Corporate Governance and Company Value

Oct 13, 2025 by magicalceylontours.com 72 views

The Effect of Good Corporate Governance on Company Value with Profitability as a Moderation Variable in Automotive Companies and Components Listed on the Indonesia Stock Exchange

Introduction

In the business world, company value is a crucial indicator that assesses the health and sustainability of a company. It refers to the selling value of the company as an operating entity. Various factors can affect company value, such as public ownership, institutional ownership, audit committee, and the Board of Commissioners. This study aims to analyze the effect of these factors on company value with profitability as a moderation variable, especially in automotive companies and components listed on the Indonesia Stock Exchange (IDX) from 2017 to 2022.

Background of the Study

The importance of good corporate governance (GCG) in the context of companies listed on the stock exchange cannot be overstated. Good GCG is expected to increase investor confidence, thus affecting the value of the company. In the automotive sector, companies must pay attention to aspects of good corporate governance to increase their value. This study focuses on the effect of GCG factors on company value, with profitability as a moderation variable.

Literature Review

Previous studies have shown that good corporate governance can have a positive impact on company value. However, the relationship between GCG factors and company value is complex and influenced by various factors. This study aims to contribute to the existing literature by analyzing the effect of GCG factors on company value in the automotive sector, with profitability as a moderation variable.

Methodology

This study includes the population of automotive companies listed on the IDX, with a total of 12 companies studied for six years, producing 72 observations. The analysis method used is linear regression analysis and interaction analysis techniques to see the relationship between variables.

Analysis of the Effect of Good Corporate Governance

Good Corporate Governance (GCG) is very important in the context of the company listed on the stock exchange. Good GCG is expected to increase investor confidence, thus affecting the value of the company. This study shows that although public ownership and institutional ownership do not significantly effect, the existence of a strong board of commissioners can increase company value. This may be caused by the active role of the Board of Commissioners in overseeing management performance and ensuring that the decisions taken are in line with the interests of shareholders.

The effective board of commissioners can also increase transparency and accountability, which in turn can increase investor confidence. Meanwhile, the absence of a significant influence of the audit committee shows that the company may need to improve the function and structure of this committee to further support good corporate governance.

Profitability as a Moderation Variable

On the other hand, the results of the interaction test show that profitability cannot moderate the effect of public ownership on company value, but can moderate the effect of institutional ownership, audit committee, and the Board of Commissioners on company value. This shows that companies that have a higher level of profitability will be able to maximize the positive effects of the GCG factors on the company's value.

Profitability can be considered as an indicator of the company's financial health that can attract the attention of investors. With good profitability, the influence of corporate governance factors will be stronger, thereby encouraging an increase in company value. Therefore, companies in the automotive sector need to manage and increase their profitability in order to maximize the benefits of good GCG practices.

Conclusion

In order to increase the value of the company, automotive companies listed on the Indonesia Stock Exchange must pay attention to aspects of good corporate governance by emphasizing the strengthening of the Board of Commissioners. Meanwhile, profitability must be used as a major focus in order to support good governance practices and increase overall company value. This research is expected to provide insight for business practitioners and stakeholders in understanding the importance of GCG and profitability in the context of company value.

Implications of the Study

This study has several implications for business practitioners and stakeholders. Firstly, it highlights the importance of good corporate governance in the automotive sector. Companies must pay attention to aspects of good corporate governance, such as the strengthening of the Board of Commissioners, to increase their value. Secondly, it emphasizes the role of profitability in supporting good governance practices and increasing company value. Companies must manage and increase their profitability to maximize the benefits of good GCG practices.

Limitations of the Study

This study has several limitations. Firstly, it only focuses on the automotive sector and may not be generalizable to other sectors. Secondly, it only analyzes the effect of GCG factors on company value and may not consider other factors that can affect company value. Finally, it only uses linear regression analysis and interaction analysis techniques, which may not capture the complexity of the relationship between GCG factors and company value.

Future Research Directions

This study provides several directions for future research. Firstly, it can be extended to other sectors to see if the findings are generalizable. Secondly, it can consider other factors that can affect company value, such as market conditions and economic indicators. Finally, it can use more advanced analysis techniques, such as machine learning algorithms, to capture the complexity of the relationship between GCG factors and company value.

References

[1] Agency Theory. (2022). Journal of Corporate Finance, 71, 102-115.
[2] Corporate Governance and Company Value. (2020). Journal of Business Ethics, 163(2), 241-255.
[3] The Effect of Good Corporate Governance on Company Value. (2019). Journal of Financial Economics, 133(2), 341-355.

Note: The references provided are fictional and for demonstration purposes only.
Frequently Asked Questions (FAQs) about the Effect of Good Corporate Governance on Company Value with Profitability as a Moderation Variable in Automotive Companies and Components Listed on the Indonesia Stock Exchange

Q: What is the main objective of this study?

A: The main objective of this study is to analyze the effect of good corporate governance (GCG) factors on company value with profitability as a moderation variable, especially in automotive companies and components listed on the Indonesia Stock Exchange (IDX) from 2017 to 2022.

Q: What are the GCG factors analyzed in this study?

A: The GCG factors analyzed in this study include public ownership, institutional ownership, audit committee, and the Board of Commissioners.

Q: What is the significance of profitability as a moderation variable in this study?

A: Profitability is considered as an indicator of the company's financial health that can attract the attention of investors. With good profitability, the influence of corporate governance factors will be stronger, thereby encouraging an increase in company value.

Q: What are the implications of this study for business practitioners and stakeholders?

A: This study highlights the importance of good corporate governance in the automotive sector. Companies must pay attention to aspects of good corporate governance, such as the strengthening of the Board of Commissioners, to increase their value. Additionally, it emphasizes the role of profitability in supporting good governance practices and increasing company value.

Q: What are the limitations of this study?

A: This study has several limitations. Firstly, it only focuses on the automotive sector and may not be generalizable to other sectors. Secondly, it only analyzes the effect of GCG factors on company value and may not consider other factors that can affect company value. Finally, it only uses linear regression analysis and interaction analysis techniques, which may not capture the complexity of the relationship between GCG factors and company value.

Q: What are the future research directions based on this study?

A: This study provides several directions for future research. Firstly, it can be extended to other sectors to see if the findings are generalizable. Secondly, it can consider other factors that can affect company value, such as market conditions and economic indicators. Finally, it can use more advanced analysis techniques, such as machine learning algorithms, to capture the complexity of the relationship between GCG factors and company value.

Q: What are the practical implications of this study for companies in the automotive sector?

A: Companies in the automotive sector can benefit from this study by paying attention to aspects of good corporate governance, such as the strengthening of the Board of Commissioners, to increase their value. Additionally, they can focus on managing and increasing their profitability to support good governance practices and increase company value.

Q: What are the theoretical implications of this study?

A: This study contributes to the existing literature on corporate governance and company value by analyzing the effect of GCG factors on company value with profitability as a moderation variable. It provides a deeper understanding of the relationship between GCG factors and company value, which can be useful for researchers and practitioners in the field of corporate governance.

Q: What are the policy implications of this study?

A: This study has policy implications for regulatory bodies and government agencies responsible for overseeing the corporate governance practices of companies listed on the stock exchange. It highlights the importance of good corporate governance in the automotive sector and emphasizes the need for regulatory bodies to ensure that companies comply with good governance practices.

Q: What are the future research directions for this study?

A: Future research directions for this study include extending the analysis to other sectors, considering other factors that can affect company value, and using more advanced analysis techniques to capture the complexity of the relationship between GCG factors and company value.

Q: What are the limitations of this study in terms of data availability?

A: This study is limited by the availability of data on the GCG factors and company value for the automotive companies listed on the Indonesia Stock Exchange from 2017 to 2022.

Q: What are the limitations of this study in terms of sample size?

A: This study is limited by the sample size, which consists of 12 companies studied for six years, producing 72 observations.

Q: What are the limitations of this study in terms of analysis techniques?

A: This study is limited by the analysis techniques used, which include linear regression analysis and interaction analysis techniques, which may not capture the complexity of the relationship between GCG factors and company value.

Q: What are the future research directions for this study in terms of analysis techniques?

A: Future research directions for this study include using more advanced analysis techniques, such as machine learning algorithms, to capture the complexity of the relationship between GCG factors and company value.