Competitiveness and Bank Stability: Empirical Study on Banking Listed on the Indonesia Stock Exchange Period 2011-2020
- 1 Postgraduate STIE Malangkucecwara, Malang, Indonesia
- 2 Postgraduate STIE Malangkucecwara, Malang, Indonesia
- 3 Postgraduate STIE Malangkucecwara, Malang, Indonesia
Abstract
Banking is an institution that maintains financial system stability, but on the other hand, banking is a business institution that is inherently risky in getting a return on its business. This paper analyzes the impact of degree of competitiveness, bank size, and revenue concentration on bank stability on the Indonesian stock exchange during the period 2011-2020. The Lerner Index is used as an inverse proxy for degree of competitiveness, the natural logarithm is used as a proxy for bank size, and the Herfindahl Hirschman Index is used as a proxy for revenue concentration, while the Z-Index and NPL ratio are used as proxies for bank stability. The results show that degree of competitiveness has a negative relationship with stability. The power squared of the Lerner Index is also used to capture the possible non-linear relationship between degree of competitiveness and stability and shows positive results indicating the relationship between degree of competitiveness , and stability is non-linear. Bank size has a negative effect on stability. Revenue concentration shows no relationship with stability.
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