The Effect of Good Corporate Governance

On Company Performance
Empirical Study of Banking Companies Listed In
The Indonesia Stock Exchange In The Period
2013 – 2017

Compiled by :
Wahyu Nugroho Indrawinata
1417104012

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 BACKGROUND RESEARCH

The banking sector has an important role in

the Indonesian economy. Therefore, the
banking sector needs to build strong
resistance to provide assurance to the public
that the banking sector has a good
performance.

During 2013 to 2017, the company performance

as measured by return on assets in the banking
sector have fluctuated as a impact of instability
of Indonesian economics. Internal factors may
be the main causes such as company
performance and conditions of corporate
governance.

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 FORMULATION
RESEARCH OBJECTIVES
OF THE PROBLEMS

1. Analyzing the influence of managerial

1. Does managerial ownership affect the
company ?
2. Does institutional ownership affect
company performance?
3. Does independent commissioners affect
company performance?
4. Does the board of directors affect the
company's performance?
5. Does the audit committee affect the
company's performance?
6. Is managerial ownership, institutional
ownership, independent commissioner,
board of directors, audit committee
influencing company performance ?
ownership on financial performance.
2. Analyzing the influence of institutional
ownership on financial performance.
3. Analyzing the influence of independent
commissioners on financial
performance.
4. Analyzing the influence of the board of
directors on financial performance.
5. Analyze the influence of the audit board
on financial performance.
6. Analyzing the influence of managerial
ownership, institutional ownership,
independent commissioners, board of
directors, audit committees influences
company performance.

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RESEARCH FRAMEWORK

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 RESEARCH HYPOTHESIS
Variables Definition Symbol Expected Sign
Independent variables
Managerial
The proportion of shares owned by management KM H1 (+)
ownership
Institutional
The number of shares owned by the manager KI H2 (+)
ownership
Organ of the Company which is fully responsible
The board of
for managing the Company for the benefit of the DD H3 (+)
directors Company
Independent Board of Commissioners members whose existence
KIND H4 (+)
commisioner is neutral.
committee to assist the board of commissioners in
Audit committee fulfilling their supervisory responsibilities
KA H5 (+)
a system that regulates, manages, and oversees
Good corporate
business control for the success of the company's GCG H6 (+)
governance business
Dependent variables
is a comparison ratio between pre-tax profit and
Return On Assets average total assets.
ROA

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 RESEARCH METHOD
Method
The method used in this
research is quantitative
descriptive.
Data
Data used in this research is
secondary data obtained from
official website of Indonesia
Stock Exchange.
Sample
The sample in this study were 30
companies in the banking sector
which were selected using purposive
sampling technique.
Data Analysis Method
• Classic assumption test
(multicolinearity, and
heterocedasticity test)
• F test (Model/goodness-of-fit test)
• Coefficient of determination test
• Hypothesis test
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 RESEARCH RESULT

Classic Assumption Test

The classic test consist of multicollinearity, and heterocedasticity test show
there is no multicollinearity and heterocedasticity. The estimation model can be
used for further testing.

Model Test / F-Test

Based on the data processing, we obtained Fcalculated is 2.842341 with αcalculated is
0.017682 , meanwhile Ftable is 1.976013 with αcalculated 0,05. It shows that F calculated >
Ftable, and αcalculated < 0,05, its means that independent variables used in this research
able to define dependent variable in a good way or the regression model is fix.

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 RESEARCH RESULT

Coefficient of Determination (R2)

Panel data regression analysis with Random Effect model shows the adjusted R square
value of 0.089827, this means that independent variables consisting of managerial
ownership, institutional ownership, independent commissioners, boards of directors
and audit committees can explain or influence the dependent variable namely return on
assets of the company the banking sector in 2013 - 2017 was 8.982%, while the
remaining 91.018% was influenced by other variables.

Hypothesis Test / t-test

The hypothesis test results show that
1. managerial ownership, institutional ownership, independent commissioners, board
of directors and audit committees simultaneously have a significant effect on return
on assets.
2. Independent commissioners partially have a significant effect on return on assets.
3. Managerial ownership, institutional ownership, board of directors and audit
committee partially have no significant effect on return on assets.

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 CONCLUSION

1. The influence of good corporate governance in terms of managerial ownership does

not have a significant effect on the performance of banking companies as measured
by return on assets (ROA).
2. The influence of good corporate governance in terms of institutional ownership does
not have a significant effect on the performance of banking companies as measured
by return on assets (ROA).
3. The influence of good corporate governance in terms of independent commissioners
has a significant effect on the performance of banking companies as measured by
return on assets (ROA).
4. The influence of good corporate governance in terms of the board of directors does
not have a significant effect on the performance of banking companies as measured
by return on assets (ROA).
5. The influence of good corporate governance in terms of audit committees does not
have a significant effect on the performance of banking companies as measured by
return on assets (ROA).
6. The effect of good corporate governance together has a significant effect on the
performance of banking companies as measured by return on assets (ROA).

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FAKULTAS BISNIS DAN MANAJEMEN

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