Effectiveness of The Board of Directors and Company Performance: Corporate Governance Perspective in Indonesia

Ririh Dian Pratiwi, Anis Chariri

Abstract


The purpose of this study was to determine the effect of board size, board independence, and board activity on company performance from a corporate governance perspective. This study uses a quantitative approach. IDX issuers in the manufacturing sector registered in 2017-2018 are the research population. The samples were obtained using the purposive sampling method. Based on the criteria, the samples in this study were 146 companies. This study uses multiple linear regression analysis. This study found that board size has a negative effect on ROA, but has an effect on and is positively correlated with ROE. Board independence has a positive effect on the achievement of company ROA and ROE. While the third variable, namely board activity does not affect the achievement of ROA and ROE of the company. Based on the limitations, further research is expected to be able to explore other factors that are relevant in influencing company performance during and after the COVID 19 pandemic, for example, namely external factors.


Keywords:

Board of Directors, Corporate Governance, Company performance



Full Text:

PDF

References


Adams, R. B., & Mehran, H. (2012). Bank board structure and performance: Evidence for large bank holding companies. Journal of Financial Intermediation. https://doi.org/10.1016/j.jfi.2011.09.002

Arayssi, M., & Jizi, M. I. (2019). Does corporate governance spillover firm performance? A study of valuation of MENA companies. Social Responsibility Journal, 15(5), 597–620. https://doi.org/10.1108/SRJ-06-2018- 0157

Bhagat, S., & Bolton, B. (2019). Corporate governance and firm performance: The sequel. Journal of Corporate Finance. https://doi.org/10.1016/j.jcorpfin.2019.04.006

Bhatt, P. R., & Bhatt, R. R. (2017). Corporate governance and firm performance in Malaysia. Corporate Governance (Bingley). https://doi.org/10.1108/CG-03-2016-0054

Brick, I. E., & Chidambaran, N. K. (2010). Board meetings, committee structure, and firm value. Journal of Corporate Finance. https://doi.org/10.1016/j.jcorpfin.2010.06.003

Byard, D., Li, Y., & Weintrop, J. (2006). Corporate governance and the quality of financial analysts’ information. Journal of Accounting and Public Policy. https://doi.org/10.1016/j.jaccpubpol.2006.07.003

Goyal, R., Kakabadse, N., & Kakabadse, A. (2019). Improving corporate governance with functional diversity on FTSE 350 boards: directors’ perspective. Journal of Capital Markets Studies, 3(2), 113–136. https://doi.org/10.1108/jcms-09-2019-0044

Guest, P. M. (2009). The impact of board size on firm performance: Evidence from the UK. European Journal of Finance. https://doi.org/10.1080/13518470802466121

Jaffar, R., & Abdul-Shukor, Z. (2016). The role of monitoring mechanisms towards company’s performance. Journal of Accounting in Emerging Economies, 6(4), 408–428. https://doi.org/10.1108/jaee-05-2014-0021

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics. https://doi.org/10.1016/0304-405X(76)90026-X

Jo, H., & Harjoto, M. A. (2011). Corporate Governance and Firm Value: The Impact of Corporate Social Responsibility. Journal of Business Ethics. https://doi.org/10.1007/s10551-011-0869-y

Johl, S. K., Kaur, S., & Cooper, B. J. (2015). Board Characteristics and Firm Performance: Evidence from Malaysian Public Listed Firms. Journal of Economics, Business, and Management. https://doi.org/10.7763/joebm.2015.v3.187

Kao, M. F., Hodgkinson, L., & Jaafar, A. (2019). Ownership structure, board of directors and firm performance: evidence from Taiwan. Corporate Governance (Bingley), 19(1), 189–216. https://doi.org/10.1108/CG-04- 2018-0144

Krishnan, S., Muliyani, A., & Amin, M. (2017). Empirical Study of Corporate Governance on Public Listed Companies in Malaysia. Human Resource Management Research.

Leblanc, R., & Gillies, J. (2003). The Coming Revolution in Corporate Governance. Ivey Business Journal.

Narwal, K. P., & Pathneja, S. (2016a). Effect of bank-specific and governance-specific variables on the productivity and profitability of banks. International Journal of Productivity and Performance Management, 65(8), 1057– 1074. https://doi.org/10.1108/IJPPM-09-2015-0130

Narwal, K. P., & Pathneja, S. (2016b). Effect of bank-specific and governance-specific variables on the productivity and profitability of banks. International Journal of Productivity and Performance Management. https://doi.org/10.1108/IJPPM-09-2015-0130

Ntim, C. G., & Osei, K. A. (2011). The Impact of Corporate Board Meetings on Corporate Performance in South Africa. African Review of Economics and Finance.

Nurazi, R., Zoraya, I., & Wiardi, A. H. (2020). The Influence of Good Corporate Governance and Capital Structure on Firm Value: The Mediation Role of Financial Performance. Media Ekonomi Dan Manajemen, 35(2), 230. https://doi.org/10.24856/mem.v35i2.1554

Nyamongo, E. M., & Temesgen, K. (2013). The effect of governance on performance of commercial banks in Kenya: A panel study. Corporate Governance (Bingley). https://doi.org/10.1108/CG-12-2010-0107

OECD. (2019). OECD Corporate Governance Factbook 2019. Www.Oecd.Org/Corporate/Corporate-Governance- Factbook.Htm.

Ofoeda, I. (2017). Corporate governance and non-bank financial institutions profitability. International Journal of Law and Management, 59(6), 854–875. https://doi.org/10.1108/ijlma-05-2016-0052

Orozco, L. A., Vargas, J., & Galindo-Dorado, R. (2018). Trends on the relationship between board size and financial and reputational corporate performance: The Colombian case. European Journal of Management and Business Economics, 27(2), 183–197. https://doi.org/10.1108/EJMBE-02-2018-0029

Prabowo, M., & Simpson, J. (2011). Independent directors and firm performance in family controlled firms: Evidence from Indonesia. Asian-Pacific Economic Literature. https://doi.org/10.1111/j.1467- 8411.2011.01276.x

Setiawanta, Y., & Purwanto, A. (2019). Stakeholder power, sustainability reporting, and corporate governance: A case study of manufacturing industry at Indonesia’s stock exchange. Scientific Papers of the University of Pardubice, Series D: Faculty of Economics and Administration.

Shahid, M. N., Abbas, A., Latif, K., Attique, A., & Khalid, S. (2020). The mediating role of board size, philanthropy and working capital management between basic corporate governance factors and firm’s performance. Journal of Asian Business and Economic Studies, 27(2), 135–151. https://doi.org/10.1108/jabes-07-2018- 0050

Shahwan, T. M. (2015). The effects of corporate governance on financial performance and financial distress: evidence from Egypt. Corporate Governance (Bingley). https://doi.org/10.1108/CG-11-2014-0140

Siagian, F., Siregar, S. V., & Rahadian, Y. (2013). Corporate governance, reporting quality, and firm value: evidence from Indonesia. Journal of Accounting in Emerging Economies. https://doi.org/10.1108/20440831311287673

Tristiarini, N., Setiawanta, Y., & Pratiwi, R. D. (2017). Optimization of Monetary Corporate Social Responsibility Value Added in Reducing Financial Distress in Indonesia. International Journal of Economics and Financial Issues.

Utama, C. A., Utama, S., & Amarullah, F. (2017). Corporate governance and ownership structure: Indonesia evidence. Corporate Governance (Bingley). https://doi.org/10.1108/CG-12-2015-0171

Zabri, S. M., Ahmad, K., & Wah, K. K. (2016). Corporate Governance Practices and Firm Performance: Evidence from Top 100 Public Listed Companies in Malaysia. Procedia Economics and Finance, 35(October 2015), 287–296. https://doi.org/10.1016/s2212-5671(16)00036-8




DOI: https://doi.org/10.33633/jpeb.v6i1.4351

Article Metrics

Abstract view : 734 times
PDF - 444 times

DOI (PDF): https://doi.org/10.33633/jpeb.v6i1.4351.g2232

Refbacks

  • There are currently no refbacks.


 

Jurnal Penelitian Ekonomi dan Bisnis (JPEB)

Published by
Fakultas Ekonomi dan Bisnis | Universitas Dian Nuswantoro
Jalan Nakula I No. 5-11, Semarang 50131, Indonesia

Email: udinusjpeb@gmail.com
Phone: (024) 3567010
Website:  http://publikasi.dinus.ac.id/index.php/jpeb

ISSN
2442-5028 (Print)
2460-4291 (Online)

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.