Foreign Ownership and Banking Performance: Evidence from Indonesia

Amarilla Hapsari, Rofikoh Rokhim

Research output: Contribution to journalArticlepeer-review

Abstract

The main objective of this study is to examine the impact of foreign entry on the domestic banking market's profitability and overhead costs as financial sector FDI is a relatively new phenomenon and typically takes the form of banks in industrialized countries establishing branches and facilities in developing countries. A panel data covering the period from 2000 to 2012 is set based on the financial data from 82 commercial banks, which operated in Indonesia as of December 2012 and represented 92 percent of the commercial banks' total assets. The results of this study are expected to complement the existing collection of studies on the foreign penetration in the Indonesian banking industry, as to date there has been limited study of the impact of foreign ownership on bank performance in Indonesia. From a policy perspective, this study draws some conclusions which clarify the impacts of foreign penetration on banking industry. The government should continue to open the banking market up to foreign investors if they are proven to bring a positive impact, and should act conversely if they are proven to have an adverse impact on the local banking sector.
Original languageEnglish
Pages (from-to)30-43
JournalJurnal Dinamika Manajemen
Volume8
Issue number1
Publication statusPublished - 1 Mar 2017

Keywords

  • Banking; Foreign Ownership; Indonesia.

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