The increase of foreign ownership and its impact to the performance, competition and risk in Indonesian banking industry

Rofikoh Rokhim, Anindya P. Susanto

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)

Abstract

Foreign ownership in Indonesian banking has increased dramatically after deregulation in 1998, following the severe economic crisis. A bank now can have up to 99% foreign ownership. This study aims to investigate the impact of increasing foreign ownership on performance, competition and short-term insolvency risk in the Indonesian banking industry. This study uses financial reports of all (115) commercial banks over a period of six years. Foreign banks
are proven to be superior compared to domestic banks in terms of profitability and cost-efficiency. Competition increases with the influx of foreign ownership to the industry which brings more efficiency to it. Nevertheless, insolvency risk builds up too and it should direct policy makers to come out with additional restrictive policies on the liberalisation.
Original languageEnglish
Pages (from-to)137-153
Number of pages17
JournalAsian Journal of Business and Accounting
Volume6
Issue number2
Publication statusPublished - 2013
Externally publishedYes

Keywords

  • Banks
  • Foreign Ownership
  • Performance

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