Good Corporate Governance And Financial Performance On Capital Adequacy Ratio: A Reflection Of Indonesian Conventional Banking

Abstract

The purpose of this study is to determine the impact of good corporate governance, as well as financial performance as measured by non-performing loans, net interest margin, return on assets, and loan to deposit ratios, on the capital adequacy ratio of conventional banking in the period 2015-2019, using data from the Federal Reserve. The composite value of banking self-assessment is the indicator that was utilized to determine good corporate governance in the context of this study. The quantitative approach used in this study was combined with secondary data. Purposive sampling was used in this study to select a sample of 35 banks, which was then analyzed. The findings revealed that GCG, NPL, ROA, and LDR had no impact on CAR. This occurs because the revenues obtained by the bank are used to mitigate the bank's operational risk, and so have no effect on the bank's capital adequacy ratio (CAR). The NIM has a negative and statistically significant effect on the CAR. This is due to the fact that the NIM indicates that the quantity of loans granted is increasing, implying that the risk faced by the bank is also increasing.

Governance Dynamics and Capitalisation of Banking Sectors in Anglophone West African Countries

“…Again, Agustina, Winarno and Dyan (2021) and Jamil and Qureshi (2020) This discussion is incomplete without mentioning the place of national or country institutional factors in banks' ability to raise adequate capital. First, it should be understood that corporate governance is a nexus of firm-country variables (mostly captured along management-board dimensions and politics-law-finance dimension).…”

“…The work of Agustina, Winarno and Dyan (2021) (2016). Finally, the study suggests that further research on the theme should consider the following observations: the need for a larger sample size and the incorporation of return on assets (ROA) and non-performing loans (NPL) as the proxies of corporate governance performance.…”

“…did not back the finding that corporate governance significantly negatively affects commercial banks' capital adequacy. Specifically,Agustina, Winarno and Dyan (2021) studied the impact of corporate governance (CG) on capital adequacy ratio (CAR) of banks in Indonesia using 2015 -2019 data and established that corporate governance (as measured by board effectiveness and management efficiency have no significant impact on capital adequacy of banks that operated in Indonesia. Another study that did not agree with the finding that corporate governance has a significant negative effect on capital adequacy isJamil and Qureshi (2020).…”

Corporate Governance and Banks’ Capital Adequacy in Gambia: The Moderating Impact of Politics

“…The crux of corporate governance in the corporate world is to ensure that businesses are ran in accordance with laid down soft and hard laws which are aimed at protecting the interests of shareholders as well as those of other fiduciary and non-fiduciary stakeholders (Agustina, Winarno & Dyan, 2021). The concepts guiding this study are depicted in Figure 1.…”