Universitas Indonesia Conferences, Asia Pacific Business and Economics Conference

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The impact of independent directors existence on board of director to firm performance: Indonesia Evidence
Maharani Putri Sekar Nugroho

Last modified: 2017-12-21

Abstract


Independent director and ownership concentration are one of the most important things on corporate governance that affects firm performance. Independent director can improves firm performance because they can represent all shareholder interest, especially in the company with concentrated ownership. Indonesia is one of the countries where firms ownership is still concentrated. Indonesia now has a regulation which requires all public companies to have at least one independent director on board of director. The regulation is issued by Indonesia Stock Exchange (IDX) in 2014. This study examines the effect of independent directors on firm performace in  Indonesia. This study used 370 companies listed on the IDX as a research sample with   5 years observation period from 2012 to 2016. Using the panel data regression method with 4 different models, this study found that independent directors have a positive effects on firm performance measured through ROA. The study also found that ownership concentration strengthens the positive effect of independent directors on company performance as measured by ROA.


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