The Relationship Between Competitive Position And Efficiency in The Indonesian-Banking Sector: A Panel Data Analysis
Analysis on the relationship between competitive position and efficiency with the focus on the Indonesian commercial banks is still very rare. On the other hand, the commercial banks contains banks have systemic impact when they have troubles. The objective of this analysis is to examine the directi...
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Bogor Agricultural University
2019-01-01
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doaj-c76d63bb6a1d48ec852ceb91729375172020-11-25T03:34:27ZengBogor Agricultural UniversityIndonesian Journal of Business and Entrepreneurship2407-54342407-73212019-01-0151878710.17358/ijbe.5.1.8720774The Relationship Between Competitive Position And Efficiency in The Indonesian-Banking Sector: A Panel Data AnalysisAruddy Aruddy0Noer Azam Achsani1Hari Wijayanto2Bagus Sartono3PT Bank Muamalat Indonesia TbkSchool of Business, Bogor Agricultural UniversityDepartment of Statistics, Faculty of Mathematics and Natural Sciences, Bogor Agricultural UniversityDepartment of Statistics, Faculty of Mathematics and Natural Sciences, Bogor Agricultural UniversityAnalysis on the relationship between competitive position and efficiency with the focus on the Indonesian commercial banks is still very rare. On the other hand, the commercial banks contains banks have systemic impact when they have troubles. The objective of this analysis is to examine the direction of the relationship between competitive position and efficiency which has managerial and policy implications for the parties concerned. The relationship was evaluated using Granger-causality test, where previous studies for Indonesian banking sector did not use this test. The quarterly financial data of each bank sample, balanced sheet and profit/loss statement, were used to calculate the efficiency score and Lerner index. The data were taken from the website of Otoritas Jasa Keuangan (OJK). Lerner index was used as an indicator for competitive position of banks, and higher index means a stronger competitive position. A score calculated by data envelopment analysis (DEA) method is a measure for bank efficiency. Dynamic model is estimated by generalized method of moment (GMM) to address endogeneity and heteroscedasticity issues. The study found that there is a significant one-way positive relationship between efficiency and competitive position, and the causality runs from efficiency to competitive position. The policy implication in this finding is that regulators should avoid implementing a regulation, which is counterproductive in strengthening bank’s ability to compete in the market. Keywords: competitive position, DEA, efficiency, Granger-causality, pricing powerhttp://journal.ipb.ac.id/index.php/ijbe/article/view/20774 |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Aruddy Aruddy Noer Azam Achsani Hari Wijayanto Bagus Sartono |
spellingShingle |
Aruddy Aruddy Noer Azam Achsani Hari Wijayanto Bagus Sartono The Relationship Between Competitive Position And Efficiency in The Indonesian-Banking Sector: A Panel Data Analysis Indonesian Journal of Business and Entrepreneurship |
author_facet |
Aruddy Aruddy Noer Azam Achsani Hari Wijayanto Bagus Sartono |
author_sort |
Aruddy Aruddy |
title |
The Relationship Between Competitive Position And Efficiency in The Indonesian-Banking Sector: A Panel Data Analysis |
title_short |
The Relationship Between Competitive Position And Efficiency in The Indonesian-Banking Sector: A Panel Data Analysis |
title_full |
The Relationship Between Competitive Position And Efficiency in The Indonesian-Banking Sector: A Panel Data Analysis |
title_fullStr |
The Relationship Between Competitive Position And Efficiency in The Indonesian-Banking Sector: A Panel Data Analysis |
title_full_unstemmed |
The Relationship Between Competitive Position And Efficiency in The Indonesian-Banking Sector: A Panel Data Analysis |
title_sort |
relationship between competitive position and efficiency in the indonesian-banking sector: a panel data analysis |
publisher |
Bogor Agricultural University |
series |
Indonesian Journal of Business and Entrepreneurship |
issn |
2407-5434 2407-7321 |
publishDate |
2019-01-01 |
description |
Analysis on the relationship between competitive position and efficiency with the focus on the Indonesian commercial banks is still very rare. On the other hand, the commercial banks contains banks have systemic impact when they have troubles. The objective of this analysis is to examine the direction of the relationship between competitive position and efficiency which has managerial and policy implications for the parties concerned. The relationship was evaluated using Granger-causality test, where previous studies for Indonesian banking sector did not use this test. The quarterly financial data of each bank sample, balanced sheet and profit/loss statement, were used to calculate the efficiency score and Lerner index. The data were taken from the website of Otoritas Jasa Keuangan (OJK). Lerner index was used as an indicator for competitive position of banks, and higher index means a stronger competitive position. A score calculated by data envelopment analysis (DEA) method is a measure for bank efficiency. Dynamic model is estimated by generalized method of moment (GMM) to address endogeneity and heteroscedasticity issues. The study found that there is a significant one-way positive relationship between efficiency and competitive position, and the causality runs from efficiency to competitive position. The policy implication in this finding is that regulators should avoid implementing a regulation, which is counterproductive in strengthening bank’s ability to compete in the market.
Keywords: competitive position, DEA, efficiency, Granger-causality, pricing power |
url |
http://journal.ipb.ac.id/index.php/ijbe/article/view/20774 |
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