The Effect of Corporate Governance and Firm Performance on Stock Price: An Empirical Study on Indonesia Stock Exchange

Authors

  • Mulyono Mulyono Bina Nusantara University
  • Adi Teguh Suprapto Bina Nusantara University
  • Danang Prihandoko Bina Nusantara University

DOI:

https://doi.org/10.21512/bbr.v9i1.1916

Keywords:

Indonesia Stock Exchange, corporate governance, firm performance, Return on Asset (ROA), Total Asset Turnover (TATO), firm size, stock price

Abstract

This research aimed to determine the effect of corporate governance and firm performance on stock prices. It was shown by Corporate Governance Perception Index (CGPI), Return on Assets (ROA), Total Asset Turnover (TATO), and firm size (SIZE) in the Indonesia Stock Exchange (IDX). Data sample used in this research was company listed on IDX during 2009-2012 and participated in CGPI of that period. Financial statement data and stock prices could be obtained from the IDX website and CGPI data were from the Indonesian Institute for Corporate Governance. Hypothesis test used in this research was a multiple linear regression analysis. As a result, the application of corporate governance and ROA give positive but insignificant effect on stock prices. Meanwhile, TATO and SIZE have a positive and significant effect on stock prices. Both variables of corporate governance and firm performance influence stock prices significantly.

Dimensions

Plum Analytics

Author Biographies

Mulyono Mulyono, Bina Nusantara University

School of Business Management

Adi Teguh Suprapto, Bina Nusantara University

School of Business Management

Danang Prihandoko, Bina Nusantara University

School of Business Management

References

Adams, J. S. (1963). Towards an understanding of inequity. The Journal of Abnormal and Social Psychology, 67(5), 422-436. https://doi.org/10.1037/h0040968

Al-Haddad, W., Alzurqan, S. T., & Al-Sufy, F. J. (2011). The effect of corporate governance on the performance of Jordanian industrial companies: An empirical study on Amman Stock Exchange. International Journal of Humanities and Social Science, 1(4), 55-69.

Balasubramanian, N., Black, B. S., & Khanna, V. (2010). The relation between firm-level corporate governance and market value: A case study of India. Emerging Markets Review, 11(4), 319-340.

Bauer, R., Frijns, B., Otten, R., & Tourani-Rad, A. (2008). The impact of corporate governance on corporate performance: Evidence from Japan. Pacific-Basin Finance Journal, 16(3), 236-251.

Coombes, P. and Watson, M. (2000). Three surveys on corporate governance. The McKinsey Quarterly, 4, 74-77.

Drobetz, W., Schillhofer, A., & Zimmermann, H. (2004). Corporate governance and expected stock returns: Evidence from Germany. European Financial Management, 10(2), 267-293.

Forum for Corporate Governance in Indonesia. (2002). The essence of good corporate governance: konsep dan impementasi [i.e. implementasi] perusahaan publik dan korporasi Indonesia. Jakarta: Yayasan Pendidikan Pasar Modal Indonesia & Sinergy Communication.

Hill, C. W. L., & Jones, T. M. (1992) Stakeholder - agency theory. Journal of Management Studies, 29, 131-154.

IICG. (2013). Corporate governance perception index 2012 report: Good corporate governance in knowledge perspective. The Indonesian Institute for Corporate Governance.

Indonesia Stock Exchange. (2014). IDX quarterly statistic 2014. Retrieved from www.idx.co.id.

Iqbal, J. (2015). Operating performance and financial success: Evidence from Pakistani companies. Pakistan Business Review, 17(1), 45-59.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.

National Committee on Governance. (2006). The guiding of Indonesia’s good corporate governance. Retrieved from http://www.knkg-indonesia.org/

OECD. (2004). Principles of corporate governance. Retrieved from https://www.oecd.org/corporate/ca/corporategovernanceprinciples/31557724.pdf.

Pratiwi, N., & Suryanawa, I. K. (2014). Pengaruh good corporate governance dan corporate sosial responsibility disclosure pada return saham. E-Jurnal Akuntansi, 9(2), 465-475.

Reuters Staff. (2014). Good corporate governance leads to higher stock gains- study. Retrieved from http://uk.reuters.com/article/2014/09/15/corporategovernance-

study-idUKL6N0RG0Y520140915

Ross, S. A. (1973). The economic theory of agency: The principal’s problem. The American Economic Review, 63(2), 134-139.

Ross, S. A., Westerfield, R. W., & Jaffe, J. (2009). Corporate finance (9th ed.). McGraw-Hill.

Sekaran, U., & Bougie, R. (2013). Research methods for business: A skill-building approach (6th ed.). New York: Wiley.

Solomon, J., & Solomon, A. (2013). Corporate governance and accountability. England: John Wiley & Sons.

Suri, S. (2014). What Indonesia needs right now is good corporate governance. Retrieved from http://thejakartaglobe.beritasatu.com/opinion/whatindonesia-

needs-right-now-is-good-corporategovernance/

Uwuigbe, O. R. (2013). Corporate governance and share price: Evidence from listed firms in Nigeria. African Research Review, 7(2), 129-143.

Venkatraman, N., & Ramanujam, V. (1986). Measurement of business performance in strategy research: A comparison of approaches. Academy of Management Review, 11(4), 801-814.

Walker, S. (2013). Corporate Governance: Its effect on Share Price. In RIBM Doctoral Symposium (pp. 1-20).

Williamson, O. E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. New York: Free Press.

Yıldız, S., & Karakaş, A. (2012). Defining methods and criteria for measuring business performance: A comparative research between the literature in Turkey and foreign. Procedia-Social and Behavioral

Sciences, 58, 1091-1102.

Downloads

Published

2018-03-31
Abstract 7580  .
PDF downloaded 1270  .