Based on Structure-Conduct-Performance (SCP) paradigm, the fact that concentration ratio of Indonesian banking industry decreasing, in terms of deposit and credit, can be interpreted as the increasing of competitiveness. This proposition tested using econometric regression that relating between profit and concentration. If there is positive relationship then one can conclude that high profit comes from collusive behavior. Other competing paradigm, Chicago School, argues this proposition and said that high profit can come from efficiency, instead of collusive behavior. Using Polius and Samuel model, this study tries to prove which hypotheses, SCP hypotheses or Efficiency hypotheses that can be used to explain the conditions in Indonesian banking industry. The result shows that efficiency variables have statistically significant relation with bank's profit, while all other structure variables are insignificant. This conclusion suggested that profit level of commercial banks in Indonesia influenced by efficiency, rather than structure variables.
|Journal||Jurnal Kebijakan Ekonomi|
|Publication status||Published - 2007|