Bank Competition and Stability: Evidence from Rural Banks in Bali
Keywords:
Banking Stability, Competition, Financial Crisis, Rural Banks
Abstract
The relationship between competition and stability is widely understood by researchers with two different perspectives, namely competition-fragility and competition-stability. A lot of research have been conducted regarding the relationship between competition and stability in the banking sector but have not specifically examined the stability of classic model of rural banks. The purpose of this study was to empirically examine the effects of rural banks competition and stability based on the aspects of capital, earning asset quality, profitability and liquidity. The indicators used in this study are adjusted to the characteristics of rural banks and existing regulations. The results of the study indicate that the competition variable has a significant positive effect on the stability of rural banks, and supports the view of competition-stability.
References
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[2] Bikker, J. A., & Haaf, K. (2002). Competition, concentration and their relationship: An empirical analysis of the banking industry. Journal of Banking & Finance, 26(11), 2191–2214. https://doi.org/10.1016/S0378-4266(02)00205-4
[3] Bikker, J., & Haaf, K. (2000). Measures of Competition and Concentration in the Banking Industry: A Review of the Literature. Economic and Financial Modelling, 9.
[4] Boyd, J., & Nicola, G. (2005). The Theory of Bank Risk Taking and Competition Revisited. Journal of Finance, 60, 1329–1343. https://doi.org/10.1111/j.1540-6261.2005.00763.x
[5] Claessens, S., & Laeven, L. (2004). What Drives Bank Competition? Some International Evidence. Journal of Money, Credit and Banking, 36, 563–583. https://doi.org/10.1353/mcb.2004.0044
[6] Deltuvaitė, V. (2011). Measuring The Costs Of Banking Crises: Theoretical And Practical Aspects. Journal of Economics and Management.
[7] Demirguc-Kunt, A., & Detragiache, E. (1998). Financial Liberalization and Financial Fragility. The World Bank, Policy Research Working Paper Series, 98. https://doi.org/10.5089/9781451850512.001
[8] Dumicic, M. (2016). Financial Stability Indicators – The Case of Croatia. Journal of Central Banking Theory and Practice, 5. https://doi.org/10.1515/jcbtp-2016-0006
[9] Freixas, X., & Ma, K. (2014). Banking Competition and Stability: The Role of Leverage. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2488426
[10] Gadanecz, B., & Jayaram, K. (2009). Measures of financial stability—A review. IFC Bulletin, 31.
[11] García, R. E., & Steele, S. (2020). Stress testing and bank business patterns: A regression discontinuity study. Journal of Banking & Finance, 105964. https://doi.org/10.1016/j.jbankfin.2020.105964
[12] Hartmann, P., & Carletti, E. (2002). Competition and stability: What’s special about banking? Monetary History, Exchange Rates and Financial Markets: Essays in Honour of Charles Goodhart, 2. https://doi.org/10.4337/9781781950784.00021
[13] Henseler, J., Hubona, G., & Ray, P. (2016). Using PLS Path Modeling in New Technology Research: Updated Guidelines. Industrial Management & Data Systems, 116, 2–20. https://doi.org/10.1108/IMDS-09-2015-0382
[14] İskenderoğlu, Ö., & Tomak, S. (2013). Competition and Stability: An Analysis of the Turkish Banking System. International Journal of Economics and Financial Issues, 3, 752–762.
[15] Jun, J., & Yeo, E. (2018). Peer-to-Peer Lending Platforms and the Stability of the Banking System (SSRN Scholarly Paper ID 3221966). Social Science Research Network. https://doi.org/10.2139/ssrn.3221966
[16] Keeley, M. C. (1990). Deposit Insurance, Risk, and Market Power in Banking. American Economic Review, 80(5), 1183–1200.
[17] Kočišová, K. (2015, October 14). Banking Stability Index: A Cross-Country Study.
[18] Laeven, L., & Valencia, F. (2008). Systemic Banking Crises: A New Database. International Monetary Fund, IMF Working Papers, 08. https://doi.org/10.5089/9781451870824.001
[19] Naaman, C., Magnan, M., Hammami, A., & Yao, L. (2021). Credit unions vs. Commercial banks, who takes more risk? Research in International Business and Finance, 55, 101340. https://doi.org/10.1016/j.ribaf.2020.101340
[20] Nachtigall, C., Kroehne, U., Funke, F., Steyer, R., & Schiller, F. (2003). (Why) Should We Use SEM? Pros and Cons of Structural Equation Modeling. Methods of Psychological Research Online, 8(2), 1–22.
[21] POJK No. 5/POJK. 03/2015 tentang Kewajiban Penyediaan Modal Minimum dan Pemenuhan Modal Inti Minimum Bank Perkreditan Rakyat, (2015).
[22] SE OJK No. 39/SEOJK.03/2017 tentang Laporan Tahunan Dan Laporan Keuangan Publikasi Bank Perkreditan Rakyat, (2017).
[23] Pirouz, D. M. (2006). An Overview of Partial Least Squares (SSRN Scholarly Paper ID 1631359). Social Science Research Network. https://doi.org/10.2139/ssrn.1631359
[24] Rakestraw, J. R. (2015). International Evidence on Product Market Competition and Firm Value. https://vtechworks.lib.vt.edu/handle/10919/73029
[25] Reinhart, C., & Rogoff, K. (2008). Is The 2007 U.S. Subprime Crisis So Different? An, International Historical Comparison. https://doi.org/10.3386/w13761
[26] Schaeck, K., & Cihak, M. (2012). Competition, Efficiency, and Stability in Banking. Financial Management, 43. https://doi.org/10.1111/fima.12010
[27] Tsomocos, D. P. (2003). Equilibrium analysis, banking and financial instability. Journal of Mathematical Economics, 39(5), 619–655. https://doi.org/10.1016/S0304-4068(03)00045-4
[28] US Department of Justice. (2015, June 25). Horizontal Merger Guidelines (08/19/2010). https://www.justice.gov/atr/horizontal-merger-guidelines-08192010
[29] Vives, X. (2019). Competition and stability in modern banking: A post-crisis perspective. International Journal of Industrial Organization, 64, 55–69. https://doi.org/10.1016/j.ijindorg.2018.08.011
[30] Wibowo, B. (2017). Banking Competition Measurement and Banking Sector Performance: Analysis of 4 ASEAN Countries. SIGNIFIKAN: Jurnal Ilmu Ekonomi, 6. https://doi.org/10.15408/sjie.v6i1.4547
[31] Zulverdi, D., Syarifuddin, F., & Prastowo, N. J. (2005). Pengaruh Kinerja Dan Struktur Sistem Keuangan Terhadap Pertumbuhan Ekonomi Di Indonesia (Working Papers No. 5). Bank Indonesia.
Published
2022-06-29
How to Cite
Yudiaatmaja, F., IGB Wiksuana, NLP Wiagustini, & Sedana, I. (2022). Bank Competition and Stability: Evidence from Rural Banks in Bali. Review of Applied Socio-Economic Research, 23(1), 48-59. https://doi.org/10.54609/reaser.v23i1.148
Section
Articles
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