Re-examine Performance of Foreign Banks in Indonesia

Abstract

We reexamine the performance of multiple definitions of foreign banks in Indonesia over the period of September 2005-December 2013 in a monthly dataset. We use a number of definitions of foreign banks which are branches and subsidiaries of foreign banks (BSFB), joint venture banks (JVB) and domestic banks acquired by foreign investors (DBAFI). Unbalanced panel data estimation, more particular random effect, is employed to examine our hypothesis. We find that BSFB have a higher performance than other banks. However, little evidence is revealed for the joint venture and acquired banks. Encouraging banks, more particular domestic banks, to be more efficient should be bolstered by the regulators to lead them to be more profitable and competitive.