Work

Competition, Diversification, and Stability in the Indonesian Banking System

Year: 2021

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.

Source: Bulletin of Monetary Economics and Banking

DOI: 10.21098/bemp.v24i0.1481

Authors: Mudeer Ahmed Khattak, Mohsin Ali, Baharom Abdul Hamid, Muhammad Umar Islam

Institutions: Asia Pacific University of Technology & Innovation, Iqra University, International Centre for Education in Islamic Finance, Taylor's University

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: diamond

OpenAlex ID: W3136775458

FWCI: 5.182

Cites: 90

Cited by: 32

Related to: 10