Yuniarti, Sari, Chandrarin, Grahita ORCID: https://orcid.org/0000-0002-7024-1315 and Subiyantoro, Edi (2018) The Direct And Indirect Impacts Of Good Corporate Governance On Banking Stability: An Empirical Study In Indonesia. International Journal of Business and Society, 19 (S4). pp. 517-534. ISSN ISSN: 15116670

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Abstract

This study describes the dimensions of good corporate governance (GCG), bank risk, market discipline, banking stability and analyzes the influence of GCG on banking stability, both directly and indirectly (bank risk and market discipline as an intervening variable). Data are analyzed by Structural Equation Modeling. We describe the contribution of each variable and examine the causal relationship of GCG as an exogenous variable on banking stability as an endogenous variable,through bank risk and market discipline as intervening variables. Our results show that, first, GCG is determined by managerial ownership and independent board of directors; Market discipline is determined by the growth of deposits and the ratio of margin levels; bank risk is determined by the Non-performing Loans (NPL) and Loan Loss Reserve (LLR); Banking stability is determined by the Z-score, Capital Adequacy Ratio (CAR), and Net Interest Margin (NIM). Second, GCG influences banking stability both directly and indirectly through banking risks. Third, GCG directly influences banking stability but does not directly affect market discipline.

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