Good Corporate Governance, Leverage and Corporate Financial Performance in the Jakarta Islamic Index
DOI:
https://doi.org/10.54099/ijibr.v2i2.685Keywords:
Institutional Ownership, , Good Corporate Governance, , Return On EquityAbstract
Purpose – This study aims to estimate the effect of Good Corporate Governance and Leverage on the Financial Performance of companies listed on the Jakarta Islamic Index in 2016 to 2020.
Methodology/approach – This study is a confirmatory research with a quantitative approach. The secondary data in this study obtained from the Jakarta Islamic Index (JII), with a total sample of 14 companies registered in the analysis period and have complete data related to the variables studied. Panel data regression analysis was used in this study by selecting the Random Effect Model as the estimation method.
Findings – It was found that institutional ownership, which is one of the measurement proxies for Good Corporate Governance, has a positive effect on variations in the company's financial performance achievements. This study has proven that institutional ownership has an important role in minimizing agency conflicts that occur between managers and shareholders. If institutional ownership is implemented properly and in line with the company's vision, the financial performance will be excellent and in the long-term financial sustainability will be created.
Novelty/value – This study proves that institutional ownership is a driving factor in increasing corporate financial performance proxied by Return on Equity (ROE).
References
Achim, M.-V., Borlea, S.-N., & Mare, C. (2016). Corporate governance and business performance: Evidence for the Romanian economy. Journal of Business Economics and Management, 17(3), 458–474.
Al-Ahdal, W. M., Alsamhi, M. H., Tabash, M. I., & Farhan, N. H. S. (2020). The impact of corporate governance on financial performance of Indian and GCC listed firms: An empirical investigation. Research in International Business and Finance, 51, 101083.
Asraf, A., & Desda, M. M. (2020). Analysis of the effect of operating leverage and financial leverage on companies profitability listed on Indonesia Stock Exchange. Ilomata International Journal of Management, 1(2), 45–50.
Capon, N., Farley, J. U., & Hoenig, S. (1990). Determinants of financial performance: a meta-analysis. Management Science, 36(10), 1143–1159.
Crisnandani, N., Rahmawati, I. Y., Tubastuvi, N., & Haryanto, T. (2021). The Effect Of Intellectual Capital And Good Corporate Governance On Financial Performance In Banking Sector Registered In Indonesia Stock Exchange With Competitive Advantage As Intervening Variables For 2016-2019. International Journal of Economics, Business and Accounting Research (IJEBAR), 5(2).
Daryaei, A. A., & Fattahi, Y. (2020). The asymmetric impact of institutional ownership on firm performance: panel smooth transition regression model. Corporate Governance: The International Journal of Business in Society, 20(7), 1191–1203.
Drobetz, W., Ehlert, S., & Schröder, H. (2021). Institutional ownership and firm performance in the global shipping industry. Transportation Research Part E: Logistics and Transportation Review, 146, 102152.
Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74.
Evans, J., Evans, R., & Loh, S. (2002). Corporate Governance And Declining Firm Performance. International Journal of Business Studies, 10(1).
Firmansyah, R., & Idayati, F. (2021). Pengaruh Good Corporate Governance dan Leverage Terhadap Kinerja Keuangan. Jurnal Ilmu Dan Riset Akuntansi (JIRA), 10(4).
Ghozali, I. (2013). Analisis Aplikasi Multivariate Dengan Program IBM SPSS 20. Badan Penerbit Universitas Diponegoro.
Hendratni, T. W., Nawasiah, N., & Indriati, T. (2018). Analisis pengaruh corporate governance terhadap kinerja keuangan sektor perbankan yang terdaftar di BEI Tahun 2012-2016. Jurnal Riset Manajemen Dan Bisnis (JRMB) Fakultas Ekonomi UNIAT, 3(1), 37–52.
Hermuningsih, S., Kusuma, H., & Cahyarifida, R. A. (2020). Corporate governance and firm performance: An empirical study from Indonesian manufacturing firms. The Journal of Asian Finance, Economics and Business (JAFEB), 7(11), 827–834.
Ho, C. (2005). Corporate governance and corporate competitiveness: an international analysis. Corporate Governance: An International Review, 13(2), 211–253.
Honi, H., Saerang, I. S., & Tulung, J. E. (2020). Pengaruh good corporate governance terhadap kinerja keuangan Bank Umum Konvensional tahun 2014-2018. Jurnal EMBA: Jurnal Riset Ekonomi, Manajemen, Bisnis Dan Akuntansi, 8(3).
Inggrid, T. (2009). bisnis dan Investasi Sistem Syariah. Yogyakarta: Penerbit Universitas Atma Jaya.
Intia, L. C., & Azizah, S. N. (2021). Pengaruh Dewan Direksi, Dewan Komisaris Independen, Dan Dewan Pengawas Syariah Terhadap Kinerja Keuangan Perbankan Syariah Di Indonesia. Jurnal Riset Keuangan Dan Akuntansi, 7(2).
Istikomah, I., Saputra, G. W., & Yusuf, M. (2022). Marketing Mix Strategy and Financial Capabilities in Improving Sharia Stock Investment. Journal of Applied Management and Business Administration, 1(1), 21–27.
Jensen, M. C., & Meckling, W. H. (2019). Theory of the firm: Managerial behavior, agency costs and ownership structure. In Corporate governance (pp. 77–132). Gower.
Kumalasari, D., & Pratikto, H. (2018). Good corporate governance affects on corporate value through return on equity and return on asset of manufacture company. KnE Social Sciences, 114–126.
Kyere, M., & Ausloos, M. (2021). Corporate governance and firms financial performance in the United Kingdom. International Journal of Finance & Economics, 26(2), 1871–1885.
Lestari, W. D., & Yulianawati, I. (2016). Pengaruh good corporate governance dan leverage terhadap kinerja keuangan (Studi pada perusahaan manufaktur yang terdaftar di BEI tahun 2011-2012). Benefit: Jurnal Manajemen Dan Bisnis, 19(2), 127–136.
Morris, R. D. (1987). Signalling, agency theory and accounting policy choice. Accounting and Business Research, 18(69), 47–56.
Mukhtaruddin, M., Ubaidillah, U., Dewi, K., Hakiki, A., & Nopriyanto, N. (2019). Good corporate governance, corporate social responsibility, firm value, and financial performance as moderating variable. Indonesian Journal of Sustainability Accounting and Management, 3(1), 55–64.
Obaid, H. J., & Jassim, H. A. (2022). Financial leverage and its impact on enhancing the financial sustainability of industrial joint-stock companies listed on the Iraq Stock Exchange for the period from 2010–to 2020. Journal of Positive School Psychology, 6(3), 8248–8256.
Otieno, K., Mugo, R., Njeje, D., & Kimathi, A. (2015). Effect of corporate governance on financial performance of SACCOS in Kenya. Research Journal of Finance and Accounting, 6(2), 48–58.
Ousama, A. A., Hammami, H., & Abdulkarim, M. (2020). The association between intellectual capital and financial performance in the Islamic banking industry: An analysis of the GCC banks. International Journal of Islamic and Middle Eastern Finance and Management, 13(1), 75–93.
Pratiwi, W., Kamaliah, K., & Al Azhar, L. (2017). Pengaruh Good Corporate Governance Dan Manajemen Laba Terhadap Kinerja Keuangan Pada Perusahaan Perbankan Yang Terdaftar Di Bursa Efek Indonesia Tahun. Jurnal Online Mahasiswa (JOM) Bidang Ilmu Ekonomi, 4(2), 1–15.
Puteri, H. E. (2018). Metode Penelitian Ekonomi dan Perbankan Syariah. IAIN Bukittinggi Press.
Puteri, H. E. (2020a). Menentukan Populasi Dan Sampel Dalam Riset-Riset Ekonomi Dan Perbankan Islam. Retrieved Oktober, Https://Www.Researchgate.Net/, IAIN Bukittinggi, 15, 2020.
Puteri, H. E. (2020b). Social Performance of Rural Bank : Impact of Commercialization Factors. Jurnal Dinamika Manajemen, 11(1), 115–125. https://doi.org/10.15294/jdm.v11i1.23091
Puteri, H. E., Arifin, M., & Arief, H. (2022). Social Performance of Islamic Microfinance Institutions: Examining the Financial Sustainability as Driving Factor. International Journal of Applied …, 4(2), 151–167. https://doi.org/10.35313/ijabr.v4i2.146
Samo, A. H., & Murad, H. (2019). Impact of liquidity and financial leverage on firm’s profitability–an empirical analysis of the textile industry of Pakistan. Research Journal of Textile and Apparel, 23(4), 291–305.
Sekaran, U., & Bougie, R. (2014). Research methods for business : a skill-building approach. In John Wiley & Sons Ltd. United Kingdom. https://doi.org/10.1007/978-94-007-0753-5_102084
Singh, K., & Pillai, D. (2022). Corporate governance in small and medium enterprises: a review. Corporate Governance: The International Journal of Business in Society, 22(1), 23–41.
Tambun, S., & Maylani, A. E. (2020). Pengaruh Leverage Dan Perubahan Intangible Asset Terhadap Kinerja Perusahaan Dengan Komite Audit Sebagai Variabel Moderating. Jurnal Akuntansi Manajerial (Managerial Accounting Journal), 5(1), 60–73.
Van Horne, J. C., & Wachowicz, J. M. (2001). Fundamentals of financial management. Pearson Educación.
Vicente-Ramos, W., Reymundo, K., Pari, L., Rudas, N., & Rodriguez, P. (2020). The effect of good corporate governance on banking profitability. Management Science Letters, 10(9), 2045–2052.
Wardhani, Y. A., & Suwarno, A. E. (2021). Pengaruh Kepemilikan Manajerial, Kepemilikan Institusional, Struktur Modal Dan Ukuran Perusahaan Terhadap Kinerja Keuangan Perusahaan. E-Prosiding Seminar Nasional Manajemen Dan Akuntansi STIE Semarang (SENMAS), 2(1), 315–332.
Widyari, K. P., Novitasari, N. L. G., & Widhiastuti, N. L. P. (2022). Pengaruh Good Corporate Governance, Ukuran Perusahaan, Leverage, Kualitas Audit Terhadap Kinerja Perusahaan. Kumpulan Hasil Riset Mahasiswa Akuntansi (KHARISMA), 4(2), 202–213.
Yusrizal, Y., & Suharti, S. (2020). Faktor Penentu Kinerja Keuangan Dan Nilai Perusahaan Sektor Pertambangan Di Bursa Efek Indonesia. Jurnal Manajemen Dan Keuangan, 9(2), 135–155.
Zogning, F. (2017). Agency theory: A critical review. European Journal of Business and Management, 9(2), 1–8.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 International Journal of Indonesian Business Review
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
