The Effect of Corporate Governance's Application on Bank's Performance (Empirical Study on Bank Listed in Indonesia Stock Exchange)

Irma, and Idrus, Olivia (2015) The Effect of Corporate Governance's Application on Bank's Performance (Empirical Study on Bank Listed in Indonesia Stock Exchange). In: SIBR 2015 Hongkong Conference on Interdisciplinary Business & Economics, 3-4 Oktober 2015, Hongkong.

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Abstract

This study aimed to examine the effect of corporate governance indicators such as the board of directors, audit committee and audit quality on bank performance which is proxied by Camel Ratio such asCAR, NPL, LDR, BOPO, andROE. This study used30 banks listed in the Indonesia Stock Exchange as samples and Structural Equation Modelling (SEM) was used to examine the influence of corporate governance indicators on bank’s performance. The test results reveal that the board of directors as one of the corporate governance indicator sh as a significantly positive correlation to bank’s performance, which means the higherthe level of supervision by the commissioners, the better the performance of the bank. As for theaudit committee indicator, the result reveal positive effect on the bank’s performance but insignificant. Meanwhile, a corporate governance indicator of audit quality hasa significant positive relationshipto the performance ofthe bank, meaning the higher the auditquality ofabank, the higher the bank’s performance. This is consistent withthe previous studies. It is concluded thatthe higherorbetterfunctioningthe board of directors, audit committee andaudit qualityin the bank, the better the performance of the bank

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