Central European Management Journal

The Effect of Corporate Governance on the Performance of a Company. Some Empirical Findings from Indonesia

Herdjiono, Irine Sari, Indah Mega

Musamus University

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Abstract

Purpose: This study is aimed at analyzing the influence of the size of the board of directors, audit committee, institutional ownership and managerial ownership on the fnancial performance of manufacturing companies listed on the Indonesia Stock Exchange.

Methodology: The study analyses 156 Indonesia frms listed on the Indonesia Stock Exchange using linear regression analysis.

Findings: The results indicated that the size of the board of directors has a positive effect on fnancial performance, while the size of the audit committee, institutional ownership and managerial ownership has no effect on the fnancial performance. While on the simultaneously testing, it showed that the size of the board of directors, audit committee size, institutional ownership and managerial ownership influence the fnancial performance.

Research limitations/implications: The research has been limited to the manufacturing sector of Indonesian companies and the internal mechanism of corporate governance. The study suggests considering an external mechanism of corporate governance as predictor variables.

Originality: The study adds to the literature of corporate government and frm performance in emerging countries. The study implies that corporate governance mechanism for audit committee, managerial ownership and institutional ownership do not enhance company performance. The average size of an audit committee just to fulfll the regulation. Corporate governance mechanism that improve fnancial performance is size board director. Improvement in board performance as board size increase has positive impact that enhance fnancial performance of company.

Metadata

Journal Central European Management Journal 
Volume 25 
Issue 1 
Issue date 2017 
Type Article 
Language en
Pagination 33-52
DOI 10.7206/jmba.ce.2450-7814.188
ISSN 2658-0845
eISSN 2658-2430