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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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    Cited by:

    1. Muhamad Nadratuzzaman Hosen & Sabrina Fitria, 2018. "The Performance of Islamic Rural Banks in Indonesia: 2010-2015," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 3), pages 423-440.
    2. Kaan Kutlay & Okan Veli Safakli, 2018. "The Relationship between Bank Profitability and Micro Variables with Particular Emphasis on Bank Type: The Case of Northern Cyprus," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(1), pages 26-40, January.
    3. Sapto Jumono & Abdurrahman & Chajar Matari Fath Mala, 2017. "Market Concentration Index and Performance: Evidence from Indonesian Banking Industry," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 249-258.
    4. 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.

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    More about this item

    Keywords

    Market Structure; Market Share; Return on Equity; Banking Industry; Performance;
    All these keywords.

    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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