The role of board expertise in enhancing bank performance
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Fifyanty Fifyanty(1*)
Department of Management, Faculty of Economics and Business, University International Batam
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Hesniati Hesniati(2)
Department of Management, Faculty of Economics and Business, University International Batam
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Serly Serly(3)
Department of Accounting, Faculty of Economics and Business, University International Batam
(*) Corresponding Author
Keywords:
Board Expertise, Bank Performance, Agency Theory
Abstract
This study examines the relationship between board expertise and bank performance through the lens of agency theory, which emphasizes effective corporate governance in aligning managerial actions with shareholder interests. Board expertise is expected to enhance monitoring effectiveness and provide strategic guidance, thereby contributing to improved performance. Using a quantitative approach, this study analyzes secondary data from banks listed with the Financial Services Authority (OJK) over the 2018–2022 period. Bank performance is measured using Return on Assets (ROA) and Return on Equity (ROE), while board expertise is assessed based on directors’ legal, financial, and industry-related backgrounds. The findings indicate that banks with higher levels of board expertise tend to exhibit better performance. This suggests that directors’ relevant expertise may contribute to more effective monitoring, better-informed decision-making, and firm value creation. This study contributes to the corporate governance literature by highlighting the relevance of board expertise to bank performance. It also offers practical implications for regulators and banking institutions regarding the importance of appointing directors with appropriate professional competencies.
Keywords: Board Expertise; Bank Performance; Agency Theory
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References
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Victor Olufemi, O., Olatunde Matthew, A., & Motunrayo, A. Y. (2023). An Assessment of Board Attributes and Financial Performance of Listed Deposit Money Banks in Nigeria. International Journal of Economics, Business and Management Research, 07(10), 175–195. https://doi.org/10.51505/ijebmr.2023.71011
Yulfiswandi, & Sadrakh, H.R. (2024). Analisis risiko likuiditas pada bank umum syariah di Indonesia. Jurnal Ilmiah Ekonomi Islam, 17(2), 17(2), 599–615.
Alzayed, N., Batiz-Lazo, B., & Eskandari, R. (2024). Does board diversity mitigate risk? The effect of homophily and social ties on risk-taking in financial institutions. Research in International Business and Finance, 70. https://doi.org/10.1016/j.ribaf.2024.102306
Andrade, C. (2021). The Inconvenient Truth About Convenience and Purposive Samples. Indian Journal of Psychological Medicine, 43(1), 86–88. https://doi.org/10.1177/0253717620977000
Bank Indonesia. (2024, April 24). BI-Rate naik 25 bps menjadi 6,25%: Memperkuat stabilitas dan menjaga pertumbuhan dari dampak rambatan global. Bank Indonesia.
Berhe, A. G. (2023). Board structure and bank performance: Evidence from Ethiopia. Cogent Business and Management, 10(1).
https://doi.org/10.1080/23311975.2022.2163559
Boadi, L. A., Isshaq, Z., & Adu-asare idun, A. (2023). Board expertise and the relationship between bank risk governance and performance. Cogent Business and Management, 10(3). https://doi.org/10.1080/23311975.2023.2283233
Ferdy Putra. (2025). Board expertise and Islamic bank performance in a two-tier system. Journal of Islamic Accounting and Finance Research, 7(2), 211–230. https://doi.org/10.21580/jiafr.2025.7.2.28594
Firdaus, F., Napitupulu, N. A., Farhan, M., Mualim, W. M. A., & Romarina, A. (2026). Monetary Policy Transmission and Economic Growth in Indonesia: An Error Correction Model Analysis. In AKADEMIK: Jurnal Mahasiswa Ekonomi & Bisnis (Vol. 6, Number 1).
Gilani, U., Keasey, K., & Vallascas, F. (2021). Board financial expertise and the capital decisions of US banks. Journal of Corporate Finance, 71, 102091, 71. https://doi.org/10.1016/j.jcorpfin.2021.102091
Hendrastuti, R., & Harahap, R. F. (2023). Agency theory: Review of the theory and current research. Jurnal Akuntansi Aktual, 10(1), 85.
https://doi.org/10.17977/um004v10i12023p085
Indonesia Statistics. (1998). Statistical Year Book of Indonesia. Badan Pusat Statistik.
Indonesia Statistics. (2024). Perkembangan Indeks Harga Konsumen Februari 2024. Badan Pusat Statistik.
Isa, M., & Lee, S. P. (2020). Does the Shariah committee influence risk-taking and performance of Islamic banks in Malaysia? Journal of Islamic Accounting and Business Research, 11(9), 1739–1755. https://doi.org/10.1108/JIABR-12-2018-0207
Jalagat, R., Doblas, M., Alghizzawi, M. A., Sayari, K., Salindo, R. Von, Ekundayo, G. U., & Rani, M. B. (2026). Board Governance and Bank Performance: Evidence From Southeast Asian Banks Using Dynamic Panel Analysis. SAGE Open, 16(3). https://doi.org/10.1177/21582440261491498
Jallali, S., & Zoghlami, F. (2022). Does risk governance mediate the impact of governance and risk management on banks’ performance? Evidence from a selected sample of Islamic banks. Journal of Financial Regulation and Compliance, 30(4), 439–464. https://doi.org/10.1108/JFRC-04-2021-0037
Kovács, T., Ko, A., & Asemi, A. (2021). Exploration of the investment patterns of potential retail banking customers using two-stage cluster analysis. Journal of Big Data, 8(1). https://doi.org/10.1186/s40537-021-00529-4
Liu, G., & Sun, J. (2021). Independent directors’ legal expertise, bank risk-taking and performance. Journal of Contemporary Accounting and Economics, 17(1), 100240, 17(1). https://doi.org/10.1016/j.jcae.2020.100240
Madyan, M., Setyowati, R. G., & Setiawan, W. R. (2021). Education Level of The Board of Directors and Financial Performance of Go Public Banks at The Indonesia Stock Exchange. Jurnal Manajemen Teori Dan Terapan| Journal of Theory and Applied Management, 14(3), 264. https://doi.org/10.20473/jmtt.v14i3.31210
Magoma, A., Ernest, E., & Kasheshi, E. (2024). Board characteristics and financial performance of banks listed on frontier stock markets in East Africa. A panel analysis. Cogent Business and Management, 11(1).
https://doi.org/10.1080/23311975.2024.2400615
Majumder, Md. T. H., Ruma, I. J., & Akter, A. (2023). Does intellectual capital affect bank performance? Evidence from Bangladesh. LBS Journal of Management & Research, 21(2), 171–185. https://doi.org/10.1108/lbsjmr-05-
2022-0016
Mohammad, R., Nour, A. I., & Al-Atoot, S. M. (2024). Risk and reward: unraveling the link between credit risk, governance and financial performance in banking industry. Journal of Islamic Marketing. https://doi.org/10.1108/JIMA-11-2023-0378
Nasir, A., Wan Ismail, W. A., Kamarudin, K. A., Zarefar, A., & Armadani. (2024). Examining the impact of corporate governance and family ownership on corporate performance: evidence from the Indonesian Stock Exchange. In Cogent Business and Management (Vol. 11, Number 1). Cogent OA. https://doi.org/10.1080/23311975.2024.2339546
Putri, R., M., Sihombing, I., Natigor, N., F., Muda, I., & Putri, M. (2025). Theoretical Foundations of Corporate Governance and Board of Directors: A Systematic Literature Review. Indonesia Economic Journal, 1(2), 2025. https://doi.org/10.63822/4e5vvs83
Ragazou, K., Passas, I., Garefalakis, A., Kourgiantakis, M., & Xanthos, G. (2022). Youth’s Entrepreneurial Intention: A Multinomial Logistic Regression Analysis of the Factors Influencing Greek HEI Students in Time of Crisis. Sustainability (Switzerland), 14(20). https://doi.org/10.3390/su142013164
Rumianti, C., Chery T, Y., Landa, A. N., Fer-Nandes, C., Anas, M. I., & Linthin, O. N. (n.d.). The Consequences of Interest Rate Risk and Credit Risk on Profitability (Empirical Study on Banking Companies Listed on the Indonesia Stock Exchange). https://doi.org/10.38035/dijefa.v5i4
Setiawati, L., & Haryati, S. (2024). Pengaruh Kenaikan Tingkat Suku Bunga Terhadap Laba Pada Bank Umum (Studi Kasus Bank BCA,Mandiri, BNI,BRI). Innovative: Journal Of Social Science Research, 4(4), 9179–-9190.
Usman, B., Lestari, H. S., Syofyan, S., & Esya, L. (2024). Exploring the relationship between dividend policy, the COVID-19 crisis, and stock market reaction: empirical insights from Indonesian real estate and property firms.
Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2302204
Victor Olufemi, O., Olatunde Matthew, A., & Motunrayo, A. Y. (2023). An Assessment of Board Attributes and Financial Performance of Listed Deposit Money Banks in Nigeria. International Journal of Economics, Business and Management Research, 07(10), 175–195. https://doi.org/10.51505/ijebmr.2023.71011
Yulfiswandi, & Sadrakh, H.R. (2024). Analisis risiko likuiditas pada bank umum syariah di Indonesia. Jurnal Ilmiah Ekonomi Islam, 17(2), 17(2), 599–615.
Published
2026-11-12
How to Cite
Fifyanty, F., Hesniati, H., & Serly, S. (2026). The role of board expertise in enhancing bank performance. Journal of Management : Small and Medium Enterprises (SMEs), 19(3), 2587-2599. https://doi.org/10.35508/jom.v19i3.26940
Section
Articles
