Impact of Corporate Governance on Financial Performance

Rony Dwi Cahyono, Ely Siswanto, Lulu Nurul Istanti, Yuli Soesetio, Fadia Zen

Abstract

This study aims to examine the effect of implementing corporate governance proxied by board accountability (BA), audit committee (AC), transparency and disclosure (TD), shareholder rights and investor relations (SI), and ownership and control disclosure (OC), leverage, and firm size as control variables on the company's financial performance. The sample was determined by the purposive sampling method, and there were 376 non-financial companies listed on the Indonesian stock exchange (IDX) for the period 2015-2019. Data analysis using panel data regression analysis. The results show that shareholder rights and investor relations (SI), leverage, and firm size significantly affect Tobin's Q. However, it has an insignificant effect on ROE. Meanwhile, board accountability (BA), audit committee (AC), transparency and disclosure (TD, and ownership and control disclosure (OC) has an insignificant effect on Tobin’s Q and ROE. The results of this study indicate that the implementation of good corporate governance can improve potential corporate market value.

 

Keywords: corporate governance, leverage, firm size, financial performance.


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