International Business Management

Year: 2017
Volume: 11
Issue: 4
Page No. 831 - 840

Corporate Governance of Indonesian Regional Development Banks: Analysis on PT Bank DKI

Authors : Ika Sri Hartantiningsih and Umanto

Abstract: It is well established that Corporate Governance (CG) in banking industry presents unique and strenuous features due to the predominant effect the industry has towards a country’s economy. In Indonesia, the banking sector is varied by regional development banks owned by each local government. Having the same business model and scale, the Regional Development Banks in Indonesia share distinct ownership structure and strategic role of these entities placed them in peculiar position where CG is concerned. These banks subservient to the local government’s political and economic agenda. Using Bank DKI as a case in point, this study is aimed at analyzing discriminant CG structures and their impact towards the practice of Bank's governance. Bank DKI has won Annual Report Award for four years in a row. This implies bank’s best practice as acknowledged by authorities in CG. Data are collected through in-depth interviews and triangulated for validation. Consistent with prevailing CG theory, agency problem persists in Bank DKI, resulted in dynamic interactions detrimental to Bank DKI’s operations. The three determinant structures of Bank DKI’s CG are the Board of Commissioner and Board of Directors; the committees and the shareholders. The third determinant is a reflection of the bank’s owner. In order to fulfill mandate from bank’s owner, Bank DKI often has to overlook CG practice, resulted in weak monitoring process, ineffective meetings and recruitment issues. Further discussions suggest that these lapses reflect the quality of local government’s governance.

How to cite this article:

Ika Sri Hartantiningsih and Umanto , 2017. Corporate Governance of Indonesian Regional Development Banks: Analysis on PT Bank DKI. International Business Management, 11: 831-840.

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