Corporate Governance , Risk Management , and Bank Performance : Does Type of Ownership Matter ? Final Report of an EADN Individual Research Grant Project

  • Tandelilin E
  • Kaaro H
  • Mahadwartha P
  • 20

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Abstract

This research provides a conceptual model called Triangle Gap Model (TGM) and then tests it in an empirical study. The purpose of this research is to investigate the relationships among corporate governance, risk management, and bank performance in Indonesian banking sector. This study examines whether the type of ownership has moderating effect on these relationships, and whether ownership structure is a key determinant of corporate governance. This research utilizes both primary data and secondary data analyses. Method of analysis used for secondary data is Generalized Methods of Moments (GMM). Meanwhile, primary data utilizes bootstrap method, factor analysis, and 3-state least squares (3SLS). This study finds that the relationships between corporate governance and risk management, and between corporate governance and bank performance are sensitive to the type of bank ownership. However, ownership structure shows partial support as a key determinant of corporate governance. Foreign-owned banks have better implemented good corporate governance than have joint- venture-owned banks, state-owned banks, and private domestic-owned banks. Foreign-owned banks also incorporate significant relationship between corporate governance and risk management. Meanwhile, state-owned banks underperform the other types of bank ownership in implementing good corporate governance. This study also finds an interrelationship between risk management and bank performance. Risk management has significant effect on bank performance, and vice versa. In general, the findings for both secondary data and primary data analyses are substantiating each other. Primary data analysis supports and strengthens the findings of secondary data analysis.

Author-supplied keywords

  • bank performance
  • corporate governance
  • ownership structure
  • risk management
  • type of ownership

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Authors

  • Eduardus Tandelilin

  • Hermeindito Kaaro

  • Putu Anom Mahadwartha

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