COMPETITION, DIVERSIFICATION, AND STABILITY IN THE INDONESIAN BANKING SYSTEM

Authors

Mudeer Ahmed Khattak, Iqra University-Islamabad, PakistanFollow
Mohsin Ali, Taylor's university, MalaysiaFollow
Baharom Abdul Hamid, International Center for Education in Islamic Finance, MalaysiaFollow
Muhammad Umar Islam, Asia Pacific University of Technology and Innovation, MalaysiaFollow

Document Type

Article

Abstract

We examine the impact of competition and portfolio diversification on banking stability for conventional and Islamic banks in Indonesia. We find that the Islamic banking sector is less stable, when compared to the conventional banking sector. Competition in the banking sector reduces stability, while diversification enhances it. We find that competition negatively impacts the Islamic banks, but diversification has no impact on these banks. An interesting finding is that competition and diversification complement each other in enhancing the stability of the Indonesian banking sector. These findings carry an important policy implication for the banking sector of Indonesia.

Recommended Citation

Khattak, Mudeer Ahmed; Ali, Mohsin; Hamid, Baharom Abdul; and Islam, Muhammad Umar (2021) "COMPETITION, DIVERSIFICATION, AND STABILITY IN THE INDONESIAN BANKING SYSTEM," Bulletin of Monetary Economics and Banking: Vol. 24: No. 0, Article 2.
DOI: https://doi.org/10.21098/bemp.v24i0.1481
Available at: https://bulletin.bmeb-bi.org/bmeb/vol24/iss0/2

First Page

59

Last Page

88

Creative Commons License

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

Country

Pakistan

Affiliation

Iqra University Islamabad