ESSAYS ON BANKING REGULATION AND RESTRUCTURING: THE CASE OF INDONESIA

Abstract

This thesis comprises three empirical- and one theoretical essays. Chapter 2 examines whether capital requirement induces Indonesian banks to limit risk-taking. Chapter 3 examines whether strategic sale of Indonesian banks improves banksa?? performance. Chapter 4 models the effectiveness of capital requirement and audit policy when regulator does not observe banksa?? capital and investment decision. Chapter 5 looks at the relationship between banksa?? efficiency and types of ownership. Chapter 6 concludes. We find that some banks that are under regulatory pressure tend to increase their capital or reduce risk; strategic sale leads to about 15 percent cost reduction; regulator must audit banks to enforce capital requirement; and state-owned banks are the least efficient banks while joint-venture banks are the most efficient ones.