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

Abstract

Abstract This paper examines the effect of board characteristics on accounting return in Indonesian banking industry. The conceptual framework borrows from agency theory claiming that board is held liable for monitoring responsibilities and that monitoring effectiveness will lead to higher corporate achievement. The theory predicts that board characteristics matter in constituting firm perfor- mance. It is hypothesized that leadership structure, representation of indepen- dent 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 controlling owners are taken into account. The association between university rank and performance is more pronounced in the listed-banks.