Abstract:
The implementation of Good Corporate Governance on the organization is expected to enhance the company performance and firm value as it is considered may promote transparent and accurate financial statement as well as provide assurance to the investors. This research examines the influence of corporate governance to the corporate performance.
To examine that influence, a multiple linear regression is employed to test the hypothesis that corporate governance influences corporate performance. The rating of corporate governance Score for 2008 and 2010 by the Indonesian Institute for Corporate Directorship (IICD) is used to measure the corporate governance implementation. Return on assets (ROA), return on equity (ROE), and net profit margin (NPM) ratio are used as performance measurement. Control variables in this research are company’s size, leverage and growth.
The result shows there is significant positive influence of corporate governance index on ROA at 5% significance level, and on ROE at 10% level. However, there is insignificant influence of corporate governance index to NPM. It shows that implementation of GCG has some effects on the company’s performance and suggests that a better-governed company may resulted to a better performance. The F-Testing also shows that the independent variables -as a unity- affect the company’s performance.
The companies, either listed or not-listed on IDX are encouraged to implement good corporate governance (GCG) as it delivers positive values within the company, which in turn, may provide future benefits to company. As the recommendation for further research for this topic is the need to consider of extending samples, year-observed, and control variables, in order to possibly produce more significant result.
