Same Market, Different Stores: Market Segmentation among Indonesian Islamic Bank Equities

Abstract

This study investigates whether publicly listed Islamic banks operating within the same national financial system exhibit a common equity market trajectory or remain segmented by institution-specific market dynamics. Focusing on Indonesia, the world’s largest Muslim majority economy and an increasingly important Islamic finance market, the study examines weekly share-price observations for Bank Syariah Indonesia (BRIS), Bank BTPN Syariah (BTPS), and Bank Panin Dubai Syariah (PNBS) from September 2021 to July 2025. The empirical strategy combines Augmented Dickey–Fuller, Phillips–Perron, and KPSS stationarity tests with Engle–Granger and Johansen cointegration procedures to distinguish short-run co-movement from persistent long-run integration. The analysis is subsequently extended through a vector autoregressive framework to examine dynamic interdependence, direction of information transmission, impulse responses, and the relative contribution of shocks across the three equities. The results indicate that the stock-price series are predominantly non-stationary in levels but stationary after first differencing, while both residual-based and system-based cointegration tests fail to establish a stable long-run equilibrium relationship among the three banks. This absence of cointegration suggests that common Islamic banking classification does not necessarily translate into common market pricing. Instead, the equities display heterogeneous price behaviour, pointing toward segmentation in investor participation, liquidity conditions, price discovery, and institution-specific valuation. The findings challenge the assumption that Shariah-compliant banks constitute a financially homogeneous equity segment and show that sectoral similarity can coexist with substantial market heterogeneity. By shifting attention from the performance of individual Islamic banks to the degree of integration within the Islamic banking equity market itself, the study contributes to the literature on Islamic capital-market efficiency, diversification, and financial integration, while offering implications for investors, bank managers, regulators, and policymakers seeking to deepen Islamic equity markets in Indonesia and other emerging Islamic financial systems.