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Risk and Competition in the Indonesian Private Banking Market: An Asymmetric Rivalry Within and Between Strategic Groups

Author

Listed:
  • Gunardi, Hery
  • Primiana, Ina
  • Effendi, Nury
  • Herwany, Aldrin
  • Satyakti, Yayan

Abstract

This paper tests the interrelationships among risk, competition, and efficiency in the Indonesian private banking industry between 2014 and 2018. We examines asymmetric rivalry within and between strategic groups defined according to the size of their members. We hypothesize that, owing to several forms of group-level effects, including price difference and efficiency, strategic groups comprising large firms expect to experience a large amount of retaliation from firms within their group and accommodation from the group comprising smaller firms. The competition of private banking is dominated by incumbent firm. The risk and efficiency evolved over time enjoyed by incumbent with fat cat taxonomy and quiet life hypothesis. The entrant play lean and hungry strategy in different market segment within strategic group, whereas foreign bank deter incumbent with higher prices to enter between strategic group. The competition of private banking in Indonesia dominated by risk appetite and fragmented market

Suggested Citation

  • Gunardi, Hery & Primiana, Ina & Effendi, Nury & Herwany, Aldrin & Satyakti, Yayan, 2020. "Risk and Competition in the Indonesian Private Banking Market: An Asymmetric Rivalry Within and Between Strategic Groups," MPRA Paper 98451, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:98451
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    File URL: https://mpra.ub.uni-muenchen.de/98451/1/MPRA_paper_98451.pdf
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    More about this item

    Keywords

    Market Structure; Risk; Efficiency; Indonesian Private Banking;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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