Optimizing good Corporate Governance Mechanism to Improve Performance: Case in Indonesia’s Manufacturing Companies

Napitupulu, Ilham Hidayah; Situngkir, Anggiat; Basuki, Ferry Hendro; Nugroho, Widyo

doi:10.1177/0972150920919875

Cited by 19 publications

(17 citation statements)

References 53 publications

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“…Independent commissioners play a critical role in establishing good CG. The term “independent” in relation to the post of independent commissioner refers to the idea that an independent commissioner’s duties and obligations are carried out freely and without coercion from interested parties (Napitupulu et al , 2020). An independent commissioner, such as an independent director, has no particular relationships with other internal parties in the company, hence he is considered as decreasing the risk of agency conflict between top management and shareholders to cut agency costs (Naciti, 2019; Al-Matari, 2020).…”

Section: Theoretical Review and Hypotheses Developmentmentioning

confidence: 99%

Does corporate governance induce green innovation? An emerging market evidence

Asni

Agustia

2022

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Purpose This study aims to investigate the effect of corporate governance (CG) mechanisms (board size, independent commissioner and ownership concentration) on green innovation (GI) in publicly traded companies of Indonesia as an emerging market. Design/methodology/approach Archival data relating to CG and GI were collected for five years (2016–2020). A total of 640 observations were obtained and analyzed using a random effect model. Findings The results indicate that effective governance mechanisms can encourage GI implementation to promote company sustainability. Respectively, the board size, independent commissioner and ownership concentration positively and significantly affect GI. These results imply that the optimal board size will result in effective coordination and cooperation in making GI decisions. Likewise, the proportional independent commissioners in the board structure will serve an effective oversight function. And concentrated ownership can influence executives to prefer innovation policies, such as GI. Research limitations/implications First, only a few CG mechanisms were used in this investigation. Therefore, further research needs to consider other mechanisms such as the number of commissioners, internal and external commissioners. Second, this research focused solely on Indonesia as an emerging market. Future research can be expanded to include countries with other emerging market characteristics. Third, different GI measurements from this study should be considered in future studies. Practical implications Practically, the results of this study are expected to provide policy recommendations, including optimizing the CG mechanisms as a control tool to achieve organizational sustainability through GI according to stakeholder expectations. This can be achieved by optimizing the size of the board of directors. The low value of the board size coefficient implies that optimization of board size is needed to encourage GI. The company can gain directors’ competence, experience and skill to increase innovation performance. In addition, maximizing the role of independent commissioners in overseeing is required for continuous innovation activities. Finally, the control of large shareholders is also necessary to encourage the implementation of GI because they could influence management to make innovative decisions. Originality/value This study extends and contributes to the extant CG and GI literature. There is little evidence that reveals how CG mechanisms affect GI, particularly in emerging market settings. The findings offer some important evidence for improving CG in driving GI implementation.

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Section: Theoretical Review and Hypotheses Developmentmentioning

confidence: 99%

Does corporate governance induce green innovation? An emerging market evidence

Asni

Agustia

2022

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“…According to agency theory, the small size of the board of directors can guarantee good oversight thereby reducing the occurrence of tax evasion while the large size of the board of directors results in large tax evasion (Jensen and Meckling, 1978) Agency theory assesses that the greater the number of independent commissioners, the higher their influence in monitoring management performance (Arianti, 2020). Meanwhile, from the stakeholder theory, the existence of an independent board of commissioners will supporting GCG principles and the functioning of an independent board of commissioners will safeguard the interests of parties with an interest in the company (Napitupulu et al, 2020). This research is supported by Wijayanti and Merkusiwati (2017) and Honggo and Marlinah (2019) showing that independent commissioners have a negative effect on tax evasion.…”

Section: Hypothesis Development 161 Effect Of the Bord Of Directors O...mentioning

confidence: 99%

The Effect of Good Corporate Governance Mechanism, Leverage, and Profitability on Tax Avoidance

Sibarani¹,

Nova²,

Simanjuntak³

et al. 2023

JEFMS

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This study aims to examine the effect of good corporate governance (GCG) mechanisms, leverage, and profitability on tax avoidance. The GCG mechanism is measured by several elements, such as the board of directors, independent commissioners and the audit committee. This research was conducted on energy sector companies as many as 19 companies out of 74 companies listed on the Indonesian Stock Exchange. Research data were obtained from financial reports and analyzed using multiple linear regression with the SPSS statistical program. The results of this study indicate that the board of directors and leverage have an effect on tax avoidance, while the independent commissioner, audit committee and profitability variables have no effect on tax avoidance

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“…Literature has shown that greater board independence can lead to better performance. Napitupulu et al (2020), analyzing 52 listed companies in Indonesia, concluded that company performance, as measured by ROA, is improved by a board of directors with independent members to provide guidance and supervision for the company management. Also, Ben Barka and Legendre (2017) and Liu et al (2015) point out a positive relationship between the board’s independence and the company’s performance measured by ROE and ROA.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Governance and social responsibility: what factors impact corporate performance in a small banking-oriented country?

Neves

Proença²,

Cancela³

2022

IJAIM

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Purpose This paper aims to analyze the corporate governance and corporate social responsibility (CSR) determinants of the Portuguese listed companies’ performance, considering a different point of view by managers, shareholders and other external stakeholders and investors. Design/methodology/approach To achieve this aim, the authors have used a sample of 34 nonfinancial listed companies in Euronext Lisbon between 2015 and 2020. The authors use the panel data methodology to test the hypotheses formulated according to the literature review, specifically the generalized method of moments (GMM) system estimation model proposed by Arellano and Bond (1991). Findings The main results point out that the determinants of the corporate performance vary depending on the dependent variable considered. From the managers’ perspective, the existence of an audit committee and expenses with the environment increase costs and reduce results, negatively influencing corporate performance, but the company’s maturity adds synergies in resource management and positively influences performance. Shareholders consider that gender diversity and board independence positively influence performance, whereas, for external stakeholders and long-term investors, gender diversity and the social responsibility committee harm the performance of Portuguese companies. However, environmental and social expenditures have a positive effect, showing that the market’s perception is that, in the long run, it is essential to eradicate poverty and protect the environment. Originality/value To the best of the authors’ knowledge, this study is the first one to analyze corporate governance and CSR determinants on the performance of listed Portuguese companies. This study shows that in a small banking-oriented country, there is still a long way to go in terms of increasing social responsibility and governance among different stakeholders. It is essential to promote actions that lead to effective governance and awareness of social responsibility.

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Optimizing good Corporate Governance Mechanism to Improve Performance: Case in Indonesia’s Manufacturing Companies

Cited by 19 publications

References 53 publications

Does corporate governance induce green innovation? An emerging market evidence

Does corporate governance induce green innovation? An emerging market evidence

The Effect of Good Corporate Governance Mechanism, Leverage, and Profitability on Tax Avoidance

Governance and social responsibility: what factors impact corporate performance in a small banking-oriented country?

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