Islamic bank margins in Indonesia: The role of market power and bank-specific variables

Abstract

Our study examines the determinants of bank margins in Indonesian Islamic banks.The determinants of bank margins consist of market-and-bankspecific variables.We investigate 31 banks, using quarterly data from 2015: Q1 to 2020: Q4.Panel regression with unbalanced data is employed.The findings indicate that higher Islamic bank margins are positively linked to banks with higher market power.Bank with high risk-sharing financing has low bank margins.Bank-specific variables such as income diversification, risk-averse, financing, and financing risk influence bank margins.This study also documents that the effect of market power on Islamic bank margins is more pronounced in Islamic bank subsidiaries, and lower

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