Market concentration, diversification, and financial distress in the Indonesian banking system

Abstract

The economic theory provides conflicting predictions about the relationship between the market structure of the banking industry and financial distress. The view of "concentration-fragility" argues that a banking structure that is more concentrated with a number of large banks is more vulnerable to financial fragility than a banking sector that is less concentrated with many banks. We examine how the concentration market, market share, and diversification affect the bank's financial distress. Using the purposive sampling method and data of listed banks in the 2014-2017 period, the results of statistical tests with logistic regression showed that market concentration has a positive effect on the bank's financial distress. The more concentrated the market, the greater the probability of the occurrence of financial distress in Indonesian banks. We also prove the validity of the SCP (The Structure-Conduct-Performance) hypothesis and efficiency hypothesis. Therefore, regulations need to be made in order to reduce this highly concentrated market so that the probability of financial distress decreases.

Effect of Profitability, Leverage and Liquidity Against Financial Distress (Case Study of Food Subsector Manufacturing Company and Beverage Listed on Idx for the 2018-2022 Period)

“…Financial distress is the condition of a company unable to fulfill its responsibilities, especially those that are short-term such as liquidity and solvency (Kristanti, 2019). A company's demonstration of declining financial conditions might erode the confidence of creditors, owners, and other stakeholders.…”

Pengaruh Financial Distress sebagai Variabel Moderasi pada Determinan Auditor Switching

“…Menurut (Kristanti, 2019), Financial distress adalah tahap kesulitan keuangan yang ditandai dengan penurunan laba (dan bahkan laba negatif). Terdapat 2 sisi dari financial distress yaitu dapat membuat perusahaan tersingkir dari pasar jika perusahaan tidak mampu mengendalikan kondisinya sehingga membuat perusahaan bisa masuk ke kondisi default dan bangkrut sedangkan di lain sisi, financial distress juga bisa menjadi sesuatu yang menguntungkan jika bisa dikelola dengan baik sehingga menjadi sebuah "alarm" yang disebut juga "early warning" untuk problem yang muncul.…”

Analysis of Financial Performance on the Prediction of Financial Distress in the Indonesia Stock Exchange

“…Salah satu indikator utama yang dijadikan dasar penilaian adalah laporan keuangan bank yang bersangkutan. Berdasarkan laporan keuangan akan dapat dihitung sejumlah rasio keuangan yang lazim dijadikan dasar prediksi kebangkrutan (Kristanti, 2019). Menurut Whitaker (Carolina, et al, 2017) suatu perusahaan dapat dikatakan berada dalam kondisi 19 Financial Distress atau kesulitan keuangan apabila perusahaan tersebut mempunyai laba bersih (net profit) negatif selama beberapa tahun.…”