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Financial Performance and Corporate Governance: Its Effect on Market Performance

In: Macroeconomic Risk and Growth in the Southeast Asian Countries: Insight from SEA

Author

Listed:
  • Nur Imamah
  • Saparila Worokinasih
  • Zeni Firdayani
  • Jung-Hua Hung

Abstract

This chapter investigates the effect of financial performance and corporate governance on market performance, using evidence from the companies listed on the IDX30 Index of the Indonesia Stock Exchange (IDX) from 2015 to 2018. The authors use six main independent variables and one dependent variable, controlled by using control variables in the regression analysis. Ordinary least square (OLS) regression methods are used to model the relationship between the dependent variable and the independent variables. The results show that the current ratio (CR) and Board Size (BS) have a significant negative effect on stock return (SR). In contrast, the quick ratio (QR) and debt to equity ratio (DER) have a significant positive impact on SR. Both the debt to asset ratio (DAR) and Independent Board of Commissioners (BOC) have an insignificant effect on SR. This evidence suggests that the CR, QR, DER, and BS are essential factors affecting SR.

Suggested Citation

  • Nur Imamah & Saparila Worokinasih & Zeni Firdayani & Jung-Hua Hung, 2023. "Financial Performance and Corporate Governance: Its Effect on Market Performance," International Symposia in Economic Theory and Econometrics, in: Macroeconomic Risk and Growth in the Southeast Asian Countries: Insight from SEA, volume 33, pages 25-39, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-03862023000033b002
    DOI: 10.1108/S1571-03862023000033B002
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    More about this item

    Keywords

    Financial performance; corporate governance; market performance; stock returns; emerging market; Board Size; G3; G32; G34;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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