THE INFLUENCE OF BOARD OF DIRECTORS AND AUDIT
oversight role. Given this, there is also a growing concern that managers might use social responsibility to hide their opportunistic behavior (Chu et al., 2013).
Therefore, regulatory mechanisms such as audit committees are needed to increase CSR disclosure. The audit committee as a representative of the board of directors is expected to be able to oversee financial and non-financial reports and minimize information asymmetry between management and stakeholders (Karamanou and Vafeas, 2005). An effective audit committee will affect the level of financial and non-financial disclosure, including CSR disclosure (Bedard and Coulombecourteau, 2008). Through the background that has been discussed, the authors are interested in carrying out research related to the effect of the characteristics of the board of directors and audit committee on CSR.
LITERATURE REVIEW
The theoretical basis used in this study is agency theory which explains the conflict of interest between shareholders (principal) and managers (agents).
Agency theory popularized by Jensen and Meckling, is a condition that occurs in companies, where management as executors who are also known as agents and owners of capital (owners) as principals build cooperation contracts called "nexus of contracts".
Corporate Social Responsibility
Corporate Social Responsibility (CSR) was first coined by Howard Rothman Browen in Social Responsibility of the Businessman in 1953. Murphy
& Ng'ombe (2009) revealed that the principles of social responsibility consist of sustainability, accountability, and transparency. Discussions about CSR are of course related to the Sustainability Report (SR) and the profit to be achieved.
Sustainability reports issued by companies in addition to financial and annual reports as evidence of the implementation of responsibilities to stakeholders regarding sustainable company performance (Supriyadi et al., 2019). Compliance with sustainability reports is determined by an independent institution or organization with international standards called the Global Reporting Initiative (GRI). In this study, the indicators used in CSR are the 2016 GRI guidelines. The GRI standards consist of 77 items that reveal economic, environmental and social impacts. In this measurement each CSR item will be given a value of 1 if it is disclosed, and a value of 0 if it is not. The scores of each item are added together to obtain the overall score for each company. Calculation of the CSR Index is formulated as follows:
Information:
CSRIi = Corporate Social Responsibility Company Index i ΣXyi = Number of items disclosed
ni = Number of items based on the 2016 GRI guidelines (77 items) Board of Directors Size
According to the Financial Services Authority Regulation Number 33/POJK.04/2014, the board of directors is an organ of the issuer or public company that is authorized and responsible for the management of the issuer or public company for the benefit of the issuer or public company, in accordance
CSRIi = ΣXyi
ni
with the aims and objectives of the issuer or public company and represents issuers or public companies, both inside and outside the court in accordance with the provisions of the articles of association. Board size is the number of members of the board of directors owned by a company. The size of the board of directors is measured by counting the number of members of the board of directors.
Board of Directors Independence
The independence of the board of directors is that there is no board attachment to any party. The independence of the board of directors is measured by the ratio of independent directors to total directors.
Managerial ownership
Borolla (2011) states that managerial ownership (insider ownership) is the largest share ownership by company management as measured by the percentage of the number of shares owned by management. If the number of shares owned by managers increases, managers will act more carefully because managers will also bear the consequences of the decisions they make (Maisarah, 2010).
Managerial ownership is obtained from the percentage of share ownership of the board of directors and board of commissioners.
CEO duality
In the science of corporate governance, the dual role of the CEO is often referred to as CEO duality. According to Booth et al. (2002), the duality of the CEO is someone who serves two roles, namely the CEO (board of directors) and chairman of the board (board of commissioners) in the company. CEO duality is measured using the dummy variable calculation method, which is 1 if there is a CEO who has duality or multiple positions, and 0 otherwise.
Audit Committee Size
The audit committee is a committee formed by the board of commissioners as a liaison for the commissioners to carry out company oversight duties. The size of the audit committee is the total number of audit committee members in a company. The audit committee is measured by looking at the number of audit committee members.
Audit Committee Independence
The independence of the audit committee is that there is no attachment of the audit committee to any party. Audit committee independence is measured using an indicator of the percentage of independent audit committee members to the total number of audit committee members.
Financial Expertise of Members of the Audit Committee
Financial expertise of members of the audit committee, is the ability that must be possessed by members of the audit committee regarding accounting, auditing and finance. Financial expertise is measured by comparing the number of audit committee members who have financial expertise with the number of audit committee members.
RESEARCH MODEL
Multiple Linear Regression Analysis
CSRi,t = β0 + β1Boardsizei,t + ꞵ1Independencei,t + ꞵ1Manageriali,t + ꞵ1Dualityi,t + ꞵ1ACSizei,t + ꞵ1ACINDi,t + ꞵ1CFEi,t + β2ROAi,t + β3LOSSi,t + εi,t
Information:
CSR Corporate Social Responsibility
t Year
β0 - β3 Regression coefficient
ACSize Audit Committee Size
ACIND Audit Committee Independence
CFE Financial expertise of audit committee members
Quality Audit quality
board sizes Board size
Independence Board independence
managerial Managerial ownership
Duality CEO duality
ROA Return on Assets
LOSS loss
ε Error term
RESULTS AND DISCUSSION
Table 1 Test Result
Model Unstandardized
Coefficients
Standardized Coefficients
t Sig.
B std.
Error
Betas
(Constant) 0.103 0.352 0.293 0.771
Board of Directors Size
0.016 0.030 0.180 0.535 0.596
Audit Committee
Size
Audit Committee Independenc
e
Financial Expertise Board of
Directors Size
Board of Directors Independenc
e Managerial
ownership
Corporate Social Responsibil
ity H1
H2
H5
H6
H4
CEO duality
H3
H7
Board of Directors Independence
-0.328 0.778 -0.141 -
0.422
0.675 Managerial
Ownership
-0.237 0.084 -0.393 -
2,832
0.007
CEO duality 0.013 0.041 0.039 0.320 0.750
Audit Committee Size
0.088 0.026 0.410 3,371 0.002
Audit Committee Independence
0.470 0.185 0.357 2,538 0.015
Financial Expertise -0.549 0.160 -0.502 - 3,424
0.001
ROA -0.242 0.295 -0.113 -
0.820
0.417
loss -0.087 0.060 -0.207 -
1.456
0.153
Based on the results of the statistical tests in the table above, the hypotheses can be interpreted as follows:
1. Board of directors size has a significant and positive effect on corporate social responsibility
Testing the effect of the size of the board of directors on CSR using multiple regression analysis. The table shows that the board of directors size variable has a significance value of 0.596 > 0.05 and the regression coefficient value shows a positive sign. This proves that there is no significant influence between the size of the board of directors and CSR.
2. Board of directors independence has a significant and positive effect on corporate social responsibility
Testing the effect of the independence of the board of directors on CSR using multiple regression analysis. The board of directors independence variable has a significance value of 0.675 > 0.05 and the regression coefficient value shows a negative sign. This proves that the independence of the board of directors has no significant positive effect on CSR.
3. Managerial ownership has a significant and positive effect on corporate social responsibility
Testing the effect of managerial ownership on CSR using multiple regression analysis. The table shows that managerial ownership has a significance value of 0.007 <0.05 and the regression coefficient value shows a negative sign.
This proves that managerial ownership has a significant negative effect on CSR.
4. CEO duality has a significant and positive effect on corporate social responsibility
Testing the influence of CEO duality on CSR using multiple regression analysis. The CEO duality variable has a significance value of 0.750 > 0.05 and the regression coefficient value shows a positive sign. This proves that CEO duality has no significant effect on CSR.
5. Audit committee size has a significant and positive effect on corporate social responsibility
Testing the effect of audit committee size on CSR using multiple regression analysis. The table shows the size of the audit committee has a significance value of 0.002 <0.05 and the regression coefficient value shows a positive
sign. This proves that the size of the audit committee has a significant positive effect on CSR.
6. Audit committee independence has a significant and positive effect on corporate social responsibility
Testing the effect of audit committee independence on CSR using multiple regression analysis. The audit committee independence variable has a significance value of 0.015 > 0.05 and the regression coefficient value shows a positive sign. This proves that there is a significant positive influence between the independence of the audit committee on CSR.
7. Financial expertise of the audit committee has a significant and positive effect on corporate social responsibility
Testing the influence of the audit committee's financial expertise on CSR using multiple regression analysis. The audit committee financial expertise variable has a significance value of 0.001 <0.05 and the regression coefficient value shows a negative sign. This proves that the audit committee's financial expertise has a significant negative effect on CSR.
CONCLUSION
1. The results of testing variable board of directors size have no significant effect on corporate social responsibility in mining companies listed on IDX for 2017-2021.
2. The results of testing variable board of directors independence have no significant and positive influence on corporate social responsibility in mining companies listed on IDX in 2017-2021.
3. The results of testing variable managerial ownership have a significant and negative effect on corporate social responsibility in mining companies listed on IDX in 2017-2021.
4. The results of testing variable CEO duality have no significant effect on corporate social responsibility in mining companies listed on IDX in 2017- 2021.
5. The results of testing variable audit committee size have a significant and positive influence on corporate social responsibility in mining companies listed on IDX in 2017-2021.
6. The results of testing variable audit committee independence have a significant and positive influence on corporate social responsibility in mining companies listed on the IDX in 2017-2021.
7. The results of testing variable audit committee's financial expertise have a significant and negative effect on corporate social responsibility in mining companies listed on IDX in 2017-2021.
8. The results of testing control variables, namely ROA and loss, have no significant and positive effect on corporate social responsibility in mining companies listed on IDX in 2017-2021.
REFERENCES
Christine Adel, M. M. (2019). Is corporate governance relevant to the quality of corporate social responsibility disclosure in large European companies?
International Journal of Accounting & Information Management, 301- 332.
Doddy Setiawan, R. T. (2018). DAMPAK KARAKTERISTIK DEWAN DIREKSI TERHADAP PENGUNGKAPAN CORPORATE SOCIAL RESPONSIBILITY PADA PERUSAHAAN PERTAMBANGAN DI INDONESIA. Journal of Management, 1-15.
Ester Ayu Febriana, A. H. (2019). PENGARUH ELEMEN-ELEMEN
CORPORATE GOVERNANCE DAN KUALITAS AUDIT
TERHADAP LUAS PENGUNGKAPAN CORPORATE SOCIAL RESPONSIBILITY. Journal of Accounting.
Maura Indira, M. S. (2022). PENGARUH KARAKTERISTIK DEWAN DAN KOMITE AUDIT TERHADAP TANGGUNG JAWAB SOSIAL PERUSAHAAN. Diponegoro Journal of Accounting, 1-10.
Nofita Visesha, D. E. (2019). PENGARUH KEPEMILIKAN SAHAM
TERHADAP PENGUNGKAPAN CORPORATE SOCIAL
RESPONSIBILITY. Journal of Accounting.
Shaban Mohammadi, H. S. (2019). The impact of board and audit committee characteristics on corporate social responsibility: evidence from the iranian stock exchage. International journal of productivity and perfomance management.
ANALYSIS OF FINANCIAL PERFORMANCE ON THE VALUE OF PHARMACEUTICAL SUB-SECTOR COMPANIES AT THE
INDONESIA STOCK EXCHANGE DURING THE COVID-19 PANDEMIC
Novi Febri Yeni
UNIVERSITAS LANCANG KUNING [email protected]
ABSTRACT
The purpose of this study was to determine the effect of liquidity ratios, profitability, solvency and activity on the value of pharmaceutical sub-sector companies on the Indonesia Stock Exchange during the Covid 19 Pandemic. This research was conducted on pharmaceutical sub-sector companies listed on the Indonesia Stock Exchange during the period 2018 to 2022. The population in this study totaled 9 companies. Because the population was relatively small, the census method determined the entire population to be the research sample. Data analysis using multiple linear regression. The results of the study explain that profitability has no significant effect, while liquidity, solvency and activity have a significant influence on the company value of the Pharmaceutical sub-sector on the Indonesia Stock Exchange during the Covid 19 Pandemic.
Keyword: Liquidity, Profitability, Solvency, Activity and Company Value
INTRODUCTION
At the end of 2019, most countries around the world had to face a very deadly virus known as Covid 19. Indonesia is also one of the many countries affected by the Covid 19 pandemic which paralyzed almost all sectors of the economy. This is due to the existence of policies from the Government of Indonesia which creates Large-Scale Social Restrictions (PSBB) which aim to reduce the mobility of citizens doing activities outside the home. Lots of business actors are making adjustments such as downsizing employees to closing their businesses. The result of this produces a domino effect such as a slowdown in economic growth (recession) an increase in unemployment and poverty (Dikri et al, 2022).
Reduced income is the main impact of the Covid-19 corona virus pandemic that is felt the most by the community. The COVID-19 pandemic has not only affected public health, but has also affected economic conditions. (Rusita and Sapariyah, 2022). One of the industries that was able to survive and thrive during the Covid 19 pandemic was the pharmaceutical industry. The pharmaceutical industry in Indonesia has enormous opportunities to grow and develop, until the Covid 19 outbreak which had various impacts so as to create opportunities for the pharmaceutical industry to boost its production.
Financial performance is an evaluation of a company's assets, liabilities, equity, costs, revenues and overall profitability. Basically investors measure company performance based on the company's ability to manage its resources to generate profits. Firm value is very important for a company, because with an increase in company value it is expected to be able to attract shareholders to invest in the company.
Financial Ratios are a company's financial analysis tool in assessing a company's performance based on a comparison of financial data contained in financial report items (Brigham and Houston, 2015). This can be done by comparing the financial ratios in a period with the previous period. In addition, analysis can also be carried out by comparing the financial ratios of a company
with similar companies in the same industry both from the factors of liquidity, profitability and solvency.
The results of the research gap explain that Permana and Rahyuda's research (2019) explains that liquidity affects company value and Timanan and Ratnawati's research (2021) explains that liquidity has an effect on company value. Whereas in Anggraeni and Suwitho's research (2018) it also explains that liquidity does not affect firm value, and in Komala et al (2022) research explains that liquidity does not affect firm value, the same results are also explained in Sudiani and Darmayanti's research (2016) where liquidity has no significant effect on firm value.
The results of the research gap explained in the study of Komala et al (2022) explaining that profitability has a significant effect on company value, the same results are explained in research by Anggraeni and Suwitho (2018) also explaining that profitability has an effect on company value. While Lumentut and Mangantar's research (2016) explains that profitability has no effect on firm value, the same results are also explained in Hidayat and Khotimah's (2022) research which explains that profitability has no significant effect on firm value.
The results of the research gap explained in the study of Komala et al (2022) explaining that solvency has a significant effect on firm value and research by Lumentut and Mangantar (2016) explains that solvency has an effect on firm value. While Anggraeni and Suwitho (2018) also explain that solvency has no effect on firm value, the same results are also explained in Sianipar's research (2020) where solvency has no significant effect on firm value.
The results of the research gap explained in Adita and Mawardi's research (2018) explaining that the activity ratio has a significant effect on firm value, while research by Oktaryani et al (2021) also explains that activity ratio has a significant effect on firm value. Meanwhile Sianipar (2020) explains that the activity ratio has no significant effect on company value.
This research was conducted at Pharmaceutical sub-sector companies listed on the Indonesia Stock Exchange during the Covid 19 Pandemic, totaling 9 companies using the sampling technique using the saturated sample method. This study uses secondary data with documentation data collection techniques. Data analysis using multiple linear regression.
CONTENT
To see this influence can be seen through the value of the regression equation used in the following table:
Table 1. Summary of Hypothesis Testing
Variabel B
Coefficients t Sig. Result
(Constant) -1058.444 -2.559 .014
Likuiditas (CR) -5.492 -3.787 .001 Hypothesis accepted Profitabilitas (ROA)
38.563 1.753 .087 Hypothesis is not accepted
Solvabilitas (DER) 2.917 4.610 .000 Hypothesis accepted Aktivitas (TATO) 25.339 6.946 .000 Hypothesis accepted
R Square 0,644
Adjusted R Square 0,630
The results of multiple linear regression calculations obtained the following equation:
The Effect of Liquidity (CR) on Firm Value (PBV) in Pharmaceutical Companies During the Covid 19 Pandemic
The results of the research that has been carried out, the tcount (-3.787) <
ttable (-2.021) and the resulting significance value of 0.001 is still below 0.05, the hypothesis in this study is accepted explaining that liquidity (CR) has a negative and significant effect on company value (PBV) in pharmaceutical companies during the Covid 19 pandemic.
According to Brigham and Joel (2014), if a company experiences financial difficulties, the company begins to slow down paying bills (trade payables), bank loans and other obligations which will increase current liabilities. When the current ratio decreases, this indicates a problem with the company, so it can be interpreted that the company's liquidity ratio is in a bad condition and is likely to reduce the value of the company.
The liquidity ratio is related to the company's ability to fulfill its obligations in the short term or which must be fulfilled immediately. Company liquidity describes a company's ability to meet its short-term obligations to creditors. The high or low of this ratio will affect the interest of investors to invest their funds. The greater this ratio, the more efficient the company is in using the company's current assets to meet its current liabilities. (Anggraeni and Suwitho, 2018).
The results of this research are in line with the research of Permana and Rahyuda (2019) explaining that liquidity affects company value and research by Timanan and Ratnawati (2021) explaining that liquidity has an effect on company value. Whereas in Anggraeni and Suwitho's research (2018) it also explains that liquidity does not affect firm value, and in Komala et al (2022) research explains that liquidity does not affect firm value, the same results are also explained in Sudiani and Darmayanti's research (2016) where liquidity has no significant effect on firm value.
The Effect of Profitability (ROA) on Firm Value (PBV) in Pharmaceutical Companies During the Covid 19 Pandemic
The results of the research that has been carried out, the tcount (1.753)
< ttable (2.021) and the resulting significance value of 0.087 is still above 0.05, the hypothesis in this study is rejected explaining that profitability (ROA) has a positive and insignificant effect on firm value (PBV) in pharmaceutical companies during the Covid 19 pandemic.
According to Wiagustini in Permana and Rahyuda (2019) states that profitability shows the success of a company to make a profit. Profitability is one that can affect the value of the company. The company has a profitability that is not high enough so that the company can improve its performance which results in a decrease in the level of company value. Companies that succeed in increasing profitability every year will attract the interest of many investors. Investors will trust companies that are able to generate large profits because the returns are low, so this is a negative signal for investors from the company. This situation will be used by company managers to obtain sources of capital in the form of shares.
(Hidayat and Khotimah, 2022)
The research results are corroborated by the research of Lumentut and Mangantar (2016) explaining that profitability has no effect on firm value, the