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Income Structure And Performance: An Empirical Analysis Of Islamic And Conventional Banks In Indonesia

Author

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  • Mohsin Ali

    (Taylor's university)

  • Mudeer Ahmed Khattak

    (Universiti Kuala Lumpur)

Abstract

Banks have tried to compensate for the decline in their profits due to increased competition by shifting their focus toward non-intermediation activities. This paper assesses the impact of these non-intermediation activities on the profitability and risk of Islamic and conventional banks in Indonesia. We use a system generalized method of moments estimator to control for the simultaneity for all the banks in our sample for the period from 2007 to 2017. Our results suggest that non-intermediation income has a positive impact on bank performance. We find no difference between Islamic and conventional banks in terms of the link between non intermediation income and performance.

Suggested Citation

  • Mohsin Ali & Mudeer Ahmed Khattak, 2020. "Income Structure And Performance: An Empirical Analysis Of Islamic And Conventional Banks In Indonesia," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 23(Special I), pages 87-108, January.
    • Handle: RePEc:idn:journl:v:23:y:2020:i:spe:p:87-108
    DOI: https://doi.org/10.21098/bemp.v23i0.1193
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    More about this item

    Keywords

    Profitability; Risk; Non-intermediation income; Indonesia;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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