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 d

h Plriid

ruuiIb..t

of r[e

Ratoltue

For

Und.rsnd!.L

Dc{re

h Ecolonis

PUTRI

LENGGOGEM

BP. 05

153 081

ACCOUNTINC DEPARTMENT

ABSTNlCT

This studr includcs

Indepdde

Tr*t

d

M

fipb

Regesiow

to

akatyze the

fttatib^hip

beteeeh bod.t chata.tetinics ahd

lnatuial

p.tfotuance of Indonsian

hlauic

BanlJ,

sp..ifcall,

.o6ilt

of

boud

of

cohnissioneE

size, bbdtd

indepen lence, b@.1 tetute,

anl

boad

dge

6

itdepe"dekt

tuiable.

ln

neMe

frcmial

p.4bme,

thtut

stt&

ue rctun

on equity tu.l BOPO

6

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

the

Melarid

beteeen

wiablet

in

nwe

the reladowhip k weqk

CTLAPTER

I

INTRODUCTION

Indonesia

*6dceply

aflectd bydre 1997 1998 cnses. morc rhan.rhers

Eur

Ajm

country. lls ec.nonric contnction wds deeper md

noft

p.olo.ScJ, lllu

only one to crF.riencc

r

(temroralJ kJss

ol

macroccondnic conrot.

dd

atso

sullercd-tsin

cnsei, in

tnc

sn$

rhar

ils

scnd$

econonic

bd

financial

problcns were acconpmicd b)r sochano s rcgime collaps.

(HiI

&

Shiashi,

2007). Thc recovery sas siowly Dd conplcx _Focess, as ncw insirurjonslnd ro

be creakd-

od

old oncs rciomed undcr successive shortli!€d adninisrmrions

Over rhe

l.sl

dccadc, much

h6

becn discussed

or

ho$

b

srimulalc cc.nonrjc

sr.wLh on dic comin-r wnhjn r|c

co

exl orar.pidt,v evotvins _{etob.teconoDy.}

Irmks

tlay

very

inp.ndr

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

ol

ljnlncial insrtumenls harc ptulided large bmks wjrh

eidcr acccss

b

tund. Banks have rcsp.nded 10 drc ncR chrltenges by going to

nestrcna so rh!l,Indoncsia is vcry e4crroco!.crn in blnkiDs indusry inordcr

ro rccover) its 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

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

sEns.

lslmic

finscill

nNdtutions ,rc developing iapidl! rn,l

hiv.

lhc cmhusidslic suppon of mdry

youg

pcopte aM ifictlecru.ls The

*o&

otdr

Shua

Burcau

of

Bank ltu]o.esi, .lemonslntcs

dd

_{lndonesi4 cspccblty in}

panicul&

pdls

ol

$e

count.y,

las

co.sidedble unnret

dcnmd

Lr

tslanic

banting ( lhe

Rluepn

ol

hlmic

Beki.g

_Derelopmenl

in

_{lndonesia cired in}

Applicalions

ol

c.rp.rare

_aoveaiancc

in

siarji

baiknrs

_beconc

uncomplain ccnaimt Mororer,

sh

ia balks

Du{

br sLep

losdd

rs

,

lerlq

ro

inplcmenr corpoBte aov€rnmce

.onceprul

frdework.

srudy by

Isldic

I

i.a.cidl

ScRice

Boad (l|SB)

launch ExposuE

Dralt

.t

_sood co4rdro

golcmuce

lbr

Sh

ia

l,ind.ing

rnsduion.

th

ditterence

oi

co4,.,,re

g.lenece

betwccn

shfia

rnd

conrcntional

{ated

!t

sh&ja complimcc.

obddienccb shdian

nsll

\t'heE6 Corpomrc (nivemdce Principlc rs w€ knorv

as fairncss. tmspdency- lccountabiliry, rcsponsibility,

mor,lilri

connibNn|

dd

i.dependenr, beconc

ifrporrbr

pnncirJle at

,ctivny

rd

exjstcncc

.a

a

Co4roratc govcmmcc sulprsed

to

bc nnpLnenled

in

iBlitutions and

corpomrions

iion

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

&

FC(jl, 2005). Thc bankine sccrtr is nainly respo.siht€ Jor rhe

allocrlion

ol

nlarcial rcsom.s

r.

all

orher

seto6

ol

m

econonv

vh.\.

Tie

precedins chaprer

h4

p@med lhe empiricat

resuhs

d lhh ohapier

povides conclusions

dEw

tiod

_lne

findings

d

_disusjons

pented

in

_rhe

previous chaprer, aollowed by sn Nessmenr

oflhe

potential tinjrations presenr _in

rhis srudy and possible _tutur

diKrio.s

_{tor research.}

5,1

Rljgrch

CorclusioDs

Tnk purpos of ihis rcscmh is ro get nrtislicat drb rhat shoss *helh$ bord

chmcknsiics which

represent

by

Bor.d

of

Commistone^,

Sizc.

Rosrd

IndepenCene,

Bodd'ltnuE,

_{d Lloard Age hale sigrificdr Etationship row&d} findcial pdfomsce meau€ by ROE

dd

BOPO.

This

Esqrch

inrestigarB hypothces srates

fiar

_{there are insigninont}

lnlucnes

of

thc

boad chmck

slic

varirbl6

bwards b.nkios

finmcial

pedomance

ol

_lndonesjan

kthic

_{bank which gore6 five yer6 dar4 rhe r6utts}

L

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

CIIAPT!]R

V

CONCLUSION

RFJFERENCES

AelRal,

R.,

&

rihion, J. . (19e9). Bank

fim

relaiioDships, financi're drd

lim

ltrfom

ceincermoy

hsret n, [c.nohti.s Lere^,7 2 _l,aa 1),275)32.

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).

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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.

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Ne*

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.,f Hanic b.nkj"E rlerel.pnert ih th.!.ne!ja

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ta.kirt

ottthi.uti.^

Bank tbr lntemalional senlercnrs.

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r

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