THE INFLUENCE OF BOARD OF COMMISSIONERS STRUCTURE ON CORPORATE SUSTAINABILITY CONCERNS AND FINANCIAL PERFORMANCE IN INDONESIAN COMMERCIAL BANKS
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Date
2019
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Jour of Adv Research in Dynamical & Control Systems, Vol. 11, 03-Special Issue
Abstract
This study examines mandatory internal corporate governance mechanism, particularly the Board of Commissioners (BoCs) structure in Indonesian commercial banks influence sustainabilityconcerns and financial performance. This study encapsulates three areas of research by examining the shareholder and stakeholder perspectives into a single empirical study in a developing country context with a two-tier corporate governance system. This study utilises a unbalanced data panel of 252 firm-year observations from a population of 39 Indonesian listed commercial banking firms during the period of 2007-2014, and draws both shareholder and stakeholders perspectives in two different research models. It does so by utilising on a decision-making model framework, the Throughput Model, which allows identification of the impact of various steps in the decision-making process.This study provides evidence that the BoCs structure in the Indonesian banking acts as an internal governance mechanism in encouraging company to be more concerned with corporate sustainability actions, i.e., economic, environmental, and social activities. This study also finds according the shareholder perspective, theBoCs structure has positive influence on sustainability concerns that may dampen the firm's market value. In contrast,from the stake holder perspective, the BoCs structure has positive influence on corporate sustainability concernsthatwill increase firm’s market value performance via its financial health performance.
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Keywords
Board of Commissioners Structure, Corporate Sustainability, Corporate Responsibility Disclosure, Company Financial Performance, the throughput Model