The Effect of Corporate Governance and Firm Performance on Stock Price: An Empirical Study on Indonesia Stock Exchange

Abstract

This research aimed to determine the effect of corporate governance and firm performance on stock prices. It was shown by Corporate Governance Perception Index (CGPI), Return on Assets (ROA), Total Asset Turnover (TATO), and firm size (SIZE) in the Indonesia Stock Exchange (IDX). Data sample used in this research was company listed on IDX during 2009-2012 and participated in CGPI of that period. Financial statement data and stock prices could be obtained from the IDX website and CGPI data were from the Indonesian Institute for Corporate Governance. Hypothesis test used in this research was a multiple linear regression analysis. As a result, the application of corporate governance and ROA give positive but insignificant effect on stock prices. Meanwhile, TATO and SIZE have a positive and significant effect on stock prices. Both variables of corporate governance and firm performance influence stock prices significantly.

Good Corporate Governance: Firm Performance and Ownership Causality Test

“…This result also consistent with Al-Haddad, Alzurqan, & Al-Sufy (2011), Sumarno, Widjaja, & Subandriah (2016), Andriana & Panggabean (2017), and Mulyono, Suprapto, & Prihandoko (2018), that support the argument that better corporate governance tends to have better performance, since there is causality between corporate governance and firm performance.…”

“…Some studies by Al-Haddad, Alzurqan, & Al-Sufy (2011), Sumarno, Widjaja, & Subandriah, (2016), Andriana & Panggabean (2017), and Mulyono, Suprapto, & Prihandoko (2018), support the argument that better corporate governance tends to have better performance, then there is a positive relationship between corporate governance and firm performance. Theoritically, Khan (2011) explained that corporate governance also enhances the long-term shareholder value by the process of accountability of managers and by enhances the firm's performance.…”

“…Most studies in Indonesia analyzed corporate governance as an internal mechanism (Sumarno, Widjaja, & Subandriah, 2016;Andriana & Panggabean, 2017;Mulyono, Suprapto, & Prihandoko, 2018), then this study will give empirical evidence whether internal, external, or both mechanism that was implemented as a corporate governance mechanism in Indonesia using causality test. The causality test may predict causality between ownership and firm performance, whether ownership is causing firm performance, firm performance is causing ownership or both event, there is said to be a feedback relationship between ownership and firm performance.…”

“…Al-Haddad, Alzurqan, & Al-Sufy (2011) found a positive direct relationship between corporate governance and corporate performance. Other studies in corporate governance using index (CGPI-Corporate Governance Perception Index) and stock return, conducted by Mulyono, Suprapto, & Prihandoko (2018). They found that corporate governance, among other variables, influenced stock prices.…”

Pengaruh Tat, Cr, Roa, Dan Per Terhadap Harga Saham Properti Dan Real Estate Di Bei

“…Hasil penelitian yang sama dilakukan oleh Karjono & Wijaya (2017) dan Rani & Diantini (2015) yang menemukan bahwa TAT memiliki pengaruh yang positif dan signifikan terhadap harga saham. Mulyono et al (2018) menemukan hasil yang sama yaitu TAT berpengaruh positif dan signifikan terhadap harga saham. Berdasarkan atas kajian teori serta hasil penelitian sebelumnya, maka dirumuskan hipotesis sebagai berikut: H1: Total Asset Turnover (TAT) berpengaruh positif dan signifikan terhadap harga saham CR merupakan rasio likuiditas yang umum digunakan untuk adalah rasio yang digunakan untuk mengukur tingkat likuiditas perusahaan.…”