The Influence Of Ownership Concentration, Independent Commissioners, Chief Risk Officers, Risk Management Committee, And Company Size On The Disclosure Of Enterprise Risk Management In Manufacturing Companies In The Consumer Goods Industry Sector Listed On The Indonesia Stock Exchange For The Period 2017-2020

The Influence of Ownership Concentration, Independent Commissioners, Chief Risk Officers, Risk Management Committee, and Company Size on the Disclosure of Enterprise Risk Management in Manufacturing Companies in the Consumer Goods Industry Sector Listed on the Indonesia Stock Exchange for the Period 2017-2020

Introduction

The disclosure of enterprise risk management (ERM) is a crucial aspect of corporate governance, as it enables stakeholders to assess a company's ability to manage risk and make informed investment decisions. In the consumer goods industry, manufacturing companies listed on the Indonesia Stock Exchange (IDX) are required to disclose their ERM practices in their annual reports. However, the extent to which these companies disclose their ERM practices varies, and the factors that influence this disclosure are not well understood.

This study examines the effect of ownership concentration, independent commissioners, Chief Risk Officer (CRO), Risk Management Committee (RMC), and company size on the disclosure of ERM in manufacturing companies in the consumer goods sector listed on the IDX for the period 2017-2020. The study uses secondary data from the company's annual reports available on the Bei website (www.idx.co.id) and employs multiple linear regression analysis using E-Views 10 software.

Literature Review

Previous studies have shown that corporate governance, risk management, and company size are important factors that influence ERM disclosure. However, the specific role of ownership concentration, independent commissioners, CRO, RMC, and company size in influencing ERM disclosure in the consumer goods industry is not well understood.

Ownership concentration refers to the percentage of shares held by a single individual or group of individuals. High ownership concentration can lead to better corporate governance, as the dominant shareholder has a greater incentive to monitor the company's performance and ensure that it is managed in a responsible manner.

Independent commissioners are appointed by the company's shareholders to oversee the company's management and ensure that it is acting in the best interests of the shareholders. The presence of independent commissioners can improve corporate governance and increase the likelihood of ERM disclosure.

The CRO is responsible for managing the company's risk and ensuring that it is aligned with the company's overall strategy. The CRO plays a critical role in identifying and mitigating risks, and their presence can increase the likelihood of ERM disclosure.

The RMC is responsible for overseeing the company's risk management practices and ensuring that they are aligned with the company's overall strategy. The RMC can provide guidance and support to the CRO and other risk management personnel, and their presence can increase the likelihood of ERM disclosure.

Company size can also influence ERM disclosure, as larger companies tend to have more resources and a more structured risk management system. Larger companies may also be subject to greater pressure from investors and regulators to disclose their ERM practices.

Methodology

This study uses secondary data from the company's annual reports available on the Bei website (www.idx.co.id). The data includes information on ownership concentration, independent commissioners, CRO, RMC, company size, and ERM disclosure for 53 manufacturing companies in the consumer goods sector listed on the IDX for the period 2017-2020.

The study employs multiple linear regression analysis using E-Views 10 software to examine the relationship between the independent variables (ownership concentration, independent commissioners, CRO, RMC, and company size) and the dependent variable (ERM disclosure).

Results

The results of the study show that ownership concentration, independent commissioners, CRO, RMC, and company size have a positive and significant influence on ERM disclosure. This suggests that companies with high ownership concentration, independent commissioners, a strong CRO, a well-functioning RMC, and a larger size are more likely to disclose their ERM practices.

The results also show that these variables have a significant influence on ERM disclosure simultaneously. This suggests that companies that have a combination of these factors are more likely to disclose their ERM practices.

Discussion

The results of this study have important implications for companies, investors, and regulators. Companies in the consumer goods industry should pay attention to the importance of corporate governance, especially the role of independent commissioners and RMCs, in encouraging better ERM disclosure. Professional and dedicated CRO formation is also an important factor for increasing the effectiveness of risk management and information transparency.

Investors can utilize ERM information expressed by companies to assess the company's ability to manage risk and improve the quality of investment decision making. Investors can also encourage companies to improve the quality of ERM disclosure through the mechanism of corporate social responsibility (CSR) and engagement.

Regulators can consider issuing firm policies related to ERM disclosure, such as setting minimum standards of disclosure and providing incentives for companies that make high-quality ERM disclosures.

Conclusion

This study provides new insights into the factors that influence ERM disclosure in manufacturing companies in the consumer goods industry sector listed on the IDX for the period 2017-2020. The results show that ownership concentration, independent commissioners, CRO, RMC, and company size have a positive and significant influence on ERM disclosure.

The study's findings have important implications for companies, investors, and regulators, and highlight the need for companies to pay attention to the importance of corporate governance and risk management in encouraging better ERM disclosure.

Suggestions for Further Research

• Subsequent research can examine the effect of other factors that might affect ERM disclosure, such as capital structure, leverage, and company profitability levels.
• Research can also be expanded using a more sophisticated analytical method and more comprehensive data to test the generalization of the findings of this study.
• It is necessary to do further research to examine the impact of ERM disclosure on company performance and company value.

By understanding the factors that influence ERM disclosure, companies can increase transparency and accountability in risk management, which in turn can increase investor confidence and other stakeholders.
Q&A: The Influence of Ownership Concentration, Independent Commissioners, Chief Risk Officers, Risk Management Committee, and Company Size on the Disclosure of Enterprise Risk Management

Frequently Asked Questions

Q: What is the purpose of this study?

A: The purpose of this study is to examine the effect of ownership concentration, independent commissioners, Chief Risk Officer (CRO), Risk Management Committee (RMC), and company size on the disclosure of enterprise risk management (ERM) in manufacturing companies in the consumer goods industry sector listed on the Indonesia Stock Exchange (IDX) for the period 2017-2020.

Q: What are the key findings of this study?

A: The key findings of this study are that ownership concentration, independent commissioners, CRO, RMC, and company size have a positive and significant influence on ERM disclosure. This suggests that companies with high ownership concentration, independent commissioners, a strong CRO, a well-functioning RMC, and a larger size are more likely to disclose their ERM practices.

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

A: The implications of this study for companies are that they should pay attention to the importance of corporate governance, especially the role of independent commissioners and RMCs, in encouraging better ERM disclosure. Professional and dedicated CRO formation is also an important factor for increasing the effectiveness of risk management and information transparency.

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

A: The implications of this study for investors are that they can utilize ERM information expressed by companies to assess the company's ability to manage risk and improve the quality of investment decision making. Investors can also encourage companies to improve the quality of ERM disclosure through the mechanism of corporate social responsibility (CSR) and engagement.

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

A: The implications of this study for regulators are that they can consider issuing firm policies related to ERM disclosure, such as setting minimum standards of disclosure and providing incentives for companies that make high-quality ERM disclosures.

Q: What are the limitations of this study?

A: The limitations of this study are that it uses secondary data from the company's annual reports available on the Bei website (www.idx.co.id) and employs multiple linear regression analysis using E-Views 10 software. The study also only examines the effect of ownership concentration, independent commissioners, CRO, RMC, and company size on ERM disclosure and does not consider other factors that may influence ERM disclosure.

Q: What are the suggestions for further research?

A: The suggestions for further research are that subsequent research can examine the effect of other factors that might affect ERM disclosure, such as capital structure, leverage, and company profitability levels. Research can also be expanded using a more sophisticated analytical method and more comprehensive data to test the generalization of the findings of this study. It is also necessary to do further research to examine the impact of ERM disclosure on company performance and company value.

Q: What are the practical implications of this study?

A: The practical implications of this study are that companies can increase transparency and accountability in risk management by paying attention to the importance of corporate governance and risk management. Investors can also utilize ERM information expressed by companies to assess the company's ability to manage risk and improve the quality of investment decision making. Regulators can also consider issuing firm policies related to ERM disclosure to encourage companies to make high-quality ERM disclosures.

Q: What are the future research directions?

A: The future research directions are that subsequent research can examine the effect of other factors that might affect ERM disclosure, such as capital structure, leverage, and company profitability levels. Research can also be expanded using a more sophisticated analytical method and more comprehensive data to test the generalization of the findings of this study. It is also necessary to do further research to examine the impact of ERM disclosure on company performance and company value.