Islamic Banks’ Market Power, State-Owned Banks, and Ramadan: Evidence From Indonesia

Risfandy, Tastaftiyan; Trinarningsih, Wahyu; Harmadi, Harmadi; Trinugroho, Irwan

doi:10.1142/s0217590817500229

“…Yanikkaya, Gümüº, & Pabuçcu (2018) use OIC countries which differs each other. We use only Indonesia, and Indonesian market is assumed to be less competitive and more concentrated compared to the other countries (Cho, 1990;Risfandy et al, 2017).…”

Section: Baseline Resultsmentioning

confidence: 99%

Equity Financing and Islamic Banks’ Profitability: Evidence from the Biggest Muslim Country

Risfandy

¹

2018

Jurnal Keuangan Dan Perbankan

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It was highlighted in the literature that Islamic banks' equity financing was very risky in practice. Theoretically, equity financing could boost Islamic banks' profitability because the riskier financial instrument was always associated with the greater return that could be created. Using a sample of nine Islamic banks in Indonesia from 2009m1 to 2014m12, interestingly we found that higher proportion of equity financing was significantly associated with lower Islamic banks' profitability. However, this negative relationship diminished in the case of large Islamic banks, implying that the negative effect of equity financing on Islamic banks' profitability was more prominent for small banks rather than for large banks. Our results were robust using various estimations. Although equity financing was a core of Islamic banks and could differ Islamic from conventional banks' activities but Islamic banks altogether with policymakers should evaluate this instrument for the sake of Islamic banks' profitability and its prospects in the future.

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“…To control the macroeconomic differences, we use inflation (INFLjt), GDP Growth (GGDPjt), and the 2008-2009 financial crisis period 7 Some papers use two factor instead of three factor prices. For instance, see Fu et al (2014) and Risfandy et al (2017), among others.…”

Section: Controlsmentioning

confidence: 99%

Competition in dual markets: Implications for banking system stability

Risfandy

¹

,

Tarazi

²

,

Trinugroho

³

2022

Global Finance Journal

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This paper examines the impact of market competition on the stability of Islamic and conventional banks in countries where these banks operate alongside one another. To investigate this issue, we use a sample of 100 Islamic and 390 conventional banks from 19 countries. Our baseline result shows that competition in a dual market erodes banks' stability.The heightened competitive pressure in a dual market encourages banks to engage in excessive risk-taking that can jeopardize their stability. However, the effect of competition is missing for Islamic banks, suggesting their superiority in having religious clients. Although our overall results support the 'competition-fragility' hypothesis, we find that competition can be beneficial for banks, especially at a low to medium competition level. Last, we also find that the adverse impact of competition can be reduced by having high capitalization, especially in the case of a conventional bank. Some policy implications are discussed in the paper.

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“…To control the macroeconomic differences, we use inflation (INFLjt), GDP Growth (GGDPjt), and the 2008-2009 financial crisis period 7 Some papers use two factor instead of three factor prices. For instance, see Fu et al (2014) and Risfandy et al (2017), among others.…”

Section: Controlsmentioning

confidence: 99%

Competition in Dual Markets: Implications for Banking System Stability

Risfandy

¹

,

Tarazi

²

,

Trinugroho

³

2018

Self Cite

View full text Add to dashboard Cite

This paper examines the impact of market competition on the stability of Islamic and conventional banks in countries where these banks operate alongside one another. To investigate this issue, we use a sample of 100 Islamic and 390 conventional banks from 19 countries. Our baseline result shows that competition in a dual market erodes banks' stability.The heightened competitive pressure in a dual market encourages banks to engage in excessive risk-taking that can jeopardize their stability. However, the effect of competition is missing for Islamic banks, suggesting their superiority in having religious clients. Although our overall results support the 'competition-fragility' hypothesis, we find that competition can be beneficial for banks, especially at a low to medium competition level. Last, we also find that the adverse impact of competition can be reduced by having high capitalization, especially in the case of a conventional bank. Some policy implications are discussed in the paper. JEL Classifications: D40; G21; G28; Z12

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Islamic Banks’ Market Power, State-Owned Banks, and Ramadan: Evidence From Indonesia

Cited by 20 publications

References 29 publications

Equity Financing and Islamic Banks’ Profitability: Evidence from the Biggest Muslim Country

Equity Financing and Islamic Banks’ Profitability: Evidence from the Biggest Muslim Country

Competition in dual markets: Implications for banking system stability

Competition in Dual Markets: Implications for Banking System Stability

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