-08-01 |
| publisher | Universitas Muhammadiyah Yogyakarta |
| record_format | Article |
| series | International Journal of Islamic Economics and Finance |
| spelling | doaj.art-4ee7b92d6bb54d3ab8147517ce2b06612023-10-18T03:32:35ZengUniversitas Muhammadiyah YogyakartaInternational Journal of Islamic Economics and Finance2622-35622622-43722023-08-016220122410.18196/ijief.v6i2.178926880The Impact of Industry Concentration on Stability: The Case of Indonesian Islamic-Commercial BanksTeguh Santoso0Egi Arvian Firmansyah1Militcyano Samuel Sapulette2Maman Setiawan3Department of Economics, Faculty of Economics and Business, Universitas PadjadjaranDepartment of Management and Business, Faculty of Economics and Business, Universitas PadjadjaranDepartment of Economics, Faculty of Economics and Business, Universitas PadjadjaranFaculty of Economics and Business, Universitas PadjadjaranThis study aims at investigating the impact of the banking industry’s concentration on the stability of Islamic commercial banks in Indonesia. This study used a single country setting of 14 Islamic-commercial banks in Indonesia from 2011 to 2020. The data utilized in this study comprised all Islamic-commercial banks' assets in Indonesia, excluding commercial banks with Islamic business units. The influence of concentration level on the stability of Islamic-commercial banks was investigated using a panel data model. According to Hausman's test, the fixed-effect model is more suitable than the random-effect model. The findings indicate that the “concentration-stability” hypothesis was supported-robust using two concentration level measurements: CR4 and HHI. It is implied that banks tended to be more stable at the higher competition level. From the bank’s specific characteristics, only the cost-to-income ratio significantly influenced the bank's stability, as expected. Other bank-specific characteristics, such as bank size, credit risk, and income diversity, had no substantial influence on observed bank stability. A robustness check was performed by estimating new models that included multiple control variables that did not change the effect of concentration level on the bank’s stability. This study adds to the literature by demonstrating the “concentration-stability” hypothesis in the Indonesian Islamic-commercial banking industry. Moreover, this study’s results confirm the previous study’s findings using different methods and measures of industry concentration. In addition, this study is relevant in the context of the merger action of three large Islamic commercial banks.https://journal.umy.ac.id/index.php/ijief/article/view/17892concentrationstabilityislamic-commercial banksindonesia |
| spellingShingle | Teguh Santoso Egi Arvian Firmansyah Militcyano Samuel Sapulette Maman Setiawan The Impact of Industry Concentration on Stability: The Case of Indonesian Islamic-Commercial Banks International Journal of Islamic Economics and Finance concentration stability islamic-commercial banks indonesia |
| title | The Impact of Industry Concentration on Stability: The Case of Indonesian Islamic-Commercial Banks |
| title_full | The Impact of Industry Concentration on Stability: The Case of Indonesian Islamic-Commercial Banks |
| title_fullStr | The Impact of Industry Concentration on Stability: The Case of Indonesian Islamic-Commercial Banks |
| title_full_unstemmed | The Impact of Industry Concentration on Stability: The Case of Indonesian Islamic-Commercial Banks |
| title_short | The Impact of Industry Concentration on Stability: The Case of Indonesian Islamic-Commercial Banks |
| title_sort | impact of industry concentration on stability the case of indonesian islamic commercial banks |
| topic | concentration stability islamic-commercial banks indonesia |
| url | https://journal.umy.ac.id/index.php/ijief/article/view/17892 |
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