Market power and efficiency of Islamic banks in Indonesia and Malaysia

Taufik Faturohman, Oktofa Yudha Sudrajad, Nur Muhammad Azis and Atika Irawan

International Journal of Trade and Global Markets, 2023, vol. 17, issue 3/4, 261-269

Abstract: Countries in South East Asia have implemented economic integration known as the ASEAN Economic Community, including the financial sector. Therefore, Islamic banks in Indonesia have to prepare for more challenging competition. Using data of Islamic banks in Indonesia and Malaysia, this research determines the relationship between market power and efficiency. Market power is analysed using the Lerner Index, while efficiency captures by the cost to income ratio (CIR). Our results show that Islamic banks in Malaysia outperform Islamic banks in Indonesia overall regarding market power and efficiency. Furthermore, market power and efficiency are positively correlated.

Keywords: market power; Lerner index; efficiency; Islamic bank; ASEAN economic community. (search for similar items in EconPapers)
Date: 2023
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