Dynamic panel data analysis of the impact of governance on bank capital structure in Indonesia

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The banking industry plays a crucial role in driving the Indonesian economy. Therefore, any financial upheaval within this sector would have a significant influence on the overall economy. Hence, this study examines the capital composition of banking institutions in Indonesia to assess the financial soundness of the banks. A bank’s susceptibility to default will adversely affect client confidence in the bank. This study investigates the influence of governance attributes, such as board size, board meeting frequency, risk committee presence, institutional ownership, and independent committee existence, on the capital structure of Indonesian banks. 31 samples were intentionally chosen using purposeful sampling. Data estimation was performed using a two-step Arellano-Bond Generalized Method of Moments (GMM) estimator. The findings suggest that the bank risk committee, institutional ownership, and independent committee exert a notable and favorable influence on the capital structure of banks in Indonesia. Nevertheless, the size of the board and the frequency of board meetings do not exert a substantial impact. The size of the board and the use of leverage have no substantial impact. Developing efficient corporate governance procedures is essential for ensuring the bank’s financial stability. This involves maximizing the effectiveness of the risk committee, institutional ownership, and independent committee.

Acknowledgment
This paper is funded by PPM-PTM Grants of the Ministry of Education, Culture, Research and Technology of 2023 (03/SP2H/RT-MONO/LL4/2023).

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    • Table 1. Descriptive statistical results
    • Table 2. Results of statistical testing
    • Conceptualization
      Farida Titik Kristanti, Hikmah Fitriyani
    • Data curation
      Farida Titik Kristanti, Hikmah Fitriyani
    • Formal Analysis
      Farida Titik Kristanti, Hikmah Fitriyani
    • Funding acquisition
      Farida Titik Kristanti
    • Methodology
      Farida Titik Kristanti, Hikmah Fitriyani
    • Supervision
      Farida Titik Kristanti, Astrie Krisnawati
    • Writing – review & editing
      Farida Titik Kristanti, Astrie Krisnawati
    • Investigation
      Hikmah Fitriyani
    • Project administration
      Hikmah Fitriyani, Astrie Krisnawati
    • Software
      Hikmah Fitriyani
    • Validation
      Hikmah Fitriyani
    • Visualization
      Hikmah Fitriyani, Astrie Krisnawati
    • Writing – original draft
      Hikmah Fitriyani