ISSN: 2225-8329
Open access
This study examines the effect of board gender diversity on the relationship between political connection and banking performance in Indonesia. The population in this study was the banking industry in Indonesia, obtained from the firm annual reports. The sampling technique used in this study was purposive sampling. The sample in the study consisted of 164 firm-years of observation for 41 listed banks in Indonesia. The period of the analysis was from 2017 to 2020. The results showed that political connection has a positive effect on banking performance. The results revealed that politically connected banks detect and interpret relevant political signals, use appropriate diplomatic language, and take appropriate steps to achieve greater performance. These results are consistent with resource dependence theory which explain that organizations need to acquire and exchange resources, leading to dependency between firms and external units such as governments. This dependence creates risk and uncertainty, which can be reduced by building political connections that allow the firm to acquire a stronger resource base to increase its value. This paper then confirms that banks in Indonesia are family-controlled. Hence, the presence of women on the board is only due to their familial relationship with the controlling shareholder compared to their expertise and experience. Therefore, the management carried out by women directors has no effect on managing the political connection to improve banking performance. There is still a lack of previous studies that examined the effect of board diversity on the relationship between political connection and bank performance in Indonesia, especially regarding the heterogeneity of gender. Based on the explanation, this research is expected to contribute to the knowledge regarding the diversity of directors in Indonesia in managing political connections and bank performance
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In-Text Citation: (Innayah et al., 2022)
To Cite this Article: Innayah, M. N., Wibowo, H., Mukarromah, S., & Pratama, B. C. (2022). Political Connection and Performance in Indonesian Banking Firms: The Role of Board Gender Diversity. International Journal of Academic Research in Accounting Finance and Management Sciences. 12(2), 317 – 333.
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