Relationship Between Governance And Performance Of Regional Development Bank In Indonesia During Covid-19 Pandemic

The Regional Development Banks in Indonesia succeeded to maintain their performance, whereas other banks actually underperformed amidst Covid-19 pandemic. Interestingly, prior to pandemic, they experienced the opposite, which was triggered by their governance which is less than optimal. Thus, why were they better in pandemic? This article will answer the question. We specifically explore the role of organizational structure and governance mechanism on their performance. Therefore, all Regional Development Banks existed at the exact time serve as objects of the study. The data were collected from the financial and annual reports of each bank. They, then, were analyzed by Two-Stage Least Squares (2SLS). The result showed that only the size of risk monitoring committee positively contributed to their performance. However, the board size and independence contributed contrariwise. Other elements of governance i.e. board meetings, audit committee size, remuneration and compensation as well as the committee meetings did not have a significant impact. Their good performance during pandemic is dominantly defined by other factors such as credit growth and regional economic growth. Hence, the results of our study showed that the existed and widely used governance measures until recently were irrelevant, particularly in crisis. Therefore, this will be homework for academics to explore governance measure models from other perspectives.