The Effect of Good Corporate Governance on Financial Performance of The Company (Empirical Study on Manufacturing Company of Consumer Goods Sector Industry Listed On Indonesia Stock Exchange Year 2015- 2016)

Abstract

This study aims to examine the influence of the implementation of good corporate
governance to the financial performance of the company. Good corporate governance is
an independent variable that is measured using the following components: number of
boards of directors, the proportion of board of commissioners, company size, and Debt
to Equity Ratio. While the company's financial performance is a dependent variable
measured by Return On Equity (ROE). The population in this research is all
manufacturing companies of consumer goods industry sector listed in Indonesia Stock
Exchange and continuously publish the financial report in 2015 until 2016. Pursuant to
purposive sampling method, the sample obtained counted 34 company every year in
year period 2015-2016, so the data obtained as much as 68 data observation. The result
of this research shows that the proportion of board of commissioner has positive
influence to company performance, and while the number of a board of directors, firm
size and Debt to Equity Ratio there is no significant effect to financial performance.
Based on the determination coefficient test (R2) obtained the coefficient of
determination with value R2 obtained is 0.277 and when converted to percent to 27.70%.
This result shows the percentage of contribution of board of director, proportion of
board of commissioner, firm size and debt to equity ratio to company financial
performance equal to 27,70% while the rest equal to 72,30% influenced by other
variables not included in this research model.
Keywords: Good Corporate Governance, Corporate Financial Performance.