6BUILDING A MODEL IN EXPLAINING BANK RISK-TAKING IN INDONESIA THROUGH THE BANK BUSINESS MODELS
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In the recent global economic condition, Indonesia banking industry is encouraged by the Financial Service Authority to minimize the potential risk occurrence. This in line with banking regulatory reform undertaken by the Basel Committee which encouraged banks to limit the scope of activities and should reconsider their business model to reduce the risk Mergaerts & Vander Vennet (2016). This paper is related to a growing literature that focuses on the concept of bank business models to explain bank risk-taking. Following Altunbas, Manganelli, & Marques-Ibanez (2011) and Mergaerts & Vander Vennet (2016), this paper aims to develop a model that links the bank business model reflected by bank’s strategic choices (asset, liability, capital, and income structure) to bank risk-taking, in the context of Indonesian banking industry.