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Market Concentration Index and Performance: Evidence from Indonesian Banking Industry

Author

Listed:
  • Sapto Jumono

    (Department of Management and Business, UEU, Jakarta, Indonesia)

  • Abdurrahman

    (Department of Management and Business, UEU, Jakarta, Indonesia,)

  • Chajar Matari Fath Mala

    (Department of Management and Business, UEU, Jakarta, Indonesia.)

Abstract

The aim of this research is to evaluate the loan market, deposit market, and performance based on basic earning power (BEP) and return on equity (ROE). This research also investigates the relationship between markets and performance. Structure-conduct-performance (SCP) theory is used as the grand theory. This research uses 97 samples from the publication of financial report during 2011-2014. The inferential analysis is conducted by generalized method of moment Arellano and Bond. The research result showed that concentration market index has a significant influence of BEP and ROE, meanwhile market share does not have a significant influence on BEP and ROE. According to SCP theory, this result shows that Indonesian banking industry is in the collusive condition and is not efficient yet

Suggested Citation

  • 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.
    • Handle: RePEc:eco:journ1:2017-02-34
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    References listed on IDEAS

    as
    1. Smirlock, Michael, 1985. "Evidence on the (Non) Relationship between Concentration and Profitability in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(1), pages 69-83, February.
    2. Evrim TURGUTLU, 2014. "Dynamics of Profitability in the Turkish Banking Industry," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 14(1), pages 43-52.
    3. 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.
    4. Trinugroho, Irwan & Agusman, Agusman & Tarazi, Amine, 2014. "Why have bank interest margins been so high in Indonesia since the 1997/1998 financial crisis?," Research in International Business and Finance, Elsevier, vol. 32(C), pages 139-158.
    5. Samad, Abdus, 2008. "Market structure, conduct and performance: Evidence from the Bangladesh banking industry," Journal of Asian Economics, Elsevier, vol. 19(2), pages 181-193, April.
    6. Pamuji Gesang Raharjo & Dedi Budiman Hakim & Adler Hayman Manurung & Tubagus N.A. Maulana, 2014. "The Determinant of Commercial Banks' Interest Margin in Indonesia: An Analysis of Fixed Effect Panel Regression," International Journal of Economics and Financial Issues, Econjournals, vol. 4(2), pages 295-308.
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    Cited by:

    1. Ahmad Rofik & Tantri Yanuar Rahmat Syah, 2020. "The Effect of Fuel Mix, Moderated by Indonesia Crude Price and Foreign Exchange, and Power Losses on Profitability of PT PlN (PERSERO)," International Journal of Energy Economics and Policy, Econjournals, vol. 10(4), pages 377-383.

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    More about this item

    Keywords

    Concentration Index; Market Share; Loan; Deposits; Basic Earning Power; Return on Equity;
    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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