ANALYSIS THE EFFECT OF GOOD CORPORATE GOVERNANCE IMPLEMENTATION ON PROFITABILITY OF BANKING SECTOR LISTED IN INDONESIA STOCK EXCHANGE PERIOD 2012 – 2014

Abstract

Implementing corporate governance (GCG) is not an easy process. Required mission, commitment, and an excellent understanding of all stakeholders the company on how the process should be run. Implementation of the practices of good corporate governance is an important step for the company to improve and maximize the value of the Company, pushing to manage the company in a professional, transparent and efficient by increasing the principles of, trustworthy, responsible, openness, accountability and fair so as to fulfill its obligations either to the Shareholders, Board of Directors, Board of Commissioners, and stakeholders. This reasearch used purposive sampling based on banking sector index for the period of 2012 – 2014. This study used multiple regression model with 5% significant level. The objective of this study is to know the effect of good corporate governance implementation on profitability of banking sector listed in Indonesia Stock Exchange for the period of 2012-2014. The result of this research showed that the audit committee, board of directors, and board of commissioners have significant effect towards profitability. Meanwhile, audit quality, composition of board of commissioners, and top share have insignificant effect towards profitability. Simultaneously, audit quality, audit committee, board of directors, board of commissioners, composition of board of commissioners, and top share have significant effect towards profitability with 35.3% adjusted R2.