The influence of bank and board characteristics : the case of Indonesian commercial banks /
The banking industry has a significant role in an economy which serves as an intermediary to mobilize fund from the surplus units to the deficit units. Examining its performance could be beneficial to the stakeholders in assessing its profitability, liquidity and solvency. Good corporate governance...
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| Main Author: | |
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| Format: | Thesis |
| Language: | English |
| Published: |
Kuala Lumpur :
Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia,
2011
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| Subjects: | |
| Online Access: | http://studentrepo.iium.edu.my/handle/123456789/3579 |
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| Summary: | The banking industry has a significant role in an economy which serves as an intermediary to mobilize fund from the surplus units to the deficit units. Examining its performance could be beneficial to the stakeholders in assessing its profitability, liquidity and solvency. Good corporate governance is needed to ensure that the banks are accountable and provide reliable information regarding its financial performance. Indonesia as one of the developing countries is heading towards the implementation of good corporate governance. The Board of Commissioners has a foremost function in supervising the company's business activities in Indonesia. This study examined the factors influencing the financial performance of commercial banks in Indonesia. The study argued that financial performance could be influenced by the presence of good corporate governance. Furthermore, the study examined whether the size and the independence of the Board have significant roles in determining banking financial performance of commercial banks in Indonesia. This study examined the financial performance of 30 commercial banks including eight banks which provided both conventional and Islamic banking services and two fully-fledged Islamic banks. The dependent variables of this study comprised eight (8) financial ratios which are classified into three (3) categories namely profitability, liquidity and risk and solvency. The independent variables consisted of two groups i.e. bank characteristics (bank size, bank age, types of banks and Non Performing Loans (NPL)) and Board characteristics (Board size and Board independence). The study found that asset size has a statistically significant relationship with profitability only. Age was found to be a factor influencing profitability and liquidity. However, it did not show a statistically significant influence. In general, the results showed that commercial banks involved in Islamic banking and conventional banks have almost similar financial performance. These results are acceptable since both types of banks operated in the same industry and in the same country. NPL is found to have a statistically negative significant relationship with profitability and liquidity ratios. Lastly, the results indicated that size of the Board has a positive relationship with financial performance, but the study does not support the prediction that independent directors strengthen the company performance. The findings of the study will be useful to academicians, bankers, and regulators. Discussions relating to the factors influencing performance are provided. Other than that, the results suggested that corporate governance guidelines should reconsider determining and stating the number of Board members and composition of Board independence. The regulators should emphasize more on the specific roles of each Board, especially the Board of Commissioners. |
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| Item Description: | Abstracts in English and Arabic. "A dissertation submitted in partial fulfilment of the requirements for the degree of Master of Science in Accounting."--On t.p. |
| Physical Description: | xiii, 136 leaves : ill. ; 30cm. |
| Bibliography: | Includes bibliographical references (leaves 105-112). |