Corporate governance diversity, dividend pressure, and financial efficiency risk in Indonesian regional development banks: The moderating role of owner fiscal dependence

Abstract

This study examines how board gender diversity and dividend pressure relate to financial efficiency risk in Indonesian Regional Development Banks (Bank Pembangunan Daerah; BPDs), and whether the effect of related party loans (RPT) varies with the owner’s fiscal dependence on intergovernmental transfers. Using a balanced panel of 26 BPDs over 2018–2024 (N=182 bank-year observations), we estimate bank fixed-effects models with year effects and cluster-robust standard errors. Financial efficiency risk (FER) is a composite index capturing credit risk, operating inefficiency, and capital fragility (standardized NPL, BOPO, and −CAR). The findings indicate that while gender diversity on the board of directors and dividend pressure are not statistically significant in the baseline model, gender diversity on the board of commissioners is positively correlated with FER. At low levels of fiscal dependency, related-party lending intensity is negatively correlated with FER. However, there is a positive and substantial interaction between related-party lending and fiscal dependence. When owning governments rely heavily on intergovernmental transfers, the beneficial association of related-party lending declines and may even reverse, as seen by the conditional effect crossing zero at a fiscal-dependence value of roughly 0.896. By demonstrating that ownership-linked lending and board composition cannot be understood independently from subnational fiscal incentives in government-owned banks, the findings advance the field of bank governance research.