FORMOSA NEWS – Managerial ownership and corporate governance play a significant role in shaping the financial performance of Indonesian banks, according to a study by Bambang Saputra, Umi Widyastuti, , and Muhammad Yusuf, from Universitas Negeri Jakarta (UNJ). Published in 2026 in the International Journal of Finance and Business Management (IJFBM), the research analyzed banking companies listed on the Indonesia Stock Exchange (IDX) between 2019 and 2024, providing new evidence on how ownership structures and governance mechanisms affect profitability and operational efficiency in the banking sector.
The findings are particularly relevant as Indonesia's banking industry remains the backbone of the country's financial system. Banks account for more than 70 percent of the nation's financial sector assets, making their stability and profitability critical to economic growth, investor confidence, and financial resilience. While macroeconomic conditions certainly influence bank performance, the study highlights that internal governance practices are equally important in determining how well banks utilize their resources and generate sustainable profits.
Why Bank Governance Matters
Corporate governance has become a major concern for regulators, investors, and financial institutions worldwide. In Indonesia, the Financial Services Authority (OJK) requires commercial banks to implement Good Corporate Governance (GCG) principles to strengthen accountability, transparency, and risk management.
Despite these regulations, governance quality varies considerably among listed banks. The research by the Universitas Negeri Jakarta team demonstrates that differences in managerial ownership and governance structures help explain why some banks perform better than others, even when operating under similar market conditions.
How the Research Was Conducted
The researchers examined 16 banking companies listed on the Indonesia Stock Exchange over a six-year period from 2019 to 2024, producing 96 firm-year observations.
Using audited annual financial statements and corporate reports published by the Indonesia Stock Exchange and the banks themselves, the researchers compared two widely used indicators of bank performance:
- Return on Assets (ROA), which measures profitability relative to total assets.
- Net Interest Margin (NIM), which measures a bank's ability to generate net interest income from productive assets.
The study also evaluated several governance indicators, including managerial ownership, the proportion of independent commissioners, audit committee size, and institutional ownership.
Key Findings
The study identified several important relationships between ownership structure, governance, and bank performance.
Managerial ownership improves bank performance
The strongest finding is that managerial ownership has a positive and statistically significant effect on both ROA and NIM.
When company executives own shares in the banks they manage, their interests become more closely aligned with those of shareholders. As a result, managers tend to make more efficient decisions that improve profitability and strengthen operational performance.
Independent commissioners strengthen profitability
The proportion of independent commissioners also showed a positive and significant relationship with Return on Assets.
Independent oversight appears to improve asset management by providing more objective supervision and reducing conflicts of interest within corporate decision-making.
Larger audit committees do not necessarily improve results
One of the study's most notable findings is that larger audit committees were associated with lower ROA and lower NIM.
Rather than improving governance, expanding committee membership may create coordination challenges, increase administrative costs, and slow decision-making. According to the researchers, governance quality depends more on the effectiveness of committee members than on the number of people serving on the committee.
Institutional ownership shows mixed effects
Institutional ownership was found to have a negative and significant effect on ROA, while showing no statistically significant influence on NIM.
The researchers suggest that concentrated institutional ownership may sometimes reduce governance effectiveness if dominant shareholders gain excessive influence over corporate decisions.
Implications for Indonesia's Banking Industry
The findings offer practical insights for banking executives, investors, and policymakers.
For banks, encouraging appropriate managerial share ownership may strengthen long-term performance by aligning management incentives with shareholder interests.
For regulators, the results suggest that governance reforms should prioritize the quality and effectiveness of oversight bodies rather than simply increasing the number of governance structures or committee members.
Investors may also use these findings when evaluating banks, as ownership structure and governance mechanisms can influence profitability beyond traditional financial indicators.
The study further recommends maintaining balanced governance arrangements that prevent excessive concentration of institutional ownership while ensuring effective oversight from independent commissioners.
Perspective from the Researchers
According to Bambang Saputra and colleagues from Universitas Negeri Jakarta, managerial ownership serves as an important mechanism for aligning the interests of managers and shareholders, encouraging more efficient asset utilization and stronger financial performance. The researchers also emphasize that effective corporate governance depends on the quality of oversight rather than the size of governance bodies, particularly audit committees.
Opportunities for Future Research
The authors note that future studies could broaden the analysis by including additional financial indicators such as the Non-Performing Loan (NPL) ratio, Capital Adequacy Ratio (CAR), Loan-to-Deposit Ratio (LDR), and macroeconomic variables such as inflation and interest rates.
Expanding research beyond publicly listed banks to include insurance companies and other financial institutions could also provide a more comprehensive understanding of governance practices across Indonesia's financial sector.
Author Profile
Bambang Saputra is a researcher in the Faculty of Economics and Business, Universitas Negeri Jakarta. This study was supervised by Umi Widyastuti, an expert in finance and corporate governance, and Muhammad Yusuf, whose expertise focuses on accounting, business management, and financial performance analysis. Together, the researchers specialize in corporate governance, financial management, and banking performance.
Source
Saputra, B., Widyastuti, U., & Yusuf, M. (2026). The Effect of Managerial Ownership and Good Corporate Governance on Bank Performance in Banking Companies Listed on the Indonesia Stock Exchange. International Journal of Finance and Business Management (IJFBM), Vol. 4, No. 4, pp. 411–426.
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