Market Structure, Spin-Off, and Efficiency: Evidence from Indonesian Islamic Banking Industry

Author : M Nur Rianto Al Arif (Universitas Islam Negeri Syarif Hidayatullah Jakarta), M Arief Mufraini (Universitas Islam Negeri Syarif Hidayatullah Jakarta), M Agung Prabowo (Universitas Sebelas Maret)

Abstract : After the enactment of Law 21 in 2008 that stated about the spin-off of Islamic banking units, some Islamic business units had done the spin-off. This led to an increase in the number of fullfledged Islamic banks. 

This study examines the relationship among spin-offs, market structure, and efficiency in the Islamic banking industry. We find a difference in efficiency between spin-off banks and non-spin-off banks. 

The increasing number of full-fledged Islamic banks does not mean that performance (measured by efficiency) will increase. These results show the opposite result with the goal of spin-off policy, which is to enhance the performance of Islamic banks. 

Keywords: Efficiency, Islamic Banks, Market Structure, Spin-Off

Journal : Emerging Markets Finance and Trade Volume 56 Issue 2 2020

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