Spin-off and market share in the Indonesian Islamic banking industry: a difference in difference analysis

Al Arif M. Nur Rianto ()
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Al Arif M. Nur Rianto: State Islamic University, Syarif Hidayatullah Jakarta, Indonesia

Management & Marketing, 2017, vol. 12, issue 4, 540-551

Abstract: According to The Act No. 21 of 2008 concerning Islamic Banking in Indonesia, the conventional banks are obligated to spun-off their Islamic business units after achieving a certain set of requirements. The spin-off requirements are: (i) reach 50% market share asset of its parents; or (ii) 15 years after the implementation of the Islamic Banking Act. This study emphasizes the impact of Islamic banks' spin-off on market share. The method used in this study is a difference in difference analysis. This technique is a quasi-experiment separate into two groups, such as the treatment groups (four spin-offs' banks) and control group (two fullfledged Islamic banks). This study used quarterly data from 2005 until 2016. The results show that, first, there is a difference in the Islamic banks' market share between pre- and post-spinoff. Second, there is a difference in the market share of spin-offs' banks between pre- and postspin- off. Third, there are there external factors that can affect the Islamic banks' market share, i.e., inflation rate, interest rate, and economic growth rate. The paper is a useful source of information that may provide relevant guidelines in helping the future development of spin-off activity in Islamic banking industry. The finding could be helpful for policymakers to create a supporting strategy to accelerate the development of Islamic banking industry. This result also could be of use for Islamic banking industries in other countries.

Keywords: Islamic bank; spin-off; market share; difference in difference analysis (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:manmar:v:12:y:2017:i:4:p:540-551:n:2

DOI: 10.1515/mmcks-2017-0032

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