Ownership structure and bank performance

  • Received October 14, 2017;
    Accepted February 1, 2018;
    Published March 16, 2018
  • Author(s)
    Hamdi Agustin , Sri Indrastuti , Amris Rusli Tanjung ,
    Muhammad Said
    ORCID
  • DOI
    http://dx.doi.org/10.21511/bbs.13(1).2018.08
  • Article Info
    Volume 13 2018, Issue #1, pp. 80-87
  • TO CITE АНОТАЦІЯ
  • Cited by
    1 articles
  • 1913 Views
  • 511 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

The purpose of this study is to evaluate the performance of banks in Indonesia. Specifically, this study has examined the static effect of ownership structure on bank performance in Indonesia over the period 1995–2006. The sample consists of 74 banks, namely 56 private banks, 15 community development banks (BPD), and three federal banks from 1995 to 2006. The data was analyzed using least-squares regression method, the general least squares method, and the method of random effects. The findings of this study show that the BPD performed better compared to private banks. This indicates that BPDs have better performance rather than private banks which is due to the fact that customers can be able to pay loans, they have special knowledge on that area and the performance of BPD is supervised by local government. In addition, the amount of equity, economic growth, financial crisis, and the financial ratios affect the performance of the bank. However, bank status has no effect on bank performance.

view full abstract hide full abstract
    • Table 1. The results of using the GLS method
    • Table 2. The results of using the random effect analysis
    • Alexius, C., & Sofoklis, V. (2009). Determinant of bank profitability: Evidence from the Greek banking sector. Economic Annals, LIV(182), 93-118.
    • Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank specific, industry specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money, 18(2), 121-136.
    • Barry, T. A., Lepetit, L., & Tarazi, A. (2011). Ownership structure and risk in publicly held and privately owned banks. Journal of Banking and Finance, 35, 1327-1340.
    • Bashir, A. M. (2003). Determinants of profitability in Islamic banks: Some evidence from middle east Islamic. Economic Studies, 11(1), 31-57.
    • Berger, A. N., Demirguc-Kunt, A., Levine, R., & Haubrich, J. G. (2004). Bank concentration and competition: An evolution in the making. Journal of Money, Credit and Banking, 36(3), 433-451.
    • Berger, A. N., Clarke, G. R., Cull, R., Klapper, L., & Udell, G. F. (2005). Corporate governance and bank performance: A joint analysis of the static, selection, and dynamic effects of domestic, foreign, and state ownership. Journal of Banking and Finance, 29(8-9), 2179-2221.
    • Boubakri, N., Cosset, J., Fischer, K., & Guedhami, O. (2015). Privatization and bank performance in developing countries. Journal of Banking and Finance, 29, 2015-2041.
    • Chantapong, S. (2005). Comparative study of domestic and foreign bank performance in Thailand: The regression analysis. Economic Change and Restructuring, 3, 63-83.
    • Cornett, M. M., Guo, L., Khaksari, S., & Tehranian, H. (2010). The impact of state ownership on performance differences in privately-owned versus state-owned banks: An international comparison. Journal Financial Intermediation, 19, 74-94.
    • Davydenko, A. (2010). Determinants of bank profitability in Ukraine. Undergraduate Economic Review, 7(1), 1-30.
    • Demirgüç-Kunt, A., & Huizinga, H. (2000). Determinants of commercial bank interest margins and profitability: Some international evidence. World Bank Economic Review, 13(2), 379-408.
    • Dietrich, A., & Wanzenried, G. (2011). Determinants of bank profitability before and during the crisis: Evidence from Switzerland. Journal of International Financial Markets, Institutions and Money, 21(3), 307-327.
    • Febriyani, A., & Zulfadin, R. (2003). Analisis kinerja keuangan bank devisa dan bank non devisa di Indonesia. Kajian Ekonomi dan Keuangan, 7(4), 38-54.
    • Fernandez, A. I., Fonseca, A. R., & Gonzalez, F. (2005). Does ownership affect banks profitability? Some international evidence. In E. Klein (8th ed.). Capital formation and banking (157-178). Nova Science Publishers, Inc.
    • Flamini, V., McDonald, C., & Schumacher, L. (2009). The determinants of commercial bank profitability in Sub-Saharan Africa. IMF Working Paper.
    • Fu, X., & Heffernan, S. (2009). The effects of reform on China’s bank structure and performance. Journal of Banking and Finance, 33, 39-52.
    • Hassan, M. K. & Bashir, A. (2005). Determinants of Islamic Banking Profitability. Proceedings of the Economic Research Forum 10th Annual Conference, Marrakesh, Morocco.
    • Iannotta, G., Nocera, G., & Sironi, A. (2007). Ownership structure, risk and performance in the European banking industry. Journal of Banking and Finance, 31(7), 2127-2149.
    • Kosak, M., & Cok, M. (2008). Ownership structure and profitability of the banking sector: The evidence from the SEE region. Proceedings of Rijeka Faculty of Economics, Journal of Economics and Business, 26(1), 93-122.
    • Kosmidou, K., Pasiouras, F., & Tsaklanganos, A. (2007). Domestic and multinational determinants of foreign bank profits: The case of Greek banks operating abroad. Journal of Multinational Financial Management, 17, 1-15.
    • La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. R. (2003). Government ownership of banks. Journal Finance, 57, 265-302.
    • Lestari, M. I., & Sugiharto, T. (2007). Kinerja bank devisa dan bank non devisa dan faktor-faktor yang mempengaruhinya. Psikologi, Ekonomi, Sastra, Arsitektur dan Sipil, 2, 195-201.
    • Li, M., & Simerly, R. (1998). The moderating effect of environmental dynamism on the ownership and performance relationship. Strategic Management Journal, 19, 169-179.
    • Mashharawi, F. Y., & Al-Zu’bi, K. (2009). The determinants of bank’s profitability: Evidence from the Jordanian banking sector (1992–2006). Jordan Journal of Business Administration, 5(3), 403-414.
    • Micco, A., Panizza, U., Yanez, M. (2007). Bank ownership and performance: Does politics matter? Journal of Banking and Finance, 31, 219-241.
    • Mirzaei, A., Liu, G., & Moore, T. (2011). Does market structure matter on banks’ profitability and stability? Emerging versus advanced economies. Economics and Finance Working Paper Series No. 11-12. London: Brunel University.
    • Naceur, S. B., & Goaied, M. (2008). The determinants of commercial bank interest margin and profitability: evidence from Tunisia. Frontiers in Finance and Economics, 5(1), 106-130.
    • Naceur, S. B., & Kandil, M. (2008). The impact of capital requirements on banks’ cost of intermediation and performance: The case of Egypt. Journal of Economics and Business, 61, 70-89.
    • Omran, M. (2007). Privatization, state ownership and bank performance in Egypt. World Development, 35(4), 714-733.
    • Pasiouras, F., & Kosmidou, K. (2007). Factors influencing the profitability of domestic and foreign commercial banks in the European Union. Research in International Business and Finance, 21(2), 222-237.
    • Ramadan, I. Z. (2011). Bank specific determinants of Islamic banks profitability: An empirical study of the Jordanian market. International Journal of Academic Research, 3(6), 73-80.
    • Reaz, M. (2005). Linking Corporate Governance and Bank Performance: Evidence from Bangladesh. Bangladesh: North South University.
    • Reynolds, S., Ratanakomut, S., & Gander, J. (2000). Bank financial structure in pre-crisis East and Southeast Asia. Journal Asian Economics, 11, 319-331.
    • Said, R. M., & Tumin, M. H. (2011). Performance and financial ratios of commercial banks in Malaysia and China. International Review of Business Research Papers, 7(2), 157-169.
    • Sastrosuwito, S., & Suzuki, Y. (2012). The determinants of post-crisis Indonesian banking system profitability. Economics and Finance Review, 1(11), 48-57.
    • Shleifer, A. (1998). State versus private ownership. Journal of Economic Perspectives, 12, 133-150.
    • Shleifer, A., & Vishny, R. (1986). Large shareholders and corporate control. Journal of Political Economy, 94, 461-488.
    • Sufian, F. (2010). Developments in the profitability of the Thailand banking sector: panel evidence from the post Asian crisis period. International Journal Economics and Accounting, 1(1/2), 161-179.
    • Sufian, F. (2011). Profitability of the Korean banking sector: Panel evidence of bank-specific and macroeconomic determinants. Journal Economics and Management, 7(1), 43-72.
    • Sufian, F., & Habibullah, M. S. (2010). Assessing the impact of financial crisis on bank performance empirical evidence from Indonesia. ASEAN Economic Bulletin, 27(3), 245-262.
    • Trujillo-Ponce, A. (2011). Why are (or were) Spanish banks so profitable. European Financial Management Association 2011 Annual Conference. Sevilla: Pablo de Olavide University.
    • Wong, J., Fong, T., Wong, T., & Choi, K. F. (2007). Determinants of the performance of banks in Hong Kong. Monetary Authority Quarterly Bulletin, 5-15.
    • Yu, P., & Neus, W. (2009). Market structure, scale efficiency and risk as determinants of German banking profitability. Tübinger Diskussionsbeiträge, 294.
Related Articles

  • Perceived health risk, online retail ethics, and consumer behavior within online shopping during the COVID-19 pandemic

    Yuniarti FihartiniORCID , Arief HelmiORCID , Meydia HassanORCID , Yevis Marty OesmanORCID doi: http://dx.doi.org/10.21511/im.17(3).2021.02
    Innovative Marketing Volume 17, 2021         Issue #3         pp. 17-29 Views: 4517 Downloads: 1729 TO CITE АНОТАЦІЯ

    The risk of virus contracting during the COVID-19 pandemic has changed consumer preference for online shopping to meet their daily needs than shopping in brick-and-mortar stores. Online shopping presents a different environment, atmosphere, and experience. The possibility of ethical violations is higher during online than face-to-face transactions. Therefore, this study was conducted to investigate the influence of perceived health risk and customer perception of online retail ethics on consumer online shopping behavior during the COVID-19 pandemic, involving seven variables, namely perceived health risk, security, privacy, non-deception, reliability fulfillment, service recovery, and online shopping behavior. The data were collected through an online survey by employing the purposive sampling technique to a consumer who has shopped online during the COVID-19 pandemic in Indonesia. 315 valid responses were obtained and analyzed through quantitative method using SEM-Amos. The results showed that perceived health risk and four variables of online retail ethics including security, privacy, reliability fulfillment, and service recovery affected online shopping behavior. Meanwhile, non-deception was found to have an insignificant effect. The coefficient value proved perceived health risk to be more dominant in influencing online shopping behavior than the variables of online retail ethics. Thus, consumers pay more concern for their health during online shopping. However, positive consumer perceptions of the behavior of online retail websites in providing services also can encourage consumers to shop online during this pandemic.

  • Human resource management in promoting innovation and organizational performance

    I Gede RianaORCID , Gede SuparnaORCID , I Gusti Made SuwandanaORCID , Sebastian KotORCID Researcher ID, Ismi RajianiORCID Researcher ID doi: http://dx.doi.org/10.21511/ppm.18(1).2020.10
    Problems and Perspectives in Management Volume 18, 2020         Issue #1         pp. 107-118 Views: 3555 Downloads: 851 TO CITE АНОТАЦІЯ

    Human resource management (HRM) is one of the elements enabling an organization to remain competitive in turbulence conditions. The effective practice of HRM makes competent and innovative employees contributing to the achievement of organizational objectives. This study aims to analyze HRM practices in creating innovation and organizational performance. The questionnaire was used to measure the respondents’ perceptions of variables used by a Likert scale. A survey of 126 manager samples and middle managers at export-oriented short and medium enterprises (SMEs) in Bali, Indonesia, was conducted to test the model. The analysis has shown that the proposed model was proven to be compliant with the research hypotheses. HRM significantly affects organizational performance and innovation, and it was found out that innovation can improve organizational performance. However, in the process of simultaneous testing, it was found out that innovation cannot improve organizational performance. The lack of attention to investments in human resources became one of the barriers to SMEs in creating innovation.

  • Positive contribution of the good corporate governance rating to stability and performance: evidence from Indonesia

    RR. Iramani , Muazaroh Muazaroh , Abdul MongidORCID doi: http://dx.doi.org/10.21511/ppm.16(2).2018.01
    Problems and Perspectives in Management Volume 16, 2018         Issue #2         pp. 1-11 Views: 3207 Downloads: 314 TO CITE АНОТАЦІЯ

    This paper aims to examine the impact of Good Corporate Governance (GCG) practice on bank stability and performance. Governance is measured using the GCG rating that covers eleven aspects. The authors apply instrumental regression to link governance to performance and stability. The study covers a sample of 150 banks. The result shows that bank stability can mediate bank governance and bank performance. On the determinant of bank performance, it can be concluded that the GCG rating is positive and directly influences bank performance. Bank stability is also positive for bank performance indicating the indirect contribution of the GCG rating to bank performance. NPL, LDR, CAR and bank’s size (LASSET) are all negative and significant. The aim of this paper is to provide strong empirical evidence on the importance of governance and stability for performance. The limitations of this paper are the size of the sample and that it only covers public banks which are theoretically required to apply better governance in all aspects of their business by the Capital Market Authority.

Download Preview
Close
Banks and Bank Systems
Banks and Bank Systems