Testing of the Structure-Conduct-Performance Hypothesis for Industrial Banking Profitability: Evidence from Indonesia

Imam Asngari(1*),

(1) Universitas Sriwijaya
(*) Corresponding Author

Abstract


This study aims to test the validity of the Structure Conduct and Performance (SCP) hypothesis on banking profitability in Indonesia. This research data comes from banking financial statements from the Financial Services Authority (OJK) and Bank Indonesia. The analysis method uses the panel data regression method. The banking industry studied includes 110 conventional commercial banks and Islamic banks from 2010-2019. This research has found that the profitability performance of the banking industry is statistically significantly influenced by concentration, market share, cost efficiency to generate revenue, bank size, net interest income margin, Bank Indonesia's benchmark interest rate, and economic growth. Meanwhile, inflation is insignificant. The contribution of the research was to develop of Structure Conduct Performance (SCP) theory. The SCP is applicable to Indonesian banking and it is the Hybrid of the Efficient-Structure Traditional Hypothesis which states that the effects of efficiency and market concentration have improved banking profitability performance. The combination of structure, market share, and efficiency supports the hypotheses on Efficiency and SCP Traditional. High banking profitability due to the combination of efficiency and market concentration formed by increased assets and mergers. Therefore, OJK and Bank Indonesia in encouraging asset improvement through future mergers can improve efficiency, the competitiveness of the banking industry, the and economic stability of Indonesia.


Keywords


Profitability, Concentration, Market Share, Hybrid Efficient and Traditional SCP

Full Text:

PDF

References


Al-abedallat, A. Z. (2017). Factors Affecting the Profitability of Banks: A Field Study of Banks Operating in Jordan. European Scientific Journal, ESJ, 13(22), 141. https://doi.org/10.19044/esj.2017.v13n22p141

Asngari, Imam, 2016. Struktur, Perilaku dan Kinerja Industri Perbankan di Indonesia, Disertasi, Pascasarja, Fakultas Ekonomi Universitas Sriwijaya, Palembang.

Asngari, Imam., Marwa, T., Susetyo, D., Suhel, S., & Kadir, S. A. (2018). International Journal of Economics and Financial Issues The Impact of Banking Architecture Policy and Macroeconomic Condition on Indonesian Banking Concentration and Market Structure. International Journal of Economics and Financial Issues, 8(1), 118–125. http:%0Awww.econjournals.com.

Ajlouni, Moh’d M., 2010. The Main Future of The Structure-Conduct-Performance (SCP) Literature in Banking during the Periode 1960s-1980s, International Journal of Economic Perspective, Volume 4, Issue 3, pp: 509-523.

Dinh, D. Van. (2020). Determinants of Commercial Banks’ Profitability: Evidence From Vietnam. Advances and Applications in Statistics, 63(1), 39–58. https://doi.org/10.17654/as063010039

Farkasdi, S., Septiawan, B., & Alghifari, E. S. (2021). Determinants of Commercial Banks Profitability: Evidence From Germany. Jurnal Riset Akuntansi Kontemporer, 13(2), 82–88. https://doi.org/10.23969/jrak.v13i2.4500.

Gujarati, Damodar, 2021. Essential Econometrics, SAGE Publications

Homma, T., Tsutsui, Y., & Uchida, H. (2014). Firm growth and efficiency in the banking industry: A new test of the efficient structure hypothesis. Journal of Banking and Finance, 40(1), 143–153. https://doi.org/10.1016/j.jbankfin.2013.11.031

Horobet, A., Radulescu, M., Belascu, L., & Dita, S. M. (2021). Determinants of Bank Profitability in CEE Countries: Evidence from GMM Panel Data Estimates. Journal of Risk and Financial Management, 14(7), 307. https://doi.org/10.3390/jrfm14070307

Jumono, S., Sugiyanto, & Mala, C. M. F. (2019). Determinants of profitability in banking industry: A case study of Indonesia. International Journal of English Language and Literature Studies, 9(1), 91–108. https://doi.org/10.18488/journal.aefr.2019.91.91.108.

Juhro, Solikin M, (2020). Pengantar Kebanksentralan: Teori dan Kebijakan, Rajawali Pers, Jakarta.

Khan, H. H., & Kutan, A. M. (2021). Testing the structure-conduct-performance relationship for ASEAN: Addressing the issues in the panel mediation. Journal of Asian Economics, 72, 101269. https://doi.org/10.1016/j.asieco.2020.101269

Knezevic, A., & Dobromirov, D. (2016). The determinants of Serbian banking industry profitability. Economic Research-Ekonomska Istrazivanja , 29(1), 459–474. https://doi.org/10.1080/1331677X.2016.1174390

Lelissa, T. B., & Kuhil, A. M. (2018). Empirical Evidences on Structure-Conduct-Performance Relationship in Banking Sector: A Literature Review. GIS Business, 13(4), 11–20. https://doi.org/10.26643/gis.v13i4.3272.

Mensi, Sami, 2010, Measurement of Competitiveness Degree in Tunisian Deposit Mensi, Sami, 2010, Measurement of Competitiveness Degree in Tunisian Deposit Banks: an Aplication of The Panzar Rosse Model, Panoeconomicus, 2010, hal: 189-207.

Nugroho, Arianto Adi, dan Edy Yusuf, 2014. Analisis Industri Perbankan Indonesia Tahun 2009-2012 dengan Pendekatan Struktur Conduct and Performance (Hipotesis Tradisional, Efisiensi dan Differensiasi), Diponegoro Journal of Economics, Volume 3, Nomor 4, Tahun 2014.

O’Connell, M. (2023). Bank-specific, industry-specific and macroeconomic determinants of bank profitability: evidence from the UK. Studies in Economics and Finance, 40(1), 155–174. https://doi.org/10.1108/SEF-10-2021-0413.

Otoritas Jasa Keuangan. (2020). Laporan Profil Industri Perbankan Triwulan IV, Otoritas Jasa Keuuangan, Jakarta.

Petria, N., Capraru, B., & Ihnatov, I. (2015). Determinants of Banks’ Profitability: Evidence from EU 27 Banking Systems. Procedia Economics and Finance, 20(15), 518–524. https://doi.org/10.1016/s2212-5671(15)00104-5

Sakti, I. M. (2020). The Effect of Market Structure on Bank Performance in Central Java Pengaruh Struktur Pasar terhadap Kinerja Bank di Jawa Tengah. Jurnal Economia, Volume, 16(1), 112–129.

Sastrosuwito, S., & Suzuki, Y. (2011). Post Crisis Indonesian Banking System Profitability: Bank-Specific, Industry-Specific, and Macroeconomic Determinants. The 2nd International Research Symposium in Service Management, July, 588–597. https://www.researchgate.net/profile/Yasushi_Suzuki3/publication/267566466_Post_Crisis_Indonesian_Banking_System_Profitability_Bank-Specific_Industry-Specific_and_Macroeconomic_Determinants/links/549d1d410cf2fedbc30ff693.pdf

Simorangkir, I. (2014). Pengantar Kebanksentralam: Teori dan Praktik di Indonesia. Jakarta: RadjaGrafindo Persada.

Wahyudi, R., Mutmainah, L., Nahar, F. H., Adha, M. A., & Rifan, A. A. (2021). Determinants of profitability in Indonesian Islamic banking: Case study in the COVID-19 period. Integrated Journal of Business and Economics, 5(1), 37–46. http://ojs.ijbe-research.com/index.php/IJBE/article/view/333.

Warjiyo, Ferry and Solikin M. Juhro, 2020. Central Bank Pilicy Mix: Issue, Chalenges, and Policy Responses, Hand Book of Central Banking Studies, Bank indonesia Instiute, Jakarta.

Widarjono, A. (2021). The Role of Equity Financing on the Profitability of Indonesian Islamic Banks. Muqtasid: Jurnal Ekonomi Dan Perbankan Syariah, 12(2), 129–143. https://doi.org/10.18326/muqtasid.v12i2.129-143

Yao, H., Haris, M., & Tariq, G. (2018). Profitability determinants of financial institutions: Evidence from banks in pakistan. International Journal of Financial Studies, 6(2), 1–28. https://doi.org/10.3390/ijfs6020053




DOI: http://dx.doi.org/10.33019/ijbe.v8i1.771

Article Metrics

Abstract view : 188 times
PDF - 25 times

Refbacks

  • There are currently no refbacks.


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


Creative Commons License

Integrated Journal of Business and Economics is licensed under a Creative Commons Attribution 4.0 International License.