The Influence Of Independent Commissioners, The Size Of The Board Of Commissioners, Auditor Reputation, And The Risk Of Financial Reporting On The Existence Of The Risk Management Committee In Manufacturing Companies Listed On The Indonesia Stock Exchange (IDX) In 2013-2015

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The Influence of Independent Commissioners, Board of Commissioners' Size, Auditor's Reputation, and Risk of Financial Reporting on the Existence of Risk Management Committee in Manufacturing Companies Listed on the Indonesia Stock Exchange (IDX) in 2013-2015

Introduction

The existence of a Risk Management Committee (RMC) in manufacturing companies listed on the Indonesia Stock Exchange (IDX) is crucial in identifying, managing, and minimizing the risks that the company might face. The RMC plays a significant role in increasing transparency and accountability, as well as providing more confidence to investors. However, the factors that influence the existence of RMC in manufacturing companies listed on the IDX are not well understood. This study aims to analyze the effect of various factors on the existence of RMC in manufacturing companies listed on the IDX between 2013 and 2015.

Background

The Indonesia Stock Exchange (IDX) is the primary stock exchange in Indonesia, and it plays a crucial role in the country's capital market. The IDX is home to over 600 listed companies, including manufacturing companies. The manufacturing sector is one of the largest sectors in the IDX, with companies such as Unilever Indonesia, Indofood, and Astra International listed on the exchange. The existence of RMC in manufacturing companies listed on the IDX is essential in managing risks and increasing transparency and accountability.

Research Methodology

This study uses a causal research method, with a population consisting of 67 manufacturing companies in the basic and chemical industry sector. Through the purposive sampling method, 44 companies were chosen as samples based on certain criteria. The data used in this study is secondary data, which was analyzed using the logistics regression analysis method with the help of SPSS software.

Independent Variables

The independent variables in this study are:

  • Independent Commissioners: Independent commissioners are members of the board of commissioners who are not affiliated with the company or its management. They play a crucial role in overseeing the company's management and ensuring that the company operates in a transparent and accountable manner.
  • Size of the Board of Commissioners: The size of the board of commissioners refers to the number of members on the board. A larger board of commissioners may provide more diverse perspectives and expertise, which can be beneficial in managing risks.
  • Auditor's Reputation: The auditor's reputation refers to the credibility and trustworthiness of the auditor. A reputable auditor can provide assurance that the company's financial statements are accurate and reliable.
  • Risk of Financial Reporting: The risk of financial reporting refers to the likelihood of the company's financial statements being inaccurate or misleading. A higher risk of financial reporting can lead to a higher likelihood of RMC formation.

Dependent Variable

The dependent variable in this study is the existence of RMC in manufacturing companies listed on the IDX.

Results

The results of this study show that the risk of financial reporting has a significant influence on the existence of RMC partially. This means that the higher the risk of financial reporting, the more likely the company is to form RMC as an effort to mitigate. Meanwhile, the independent commissioner variable, the size of the board of commissioners, and the auditor's reputation did not show a partial significant effect on the existence of RMC.

However, when viewed simultaneously, all variables - independent commissioners, board of commissioners' size, auditor's reputation, and financial reporting risk - significant influence on the existence of the Risk Management Committee. This shows that although several factors have no strong influence when analyzed one by one, a combination of all these factors can influence company decisions in establishing RMC.

Discussion

The results of this study provide a clear picture of the dynamics between company structure, auditor's reputation, and risks faced in the context of the existence of the Risk Management Committee in manufacturing companies in Indonesia. This is important for better managerial strategies and to improve the company's performance and reputation in the capital market.

The existence of RMC in manufacturing companies listed on the IDX is crucial in managing risks and increasing transparency and accountability. The results of this study show that the risk of financial reporting has a significant influence on the existence of RMC partially. This means that the higher the risk of financial reporting, the more likely the company is to form RMC as an effort to mitigate.

Conclusion

In conclusion, this study provides a clear picture of the dynamics between company structure, auditor's reputation, and risks faced in the context of the existence of the Risk Management Committee in manufacturing companies in Indonesia. The results of this study show that the risk of financial reporting has a significant influence on the existence of RMC partially. This means that the higher the risk of financial reporting, the more likely the company is to form RMC as an effort to mitigate.

Recommendations

Based on the results of this study, the following recommendations are made:

  • Manufacturing companies listed on the IDX should pay attention to the risk of financial reporting: Companies should take steps to mitigate the risk of financial reporting, such as implementing internal controls and ensuring that financial statements are accurate and reliable.
  • Independent commissioners should play a more active role: Independent commissioners should play a more active role in overseeing the company's management and ensuring that the company operates in a transparent and accountable manner.
  • Board of commissioners' size should be optimized: The size of the board of commissioners should be optimized to ensure that the board has the necessary expertise and perspectives to manage risks effectively.
  • Auditor's reputation should be maintained: The auditor's reputation should be maintained by ensuring that the auditor provides accurate and reliable assurance on the company's financial statements.

Limitations

This study has several limitations, including:

  • Sample size: The sample size of this study is relatively small, which may limit the generalizability of the results.
  • Data quality: The data used in this study is secondary data, which may be subject to errors or biases.
  • Research design: The research design of this study is causal, which may not capture the complexity of the relationships between the variables.

Future Research Directions

Future research directions include:

  • Investigating the effect of RMC on company performance: Future research should investigate the effect of RMC on company performance, including financial performance and stock price performance.
  • Examining the role of RMC in managing risks: Future research should examine the role of RMC in managing risks, including financial risks and operational risks.
  • Investigating the impact of RMC on investor confidence: Future research should investigate the impact of RMC on investor confidence, including the effect of RMC on investor perceptions of company risk and return.
    Frequently Asked Questions (FAQs) about the Influence of Independent Commissioners, Board of Commissioners' Size, Auditor's Reputation, and Risk of Financial Reporting on the Existence of Risk Management Committee in Manufacturing Companies Listed on the Indonesia Stock Exchange (IDX)

Q: What is the purpose of a Risk Management Committee (RMC) in a manufacturing company?

A: The purpose of a RMC is to identify, manage, and minimize the risks that the company might face. RMC plays a crucial role in increasing transparency and accountability, as well as providing more confidence to investors.

Q: What are the factors that influence the existence of RMC in manufacturing companies listed on the IDX?

A: The factors that influence the existence of RMC in manufacturing companies listed on the IDX are independent commissioners, board of commissioners' size, auditor's reputation, and risk of financial reporting.

Q: What is the role of independent commissioners in the existence of RMC?

A: Independent commissioners play a crucial role in overseeing the company's management and ensuring that the company operates in a transparent and accountable manner. They can influence the existence of RMC by ensuring that the company has a robust risk management framework in place.

Q: How does the size of the board of commissioners affect the existence of RMC?

A: The size of the board of commissioners can affect the existence of RMC by providing more diverse perspectives and expertise. A larger board of commissioners may be more effective in managing risks and increasing transparency and accountability.

Q: What is the significance of auditor's reputation in the existence of RMC?

A: Auditor's reputation is crucial in the existence of RMC as it provides assurance that the company's financial statements are accurate and reliable. A reputable auditor can influence the existence of RMC by ensuring that the company has a robust risk management framework in place.

Q: How does the risk of financial reporting affect the existence of RMC?

A: The risk of financial reporting has a significant influence on the existence of RMC. Companies with a higher risk of financial reporting are more likely to form RMC as an effort to mitigate.

Q: What are the benefits of having a RMC in a manufacturing company?

A: The benefits of having a RMC in a manufacturing company include increased transparency and accountability, improved risk management, and increased confidence to investors.

Q: How can manufacturing companies listed on the IDX improve their risk management practices?

A: Manufacturing companies listed on the IDX can improve their risk management practices by implementing a robust risk management framework, ensuring that financial statements are accurate and reliable, and having a RMC in place.

Q: What are the limitations of this study?

A: The limitations of this study include sample size, data quality, and research design.

Q: What are the future research directions?

A: Future research directions include investigating the effect of RMC on company performance, examining the role of RMC in managing risks, and investigating the impact of RMC on investor confidence.

Q: What are the implications of this study for policymakers and regulators?

A: The implications of this study for policymakers and regulators include the need to strengthen the risk management framework for manufacturing companies listed on the IDX, ensure that financial statements are accurate and reliable, and promote the existence of RMC in these companies.

Q: What are the implications of this study for investors?

A: The implications of this study for investors include the need to consider the risk management practices of manufacturing companies listed on the IDX when making investment decisions, and to look for companies with a robust risk management framework in place.