Ownership Structure and Financial Performance of Islamic Bank in Indonesia

Transcription

1. International Journal of Islamic Economics & Business Management in Emerging Market (IJIEBMEM) Ownership Structure and Financial Performance of Islamic Bank In Indonesia 1 1, 2 2 Arif Lukman Santoso , Inggita Galuh Santasyacitta Faculty of Economics and Business, Sebelas Maret University, Indonesia Corresponding Author: ariflukmans@staff.uns.ac.id Abstract: This study aims to provide empirical evidence about the influence of ownership structure on the financial performance of sharia banks in Indonesia. Ownership structure in this study consisted of ownership concentration and type of ownership. Ownership concentration is proxied by the most significant number of shareholders and the three largest number of shareholders, while the type of ownership is proxied by government ownership, institutional ownership, family ownership, foreign ownership. Financial performance measured by Return on Assets (ROA) and Return on Equity (ROE). This study uses multiple linear regression analysis. The samples in the study are 60 Firms-Year Sharia Commercial Banks in observation period 2009-2014. The results showed a positive effect of ownership concentration on the bank's financial performance. The results also show that there is a positive influence between institutional ownership and family ownership on bank's financial performance, while government ownership has an adverse effect on bank's financial performance. On the other hand, there is no influence of foreign ownership on the bank's financial performance. Keywords:ownership structure, financial performance, return on asset, return on equity INTRODUCTION The system of capitalism and socialism is the economic systems that are evolving today. The nature of the system since the beginning has been unfair or discriminatory because it tends to side the owners of capital (Farihah, 2014). These economics systems contradicts with Islamic principles. The economy in Islam should be able to provide welfare for the whole community, providing a sense of justice, solidarity and kinship and able to provide the fullest opportunity for every business (Apipudin, 2015). In response, it would require the financial institution that adheres to Islamic economic system that can achieve these goals. One of the financial institutions in question is Islamic banks. The development of an Islamic bank in Indonesia has begun over 25 years ago. The high enthusiasm of the people to use Islamic bank services causes the founding of many more Islamic banks. Even many conventional banks expand their businesses by opening sharia division. Until 2015, there have been 12 Islamic Banks or Bank Umum Syariah (BUS) founded. The flourishing Islamic Banks makes the competition among Islamic Banks inevitable. The positive impact of this, it motivates banks to race to be the best, while the negative impact is that if they lose the competition, it will hamper the development of the banks themselves (Safitri, 2015). Efforts which can be done by Islamic banks to survive in the high competition among others is to improve their financial performance. Wahyudi and Pawesti (2006) explained that the ownership structure could affect the running of the company, which in the end takes effect on the company’s performance. The same thing is stated by Hastuti (2005) that the financial performance can be affected by ownership structure, that is, whether the ownership is concentrated or not. Volume 1, Issue 01 : January – Juny 2020 | E-ISSN: 2721-7485 | P-ISSN: 2721-7493 Page | 47
2. International Journal of Islamic Economics & Business Management in Emerging Market (IJIEBMEM) Issues regarding ownership structure that affect company performance have been widely studied. Zouari and Taktak (2014) researched the effect of ownership concentration on Islamic bank financial performance. The result showed that there was no effect of concentrated ownership on the financial performance of the Islamic banks. Islamic bank performance precisely depends on the type of ownership concentration. Government and family-owned banks showed positive and significant impacts on the performance of the banks for the research model. However, there is a negative relationship between institutional ownership and bank performance as well as foreign ownership. The different result was shown by Zeitun and Tian (2007). They found a positive effect of ownership concentration on corporate performance as measured by ROA and ROE. They also found a negative effect of government ownership on the company’s performance. The result was supported by the statement of Kautsar and Fajar (2012) that corporate performance could be improved by reducing the proportion of government ownership. Arouri et al. (2014), which uses 58 banks in the GCC countries (Gulf Co-Operation Council) during 2010 as a sample in the study, also showed different results. The study found that the structure of institutional ownership has a positive effect on company performance. Different results were indicated by Douma et al. (2006) who studied the effect of foreign ownership on corporate performance in India. The study showed a positive effect of foreign ownership on firm performance. Prabowo and Simpson (2011) find that there was a negative effect on the performance of family ownership of companies in Indonesia. Family ownership is detrimental to the performance of the company when the family is involved in management decisions. The results of previous studies are inconclusive. This research will examine the impact of ownership structure on financial performance. This study will focus on ownership concentration and the type of ownership in the relation of the financial performance of Islamic Banks in Indonesia. The Purposes of this study are to provide empirical evidence of the effect of ownership concentration and the type of ownership on the financial performance of Islamic Banks In Indonesia. LITERATURE REVIEW AND HYPOTHESES FORMULATION Agency Theory This theory holds that an agency relationship arises when there are one or more persons, called the principal, hires someone else, which is referred to as an agent, to perform services and delegate decision-making authority to the agent. Separation of ownership and control in large companies is causing problems in the alignment of interests between shareholders and management, which leads to agency problems (Jensen and Meckling, 1976). Conflicts of interest may affect the future performance of the company (Wiranata and Nugrahanti, 2013). The ownership structure is often regarded as an essential instrument for corporate governance to resolve conflicts of interest between shareholders and managers (Hu and Izumida, 2008). Furthermore, Hu and Izumida (2008) state that the concentration of ownership has the potential to limit the agency problem, and then it can result in improved performance of the company. Islamic Bank According to Undang-Undang No. 21 of 2008 concerning Islamic Banking Article 1, Bank Syariah is a bank running their business based on Sharia principles and based on the type. It consists of Islamic Banks (BUS) and Rural Banks (BPRS). Islamic bank has activities provide services in payment traffic, while the Rural Banks (BPRS) is an Islamic bank whose activities Page | 48 Volume 1, Issue 01 : January – Juny 2020 | E-ISSN: 2721-7485 | P-ISSN: 2721-7493
3. International Journal of Islamic Economics & Business Management in Emerging Market (IJIEBMEM) do not provide services in payment traffic (Act No. 21 of 2008). Under article 2 of Regulation No. 21 In 2008, Islamic banking should be based on Islamic principles, economic democracy, and the principle of prudence. Islamic principles are the principles of Islamic law in banking activities by the fatwa issued by the agency that has the authority in setting the fatwa in the field of Sharia (Undang-Undang No. 21 of 2008). Ownership Structure According to Wu (2003), the ownership structure defined as the ratio of shares owned by different shareholders. The ownership structure falls into two forms, namely concentrated or mixed. The ownership structure is concentrated if several major shareholders own a majority of shares, while the structure of the mixture involves diffusion of ownership among the different shareholders such as governments, businesses, individuals, foreign companies, and others (Parveen and Siddique, 2014). Corporate ownership structure in East Asia, including Indonesia, is found tend to be concentrated (Claessens et al., 2000). Ownership Types Thomsen and Pedersen (2000) divide into four different types of ownership, i.e. the government, institutions, family, and foreigns. a. Government Ownership Government (state) ownership is the shares held directly by the government or by a government agency (Zeitun and Tian, 2007). Winata (2012) explains that the banking company in Indonesia, the government's stake in the bank whose shares are partly or wholly owned by the government, namely the category of state-owned banks (SOEs) and local government-owned banks (BPD). b. Institutional Ownership Ownership by the institution is the proportion of the company's shares owned by the institution or institutions such as insurance companies, banks, investment companies, and other institutional ownership (Tarjo, 2008). According to Veronica and Bachtiar (2005), institutional ownership is ownership of company shares by financial institutions, such as insurance companies, banks, pension funds, and asset management. c. Family Ownership Rebecca and Siregar (2013) define family ownership as ownership of individual and the ownership of the closed companies (above 5%), which is not a public company, state, or financial institutions. Anderson and David (2003) state that the family represents a group of large shareholders who could potentially have a unique incentive structure, high strength of the company, and a strong motive to manage individual companies. d. Foreign Ownership Machmud and Djakman (2008) state that foreign ownership is the ownership of the shares owned by multinational companies. According to Wiranata and Nugrahanti (2013), foreign ownership is a proportion of the company's common stock owned by an individual, corporation, government as well as the status of its parts abroad or individuals, legal entities, governments that do not originate from Indonesia. Financial Performance According to Mustafa and Handayani (2014), financial performance is a picture of the condition of a company that is analyzed through financial analysis tools that can be used to determine the good or poor financial condition of a company which can then describe the performance of a company within a specified period. Ratio analysis is done to conduct an Volume 1, Issue 01 : January – Juny 2020 | E-ISSN: 2721-7485 | P-ISSN: 2721-7493 Page | 49
4. International Journal of Islamic Economics & Business Management in Emerging Market (IJIEBMEM) assessment of the financial performance and the potential or ability of a company (Tho’in, 2019); (Muqorobin and Nasir, 2009). Lahonda, Ilat, and Tirayoh (2014) suggested that financial ratios are often used in measuring the financial performance of companies, one of which is a profitability ratio. Profitability is the company's ability to generate profits of several ratios as follows (Faisol, 2007): a. Return on Asset (ROA), is the ratio used to measure the ability of a bank's management in the gain (profit) as a whole. b. Return on Equity (ROE), is the ratio between net income with their capital. c. Net Profit Margin (NPM), is the ratio of the use of bank profit rate compared to income received from operations. Company Size Company size is a value that indicates the size of the company (Butar and Sudarsi, 2012). The size of the company is divided into three categories: large companies (large firm), medium companies (medium size) and small companies (small firm) (Suwito and Herawaty, 2005). Daniati and Suhairi (2006) explain that the company which has significant total asset shows the company has already reached maturity, where cash flows and business prospects are good. Leverage Leverage is the ratio between debt and assets, which indicates what portion of the assets is used to secure the loan (Butar and Sudarsi, 2012). Leverage describes the company's ability to pay for all long-term and short-term liabilities or if it continues to rise in liquidation (Marwata, 2001). The lower the leverage ratio will increase profits, so the higher creditors guarantee for repayment of loans given by the company (Hendri, 2015). Capital Adequacy Ratio Capital Adequacy Ratio (CAR) is an indicator of the ability of banks to offset a decline in its assets as a result of bank losses caused by risky assets with its capital adequacy (Margaretha and Zai, 2013). The more significant CAR the bank has, the higher obtained by the bank or in other words, the smaller bank risk (Kuncoro and Suhardjono, 2002). Hypothesis Formulation The concentration of ownership can improve performance by reducing monitoring costs (Zeitun and Tian, 2007). Ownership concentrated by the institutions will facilitate control that will enhance the performance of the company (Hastuti, 2005). Zeitun and Tian (2007) found a positive effect of ownership concentration on corporate performance as measured using accounting measures ROA and ROE. Similar results were shown by Yendrawati and Nugroho (2012) found that the most significant concentrated holdings have a positive effect on the company's financial performance. H1 : Concentration of ownership has a positive effect on the financial performance of Islamic Banks. Thomsen and Pedersen (2000) state that the effect of the concentration of ownership varies by type of ownership concentration, precisely the type of government ownership, foreigners, families, and institutions. Research conducted by Zori and Taktak (2014) and Zeitun and Tian (2007) found that each type of ownership had a different effect on the bank's financial performance. H2 : Type of ownership affects the financial performance of Islamic Banks. Page | 50 Volume 1, Issue 01 : January – Juny 2020 | E-ISSN: 2721-7485 | P-ISSN: 2721-7493
5. International Journal of Islamic Economics & Business Management in Emerging Market (IJIEBMEM) According to Kauthar and Fajar (2012), a reduction in the proportion of state ownership can improve the performance of the company. The statement was supported by Zeitun and Tian (2007), who found a negative influence on the financial performance of government ownership. That is because the government's focus is more on social benefits rather than on profit. H2a: Government ownership negatively affects the financial performance of Islamic Banks. Institutional shareholders are more and may have more incentive to monitor the company (Zeitun and Tian, 2007). Results of research conducted by Arouri et al. (2014) proved that institutional ownership had a positive effect on company performance. H2b: Institutional ownership has a positive influence on the financial performance of Islamic Banks. Family relationships can improve supervision, which in turn will generate better corporate performance (Arouri et al., 2014). Zouari and Taktak (2014) showed that family ownership had a positive impact on the performance of banks. H2c: Family ownership has a positive influence on the financial performance of Islamic Banks. The increasing number of foreigners who invest their shares in the company will increase the performance of these companies, for foreigners who have invested their shares have the management systems, technology and innovation, expertise and good marketing can bring a positive influence for the company (Wiranata and Nugrahanti, 2013). The results of the study Douma et al. (2006) showed that foreign ownership has a positive effect on financial performance. H2d: Foreign ownership has a positive effect on the financial performance of Islamic Banks. Research Framework Figure 1 The Research Framework Independent Variables: Ownweship Concentration: C1 and C3 Ownership Types (Dummy): 1. Government 2. Institutional 3. Family 4. Foreign Control Variables Company size H1 H2 Dependen Variables: Financial Performance: ROA and ROE Leverage CAR RESEARCH METHODS Population, Sample and Sampling Techniques The population used for this study are all Islamic Banks listed on the Indonesian Financial Services Authority (FSA) in 2009-2014. The selection of the samples for this research uses a Volume 1, Issue 01 : January – Juny 2020 | E-ISSN: 2721-7485 | P-ISSN: 2721-7493 Page | 51
6. International Journal of Islamic Economics & Business Management in Emerging Market (IJIEBMEM) purposive sampling technique. Purposive sampling technique sampling methods tailored to the specific criteria (Sekaran and Bougie, 2010). The criteria used in determining the sample are Islamic Banks which published its annual report in the range 2009-2014. Method of collecting data The data used in this research is secondary data, in the form of annual reports of Islamic Banks, published on the official website of each bank. Also, the official website of the Financial Services Authority (FSA) is also used to determine Islamic Banks which were registered during 2009-2014. Table 1.Sample Selection Criteria Year Number of Islamic 2009 2010 2011 2012 2013 2014 Bank (Year Data) Islamic Bank Registered 6 11 11 11 11 12 62 Missing Data (No Annual Report) 2 (2) Jumlah sampel penelitian 60 Source: Research Data Operational Definition and Measurement of Variables Financial Performance Regarding research conducted by Taktak and Zouari (2014), the measurement of financial performance is proxied by two indicators of the bank's financial performance, the ROA and ROE. 1. Return on Asset (ROA) ROA is the ratio of earnings before interest and taxes (EBIT) to total assets of the company, calculated using the following formula (Safitri, 2015): 2. Return on Equity (ROE) ROE is a profitability ratio that indicates the ratio between profit with bank capital, this ratio shows the percentage rate that can be generated (Thamrin, Wiyati, and Oemar, 2015). ROE calculated using the formula : Ownership Concentration Measurement of the ownership concentration followed Zouari and Taktak (2014) in their study, namely: 1. C1, the percentage of shares owned by the largest shareholder. 2. C3, the percentage of shares owned by the three largest shareholders Ownership Type The measurement of ownership types is described by using dummy variables. We follow (Taktak and Zouari, 2014) to categorize the largest shareholder (controlling owner) with four dummy variables. 1. GOV, given the value of 1 if the largest shareholder is the government, and 0 otherwise. 2. INST, given the value of 1 if the most significant shareholders were financial institution investors, and 0 otherwise. 3. FAM, given the value of 1 if the largest shareholder is a family investor and 0 otherwise. Page | 52 Volume 1, Issue 01 : January – Juny 2020 | E-ISSN: 2721-7485 | P-ISSN: 2721-7493
7. International Journal of Islamic Economics & Business Management in Emerging Market (IJIEBMEM) 4. FORG, given the value of 1 if there are foreign shareholders, although not the majority, and 0 otherwise. Company Size This study uses the size of the company, according to Prabowo and Simpson (20011) by using the natural log of total assets. Size = Ln (Total Asset) Leverage Leverage indicates what portion of the assets used to secure the loan, obtained from the ratio between debt and assets (Butar and Sudarsi, 2012). Capital Adequacy Ratio (CAR) CAR is the ratio of the amount of capital, and the amount Weighted Assets Ratio (RWA) are formulated with (Safitri, 2015): Data analysis method Descriptive statistics Descriptive statistics were used to know the distribution and behaviour of the research data. Descriptive statistics analysis used in this study is the mean, standard deviation, maximum value, and minimum value. Hypothesis testing To test the hypothesis, we use multiple regression analysis. Multiple regression equation to test the hypothesis in this study are: ROA = α + β1 C1 + β2 C3 + β3 GOV + β4 INST + β5 FAM + β6 FORG + β7 SIZE + β8 LEV + β9 CAR + ε ROE = α + β1 C1 + β2 C3 + β3 GOV + β4 INST + β5 FAM + β6 FORG + β7 SIZE + β8 LEV + β9 CAR + ε Information: ROA = ROE = C1 = C3 = GOV = INST = FAM = FORG = SIZE = LEV = CAR = α = β = ε = Return on Asset Return on Equity Largest Number of Shareholders Number of Three Largest Shareholder Government ownership Institutional ownership Family Ownership Foreign Ownership Company Size Leverage Capital Adequacy Ratio constants Regression coefficients Error Volume 1, Issue 01 : January – Juny 2020 | E-ISSN: 2721-7485 | P-ISSN: 2721-7493 Page | 53
8. International Journal of Islamic Economics & Business Management in Emerging Market (IJIEBMEM) DATA ANALYSIS AND DISCUSSION Data Description The population used in this study are all Islamic Banks (BUS) registered with the Indonesian Financial Services Authority (FSA) in 2009-2014. The sample selection for the study is based on predetermined criteria. Based on these criteria, there are as many as 60 BUS during 2009-2014 were selected as the study sample (Table 4.1). Descriptive statistics ROA ROE C1 C3 GOV INST FAM FORG SIZE LEV CAR Valid N N 60 60 60 60 60 60 60 60 60 60 60 60 Tabel 2. Statistik Deskriptif Minimum Maximum Mean 0,08 5,49 1,402 0,39 35,01 8,525 22,17 66,76 43,044 42,01 98,95 65,951 0,00 1,00 0,3750 0,00 1,00 0,4286 0,00 1,00 0,1964 0,00 1,00 0,6786 642026,00 66942422,00 13657371,45 2,78 41,19 19,0972 10,60 76,39 23,7041 Std. Deviation 1,124 7,457 14,793 18,458 0,48850 0,49935 0,40089 0,47125 18139659,43 7,56544 16,63916 Based on Table 2, the financial performance, as measured by ROA, has the lowest value of 0.08 with the highest value is 5.49. Islamic bank which has the lowest ROA is BRI Syariah in 2014, while Islamic bank with the highest ROA is Victoria Islamic Bank in 2011. The average value of ROA at 1.402 with a standard deviation of 1.124. The measurement of performance through ROE has the lowest value of 0.39, which is experienced by BRI Syariah 2014. The highest ROE owned by Bank Syariah Mega Indonesia in 2012 is 35.01. The average value of ROE amounted to 8.525 and the value of the standard deviation is equal to 7.457. The average value for C1 is 43.044, with a standard deviation of 14.793. Islamic Bank which has the highest score largest shareholder is Bank Syariah Mandiri in 2009 amounted to 66.76%, while the lowest value of 22.17% owned by BCA Syariah in 2010. C3 has an average value of 65.951 and 18.458 standard deviation value. Bank Syariah Bukopin in 2012 had a value of the three largest shareholders other than the most minor, i.e., 42.01%. BRI Syariah owned the highest number three largest shareholders in 2011 amounted to 98.95%. GOV average value of 0.3750 means that the BUS is 37.5% owned by the government. GOV standard deviation is 0.48850. Variable INST has the highest average value compared to other dummy variables, namely 0.4286, which means BUS 42.86% is owned by institutions, with a standard deviation value of 0.49935. Furthermore, the variable FAM has an average value of 0.1964 means that the family owns 19.64% Islamic banks. FAM standard deviation value of 0.40089. Recently, variable FORG has an average value of 0.6786 means that 67.86% Islamic bank in Indonesia has foreign investors in the composition of its shareholders. The standard deviation value for FORG is 0.471. From these results, it can be seen that the institution owns the majority of Islamic banks in Indonesia. This study uses three control variables, namely size, leverage, and CAR. The total assets of the bank measure the size of the company have an average value of Rp 13,657 billion, while the standard deviation value is Rp 18,139 billion. An Islamic bank, which has the most significant size, is Bank Syariah Mandiri in 2014, with total assets of Rp 66,942 billion. Page | 54 Volume 1, Issue 01 : January – Juny 2020 | E-ISSN: 2721-7485 | P-ISSN: 2721-7493
9. International Journal of Islamic Economics & Business Management in Emerging Market (IJIEBMEM) Victoria Islamic Bank in the year 2011 is the smallest BUS with total assets of Rp 642 billion. The lowest value for leverage was 2.78, which is owned by Bank Panin Syariah in 2011. For a record high of 41.19 was held by Bank Syariah Bukopin in 2009. The average value of leverage is 19.0972, with the standard deviation value of 7.56544. The last control variables, CAR, had an average value of 23.7041 and a standard deviation value of 16.63916. Bank Syariah Mandiri in 2010 had the lowest value of CAR of 10.6. BCA Syariah held the highest value CAR of 76.39 in the same year. Hypothesis testing Table 3 and Table 4 shows the results of hypothesis testing with multiple linear regression analysis in nine different models. All model is a summary or the final result of the model one to eight. Thus, the model for one to eight is the explanation of all models. Table 3. Results of Hyphothesis Testing (Dependent Variable ROA) Model 1 2 3 4 5 6 7 8 All C1 0,019*** 0,044* 0,051* 0,014 0,047* C3 0,006 0,018 0,012 0,002 0,004 GOV -1,346* -0,822** -1,173** INST 1,131* 0,345 1,454* FAM 0,504 0,754 1,173** FORG 0,305 0,668*** -0,296 0,709 0,345 0,451 0,108 0,960 0,399 SIZE -0,114 -0,144 -0,104 -0,129 -0,058 -0,066 -0,045 -0,095 -0,149 LEV 0,008 -0,004 -0,015 0,013 0,015 0,010 0,010 0,021 -0,009 CAR 0,029** 0,020*** 0,029* 0,026** 0,029** 0,025** 0,029** 0,024** 0,022*** Consta 1,340 1,384 0,184 1,368 0,733 0,502 0,191 0,953 -0,029 nt F value 3,691* 6,091* 4,921* 3,195* 3,025** 3,544* 2,693** 2,904** 4,460* Adj R2 0,197 0,357 0,300 0,193 0,155 0,217 0,156 0,172 0,335 Source: Data Analysis Remark: * = significant at 1% ** = significant at 5% *** = significant at 10% Table 4. Result of Hypothesis Testing (Dependent Variable ROE) Model 1 2 3 4 5 6 7 8 All C1 0,189** 0,351* 0,363* 0,144*** 0,317* C3 0,112 0,183** 0,133 0,081 0,081 GOV -8,560* -5,004*** -9,218** INST 6,192** 1,130 9,050* FAM 5,032 7,006*** 9,218** FORG -3,984 -1,678 -7,275* 0,046 -4,720 -4,078 -5,497 0,996 -2,765 SIZE 1,551 1,361 1,602 1,398 1,836 1,787 1,880 1,492 1,124 LEV -0,060 -0,133 -0,183 -0,003 -0,014 -0,041 -0,030 0,047 -0,153 CAR -0,025 -0,078 -0,026 -0,056 -0,018 -0,043 -0,016 -0,062 -0,076 Constant -19,460 -19,181 -25,790 -19,184 -23,693 -25,098 -25,469 -21,650 -27,204 F value 3,752* 5,861* 4,309* 3,485* 2,693** 3,041** 2,250*** 3,039** 4,442* Adj R2 0,200 0,347 0,265 0,213 0,133 0,182 0,120 0,182 0,334 Source: Data Analysis Remark: * = significant at 1% ** = significant at 5% *** = significant at 10% Volume 1, Issue 01 : January – Juny 2020 | E-ISSN: 2721-7485 | P-ISSN: 2721-7493 Page | 55
10. International Journal of Islamic Economics & Business Management in Emerging Market (IJIEBMEM) Model Fit Test (Test F) Table 4.9 and 4.10 show a significance value is below 5% in all models. Based on these results, it can be concluded that the regression model used in the study is fit and the models can measure the effect of ownership structure on financial performance. Hypothesis Testing (t-test) 1. Hypothesis 1 Hypothesis one states that the concentration of ownership has a positive effect on the financial performance of Islamic Banks. According to Table 4.9, the variable C1 has a regression coefficient of 0.047, with a significance value below 1%. Table 4.10, variable C1 has a regression coefficient of 0.317 with a significance value below 1%. These results indicate that the hypothesis (H1) is supported. Although variable C3 on both tables have a significant value above 5%, the concentration of ownership has been fairly represented by the variable C1 so that H1 can be supported. 2. Hypothesis 2a Hypothesis two states that government ownership has a negative effect on the financial performance of Islamic Banks. According to Table 4.9, the GOV variable has a regression coefficient of -1.173 with a significance value below 5%. For Table 4.10, the GOV variable has a regression coefficient of -9.218 with a significance value below 5%. From these results, it can be concluded that the hypothesis of 2a (H2a) is supported. 3. Hypothesis 2b Hypothesis two b states that institutional ownership has a positive influence on the financial performance of Islamic Banks. According to Table 4.9, variable INST has a regression coefficient of 1.454, with a significance value below 1%. For Table 4.10, variable INST has a regression coefficient of 9.050 with a significance value below 1%. This results suggested that the hypothesis of 2b (H2b) is supported. 4. Hypothesis 2c Hypothesis two c states that family ownership has a positive effect on the financial performance of Islamic Banks. According to Table 4.9, variable FAM has a regression coefficient of 1.173, with a significance value below 5%. For Table 4.10, variable FAM has a regression coefficient of 9.218 with a significance value below 5%. The results indicate that the hypothesis of 2c (H2C) is supported. 5. Hypothesis 2d Hypothesis two d states that foreign ownership has a positive impact on the financial performance of Islamic Banks. According to Table 4.9, the FORG variable has a regression coefficient of 0.399 with a significance value above 5%. For Table 4.10, the FORG variable has a regression coefficient of -2.765 with a significance value above 5%. The results have not supported the hypothesis of two d (H2d). Discussion Effect of Ownership Concentration against Islamic Banks Financial Performance Based on the results of hypothesis testing showed that the significant value for the variable C1, both the ROA and ROE, is below 1%, but the significance value for the variable C3 is above 5%. The results reveal that the concentration of ownership (especially C1) has a positive effect on the financial performance of Islamic Banks. This finding is consistent with the results of Zeitun and Tian (2007) who found a positive effect of the concentration of ownership of the company's financial performance. According to Zeitun and Tian (2007), concentrated ownership can improve performance by lowering the cost of monitoring and Page | 56 Volume 1, Issue 01 : January – Juny 2020 | E-ISSN: 2721-7485 | P-ISSN: 2721-7493
11. International Journal of Islamic Economics & Business Management in Emerging Market (IJIEBMEM) provide better management control. So, the more concentrated the ownership of a bank, the better the performance will be. The effect of Ownership Type on Financial Performance of Islamic Banks Based on the results of hypothesis testing showed that significant value to a variable type of GOV, INST, and FAM ownership is under 5%. The results reveal that a type of ownership influences the financial performance of Islamic Banks. Effect of Government Ownership type against Islamic Banks Financial Performance Based on the results of hypothesis testing showed that the value of the variable GOV significance for both the ROA and ROE was under 5%. GOV has a regression coefficient - of -1.173 on the ROA and -9.218 on the ROE. The results reveal that the type of government ownership has a negative influence on the financial performance of Islamic Banks. These findings concur with those of Zeitun and Tian (2007) who found a negative influence on the financial performance of government ownership. These results are reinforced by the statement Kauthar and Fajar (2012) which states that a reduction in the proportion of state ownership can improve the performance of the company. Marciano (2008) stated that the government corporation controlled by bureaucrats has goals that are based on political interests and not for the welfare of society and the company itself. The government or the bureaucrats have an interest in social and political, rather than think of to improve the performance of the company (Shen and Lin, 2009). Therefore, the performance of the bank owned by the government tends to be lower than that of the bank which is not government ownership. Effect of Ownership Type of Financial Institutions on the Performance of the Islamic Banks Based on the results of hypothesis testing showed that the value of the variable INST significance for both the ROA and ROE was under 1%. INST has a regression coefficient 1.454 in ROA and 9.050 in ROE. The results reveal that a type of ownership institutional has a positive influence on the financial performance of Islamic Banks. These findings concur with those of Arouri et al. (2014), who found that institutional ownership positively affects financial performance. That is because institutional shareholders are more profit-oriented (Zeitun and Tian, 2007). Hastuti (2005) states that the ownership which is concentrated by the institutions will facilitate control that will increase the company's performance. Effect of Family Ownership type against Islamic Banks Financial Performance Based on the results of hypothesis testing showed that the significant value for the variable FAM, both the ROA and ROE, was under 5%. FAM has a regression coefficient of 9.218 on ROA and 1.173 on the ROE. The results reveal that the type of family ownership has a positive influence on the financial performance of Islamic Banks. These findings concur with those of Arouri et al. (2014) as well as Zouari and Taktak (2014), who found a positive influence on the financial performance of family ownership. According to Arouri et al. (2014), family relations can improve supervision, which in turn will generate better corporate performance. On the other hand, these results do not correspond with the research Prabowo and Simpson (2011), who found that family ownership negatively affects the company's performance. Volume 1, Issue 01 : January – Juny 2020 | E-ISSN: 2721-7485 | P-ISSN: 2721-7493 Page | 57
12. International Journal of Islamic Economics & Business Management in Emerging Market (IJIEBMEM) Effects of Foreign Ownership type against Islamic Banks Financial Performance Based on the results of hypothesis testing showed that the value of the variable FORG significance for both the ROA and ROE was above 5%. Of the nine existing models in each performance measurement, FORG significant only in one model, model two on the ROA and model three on ROE. The results suggest that foreign ownership does not affect the financial performance of Islamic Banks. This finding is consistent with Zeitun and Tian (2007), which found no effect of foreign ownership on the company's performance. These results could be due to foreign owners have not been able to encourage the adoption of good corporate governance and strict supervision of all activities of the company. Besides, foreign investors merely voicing their interests only and have not been able to be a good influence in operational terms (Atmaja and Wibowo, 2015). CONCLUSION This study aims to determine the effect of ownership structure proxied by the concentration of ownership and the type of ownership of the financial performance of Islamic Banks. Based on the results of multiple linear regression analysis, we suggest that ownership concentrations (C1) have a positive effect on financial performance BUS. In other words, the more concentrated ownership of a bank, it will bring a good impact on the performance of the bank, meaning that the bank's performance will be better. That is because the concentrated ownership provides better management oversight to improve performance. Government ownership (GOV) negatively affect the financial performance of Islamic Banks. That is, banks whose shares are primarily owned by the government; their performance tends to be lower compared with the bank whose government ownership proportion is small. That is because the government has a purpose that is based on social and political interests rather than thinking to improve company performance. Institutional ownership variable (INST) has a positive effect on the financial performance of Islamic Banks. Unlike the government, institutional shareholders are more profit-oriented. Therefore, the more the proportion of institutional ownership in a bank, then the better the performance of the bank is. Family ownership variables (FAM) have a positive influence on the financial performance of Islamic banks. Family shareholders usually have enormous power over the company. It can improve the control so that later can produce a better performance of the company. Finally, the foreign ownership variable (FORG) does not affect the financial performance of Islamic banks. In other words, whether or not there are foreign shareholders in a bank, it will not have any influence on the performance of the bank. Limitation Some of the limitations that can be found in this study are as follows: (1) This study uses only Islamic Banks as the object so that the number of samples used is relatively limited, it is because the number of Islamic Banks in Indonesia is still limited. (2) The measurement of variables government ownership, institutional ownership, family ownership and foreign ownership in this research is simply by using dummy variables that the influence of the type of ownership and financial performance less than the maximum. Suggestions Future research suggested to take the object of research not only Islamic Banks but also coupled with other Islamic financial institutions, such as Sharia Business Unit and also expand the study scope over countries. The measurement of variables government Page | 58 Volume 1, Issue 01 : January – Juny 2020 | E-ISSN: 2721-7485 | P-ISSN: 2721-7493
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