The Impact of Financial Conglomeration on Risk and Return Performance in Indonesia Banking Industry

Taufiq Hidayat
International Journal of Finance, Insurance and Risk Management, Volume 6, Issue 2, 1135, 2016
DOI: 10.35808/ijfirm/144

Abstract:

There is a tendency in financial market that occurs in many countries, in which some financial institutions are formed to be a financial conglomeration. The financial conglomeration is driven by the trend of globalization of trade, the development of technology and deregulation that led to the consolidation of cross-sector businesses. Conglomeration of financial institutions also occurred in Indonesia with the holding, usually the bank holding company (BHC). According to Financial Services Authority (FSA), currently there are 31 financial institutions conglomerate operating in the Indonesian and control 77% of the financial institutions’ total assets. The Indonesian financial conglomeration’s performance will be examined by using the TOPSIS method (Technique For Order Preference By Similarity To An Ideal Solution), by looking at the differences in term of the TOPSIS Score between financial conglomerate (C) and focus bank companies (F). Based on the TOPSIS models, the analysis performance of 29 financial conglomerate and 29 focus bank in Indonesia as emerging financial market will be conducted. The models suggest that financial conglomerates have a better financial performance than the focus bank.


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