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The study was conducted with the aim of examining whether Regional Development Banks (RDBs) can maintain their independence in performance when political relationships exist between these GLCs and the government as the owner. Data for the study was obtained directly from the official websites of 26 RDBs from the year 2013 to 2016. The collected data was analyzed quantitatively using the Generalized Least Square (GLS) method, The results show that political connections have no effect on the RDBs performance. This finding is consistent with our previous research on RDBs whcih suggest that even though RDBs are government-owned banks, the operations of RDBs remain independent and professional.
Donal Devi Amdanata1
Noorhayati Mansor2*
1 Sekolah Tinggi Ilmu Ekonomi Riau, Pekanbaru, Indonesia. Email:
2 Universiti Sultan Zainal Abidin, Terengganu, Malaysia. Email:
*Corresponding author
Accepted date: 12 March 2018 Published date: 15 July 2018
To cite this document: Amdanata, D. D., & Mansor, N. (2018). Do Political Connections
Affect the Performance of Indonesian Regional Development Banks? International Journal of
Accounting, Finance and Business (IJAFB), 3(12), 109 - 118.
Abstract: This study was conducted with the aim of examining whether Regional Development
Banks (RDBs) in Indonesia which fall under the category as Government-Linked Companies
(GLCs) can maintain their independence in performance when political relationships exist
between these GLCs and the government as the owner. Data for the study was obtained directly
from the official websites of 26 RDBs from the year 2013 to 2016. The collected data was
analyzed quantitatively using the Generalized Least Square (GLS) method. The results show
that political connections have no effect on the RDBs performance. This finding is consistent
with our previous research on RDBs which suggests that even though RDBs are government-
owned banks, the operations of RDBs remain independent and professional.
Keywords: Regional Development Bank, Political Connections
Government ownership of companies is always a dynamic issue and subject to political and
business criticisms. Thus, the topic provides a room for research study. Many researchers have
examined the theme of government ownership in businesses. Among others, research by Lau
& Tong (2008), Janang, Suhaimi, & Salamudin (2015) and Ting & Lean (2015) examine state-
owned enterprises in Malaysia. Mak & Li (2001), Rodan (2004) and Ang & Ding (2006)
research this issue in Singapore while Zou & Adams (2008) and Yen (2013) explore the topic
in China. In Indonesia, Buchory (2014, 2016) and Harsanti, Ghozali, & Chariri (2016) also
investigate the issue of government ownership. Interestingly, the use of the term government-
owned companies also varies. For example, Malaysia and Singapore more often refer to
government-owned companies as Government-Linked Companies (GLC). Indonesia and some
other Asian countries, on the other hand, call it State-Owned Enterprises (SOEs) and in the
United States the term Government-Sponsored Enterprises (GSEs) is commonly used.
Volume: 3 Issues: 12 [June, 2018] pp. 109 - 118]
International Journal of Accounting, Finance and Business
eISSN: 0128-1844
Journal website:
Most studies conducted on GLCs focus on performance (e.g., Ab Razak, Ahmad, & Aliahmed
Jober, 2011; Ang & Ding, 2006; Yeng Wai Lau, 2013). The specific group of research focusing
on GLCs suggests a level of curiosity among researchers in the uniqueness of the GLCs and
their operations. In fact, according to Huang, Xie, Li, & Reddy (2016), there are at least three
weaknesses of GLCs, namely (i) the small opportunity to compete widely; (ii) the rapid
development of markets; and (iii) competition with similar companies that can reduce the
company's profit. Also, Huang et al. (2016) reveals the shortfalls of government ownerships in
these companies. They also suggest that there are opportunities that can be utilized by the GLCs
and one of them is the broad political connection.
Unique to Indonesia, government-owned enterprises also include the banking sector and there
are several objectives for setting-up government-owned banks. Based on Law No. 19 year 2003
on State-Owned Enterprises, there are three major purposes of establishing state-owned
enterprises. Firstly, to contribute to the development of the national economy and increase state
revenues. Secondly, to become a pioneer of business activities that cannot be left to the private
sector, and thirdly, to actively provide guidance and assistance to small and medium
entrepreneurs. At present, 116 banks are operating in Indonesia and 30 of them are government-
owned. These 30 government-banks can be further categorized as state-owned banks (4) and
local government banks (26). They are often referred to as Regional Development Bank (RDB).
RDB in Indonesia has attracted a lot of interest in recent times. The local government
established RDB for regional economic development, and on average has been more than 40
years old. The long-existence of RDBs suggests that these RDBs have had a long experience in
the banking business. Almost all local government funds are placed in the RDBs and uniquely,
every province in Indonesia has its own RDB. A study conducted by Amdanata & Mansor
(2017) provides evidence that local government ownership of RDBs has no significant effect
on the RDBs’ performance. The finding also suggests that the RDBs have performed the
banking activities professionally. Agustin (2016) also reports superior performance of RDBs in
Indonesia based on comparisons of financial performance between sharia bank units of national
banks and the RDBs’ financial performance.
The findings of Agustin (2016) highlight an interesting point. Even though the RDBs are
directly controlled by local governments, in addition to being regulated by the Central Bank of
Indonesia (CBI) and the Indonesian Financial Services Authority (IFSA), the RDBs’
performance was better than the sharia units of the private banks. Indirectly, according to
Agustin (2016), the local government has strong influence on the performance of RDBs.
Consistent with Agustin (2016), Abdallah & Ismail (2017) also document that the positive
effect of corporate governance on performance is the highest when the majority of shareholders
are government or local corporations. The findings of Agustin and Abdallah contradict those
of Pina, Torres, & Bachiller (2011) who report that the non-ownership structure of savings
banks, the lack of best practices of corporate governance mechanisms, and political presence
have weakened the RDBs. Similarly, Shen & Lin (2012) conclude that government intervention
also results in poor performance of the RDBs.
To date, many studies on the effect of political connections on business performance conclude
that political connections benefit firms by providing business opportunities, preferential access
to financing, lower tax rates, preferential access to government funding, bailout possibilities
and improved corporate performance (e.g., Chen, Luo, & Li, 2014; Claessens, Feijen, &
Laeven, 2008; Ferguson & Voth, 2008; Fisman, 2001; Wu, Wu, Zhou, & Wu, 2012). However,
the issue of political connections has not been researched on GLCs involved in the banking
Political and Corporate Conditions in Indonesia
After the economic crisis, Indonesia has made many improvements in various sectors to keep
up with economic growth and development in order to compete effectively in the global
economy. Laws, politics, and economics are the sectors that are of primary concerns to the
government for reform. Many regulations were put in place to properly regulate these three
sectors since they are interconnected. All parties are aware that the economic crisis that hit
Indonesia in 1997 was caused by the weakness of corporate governance, added with the absence
of legal and political certainty of corruption, collusion and nepotism practices that have taken
root in Indonesia. The valuable lesson then becomes the background for Indonesia to implement
various regulations so that the economic crisis will not repeat itself, and if repeated, Indonesia
is ready to properly handle it.
It is possible that these government reforms may have contributed to local leaders being given
opportunities which allow them to work for personal gain. By embracing the system of many
parties and the provision of special autonomy, not all provincial leaders in Indonesia belong to
the same party as the winning party in the national election. This condition sometimes causes
local leaders to attempt to maintain their power. Furthermore, being involved in politics in
Indonesia can be very costly. As such local leaders could be forced to use their political power
and influence in the operations of companies operating in their areas. In addition to private
companies, of course, the easy target would be companies owned by the local governments.
According to La Porta, Lopez-De-Silanes, & Shleifer (2002) politicians use the existence of
state-owned banks for their purposes. The magnitude of influence and ownership of this
regional heads on the local government-owned companies may negatively affect their
professionalism. As a result, these companies may avoid political connections with the
authorities or with the government.
Literature Review
Political Connections
Relying on Resource-Dependence Theory (RDT), political connections are among the things
that influence the company. Hillman, Withers, & Collins (2009) in their review suggests that
although the environmental idea created may be the most overlooked idea by RDT field
researchers, research in this field supports the following: (a) political action correlates with
environmental dependency faced by companies, (b) companies facing the same environment
tend to choose the same forms of political behavior to manage them, and (c) increased
performance benefits for firms that create relationships with the political environment.
Indirectly they claim that the action of RDT supports political action as an effort of company
to improve company performance.
Previous studies describe political connections differently. For example, Faccio, M., Masulis,
R. W., & McConnell (2006) mentions the political connection as a special relationship between
company officials and politicians. On the other hand Fisman (2001) states that the political
connection is the proximity of employers and companies to the regime and the family in power.
Claessens et al. (2008) include as political connections when companies provide certain
facilities to government employees. According to Y. S. Chen, Shen, & Lin (2014) describe
political relations as a relationship between company officials and politicians. They also state
that the political connections between one country and another is not the same as the political
connection of individuals. Ismail, Kamarudin, & Othman (2012) refers to political connections
as when former government officials become high-ranking government-owned companies.
In the present study, political relation is defined as when government officials or retired
government officials occupy high positions in government-owned companies. Many conditions
occur in Indonesia, when many officials or retired elected officials become commissioners in
the company. The role of the commissioner in determining the way the company in Indonesia
is regulated by Law No. 40 year 2007 on Persero and is very comprehensive. This condition
causes the position of the commissioner to be very significant. The government, as a party
providing capital, entrusted the status of this commissioner to government officials or retired
government officials. Therefore, having a political connection with the government has its
advantages for companies to the extent that it is difficult to distinguish between the government
and politics.
Regional Development Bank
Agency relationship is defined as a contract in which one or more persons as owners or
shareholders or owners, appoint another person to do some work on behalf of the owner. Those
at this point are always referred to as agents or management. A work that is maximized is to
include the delegation of authority to make decisions. In this case the management is expected
by the owner to be able to optimize the existing resources in the company to the maximum to
gain profit.
If both parties maximize their role, it is reasonable that management will not always act in the
best interest of the owner. This is very reasonable because in general the owners have long term
welfare motives, otherwise management is more short term so that sometimes they tend to
maximize profit for the short term by ignoring the sustainability of profit in the long term. To
limit or reduce the likelihood of such discrepancies, the owner may determine the appropriate
incentives for management by paying a monitoring fee in the form of a salary. With the
monitoring cost management will always maximize the welfare of the owner, although
management decisions in practice will be different from the wishes of the owner (Jensen &
Meckling, 1976).
In relation to political connection, RDB has a vague, theoretical clash of theories between the
theory agency and RDT. If it refers to the agency theory, then the owner of the political power
of the government is the owner of the RDB. However, if viewed from the side of RDT, the
government or political ruler is an environment that must be in condition to be able to improve
company performance. but with current RDB positions, it is precisely the RDB that is under
the pressure of the owner or political power.
Based on Law No.13 year 1962 on Basic Provisions of Regional Development Banks, the main
objective of RDB is to provide financing for the implementation of regional development
efforts to succeed national development. The Act also states that the implementation of such
businesses involves lending for investment purposes, expansion, and renewal of regional
development projects in the region concerned.
As locally government-owned banks RDBs have an advantage in raising public funds,
especially from the local governments where the RDB was established. Almost every local
government places government funds in RDB. One of the objectives of RDB is to finance the
development of provincial and district governments. However, the provincial governments
have limitations in loan financing and collections of loan payments. The governments can only
raise taxes and restricts the community. Also, the government can not engage in government to
business activities, so that the usual agreements of business to business cannot be done.
Therefore, the RDBs as intermediary institutions are needed to support the provincial
government in in conducting fund-raising activities and fund disbursement.
Local researchers in Indonesia have reviewed the RDB. Call it Suryanto (2015), Buchory (2014,
2016) who examines the RDB. There are also several studies of efficiency-related RDBs as
performed by Abidin & Endri (2009); and Sutanto (2015) and all of their research has shown
positive results. However, the study only revolves around the influence of financial ratios on
RDB performance, not to mention external problems that actually have an effect on RDB
However, with their status as government-owned banks and the dynamic political conditions of
each region, the operational activities and objectives of the RDBs are at risk of being subject to
political influence and power which eventually may disrupt the efforts of RDBs to achieve their
Pina et al. (2016) conducted a study of 45 savings banks in Spain and report that banks which
are influenced by politicians produce low performance. According to them this is due to
politicians as holders of power having a strong influence on the policies of companies under
the control of the government. Similarly, Sapienza (2004) also supports the finding and
concludes that politicians have a strong influence on government-owned companies.
Accordingly, the hypothesis in this study is:
H1 : Political connections influence the performance of Regional Development Banks in
Methodology and Data
The sample of this research consists of 26 RDBs in Indonesia. The data used are bank data from
the years 2013 to 2016 or a total of 104 bank years. The bank data was sourced from the Annual
Reports of RDBs and downloaded from the official website of each RDB. The study adopted
and modified the research model from Agustin (2016); Bliss & Gul (2012); Y. Chen et al.
(2014). Chen and Agustin used the Return on Assets (ROA) of the company in measuring the
performance of the company's financial. In this study ROA represents an independent variable.
The dependent variable is political connection (POLCON) which is measured by comparing
the number of government-linked commissioners, i.e., senior government officer (SGO);
former SGO and politician.
To test if political connection influenced bank performance the natural logarithms of board of
directors (BOARDSIZE), natural logarithms of the asset (ASSETS), leverage (LEV),
Nonperforming Loan (NPL) and Loan to Deposit Ratio (LDR) were used as panel data with
pooled ordinary least square (OLS), random effect and fixed effect analysis using the following
      
   
 
PERF = Profit before tax and interest on outstanding loans;
POLCON = Commissioners are Senior Government Officers or retired Senior
Government Officicers or politicians. This variable using the dummy
variable; 1 refers to if the Commissioners are Senior Government
Officers and 0 if not.
AGE = Age of the RDB
ASSET = Total assets of the company
BOARDSIZE = Size of Directors
LEV = Leverage
NPL = Non Performing Loan
LDR = Loan to Deposit Ratio
Results and Discussion
Table 1 shows the results of the regression model. After doing Hausman Test, the Random
Effect model was performed and the analysis suggests that POLCON has no significant effect
on the RDBs performance. The Fixed Effect model also produces similar finding. Durbin-
Watson Statistic shows a value of 1.976434 which is below 2 and thus, indicating that there is
no autocorrelation problem.
Based on the output in Table 1, the Random Effects model results in the adjusted R-square
value of 0.1073 while the Fixed Effect model shows the value of 0.6238 for the adjusted R-
square. All variables of AGE, ASSETS, BOARDSIZE, LDR and LEV show no significant
effect on the RDBs performance except for the NPL (p=0.0004 < 0.01). Together, all of the
independent variables have a significant influence on the performance of the RDBs at the 10
per cent confidence below (p = 0.0783). Although none of the independent variables have a
significant influence on the RDBs’ performance other than the NPL, the F-test result (p =
0.011472 < 0.05) suggests that simultaneously the independent variables affect the performance
of the RDBs at a degree of confidence level below 5 per cent.
The regression output provides evidence that the POLCON coefficient on RDB performance is
(-0.12). This result indicates that POLCON has a negative but insignificant effect on the RDBs
performance (p= 0.4649 > 0.05) and thus, the hypothesis is rejected. The finding indicates that
RDBs in Indonesia operate professionally since there is no evidence of significant political
influence on the RDBs performance. These findings are similar to studies conducted by
Amdanata & Mansor (2017); Berkman & Galpoththage (2016); Faccio (2010); and Saeed,
Belghitar, & Clark (2016). The result, however, is inconsistent with the conclusion by
Bencheikh & Taktak (2017); and Coulomb & Sangnier (2014).
Table 1: Regression Result
*Sample: 2013 2016; Periods included: 4; Cross-sections included: 26; Total panel (balanced) observations: 1
Politics in Indonesia is unique since election winners in each province can be different from
other regions which make the political map in each area also different. However, the pattern of
interactions between the RDBs and political winners is almost the same, that is, local leaders
tend to have a strong influence in controlling the RDBs, including in the selection of the
president or director. This suggests that potential RDB owners and holders of political power
in the regions will make use of the RDB for enormous political gain. As with putting a person
in the company stewardship, this is of course already violate the principles of corporate
governance that has been running in Indonesia
However, seeing the bad experiences faced by Indonesia when hit by the economic crisis caused
the government of the Republic to make many regulations related to the banking industry, not
least the RDBs. The central government, such as realizing that the cost of politics in Indonesia
is very expensive, sooner or later will make the local political authorities will glance at the RDB
for political purposes.
Therefore, the government has set up many barries to protect the RDB from political interests.
At this time, banks in Indonesia have many regulations that prevent them from deviating from
the main task. Strict supervisions are conducted by Central Bank of Indonesia since 2014 and
furthermore banks in Indonesia are also overseen by the Indonesian Financial Services
Fixed Effects
Random Effects
Std. Error
Effects Specification
Cross-section fixed (dummy variables)
Weighted Statistics
Adjusted R2
S.E. of regression
Sum squared resid
Log likelihood
Mean dependent var
S.D. dependent var
Durbin-Watson stat
Hausman (P > 0.05)
Authority. In addition, the Indonesian government has also issued a special Corporate
Governance Guideline for the banking sector. These various regulations and regulatory bodies
cause banks to run the banking operations professionally. Local governments as owners can
provide wide economic access to the RDBs and also have direct access to control the RDBs
and maintain the required level of professionalism in running these local government-owned
Amdanata & Mansor (2017) has investigated whether RDB as a bank owned by local
government utilizes local government facilities to improve their performance. In other words,
the RDB competes with other banks in the area by utilizing their status as state-owned banks.
The results show that the relationship is negative, meaning that RDB has no competitive
advantage to the local government. While in this study, the emphasis of research is whether
local government as the owner utilizing RDB for political purposes, was also negative. These
results indicate that RDB in Indonesia has run the regulations and apply the principles of
corporate governance with a consistent.
For further research, researchers can try to compare with other government-owned companies
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... Beberapa penelitian sebelumnya menunjukkan bahwa kedekatan dengan pemerintah tidak selalu berdampak positif, namun sebaliknya, hubungan dengan pemerintah justru tidak meningkatkan kinerja perusahaan (Amdanata & Mansor, 2018;Boubakri et al., 2008;Cheema et al., 2016;Faccio, 2010). Dalam kasus Pakistan, menjadi dekat dengan pemerintah meningkatkan biaya politik yang harus dikeluarkan oleh perusahaan (Cheema et al., 2016).Alasannya adalah bahwa perusahaan sering menjadi penyedia dana untuk politik dan militer. ...
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Abstrak Artikel ini bertujuan untuk mengungkapkan hubungan antara Badan Usaha Milik Daerah (BUMD) dengan koneksi politik di daerah. BUMD dibentuk dengan tujuan yang jelas, salah satunya adalah salah satunya adalah menjadi sumber Pendapatan Asli Daerah (PAD). Namun dalam praktiknya, kegiatan BUMD banyak dipengaruhi oleh faktor-faktor eksternal yang menjadikan kinerja BUMD menjadi buruk. Salah satu faktor eksternal itu adalah kekuatan politik di suatu daerah. Artikel ini merupakan konsep teori yang akan mengungkapkan hubungan antara BUMD dan koneksi politik melalui kajian pustaka. Metode penelitian yang digunakan adalah metode kualitatif. Kesimpulan penelitian menunjukkan bahwa koneksi politik daerah memberikan pengaruh yang negatif terhadap kinerja perusahaan. Abstract This article aims to reveal the relationship between Regional Owned Enterprises (BUMD) and political connections in the regions. BUMD was formed with clear objectives, one of which is to become a source of Regional Original Income (PAD). However, in practice, BUMD's activities are heavily influenced by external factors that make BUMD's performance worse. One of the external factors is the political power in an area. This article is a theoretical concept that will reveal the relationship between BUMD and political connections through a literature review. The research method used is qualitative. The conclusion of the study shows that regional political connections have a negative influence on company performance.
... The existence of RGLCs also attracts academics and researchers to research and understand more about their performance aspects. Among these studies include Agustin (2016) who compared the financial performance of RGLCs in the banking industry with commercial banks; Amdanata and Mansor (2018) who studied the influence of political relations on the performance of RGLCs; Bahri et al. (2015) who observed the performance of RGLCs in Aceh Province; Sari and Purwanegara (2016) whose study examined the influence of accounting information system on RGLCs in West Java Province; and Widjajanti (2012) who examined the RGLCs' performance. ...
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Regional Government-Linked Companies (RGLCs) in Indonesia have suffered from the unhealthy image and loss of respect from the public. The RGLCs are incapable of independently running the companies without financial support from the government. Accordingly, this research determines the effects of audits conducted by the State Audit Board of the Republic of Indonesia on the performance of RGLCs. This study also examines the influence of regulations on the RGLCs'. Agency theory and resource dependence theory provide the bases in developing the proposed hypotheses. The survey questionnaire was used to collect primary data. A total number of 57 out of 113 RGLCs (50.44%) made up the final sample. Each RGLC represented by six respondents, and the total final sample size was 342. The results provide new evidence that the financial audit does not affect the performance of RGLCs, while the Compliance audit indicates a positive effect on the performance of these RGLCs. ABSTRAK Syarikat Milik Kerajaan Negeri (RGLCs) di Indonesia telah menderita akibat imej tidak sihat dan hilangnya hormat masyarakat. RGLCs tidak berupaya menjalankan syarikat secara bebas tanpa sokongan kewangan daripada kerajaan. Sehubungan dengan itu, kajian ini memeriksa kesan audit yang dikendalikan oleh Lembaga Audit Negara Republik Indonesia terhadap prestasi RGLCs. Kajian ini juga mengkaji pengaruh peraturan ke atas prestasi RGLC. Teori agensi dan teori kebergantungan sumber menyediakan asas dalam membangunkan hipotesis yang dicadangkan. Soal selidik tinjauan digunakan bagi tujuan mengumpul data primer. Sejumlah 57 daripada 113 RGLCs (50.44%) membentuk sampel akhir. Setiap RGLC diwakili enam responden dan jumlah sampel akhir adalah sebanyak 342. Hasil kajian memberi bukti baharu bahawa audit kewangan tidak memberi kesan ke atas prestasi RGLCs, manakala audit pematuhan menunjukkan kesan positif terhadap prestasi RGLCs.
... Terbukti tidak satu pun BUMD di Provinsi Riau yang mengunggah laporan keuangan perusahaan ke dalam website resmi perusahaan mereka. Berdasarkan penelitian yang peneliti lakukan terhadap BUMD di Indonesia, peneliti mengidentifikasi beberapa faktor mengapa BUMD selalu mengalami kerugian (Amdanata and Mansor, 2018a, 2018b, 2016 yaitu: BUMD tidak memiliki regulasi yang mengatur BUMD; BUMD tidak memiliki pedoman GCG; BUMD tidak profesional dam BUMD tidak memanfaatkan Competitive Advantage yang dimiliki oleh BUMD. ...
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The Government of Indonesia finally issued a Government Regulation (PP) governing Regionally Owned Enterprises (BUMD), namely PP No. 54 of 2017 concerning BUMD. The PP is the government's answer to the debate about BUMD that has occurred so far. The government provides an opportunity for regional governments to optimize the wealth of their respective regions, but because local governments are not allowed to carry out business activities, establishing BUMD is one way that can be done by local governments to increase Regional Original Revenue (PAD). Even so, the government did not prepare regulations that govern BUMD. With PP No. 54, it is hoped that the parties involved with BUMD have guidelines on how to manage and oversee BUMD operations. The purpose of this study was to determine the level of implementation of Good Corporate Governance (GCG) guidelines on BUMD throughout Indonesia in the form of Regional Corporation (Perseroda). In this study, the scope of the research is limited to examining the implementation of the principle of transparency in the General Guidelines for GCG in Indonesia issued by the National Committee on Governance Policy (KNKG) in 2006. One of the main guidelines for the implementation of the transparency principle is that companies must provide information in a timely, adequate, precise, accurate, and comparable and easily accessible to stakeholders under their rights. To obtain this information, the first step taken is to inventory BUMDs in the form of Perseroda in Indonesia. BUMD data obtained through searching facilities from the internet. Based on the searching, 57 BUMDs were obtained that matched the research criteria. Based on this study, only 35% of BUMDs implemented the principle of transparency, 26% only implemented a part of the transparency principle, and the remaining 39% did not apply the principle of transparency.
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Regional Development Bank in Indonesia was established to accelerate the growth of the economy. But in reality the contribution of BPD to Gross Domestic Product in 2012 was still relatively small, it is allegedly not optimal implementation intemediasi banking functions by BPD indicated by the Loan to Deposit Ratio (LDR) are still low. The purpose of this study was to analyze the factors that affect the implementation of intermediation include Capital Adequacy Ratio (CAR) , Net Interest Margin (NIM ) , the ratio of operating expenses to operating income (BOPO), Non Performing Loan (NPL), and Return on Assets (ROA) . The method used is descriptive and verification method, with secondary data from financial statements 26 all over Indonesian Regional Development Bank as a research object units. Data analysis technique is the multiple linear regression, hypothesis testing while using t - test to examine the effect of partial variables and test - F to examine the effect of variables simultaneously with a significance level of 5 %. Based on the results it is concluded that partial CAR, NIM, BOPO and ROA positive and significant effect on LDR. While the NPL but no significant negative effect on LDR. Simultaneously CAR, NIM, BOPO, NPL and ROA significantly influence the level of influence of LDR with 55.7 % and the rest is influenced by other factors not examined. Keywords : Capital Adequacy Ratio (CAR),Loan to Deposit Ratio (LDR),Net Interest Margin (NIM), Non-Performing Loans (NPLs), Ratio of Operating Expenses to Operating Income (BOPO), Return on Assets (ROA) .
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Local governments in Indonesia are allowed to establish their own Regional Development Banks (RDB) in their respective provinces. Apart from Indonesian national banks, these RDBs also have to compete with privately-owned and international banks in the country. In addition, each RDB from various regions also have to compete with one another. This study aims to determine the impact of local government ownership and competitive advantage on the financial performance of the RDBs. The influence of competitive advantage of state-owned banks has not yet been studied. Data for RDBs for the year 2015 were gathered from their annual reports available from the websites. Additional secondary data were also obtained from the Indonesian Central Bank and Financial Services Authority (FSA). The final analyses using OLS regression involved a total of 26 RDBs throughout Indonesia. The results of this study show that only capital adequacy as a proxy of government ownership has a positive and significant impact (at 1 percent level) on the performance of RDBs while competitive advantage does not contribute to their financial success. The results contribute to improve the current understanding of RDBs’ performance as government banks. This study also provides input to local governments in managing their funds and resources to ensure the sustainability of RDBs.
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The study of the effect of political connections on the Tunisian firm performance after the 2011 uprising is the focal point of the paper. First, by applying a multiple linear regression model, the results show that political connections are positively associated with the market firm performance. Thereafter, a difference in difference model is applied to separate the connected and non-connected firms. Such a method is most likely to determine the factors driving the market performance of politically connected firms. Hence, results reveal that leverage, age and equity holdings increase the market performance of politically connected firms.
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This study is motivated by highly concentrated ownership, the relatively large government stake in listed firms in the GCC (Gulf Cooperative Council) region, and the rapid stock market development and developing investor protection environment. The results point to heterogeneity in governance quality across exchanges. For the first time, we find that the positive relationship between governance quality and firm performance is maintained and is stronger at low levels of concentrated ownership. More interestingly, we find that the relationship between governance and firm performance is an increasing function of dispersed ownership and that the value addition of good governance is not necessarily maintained at high levels of ownership concentration. Furthermore, such a relationship reaches its highest level when the government or local corporations are the firm’s major shareholders.
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The research was aimed to test the determinant of auditors internal behavior in whistle blowing with formal retaliation and structural anonimity line as moderating variables. The population of research was 735 internal auditors of entire State-Owned Enterprises in Indonesia. Census methods was applied to collect the data and the samples were 197 among them. Structural Equation Modelling (SEM) aided by Warp PLS 5,0 was used for data processing. The conclusion was that auditors attitude on whistle blowing, subjective norms, and perceived behavioral control positively influenced whistle blowing intention. Whistle blowing intention positively influenced whistle blowing behavior. Structural anonimity line reinforced the relationship between whistle blowing intention and whistle blowing behavior. Formal retaliation weakened the relationship between whistle blowing intention and whistle blowing behavior.
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The aim of this study was to analyze the determinant factors of banking profitability in Indonesian Regional Development Banks. Descriptive and verification methods were used on secondary data from 26 financial statements. The results showed that loan to deposit ratio (LDR) and capital adequacy ratio (CAR) have negative effect but no significant effect on return on assets (ROA); net interest margin (NIM) has positive but not significant effect on return on assets (ROA); operating expenses to operating income (OEOI) have negative and significant effect on ROA; while non-performing loans (NPLs) have positive and significant effect on ROA.
This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. We define the concept of agency costs, show its relationship to the 'separation and control' issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears the costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem.
One of the unique banking in Indonesia is a Regional Development Banks (RDB), which is a districts government-owned bank. Indonesia banks have Islamic banking units, where the status usually in division and business unit of the Bank's parent (conventional). But there are no funds will be mixed with the conventional, because they have a different system of financial records between sharia units and conventional units. The purpose of this study is to comparing the performance of RDB and private banks which has Islamic banking units. The population and sample consists of 24 Islamic business units Regional Development Banks (RDB) and private owned banks. From the 24 banks, only 18 banks were selected to be the sample. The banks are 7 private banks and 11 regional development banks. The period of this study is from 2010 to 2014. Data are taken from the bank's annual reports. This study using panel data and using pooled Ordinary Least Squares (OLS), random effect and fixed effect analysis. The results showed that RDB of Islamic banking units is better than Islamic business unit of private banks; this suggests that due to several factors. First, lending only to employees of the local government where government employees are very difficult to stop. Because of they are difficult to be dismissed; the probability that they are unable to repay loans is very low despite the unstable economic situation. Second, since RDB provide services only to an area only, so it has special knowledge about the area. This simplifies the RDB to assess loan applications from customers and identify viable loans. Third, the performance of RDB supervised by local governments This study also shows that DIBU, DEPOSIT, LDR, CAR and NPL plays a significant factor in explaining the performance of Islamic banking unit in Indonesia banks. IJER
This article presents empirical evidence about factors that influence the solvency of Spanish savings banks. It also studies whether the presence of politicians in their governance has led to lower solvency ratios and, consequently, to the current economic situation in the Spanish banking sector. We use multivariate regressions, taking the solvency ratio as the dependent variable; and efficiency, the coverage ratio, political influence, CEOs' political influence, size, growth, and age as independent variables. Our results confirm that banking entities controlled by politicians resulted in poor performance, and political influence on the boards of savings banks led them to insolvency. The findings show that the non-ownership structure of savings banks, the lack of best practice corporate governance mechanisms, and political presence have weakened them.