<![CDATA[Introduction/Main Objectives: The increasingly concentrated market structure in Indonesia’s Islamic banking industry following the 2021 merger of Bank Syariah Indonesia (BSI) raises critical questions regarding the relationship between market structure and bank financial stability. Novelty: This study examines market concentration, measured by the Herfindahl–Hirschman Index (HHI), and individual bank market power, measured by the Lerner Index, in relation to the stability of Islamic banking in Indonesia over the 2019–2024 period. Research Methods: Using an unbalanced panel dataset of Islamic banking institutions in Indonesia, this study employs panel regression analysis to examine the relationships between HHI, the Lerner Index, and banking stability, measured by the Z-score. The appropriate panel estimation model is determined through model selection tests. Finding/Results: The results show that market concentration has a positive but statistically insignificant relationship with the Z-score, whereas market power has a negative but statistically insignificant relationship with the Z-score. Thus, neither variable provides statistically significant evidence of an association with Islamic banking stability under the estimated model. Conclusion: The findings provide inconclusive evidence regarding the relationship between market structure and Islamic banking stability in Indonesia. They highlight the importance of distinguishing between industry-level market concentration and bank-level market power, while interpreting the results in light of measurement choices, sample composition, and the limited time variation in market concentration.]]>
