Spin-off policy and efficiency in the Indonesian Islamic banking industry

  • Released On
    Monday, 15 January 2018
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/bbs.13(1).2018.01
  • Article Info
    Volume 13 2018, Issue #1, pp. 1-10
  • TO CITE АНОТАЦІЯ
  • Cited by
    1 articles
  • 944 Views
  • 129 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Indonesian Islamic Banking Act requires conventional banks to spin-off their Islamic business units if they had fulfilled the spin-off criteria. Some of the Islamic business units had done the spin-off process although they are not fulfilling the spin-off criteria. The data showed that there is an efficiency decline after the spun-off. This study is going to examine the spin-off’s impact on the efficiency in spin-off banks. The method used in this paper is a difference-in-differences analysis. The sample used is four spin’s banks as treatment objects and two Islamic full-pledge banks as control objects. This research shows that there is an impact of spin-off policy on the efficiency in spin-off banks. There is an efficiency decrease in spin-off banks after the activities. It implies that the spin-off policy is not the only strategy that can be implemented. The policy-makers can choose other strategies to enhance the development of Islamic banking industry.

view full abstract hide full abstract
    • Figure 1. The theoretical framework of Islamic bank spin-offs
    • Table 1. The operational efficiency of spin-off banks
    • Table 2. Difference-in-differences framework
    • Table 3. Estimation results of spin-off and performance