Stewardship Theory of Donaldson and Davis in Third-Party Fund Management: Management Responsibility of Banking Institutions Toward Depositor Interests and Financial System Stability

Abstract

Banking institutions operate as fiduciary intermediaries entrusted with the management of third-party funds (dana pihak ketiga/DPK), comprising demand deposits, savings, and time deposits contributed by millions of individual and institutional depositors. Classical agency theory has long dominated governance discourse in banking, emphasizing the adversarial principal-agent relationship and the necessity of external monitoring mechanisms to constrain managerial self-interest. However, agency theory's assumptions are increasingly challenged by empirical evidence from high-performing banking institutions in which managerial behavior is more accurately characterized by institutional loyalty, risk prudence, and long-term orientation than by opportunism. This article proposes stewardship theory—as originally formulated by Donaldson and Davis (1991) and subsequently extended by Davis et al. (1997) and Hernandez (2012)—as a more analytically appropriate and practically actionable framework for understanding management responsibility in the governance of third-party funds. Through a systematic conceptual analysis supported by empirical evidence from the Indonesian banking industry and comparative regulatory benchmarks, this study demonstrates that stewardship-oriented management behaviors—including fiduciary transparency, prudent credit stewardship, long-term capital allocation, and depositor-centric governance—are positively associated with financial system stability. The article further develops a Stewardship-Based Banking Governance Framework (SBBGF) that integrates Donaldson and Davis's theoretical constructs with Indonesia's regulatory architecture under the Otoritas Jasa Keuangan (OJK) and Bank Indonesia (BI). Findings indicate that stewardship theory offers a more nuanced, contextually grounded, and institutionally responsive framework for banking governance reform in emerging market economies, with particular relevance for Indonesia's state-owned banking sector.

Keywords: stewardship theory, third-party funds, banking governance, depositor protection, financial system stability, Indonesia, Donaldson and Davis