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Islamic Banks’ Market Power, State-Owned Banks, And Ramadan: Evidence From Indonesia

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  • TASTAFTIYAN RISFANDY

    (Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36A, Surakarta 57126, Indonesia)

  • WAHYU TRINARNINGSIH

    (Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36A, Surakarta 57126, Indonesia)

  • HARMADI HARMADI

    (Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36A, Surakarta 57126, Indonesia)

  • IRWAN TRINUGROHO

    (Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36A, Surakarta 57126, Indonesia)

Abstract

We use a monthly dataset to analyze whether Islamic banks have greater market power compared with their conventional counterparts. Using a sample of Indonesian banks, we find that Islamic banks possess greater market power than conventional banks. This condition does not hold, however, when we compare state-owned Islamic and conventional banks. We also find some specific determinants of Islamic banks’ market power: the Ramadan holy month (positive impact), the proportion of profit-and-loss sharing in their financing (negative impact), and the presence of a Sharia board (positive impact). Interestingly, Ramadan benefits not only Islamic banks but also conventional banks. Our findings support prior literature emphasizing the role of religiosity in Islamic banks’ behavior.

Suggested Citation

  • Tastaftiyan Risfandy & Wahyu Trinarningsih & Harmadi Harmadi & Irwan Trinugroho, 2019. "Islamic Banks’ Market Power, State-Owned Banks, And Ramadan: Evidence From Indonesia," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(02), pages 423-440, March.
    • Handle: RePEc:wsi:serxxx:v:64:y:2019:i:02:n:s0217590817500229
    DOI: 10.1142/S0217590817500229
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    References listed on IDEAS

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    Cited by:

    1. Risfandy, Tastaftiyan & Tarazi, Amine & Trinugroho, Irwan, 2022. "Competition in dual markets: Implications for banking system stability," Global Finance Journal, Elsevier, vol. 52(C).
    2. Baldwin, Kenneth & Alhalboni, Maryam, 2023. "A value-based measure of market power for the participatory deposits of Islamic banks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 87(C).
    3. Tastaftiyan Risfandy & Amine Tarazi & Irwan Trinugroho, 2022. "Competition in dual markets: Implications for banking system stability," Post-Print hal-04681689, HAL.

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