Financial Performance and Corporate Governance: Its Effect on Market Performance

Abstract

This chapter investigates the effect of financial performance and corporate governance on market performance, using evidence from the companies listed on the IDX30 Index of the Indonesia Stock Exchange (IDX) from 2015 to 2018. The authors use six main independent variables and one dependent variable, controlled by using control variables in the regression analysis. Ordinary least square (OLS) regression methods are used to model the relationship between the dependent variable and the independent variables. The results show that the current ratio (CR) and Board Size (BS) have a significant negative effect on stock return (SR). In contrast, the quick ratio (QR) and debt to equity ratio (DER) have a significant positive impact on SR. Both the debt to asset ratio (DAR) and Independent Board of Commissioners (BOC) have an insignificant effect on SR. This evidence suggests that the CR, QR, DER, and BS are essential factors affecting SR.

Citation

Imamah, N., Worokinasih, S., Firdayani, Z. and Hung, J.-H. (2023), "Financial Performance and Corporate Governance: Its Effect on Market Performance", Barnett, W.A. and Sergi, B.S. (Ed.) Macroeconomic Risk and Growth in the Southeast Asian Countries: Insight from SEA (International Symposia in Economic Theory and Econometrics, Vol. 33B), Emerald Publishing Limited, Leeds, pp. 25-39. https://doi.org/10.1108/S1571-03862023000033B002