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Analysing the Demand for Financial Assets in Indonesia

Author

Listed:
  • Eliyathamby A Selvanathan

    (Griffith University)

  • Saroja Selvanathan

    (Griffith University)

Abstract

This paper empirically assesses the relation between bank performance and capital regulation for Islamic banks from 13 countries and evaluates whether the relation varies with bank size, capital, and liquidity. We find small Islamic banks to be less stable and less profitable; they also cut lending growth as capital regulation becomes more stringent. The stability and lending growth of big Islamic banks are, however, directly related to capital regulation. Further, capital regulation adversely affects the profitability of Islamic banks with low liquidity and high capital holdings. While capital regulation is needed, it should not be adopted in a blanket manner for all Islamic banks.

Suggested Citation

  • Eliyathamby A Selvanathan & Saroja Selvanathan, 2019. "Analysing the Demand for Financial Assets in Indonesia," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 22(1), pages 69-86, April.
    • Handle: RePEc:idn:journl:v:18:y:2019:i:1d:p:69-86
    DOI: https://doi.org/10.21098/bemp.v22i1.982
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    References listed on IDEAS

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    1. Selvanathan, E.A. & Jayasinghe, Maneka & Selvanathan, Saroja & Viswanathan, Brinda, 2025. "Modelling the demand for financial assets: The case of Sri Lanka," Emerging Markets Review, Elsevier, vol. 68(C).

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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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