The Impact of Ownership Concentration, Commissioners on Bank Risk and Profitability: Evidence from Indonesia

We investigate corporate governance and risk in Indonesian banking. More specifically, we investigate whether ownership concentration and commissioners affect bank risk and profitability. Using a sample of 117 Indonesian banks (for ownership concentration analysis), and 28 public banks (for commissi...

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Bibliographic Details
Published in:Eurasian economic review 2013-12, Vol.3 (2), p.183-202
Main Authors: Hanafi, Mamduh M., Santi, Fitri, Muazaroh
Format: Article
Language:English
Subjects:
Banking industry
Banks
Boards of directors
Corporate governance
Developing countries
Economics
Economics and Finance
Impact analysis
LDCs
Nonperforming loans
Ownership
Profitability
Regression analysis
Risk
Stockholders
Studies
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Summary:We investigate corporate governance and risk in Indonesian banking. More specifically, we investigate whether ownership concentration and commissioners affect bank risk and profitability. Using a sample of 117 Indonesian banks (for ownership concentration analysis), and 28 public banks (for commissioner analysis), we find that ownership concentration and governance by larger numbers of commissioners improves a bank’s profitability and it’s handling of risk. The impact of commissioners on bank risk and profitability takes non-linear forms. We also show that various types of commissioners have different impacts on bank risk and profitability. Our study highlights the importance of corporate governance in the banking industry.
ISSN:1309-422X
2147-429X
2147-429X
DOI:10.14208/eer.2013.03.02.005