Family Control, Board of Directors and Bank Performance in Indonesia

This study examined the effects of family control and board of directors on bank performance in Indonesia. There are 362 observations were conducted in all national banks in Indonesia during 2007-2009. Performance is proxied by ROA, ROE, and NPL. The findings showed that banks controlled by family and private institutions were more likely to have lower performance which indicates that the entrenchment effect is stronger than alignment effect. Owner involvement in the board of directors and in management had a negative effect on performance. This indicates that expropriation leads to performance downgrade. The independence of the board of direction had no effects on performance. This showed that board of directors could not function in concentrated and controlled ownership. Control variables such as number of branch, supporting branch, cash office, and automated teller had no significant effect on performance.

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