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The Effect of Loan Market Concentration on Banking Rentability: A Study of Indonesian Commercial Banking, Dynamics Panel Data Regression Approach

Author

Listed:
  • Sapto Jumono

    (Department of Management and Business, Universitas Esa Unggul, Jakarta, Indonesia)

  • Noer Azam Achsani

    (School of Business and Department of Economics, Faculty of Economics and Management, Bogor Agriculture University, Indonesia.)

  • Dedi Budiman Hakim

    (School of Business and Department of Economics, Faculty of Economics and Management, Bogor Agriculture University, Indonesia.)

  • Muhammad Fidaus

    (School of Business and Department of Economics, Faculty of Economics and Management, Bogor Agriculture University, Indonesia.)

Abstract

The aim of this research is to find out the speed of adjustment and impact of market concentration on rentability (return on equity [ROE]). From 145 banks, there were 97 banks chosen in a period of 2001-2012 as sampling of research by using purposive sampling. This research uses data panel, therefore dynamics panel data regression is used in this research and using generalized method of moments Arellano Bonds as research tools. This research shows that speed of adjustment close to zero point which means the market condition is more competitive; and the variables which affect ROE are ROElag1, market concentration, bank size, non-performing loan, and overhead to revenue ratio meanwhile the other variables do not impact ROE.

Suggested Citation

  • Sapto Jumono & Noer Azam Achsani & Dedi Budiman Hakim & Muhammad Fidaus, 2016. "The Effect of Loan Market Concentration on Banking Rentability: A Study of Indonesian Commercial Banking, Dynamics Panel Data Regression Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 207-213.
  • Handle: RePEc:eco:journ1:2016-01-28
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    References listed on IDEAS

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    1. Athanasoglou, Panayiotis P. & Brissimis, Sophocles N. & Delis, Matthaios D., 2008. "Bank-specific, industry-specific and macroeconomic determinants of bank profitability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 121-136, April.
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    Cited by:

    1. repec:eco:journ1:2017-02-34 is not listed on IDEAS
    2. repec:ers:journl:v:xxi:y:2018:i:special3:p:423-440 is not listed on IDEAS
    3. repec:hur:ijaraf:v:8:y:2018:i:1:p:26-40 is not listed on IDEAS

    More about this item

    Keywords

    Market Structure; Market Share; Return on Equity; Banking Industry; Performance;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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