Ownership Structure, Bank Performance, and the Moderating Role of Islamic Banking Status: Evidence from Indonesia and Malaysia

Abstract

This study examines whether ownership concentration and state ownership influence the financial performance of banks operating under a dual banking system, and whether Islamic banking status alters the strength of that relationship. Using an unbalanced panel of 60 publicly listed banks from Indonesia and Malaysia observed between 2015 and 2025, financial performance is regressed on ownership concentration, state ownership, Islamic bank status, and their interaction terms through a random effects model corrected for correlated unobserved heterogeneity. Ownership concentration and state ownership show no significant direct association with return on average assets or return on average equity once bank size, capitalization, asset quality, and macroeconomic conditions are controlled for. The interaction between ownership concentration and Islamic banking status is positive and significant for return on average assets, suggesting that the monitoring benefit of concentrated ownership is more pronounced in Shariah compliant banks. These findings imply that ownership structure alone is an incomplete predictor of bank performance and that institutional context, particularly the Shariah governance environment, conditions how ownership translates into outcomes. The results carry practical relevance for regulators and boards seeking to calibrate governance expectations across conventional and Islamic banking segments within the same jurisdiction.