Effect of Governance on the Efficiency of the Indonesian Banking Industry
Abstract
This study aims to examine observations and determine the effects of corporate governance on the efficiency of the Indonesian banking sector. The research calculated DEA efficiency and performed logistic regression, with a total sample of 150 observations. Results show that independent commissioners, the educational level of commissioners, the board of commissioners meeting, and the term of office of the commissioners all have a significant impact on improving the efficiency of the banking industry. Conversely, the large number of commissioners as well as the gender differences among them do not have any effect on banking efficiency. These findings indicate that authorities should not focus on the size of the board and the gender differences among the board commissioners in finding ways to increase or decrease a firm’s efficiency. The results of this study can contribute to academic research through agency theory and resource dependence theory as well as provide insights that can be used by practitioners.
Keywords: Governance; banking efficiency; DEA
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References
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Putri, V. R., & Lukviarman, N. (2008). Pengukuran Kinerja Bank Komersial dengan Pendekatan Efisiensi: Studi terhadap Perbankan Go-Public di Indonesia. JAAI, 12(1), 37-52.
Rose, C. (2007). Does female board representation influence firm performance? The Danish evidence. Corporate Governance: An International Review, 15(2), 404-413.
Salim, R., Arjomandi, A., & Seufert, J. H. (2016). Does corporate governance affect Australian banks' performance? Journal of International Financial Markets, Institutions and Money, 43, 113-125.
Sarwono, J. (2016). Prosedur-prosedur Analisis Populer Aplikasi Riset Skripsi dan Thesis dengan Eviews. Yogyakarta: Penerbit Gava Media.
Soba, M., Erem, I., & Ceylan, F. (2016). The Impact of Corporate Governance Practices on Bank Efficiency: A Case of Turkey Journal of Süleyman Demirel University Institute of Social Sciences 3(25), 305-322.
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Tanna, S., Pasiouras, F., & Nnadi, M. (2011). The effect of board size and composition on the efficiency of UK banks. International Journal of the Economics of Business, 18(3), 441-462.
Wang, J. L., Jeng, V., & Peng, J. L. (2007). The Impact of Corporate Governance Structure on the Efficiency Performance of Insurance Companies in Taiwan. The Geneva Papers, 32, 264-282.
Adams, R. B., & Funk, P. (2010). Beyond the glass ceiling: Does gender matter? Management Science, 58(2), 219-235.
Ahmad, G. N. (2013). Analysis of Financial Distress in Indonesian Stock Exchange. Review of Integrative Business & Economics Research 2(2), 521-533.
Andrieș, A. M., Căpraru, B., & Nistor, S. (2018). Corporate governance and efficiency in banking: evidence from emerging economies. Applied Economics, 50(34), 1-21.
Azoury, N., & Salloum, C. (2010). Governance, Stress Financier et Performance des entreprises, cas du Liban, La Revue des Sciences de Gestion. Int. J. Business Performance Management 3(1), 243-244.
Bashir, A., & Asad, M. (2018). Moderating Effect of Leverage on the Relationship between Board Size, Board Meetings and Performance: A Study on Textile Sector of Pakistan. American Scientific Research Journal for Engineering, Technology, and Sciences (ASRJETS), 39(1), 19-29.
Bestari, A. R., & Rohman, A. (2013). Pengaruh Rasio CAMEL dan Ukuran Bank terhadap Prediksi Kondisi Bermasalah pada Sektor Perbankan. Diponegoro Journal of Accounting, 2(3), 1-9.
Bodroastuti, T. (2009). Pengaruh Struktur Corporate Governance terhadap Financial Distress. Ilmu Ekonomi ASET, 11(2), 1-15.
Brédart, X. (2014). Financial Distress and Corporate Governance: The Impact of Board Configuration. International Business Research, 7(3), 72-80.
Brick, I. E., & Chidambaran, N. K. (2010). Board meetings, committee structure, and firm value. Journal of Corporate Finance, 16(4), 533-553.
Cooper, D. R., & Schindler, P. S. (2017). Metode Penelitian Bisnis. Jakarta: Salemba Empat.
Darmadi, S. (2013a). Board members' education and firm performance: evidence from a developing economy. International Journal of Commerce and Management, 23(2), 113-135.
Darmadi, S. (2013b). Do women in top management affect firm performance? Evidence from Indonesia. Corporate Governance: The international journal of business in society, 13(3), 288-304.
García-Meca, E., García-Sánchez, I.-M., & Martínez-Ferrero, J. (2015). Board diversity and its effects on bank performance: An international analysis. Journal of Banking & Finance, 53, 202-214.
Huang, S. K. (2013). The Impact of CEO Characteristics on Corporate Sustainable Development. Corporate Social Responsibility and Environmental Management, 20(234-244).
Jensen, C. M. (1993). The Modern Industrial Revolution, Exit and the Failure of Internal Control Systems. The Journal of Finance, 48(3), 831-880.
Jensen, M. C., & Meckling, W. H. (1976). Theory of The Firm: Managerial Behavious, Agency Costs and Ownership Structure. Journal of Financial Economics 3, 305-360.
John, A. T., Ogechukwu, O. L., & Awolowo, O. (2018). Corporate Governance and Financial Distress in the Banking Industry: Nigerian Experience. Journal of Economics and Behavioral Studies 10(1), 182-193.
Khan, H., Hassan, R., & Marimuthu, M. (2017). Diversity on Corporate Boards and Firm Performance: An Empirical Evidence from Malaysia. American Journal of Social Sciences and Humanities, 2(1), 1-8.
Kristanti, F. T., Rahayu, S., & Huda, A. N. (2016). The Determinant of Financial Distress on Indonesian Family Firm. Social and Behavioral Sciences 219, 440-447.
Lehmann, E., Warning, S., & Weigand, J. (2004). Governance Structure, Multidimensional Efficiency and Firm Profitability. Journal of Management and Governance 8, 279-304.
Maere, J. D., Jorissen, A., & Uhlaner, L. M. (2014). Board Capital and the Downward Spiral: Antecedents of Bankruptcy in a Sample of Unlisted Firms. Corporate Governance: An International Review, 22(5), 387–407.
Manzaneque, M., Priego, A. M., & Merino, E. (2016). Corporate governance effect on financial distress likelihood: Evidence from Spain. Spanish Accounting Review 19(1), 111-121.
Melo, T. (2012). Determinants of corporate social performance: the influence of organizational culture, management tenure and financial performance. Social Responsibility Journal, 8(1), 33-47.
Nielsen, S., & Huse, M. (2010). Women directors’ contribution to board decision-making and strategic involvement: The role of equality perception. European Management Review, 7(1), 16-29.
Ombaba, K. M. B., & Kosgei, D. (2017). Board Composition and Financial Distress of Listed Firms in Kenya. An Empirical Analysis. Journal of Finance and Investment Analysis, 6(4), 75-93.
Pfeffer, J. (1973). Size, Composition, and Function of Hospital Boards of Directors: A Study of Organization-Environment Linkage. Administrative Science Quarterly, 18(3), 349-364.
Poudel, R. P. S., & Hovey, M. (2013). Corporate Governance and Efficiency in Nepalese Commercial Banks. International Review of Business Research Papers 9(4), 53-64.
Putri, V. R., & Lukviarman, N. (2008). Pengukuran Kinerja Bank Komersial dengan Pendekatan Efisiensi: Studi terhadap Perbankan Go-Public di Indonesia. JAAI, 12(1), 37-52.
Rose, C. (2007). Does female board representation influence firm performance? The Danish evidence. Corporate Governance: An International Review, 15(2), 404-413.
Salim, R., Arjomandi, A., & Seufert, J. H. (2016). Does corporate governance affect Australian banks' performance? Journal of International Financial Markets, Institutions and Money, 43, 113-125.
Sarwono, J. (2016). Prosedur-prosedur Analisis Populer Aplikasi Riset Skripsi dan Thesis dengan Eviews. Yogyakarta: Penerbit Gava Media.
Soba, M., Erem, I., & Ceylan, F. (2016). The Impact of Corporate Governance Practices on Bank Efficiency: A Case of Turkey Journal of Süleyman Demirel University Institute of Social Sciences 3(25), 305-322.
Sumedi, D. P. (2014). OJK Berharap Kasus Bank Mutiara Tak Terulang. Retrieved 26/4, 2018, from (Online) https://bisnis.tempo.co/read/542626/ojk-berharap-kasus-bank-mutiara-tak-terulang
Tanna, S., Pasiouras, F., & Nnadi, M. (2011). The effect of board size and composition on the efficiency of UK banks. International Journal of the Economics of Business, 18(3), 441-462.
Wang, J. L., Jeng, V., & Peng, J. L. (2007). The Impact of Corporate Governance Structure on the Efficiency Performance of Insurance Companies in Taiwan. The Geneva Papers, 32, 264-282.
Published
2020-01-20
How to Cite
INDRIANTI, Fransiska Novina Hayu; T., Sutrisno; SARASWATI, Erwin.
Effect of Governance on the Efficiency of the Indonesian Banking Industry.
Jurnal Ilmiah Akuntansi dan Bisnis, [S.l.], v. 15, n. 1, p. 93-106, jan. 2020.
ISSN 2303-1018.
Available at: <https://ojs.unud.ac.id/index.php/jiab/article/view/52549>. Date accessed: 04 nov. 2024.
doi: https://doi.org/10.24843/JIAB.2020.v15.i01.p09.
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