BOARD CHARACTERISTICS AND FINANCIAL OF ISLAMIC BANK : THE CASE OF INDONESIA.
BOARD CHARACTERISTICS AND FINANCIAL
PERFORMANCtr OF ISLAMIC BANKS:
'
TEE CASE OF INDONESIA
THESIS
Subnitt
h Plriid ruuiIb..t of r[e Ratoltue For
Und.rsnd!.L Dc{re h Ecolonis
d
PUTRI LENGGOGEM
BP. 05 153 081
ACCOUNTINC DEPARTMENT
IACTILTY OF ECONOMICS
ABSTNlCT
This studr includcs
Indepdde
Tr*t
d
fttatib^hip beteeeh bod.t chata.tetinics
M fipb
ahd
Regesiow to akatyze
lnatuial p.tfotuance of Indonsian
hlauic BanlJ, sp..ifcall, .o6ilt of boud of cohnissioneE size,
indepen lence,
frcmial
[email protected] tetute, anl boad dge
p.4bme,
thtut
stt& ue rctun
6
itdepe"dekt tuiable.
on equity tu.l BOPO
6
bbdtd
ln neMe
efrciency /atio.
me result ihdi.ates thd geretullt thz boad choacte stics idisnil)cee
klrene
toedd lnarciol pethtuance of tndonesin Istanic bants accd.tina to
Melarid
beteeen
wiablet
in
nwe
Ketwords: board chuactqisti.s,
annissiohss
size, b@t
the
the
the
reladowhip k weqk
lrurcial pethrndc4 hlmic
bank\, boanl
af
! in4epehdeh.., b@d tenure, boar.t ase, retum on eqtity,
CTLAPTER
I
INTRODUCTION
Indonesia
Eur
Ajm
*6dceply aflectd bydre 1997
1998 cnses. morc
country. lls ec.nonric contnction wds deeper md
only one to crF.riencc
r
rhan.rhers
noft p.olo.ScJ, lllu
(temroralJ
kJss
ol macroccondnic conrot. dd
sn$
rhar
ils scnd$ econonic
sullercd-tsin cnsei, in tnc
problcns were acconpmicd b)r sochano s rcgime collaps.
atso
bd
financial
(HiI &
Shiashi,
2007). Thc recovery sas siowly Dd conplcx Focess, as ncw insirurjonslnd ro
be creakd-
Over rhe
od
old oncs rciomed undcr successive shortli!€d adninisrmrions
l.sl dccadc, much h6
becn discussed
sr.wLh on dic comin-r wnhjn r|c
Irmks tlay very
co
inp.ndr
or ho$ b
srimulalc cc.nonrjc
exl orar.pidt,v evotvins etob.teconoDy.
rule in thc cconomic life ot
$c narion.
l.bc
health of ihe econonic is closcl)' tuhred to thc somdDess ot its bekina sysrcnr.
Cruning
and lqbal
(200t),rsued rhaithc sro$rh inrermtional Jtnucjal marke$
md arat.r dilcuirr
eidcr
acccss
b
ol ljnlncial
tund. Banks have rcsp.nded 10 drc ncR chrltenges by going to
nestrcna so rh!l,Indoncsia
ro rccover) its
insrtumenls harc ptulided large bmks wjrh
is vcry
e4crroco!.crn in blnkiDs indusry inordcr
miion econonric life.
In dclcloFing eronomic Ero*rh. Indonesia ado|rs several s_r$ens ot
b.nkloe: there areconv.nrio.al slstm ard sh.ri! brnkins syslcnr. Ptuse.rtyrhcrc
are tu]I-flcdgcd
lrdon.sia {nh
lsl,mi!
the
R
vorldt
k, Shrn. Business Unirs
lareesr
dd
Sha.ia RLUxt
ppulation olMustims. h6 comc
b
Brk
Islrmic or
shai a ba&ine in rly lare Many of tndo.csi
ai
Musl im leadcs do no r beliele thar
codqurcial inlerest in ils nodm tirm is prohibilc4 althoush otieB do. Aner
sone
iale
finscill
sEns. lslmic
nNdtutions ,rc developing iapidl! rn,l
lhc cmhusidslic suppon of mdry youg pcopte aM ifictlecru.ls The
Shua Burcau of Bank ltu]o.esi, .lemonslntcs
panicul& pdls
banting
(
ol $e
ol
hlmic Beki.g
sh
ia balks
Lr
in siarji
baiknrs beconc
Du{ br sLep losdd
rs
, lerlq
inplcmenr corpoBte aov€rnmce .onceprul frdework. srudy by
I
i.a.cidl ScRice Boad (l|SB) launch ExposuE Dralt
golcmuce lbr Sh ia l,ind.ing rnsduion.
g.lenece
betwccn
obddienccb shdian
shfia rnd
nsll
th
conrcntional {ated
!t
Co4roratc govcmmcc sulprsed
iion
ro
Isldic
sood co4rdro
oi
co4,.,,re
sh&ja complimcc.
\t'heE6 Corpomrc (nivemdce Principlc rs w€ knorv
mor,lilri connibNn|
i.dependenr, beconc ifrporrbr pnncirJle at ,ctivny
corpomrions
.t
ditterence
as fairncss. tmspdency- lccountabiliry, rcsponsibility,
dd
tslanic
Derelopmenl in lndonesia cired in
c.rp.rare aoveaiancc
uncomplain ccnaimt Mororer,
*o& otdr
lndonesi4 cspccblty in
count.y, las co.sidedble unnret dcnmd
lhe Rluepn ol
Applicalions
dd
hiv.
rd
exjstcncc
to bc nnpLnenled in iBlitutions
.a
a
and
whole scctou. Altlbugh corporalc gov.rnsce is e$ential ro
dtc success of firms in nmy indust jes. lbe banlDg sector desencs specirl
atlenrion
(Ulll &
allocrlion
FC(jl, 2005). Thc bankine sccrtr is nainly respo.siht€
ol nlarcial rcsom.s r. all
orher
Jor rhe
seto6 ol m econonv vh.\.
etncicncr lcl-v much dermines the perfommce
.f
ihe
econonr]
CIIAPT!]R V
CONCLUSION
Tie precedins
povides conclusions
chaprer
h4 p@med lhe empiricat resuhs d lhh
dEw tiod lne findings d disusjons pented in rhe
previous chaprer, aollowed by sn Nessmenr
rhis srudy and possible
5,1
Rljgrch
ohapier
tutur diKrio.s tor
oflhe potential tinjrations
presenr in
research.
CorclusioDs
Tnk purpos of ihis rcscmh is ro get nrtislicat drb rhat shoss *helh$ bord
chmcknsiics which represent by Bor.d
IndepenCene,
Bodd'ltnuE,
findcial pdfomsce meau€
of
Commistone^, Sizc. Rosrd
d Lloard Age hale sigrificdr Etationship row&d
by ROE
dd
BOPO.
This Esqrch inrestigarB hypothces srates
lnlucnes
pedomance
L
fiar
there are insigninont
of thc boad chmck slic varirbl6 bwards
ol
lndonesjan
kthic
b.nkios finmcial
bank which gore6 five yer6 dar4 rhe r6utts
TheE is no significanl inlluence
Lretwccn Board
of
CommissioneB,
SiZ
tow$,1 finhcial peformance measure by ROE &d BOPO.
2. lhcrc is no
siSnificMr infllencc berween Board Independdce towtrd
lintucial p.riofrdce mesu€ by RO! ..d BOPO.
RFJFERENCES
AelRal, R., & rihion,
ltrfom
J.
. (19e9). Bank fim relaiioDships, financi're drd lim
hsret n, [c.nohti.s Lere^,7 2 l,aa 1),275)32.
ceincermoy
Andeson, R., Mansi, S.. & Rcsb. D (2004). Bodrd characcistics, accounlins rcpon
inresritv $d ihe cost ot debt. lta.t in Jotrnul ofAct.rntins ohd Lcono its,
37,3t5 312.
Alshlio
APEC Srud! CertE's Msaeing Rclulxtory ChmSe Prcg€m. (200.1).
Bn * Go\zrnance ?nnejplet dtl Balel 2: A lt.i P/u.tice Cui.le AAtxlia
Atrimrian srock Er.hdnse (7003) tSX Gti.lahce Note t0 Reriet oJ t)puot;o's
ahtl /lctitilie! - Listing Rule L l 0 I 7
liom htpr/*vw.dx.coor.au/ListinsRulcdeuiddce/GuidrceNoi€10 tdl.
Rx.n, t. (t99iJ. a.ryatot. B.dra! untl catparub Aorenon ?. Ne* York:
Bank ltulonesir. {2002) Th?
hlrctri"r .,f Hanic b.nkj"E rlerel.pnert
The
ih th.!.ne!ja
Btuking Slteryisian 1.2005). Enhan.i,S .nryorc|? Eorettun.t
ottthi.uti.^ Bank tbr lntemalional senlercnrs.
Lrasel Commntcc on
Jot
ta.kirt
r
Beasley. M. (1996).
cnDirical dalysis ol rhe Elarion beNccn rhe bad ol
direcror comFsitio0 lnd fm.ncial sarcm.nr liaud hswt iaAccourtjnxAsie\
Bciner, s . Dnbet- w , Schmid, F . & Zimnemann, H. (2003) h Board Sizc an
lndcpcndc r Corpoture G.vdmrce Mechanism?. Rclricvcd Ndvcmber lt.
2009, lrom hitp://papc6.sytr.com
Bcrger, P C, Otek. t., & Ycmack. D- L. (1997). Managerial cntrcnchmenl and
canihl structur lecisiors. /rxxdr h Joumul of Findn.e, 52 (1), 141 l -141a
AhaglE! S.,
& B. Black (1999). The uncertair
rclaiioNhip brllvecn blzd
composirion and rirnr p€dormsc.. Lsrcs in Bu:ihes. Laaret 5.1, 921 -963
Bhag[at, S., & B. Lllack (2001). Thc n.n core rlion bdwccn board indepenJence
and lon8'efln firm peraoana0cc .^:!ue! tn Jounktt oJCor\tuti.h kr,27.131
PERFORMANCtr OF ISLAMIC BANKS:
'
TEE CASE OF INDONESIA
THESIS
Subnitt
h Plriid ruuiIb..t of r[e Ratoltue For
Und.rsnd!.L Dc{re h Ecolonis
d
PUTRI LENGGOGEM
BP. 05 153 081
ACCOUNTINC DEPARTMENT
IACTILTY OF ECONOMICS
ABSTNlCT
This studr includcs
Indepdde
Tr*t
d
fttatib^hip beteeeh bod.t chata.tetinics
M fipb
ahd
Regesiow to akatyze
lnatuial p.tfotuance of Indonsian
hlauic BanlJ, sp..ifcall, .o6ilt of boud of cohnissioneE size,
indepen lence,
frcmial
[email protected] tetute, anl boad dge
p.4bme,
thtut
stt& ue rctun
6
itdepe"dekt tuiable.
on equity tu.l BOPO
6
bbdtd
ln neMe
efrciency /atio.
me result ihdi.ates thd geretullt thz boad choacte stics idisnil)cee
klrene
toedd lnarciol pethtuance of tndonesin Istanic bants accd.tina to
Melarid
beteeen
wiablet
in
nwe
Ketwords: board chuactqisti.s,
annissiohss
size, b@t
the
the
the
reladowhip k weqk
lrurcial pethrndc4 hlmic
bank\, boanl
af
! in4epehdeh.., b@d tenure, boar.t ase, retum on eqtity,
CTLAPTER
I
INTRODUCTION
Indonesia
Eur
Ajm
*6dceply aflectd bydre 1997
1998 cnses. morc
country. lls ec.nonric contnction wds deeper md
only one to crF.riencc
r
rhan.rhers
noft p.olo.ScJ, lllu
(temroralJ
kJss
ol macroccondnic conrot. dd
sn$
rhar
ils scnd$ econonic
sullercd-tsin cnsei, in tnc
problcns were acconpmicd b)r sochano s rcgime collaps.
atso
bd
financial
(HiI &
Shiashi,
2007). Thc recovery sas siowly Dd conplcx Focess, as ncw insirurjonslnd ro
be creakd-
Over rhe
od
old oncs rciomed undcr successive shortli!€d adninisrmrions
l.sl dccadc, much h6
becn discussed
sr.wLh on dic comin-r wnhjn r|c
Irmks tlay very
co
inp.ndr
or ho$ b
srimulalc cc.nonrjc
exl orar.pidt,v evotvins etob.teconoDy.
rule in thc cconomic life ot
$c narion.
l.bc
health of ihe econonic is closcl)' tuhred to thc somdDess ot its bekina sysrcnr.
Cruning
and lqbal
(200t),rsued rhaithc sro$rh inrermtional Jtnucjal marke$
md arat.r dilcuirr
eidcr
acccss
b
ol ljnlncial
tund. Banks have rcsp.nded 10 drc ncR chrltenges by going to
nestrcna so rh!l,Indoncsia
ro rccover) its
insrtumenls harc ptulided large bmks wjrh
is vcry
e4crroco!.crn in blnkiDs indusry inordcr
miion econonric life.
In dclcloFing eronomic Ero*rh. Indonesia ado|rs several s_r$ens ot
b.nkloe: there areconv.nrio.al slstm ard sh.ri! brnkins syslcnr. Ptuse.rtyrhcrc
are tu]I-flcdgcd
lrdon.sia {nh
lsl,mi!
the
R
vorldt
k, Shrn. Business Unirs
lareesr
dd
Sha.ia RLUxt
ppulation olMustims. h6 comc
b
Brk
Islrmic or
shai a ba&ine in rly lare Many of tndo.csi
ai
Musl im leadcs do no r beliele thar
codqurcial inlerest in ils nodm tirm is prohibilc4 althoush otieB do. Aner
sone
iale
finscill
sEns. lslmic
nNdtutions ,rc developing iapidl! rn,l
lhc cmhusidslic suppon of mdry youg pcopte aM ifictlecru.ls The
Shua Burcau of Bank ltu]o.esi, .lemonslntcs
panicul& pdls
banting
(
ol $e
ol
hlmic Beki.g
sh
ia balks
Lr
in siarji
baiknrs beconc
Du{ br sLep losdd
rs
, lerlq
inplcmenr corpoBte aov€rnmce .onceprul frdework. srudy by
I
i.a.cidl ScRice Boad (l|SB) launch ExposuE Dralt
golcmuce lbr Sh ia l,ind.ing rnsduion.
g.lenece
betwccn
obddienccb shdian
shfia rnd
nsll
th
conrcntional {ated
!t
Co4roratc govcmmcc sulprsed
iion
ro
Isldic
sood co4rdro
oi
co4,.,,re
sh&ja complimcc.
\t'heE6 Corpomrc (nivemdce Principlc rs w€ knorv
mor,lilri connibNn|
i.dependenr, beconc ifrporrbr pnncirJle at ,ctivny
corpomrions
.t
ditterence
as fairncss. tmspdency- lccountabiliry, rcsponsibility,
dd
tslanic
Derelopmenl in lndonesia cired in
c.rp.rare aoveaiancc
uncomplain ccnaimt Mororer,
*o& otdr
lndonesi4 cspccblty in
count.y, las co.sidedble unnret dcnmd
lhe Rluepn ol
Applicalions
dd
hiv.
rd
exjstcncc
to bc nnpLnenled in iBlitutions
.a
a
and
whole scctou. Altlbugh corporalc gov.rnsce is e$ential ro
dtc success of firms in nmy indust jes. lbe banlDg sector desencs specirl
atlenrion
(Ulll &
allocrlion
FC(jl, 2005). Thc bankine sccrtr is nainly respo.siht€
ol nlarcial rcsom.s r. all
orher
Jor rhe
seto6 ol m econonv vh.\.
etncicncr lcl-v much dermines the perfommce
.f
ihe
econonr]
CIIAPT!]R V
CONCLUSION
Tie precedins
povides conclusions
chaprer
h4 p@med lhe empiricat resuhs d lhh
dEw tiod lne findings d disusjons pented in rhe
previous chaprer, aollowed by sn Nessmenr
rhis srudy and possible
5,1
Rljgrch
ohapier
tutur diKrio.s tor
oflhe potential tinjrations
presenr in
research.
CorclusioDs
Tnk purpos of ihis rcscmh is ro get nrtislicat drb rhat shoss *helh$ bord
chmcknsiics which represent by Bor.d
IndepenCene,
Bodd'ltnuE,
findcial pdfomsce meau€
of
Commistone^, Sizc. Rosrd
d Lloard Age hale sigrificdr Etationship row&d
by ROE
dd
BOPO.
This Esqrch inrestigarB hypothces srates
lnlucnes
pedomance
L
fiar
there are insigninont
of thc boad chmck slic varirbl6 bwards
ol
lndonesjan
kthic
b.nkios finmcial
bank which gore6 five yer6 dar4 rhe r6utts
TheE is no significanl inlluence
Lretwccn Board
of
CommissioneB,
SiZ
tow$,1 finhcial peformance measure by ROE &d BOPO.
2. lhcrc is no
siSnificMr infllencc berween Board Independdce towtrd
lintucial p.riofrdce mesu€ by RO! ..d BOPO.
RFJFERENCES
AelRal, R., & rihion,
ltrfom
J.
. (19e9). Bank fim relaiioDships, financi're drd lim
hsret n, [c.nohti.s Lere^,7 2 l,aa 1),275)32.
ceincermoy
Andeson, R., Mansi, S.. & Rcsb. D (2004). Bodrd characcistics, accounlins rcpon
inresritv $d ihe cost ot debt. lta.t in Jotrnul ofAct.rntins ohd Lcono its,
37,3t5 312.
Alshlio
APEC Srud! CertE's Msaeing Rclulxtory ChmSe Prcg€m. (200.1).
Bn * Go\zrnance ?nnejplet dtl Balel 2: A lt.i P/u.tice Cui.le AAtxlia
Atrimrian srock Er.hdnse (7003) tSX Gti.lahce Note t0 Reriet oJ t)puot;o's
ahtl /lctitilie! - Listing Rule L l 0 I 7
liom htpr/*vw.dx.coor.au/ListinsRulcdeuiddce/GuidrceNoi€10 tdl.
Rx.n, t. (t99iJ. a.ryatot. B.dra! untl catparub Aorenon ?. Ne* York:
Bank ltulonesir. {2002) Th?
hlrctri"r .,f Hanic b.nkj"E rlerel.pnert
The
ih th.!.ne!ja
Btuking Slteryisian 1.2005). Enhan.i,S .nryorc|? Eorettun.t
ottthi.uti.^ Bank tbr lntemalional senlercnrs.
Lrasel Commntcc on
Jot
ta.kirt
r
Beasley. M. (1996).
cnDirical dalysis ol rhe Elarion beNccn rhe bad ol
direcror comFsitio0 lnd fm.ncial sarcm.nr liaud hswt iaAccourtjnxAsie\
Bciner, s . Dnbet- w , Schmid, F . & Zimnemann, H. (2003) h Board Sizc an
lndcpcndc r Corpoture G.vdmrce Mechanism?. Rclricvcd Ndvcmber lt.
2009, lrom hitp://papc6.sytr.com
Bcrger, P C, Otek. t., & Ycmack. D- L. (1997). Managerial cntrcnchmenl and
canihl structur lecisiors. /rxxdr h Joumul of Findn.e, 52 (1), 141 l -141a
AhaglE! S.,
& B. Black (1999). The uncertair
rclaiioNhip brllvecn blzd
composirion and rirnr p€dormsc.. Lsrcs in Bu:ihes. Laaret 5.1, 921 -963
Bhag[at, S., & B. Lllack (2001). Thc n.n core rlion bdwccn board indepenJence
and lon8'efln firm peraoana0cc .^:!ue! tn Jounktt oJCor\tuti.h kr,27.131