The effect of the independent board of commissioners and motivation on financial distress

Abstract

Financial distress is carried out before real bankruptcy occurs in an industry. Problems in the finances of an industry are often faced because there are irregularities in it, the company does not have the ability to pay its long-term obligations to the total assets it has, while the margin obtained is not in line with the amount of assets that have been issued. The purpose of this study was to analyze the factors that influence financial distress with independent commissioners and motivation as the independent variables. The population used is the transportation company on the IDX (Indonesian Stock Exchange) for the 2019-2020 period with the purposive sampling method. The analysis technique used multiple linear regression using SPSS 25. The results obtained: motivation has a positive and significant effect on the financial distress variable and the independent board of commissioners has no significant effect on the financial distress variable. This study provides input to enrich the theory of the relationship between the Board of Independent Commissioners and Motivation towards Financial Distress.

Financial Ratio, Board Diversity and Financial Distress: Evidence from Indonesia

“…Independent Trustee is one of the corporate governance mechanisms that can reduce agency theory problems known as agency problems. Due to the existence of this independent commissioner, it can avoid information asymmetry between the two parties which can lead to possible financial difficulties [24].…”

The Effect of Cash Flow, Board Independence, and Company Size on Financial Distress

“…Therefore, a high proportion of board independence will minimize the possibility of the company to experience the financial distress (Zhafirah & Majidah, 2019). The previous research conducted by (Hasniati et al, 2017) and (Yusmaniarti et al, 2022) stated that board independence had an effect on financial distress, whereas (Muslifiansyah et al, 2022), (Annisa et al, 2022), and (Dirman, 2020) stated that board independence had no an effect on financial distress.…”

“…Financial distress is an early symptom in the form of bankruptcy which will be experienced by a company (Muslifiansyah et al, 2022). Financial distress is the company's inability to meet obligations which can be an early feature before bankruptcy.…”

“…Board independence consists of members who are not part of the control structure (Muslifiansyah et al, 2022). Unlike other board of commissioners, board independence does not have a direct relationship with the company so they are neutral (Zhafirah & Majidah, 2019).…”

“…Board independence has a function to keep the board of directors be responsible for its financial decisions and ensures that the business is protected from any potential harms. Therefore, board independence has a vital task so that the organization does not experience financial difficulties or financial distress (Hanafi & Breliastiti, 2016;Muslifiansyah et al, 2022).…”