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Spin-off and market share in the Indonesian Islamic banking industry: a difference in difference analysis

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  • Al Arif M. Nur Rianto

    (State Islamic University, Syarif Hidayatullah Jakarta, Indonesia)

Abstract

According to The Act No. 21 of 2008 concerning Islamic Banking in Indonesia, the conventional banks are obligated to spun-off their Islamic business units after achieving a certain set of requirements. The spin-off requirements are: (i) reach 50% market share asset of its parents; or (ii) 15 years after the implementation of the Islamic Banking Act. This study emphasizes the impact of Islamic banks' spin-off on market share. The method used in this study is a difference in difference analysis. This technique is a quasi-experiment separate into two groups, such as the treatment groups (four spin-offs' banks) and control group (two fullfledged Islamic banks). This study used quarterly data from 2005 until 2016. The results show that, first, there is a difference in the Islamic banks' market share between pre- and post-spinoff. Second, there is a difference in the market share of spin-offs' banks between pre- and postspin- off. Third, there are there external factors that can affect the Islamic banks' market share, i.e., inflation rate, interest rate, and economic growth rate. The paper is a useful source of information that may provide relevant guidelines in helping the future development of spin-off activity in Islamic banking industry. The finding could be helpful for policymakers to create a supporting strategy to accelerate the development of Islamic banking industry. This result also could be of use for Islamic banking industries in other countries.

Suggested Citation

  • Al Arif M. Nur Rianto, 2017. "Spin-off and market share in the Indonesian Islamic banking industry: a difference in difference analysis," Management & Marketing, Sciendo, vol. 12(4), pages 540-551, December.
    • Handle: RePEc:vrs:manmar:v:12:y:2017:i:4:p:540-551:n:2
    DOI: 10.1515/mmcks-2017-0032
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    References listed on IDEAS

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