Chapter V CONCLUSIONS AND RECOMMENDATIONS
E. Hypothesis Testing
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a. Heteroscedasticity does not happen, if the t value is smaller than t table and significance values greater than 0.05.
b. Heteroscedasticity happen, if the value of t count greater than table and significance value less than 0.05.
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independent variables explaining dependent variablethe hypothesis in this study is influenced by the value of the corresponding variable coefficient significance after testing. Conclusion the hypothesis made by t-test.
b. Multiple Regression Analysis
Multiple regression analysis is used to test the effect of two or more independent variables toward the dependent variable (Ghozali, 2013: 96).
Regression analysis divided into two kinds, simple regression analysis (if there is only one independent variable) and multiple regression analysis (if there is more than one independent variables). Multiple regression analysis can be measured partially (indicated by coefficient of partial regression) jointly indicated by coefficient of multiple determination or R2 (Indriantoro and Supomo, 2002).
This research will show to us about the influence of independent variables, Board of Commissioners size (BOC), Independent Board of Commissioners composition (INBOC), Institutional ownership (IO), managerial ownership (MO) and Board of Directors (BOD) concerning dependent variable, Profitability. The form of multiple linear regression equation as follows:
ROA = β0 + β1X1+ β2X2+ β3X3 + β4X4+ β5X5 + ε Where:
ROA = Return of Assets to measure profitability X1 = Board of Commissioners size (BoC)
X2 = Independent Board of Commissioners composition (INBoC) X3 = Institutional ownership (IO)
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X4 = Managerial ownership (MO) X5 = Board of Directors size (BOD)
β1= Regression Variable Board of Commissioners size
β2= Regression Variable Independent Board of Commissioners composition
β3= Regression Variable Institutional ownership β4= Regression Variable Managerial ownership β5= Regression Variable Board of Directors size c. Simultaneous Significance Testing ( F-Test)
Essentially, F-test has purpose to know whether among independent variables simultaneously have significant influence toward dependent variable (Ghozali, 2013: 98). Independent variables in this research are good corporate governance indicator and ownership structure whereas dependent variable is profitability. So, F-test has a function to know the effect of good corporate governance on profitability. α used for this research is 0.05 ( 5%) with assumption:
1.) If sig ≥ 5%, ho is accepted.
2.) If sig < 5%, ho is rejected.
d. Partial Significance Test ( t-Test)
Partial Significance Test or t-test basically has purpose to know how far and how much the influence independent variables on dependent variables (Ghozali, 2013:98). In this research, t-test is done to know the effect of good
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corporate governance as independent variables on profitability as dependent variable.
Assumption used for this test are if the significance value of t more than α (significance value > α), then hypothesis is rejected but if on contrary the significance value of t less than α (significance value < α), so hypothesis is accepted. Level of significance (α) use in this research is 0.05 (5%).
e. Operational Variable
Operational variable is a way to set up a concept and how the concept should be measured so that there are variables that can lead to other problems of a variable depends on the situation and condition of other variables.
Operational variables based on the nature of the attributes of the object observed in the study, can form both qualitative and quantitative researchers made merely for the purpose of research, after understanding the attributes based on the support of various runway. The variables used in this study are divided into two, namely, the independent variable and the dependent variable.
The Independent variables are Board of commissioners size, independent Board of Commissioners composition, institutional ownership, managerial ownership and Board of Directors size, while the dependent variable is the profitability measured by Return on Assets.
1. Independent Variable
The independent variable is the type of variables that influence another variable or variables suspected as the cause of the dependent variable
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(Indriantoro and Supomo, 2002). The independent variables used in this research are:
a. Board of Commissioners (BoC) size is a board member who is not an employee or person who deal directly with the company, and do not represent the shareholders and to oversee and provide guidance and direction to the management company. Board of Commissioners size measured by the number of Board of Commissioners member in the company.
b. Independent Board of Commissioners composition isoverseeing measured using the indicator percentage of Board of Commissioners members from outside the company of all Board of Commissioners size company.
c. Institutional Ownership is ownership by the government, financial institutions, incorporated institutions, foreign institutions, and other institutions in a company. Institutional ownership measured by the total percentage of institutional ownership in a company.
d.Managerial ownership is the ownership by the shareholders who have a management position in the company like directors and commissioners.
Managerial ownership measured by the total percentage of managerial ownership in a company.
Independent BOC composition =𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑖𝑛𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑡 𝑐𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑒𝑟𝑠 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐵𝑂𝐶 𝑚𝑒𝑚𝑏𝑒𝑟
Institutional ownership = % institutional ownership in the company
Managerial ownership = % managerial ownership in the company
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e. Board of Directors is authorized and are fully responsible for the management of the company effective and efficient in order to achieve the company's goals.Board of Directors sizemeasured by the number of Board of Directors member in the company.
2. Dependent Variable
The dependent variable is type of variables that explained or influenced by other variables or variable expected as a result of the independent variable (Indriantoro & Supomo, 2009). Dependent variable used in this research is the profitability. The profitability is measured by Return on Assets (ROA). This is aims to examine the amount of the net income after tax that can be earned for every profit assets in the company. So that ROA is an important because it measures the efficiency.
ROA measures the amount of profits relative to the firm-level investment in total assets. Returns the ratio of assets related to the category of financial asset management ratios. Net profit was taken from the income statement and total assets were taken from the balance sheet. The formula of return on assets equals with the percentage of company net income divided by the value of the total assets for the accounting period. (Clarkson et al cited inIsmail &
Shukeri 2014) the greater the value of the ratio, the better a company is performing. However, merely determining a company’s return on asset ratio is insufficient to get a good understanding on how a business is doing.
Return on Asset
=
𝑵𝒆𝒕 𝒊𝒏𝒄𝒐𝒎𝒆 𝒃𝒆𝒇𝒐𝒓𝒆 𝒕𝒂𝒙 𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔57
Table 3.1
Summary of The Operational Variables
NO VARIABLES INDICATOR FORMULATION SCALE
1 Board of Commissioners (BoC)
The number of Board of Commissioners members
Board of Commissioners number of Board of Commissioners
member in the company
Ratio
1 Board of Directors (BoD)
The number of Board of Directors members
Board of Director
number of Board of Directorsmember in the company
Ratio
2 The Board of Independent Commissioners (INBoC)
The number of independent Commissioners divided by the total number of board members.
Independent BoC composition
=
Ratio
3 Managerial ownership (MO)
The percentage of managerial ownership in a company.
Managerial ownership
= % managerial ownership in the company
Ratio
4 Institutional Ownership (IO)
The percentage of institutional ownership in a company.
Institutional ownership
= % institutional ownership in the company
Ratio
5 Profitability (ROA) Return on assets equals the company net income divided by the value of the total assets times 100 percent.
Return on Asset
=
Ratio
58 CHAPTER IV RESULT AND ANALYSIS