Is the Implementation of Good Corporate Governance Principles Capable of Improving Company Performance? (Study at Sharia Commercial Banks in Bandung City, Indonesia)

Abstract

The implementation of Good Corporate Governance (GCG) principles which includes: transparency, accountability, independence, responsibility and fairness are expected to improve company performance. Various problems that are related to the weak implementation of GCG principles have led to a decline in company performance.The purpose of this study is to analyze how far the implementation of GCG principles and how the company performance is measured by using Balanced Scorecard (BSC) method at Sharia Commercial Banks in Bandung City and then to analyze how the implementation of GCG principles is able to improve the company performance which is measured by using BSC method. In this study,the research method is descriptive with a qualitative approach. This study was conducted on nine Sharia Commercial Banks in Bandung City. Data collection techniques were carried out by distributing questionnaires to 45 operational managers at Sharia Commercial Bank in Bandung City and by interviews.The sampling technique is non probability sampling with the type of convenience sampling.The study results indicate that the implementation of GCG principles in Sharia Commercial Banks in Bandung City is very good. The company performance in Sharia Commercial Banks in Bandung City which are measured using BSC method is in very good category.Furthermore, the implementation of GCG principles in Sharia Commercial Banks in Bandung City is able to improve the company performance which is measured by using BSC method, as it is evidenced by one of them when Sharia Commercial Banks apply the responsibility principle in their operational activities, the level of customer trust will increase. With the increasing of customer trust, it will result in a higher level of financial return as an indicator in the increasing of company performance as it is measured by BSC method.

Keywords: good corporate governance principles, company performance and balanced scorecard.

DOI: 10.7176/EJBM/11-6-10