Board Characteristics and Accounting Performance in Banking Industry: The Indonesian Experience

Muhammad Agung Prabowo

Abstract


This paper examines the effect of board characteristics on accounting return in the Indonesian banking industry. The conceptual framework borrows from agency theory claiming that the board is held liable for monitoring responsibilities and that monitoring effectiveness will lead to higher corporate achievement. Yet the theory predicts that board characteristics matter in constituting firm performance. It is hypothesized that leadership structure, representation of independent directors, board size, and the rank of college board chairperson attended are necessary attributes enable the board to deliver better performance. The investigation is based on a dataset consisting of 83 banks during 2009-2015. Panel data analysis reveal that the proportion of independent directors, board leadership structure, and board size shows insignificant influence. The rank of universities the board chairperson graduated is found to have an impact on accounting earnings. The impact is robust after the type of controlling owners is taken into account. Yet the association between university rank and performance is more pronounced in the listed-banks.

JEL Classification: G32; M14

DOI: https://doi.org/10.26905/jkdp.v22i1.1742


Keywords


Accounting Performance; Board Characteristics; Corporate Governance

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DOI: https://doi.org/10.26905/jkdp.v22i1.1742

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Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

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