This paper aims to examine the impact of Good Corporate Governance (GCG) practice on bank stability and performance. Governance is measured using the GCG rating that covers eleven aspects. The authors apply instrumental regression to link governance to performance and stability. The study covers a sample of 150 banks. The result shows that bank stability can mediate bank governance and bank performance. On the determinant of bank performance, it can be concluded that the GCG rating is positive and directly influences bank performance. Bank stability is also positive for bank performance indicating the indirect contribution of the GCG rating to bank performance. NPL, LDR, CAR and bank’s size (LASSET) are all negative and significant. The aim of this paper is to provide strong empirical evidence on the importance of governance and stability for performance. The limitations of this paper are the size of the sample and that it only covers public banks which are theoretically required to apply better governance in all aspects of their business by the Capital Market Authority.

This  paper investigate the determinant of profitability of Islamic banks from the MENA region and how Global Financial Crisis (GFC) impacts on their performance. The study covers 117 banks for periods of  2003 to 2011. To examine the determinant of Islamic banking profitability (ROA), we apply a balanced and dynamic panel data regression model. We  conclude that the profitability of Islamic banks in the MENA countries is determined positively by asset size,  equity to total asset, liquidity risk and negatively by capital adequacy ratio, innovation  and global financial crisis. Positive and significant of asset size underlines the viability of economies of scale and scope.  Foremost, Dummy for crisis is negative and significant indicating Islamic banks are not immune to the crisis. Innovation should be performed with caution, especially on Off-balancesheet activities.

This paper test interrelationship between risk taking and profitability (ROAA) using two stage regression. We study 150 bank sample for 2008-2014 from Indonesia. Instrumented variable is total risk taking (RT) and the instruments are asset size, equity to total asset, loan asset ratio, loan loss reserve, efficiency, liquidity. For macroeconomic variables, we use economic growth, Central bank -rate (CBDR) and inflation rate (CPI). We find a positive relationship between risk taking (RT) and bank profitability (ROAA). Further, the relationship between risk taking (RT) and profitability (ROAA) is endogenous. The result confirms that bank's motivation to take more risk is to earn higher profit. In addition, capital ratio is negative to risk taking (RT) and profitability (ROAA). Interestingly, credit risk taking is negative due to the high correlation with a problem loan (LLRGL). The cost inefficiency is negative to bank’s profitability. Finally, for improving profitability, bank’s manager should manage the operation better such as reducing problem loan and improving cost efficiency as these actions are more effective than taking more risk taking (RT).Keywords: Risk Taking; Profitability; Two-Stage Regression; Macroeconomic; Indonesia.

This study examines the determinants of cost inefficiency of banks operating in 8 member countries of the Association of Southeast Asian Nations (ASEAN): Indonesia, Malaysia, Singapore, Thailand, the Philippines, Cambodia, Brunei and Vietnam. The author defines the cost inefficiency using accounting based efficiency known as business efficiency (CIR). Second, the researcher regresses the cost inefficiency ration on a set of bank specific variables (size, equity to total asset, personnel expenses to total expenses) and economic variables (economic growth and inflation rate) using ordinary least squared (OLS) regression analysis. The dataset of 504 banks in the ASEAN countries is used for the period from 2008 to 2012. The results show that the average cost inefficiency ratio during the period is about 59%. Banks from Vietnam exhibit the lowest cost inefficiency relative to banks in the other ASEAN countries. It is found that cost inefficiency is positively determined by inflation, loan loss provision, personnel expenses, capital adequacy and negatively by asset size and liquidity position

In January 2001, the Basel Committee on Banking Supervision published a proposal for a new capital framework, the "New Basel Capital Accord (Basel 11)" thus replacing Basel 1. One of the major motivations in the proposal is the introduction of explicit capital charge for operational risks in the business activities of banks. The objective of this paper is to estimate operational risk capital charge using historical data for 77 rural banks in Indonesia for a three-year period, 2006 to 2008. This study uses three approaches: (i) Basic Indicator Approach (BIA), (ii) Standardized Approach (SA) and (iii) Alternative Standardized Approach (ASA). We found that the average capital charge required to cover operational risk is IDR 154 million (1.5% of asset). When the calculation is conducted using the SA method, we found, on average a requirement of IDR 123 million (1.23% of asset). When the calculation is conducted using the Alternative Standardized Approach (ASA), the capital required was IDR 43 million (0.43% of asset). The results provide evidence that banks using more advance model require less capital charge.