The Corporate Governance Mechanism on Earnings Management and Firm Performance

Abstract

Corporate governance mechanism is a form of supervision of the company to run effectively and efficiently to improve firm performance and value. The supervision that corporate governance mechanism provide is to lesser the agency conflicts due the different interest between manager and owner such earnings management that is detrimental to shareholders. This study examines corporate governance as a supervisory mechanism that aims to improve firm performance, value and minimize earnings management. Then, we analyze the possibility that corporate governance mechanisms can improve firm’s performance and value by controlling earnings management. Using data of banking companies from 2018-2019 then tested using partial least squares with the WarpPLS application, we found evidence that corporate governance mechanisms positively influence the company's financial performance. Corporate governance mechanism has a negative effect on firm value. Corporate governance mechanisms have a negative effect on earnings management. Then earnings management does not provide a mediating effect in the relationship of corporate governance with the company's financial performance and firm value.

Pengaruh Corporate Governance Dan Karakteristik Perusahaan Terhadap Kinerja Keuangan

“…Corporate governance berfungsi sebagai alat untuk menjaga kepentingan pemangku kepentingan perusahaan, mencegah tindakan sewenang-wenang manajemen, dan mengawasi perilaku manajer perusahaan (Maulana et al, 2022). Tujuan utama corporate governance adalah untuk menjaga kepentingan dan hak pemegang saham dengan tujuan mengoptimalkan akumulasi kekayaan.…”

“…Penerapan corporate governance secara efisien sangat penting untuk meningkatkan kinerja perusahaan dan memitigasi risiko yang timbul dari pengambilan keputusan yang bersifat mementingkan diri sendiri oleh dewan. Corporate governance sebagai mekanisme dapat dilihat pula sebagai cara bagi perusahaan untuk memonitor perilaku manajer perusahaan agar tidak membuat keputusan yang salah, sehingga dapat meningkatkan kinerja dan nilai perusahaan di mata pasar modal (Maulana et al, 2022).…”

Bibliometric Analysis on Internal Corporate Governance: What Is the Next Research?

“…The form of supervision is divided into two mechanisms, namely, internal and external. The internal mechanism is a mechanism created to bridge the interests of managers and shareholders (Maulana, 2020;Maulana et al, 2022).…”