Market Share, Concentration Ratio and Profitability: Evidence from Indonesian Islamic Banking Industry

Abstract Various literatures mention that an increasingly concentrated market will have an impact on performance. This study aims to analyze the influence of market structure on the profitability of the Islamic banking industry in Indonesia, especially after the enactment of the Islamic banking act. This research used panel regression with random effect model. The result shows that market structure - proxies by market share (MS) and concentration ratio (CR4)- does not affect profitability of the Indonesian Islamic banking industry. This result implies that the performance of the Islamic banking industry in Indonesia is not supported by the traditional hypothesis and the efficient structures hypothesis. However, this research indicates that there is no collusive behavior in the Islamic banking industry in Indonesia. Meanwhile, for control variables such as liquidity ratio, default rate, and operational efficiency ratio have been found to have adverse effect on the performance of the Islamic banking industry in Indonesia.

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Determinan Pembiayaan Bagi Hasil Perbankan Syariah Di Indonesia: Model Regresi Panel

AL-FALAH Journal of Islamic Economics ◽

10.29240/jie.v2i1.161 ◽

2017 ◽

Vol 2 (1) ◽

pp. 1

Author(s):

M Nur Rianto Al Arif ◽

Ika Nurhikmah

Keyword(s):

Banking Industry ◽

Fixed Effect Model ◽

Profit Sharing ◽

Islamic Banking ◽

Panel Regression ◽

Islamic Banks ◽

Efficiency Ratio ◽

Internal Factors ◽

Effect Model ◽

Default Rate

Financing is one of the performance’s indicator in Islamic banking industry. The aim of this research is to examine the factors that influence the financing in the Indonesian Islamic banking industry. The method that used in this research is panel regression with fixed effect model. The variabels that used in this research are capital ratio, profitability ratio, default rate, liquidity ratio, efficiency ratio, deposit fund, inflation, and profit sharing yield. The result shows that the capital ratio, profitability ratio, efficiency ratio, deposit funds, and profit sharing yield had an impact on financing in the Indonesian Islamic banking industry. This result implies that the Islamic banks should maintain the internal factors to increase the financing in the Islamic banking industry.

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The Effect of Market Structure on Bank Performance in Central Java

Jurnal Economia ◽

10.21831/economia.v16i1.30150 ◽

2020 ◽

Vol 16 (1) ◽

pp. 112-129

Author(s):

Imanuel Madea Sakti

Keyword(s):

Market Structure ◽

Commercial Banks ◽

Random Effect ◽

Random Effect Model ◽

Bank Performance ◽

Independent Variables ◽

Central Java ◽

Effect Model ◽

The Relationship ◽

Positive Effect

Abstract: The research on the Structure-Conduct-Performance (SCP) hypothesis in the banking industry has been done many times, including in Indonesia. However, it still focuses on commercial banks. This research aims to examine the relationship between market structure and bank performance by involving commercial banks and rural banks (Bank Perkreditan Rakyat/BPR) when they are in the same market in the regency/city level. It uses panel data from 565 banks in Central Java: 261 BPR and 304 Commercial Banks, divided into 34 regencies/cities during 2012-2016. Independent variables involve market concentration and market share which is also as moderating variable, and the dependent variable is bank performance. The hypotheses are examined by multiple linear regression with a random effect model. In general, the results support that the market structure has a significant positive effect on bank performance. Another result has found no collusive behavior among dominant banks. Keywords: Structure-Conduct-Performance, Commercial Bank, Rural Bank, Market Structure, Bank Performance Pengaruh Struktur Pasar terhadap Kinerja Bank di Jawa Tengah Abstrak: Penelitian mengenai hipotesis Structure-Conduct-Performance (SCP) pada industri perbankan telah banyak dilakukan, termasuk di Indonesia. Namun, penelitian tersebut hanya berfokus pada bank umum saja. Penelitian ini bertujuan untuk menguji hubungan antara struktur pasar dan kinerja bank dengan melibatkan bank umum dan Bank Perkreditan Rakyat (BPR) ketika berada di pasar yang sama di tingkat kabupaten/kota. Penelitian ini menggunakan data panel terdiri dari 565 bank di Jawa Tengah: 261 BPR dan 304 Bank umum, yang terbagi ke dalam 34 kabupaten/kota selama tahun 2012-2016. Variabel independen yaitu konsentrasi pasar dan pangsa pasar yang sekaligus sebagai variabel moderasi, dan variabel dependen adalah kinerja bank. Hipotesis diuji menggunakan regresi linier berganda dengan random effect model. Secara umum, hasil mendukung bahwa struktur pasar berpengaruh positif signifikan terhadap kinerja bank. Hasil lainnya menunjukkan tidak terdapat perilaku kolusif di antara bank-bank besar. Kata kunci: . Structure-Conduct-Performance, Bank Umum, BPR, Struktur Pasar, Kinerja Bank.

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PENGARUH KONSENTRASI STRUKTUR PASAR TERHADAP KINERJA INDUSTRI KOMERSIAL PERBANKAN DI INDONESIA PERIODE TAHUN 2007 - 2011

Quantitative Economics Journal ◽

10.24114/qej.v2i4.17439 ◽

2020 ◽

Vol 2 (4) ◽

Author(s):

Mr Rofanov

Keyword(s):

Market Structure ◽

Market Share ◽

Commercial Banks ◽

Concentration Ratio ◽

Banking Industry ◽

Capital Adequacy ◽

Return On Assets ◽

Net Interest Margin ◽

Banking Market ◽

Capital Adequacy Ratio

Based on the ratio of market share of 11 commercial banks discovered the phenomenon gap of the period 2007-2011 where 11 commercial banks dominate the banking market predominantly in Indonesia, including four state-owned banks. This phenomenon has resulted in the banking market structure tends to form an oligopoly, it is obviously affecting the behavior of banks that have a dominant position to maintain supernormal profit, which is reluctant to extend credit with low interest tribes and not a reflection of efficient behavior that ultimately lead to the real sector can not run role in the economy because of factors hampered financing. And with the market conditions are 11 commercial banks were so dominant, which is feared if one bank's collapse could affect the performance of banks in a systemic and even disrupt the Indonesian economy in general. The objectives of this research to determine the form of the banking market structure and analize the influence of concentration market structure and Capital Adequacy Ratio (CAR), Non Performing Loan (NPL), Net Interest Margin (NIM), and Loan to Deposit Ratio (LDR) to Return on Asset (ROA) wich is as a proxy of Financial Performance Banking in 2007 until 2011 periods. The data in this study was collected from Indonesian Banking Directory of 2007-2011. The collected sample was 11 biggest commercial banks over the period from 2007-2011. The analysis model was used to determine the shape of banking market structure by using CR4 concentration ratio (Four Concentration Ratio) on a share of the assets, the share of third-party funding (DPK) and the share of loans, that produce banking that shaped the oligopoly market structure moderate low or concentration oligopoly level IV, where four largest banks a dominate about 42% - 50% market share. The estimation of the Fixed Effect Model unknown that concentration market, market share, Capital Adequacy Ratio (CAR), Net Interest Margin (NIM) and the Loan to Deposit Ratio (LDR) has a positive effect on profitability (Return on Assets ) as a proxy for the performance of the banking industry. And for the Non Performing Loan (NPL) has a negatively effect on profitability (Return on Assets) as a proxy for the performance of the banking industry.

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METODE SPIN-OFF DAN TINGKAT PROFITABILITAS: STUDI PADA BANK UMUM SYARIAH HASIL SPIN-OFF

IQTISHADIA Jurnal Kajian Ekonomi dan Bisnis Islam ◽

10.21043/iqtishadia.v10i1.2316 ◽

2017 ◽

Vol 10 (1) ◽

pp. 23

Author(s):

M Nur Rianto Al Arif ◽

Endah Putri Dewanti

Keyword(s):

Commercial Banks ◽

Random Effect ◽

Random Effect Model ◽

Islamic Banking ◽

Panel Regression ◽

Islamic Banks ◽

Business Unit ◽

Business Units ◽

Effect Model ◽

Internal Condition

The Law No. 21 of 2008 about Islamic banking, requires every Islamic business unit to spin-off if they have met the criterion. There are two spin-off’s methods can be selected by Islamic banks. The purpose of this research is to analyze the effect of spin-off method to profitability. The profitability indicator that used in this study is the return on asset. This study is using panel regression with random effect model. The result showed that spin-off method doesn’t have a significant impact on the Return On Asset (ROA) Islamic Banks from spin-off effect. Only BOPO and Non-Performing Finance (NPF) had a significant effect on Return On Asset (ROA). These results indicate that the Islamic business units that want to do the spin-off can choose one of two methods of the spin-off. The decision depends on the internal condition of Islamic business unit and the internal policies of conventional commercial banks.Undang-undang No. 21 tahun 2008 tentang Perbankan Syariah mewajiban setiap unit usaha syariah untuk melakukan pemisahan apabila telah memenuhi kriteria. Terdapat dua metode pemisahan yang dapat dipilih oleh bank syariah. Tujuan dari penelitian ini ialah untuk menganalisis pengaruh metode pemisahan terhadap tingkat profitabilitas. Sampel yang digunakan pada penelitian ini adalah empat bank syariah hasil pisah. Indikator profitabilitas yang dipergunakan dalam penelitian ini ialah rasio return on asset. Metode analisis yang dipergunakan dalam penelitian ini regresi panel dengan model efek acak. Hasil penelitian menunjukkan bahwa metode pemisahan tidak berdampak pada tingkat profitabilitas di bank umum syariah hasil pemisahan, hanya tingkat efisiensi operasional (BOPO) dan tingkat pembiayaan bermasalah (NPF) yang berdampak pada tingkat profitabilitas.. Hasil ini mengindikasikan bahwa unit usaha syariah yang ingin memisahkan diri dapat memilih metode pemisahan. Keputusan tergantung pada kondisi internal dari unit usaha syariah dan kebijakan internal dari bank induk konvensional.

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CUSTOMERS’ DEPOSIT BEHAVIOUR IN DUAL BANKING INDUSTRY: A MARKET STRUCTURE ANALYSIS

Journal of Nusantara Studies (JONUS) ◽

10.24200/jonus.vol5iss1pp356-377 ◽

2020 ◽

Vol 5 (1) ◽

pp. 356-377

Author(s):

Nafisah Mohammed ◽

Azmafazilah Jauhari ◽

Nadzirah Mohammed

Keyword(s):

Market Structure ◽

Structure Analysis ◽

Concentration Ratio ◽

Banking Industry ◽

Market Concentration ◽

Islamic Banking ◽

Market Structure Analysis ◽

Banking Markets ◽

Conventional Banks ◽

Structure Perception

Background and Purpose: The aim of this paper is to evaluate public acceptance toward Islamic banking system in Malaysia by using the market structure analysis as proposed in industrial organizational studies. The structural approach framework was used to evaluate the nature and changes of market concentration in the Malaysian Islamic and conventional deposit markets. Methodology: The well-known market concentration measure, namely concentration ratio (CR) is calculated to study the changes in saving behaviour among depositors in both banking markets. The concentration ratios of deposits for both banking markets are evaluated by using the banking firms’ level data for the period 1997–2016. Pearson and Spearman correlation analysis was also used to investigate the relationship between the total deposits and bank-specific variables. Findings: It is found that interest or profit rate paid to the depositors are the factor that greatly affect the depositors’ choice of banks to save their money. Besides, experience doing businesses is more important to Islamic banks compared to conventional banks in order to attract depositors. Contributions: The findings demonstrate that societies, especially the Islamic community, are still loyal to conventional banks, which have more experience in the banking operation. The findings of this study are expected to open the eyes of the Muslim community to use Islamic banking services, which are certainly sharia-compliance. Keywords: Concentration ratio, deposit, dual banking, market structure, perception. Cite as: Mohammed, N., Jauhari, A., & Mohammed, N. (2020). Customers’ deposit behaviour in dual banking industry: A market structure analysis. Journal of Nusantara Studies, 5(1), 356-377. http://dx.doi.org/10.24200/jonus.vol5iss1pp356-377

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Determinant factors of market share: evidence from the Indonesian Islamic banking industry

Problems and Perspectives in Management ◽

10.21511/ppm.16(1).2018.37 ◽

2018 ◽

Vol 16 (1) ◽

pp. 392-398

Author(s):

M. Nur Rianto Al Arif ◽

Yuke Rahmawati

Keyword(s):

Market Share ◽

Banking Industry ◽

Profit Sharing ◽

Islamic Banking ◽

Internal Factors ◽

Policy Makers ◽

Default Rate ◽

And Performance ◽

Set Up ◽

Efficiency Rate

Market share is one of the performance indicators for the Islamic banking industry in Indonesia. Actually, the policy makers had set up the 5% market share to be achieved in 2008. Unfortunately, this target finally was met at the end of 2016. This study is going to examine the determinants of market share in the Indonesian Islamic banking industry. From the empirical result, we can see that some of the variables had an impact on market share. The variables impacting market share are the default rate, operational efficiency rate, the yield of profit sharing, and conventional bank’s interest rate. The other variables such as profitability ratio and liquidity ratio don’t have an impact on market share. The result implies that Islamic banks should strengthen the internal factors to accelerate their growth and performance.

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ANALISA STRUKTUR PASAR DAN EFISIENSI INDUSTRI PERBANKAN DI INDONESIA PERIODE 2017-2012

Media Ekonomi ◽

10.25105/me.v22i1.2816 ◽

2014 ◽

Vol 22 (1) ◽

pp. 27

Author(s):

Nuraini Chaniago

Keyword(s):

Data Envelopment Analysis ◽

Market Structure ◽

Market Share ◽

Concentration Ratio ◽

Banking Industry ◽

Maximum Level ◽

Data Envelopment ◽

High Concentration ◽

Input And Output ◽

Analysis Technique

The purpose of this study was to determine how the market structure and efficiency of banking industry in Indonesia.The analysis technique used in this research is to use the concentration ratio (CR20) and the Herfindahl Hirchman Index (HHI), and DEA (Data Envelopment Analysis). This study uses data on the number of banking and corporate assets to determine the efficiency of using the 20 banks in the Input and Output of the report Indonesian banking in the period 2007-2012. The results showed the level of concentration ratio (CR20) range from 77.69% - 79.47%. The figure shows the structure of the banking industry 2007-2012 period was a tight oligopoly. which means that the structure of the banking industry in Indonesia is not structured oligopoly monopoly but because it is not close to 1. When viewed competition banks in Indonesia is competitive with high concentration and competitive, it is characterized by competition between the market share of twenty dominant company in the Indonesian banking industry in the number of assets. In the calculation of the twenty study Indonesian banking industry in the period 2007-2012 by using the method of DEA (Data Envelopment Analysis) produced differences in the efficiency of each bank, Of the twenty 20 Indonesian banking industry that has not reached the maximum level of efficiency that is 100% should refer to the banking has reached a maximum level of 100% in accordance with the characteristics of banking itself.

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STRUKTUR PASAR DAN EFISIENSI INDUSTRI PERBANKAN DI INDONESIA

Media Ekonomi ◽

10.25105/me.v22i2.2967 ◽

2018 ◽

Vol 22 (2) ◽

pp. 157

Author(s):

Muhammad Rizky Ramadhan ◽

Nur’aini Chaniago

Keyword(s):

Data Envelopment Analysis ◽

Market Structure ◽

Market Share ◽

Concentration Ratio ◽

Banking Industry ◽

Maximum Level ◽

Data Envelopment ◽

Input And Output ◽

Analysis Technique

The purpose of this study was to determine how the market structure and efficiency of banking industry in Indonesia. The analysis technique used in this research is to use the concentration ratio (CR20) and the Herfindahl Hirchman Index (HHI), and DEA (Data Envelopment Analysis). This study uses data on the number of banking and corporate assets to determine the efficiency of using the 20 banks in the Input and Output of the report Indonesian banking in the period 2007-2012. The results showed the level of concentration ratio (CR20) range from 77.69% - 79.47%. The figure shows the structure of the banking industry 2007-2012 period was a tight oligopoly. Which means that the structure of the banking industry in Indonesia is not structured oligopoly monopoly but because it is not close to 1. When viewed competition banks in Indonesia is competitive with high concentration and competitive, it is characterized by competition between the market share of twenty dominant company in the Indonesian banking industry in the number of assets. In the calculation of the twenty study Indonesian banking industry in the period 2007-2012 by using the method of DEA (Data Envelopment Analysis) produced differences in the efficiency of each bank, Of the twenty 20 Indonesian banking industry that has not reached the maximum level of efficiency that is 100% should refer to the banking has reached amaximum level of 100% in accordance with the characteristics of banking it self.

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The Influence of Market Structure in Indonesian Banking Performance

JEJAK ◽

10.15294/jejak.v13i1.21458 ◽

2020 ◽

Vol 13 (1) ◽

pp. 120-134

Author(s):

Maal Naylah ◽

Cahyaningratri Cahyaningratri

Keyword(s):

Data Analysis ◽

Panel Data ◽

Market Structure ◽

Market Share ◽

Negative Correlation ◽

Commercial Banks ◽

Banking Industry ◽

Panel Data Analysis ◽

Effect Model ◽

Efficiency Hypothesis

There are three hypotheses about structure-conduct-performance paradigm; traditional hypothesis, differentiation hypothesis and efficiency hypothesis. The objective of this research is to examine how strong the influence of market structure in banking performance. This study uses the fix effect model by applying the Weiss model. This research also tries to prove whether market share and concentration in the banking industry as a proxy to efficiency. The result of the panel data analysis conducted on a sample of 15 biggest commercial banks over the period from 2009 to 2018 is strongly reject the traditional hypothesis. The empirical findings suggest that market concentration has a negative correlation between profitability, it means that Indonesian banking industry strongly reject the traditional hypothesis and support efficiency hypothesis and there is a positive correlation between market share and profitability, supports the differentiation hypothesis.

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Analisis Pengaruh Kepemilikan Blockholder, Kepemilikan Manajerial, Kepemilikan Institusional, dan Komite Audit terhadap Nilai Perusahaan

INDONESIAN JOURNAL OF ACCOUNTING AND GOVERNANCE ◽

10.36766/ijag.v2i1.10 ◽

2018 ◽

Vol 2 (1) ◽

pp. 96-121

Author(s):

Iwan Wirawardhana ◽

Meco Sitardja

Keyword(s):

Firm Value ◽

Audit Committee ◽

Stock Exchange ◽

Random Effect ◽

Random Effect Model ◽

Institutional Ownership ◽

Managerial Ownership ◽

Estimation Model ◽

Effect Model ◽

Positive Effect

The aim of this study is to analyse the effect of Blockholder Ownership, Managerial Ownership,Institutional Ownership, and Audit Committee towards Firm Value. The background of this research isthe agency theory and ownership theory. The population in this study are 46 property companies listedon the Indonesia Stock Exchange (IDX) for the period 2012-2016. By using purposive samplingtechnique, 35 companies are qualified as data samples. This research uses the random effect model asthe estimation model and multiple regression as the method of analysis. The results of this study showsthat Institutional Ownership has a positive effect on Firm Value. Meanwhile, Blockholder Ownership,Managerial Ownership, and Audit Committee have no effect on Firm Value. Moreover, the F-testimplies that the variables, blockholder ownership, managerial ownership, institutional ownership, andaudit committee, simultaneously influence firm value.

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