Sutarti, Akhmad Syakhroza, Vera Diyanty and Setio Anggoro Dewo
This study aims to investigate the direct effect of directors’ age diversity, and its interaction effect with the effectiveness of TMT meetings on bank performance.
Abstract
Purpose
This study aims to investigate the direct effect of directors’ age diversity, and its interaction effect with the effectiveness of TMT meetings on bank performance.
Design/methodology/approach
Quantitative data were extracted from the bank’s annual reports for the six years 2011–2016. Age diversity was calculated using the coefficient of variation, and the bank’s performance was measured as return on assets and return on equity. The frequency of directors’ meetings was used as a proxy for the effectiveness of TMT meetings.
Findings
Based on the hierarchical regression analysis, the results do not support the hypothesis that there is a negative influence between age diversity on performance. However, the results support the hypothesis that age diversity has a positive effect on performance because of the high effectiveness of TMT meetings.
Research limitations/implications
The limitations of the study include the use of only samples of the banks registered with Bank Indonesia. The subsequent research could use cross-country bank samples. In addition, the research uses age-related diversity variables only. Therefore, further research could consider other types of diversity such as education, functional or tenure. Furthermore, this study is limited to the effectiveness of the director (TMT) meetings as the only moderating variable. Further research could improve on this by including other moderating variables.
Practical implications
The findings of this study indicate that the existence of age diversity in TMT will aid bank governance if it is accompanied by effective meetings among groups of directors of varying ages. This age composition of directors will make meetings more effective as rich information for strategic decisions will be generated from different points of view because of the wide spectrum of age categories, and hence, there will be a positive impact on bank performance.
Social implications
This study indicates that effective meetings of TMT groups of different ages will minimize the rise of “self-esteem”. Therefore, they will benefit the creation of a better quality relationship among TMT individuals. Accordingly, TMT within a company will have more opportunities to discuss in providing bright ideas for the company on how to innovate and create a new strategy to improve its performance.
Originality/value
This study, being the first to explore the effectiveness of TMT meetings to bank performance in the contexts of directors’ age diversity, contributes to the literature in this area, and especially to the body of knowledge about companies implementing a two-tier governance system.
Details
Keywords
Etikah Karyani, Setio Anggoro Dewo, Wimboh Santoso and Budi Frensidy
The purpose of this paper is to highlight the disparity between the disclosures of risk governance (RGOV) categories, namely, structures both at the board and management level…
Abstract
Purpose
The purpose of this paper is to highlight the disparity between the disclosures of risk governance (RGOV) categories, namely, structures both at the board and management level, and RGOV practices among five of the Association of Southeast Asian Nations (ASEAN-5) countries. Furthermore, this paper investigates the effects of RGOV and its categories on return on assets (ROA).
Design/methodology/approach
Using 285 ASEAN-5 bank-year observations comprising hand-collected data for the period of 2010–2014, RGOV indexes are developed on the basis of 12 of the 13 governance guidelines published by the Basel Committee.
Findings
Although some banks are found to be early adopters, there is an increasing trend of disclosure for all of the investigated categories. Furthermore, there are no effects of the overall RGOV, board-level RGOV structure and risk management practice on ROA. However, the effect of the management-level RGOV structure on ROA is negative and significant.
Research limitations/implications
Measurements of RGOV indexes are based solely on the examination of criteria that have not been previously tested. Other limitations are related to the information completeness, subjectivity and interpretation.
Practical implications
Management-level RGOV tends to decrease profitability because of the additional costs related to its implementation. Financial regulators may find this result useful as feedback to evaluate the effectiveness of regulation and possible future improvements.
Originality/value
This paper’s uniqueness lies in constructing new RGOV indexes on the basis of the latest bank governance guidelines from the Basel Committee issued on July 9, 2015.
Details
Keywords
Idrianita Anis, Lindawati Gani, Hasan Fauzi, Ancella Anitawati Hermawan and Desi Adhariani
This study aims to propose a solution to accelerate financing support low carbon (circular economy) transition. The authors developed a sustainability governance (SGOV) model and…
Abstract
Purpose
This study aims to propose a solution to accelerate financing support low carbon (circular economy) transition. The authors developed a sustainability governance (SGOV) model and a sustainability governance (SGOV) index as a proxy for the diffusion of sustainability innovation. This study investigates the effect of SGOV practices on profitability with the mediating role of operational efficiency.
Design/methodology/approach
The SGOV index consists of 32 and 122 sub-items, constructed using content analysis of annual and sustainability reports published by banks listed on the Indonesia Stock Exchange (IDX) from 2010 to 2020 (404 bank-year observations).
Findings
Banks are at a moderate level of sustainability innovation. They are prioritizing the balance aspects of financial, social and environmental. SGOV practice negatively affects profitability. However, operational efficiency plays a positive mediating role that is robust.
Research limitations/implications
The measurement of the SGOV index uses criteria that have not been tested in previous studies. There is the potential subjectivity in interpreting qualitative data, although this has been minimized by cross-checking the analysis of five raters.
Practical implications
This study gives feedback for the Indonesia sustainable finance (SF) journey phase I to proceed into SF journey phase II.
Social implications
The SGOV model can be applied in other industry sectors to know the readiness for entering low carbon (circular economy) transition.
Originality/value
The uniqueness of the scoring technique assuming a step-by-step innovation model to sustainable finance.