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All Journal Signifikan : Jurnal Ilmu Ekonomi
Mansor H Ibrahim
International Centre for Education in Islamic Finance
Economics, Econometrics & Finance

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Restructuring and Bank Performance in Dual Banking System Raditya Sukmana; Mansor H Ibrahim
Signifikan: Jurnal Ilmu Ekonomi Vol 10, No 2 (2021)
Publisher : Faculty of Economic and Business Syarif Hidayatullah State Islamic University of Jakarta

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.15408/sjie.v10i2.20740

Abstract

This paper assesses the impact of changing competition landscape and Islamic bank penetration on bank risk, profitability and capitalization. This study utilizes an unbalanced panel dataset consisting of 37 commercial banks over the period 1997 to 2015. The paper uses a panel VAR methodology to discern the interactions between bank competition and Islamic banking presence on one hand and bank performance on the other hand. We find evidence supportive of both competition – stability and competition – fragility views for conventional banks. The results suggest that bank competition improves conventional bank risk and, at the same time, lower profitability and capital holdings. As for Islamic banks, competition seems to robustly influence only bank profitability. Finally, we note that increasing Islamic bank penetration improves the risk profile of conventional banks and, as expected, reduces their market power. These results bear important implications on the design of competition policies in a dual banking system as well as on the development of the Islamic banking sector.JEL Classification: C23, G21, G28How to Cite:Sukmana, R., & Ibrahim, M. H.. (2021). Restructuring and Bank Performance in Dual Banking System. Signifikan: Jurnal Ilmu Ekonomi, 10 (2), 223-247. https://doi.org/10.15408/sjie.v10i2.20740. 
Co-Authors Raditya Sukmana