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

Gunardi, Hery and Primiana, Ina and Effendi, Nury and Herwany, Aldrin and Satyakti, Yayan (2020): Risk and Competition in the Indonesian Private Banking Market: An Asymmetric Rivalry Within and Between Strategic Groups.

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

• Item Type: MPRA Paper
• Language: English
• Keywords: Market Structure, Risk, Efficiency, Indonesian Private Banking
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill

References

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