The effect of board governance and debt policy on value of non-financial firms

Abstract

Supervisory board plays an essential role to implement good governance in firm. If this governance is implemented well, the increase in firm value will occur. Related to this statement, the main question that appears is about the number and independence rate of supervisory board members needed to enhance firm value. Besides supervisory board, debt policy holds an important role for firm because of bankruptcy issue. Firm with good governance tries to avoid this issue by decreasing the amount of its debt to create high value.The aim of this study is to test and analyze the effect of board governance, consisting of size and independence of supervisory board, and debt policy on value of non-financial firms forming the Kompas 100 Index on Indonesia Stock Exchange. To be able to generalize results on all non-financial firms forming this index, stratified random sampling method is used to take firms as the sample from the population. Method of data analysis used is fixed effect regression model.This study infers that the number of supervisory board members has no effect on firm value, whereas board independence and debt policy have the effect on firm value: firm with high portion of supervisory board independence and the amount of debt significantly tends to have low value.

Corporate Governance and R&D Strategic Decision Making

“…Supervisory board independence has a negative effect on firm value. It means to create high firm value; shareholders have to appoint more members of insider supervisory board, because they can collaborate with board directors (Sahabuddin & Hadianto, 2019).…”

Profits Management with Classification Shifting: Testing the Impact of Discontinued Operations and Institutional Ownership on Unexpected Core Earnings

“…Descriptive statistics are required to describe the variables based on statistical measurements (Hartono, 2012), for example, the observation number (N), minimum, maximum, mean, standard deviation (Sahabuddin & Hadianto, 2019). Because the samples consist of 28 firms for four years, the N becomes 112, where the details for each variable are in the third table.…”