Ownership Structure and Bank Performance

Oct 13, 2025 by talynt.org 110 views

Introduction

The banking industry plays a vital role in the economic development of a country, and Indonesia is no exception. Commercial banks in Indonesia are subject to various factors that can affect their performance, including ownership structure and credit risk. This study aims to investigate the impact of these two factors on the financial performance of commercial banks in Indonesia.

Background

Ownership structure and credit risk are two critical factors that can influence the performance of commercial banks. Ownership structure refers to the composition of ownership among shareholders, while credit risk refers to the likelihood of borrowers defaulting on their loans. A solid ownership structure can provide expertise and knowledge in risk management, leading to better decision-making and improved financial performance. On the other hand, high credit risk can lead to losses and reduced profitability.

Methodology

This study employed a quantitative approach using secondary data from commercial banks in Indonesia. The data was collected from January 2018 to December 2023, with a total of 72 observations. The analysis method used was multiple linear regression analysis to evaluate the relationship between ownership structure, credit risk, and bank performance.

Results

The results of this study showed that ownership structure had a positive and significant effect on the performance of commercial banks in Indonesia. This means that banks with more solid ownership structures tend to show better performance. A good structure of ownership can include strong institutional ownership, which usually brings with expertise and knowledge in risk management and better decision-making.

Ownership Structure and Bank Performance

The results of this study showed that ownership structure had a positive and significant effect on bank performance. This means that banks with more solid ownership structures tend to show better performance. A good structure of ownership can include strong institutional ownership, which usually brings with expertise and knowledge in risk management and better decision-making.

Credit Risk and Bank Performance

The results of this study showed that credit risk had a negative and significant effect on bank performance. This means that banks that face high credit risk will experience a decline in their financial performance. When credit risk increases, banks must prepare reserves for losses that may occur, which in turn can reduce profitability.

The Joint Effect of Ownership Structure and Credit Risk

The results of this study also showed that the combination of ownership structures and credit risk jointly affects the performance of commercial banks in Indonesia. That is, although the structure of ownership can provide support, if a bank faces a high credit risk, the positive impact of the ownership structure can be insufficient to compensate for the losses caused.

Conclusion

The results of this study imply that bank managers need to pay attention to these two aspects simultaneously. To improve performance, banks should strengthen their ownership structure while minimizing credit risk. This can be done through better risk management policies, more selective customer selection, and improving the quality of credit analysis.

Recommendations

Based on the findings of this study, the following recommendations are made:

Bank managers should prioritize strengthening their ownership structure to improve financial performance.
Banks should implement better risk management policies to minimize credit risk.
Banks should be more selective in customer selection and improve the quality of credit analysis to reduce the likelihood of default.
Regulatory bodies should monitor and regulate the banking industry to ensure that banks operate in a safe and sound manner.

Limitations

This study has several limitations that should be noted. Firstly, the study only focused on commercial banks in Indonesia, and the findings may not be generalizable to other countries or types of banks. Secondly, the study used secondary data, which may not be comprehensive or up-to-date. Finally, the study only examined the relationship between ownership structure, credit risk, and bank performance, and did not explore other potential factors that may influence bank performance.

Future Research Directions

This study provides several avenues for future research. Firstly, researchers can explore the relationship between ownership structure, credit risk, and bank performance in other countries or types of banks. Secondly, researchers can examine the impact of other factors, such as macroeconomic conditions, regulatory environment, and technological advancements, on bank performance. Finally, researchers can investigate the effectiveness of different risk management policies and strategies in minimizing credit risk.

References

[1] Bank Indonesia. (2020). Annual Report 2020.
[2] World Bank. (2020). Indonesia Overview.
[3] International Monetary Fund. (2020). Indonesia: Staff Report for the 2020 Article IV Consultation.

Appendix

Q: What is the main objective of this study?

A: The main objective of this study is to investigate the impact of ownership structure and credit risk on the financial performance of commercial banks in Indonesia.

Q: What is ownership structure, and how does it affect bank performance?

A: Ownership structure refers to the composition of ownership among shareholders. A solid ownership structure can provide expertise and knowledge in risk management, leading to better decision-making and improved financial performance.

Q: What is credit risk, and how does it affect bank performance?

A: Credit risk refers to the likelihood of borrowers defaulting on their loans. High credit risk can lead to losses and reduced profitability.

Q: What are the key findings of this study?

A: The key findings of this study are:

Ownership structure has a positive and significant effect on bank performance.
Credit risk has a negative and significant effect on bank performance.
The combination of ownership structures and credit risk jointly affects the performance of commercial banks in Indonesia.

Q: What are the implications of this study for bank managers?

A: The implications of this study for bank managers are:

Bank managers should prioritize strengthening their ownership structure to improve financial performance.
Banks should implement better risk management policies to minimize credit risk.
Banks should be more selective in customer selection and improve the quality of credit analysis to reduce the likelihood of default.

Q: What are the limitations of this study?

A: The limitations of this study are:

The study only focused on commercial banks in Indonesia, and the findings may not be generalizable to other countries or types of banks.
The study used secondary data, which may not be comprehensive or up-to-date.
The study only examined the relationship between ownership structure, credit risk, and bank performance, and did not explore other potential factors that may influence bank performance.

Q: What are the future research directions based on this study?

A: The future research directions based on this study are:

Researchers can explore the relationship between ownership structure, credit risk, and bank performance in other countries or types of banks.
Researchers can examine the impact of other factors, such as macroeconomic conditions, regulatory environment, and technological advancements, on bank performance.
Researchers can investigate the effectiveness of different risk management policies and strategies in minimizing credit risk.

Q: What are the practical implications of this study for regulatory bodies?

A: The practical implications of this study for regulatory bodies are:

Regulatory bodies should monitor and regulate the banking industry to ensure that banks operate in a safe and sound manner.
Regulatory bodies should implement policies and regulations that promote better risk management practices among banks.
Regulatory bodies should provide guidance and support to banks in implementing effective risk management strategies.

Q: What are the practical implications of this study for investors?

A: The practical implications of this study for investors are:

Investors should consider the ownership structure and credit risk of a bank when making investment decisions.
Investors should look for banks with solid ownership structures and effective risk management practices.
Investors should be aware of the potential risks associated with credit risk and take steps to mitigate them.