The Causality between Corporate Governance Practice and Bank Performance: Empirical Evidence from Indonesia

Abstract: The aim of this study is to examine the existence of causality between corporate governance practice and performance of commercial banks in Indonesia. We also investigate the influence of age, capital adequacy, and type of commercial banks on bank performance and examine the influence of...

Full description

Bibliographic Details
Main Author: Perpustakaan UGM, i-lib
Format: Article
Published: [Yogyakarta] : Universitas Gadjah Mada 2011
Subjects:
Description
Summary:Abstract: The aim of this study is to examine the existence of causality between corporate governance practice and performance of commercial banks in Indonesia. We also investigate the influence of age, capital adequacy, and type of commercial banks on bank performance and examine the influence of the bank size, foreign ownership, and listing status on corporate governance practice. The result shows that corporate governance practice, bank size and capital adequacy ratio have positive influences on bank performance in Indonesia. However, bank performance does not influence corporate governance practice. This study also finds that regional banks have better performance than private banks. The results of the study support the Central Bank�s efforts to enhance CG practices in the banking sector, to strenghten banks� capital base and its policy to encourage banks to merge to become larger. Abstrak: Tujuan dari penelitian ini adalah menguji hubungan timbal-balik antara praktik tata kelola dan kinerja bank umum di Indonesia. Pengujian dilakukan dengan melihat pengaruh dari umur, indikator kecukupan modal, tipe bank terhadap kinerja bank dan selanjutnya dilihat pula pengaruh dari ukuran bank, kepemilikan asing, dan status terdaftar di bursa terhadap praktik tata kelola bank tersebut. Hasil penelitian menunjukkan bahwa praktik tata kelola, ukuran bank, dan rasio kecukupan modal memiliki pengaruh positif terhadap kinerja bank di Indonesia. Tetapi, kinerja bank tidak memiliki pengaruh terhadap praktik tata kelolanya. Studi juga menemukan bahwa bank pemerintah daerah memiliki kinerja lebih baik dibandingkan bank swasta nasional. Hasil penelitian ini mendukung usaha Bank Indonesia dalam meningkatkan praktik tata kelola di dalam sektor perbankan, untuk memperkuat modal dasar bank dan kebijakan Bank Indonesia dalam mendorong bank untuk melakukan merger dan menjadi semakin besar..