What drives the performance of different bank-ownership types in Indonesia? The pre- and post-GFC analysis
International Journal of Productivity and Performance Management
ISSN: 1741-0401
Article publication date: 3 May 2021
Issue publication date: 29 November 2022
Abstract
Purpose
The Indonesian banks play crucial roles in the economy, especially because of less developed bond and stock markets. It has undergone drastic changes in bank-ownership composition over time. This paper aims to analyze the impact of bank-specific characteristics on the performance of different bank-ownership types in Indonesia to determine whether their profitability drivers differ.
Design/methodology/approach
Fixed-effect panel data regression is applied to 1,649 bank-year observations (97 banks throughout 2003–2019). It encompasses the pre- and post-global financial crisis (GFC) period.
Findings
The findings show that age, liquidity, equity and credit risk are significant determinants of bank performance. The significance of these effects differs for each bank-ownership type and show changes between the pre-GFC and post-GFC periods.
Research limitations/implications
Notwithstanding the merit of this paper, the results are not without limitations. This paper only focuses on one country. Furthermore, the prominence of banks relative to bond and stock markets with consideration of the GDP of countries may result in different findings
Practical implications
These findings provide the owners and managers of banks with information that can be applied to compare and assess own bank drivers and performance to enhance their own efficiency. The findings also inform bank authorities and regulators about differences in performance drivers that could be considered in changes to policies aimed at improving the performance of different bank-ownership types.
Originality/value
This paper is a pioneer study that focuses on the drivers of bank performance for different ownership types during the pre- and post-GFC periods in a country where the financial market is overall small and bank credits dominate capital supply.
Keywords
Acknowledgements
The authors would like to thank the editor of the journal and the anonymous reviewers for their insightful comments. It really contributed to the improvement of the paper. Academic colleagues and students also provided reputable assistance with the paper. Andrian Huruta from Chung Yuan Christian University, Taiwan assisted with the retrieval of relevant recent published papers on the topic of research. Adrian Cheung (City University of Macau), Dhian Adhitya (Universitas Kristen Satya Wacana) and Immanuel Madea Sakti (Universitas Kristen Satya Wacana) assisted the authors with panel data issues. Gideon Felix Gunawan and Melia Bakti Milenia Mintara (students at Universitas Kristen Satya Wacana) put in much effort to update the data for the paper.
Citation
Atahau, A.D.R. and Cronje, T. (2022), "What drives the performance of different bank-ownership types in Indonesia? The pre- and post-GFC analysis", International Journal of Productivity and Performance Management, Vol. 71 No. 8, pp. 3309-3330. https://doi.org/10.1108/IJPPM-03-2020-0096
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited