TY - JOUR
T1 - The role of resource investment as a key element for resolving the bank size paradox
AU - Dahlan, Rolan Mauludy
AU - Kasali, Rhenald
AU - Wijanto, Setyo Hari
AU - Haryanto, Jony Oktavian
N1 - Publisher Copyright:
© 2022, Emerald Publishing Limited.
PY - 2023/10/19
Y1 - 2023/10/19
N2 - Purpose: This study aims to explore the role of resource investment in resolving the bank size paradox, in which there is a direct positive impact on financial performance but also the potential for increased business diversification, which thus poses the risk of a negative impact on financial performance. Design/methodology/approach: This study assessed secondary data on 108 commercial banks in Indonesia using specific document types, including financial reports and banking directory reports published by the financial regulatory authority. The data thus obtained were analysed via covariance-based structural equation modelling. Findings: In the context of the Indonesian banking industry, the results showed that firm size (or bank size) had positive effects on both diversification strategy and financial performance. Meanwhile, diversification strategy had a direct negative impact on financial performance but an indirect positive effect on financial performance when mediated by resource investment. Originality/value: While this study empirically demonstrated the existence of the bank size paradox, the results confirmed that it could be reduced through the strategic role of resource investment, which minimises the negative impacts of diversification strategies on financial performance.
AB - Purpose: This study aims to explore the role of resource investment in resolving the bank size paradox, in which there is a direct positive impact on financial performance but also the potential for increased business diversification, which thus poses the risk of a negative impact on financial performance. Design/methodology/approach: This study assessed secondary data on 108 commercial banks in Indonesia using specific document types, including financial reports and banking directory reports published by the financial regulatory authority. The data thus obtained were analysed via covariance-based structural equation modelling. Findings: In the context of the Indonesian banking industry, the results showed that firm size (or bank size) had positive effects on both diversification strategy and financial performance. Meanwhile, diversification strategy had a direct negative impact on financial performance but an indirect positive effect on financial performance when mediated by resource investment. Originality/value: While this study empirically demonstrated the existence of the bank size paradox, the results confirmed that it could be reduced through the strategic role of resource investment, which minimises the negative impacts of diversification strategies on financial performance.
KW - Banking
KW - Diversification strategy
KW - Financial performance
KW - Firm size
KW - Resource investment
UR - http://www.scopus.com/inward/record.url?scp=85142429516&partnerID=8YFLogxK
U2 - 10.1108/JABS-12-2021-0501
DO - 10.1108/JABS-12-2021-0501
M3 - Article
AN - SCOPUS:85142429516
SN - 1558-7894
VL - 17
SP - 897
EP - 910
JO - Journal of Asia Business Studies
JF - Journal of Asia Business Studies
IS - 5
ER -