THE IMPACT OF OWNERSHIP STRUCTURE ON THE FINANCIAL PERFORMANCE AND RISK TAKING OF BANKS (Some Evidence from Indonesia)
Dewi Asri Rosalina, Nugraha

Universitas Pendidikan Indonesia

Abstract

This study aims to examine the effect of ownership structure on financial performance and risk taking of banks in Indonesia. The structure of bank ownership is divided into three categories, namely state-owned banks, foreign-owned banks, and private-owned domestic banks. Bank performance is measured by Return On Assets (ROA) and Return on Equity (ROE). Bank risk taking is measured by the Z-Score value. This research uses five control variables, namely loan to deposit ratio, equity to total asset ratio, bank size, inflation, and GDP. The study was conducted on 84 commercial banks in Indonesia. Data analysis techniques used are descriptive statistics, panel regression testing with common effect modeling, classical assumption test and hypothesis test
The results show that: first, government ownership negatively affects the profitability of banks and negatively affects bank risk-taking. Second, foreign ownership positively affects bank profitability and also positively affects risk-taking. The results also found that government banks and foreign banks have a better level of profitability compared to domestic private banks.

Keywords: ownership structure, financial performance, risk taking, banking, Indonesia

Topic: Financial Management and Accounting