Impact of Good Corporate Governance to Bank Financial Performance an Empirical Study on Bank Listed in Indonesia Stock Exchange(IDX)
ANINDIA TRINOVITA, Indra Wijaya Kusuma, Prof., Dr., M.B.A.
This research seeks to examine the influence of good corporate governance on bank financial performance. It assessed the impact of corporate governance on bank financial performance by observing listed bank in Indonesian Stock Exchange (IDX) during the period of 2004-2008. Instead of using GCG index issued by IICG (Indonesian Institute Corporate Governance), this research uses private index constructed by adding the main element of banking corporate governance as required by Bank Indonesia. Besides the GCG index, this research also uses some financial indicators as independent variables, such as CAR and LDR, in the regression.
A total of 22 listed banks were financially analyzed, and multiple regressions were used to estimate the impact of Capital Adequacy Ratio (CAR), Loan Deposit Ratio (LDR) and Good Corporate Governance on the financial performance of these banks. The main indicator for bank financial performance in this research is ROA (Return on Assets).
Three variables are hypothesized to influence bank financial performance (ROA). The results reveal that only two out of the 3 hypotheses are supported; those are, Loan Deposit ratio is negatively affects bank financial performance and Good Corporate Governance positively affects bank financial performance. Meanwhile, the Capital Adequacy Ratio does not affect bank financial performance significantly.
Kata Kunci : Good Corporate Governance (GCG), Loan Deposit Ratio (LDR), Capital Adequacy Ratio (CAR), bank financial performance
