The Effect of Risk Preference and Corporate Governance on the Islamic Banks' Efficiency Using Stochastic Frontier Approach

Ratnika Detri Goddes; evony silvino violita

Universitas Indonesia Conferences, International Accounting Conference - 2017

Ratnika Detri Goddes, evony silvino violita

Last modified: 2017-07-06

Abstract

This research investigates the effects of risk preferences and good corporate governance on cost efficiency of Islamic Banks. This paper investigates the Islamic Banking listed on the Indonesia Financial Service Authority during the period 2010-2014. The cost efficiency score is measured using Stochastic Frontier Approach (SFA) and the hypothesis is tested using regression method. The result shows that the solvency and liquidity have positive effects on the efficiency of the Islamic Banks. However, financing quality, good corporate governance (GCG) have no significant effect on the cost efficiency of the Islamic Banks. It indicates that banks’ management reacts positively to maintain the ability to meet all its obligations by improving the efficiency.

Keywords

Efficiency; Corporate Governance; Islamic Banks; Risk; Stochastic Frontier

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