THE INFLUENCE OF CORPORATE GOVERNANCE PRACTICES ON THE COMPANY'S FINANCIAL PERFORMANCE (Studies on the companies surveyed by llCG and listed on the lndonesia Stock Exchange)
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Date
2012-07
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Journal of Global Business and Economics, Global Research Agency, Volume 5, Number 1
Abstract
The aim of this study is to examine the effect of corporate governance practices on company's financial
performance. Corporate governance practices are measured by score of corporate governance
perception index (CGPI) issued by the Indonesian Institute of Corporate Governance (IICG). Financial
performances in this study include operational performance and the performance of company stock.
Operational performance is measured by current ratio (CR), debt to asset (DAR), return on asstes (ROA),
net profit margin (NPM), return on equty (ROE). Stock performance is measured by price to book value
(PBV). Statistical model used is the regression model. Study sample size was forty-three firms (43 firms),
which are all included in the application of corporate governance ranking by llCG in 2007-2009, and are
listed on the lndonesia Stock Exchange. The data is taken from the CGPI report and financial statements
for the year 2007-2009. The results of this study indicate that the practice of corporate governance has a
positive effect on company's operational performance by proxy CR, ROA, ROE and also a positive
influence on stock performance by proxy PBV.
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Keywords
Corporate Governance Practices, Financial Performance