The Impact of Ownership Concentration, Commissioners on Bank Risk and Profitability: Evidence from Indonesia

We investigate corporate governance and risk in Indonesian banking. More specifically, we investigate whether ownership concentration and commissioners affect bank risk and profitability. Using a sample of 117 Indonesian banks (for ownership concentration analysis), and 28 public banks (for commissioner analysis), we find that ownership concentration and governance by larger numbers of commissioners improves a bank’s profitability and it’s handling of risk. The impact of commissioners on bank risk and profitability takes non-linear forms. We also show that various types of commissioners have different impacts on bank risk and profitability. Our study highlights the importance of corporate governance in the banking industry. © 2013, Eurasia Business and Economics Society.