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Industry Market Structure and Banking Performance in Indonesia

Author

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  • Ignatius Roni Setyawan
  • Margarita Ekadjaja
  • Agustin Ekadjaja

Abstract

After the economic crisis, Indonesian banks began to compile the Indonesian Banking Architecture to design the Indonesian banking system. Banks mostly have a motive to increase their market share by increasing the amount of third-party funds and the amount of credit extended, thus changing the character of the banking market structure in Indonesia. This research measures the effect of performance as reflected in the level of bank profitability in relation to the market structure by assuming that these conditions are influenced by internal (Asset Liability Management) and market factors. Bank market concentration is measured by the Herfindahl-Hirschman Index. This research concludes that the Indonesian banking industry has a monopolistic market structure. The effect of bank market concentration, capital ratio, and liquidity ratio are positive and significant on bank performance. Conversely, the credit risk ratio has a negative effect on banking performance.

Suggested Citation

  • Ignatius Roni Setyawan & Margarita Ekadjaja & Agustin Ekadjaja, 2022. "Industry Market Structure and Banking Performance in Indonesia," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 11, March.
    • Handle: RePEc:bjz:ajisjr:2217
    DOI: https://doi.org/10.36941/ajis-2022-0056
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    References listed on IDEAS

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    5. Klaus Gugler & Evgeni Peev, 2018. "The persistence of profits in banking: an international comparison," Applied Economics, Taylor & Francis Journals, vol. 50(55), pages 5996-6009, November.
    6. Dungey, Mardi & Gajurel, Dinesh, 2015. "Contagion and banking crisis – International evidence for 2007–2009," Journal of Banking & Finance, Elsevier, vol. 60(C), pages 271-283.
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