Wiwiek Rabiatul Adawiyah


This article empirically examined the effects of foreign banks entry on the performance of Islamic banks in
Indonesia, with the observation period 1999-2013. The method of analysis employed was descriptive statistics
and multiple regressions. The result of the study indicated that capital adequacy ratio had a negative influence
on the financial performance, measured using return on assets (ROA) of domestic Islamic banks in Indonesia
while liquidity ratio did not influence ROA. Surprisingly this study revealed that foreign banks entry had a
negative effect, insignificant influence on the financial performance of Islamic banks. This result supported the
views that foreign banks entry had an adverse effect on the performance of domestic banks in several emerging
market economies worldwide, but against the notion that foreign banks entry brought positive effects on the
performance of incumbent banks.

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DOI: https://doi.org/10.26905/jkdp.v19i1.841


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Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

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