BOARD SIZE AND COST EFFICIENCY IN ISLAMIC BANKS IN INDONESIA
DOI:
https://doi.org/10.30651/iconemba.v1i1.22652Keywords:
Islamic Banks, Corporate Governance, Size of Board of DirectorsAbstract
This study aims to analyze the board size's impact on cost efficiency in the context of Islamic banks in Indonesia. Board size involves the composition of the board of commissioners, board of directors, and the sharia supervisory board, all of which play vital roles in guiding and overseeing a bank's activities. In this research, we take an empirical approach, using linear regression analysis to examine the influence of the board size of commissioners, directors, and the sharia supervisory board on cost efficiency through the use of a Fixed Effect Model with software Stata 17. Panel data was collected from Islamic banks in Indonesia for the period 2015-2022. The analysis results indicate that the size of the Board of Commissioners does not have a significant impact on cost efficiency. Meanwhile, the size of the Board of Directors and the size of the Sharia Supervisory Board have a negative effect on the cost efficiency of Islamic banks.
References
Ahzar, F. A., Rosadi, S., Wati, A., & Ahzar, F. A. (2021). Corporate Governance, Karakteristik Dewan Pengawas Syariah dan Maqoshid Sharia Index pada Perbankan Syariah di Indonesia. AKTSAR: Jurnal Akuntansi Syariah, 4(2), 241–254.
Ain, Q. U., Yuan, X., Javaid, H. M., Usman, M., & Haris, M. (2021). Female directors and agency costs: evidence from Chinese listed firms. International Journal of Emerging Markets, 16(8), 1604–1633. https://doi.org/10.1108/IJOEM-10-2019-0818
Amin, A., Ur Rehman, R., Ali, R., & Ntim, C. G. (2022). Does gender diversity on the board reduce agency cost? Evidence from Pakistan. Gender in Management: An International Journal, 37(2), 164–181. https://doi.org/10.1108/GM-10-2020-0303
Arifin, R., Rosadi, S., Nugroho, A., & Wahyuningsih, T. (2021). Characteristics of the Sharia Supervisory Board, Sharia Company Size, Zakah, and Islamic Social Reporting on Sharia Banks in Indonesia. Falah: Jurnal Ekonomi Syariah, 6(2), 15–28.
Aslam, E., & Haron, R. (2020). Does corporate governance affect the performance of Islamic banks? New insight into Islamic countries. Corporate Governance: The International Journal of Business in Society, 20(6), 1073–1090. https://doi.org/10.1108/CG-11-2019-0350
Aslam, E., & Haron, R. (2021). Corporate governance and risk-taking of Islamic banks: evidence from OIC countries. Corporate Governance (Bingley), 21(7), 1460–1474. https://doi.org/10.1108/CG-08-2020-0311
Aslam, E., Ur Rehman, A., & Iqbal, A. (2023). The mediating role of intellectual capital in corporate governance and financial efficiency of Islamic banks. Corporate Governance: The International Journal of Business in Society, ahead-of-print(ahead-of-print). https://doi.org/10.1108/CG-06-2022-0276
Bhatti, M., & Bhatti, M. I. (2010). Toward Understanding Islamic Corporate Governance Issues in Islamic Finance. Asian Politics & Policy, 2(1), 25–38. https://doi.org/https://doi.org/10.1111/j.1943-0787.2009.01165.x
Bukair, A. A., & Rahman, A. A. (2015). Bank performance and board of directors attributes by Islamic banks. International Journal of Islamic and Middle Eastern Finance and Management, 8(3), 291–309.
Chang, H.-Y., Liang, L.-W., & Liu, Y.-L. (2021). Using Environmental, Social, Governance (ESG) and Financial Indicators to Measure Bank Cost Efficiency in Asia. Sustainability, 13(20). https://doi.org/10.3390/su132011139
Coles, J. L., Daniel, N. D., & Naveen, L. (2008). Boards: Does one size fit all? Journal of Financial Economics, 87(2), 329–356.
Collin, S.-O. Y., Ponomareva, Y., Ottosson, S., & Sundberg, N. (2017). Governance strategy and costs: board compensation in Sweden. Journal of Management & Governance, 21(3), 685–713. https://doi.org/10.1007/s10997-016-9359-z
Fama, E. F., & Jensen, M. C. (1983). Agency problems and residual claims. The Journal of Law and Economics, 26(2), 327–349.
Gassouma, M. S., & Ghroubi, M. (2021). Discriminating between Islamic and Conventional banks in terms of cost efficiency with combination of credit risk and interest rate margin in the GCC countries: Does Arab Spring revolution matter? ACRN Journal of Finance and Risk Perspectives, 10, 280–295.
Grassa, R., & Matoussi, H. (2014). Corporate governance of Islamic banks: a comparative study between GCC and Southeast Asia countries. International Journal of Islamic and Middle Eastern Finance and Management.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.
Karavitis, P., Kokas, S., & Tsoukas, S. (2021). Gender board diversity and the cost of bank loans. Journal of Corporate Finance, 71, 101804. https://doi.org/https://doi.org/10.1016/j.jcorpfin.2020.101804
Khan, I., Khan, M., & Tahir, M. (2017). Performance comparison of Islamic and conventional banks: empirical evidence from Pakistan. International Journal of Islamic and Middle Eastern Finance and Management, 10(3), 419–433. https://doi.org/10.1108/IMEFM-05-2016-0077
Riswanda, M., & Ghozali, I. (2020). Tips & Trick Android Root:Cara Cepat dan Mudah Belajar Tips & Trick Android. Jakad Media Publishing. www.nandroid19.com
Mak, Y. T., & Li, Y. (2001). Determinants of corporate ownership and board structure: evidence from Singapore. Journal of Corporate Finance, 7(3), 235–256.
Milenković, N., Radovanov, B., Kalaš, B., & Horvat, A. M. (2022). External two stage DEA analysis of bank efficiency in West Balkan countries. Sustainability, 14(2), 978.
Mollah, S., & Zaman, M. (2015). Shari’ah supervision, corporate governance and performance: Conventional vs. Islamic banks. Journal of Banking & Finance, 58, 418–435.
OJK, R. I. (2021). Laporan Perkembangan Keuangan Syariah Indonesia. Ojk.
Quttainah, M. A., Song, L., & Wu, Q. (2013). Do Islamic banks employ less earnings management? Journal of International Financial Management & Accounting, 24(3), 203–233.
ZamZami, M. R., Wibowo, N. C., Ana Wati, S. F., Ghozali, I., & Imawan, M. R. (2024). Rancang Bangun Sistem Informasi Berbasis Web Menggunakan Metode Waterfall. CYCLOTRON, 7(01), 61–66. https://doi.org/10.30651/cl.v7i01.21084
Ramdani, D., & Witteloostuijn, A. van. (2010). The impact of board independence and CEO duality on firm performance: A quantile regression analysis for Indonesia, Malaysia, South Korea and Thailand. British Journal of Management, 21(3), 607–627.
Titova, Y. (2016). Are board characteristics relevant for banking efficiency? Evidence from the US. Corporate Governance.
