Title: Islamic banks' merger: the case of Bank Syariah Indonesia

Authors: Ayu Dwi Utami; Tastaftiyan Risfandy; Rolina Rahardjoputri

Addresses: Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36A Surakarta 57126, Indonesia ' Faculty of Economics and Business & Center for Fintech and Banking, Universitas Sebelas Maret, Jl. Ir. Sutami 36A Surakarta 57126, Indonesia ' Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36A Surakarta 57126, Indonesia

Abstract: This paper provides a case study of the Bank Syariah Indonesia (BSI) that has been formally created on the 1st of February 2021 through mergers of three State-owned Islamic banks in Indonesia. This paper is a descriptive case study focusing on why the merger was initiated, what happens to the Indonesian Islamic banking industry after mergers, and its implication on market competition and stock prices. We use data of total assets of 34 Islamic banks in Indonesia and the weekly stock price of 4 listed Islamic banks for 18 months. By computing concentration ratio and Herfindahl index, we find that the Indonesian Islamic banking market competition decreases substantially after the merger. We also find that although the merger of BSI previously brings a positive reaction in the stock markets, the stock price of BSI consistently decreased after mergers.

Keywords: mergers; BSI; Bank Syariah Indonesia; competition; stock price; IDX; Indonesia stock exchange; Indonesia.

DOI: 10.1504/IJMEF.2022.126904

International Journal of Monetary Economics and Finance, 2022 Vol.15 No.3, pp.201 - 212

Received: 28 Feb 2021
Accepted: 12 Nov 2021
Published online: 11 Nov 2022 *

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