0.0976 significant at 10 with the coefficient value -307.105. In general, it can be concluded that in terms of bank risk taking, although both types of
ownership lower the value of the Z-Score, government banks are riskier than foreign bank.
E. DISCUSSION 1. State-Owned Banks
Regression test results indicate that state-ownership negatively affects banks profitability as measured by Return on Equity, with the p-value
0.0004 significant at 1 and the resulted coefficient value is -32.623, indicating that the increase in state-ownership can lower banks Return on
Equity by -32.623. This result is consistent with previous studies conducted by Linqiang Huang and Sheng Xiao 2012 which stated that
the profitability of the firm, as measured by Return on Sales ROS is negatively affected by the government ownership. These results are also in
line with another prior study conducted by Alejandro Micco 2007 which concluded that state-owned bank located in developing countries tend to
have profitability much lower than domestic privately owned bank. Regarding with bank risk taking, State-ownership does not affect bank
risk taking, both measured by Z-Score ROE, and Z-Score ROA.
2. Regional Development Banks
From the hypothesis test we can conclude that regional government ownership positively affects banks profitability as measured by Return on
Equity ROE, with the p-value 0.0000 significant at 1 and the resulted
coefficient value is 17.397. Meanwhile, regional government ownership also positively affects banks profitability as measured by Return on Asset,
with the p-value 0.000 significant at 1 and the resulted coefficient value is 1.185. Although both are involving government ownership,
regional development bank is more profitable than stated-owned bank. Regarding with bank risk taking as measured with the value of Z-
Score Boyd and Graham, 1986, regional government ownership does not affect bank risk taking measured by Z-Score ROE, but it negatively affects
bank risk taking measured by Z-Score ROA. The resulting p-value is 0.000 significant at 1, with the coefficient value -1183.736, indicating
that the increase in regional government ownership can lower the value of Z-Score ROA by -1183.736.
3. Foreign Banks
Foreign ownership, which is divided into two categories: Foreign banks and joint venture banks, positively affects banks profitability, both
Return on Equity ROE and Return on Asset ROA. For the Return on Equity, foreign banks resulted p-value 0.000 significant at 1 with the
coefficient value 47.959 and the joint venture banks resulted p-value 0.000 significant at 1 with the coefficient value 11.513. Meanwhile, for the
Return on Asset, foreign banks resulted p-value 0.000 significant at 1 with the coefficient value 0.435 and the joint venture banks resulted p-
value 0.000 significant at 1 with the coefficient value 1.163. Foreign ownership as a whole is the most profitable type of bank ownership.
This results were supported by previous study conducted by Alejandro Micco 2007, which concluded that foreign bank located in developed
countries tend to be more profitable than private domestic bank. Previous study by Allen et al. 2009 also stated that foreign banks have the highest
level of profit efficiency followed by private domestic banks in the second rank. . In line with this research, study conducted by Enrica and Poonam
2006 also concluded that foreign banks performed significantly better in terms of profitability and Net Interest Margin than domestic banks.
Concerning with bank risk taking, foreign ownership in a form of foreign banks, positively affects bank risk-taking as measured by Z-Score
ROE. The resulting p-value is 0.0156 significant at 5, with the coefficient value 441.499. Meanwhile, foreign ownership does not affects
bank risk taking as measured by Z-Score ROA. In a form of joint venture banks, foreign ownership negatively affects the value of Z-Score ROE,
with the resulting p-value 0.0463 significant at 5 and coefficient value -61.913.
Through these results, we can conclude that in terms of bank risk taking, foreign ownership is the best type of ownership among all types of
bank ownership structures. This result is supported by previous study conducted by Enrica and Poonam 2006, which stated that foreign banks
performed significantly better than domestic banks because foreign banks tend to implement more sophisticated risk management technique and
better system of internal control. In line with these results, another prior
study conducted by Boubakri 2005 also stated that associated with bank risk-taking, risk in foreign-owned banks is lower than domestic private
banks.
4. Robustness Check
