The impact of financial and competition conglomeration policies on banking efficiency and risk in Indonesia
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Author(s)Teguh Supangkat ,Eleonora SofildaLink to ORCID Index: https://orcid.org/0000-0002-5105-8208
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Muhammad Zilal HamzahLink to ORCID Index: https://orcid.org/0000-0001-6546-4736
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Ari Mulianta GintingLink to ORCID Index: https://orcid.org/0000-0002-2751-1199
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DOIhttp://dx.doi.org/10.21511/bbs.15(3).2020.04
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Article InfoVolume 15 2020, Issue #3, pp. 29-43
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- 1017 Views
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435 Downloads
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Creative Commons Attribution 4.0 International License
Financial conglomerates and bank competition play a significant role in developing efficiency levels and increased risk exposure. This study aims to formulate a conceptual model of the policy’s impact of financial conglomerates and bank competition on bank efficiency and stability risk. This research is conducted using data samples from 90 commercial banks in Indonesia from 2010 to 2017. The empirical analysis is carried out using the dynamic data panel or Generalized Method of Moments (GMM). The study results show that policies of financial conglomerates and competition have a positive effect on banking efficiency. These results support previous empirical studies, where financial conglomeration, in general, can improve banking efficiency. Furthermore, it is found that the interaction between financial conglomerates and competition has a positive effect on banking stability. The implication of this research shows that the potential risks that cause distortion become irrelevant when the banking structure is more competitive. Furthermore, this study recommends the need to build the ideal financial conglomerate institutional structure to strengthen and encourage the role of more competitive banks.
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JEL Classification (Paper profile tab)G21, G34, G32, C23
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References28
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Tables6
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Figures0
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- Table 1. Research variables
- Table 2. Variable description
- Table 3. The effect of bank conglomeration and competition (COS⋅HHI or CON⋅HHI) on bank efficiency (EFF1)
- Table 4. The effect of bank conglomeration and competition (COS⋅HHI or CON⋅HHI) on bank efficiency (EFF2)
- Table 5. The effect of bank conglomeration and competition (COS⋅HHI or CON⋅HHI) on banking insolvency risk (ZSCORE)
- Table 6. The effect of bank conglomeration and competition (COS⋅HHI or CON⋅HHI) on banking credit risk (LLP)
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The impact of monetary policy and bank competition on banking industry risk: A default analysis
Sri Ayomi , Eleonora Sofilda ,
Muhammad Zilal Hamzah ,
Ari Mulianta Ginting
doi: http://dx.doi.org/10.21511/bbs.16(1).2021.18
Banks and Bank Systems Volume 16, 2021 Issue #1 pp. 205-215 Views: 1759 Downloads: 883 TO CITE АНОТАЦІЯIn the financial system and economy, the banking industry plays a crucial role. Default risk takes central stage in preserving financial stability and needs to be mitigated as it can trigger a crisis. The study examines the combined effects of monetary policy and bank competition on banking defaults. Using a sample of 95 commercial banks in Indonesia between 2009 and 2019, this study employs the Generalized Method of Moments, a two-step dynamic panel-data estimation system, to analyze it. Empirical estimation results show that monetary policy, through an increase in the benchmark interest rate, negatively affects probability of default. The extent of banking stability is also enhanced by monetary policy. Banking competition has a negative and significant effect on probability of default and has a positive effect on the banking distance to default. Furthermore, the combined impact of monetary policy and banking competition positively affects probability of default but has a negative impact on the distance of default. Building on this study, to promote a stable and more efficient banking system, policymakers should develop policies that foster complementary monetary and competition policies.
