THE BOARD OF COMMISSIONERS, CORPORATE SUSTAINABILITY CONCERNS AND COMPANY FINANCIAL PERFORMANCE: EVIDENCE FROM INDONESIAN COMMERCIAL BANKS
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Date
2019-01
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Fakultas Ekonomi Universitas Widyatama
Abstract
This study addresses the issue of whether mandatory internal corporate governance
mechanisms, particularly the role of board of commissioners as the board supervision
function, could influence corporate sustainability concerns as the construct of
corporate responsibility disclosure. Further, this study examines whether there is an
extended impact of the relationship of corporate sustainability concern on financial
performance, in terms of both financial health and market value performance. This
study provides evidence that the board of commissioners could be an important
control mechanism to encourage the company to be more concerned with corporate
sustainability with respect to economic, environment, and social activities. Further,
viewed from the shareholder perspective, the positive influence brought by the board
of commissioners on corporate sustainability concerns may dampen the firm's market
value. On the other hand, according to the stakeholder perspective, the positive
influence of the board of commissioners on corporate sustainability concern will
improve company market value performance through its financial health performance.
Moreover, this study also reveals that the motive of Indonesian banking companies in
engaging in corporate sustainability initiatives tends to be altruistic. Indonesian
commercial banking companies conduct corporate social responsibility activities only
for their own sake, which influences the reduction of the company’s financial
performance, both financial health and market value performance.
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Keywords
Board of Commissioners Structure, Corporate Sustainability, Corporate Responsibility Disclosure, Company Financial Performance and the Throughput Model