The Effect Of Good Corporate Governance And Company Size On Financial Performance In Banking Companies Listed On The Indonesia Stock Exchange For The 2013-2016 Period
The Effect of Good Corporate Governance and Company Size on Financial Performance in Banking Companies Listed on the Indonesia Stock Exchange (2013-2016)
Introduction
Good corporate governance (GCG) and company size are two critical factors that can significantly impact the financial performance of companies listed on the Indonesia Stock Exchange (IDX). The banking sector, in particular, is a highly regulated industry that requires strict adherence to GCG principles to ensure transparency, accountability, and sustainability. This study aims to analyze the effect of GCG, measured through the Board of Commissioners, Board of Directors, and Audit Committee, as well as company size on the financial performance of banking companies registered on the IDX in the 2013 to 2016 period.
Background
Previous research has yielded mixed results regarding the impact of GCG and company size on financial performance. Some studies have found a positive correlation between GCG and financial performance, while others have reported no significant effect. This study seeks to re-test existing theories and provide a deeper understanding of the factors that affect financial performance in the banking sector. By examining the relationship between GCG, company size, and financial performance, this study aims to contribute to the existing body of knowledge in the field of corporate governance and financial performance.
Methodology
The population used in this study consisted of 35 banking companies registered on the IDX. The sampling method applied was purposive sampling, where 29 sample companies were obtained for the 4-year observation period (2013-2016), with a total observation of 116. Research data were obtained from the company's annual reports downloaded from the official website of the Indonesia Stock Exchange. The data analysis techniques applied include descriptive statistical analysis and multiple regression analysis, which is carried out gradually by first carrying out a classic assumption test before conducting hypothesis testing.
Results
The results of this study indicate that partially, only the size of the company has a significant influence on financial performance. This indicates that larger companies tend to have better financial performance compared to smaller companies. On the other hand, simultaneous analysis revealed that the board of commissioners, board of directors, audit committees, and company size simultaneously had an influence on financial performance.
Additional Analysis and Explanation
The effect of company size on financial performance is a significant finding and can be explained from several points of view. The size of the company is often identified with larger capacity and resources, such as capital, technology, and more competent labor. This allows companies to make larger investments and get more optimal profits. Conversely, smaller companies may experience limitations in terms of resources that can affect their ability to compete in the market.
However, it is essential to note that although good GCG contributes to better performance, its effects can vary depending on the company's context. For example, the existence of an effective board of commissioners and directors may not be seen directly, but can play a role in building stakeholder trust and maintaining the company's reputation in the long run.
Meanwhile, this research also implies that banking companies that apply strong GCG principles, although they do not always have a significant effect on financial performance, still have important value in creating transparency and accountability. This will help attract investors and improve the company's position in the capital market.
Conclusion
The findings in this study are important to consider by the management of banking companies and other stakeholders. They need to continue to increase company size and apply good GCG in order to achieve optimal financial performance. Further research is needed to explore other factors that might affect financial performance, as well as to confirm these findings in a broader context in other sectors.
Recommendations
Based on the findings of this study, the following recommendations are made:
- Increase company size: Banking companies should continue to increase their size to take advantage of economies of scale and improve their financial performance.
- Apply good GCG: Banking companies should apply strong GCG principles to create transparency and accountability, which can help attract investors and improve their position in the capital market.
- Further research: Further research is needed to explore other factors that might affect financial performance, as well as to confirm these findings in a broader context in other sectors.
Limitations
This study has several limitations that should be acknowledged. Firstly, the sample size is relatively small, which may limit the generalizability of the findings. Secondly, the study only examines the effect of GCG and company size on financial performance, and does not consider other factors that may also impact financial performance. Finally, the study only examines the banking sector, and does not consider other sectors that may also be affected by GCG and company size.
Future Research Directions
Future research should aim to explore other factors that might affect financial performance, such as management quality, organizational culture, and industry characteristics. Additionally, future research should aim to confirm these findings in a broader context in other sectors, such as manufacturing, services, and technology. By exploring these research directions, future studies can provide a more comprehensive understanding of the factors that affect financial performance and contribute to the development of effective corporate governance practices.
Frequently Asked Questions (FAQs) about the Effect of Good Corporate Governance and Company Size on Financial Performance in Banking Companies Listed on the Indonesia Stock Exchange (2013-2016)
Q: What is the main objective of this study? A: The main objective of this study is to analyze the effect of Good Corporate Governance (GCG) and company size on the financial performance of banking companies registered on the Indonesia Stock Exchange (IDX) in the 2013 to 2016 period.
Q: What are the key findings of this study? A: The key findings of this study are that partially, only the size of the company has a significant influence on financial performance, and that the board of commissioners, board of directors, audit committees, and company size simultaneously had an influence on financial performance.
Q: What is the significance of this study? A: This study is significant because it provides a deeper understanding of the factors that affect financial performance in the banking sector, and it contributes to the existing body of knowledge in the field of corporate governance and financial performance.
Q: What are the limitations of this study? A: The limitations of this study are that the sample size is relatively small, which may limit the generalizability of the findings, and that the study only examines the effect of GCG and company size on financial performance, and does not consider other factors that may also impact financial performance.
Q: What are the implications of this study for banking companies and other stakeholders? A: The implications of this study for banking companies and other stakeholders are that they need to continue to increase company size and apply good GCG in order to achieve optimal financial performance.
Q: What are the recommendations of this study? A: The recommendations of this study are that banking companies should continue to increase their size to take advantage of economies of scale and improve their financial performance, and that they should apply strong GCG principles to create transparency and accountability, which can help attract investors and improve their position in the capital market.
Q: What are the future research directions suggested by this study? A: The future research directions suggested by this study are that further research should aim to explore other factors that might affect financial performance, such as management quality, organizational culture, and industry characteristics, and that further research should aim to confirm these findings in a broader context in other sectors.
Q: What are the practical implications of this study for banking companies and other stakeholders? A: The practical implications of this study for banking companies and other stakeholders are that they need to prioritize the implementation of good GCG practices and increase their company size in order to achieve optimal financial performance.
Q: What are the theoretical implications of this study? A: The theoretical implications of this study are that it contributes to the existing body of knowledge in the field of corporate governance and financial performance, and that it provides a deeper understanding of the factors that affect financial performance in the banking sector.
Q: What are the policy implications of this study? A: The policy implications of this study are that regulatory bodies and policymakers should prioritize the implementation of good GCG practices and encourage banking companies to increase their company size in order to achieve optimal financial performance.
Q: What are the future research directions suggested by this study for policymakers and regulatory bodies? A: The future research directions suggested by this study for policymakers and regulatory bodies are that they should prioritize the implementation of good GCG practices and encourage banking companies to increase their company size in order to achieve optimal financial performance.