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CORPORATE GOVERNANCE MECHANISMS AND ITS PERFORMANCE
Wisnu P. Setiyono

Universitas Muhammadiyah Sidoarjo


Abstract

The purpose of this paper is to investigate the impact of internal governance structures in relation to managerial performance in Indonesian companies. In addition, we employed three proxy variables to measure internal governance structures including board, ownership, and compensation structure as independent variables. This study also used Tobinsq as a proxy of managerial performance.
The study also used a sample of companies whose stocks are actively traded on the Indonesia Stock Exchange. The data used were panel data, namely, the data of cross section and time series from the period of 2006 to 2011. The sampling was simple random sampling, and the analytical techniques were logistics regression analysis.
The finding generally suggest a strong effect of internal governance structure measures in this data set. First, it is found that independent commissioners are effective in monitoring managerial performance, but the impact is negative. Secondly, the small proportion of managerial ownership is also found to be important result in this analysis. A higher proportion of insider ownership leads to an decrease in managerial performance. Finally, there is strong support for the view that the provision of executive bonuses has a positive impact of managerial performance. The results suggest that granting incentive compensation to managers is an appropriate way to increase their performance.

Keywords: Internal governance structures, managerial performance, Indonesia

Topic: Financial Management and Accounting

Plain Format | Corresponding Author (WISNU PANGGAH SETIYONO)

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