Revisiting Corporate Governance in Emerging Economies: The Role of Board Size and Independence in Indonesian Banks
DOI:
https://doi.org/10.61194/ijtc.v7i2.2145Keywords:
Board Composition, Financial Performance, Corporate Governance, Board Size, IndonesiaAbstract
Corporate governance remains a critical determinant of organizational performance in emerging markets, particularly in the banking sector, where transparency and accountability are essential. This study examines how board composition specifically board size and board independence affects financial performance among 38 Indonesian foreign exchange banks from 2017 to 2021. Using panel data regression with fixed effects, validated through Chow and Hausman tests, the study controls for unobserved heterogeneity and firm-specific characteristics. Results show that board size has a statistically significant positive association with both Return on Assets (ROA) and Return on Equity (ROE). From the perspective of Resource Dependence Theory, this relationship may reflect broader access to expertise and external resources associated with larger boards rather than a directly observed improvement in internal decision-making processes. However, board independence does not significantly impact financial outcomes, suggesting that structural independence lacks effectiveness without supporting institutional and cultural frameworks. These findings highlight the need for governance reforms emphasizing functional independence, director training, and stronger enforcement mechanisms to improve oversight. The study contributes to the literature by contextualizing Resource Dependence Theory within Indonesia’s institutional environment and offering insights for tailoring international governance standards to local realities. Overall, the results underscore that governance effectiveness depends not merely on structure but on institutional capacity and cultural adaptation, providing guidance for policymakers and future research.
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Potharla, S., & Amirishetty, B. (2021). Non-Linear Relationship of Board Size and Board Independence With Firm Performance – Evidence From India. Journal of Indian Business Research, 13(4), 503–532. https://doi.org/10.1108/jibr-06-2020-0180
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Widyani, I. P., & Hadiwidjaja, R. D. (2020). The Good Corporate Governance Mechanism Effects Toward Bank Pembangunan Daerah Performance in Indonesia With Ownership Structure as Moderation. https://doi.org/10.2991/aebmr.k.200522.057
Wijethilake, C., & Ekanayake, A. (2019). CEO Duality and Firm Performance: The Moderating Roles of CEO Informal Power and Board Involvements. Social Responsibility Journal, 16(8), 1453–1474. https://doi.org/10.1108/srj-12-2018-0321
YULFASNI, W. F. (2023). The Effectiveness of Bank Supervision Legal Concepts in Protecting Customer Interests in Indonesia. Russian Law Journal, 11(5s). https://doi.org/10.52783/rlj.v11i5s.966
Arayssi, M., & Jizi, M. (2019). Does Corporate Governance Spillover Firm Performance? A Study of Valuation of MENA Companies. Social Responsibility Journal, 15(5), 597–620. https://doi.org/10.1108/srj-06-2018-0157
Ayamga, T. A., Avortri, C., Nasere, D., Donnir, S., & Tornyeva, K. (2024). The Influence of Corporate Social Responsibility on the Financial Performance of Firms in Ghana: The Moderating Role of Board Independence and Diversity. American Journal of Industrial and Business Management, 14(04), 510–536. https://doi.org/10.4236/ajibm.2024.144026
Baltagi, B. H. (2021). Econometric Analysis of Panel Data. Springer.
Boachie, C. (2021). Corporate Governance and Financial Performance of Banks in Ghana: The Moderating Role of Ownership Structure. International Journal of Emerging Markets, 18(3), 607–632. https://doi.org/10.1108/ijoem-09-2020-1146
Buallay, A. (2019). Is Sustainability Reporting (ESG) Associated With Performance? Evidence From the European Banking Sector. Management of Environmental Quality an International Journal, 30(1), 98–115. https://doi.org/10.1108/meq-12-2017-0149
Buchdadi, A. D., Suherman, S., Mahfirah, T. F., Usman, B., & Kurniawati, H. (2023). An Assessment of Female Executives’ Influence on Bank Performance in Indonesia Based on Critical Mass Theory. International Journal of Management and Sustainability, 12(1), 26–43. https://doi.org/10.18488/11.v12i1.3262
Ernanda, M. D. B. (2022). The Impact of Pernyataan Standar Akuntansi Keuangan 68 Application Guidelines for Banking Sector Issued by Otoritas Jasa Keuangan (OJK. Journal of International Conference Proceedings, 5(3), 88–96. https://doi.org/10.32535/jicp.v5i3.1784
Habtoor, O. S. (2022). Board Attributes and Bank Performance in Light of Saudi Corporate Governance Regulations. Journal of Risk and Financial Management, 15(10), 441. https://doi.org/10.3390/jrfm15100441
Hanafi, R., Rohman, A., & Ratmono, D. (2021). How Do Sharia Supervisory Board and Good Corporate Governance Relate to Islamic Banks Performance? Share Jurnal Ekonomi Dan Keuangan Islam, 10(2), 230–248. https://doi.org/10.22373/share.v10i2.11112
Iska, S., Nofrivul, N., Jaya, I., Nengsih, I., & Renie, E. (2024). The Implications of the Countercyclical COVID-19 Policy on the Performance of Rural Banks and Sharia Rural Banks in Indonesia. Juris (Jurnal Ilmiah Syariah, 23(1), 143. https://doi.org/10.31958/juris.v23i1.12329
Kasanah, R., Abidillah, A. F., & Rusgianto, S. (2022). Assessing the Internal Factor Affecting the Bank Profitability in Indonesia: Case of Dual Banking System. Jurnal Ekonomi & Keuangan Islam. https://doi.org/10.20885/jeki.vol8.iss2.art2
Kılıç, M., & Kuzey, C. (2016). The Effect of Board Gender Diversity on Firm Performance: Evidence From Turkey. Gender in Management an International Journal, 31(7), 434–455. https://doi.org/10.1108/gm-10-2015-0088
Majeed, S., Zhou, Z., Lu, C., & Ramkissoon, H. (2020). Online Tourism Information and Tourist Behavior: A Structural Equation Modeling Analysis Based on a Self-Administered Survey. Frontiers in Psychology, 11. https://doi.org/10.3389/fpsyg.2020.00599
Mayrendra, R. T., & Suryono, A. F. (2023). Analisis Yuridis Peran OJK Dalam Melakukan Perlindungan Hukum Korban Pinjaman Online Berdasarkan Peraturan Otoritas Jasa Keuangan Nomor 77/Pojk.1/2016. Lawstudies, 1(1). https://doi.org/10.47134/lawstudies.v1i1.1948
Meilani, A. D., Zulaikha, Z., & Sari, R. P. (2023). Corporate Governance and Banking Performance Amid Covid-19 in Indonesia. Accounting Analysis Journal, 11(3), 196–205. https://doi.org/10.15294/aaj.v11i3.65812
Meutıa, I., & Soediro, A. (2019). Disclosure of Governance Practice by Islamic Banks in Indonesia. International Journal of Islamic Economics and Finance Studies. https://doi.org/10.25272/ijisef.466463
Mititean, P. (2022). The Impact of Corporate Governance Characteristics on Companies’ Financial Performance: Evidence From Romania. Economic Annals, 67(233), 113–133. https://doi.org/10.2298/eka2233113m
Mooney, A., Taneja, S., & Rajan, V. (2021). Corporate Governance Characteristics and Firm Value: Evidence from Emerging Markets. Corporate Governance: The International Journal of Business in Society, 21(6), 1123–1139. https://doi.org/10.1108/CG-09-2020-0375
Mukhibad, H., Nurkhin, A., & Rohman, A. (2020). Corporate Governance Mechanism and Risk Disclosure by Islamic Banks in Indonesia. Banks and Bank Systems, 15(1), 1–10. https://doi.org/10.21511/bbs.15(1).2020.01
Naseem, M. A., Lin, J., Rehman, R. U., Ahmad, M. I., & Ali, R. (2020). Does Capital Structure Mediate the Link Between CEO Characteristics and Firm Performance? Management Decision, 58(1), 164–181. https://doi.org/10.1108/md-05-2018-0594
Nazir, G., Ris, M., Prasetyo, P., Buchdadi, A. D., Widyastuti, U., & Kurniawati, H. (2022). The Effect of CEO Characteristics on Firm Performance of Food and Beverage Companies in Indonesia, Malaysia and Singapore. Qas, 23(186). https://doi.org/10.47750/qas/23.186.15
Nikmah, A. N. N., Ghofur, R. A., & Noviarita, H. (2023). Determinant Variables That Affect the Financial Performance of Islamic Banking in Indonesia. Al-Kharaj Jurnal Ekonomi Keuangan & Bisnis Syariah, 5(3), 2480–2500. https://doi.org/10.47467/alkharaj.v5i3.1975
Nugroho, A. A., Pratama, B. C., Fakhruddin, I., & Wibowo, H. (2022). Islamic Governance, Sharia Supervisory Board, Environmental Performance, and Islamic Social Reporting: Evidence From Indonesia. Jifa (Journal of Islamic Finance and Accounting, 5(1), 1–14. https://doi.org/10.22515/jifa.v5i1.5294
Nurkhin, A., Kusmuriyanto, W., W., W., K., A., & Aeni, I. N. (2023). Do Corporate Governance Implementation and Bank Characteristics Improve the Performance of Indonesian Islamic Banking? Before-Covid-19 Pandemic Analysis. Banks and Bank Systems, 18(3), 126–135. https://doi.org/10.21511/bbs.18(3).2023.11
Ponce, H. G., & Wibowo, S. A. (2023). Do Sustainability Activities Affect the Financial Performance of Banks? The Case of Indonesian Banks. Sustainability, 15(8), 6892. https://doi.org/10.3390/su15086892
Potharla, S., & Amirishetty, B. (2021). Non-Linear Relationship of Board Size and Board Independence With Firm Performance – Evidence From India. Journal of Indian Business Research, 13(4), 503–532. https://doi.org/10.1108/jibr-06-2020-0180
Pradeep, A. A. (2023). Board Characteristics, Ownership Structures and Bank Profitability: Evidence From Sri Lanka. Sri Lankan Journal of Banking and Finance, 6(1), 61–94. https://doi.org/10.4038/sljbf.v6i1.41
Pratiwi, R. D., & Chariri, A. (2021). Effectiveness of the Board of Directors and Company Performance: Corporate Governance Perspective in Indonesia. Jurnal Penelitan Ekonomi Dan Bisnis, 6(1), 17–27. https://doi.org/10.33633/jpeb.v6i1.4351
Putri, H. B. I., & Muhammad, R. (2023). Pengaruh Good Corporate Governance Terhadap Kinerja Keuangan. Al-Kharaj Jurnal Ekonomi Keuangan & Bisnis Syariah, 6(1), 206–218. https://doi.org/10.47467/alkharaj.v6i1.2743
Risdianto, J. S. (2021). Legal Protection for Customers Victims of Savings Account Break-Ins Crime. International Journal of Social Science and Human Research, 04(10). https://doi.org/10.47191/ijsshr/v4-i10-34
Rusydiana, A. S. (2016). Analisis Problem Pengembangan Perbankan Syariah Di Indonesia: Aplikasi Metode Analytic Network Process. Esensi Jurnal Bisnis Dan Manajemen, 6(2). https://doi.org/10.15408/ess.v6i2.3573
Saidat, Z., Silva, M., & Seaman, C. (2019). The Relationship Between Corporate Governance and Financial Performance. Journal of Family Business Management, 9(1), 54–78. https://doi.org/10.1108/jfbm-11-2017-0036
Shariff, M. F., Karim, A., & Rahman, M. (2022). Resource Dependence and Corporate Board Effectiveness in ASEAN Banking. Asian Journal of Accounting Research, 7(3), 241–258. https://doi.org/10.1108/AJAR-10-2021-0150
Siregar, A. I., Johannes, J., Yacob, S., & Octavia, A. (2024). Electronic Word of Mouth and Its Effects on Consumer Decision-Making: Insights From an Extensive Literature Review. Ekonomis Journal of Economics and Business, 8(2), 1561. https://doi.org/10.33087/ekonomis.v8i2.1994
Suherman, S., Mahfirah, T. F., Usman, B., Kurniawati, H., & Kurnianti, D. (2023). CEO Characteristics and Firm Performance: Evidence From a Southeast Asian Country. Corporate Governance, 23(7), 1526–1563. https://doi.org/10.1108/cg-05-2022-0205
Waheed, A., & Malik, Q. A. (2019). Board Characteristics, Ownership Concentration and Firms’ Performance. South Asian Journal of Business Studies, 8(2), 146–165. https://doi.org/10.1108/sajbs-03-2018-0031
Wibisono, W. (2023). Preliminary Study on Corruption Case in the Indonesian Banking Sector: Overview of the Fraudster, Loss, and Fraud Modes. Asia Pacific Fraud Journal, 8(1), 31. https://doi.org/10.21532/apfjournal.v8i1.263
Widarwati, N., Sari, D., & Ramli, A. (2022). Corporate Governance and Financial Performance: Empirical Evidence from Indonesian Banks. Cogent Business & Management, 9(1), 2089751. https://doi.org/10.1080/23311975.2022.2089751
Widyani, I. P., & Hadiwidjaja, R. D. (2020). The Good Corporate Governance Mechanism Effects Toward Bank Pembangunan Daerah Performance in Indonesia With Ownership Structure as Moderation. https://doi.org/10.2991/aebmr.k.200522.057
Wijethilake, C., & Ekanayake, A. (2019). CEO Duality and Firm Performance: The Moderating Roles of CEO Informal Power and Board Involvements. Social Responsibility Journal, 16(8), 1453–1474. https://doi.org/10.1108/srj-12-2018-0321
YULFASNI, W. F. (2023). The Effectiveness of Bank Supervision Legal Concepts in Protecting Customer Interests in Indonesia. Russian Law Journal, 11(5s). https://doi.org/10.52783/rlj.v11i5s.966
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2026-04-01
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Bahari, S., Suriadi, Alzarliani, W. O., & Sumail, L. O. (2026). Revisiting Corporate Governance in Emerging Economies: The Role of Board Size and Independence in Indonesian Banks. Ilomata International Journal of Tax and Accounting, 7(2), 1–8. https://doi.org/10.61194/ijtc.v7i2.2145
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Copyright (c) 2026 Samsul Bahari, Suriadi, Wa Ode Alzarliani, La Ode Sumail
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This work is licensed under a Creative Commons Attribution 4.0 International License.
