THE EFFECT OF GOOD CORPORATE GOVERNANCE ON RETURN ON EQUITY AT SHARIA BANK

Abstract

This research is motivated by the condition in which the implementation of Good Corporate Governance at Bank Panin Dubai Syariah has received favorable evaluations, yet has not been able to significantly boost the company's income generated from its own capital (Return on Equity/ROE). The purpose of this study is to analyze the influence of Good Corporate Governance on Return on Equity over the same period.This study employs a quantitative method with a descriptive approach. The object of the research is Bank Panin Dubai Syariah, and the data used are secondary data. Data collection techniques include literature review and documentation, using semi-annual financial reports published on the official website of Bank Panin Dubai Syariah. Data analysis techniques involve Classical Assumption Tests, Simple Linear Regression, Hypothesis Testing, and the Coefficient of Determination, using Eviews 12 software. The results of the study show that Good Corporate Governance has a significant partial influence with a negative direction on Return on Equity at Bank Panin Dubai Syariah during the period 2017–2024. The coefficient of determination test indicates that the independent variable explains 34.8816% of the variation in the dependent variable (ROE), while the remaining 65.1184% is explained by other variables outside the scope of this study. The implications of this study suggest that although Good Corporate Governance has been structurally well implemented, its effectiveness in enhancing Return on Equity still requires improvement. Within the context of Agency Theory, these findings reflect a potential misalignment of interests between management (agents) and shareholders (principals), where the existing GCG mechanisms have not yet been fully effective in aligning those interests to enhance company value. Therefore, a comprehensive evaluation of GCG implementation is necessary, not only to meet compliance standards but also to generate tangible impacts on the company’s financial performance.