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THE ADJUSTED MARKET POWER, COMPETITION, AND PERFORMANCE : ISLAMIC VS CONVENTIONAL BANKS

Khattak, Mudeer Ahmed ; Ali, Mohsin ; Khan, Noureen A. and Ahmad, Fawad LU (2022) In Journal of Islamic Monetary Economics and Finance 8(4). p.577-598
Abstract

This study explores the relationship between competition and performance in a dual banking setting. More specifically, we compare whether using the Traditional Lerner index (TLI) the efficiency-adjusted Lerner index (EALI) would yield different conclusions. We take data from 2008 to 2020 and take Malaysia as a case study. Considering the nature of the dataset and the variables within, we employ the system Generalized Method of Moments. Our findings reveal contradictory results when market power is measured differently. Based on the overall sample, the models using the adjusted market power is supportive of the 'competition-stability view' while the models with TLI report evidence in favor of the 'competition-fragility view.' The Islamic... (More)

This study explores the relationship between competition and performance in a dual banking setting. More specifically, we compare whether using the Traditional Lerner index (TLI) the efficiency-adjusted Lerner index (EALI) would yield different conclusions. We take data from 2008 to 2020 and take Malaysia as a case study. Considering the nature of the dataset and the variables within, we employ the system Generalized Method of Moments. Our findings reveal contradictory results when market power is measured differently. Based on the overall sample, the models using the adjusted market power is supportive of the 'competition-stability view' while the models with TLI report evidence in favor of the 'competition-fragility view.' The Islamic banks' results support the 'competition-fragility view' when competition is measured with the efficiency-adjusted Lerner index (EALI) and the 'competitionstability view' when measured with the TLI. These findings are robust to different econometric estimators and carry important policy implications.

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author
; ; and
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Competition, Efficiency, GMM, Lerner index, Risk-adjusted performance
in
Journal of Islamic Monetary Economics and Finance
volume
8
issue
4
pages
22 pages
publisher
Bank Indonesia Institute
external identifiers
  • scopus:85146674195
ISSN
2460-6146
DOI
10.21098/jimf.v8i4.1532
language
English
LU publication?
no
additional info
Publisher Copyright: © 2022 Universidade Federal de Goias. All rights reserved.
id
18da77a9-7887-4d2d-ad1a-8f7b85d31073
date added to LUP
2024-09-14 22:11:15
date last changed
2025-04-04 14:31:54
@article{18da77a9-7887-4d2d-ad1a-8f7b85d31073,
  abstract     = {{<p>This study explores the relationship between competition and performance in a dual banking setting. More specifically, we compare whether using the Traditional Lerner index (TLI) the efficiency-adjusted Lerner index (EALI) would yield different conclusions. We take data from 2008 to 2020 and take Malaysia as a case study. Considering the nature of the dataset and the variables within, we employ the system Generalized Method of Moments. Our findings reveal contradictory results when market power is measured differently. Based on the overall sample, the models using the adjusted market power is supportive of the 'competition-stability view' while the models with TLI report evidence in favor of the 'competition-fragility view.' The Islamic banks' results support the 'competition-fragility view' when competition is measured with the efficiency-adjusted Lerner index (EALI) and the 'competitionstability view' when measured with the TLI. These findings are robust to different econometric estimators and carry important policy implications.</p>}},
  author       = {{Khattak, Mudeer Ahmed and Ali, Mohsin and Khan, Noureen A. and Ahmad, Fawad}},
  issn         = {{2460-6146}},
  keywords     = {{Competition; Efficiency; GMM; Lerner index; Risk-adjusted performance}},
  language     = {{eng}},
  number       = {{4}},
  pages        = {{577--598}},
  publisher    = {{Bank Indonesia Institute}},
  series       = {{Journal of Islamic Monetary Economics and Finance}},
  title        = {{THE ADJUSTED MARKET POWER, COMPETITION, AND PERFORMANCE : ISLAMIC VS CONVENTIONAL BANKS}},
  url          = {{http://dx.doi.org/10.21098/jimf.v8i4.1532}},
  doi          = {{10.21098/jimf.v8i4.1532}},
  volume       = {{8}},
  year         = {{2022}},
}