The effects of loan portfolio concentration on Brazilian banks return and risk

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Institutional ownership, independent board, the board size, and firm performance: Evidence from Indonesia

Financing constraints and firm-level responses to the COVID-19 pandemic: International evidence

Do foreign banks perform better than domestic banks in host developing economies? Relying on financial statements and survey data I compare the performance of three different categories of foreign banks to the group of domestic banks in sub-Saharan Africa: global banks from developed countries, regional African banks and banks from non-African emerging economies. While emerging-market banks and global banks consistently outperform domestic banks, the difference is not significant for regional African banks. The higher performance of global banks and emerging-market banks is related to higher operational efficiency and lower cost of funding, while there is no strong evidence of segmentation by business segment in the loans market. Regional African banks, which started their foreign expansion more recently, are less able to generate interest income compared to domestic banks. These findings highlight the importance of taking into account foreign banks’ heterogeneity when assessing the impact of financial FDI on the host economy.

Performance of foreign banks in developing countries: evidence from sub-Saharan African banking markets

Government-owned banks represent the smallest number of banks in Indonesia (25% of all banks) but have a dominant market share of almost 50% in the loan market. Studies previous to this one do not address the effect of size differences on the loan portfolio structures and performance of such banks. The objective of this study is to add to the literature in this area by determining whether small and large Indonesian government-owned banks differ in terms of their loan portfolio structures and performance. The study covers the 2003 to 2011 period. Descriptive statistics, univariate statistics and generalized least squares estimation are applied. The findings show that the loan portfolio structures and returns of small and large government-owned banks differ significantly.

Loan Portfolio Structure and Performance of Government Owned Banks in Indonesia: Does Size Matter?

Bank lending: The bank ownership focus in the pre- and post-global financial crisis periods

The purpose of this paper is to determine the impact of loan concentration on the returns of Indonesian banks and examines whether bank ownership types affect the relationship between concentration and returns.,This research uses heuristic measures of concentration: The Hirschman–Herfindahl index and Deviation from Aggregated Averages are applied to Indonesian banks across all sectors. The data covers the pre and post global financial crises periods from 2003-2011 for 109 commercial banks in Indonesia. Panel feasible generalised least squares analysis was applied.,The findings show that loan concentration increases bank returns. The positive effect of concentration on returns tends to be more significant for domestic-owned banks. In addition, the interaction effect shows that the positive effect of concentration on returns is less for foreign-owned banks.,The Indonesian central bank changes to the reporting format of sectoral loan allocation by banks since 2012 in terms of the Indonesian Banking Statistics Details of Enhancement matrix requires separate data analysis for 2012 onwards. The findings of this paper could be enhanced by more detailed data like interest rate expenses and bank level sectoral non-performing loans data.,The findings suggest that a focus strategy provides better returns. Moreover, bank ownership types is an important factor to consider when setting a bank lending policy.,This paper is among the few studies where different measures of loan concentration in combination with measures of return are applied in Indonesia as an emerging Asian country. The research also provides evidence of the impact of concentration on the interest earnings of the loan portfolios of banks in addition to return on assets and return on equity that are generally applied as measures of return in previous research.

Does focus strategy work? A study of bank loan portfolios in Indonesia

PurposeThe Indonesian banks play crucial roles in the economy, especially because of less developed bond and stock markets. It has undergone drastic changes in bank-ownership composition over time. This paper aims to analyze the impact of bank-specific characteristics on the performance of different bank-ownership types in Indonesia to determine whether their profitability drivers differ.Design/methodology/approachFixed-effect panel data regression is applied to 1,649 bank-year observations (97 banks throughout 2003–2019). It encompasses the pre- and post-global financial crisis (GFC) period.FindingsThe findings show that age, liquidity, equity and credit risk are significant determinants of bank performance. The significance of these effects differs for each bank-ownership type and show changes between the pre-GFC and post-GFC periods.Research limitations/implicationsNotwithstanding the merit of this paper, the results are not without limitations. This paper only focuses on one country. Furthermore, the prominence of banks relative to bond and stock markets with consideration of the GDP of countries may result in different findingsPractical implicationsThese findings provide the owners and managers of banks with information that can be applied to compare and assess own bank drivers and performance to enhance their own efficiency. The findings also inform bank authorities and regulators about differences in performance drivers that could be considered in changes to policies aimed at improving the performance of different bank-ownership types.Originality/valueThis paper is a pioneer study that focuses on the drivers of bank performance for different ownership types during the pre- and post-GFC periods in a country where the financial market is overall small and bank credits dominate capital supply.

What drives the performance of different bank-ownership types in Indonesia? The pre- and post-GFC analysis

This study empirically examines whether the mode of entry into the Indonesian banking sector affects loan portfolio structures and loan interest rates of foreign-owned banks (FBs). It also attempts to explore whether the mode of entry affects loan portfolio returns of FBs in Indonesia. The data of all FBs were analyzed over the period from 2003 to 2011 using univariate statistics and pooled regression analyses. The study finds significant differences in the loan portfolio structures and loan interest rates of FBs based on different modes of entry into the Indonesian banking sector. In addition, FB mode of entry significantly affects loan portfolio returns. The findings show that the loan interest rates charged by FBs that acquired domestic banks are higher than the interest rates charged by greenfield FBs, although they have lower returns on assets and equity. The study also provides evidence that the loan portfolio structures of FBs that acquired domestic banks as a mode of entry, are more diversified than that of greenfield FBs. From an overall perspective, these findings imply that the loan portfolios of FBs that acquired domestic banks, are more diversified to different sectors of the economy, whilst the financial returns of greenfield FBs are more efficient.

Apriani Dorkas Rambu Atahau

Papers

Loan Portfolio Structure and Performance of Government Owned Banks in Indonesia: Does Size Matter?

Bank lending: The bank ownership focus in the pre- and post-global financial crisis periods

Does focus strategy work? A study of bank loan portfolios in Indonesia

What drives the performance of different bank-ownership types in Indonesia? The pre- and post-GFC analysis

Mode of entry, loan portfolio structure, and returns of foreign-owned banks in Indonesia