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All Journal Signifikan : Jurnal Ilmu Ekonomi Global Review of Islamic Economics and Business
Chajar Matari Fath Mala
Syarif Hidayatullah State Islamic University Jakarta
Economics, Econometrics & Finance

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MARKET POWER AND EFFICIENCY OF ISLAMIC BANKING AND CONVENTIONAL BANKING IN INDONESIA Chajar Matari Fath Mala; Ahmad Rodoni; Bahrul Yaman
Global Review of Islamic Economics and Business Vol 6, No 2 (2018)
Publisher : Faculty of Islamic Economics and Business, State Islamic University Sunan Kalijaga

Show Abstract | Download Original | Original Source | Check in Google Scholar | Full PDF (492.256 KB) | DOI: 10.14421/grieb.2018.062-05

Abstract

ASEAN Economic Community (AEC) of banking industry requires both Islamic and conventional banking to improve their efficiency because the competition in banking market industry will be more intense. Therefore, this study aims to identify the type of hyphotesis of industrial organization which exists in Islamic and conventional banks in order to investigate their readiness for AEC. The research sampling consists of 10 Islamic banks and 10 conventional banks from January 2009 to December 2016. To measure x-efficiency and scale efficiency, this research uses Data Envelopment Analysis (DEA). Meanwhile, the concentration is measured by Lerner index. The hypothesis is tested by using panel regression. The result shows SCP (Structure-Conduct-Performance) hypothesis is closely applied to Islamic and conventional banks because market concentration significantly influences profitability. RMP (Relative Market Power) hypothesis is also closely applied to Islamic and conventional banking, this indicates Indonesian banking has market power in determining prices and this condition makes the profit higher. RES (Relative Efficiency Structure) and SES (Scale Efficiency Structure) hypothesis do not exist in both conventional and Islamic banks because x-efficiency and scale efficiency do not affect profitability, concentration, and  market share simultaneously. Market power and efficiency researches are commonly conducted in conventional banking, however there are only a few research in Islamic banking area. The novelty of this study is the comparison between conventional and Islamic banking in the term of market structure and efficiency.
The Response of Financial Performance to The Market Power of Islamic Banking in Indonesia Chajar Matari Fath Mala; Muhammad Nadratuzzaman Hosen; Mohammad Nur Rianto Al Arif
Signifikan: Jurnal Ilmu Ekonomi Vol 11, No 2 (2022)
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.v11i2.26777

Abstract

market power of Islamic banking in Indonesia. This study contributes to filling the gap in the literature by combining the variables under the analysis of impulse response friction (IRF) about the relationship between market power, efficiency, liquidity, profitability, and stability. The data of this study covered Islamic banking in Indonesia from the period January 2010 to 2019 and used IRF from the VAR/VECM panel. This study found that shock/innovation of market power of Islamic banking in Indonesia is responded positively by efficiency, liquidity, and profitability. Meanwhile, financial stability responds negatively to shock/innovation of market power. These findings suggest that innovation in market power in Indonesian Islamic banking will lead to an increase in efficiency, liquidity, and profitability. This result poses a dilemma because competition increases stability but reduces efficiency, liquidity, and profitability. The balance between market power and stability at the macro and industrial levels becomes crucial because it is necessary to maintain the financial system’s stability and national economic growth.How to Cite:Mala, C. M. F., Hosen, M. N., & Al Arif, M. N. R. (2022). The Response of Financial Performance to The Market Power of Islamic Banking in Indonesia. Signifikan: Jurnal Ilmu Ekonomi, 11(2), 415-424. https://doi.org/10.15408/sjie.v11i2.26777.JEL Classification: G18, G21, G28
Co-Authors Ahmad Rodoni Bahrul Yaman Mohammad Nur Rianto Al Arif Muhamad Nadratuzzaman Hosen