Value Creation in the Listed Banks: Do Governance Matter?
We assess the relationship between bank governance practice (GCG), efficiency, capital and risk on value creation in a sample of Indonesia commercial banks using the balance panel methodology. Our results suggest that GCG has a positive impact on value creation and performance. We also find that higher interest margin eventually becomes more profitable, better capitalized and that higher capital levels tend to have a neutral or negative effect on value creation. Efficiency levels are positive to value creation. These results are generally confirmed by a series of robustness tests. The findings convey potentially important implications for bank prudential supervision and underline the importance of attaining better governance to support sustainability and financial stability objectives.
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