Ownership structure, board characteristics, and performance of Indonesian Islamic rural banks

Muhamad Umar Mai, Ruhadi Nansuri and Setiawan Setiawan

International Journal of Islamic and Middle Eastern Finance and Management, 2024, vol. 17, issue 2, 292-309

Abstract: Purpose - This study aims to examine the influence of ownership structure and board characteristics on the performance of Indonesian Islamic rural banks (IRB) using the system generalized method of moment model. Design/methodology/approach - This research uses Indonesian IRB unbalanced annual panel data from 2016 to 2022. IRB performance is measured by return on assets (ROA), return on equity (ROE) and nonperforming financing (NPF). The ownership structure is represented by controlling shareholders, ownership of the board of directors (BD) and ownership of the board of commissioners (BC). Meanwhile, board characteristics are represented by the size of the BC, the proportion of female board directors and female president directors. Findings - The results show that the ownership structure and board characteristics play an important role in improving the IRB’s performance. Technically, the results show that the size of the BC and the ownership of the BD increase all IRB performance measures. Female president directors and controlling shareholders improve IRB’s performance as measured by ROA and ROE. Women’s boards of directors improve IRB performance as measured by NPF. Meanwhile, the ownership of the BC does not show its effect on all IRB performance measures. Research limitations/implications - This study fills a literature gap on the influence of ownership structure and board characteristics on IRB Indonesia’s performance. In addition, it adds understanding and insight for Islamic bank regulators, management and IRB depositors in Indonesia. Originality/value - To the best of the authors’ knowledge, this study is one of the first to provide an empirical survey on the influence of controlling shareholders and board characteristics on IRB performance, particularly in Indonesia.

Keywords: Islamic rural banks (IRB); Ownership structure; Board characteristics; IRB Indonesia performance (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:imefmp:imefm-12-2022-0465

DOI: 10.1108/IMEFM-12-2022-0465

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