Antecedentes Teóricos

As mentioned in the methodology chapter, model (3) will investigate the association between both corporate governance and risk management with bank performance measured by ROE and ROA. This section discusses the results of the OLS test for model (3). There are six tables from 5-20 to 5-25 showing this association as follows:

As indicated in table 5-20 which shows the relationship between corporate governance and risk management and ROE, the adjusted R squared is 0.2265 at 1% significance level. It was noted that the association between the ROE and non-executive board member, CEO turnover, non-performing loan, and credit risk are negative and significant at 1% significance level. In addition, capital risk is negatively and significantly associated with ROE at 5% significant level. Moreover, role duality and credit and investment committee are associated with ROE significantly with negative direction, at 10% significant level. There is no significant association between ROE and the following independent variables; capital ratio, board size, gender diversity, audit committee, risk committee, capital adequacy ratio, loan to deposit ratio, and liquidity risk.

Interestingly, the four control variables; bank type, bank size, government ownership, and financial crisis were noted significant, with ROE at 1% significance level.

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Table 5-20 Model (3) OLS Regression Results

Corporate Governance and Risk Management with ROE All Banks data

ROE Coef. Std. Err. T P>t [95%

Conf. Interval] Board size -0.002 0.002737 -0.73 0.466 -0.00737 0.003377 Non-executive board member -0.12042 0.040937 -2.94 0.003 -0.20077 -0.04008 Gender diversity 0.007357 0.016871 0.44 0.663 -0.02575 0.040469 CEO turnover -0.07343 0.018099 -4.06 0.000 -0.10896 -0.03791 Role duality -0.04887 0.026309 -1.86 0.064 -0.10051 0.002763 Audit committee -0.00653 0.015668 -0.42 0.677 -0.03728 0.024223 Credit and investment

committee -0.01878 0.010854 -1.73 0.084 -0.04008 0.002521 Capital ratio 0.073185 0.049264 1.49 0.138 -0.0235 0.169873 Non-performing loan -0.10646 0.040806 -2.61 0.009 -0.18655 -0.02637 Capital adequacy ration -0.00225 0.051147 -0.04 0.965 -0.10264 0.098132 Liquidity risk 0.024802 0.0257 0.97 0.335 -0.02564 0.075243 Capital risk -0.08005 0.037357 -2.14 0.032 -0.15337 -0.00674 Credit risk -0.60674 0.166433 -3.65 0.000 -0.93339 -0.28008 Loan to deposit ratio 0.008226 0.005598 1.47 0.142 -0.00276 0.019213 Risk committee -0.00484 0.014093 -0.34 0.731 -0.0325 0.022817 Bank type -0.0334 0.012091 -2.76 0.006 -0.05713 -0.00967 Financial crisis 0.078491 0.010169 7.72 0.000 0.058534 0.098449 Government ownership -0.04264 0.01366 -3.12 0.002 -0.06945 -0.01583 Bank size 0.018815 0.003154 5.96 0.000 0.012624 0.025005 _cons 0.08144 0.054571 1.49 0.136 -0.02566 0.188545 Prob. >F 0.000 Adjusted R- squared 0.2265

Regarding table 5-21 and table 5-22 it was noted that the R squared is 31.49%and 24.77 % respectively. As shown in the tables, the non-executive board member, financial crisis, and bank size are significantly affecting the ROE in Islamic banks and conventional banks, the positive direction of association with bank size means that the larger bank size the higher bank performance. Interestingly in this model, the role duality, gender diversity, audit committee, LDR, NPL, credit risk, capital risk and liquidity risk are insignificantly associated

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with ROE in both type of banks; Islamic banks and conventional banks. In conventional banks, the board size, CEO turnover, risk committee, and government ownership are significantly associated with ROE and vice versa with Islamic banks. In Islamic banks, it was noted that the credit and investment committee, capital ratio, and capital adequacy ratio are significantly associated with ROE but are not significant in Conventional banks.

Table 5-21 Model (3) OLS Regression Results

Corporate Governance and Risk Management with ROE Islamic Banks

ROE Coef. Std. Err. T P>t [95%

Conf. Interval] Board size 0.008777 0.005756 1.52 0.129 -0.00256 0.020112 Non-executive board member -0.64342 0.13752 -4.68 0.000 -0.91421 -0.37263 Gender diversity 0.037081 0.038253 0.97 0.333 -0.03824 0.112405 CEO turnover -0.02367 0.044267 -0.53 0.593 -0.11084 0.063498 Role duality -0.0951 0.094909 -1 0.317 -0.28198 0.09179 Audit committee -0.02538 0.034323 -0.74 0.46 -0.09296 0.042208 Credit and investment committee -0.04743 0.020399 -2.32 0.021 -0.08759 -0.00726 Capital ratio 0.395124 0.177705 2.22 0.027 0.045206 0.745041 Loan to deposit ratio 0.059078 0.054301 1.09 0.278 -0.04785 0.166001 Risk committee 0.031945 0.035281 0.91 0.366 -0.03753 0.101417 Non-performing loan -0.20061 0.250754 -0.8 0.424 -0.69437 0.29315 Capital adequacy ration -0.32952 0.170404 -1.93 0.054 -0.66506 0.006026 Credit risk -0.55956 0.431613 -1.3 0.196 -1.40945 0.290325 Capital risk -0.07529 0.097856 -0.77 0.442 -0.26798 0.117395 Liquidity risk 0.289091 0.214067 1.35 0.178 -0.13243 0.710609 Financial crisis 0.091009 0.019649 4.63 0.000 0.052319 0.129699 Government ownership 0.011398 0.033143 0.34 0.731 -0.05386 0.076659 Bank size 0.023107 0.010227 2.26 0.025 0.00297 0.043244 _cons 0.331508 0.154052 2.15 0.032 0.028166 0.634851

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Prob. >F 0.000

Adjusted R- square 0.3149

Table 5-22 Model (3) OLS Regression Results

Corporate Governance and Risk Management with ROE Conventional Banks Data

ROE Coef. Std. Err. T P>t [95%

Conf. Interval] Board size -0.00626 0.001845 -3.39 0.001 -0.00988 -0.00264 Non-executive board member -0.0403 0.020239 -1.99 0.046 -0.07997 -0.00063 Gender diversity 0.009881 0.015804 0.63 0.532 -0.0211 0.040857 CEO turnover -0.08079 0.039511 -2.04 0.041 -0.15823 -0.00335 Role duality 0.023276 0.031987 0.73 0.467 -0.03942 0.085969 Audit committee 0.020412 0.015346 1.33 0.183 -0.00967 0.050489 Credit and investment

committee -0.0052 0.005405 -0.96 0.336 -0.0158 0.00539 Capital ratio 0.02256 0.051781 0.44 0.663 -0.07893 0.124048 Loan to deposit ratio 0.002482 0.005193 0.48 0.633 -0.0077 0.01266 Risk committee -0.03487 0.013201 -2.64 0.008 -0.06075 -0.009 Non-performing loan -0.1148 0.086359 -1.33 0.184 -0.28406 0.054465 Capital adequacy ration 0.048605 0.032074 1.52 0.13 -0.01426 0.111468 Credit risk -0.78324 0.612242 -1.28 0.201 -1.98321 0.41673 Capital risk -0.08551 0.057475 -1.49 0.137 -0.19816 0.027139 Liquidity risk 0.009198 0.0101 0.91 0.362 -0.0106 0.028993 Financial crisis 0.069151 0.017647 3.92 0.000 0.034565 0.103738 Government ownership -0.02499 0.006545 -3.82 0.000 -0.03782 -0.01217 Bank size 0.017832 0.003016 5.91 0.000 0.011921 0.023742 _cons 0.056145 0.031769 1.77 0.077 -0.00612 0.118411 Prob. >F 0.000 Adjusted R- square 0.2477

As indicated in table 5-23 which shows the relationship between corporate governance and risk management with ROA, the adjusted R squared is 15.75% at 1% significance level. It

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was found that the non-executive board member, CEO turnover, capital ratio, audit committee, LDR, credit risk, bank size, government ownership, and financial crisis are significantly associated with ROA. Regarding the role duality, board size, gender diversity, credit and investment committee, risk committee, capital adequacy ratio, non-performing loan, liquidity risk, capital risk, and bank type, all of them are not significantly associated with ROA in this model.

Table 5-23 Model (3) OLS Regression Results Corporate Governance and Risk Management with ROA

All Banks Data

ROA Coef. Std. Err. T P>t [95%

Conf. Interval] Board size 0.0000323 0.001037 0.03 0.975 -0.002 0.002068 Non-executive board member -0.05652 0.013566 -4.17 0.000 -0.08315 -0.0299 Gender diversity 0.007445 0.004764 1.56 0.118 -0.00191 0.016795 CEO turnover -0.02782 0.01035 -2.69 0.007 -0.04814 -0.00751 Role duality 0.010588 0.017877 0.59 0.554 -0.0245 0.045674 Audit committee -0.01331 0.005753 -2.31 0.021 -0.0246 -0.00202 Credit and investment

committee -0.00489 0.003521 -1.39 0.165 -0.0118 0.002023 Capital ratio 0.051087 0.024577 2.08 0.038 0.00285 0.099324 Loan to deposit ratio 0.003491 0.001645 2.12 0.034 0.000263 0.006719 Risk committee 0.002246 0.003827 0.59 0.558 -0.00527 0.009757 Non-performing loan 0.02834 0.030627 0.93 0.355 -0.03177 0.08845 Capital adequacy ration 0.021642 0.016438 1.32 0.188 -0.01062 0.053904 Credit risk -0.13078 0.071376 -1.83 0.067 -0.27087 0.009303 Capital risk -0.02452 0.031667 -0.77 0.439 -0.08667 0.03763 Liquidity risk 0.004854 0.005895 0.82 0.41 -0.00671 0.016423 Bank type -0.00509 0.003976 -1.28 0.201 -0.0129 0.002712 Financial crisis 0.02182 0.003311 6.59 0.000 0.015321 0.028319 Government ownership -0.01486 0.003036 -4.89 0.000 -0.02082 -0.0089 Bank size 0.005163 0.001405 3.68 0.000 0.002406 0.007919 _cons 0.013818 0.018286 0.76 0.45 -0.02207 0.049707 Prob. >F 0.000 Adjusted R- square 0.1575

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Regarding table 5-24 and table 5-25, it was noted that the adjusted R squared is 26.13% and 18.05% respectively. As shown in the tables, the board size, non-executive board member, risk committee, financial crisis, and bank size are significantly associated with ROA in Islamic banks and Conventional banks. It was found that the role duality, gender diversity, credit and investment committee, capital ratio, NPL, LDR, credit risk, capital risk, and liquidity risk are insignificantly associated with ROA in both type of banks; Islamic and Conventional banks. In Conventional banks, the CEO turnover, capital adequacy ratio, and government ownership are significantly associated with ROA and vice versa in Islamic banks. The audit committee in Islamic banks is significantly associated with ROA, and insignificant in Conventional banks.

Table 5-24 Model (3) OLS Regression Results

Corporate Governance and Risk Management with ROA Islamic Banks

ROA Coef. Std. Err. T P>t [95%

Conf. Interval] Board size 0.006251 0.003107 2.01 0.044 0.000162 0.01234 Non-executive board member -0.29608 0.070617 -4.19 0.000 -0.43449 -0.15767 Gender diversity 0.022096 0.031914 0.69 0.489 -0.04045 0.084646 CEO turnover -0.01385 0.018255 -0.76 0.448 -0.04963 0.021929 Role duality 0.023337 0.022358 1.04 0.297 -0.02048 0.067159 Audit committee -0.03625 0.013974 -2.59 0.009 -0.06364 -0.00886 Credit and investment committee -0.00939 0.012098 -0.78 0.438 -0.0331 0.01432 Capital ratio 0.111433 0.08943 1.25 0.213 -0.06385 0.286713 Loan to deposit ratio 0.016246 0.014285 1.14 0.255 -0.01175 0.044243 Risk committee 0.025506 0.015361 1.66 0.097 -0.0046 0.055613 Non-performing loan 0.005795 0.038598 0.15 0.881 -0.06985 0.081445 Capital adequacy ration -0.01397 0.090912 -0.15 0.878 -0.19215 0.16422 Credit risk -0.04024 0.185754 -0.22 0.829 -0.40431 0.323833 Capital risk -0.0423 0.033191 -1.27 0.203 -0.10735 0.022756 Liquidity risk 0.090196 0.065439 1.38 0.168 -0.03806 0.218453 Financial crisis 0.037843 0.009749 3.88 0.000 0.018736 0.05695 Government ownership 0.025025 0.0223 1.12 0.262 -0.01868 0.068733 Bank size 0.007169 0.003822 1.88 0.061 -0.00032 0.014659 _cons 0.129461 0.076707 1.69 0.091 -0.02088 0.279804 Prob. >F 0.000

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Adjusted R- square 0.2613

Table 5-25 Model (3) OLS Regression Results

Corporate Governance and Risk Management with ROA Conventional Banks

ROA Coef. Std. Err. T P>t [95%

Conf. Interval] Board size -0.00187 0.000777 -2.41 0.016 -0.0034 -0.00035 Non-executive board member -0.01789 0.00965 -1.85 0.064 -0.03684 0.00106 Gender diversity 0.004539 0.005241 0.87 0.387 -0.00575 0.014832 CEO turnover -0.02481 0.013142 -1.89 0.06 -0.05062 0.001002 Role duality 0.0059 0.006159 0.96 0.338 -0.0062 0.017995 Audit committee 0.001144 0.00299 0.38 0.702 -0.00473 0.007016 Credit and investment

committee -0.00071 0.003117 -0.23 0.819 -0.00684 0.005407 Capital ratio 0.000526 0.019591 0.03 0.979 -0.03795 0.039 Loan to deposit ratio 0.001428 0.001325 1.08 0.281 -0.00117 0.00403 Risk committee -0.00861 0.003 -2.87 0.004 -0.0145 -0.00271 Non-performing loan 0.005407 0.030415 0.18 0.859 -0.05433 0.06514 Capital adequacy ration 0.027258 0.015629 1.74 0.082 -0.00344 0.057953 Credit risk -0.18294 0.118146 -1.55 0.122 -0.41497 0.049087 Capital risk 0.029036 0.024384 1.19 0.234 -0.01885 0.076925 Liquidity risk 0.004391 0.003827 1.15 0.252 -0.00313 0.011907 Financial crisis 0.014704 0.002603 5.65 0.000 0.009593 0.019816 Government ownership -0.00874 0.002996 -2.92 0.004 -0.01462 -0.00285 Bank size 0.004666 0.001638 2.85 0.005 0.001449 0.007884 _cons -0.0001 0.014058 -0.01 0.994 -0.02771 0.027505 Prob. >F 0.000 Adjusted R- square 0.1805