Market Structure and Profitability: Evidence in the Indonesian Islamic Insurance Industry
There is limited research about the relationship between market structure and profitability in the insurance industry, especially in the Islamic insurance industry. This study examines the relationship among market structure and profitability in Islamic life insurance industry in Indonesia. This research used regression with panel data for the technique of analysis. The model used in this research was the fixed effect model. The result shows that the market structure affected the profitability of Islamic life insurance industry. This result implies that the traditional hypothesis supports the performance of Islamic life insurance industry in Indonesia. However, this research shows that there is no collusive behavior in Islamic life insurance industry in Indonesia. Meanwhile, for control variables, operational efficiency has an adverse effect on the performance of Islamic life insurance industry in Indonesia.
Acosta, R. S. (2014). Effects of Health Insurance Concentration Market on Insurance Coverage in Colombia. Journal of Competitiveness, 6(3), 3-19. https://doi.org/10.7441/joc.2014.03.01
Alhassan, A. L., Addison, G. K., & Asamoah, M. E. (2015). Market Structure, Efficiency, and Profitability of Insurance Companies in Ghana. International Journal of Emerging Markets, 10(4), 648-669. https://doi.org/10.1108/IJoEM-06-2014-0173
Alshammari, A. A., Alhabshi, S. M. S. J., & Siti, B. (2019). The Impact of Competition on Cost Efficieny of Insurance and Takaful Sectors: Evidence from GCC Markets Based on the Stochastics Frontier Analysis. Research in International Business and Finance, 47, 410-427. https://doi.org/10.1016/j.ribaf.2018.09.003
Bajtelsmit, V. L., & Bouzouita, R. (1998). Market Structure and Performance in Private Passenger Automobile Insurance. The Journal of Risk and Insurance, 65(3), 503-514. https://doi.org/10.2307/253662
Basturk, F. H. (2012). Characteristics and Competition Structure of Turkish Insurance Industry. Procedia -Social and Behavioral Sciences, 62, 1084-1088. https://doi.org/10.1016/j.sbspro.2012.09.185
Cãpraru, B., & Moise, N. (2015). Insurance Market's Competition in Romania After 2007. Procedia Economics and Finance, 20, 112-118. https://doi.org/10.1016/S2212-5671(15)00054-4
Celik, T., & Kaplan, M. (2016). Testing The Structure-Conduct-Performance Paradigm for The Turkish Banking Sector: 2008-2013. International Journal of Economics and Financial Issues, 6(4), 1625-1631.
Chan, S. G., Koh, E. H. Y., Zainir, F., & Yong, C. C. (2015). Market Structure, Institutional Framework and Bank Efficiency in ASEAN 5. Journal of Economics and Business, 82, 84-112. https://doi.org/10.1016/j.jeconbus.2015.07.002
Choi, B. P., & Weiss, M. A. (2005). An Empirical Investigation of Market Structure, Efficiency, and Performance in Property-Liability Insurance. Journal of Risk and Insurance, 72(4), 635-673. https://doi.org/10.1111/j.1539-6975.2005.00142.x
Cole, C. R., He, E., & Karl, J. B. (2015). Market Structure and the Profitability of US Health Insurance Marketplace: A State Level Analysis. Journal of Insurance Regulation, 34(1), 1-30.
Cummins, J. D., Rubio-Misas, M., & Vencappa, D. (2017). Competition, Efficiency and Soundness in European Life Insurance Markets. Journal of Financial Stability, 28, 66-78. https://doi.org/10.1016/j.jfs.2016.11.007
Demsetz, H. (1973). Industry Structure, Market Rivalry, and Public Policy. Journal of Law and Economics, 16, 1-9. https://doi.org/10.1086/466752
Eling, M., & Jia, R. (2018). Business Failure, Efficiency, and Volatility: Evidence from the European Insurance Industry. International Review of Financial Analysis, 59, 58-76. https://doi.org/10.1016/j.irfa.2018.07.007
Eling, M., & Jia, R. (2019). Efficiency and Profitability in the Global Insurance Industry. Pacific Basin Finance Journal, 57, 1-12. https://doi.org/10.1016/j.pacfin.2019.101190
Evanoff, D. D., & Fortier, D. L. (1988). Reevaluation of the Structure-Conduct-Performance Paradigm in Banking. Journal of Financial Services Research, 1(3), 277-294. https://doi.org/10.1007/BF00114854
Feo, G. D., & Hindriks, J. (2014). Harmful Competition in Insurance Market. Journal of Economic Behavior and Organization, 106, 213-226. https://doi.org/10.1016/j.jebo.2014.06.002
Hamid, F. S. (2017). The Effect of Market Structure on Bank's Profitability and Stability: Evidence from ASEAN-5 Countries. International Economic Journal, 31(4), 575-598. d https://doi.org/10.1080/10168737.2017.1408668
Hidayat, I. P., & Firmansyah, I. (2017). Determinants of Financial Performance in the Indonesian Islamic Insurance Industry. Etikonomi, 16(1), 1-12. https://doi.org/10.15408/etk.v16i1.4648
Hiestand, T. (2005). Using Pooled Model, Random Model, and Fixed Model Multiple Regression to Measure Foreign Direct Investment in Taiwan. International Business & Economics Research Journal, 4(12), 37-52. https://doi.org/10.19030/iber.v4i12.3642
Homma, T., Tsutsui, Y., & Uchida, H. (2014). Firm Growth and Efficiency in the Banking Industry. Journal of Banking and Finance, 40(March), 143-153. https://doi.org/10.1016/j.jbankfin.2013.11.031
Jaloudi, M., & Bakir, A. (2019). Market Structure, Efficiency, and Performance of Jordan Insurance Market. International Journal of Business and Economics Research, 8(1), 6-13. https://doi.org/10.11648/j.ijber.20190801.12
Joskow, P. L. (1973). Cartels, Competition, and Regulation in The property-liability Insurance Industry. The Bell Journal of Economics and Management Sciences, 4(2), 375-427. https://doi.org/10.2307/3003047
Karbhari, Y., Muye, I., Hassan, A. F. S., & Elnahass, M. (2018). Governance Mechanisms and Efficiency: Evidence from an Alternative Insurance (Takaful) Market. Journal of International Financial Markets, Institutions, and Money, 56, 71-92. https://doi.org/10.1016/j.intfin.2018.02.017
Krishnamurthy, S., Mony, S. V., Jhaveri, N., Bakhshi, S., Bhat, R., Dixit, M. R., Maheshwari, S., & Bhat, R. (2005). Insurance Industry in India: Structure, Performance and Future Challenges. Vikalpa: The Journal for Decision Makers, 30(3), 93-120. https://doi.org/10.1177/0256090920050308
Krivokapic, R., Njegomir, V., & Stojic, D. (2017). Effects of Corporate Diversification on Firm Performance: Evidence from the Serbian Insurance Industry. Economic Research-Ekonomska Istrazivanja, 30(1), 1224-1236. https://doi.org/10.1080/1331677X.2017.1340175
Lee, C-C., & Lin, C-W. (2016). Globalization, Political Institutions, Financial Liberalization, and Performance of the Insurance Industry. The North American Journal of Economics and Finance, 36, 244-266. https://doi.org/10.1016/j.najef.2016.01.007
Martin, S. (2012). Market Structure and Market Performance. Review of Industrial Organization, 40(2), 87-108. https://doi.org/10.1007/s11151-012-9338-8
McShane, M. K., Cox, L. A., & Butler, R. J. (2010). Regulatory Competition and Forbearance: Evidence from the Life Insurance Industry. Journal of Banking and Finance, 34(3), 522-532. https://doi.org/10.1016/j.jbankfin.2009.08.016
Mensi, S. & Zouari, A. (2011). Banking Industry, Market Structure, and Efficiency: The Revisited Model to Intermediary Hypotheses. International Journal of Economic Research, 2(1), 23-36. https://doi.org/10.5539/ijef.v2n4p151
Molyneux, P., & Forbes, W. (1995). Market Structure and Performance in European Banking. Journal Applied Economics, 27(2), 155-159. https://doi.org/10.1080/00036849500000018
Njegomir, V., & Stojic, D. (2011). Liberalisation and Market Concentration Impact on Performance of the Non-Life Insurance Industry: The Evidence from Eastern Europe. The Geneva Papers, 36, 94-106. https://doi.org/10.1057/gpp.2010.32
Nugraheni, P., & Muhammad, R. (2020). Innovation in the Takaful Industry: a Strategy to Expand the Takaful Market in Indonesia. Journal of Islamic Marketing, 11(6), 1313-1326. https://doi.org/10.1108/JIMA-08-2018-0143
Pilloff, S. J., & Rhoades, S. A. (2002). Structure and Profitability in Banking Markets. Review of Industrial Organization, 20(1), 81-98. https://doi.org/10.1023/A:1013362913973
Pope, N., & Ma, Y-L. (2008). The Market Structure-Performance Relationship in The International Insurance Sector. The Journal of Risk and Insurance, 75(4), 947-966. https://doi.org/10.1111/j.1539-6975.2008.00292.x
Samad, A. (2008). Market Structure, Conduct and Performance: Evidence from The Bangladesh Banking Industry. Journal of Asian Economics, 19(2), 181-193. https://doi.org/10.1016/j.asieco.2007.12.007
Seelanatha, L. (2010). Market Structure, Efficiency, and Performance of Banking Industry in Sri Lanka. Banks and Bank System, 5(1), 20-31.
Shim, J. (2015). An Investigation of Market Concentration and Financial Stability in Property-Liability Insurance Industry. Journal of Risk and Insurance, 84(2), 567-597. https://doi.org/10.1111/jori.12091
Smirlock, M. (1985). Evidence on the (Non) Relationship Between Concentration and Profitability in Banking. Journal of Money, Credit, and Banking, 17(1), 69-83. https://doi.org/10.2307/1992507
Stanciulescu, G. C., & Molnar, E. I. (2017). Structure, Conduct, Performance Paradigm in Assessing Travel Agency Performances. Proceeding of the 11th International Conference on Business Excellence: pp. 802-809. https://doi.org/10.1515/picbe-2017-0085
Tan, H-B., Wong, M-F., & Law, S-H. (2009). The Effect of Consumer Factors and Firm Efficiency on Malaysian Life Insurance Expenditure. International Journal of Business and Society, 10(1), 59-73.
Wu, M., & Wang, Y. (2018). Influencing Factors of Corporate Performance of Life Insurance Companies: Evidence from China. Accounting and Finance Research, 7(2), 219-231. https://doi.org/10.5430/afr.v7n2p219
Yuhanah, S. (2016). Pengaruh Struktur Pasar Terhadap Profitabilitas Perbankan Syariah di Indonesia. Esensi: Jurnal Bisnis dan Manajemen, 6(1), 125-138. https://doi.org/10.15408/ess.v6i1.3138
Copyright Transfer Statement for Journal
1) In signing this statement, the author(s) grant UNIMAS Publisher an exclusive license to publish their original research papers. The author(s) also grant UNIMAS Publisher permission to reproduce, recreate, translate, extract or summarize, and to distribute and display in any forms, formats, and media. The author(s) can reuse their papers in their future printed work without first requiring permission from UNIMAS Publisher, provided that the author(s) acknowledge and reference publication in the Journal.
2) For open access articles, the author(s) agree that their articles published under UNIMAS Publisher are distributed under the terms of the CC-BY-NC-SA (Creative Commons Attribution-Non Commercial-Share Alike 4.0 International License) which permits unrestricted use, distribution, and reproduction in any medium, for non-commercial purposes, provided the original work of the author(s) is properly cited.
3) For subscription articles, the author(s) agree that UNIMAS Publisher holds copyright, or an exclusive license to publish. Readers or users may view, download, print, and copy the content, for academic purposes, subject to the following conditions of use: (a) any reuse of materials is subject to permission from UNIMAS Publisher; (b) archived materials may only be used for academic research; (c) archived materials may not be used for commercial purposes, which include but not limited to monetary compensation by means of sale, resale, license, transfer of copyright, loan, etc.; and (d) archived materials may not be re-published in any part, either in print or online.
4) The author(s) is/are responsible to ensure his or her or their submitted work is original and does not infringe any existing copyright, trademark, patent, statutory right, or propriety right of others. Corresponding author(s) has (have) obtained permission from all co-authors prior to submission to the journal. Upon submission of the manuscript, the author(s) agree that no similar work has been or will be submitted or published elsewhere in any language. If submitted manuscript includes materials from others, the authors have obtained the permission from the copyright owners.
5) In signing this statement, the author(s) declare(s) that the researches in which they have conducted are in compliance with the current laws of the respective country and UNIMAS Journal Publication Ethics Policy. Any experimentation or research involving human or the use of animal samples must obtain approval from Human or Animal Ethics Committee in their respective institutions. The author(s) agree and understand that UNIMAS Publisher is not responsible for any compensational claims or failure caused by the author(s) in fulfilling the above-mentioned requirements. The author(s) must accept the responsibility for releasing their materials upon request by Chief Editor or UNIMAS Publisher.
6) The author(s) should have participated sufficiently in the work and ensured the appropriateness of the content of the article. The author(s) should also agree that he or she has no commercial attachments (e.g. patent or license arrangement, equity interest, consultancies, etc.) that might pose any conflict of interest with the submitted manuscript. The author(s) also agree to make any relevant materials and data available upon request by the editor or UNIMAS Publisher.