Stability, Liquidity, Efficiency, and Profitability After Spin-off Implementation: Evidence from Indonesian Islamic Banking Industry
DOI:
https://doi.org/10.58229/jims.v1i1.13Keywords:
Islamic Bank, Spin-off, Liquidity, Stability, Difference-in-DifferenceAbstract
The business-unit Islamic bank was forced to separate from its parent company according to Banking Act No. 21 of 2008 that issued by the Indonesian Central Bank. However, the Development and Strengthening of the Financial Sector Act No.4 of 2023 have allowed them not to convert themselves into full-fledged Islamic banks with certain conditions. Thus, doing spin-offs will be appealing if it is beneficial for them. However, the benefit of converting a business-unit Islamic bank spin-off into a full-fledged Islamic bank has yet to be entirely evident. This study aims to determine how spin-off affects the stability and financial performance, covering the profitability, efficiency, and liquidity of spin-off business-unit Islamic banks in Indonesia. Using difference-in-difference (DID) analysis, this study examined four spin-off full-fledged Islamic banks as the treatment group and twenty business-unit Islamic banks as the control group from 2005 to 2019. The parameter used are return on equity (ROE), cost-to-income ratio (CIR), financing-to-deposit ratio (FDR), quick ratio (QR), and Z-score. The result indicates that profitability and efficiency are decreasing, while the liquidy kept increasing after the spin-off undertaking. However, the stability has not been found to have evidence of significant differences after spin-off implementation.
References
Journal Article
Abbas, A., & Arizah, A. (2019). Marketability, profitability, and profit-loss sharing: evidence from sharia banking in Indonesia. Asian Journal of Accounting Research, 4(2), 315–326. https://doi.org/10.1108/AJAR-08-2019-0065
Al Arif, M. N. R. (2015). The effect of spin-off policy on financing growth in Indonesian Islamic banking industry. Al-Ulum, 15(1), 173–184. http://journal.iaingorontalo.ac.id/index.php/au
Al Arif, M. N. R. (2017). Spin-off and market share in the Indonesian Islamic banking industry: A difference in difference analysis. Management and Marketing, 12(4), 540–551. https://doi.org/10.1515/mmcks-2017-0032
Ali, M., & Puah, C. H. (2019). The internal determinants of bank profitability and stability: An insight from the banking sector of Pakistan. Management Research Review, 42(1), 49–67. https://doi.org/10.1108/MRR-04-2017-0103
Antzoulatos, A. A., Syrmos, T., & Tsoumas, C. (2015). Sustainable banks were Prudent and Profitable. SSRN. http://ssrn.com/abstract=2661418http://ssrn.com/abstract=2661418
Arif, A., & Anees, A. N. (2012). Liquidity risk and performance of banking system. Journal of Financial Regulation and Compliance, 20(2), 182–195. https://doi.org/10.1108/13581981211218342
Barra, C., & Zotti, R. (2020). Market power and stability of financial institutions: evidence from the Italian banking sector. Journal of Financial Regulation and Compliance, 28(2), 235–265. https://doi.org/10.1108/JFRC-05-2019-0055
Belkhaoui, S., Alsagr, N., & van Hemmen, S. F. (2020). Financing modes, risk, efficiency, and profitability in Islamic banks: Modeling for the GCC countries. Cogent Economics and Finance, 8(1). https://doi.org/10.1080/23322039.2020.1750258
Epure, M., Prior, D., & Serarols, C. (2016). Assessing Technology-Based Spin-offs from University Support Units. Regional Studies, 50(3), 411–428. https://doi.org/10.1080/00343404.2014.921669
Hutapea, E. G., & Kasri, R. A. (2010). Bank margin determination: a comparison between Islamic and conventional banks in Indonesia. International Journal of Islamic and Middle Eastern Finance and Management, 3(1), 65–82. https://doi.org/10.1108/17538391011033870
Iqbal, M., Kusuma, H., & Sunaryati, S. (2022). Vulnerability of Islamic banking in ASEAN. Islamic Economic Studies, 29(2), 159–168. https://doi.org/10.1108/ies-10-2021-0040
Koster, S. (2004). Spin-off firms and individual start-ups. Are they really different? European Regional Science Association: http://hdl.handle.net/10419/117103
Laeven, L., & Levine, R. (2009). Bank governance, regulation and risk taking. Journal of Financial Economics, 93(2), 259–275. https://doi.org/10.1016/j.jfineco.2008.09.003
Margaretha, F., & Aditya, K. (2016). Pengaruh Resiko Likuiditas terhadap Profitabilitas Bank Konvensional di Indonesia. Journal of Accounting and Investment, 14(2), 96–105.
Mohammad, S., Asutay, M., Dixon, R., & Platonova, E. (2020). Liquidity risk exposure and its determinants in the banking sector: A comparative analysis between Islamic, conventional and hybrid banks. Journal of International Financial Markets, Institutions and Money, 66. https://doi.org/10.1016/j.intfin.2020.101196
Parmentola, A., & Ferretti, M. (2018). Stages and trigger factors in the development of academic spin-offs: An explorative study in southern Italy. European Journal of Innovation Management, 21(3), 478–500. https://doi.org/10.1108/EJIM-11-2017-0159
Prawira, M. F. A., Susanto, E., Goeltom, A. D. L., & Furqon, C. (2022). Developing Cashless Tourism from a Tourist Perspective: The Role of TAM and AMO Theory. Journal of Environmental Management and Tourism, 13(8), 2104–2112. https://doi.org/10.14505/jemt.v13.8(64).03
Rashid, A., Yousaf, S., & Khaleequzzaman, M. (2017). Does Islamic banking really strengthen financial stability? Empirical evidence from Pakistan. International Journal of Islamic and Middle Eastern Finance and Management, 10(2), 130–148. https://doi.org/10.1108/IMEFM-11-2015-0137
Roy, A. D. (1952). Safety First and the Holding of Assets. Econometrica, 20(3), 431–449.
Satibi, E., Utami, W., & Nugroho, L. (2018). A Comparison of Sharia Banks and Conventional Banks in Terms of Efficiency, Asset Quality and Stabiltiy in Indonesia for The Period 2008-2016. International Journal of Commerce and Finance, 4, 134–149.
Soedarmono, W., Machrouh, F., & Tarazi, A. (2011). Bank market power, economic growth and financial stability: Evidence from Asian banks. Journal of Asian Economics, 22(6), 460–470. https://doi.org/10.1016/j.asieco.2011.08.003
Sudrajad, O. Y., & Hübner, G. (2019). Empirical evidence on bank market power, business models, stability and performance in the emerging economies. Eurasian Business Review, 9(2), 213–245. https://doi.org/10.1007/s40821-018-0112-1
Susanto, E., Hendrayati, H., Rahtomo, R. W., & Prawira, M. F. A. (2022). Adoption of Digital Payments for Travelers at Tourism Destinations. African Journal of Hospitality, Tourism and Leisure, 11(2), 741–753.
Susanto, E., Solikin, I., & Purnomo, B. S. (2022). A Review of Digital Payment Adoption in Asia. Advanced International Journal of Business, Entrepreneurship and SMEs, 4(11), 01–15. https://doi.org/10.35631/aijbes.411001
Trinugroho, I., Santoso, W., Irawanto, R., & Pamungkas, P. (2021). Is spin-off policy an effective way to improve performance of Islamic banks? Evidence from Indonesia. Research in International Business and Finance, 56. https://doi.org/10.1016/j.ribaf.2020.101352
Walter, A., Auer, M., & Ritter, T. (2006). The impact of network capabilities and entrepreneurial orientation on university spin-off performance. Journal of Business Venturing, 21(4), 541–567. https://doi.org/10.1016/j.jbusvent.2005.02.005
Woo, C. Y., Willard, G. E., & Daellenbach, U. S. (1992). Spin‐off performance: A case of overstated expectations? Strategic Management Journal, 13(6), 433–447.
Zarrouk, H., Ben Jedidia, K., & Moualhi, M. (2016). Is Islamic bank profitability driven by same forces as conventional banks? International Journal of Islamic and Middle Eastern Finance and Management, 9(1), 46–66. https://doi.org/10.1108/IMEFM-12-2014-0120
Book
Albouy, D. (2004). Program Evaluation and the Difference in Difference Estimator. University of California, Berkeley.
Berger, A. N., Klapper, L. F., & Turk-Ariss, R. (2017). Bank competition and financial stability. In Handbook of Competition in Banking and Finance. Edward Elgar Publishing.
Gertler, P. J., Martinez, S., Premand, P., Rawlings, L. B., & Vermeersch, C. M. J. (2016). Impact Evaluation in Practice Second Edition (2nd ed.). Inter-American Development Bank and World Bank.
Gurajati, D. N. (2004). Basic Econometric (4th ed.). McGraw Hill.
Kennedy, P. (2003). A Guide to Econometrics (5th ed.). MIT press.
Veithzal, R. H., & Veithzal, A. P. (2008). Islamic financial management: teori, konsep dan aplikasi panduan praktis untuk lembaga keuangan, nasabah, praktisi, dan mahasiswa. Rajawali.
Wooldridge, J. (2009). Introductory Econometrics: A Modern Approach (4th ed.). Cengage Learning.
Yumanita, D., & Ascarya. (2005). Bank Syariah: Gambaran Umum. Pusat Pendidikan dan Studi Kebanksentralan (PPSK) Bank Indonesia.
Internet Source
n. d. (1998). Undang-Undang Nomor 10 Tahun 1998 Tentang Perbankan. Dewan Perwakilan Rakyat.
Retrieved from https://jdih.kemenkeu.go.id/fulltext/1998/10tahun~1998uu.htm
n. d. (2008). Undang-Undang Nomor 21 Tahun 2008 Tentang Perbankan Syariah. Dewan Perwakilan Rakyat.
Retrieved from https://www.ojk.go.id/waspada-investasi/id/regulasi/Pages/Undang-Undang-Nomor-21-Tahun-2008-Tentang-Perbankan-Syariah.aspx
n.d. (2018). BI Wajibkan Unit Usaha Syariah Dipisah dari Bank Induk. Detik Finance.
Retrieved from https://finance.detik.com/moneter/d-1102428/bi-wajibkan-unit-usaha-syariah-dipisah-dari-bank-induk
n. d. (2019). Statistik Perbankan Indonesia. Otoritas Jasa Keuangan.
n. d. (2023). Undang-Undang Nomor 4 Tahun 2023 Tentang Pengembangan dan Penguatan Sektor Keuangan. Dewan Perwakilan Rakyat. Retrieved from https://jdih.kemenkeu.go.id/download/58fac07c-7165-4c55-882d-965687f8090b/UU4TAHUN2023.pdf
