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Depositor Sensitivity To Risk Of Islamic And Conventional Banks: Evidence From Indonesia

Author

Listed:
  • Erie Febrian
  • Aldrin Herwany

Abstract

Islamic banks operate without involving interest, and therefore are believed to be less risky during financial crises than conventional banks. This advantage may not be significant if the government either partially or fully guarantees bank deposits. In the presence of deposit insurance the public can be indifferent to risk of both Islamic and conventional banks. However, insufficient studies have examined the issue of deposit insurance impact on depositor behavior and market discipline. This research conducts empirical tests on whether the risk of Islamic and conventional banks influence depositors in Indonesia, during two periods using cross-sectional analysis. This research also investigates the behavior of Indonesian depositors towards risk of both bank types during the US crisis through panel data analysis. Data from all insured domestic banks in Indonesia, from January 2002 to December 2009 are examined.

Suggested Citation

  • Erie Febrian & Aldrin Herwany, 2011. "Depositor Sensitivity To Risk Of Islamic And Conventional Banks: Evidence From Indonesia," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 5(3), pages 29-44.
    • Handle: RePEc:ibf:ijbfre:v:5:y:2011:i:3:p:29-44
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    Citations

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    Cited by:

    1. Umi Widyastuti & Erie Febrian & Sutisna & Tettet Fitrijanti, 2019. "Factors Explaining the Market Discipline of Sharia Mutual Funds from a Behavioural Finance Perspective: A Theoretical Approach," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 198-212.

    More about this item

    Keywords

    Bank Risk; Deposit Insurance; Market Discipline; Islamic Bank;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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