Foreign banking presence and banking market concentration: The case of Indonesia

This study examines whether and how foreign banking presence has influenced market concentration in the host commercial banking industry. The evidence shows that foreign banking presence has contributed to the increased banking market competition in the case of the Indonesian banking industry. The study also finds that the size of market and relaxation of government policy on market expansion (for example, lowering of minimum liquidity ratio) have negative relationships with banking market concentration, consistent with previous findings in the manufacturing sector. On the other hand, market growth and number of banks have a positive influence on banking market concentration; economies of scale do not play their usual role as a market entry barrier in Indonesian banking.