The effect of corporate governance's application on banks' performance: empirical study of banks listed on the Indonesian Stock Exchange

Abstract

This study aimed to examine the effect of corporate governance indicators, e.g., the board of directors, audit committee, and audit quality on bank's performance. This study used 30 banks listed on the Indonesia Stock Exchange (IDX) in the year of 2009-2010 as samples. The results reveal that the board of directors as one of the corporate governance indicators has a significantly positive correlation to banks' performance. As for the audit committee indicator, the result reveals a positive but insignificant effect on banks' performance. Meanwhile, a corporate governance indicator of audit quality has a significant positive relationship to the performance of the bank. This is consistent with the previous studies. It is concluded that the higher or better functioning the board of directors, audit committee and audit quality in the bank, the better the performance of the bank.