The impact of corporate governance to the economic value added listed company in BEI 2003-2004 ∗
5. Conclusion
Berglof and Pajuste (2005) finding that finance performance of company closely related to which how easy the information available at public.
Appendix 3.1 showed Pearson correlation between CGI and other control variable with ROE and ROA. But only CGI, company age had significant correlation to ROA. All variable had positive relation with ROE and statistically significant except sales growth that have negative relation but not significant.
Multiple regression result indicated the existence of positive relationship between CG and control variables to ROA. All variables were statistically significant at level 1% except company size significant at level 5%.
Multiple regression with ROE showed that all variables have positive relationship except sales growth have negative relation to ROE but not significant.
Result of sensitivity analysis found finding positive relation between CG with ROA and ROE as a financial performance measurement. This result was in line with research Miyajima (2005) that found positive relation between CGI and ROA in Japan. This result also as in line with Brown and Caylor (2006) expressing that company that have better corporate governance will have high ROE and ROA also.
Result of sensitivity analysis strengthens the hypothesis expressing that CG have positive correlation with company performance. This result found the relationship CGI with the three performance measurement EVA, ROA and ROE. Based on this coefficient CG more stronger influence ROE compared to EVA and ROA.
The impact of corporate governance to the economic value added listed company in BEI 2003-2004
37 improve the CG practice to increase the firm value. Company in Indonesia is also expected to adopt EVA as performance measurement, which still a little applied by companies in Indonesia. EVA is expected to reflect the performance and value of companies. Investor can use EVA as an alternative performance measurement of companies that is useful for investment decision.
Limitation of this research was the number of samples. The research only used 64 samples for two years because the availability of data.
Further researches can use more samples and also lengthen the time span of research. They can used another CG index like CLSA, CGPI that resulted from IICD (Indonesian Institute on Corporate Governance). In this research, we only used company becoming 100 companies that have higher EVA score. For further research, they can use all companies. Another controlled variable can be considered in the regression models.
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(Edited by Emily and Ann)
Appendix 1 Summary of previous research
No Researcher Samples Performance
measurement Result 1. Durnev and Kim Index of CLSA 859 Tobins’Q Positive
(2003) firm in 270 countries
2. Klapper and Love Index of CLSA 374 firms Tobins’Q Positive
(2002) in 14 countries
3. Black, Jang and Korean CG index
515 firm Tobins’Q Positve
Kim (2005)
4. Mohanty (2001) Index of CG 113 firm in Tobins’Q Positive
India
5. Miyajima (2005) CG score in Jepang Tobins’Q Positive
ROA Positive
6. Bauer, Günster, Deminor CG rating in Eropa Tobins’Q Positive and Otten (2003) and Amerika Serikat ROE Negative
NPM Negative
7. Gompers, Ishii, Governance index of 1500 firms Profit Positive
Metrick (2003) Sales growth Positive
8. Arsjah (2002) CGPI 2001 PBV Not significant
CLSA 2001 PBV Positive
9. Farhani (2006) CGPI 2001-2004 PBV Not significant 10. Utama and CGPI 2001 Spread EVA Positive
Afriani (2005) MV/IC Negative
CLSA 2001 spread EVA Not significant
MV/IC Positive
The impact of corporate governance to the economic value added listed company in BEI 2003-2004
39 Appendix 2 Sensitivity analysis of CGI component
Appendix 2.1 Pearson correlation matrix of CGI component and EVA
EVA R ET RS DT RB
EVA 1 0.171 0.303** 0.281** 0.467* 0.372*
(0.178) (0.015) (0.025) (0.000) (0.003)
Rights of Shareholders ® 0.171 1 -0.028 0.158 0.353* 0.173
(0.178) (0.824) (0.211) (0.004) (0.172)
Equitable Treatment (ET) 0.303** -0.028 1 0.216*** 0.336* 0.198
(0.015) (0.824) (0.087) (0.007) (0.117)
Role of Stakeholders (RS) 0.281** 0.158 0.216*** 1 0.578* 0.250**
(0.025) (0.211) (0.087) (0.000) (0.046)
Disclosure and Transparency
(DT) 0.467* 0.353* 0.336* 0.578* 1 0.604*
(0.000) (0.004) (0.007) (0.000) (0.000)
Responsibility of the Board
(RB) 0.372* 0.173 0.198 0.250** 0.604* 1
(0.003) (0.172) (0.117) (0.046) (0.000)
Notes: * significant 0.01; ** significant 0.05; *** significant 0.10.
Appendix 2.2 Sensitivity analysis
Impact of CGI component to EVA with control variables
Variable Koefisien Std. Error t-Statistic Prob.
C -1.0735 0.0650 -16.5010 0.0000
Rights of shareholders -0.0500 0.0482 -1.0364 0.3046 Equitable treatment of shareholders 0.6708 0.0476 14.0910 0.0000 Role of shareholders 0.0132 0.0344 0.3852 0.7016 Disclosure transparency 0.4007 0.0573 6.9947 0.0000 Responsibility of the board 0.0399 0.0516 0.7743 0.4421
GROWTH 0.0424 0.0044 9.6982 0.0000
LEVERAGE 0.0006 0.0041 0.1388 0.8901
SIZE 0.0122 0.0047 2.5979 0.0121
AGE 0.1249 0.0129 9.6672 0.0000
R-squared 0.9457 Mean dependent var 0.0579
Adjusted R-squared 0.9367 S.D. dependent var 0.4363 S.E. of regression 0.1098 Sum squared resid 0.6514
F-statistic 104.4593 Durbin-Watson stat 1.3272
Prob(F-statistic) 0.0000
Lampiran 3 Hasil analisis sensitivitas dengan variable ROA and ROE
Appendix 3.1 Pearson correlation matrix of CG index, control variables, ROA and ROE
CGI GROWTH LEVERAGE SIZE AGE ROA ROE CGI 1 -0.137 0.256** 0.522* 0.289** 0.236*** 0.593*
(0.280) (0.041) (0.000) (0.020) (0.061) (0.000) GROWTH -0.137 1 0.072 -0.138 -0.227*** -0.101 -0.001 (0.280) (0.570) (0.277) (0.072) (0.426) (0.995) LEVERAGE 0.256** 0.072 1 0.256** 0.282** 0.013 0.618*
(0.041) (0.570) (0.041) (0.024) (0.919) (0.000) SIZE 0.522* -0.138 0.256** 1 0.341* 0.146 0.428*
(0.000) (0.277) (0.041) (0.006) (0.251) (0.000) AGE 0.289** -0.227*** 0.282** 0.341* 1 0.498* 0.304**
(0.020) (0.072) (0.024) (0.006) (0.000) (0.014) ROA 0.236*** -0.101 0.013 0.146 0.498* 1 0.397*
(0.061) (0.426) (0.919) (0.251) (0.000) (0.001) ROE 0.593* -0.001 0.618* 0.428* 0.304** 0.397* 1 (0.000) (0.995) (0.000) (0.000) (0.014) (0.001) Notes: * significant 0.01; ** significant 0.05; *** significant 0.10.
Appendix 3.2 Sensitivity analysis, ROA and ROE as dependent variables ROA as dependent variable
Variables Coefficient Std. Error t-Statistic Prob.
C -0.3051 0.0213 -14.3124 0.0000
CGI 0.3167 0.0315 10.0467 0.0000
GROWTH 0.0326 0.0081 4.0159 0.0002
LEVERAGE -0.0303 0.0040 -7.4811 0.0000
SIZE -0.0126 0.0056 -2.2626 0.0274
AGE 0.2325 0.0254 9.1598 0.0000
R-squared 0.8494 Mean dependent var. 0.3127 Adjusted R-squared 0.8364 S.D. dependent var. 0.2831 S.E. of regression 0.1145 Sum squared resid. 0.7609 F-statistic 65.4068 Durbin-Watson stat 1.0331
ROE as dependent variable
Variables Coefficient Std. Error t-Statistic Prob.
C -0.8710 0.0386 -22.5363 0.0000
CGI 1.1840 0.1023 11.5779 0.0000
GROWTH 0.0342 0.0116 2.9489 0.0046
LEVERAGE 0.0972 0.0160 6.0708 0.0000
SIZE 0.0408 0.0100 4.0582 0.0001
AGE -0.0165 0.0215 -0.7679 0.4457
R-squared 0.8882 Mean dependent var. 0.4149 Adjusted R-squared 0.8786 S.D. dependent var. 0.4032 S.E. of regression 0.1405 Sum squared resid. 1.1451 F-statistic 92.1773 Durbin-Watson stat 1.3869
Mar. 2009, Volume 8, No.3 (Serial No.69) China-USA Business Review, ISSN1537-1514, USA
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