What characteristics of board of directors affect Indonesian bank performance?

Abstract

<jats:p>The sustainability of a firm is determined by the effectiveness of its board of directors. Hambrick and Mason’s Upper Echelon theory states that management characteristics could predict organizational outcomes. This study examines the effects of the characteristics of board of directors on the performance of publicly-traded banks in Indonesia. The measures of board characteristics are educational attainment, presence of independent directors, employment of foreign directors, compensation of directors, and age of directors. Our 58 firm-year observations from 2014-2015 were analyzed using fixed effects model. We find evidence that bank profitability is (i) positively affected by doctorate education of board members and (ii) negatively affected by remuneration of top executives. Based on our findings, we would suggest corporations to: comply with governmental regulations regarding the employment of independent directors, align the interest between principals and agents to eliminate agency problem, and accommodate board members with scholarships designated for academic development.</jats:p>

The Presence and Characteristics of Female Directors: How They Influence Firm Performance

“…ROA is not affected by the foreign nationality of female directors. Our finding is in line with Wicaksana and Astawa (2011); Pangestu and Dharmastuti (2018). This insignificant result may be caused by the motivation of the foreign directors' presence on the board.…”

“…Age is shown not to influence ROA. This is in line with Tanikawa et al (2016) and Pangestu and Dharmastuti (2018). There have been contrasting findings regarding the influence of age on firm performance.…”