The Role of Profitability and Board Diversity on Firm Values: Empirical Study of the 100 Kompas Indexed Companıes
Main Article Content
Abstract
The main objective of financial management is to improve shareholder welfare or corporate value. The purpose of this study is to examine the effect of profitability consisting of return on assets (ROA) and return on equity (ROE), and board diversity consisting of board size, independent board of commissioners, women on board, and foreign on board on corporate value as measured by Tobin's Q, and controlled by the leverage variable. The population in this study were public companies listed in the Kompas 100 index with a sample of 55 companies taken using purposive sampling technique, over a five-year observation period (2019 to 2023). Hypothesis testing used panel data regression analysis. The results of the study show that profitability as measured by ROA has a significant positive effect but ROE does not significantly affect corporate value. Meanwhile, board diversity that has a significant and positive effect on corporate value is the independent board of commissioners and women on board, while board size and foreign on board have no effect on corporate value.
Downloads
Article Details
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
https://creativecommons.org/licenses/by-sa/4.0/
References
Aksan, I., & Gantyowati, E. (2020). Disclosure on Sustainability Reports, Foreign Board, Foreign Ownership, Indonesia Sustainability Reporting Awards, and Firm Value. Journal of Accounting and Strategic Finance, 3(1), 33–51. https://doi.org/10.33005/jasf.v3i1.69
Al-Daoud, K. I., Saidin, S. Z., & Abidin, S. (2016). Board meeting and firm performance: Evidence from the Amman stock exchange. Corporate Board: Role, Duties and Composition, 12(2), 6–11. https://doi.org/10.22495/cbv12i2art1
Alfar, A. J. K., Abuatwan, N., Elheddad, M., & Qaki, M. (2023). The Internal Determinants of Gender Diversity and Its Non-Linear Impact on Firms’ Performance: Evidence from the Listed Companies in Palestine Exchange. Journal of Risk and Financial Management, 16(1). https://doi.org/10.3390/jrfm16010028
Arenas-Torres, F., Bustamante-Ubilla, M., & Campos-Troncoso, R. (2021). Diversity of the Board of Directors and Financial Performance of the Firms. Sustainability, 13(21), 11687. https://doi.org/10.3390/su132111687
Arvanitis, S. E., Varouchas, E. G., & Agiomirgianakis, G. M. (2022). Does Board Gender Diversity Really Improve Firm Performance? Evidence from Greek Listed Firms. Journal of Risk and Financial Management, 15(7). https://doi.org/10.3390/jrfm15070306
Babić, V., Nikolić, J., & Simić, M. (2020). Board Structure and Bank Performance: Evidence From Serbian Banking Sector. Facta Universitatis, Series: Economics and Organization, 17(1), 57–68. https://doi.org/10.22190/fueo191006005b
Bon, S. F., & Hartoko, S. (2022). The Effect of Dividend Policy, Investment Decision, Leverage, Profitability, and Firm Size on Firm Value. European Journal of Business and Management Research, 7(3), 7–13.
Brahma, S., Nwafor, C., & Boateng, A. (2021). Board gender diversity and firm performance: The UK evidence. International Journal of Finance and Economics, 26(4), 5704–5719. https://doi.org/10.1002/ijfe.2089
Buchwald, A., & Hottenrott, H. (2015). Women on the Board and Executive Duration Evidence for European Listed Firms. SSRN Electronic Journal, 178. https://doi.org/10.2139/ssrn.2580776
Choi, H. M., Sul, W., & Min, S. kee. (2012). Foreign board membership and firm value in Korea. Manajemen Decision, 50(2), 207–233.
Dodd, O., & Zheng, B. (2022). Does Board Cultural Diversity Contributed by Foreign Directors Improve Firm Performance? Evidence from Australia. Journal of Risk and Financial Management, 15(8). https://doi.org/10.3390/jrfm15080332
EmadEldeen, R., Elbayoumi, A. F., Basuony, M. A. K., & Mohamed, E. K. A. (2021). The effect of the board diversity on firm performance: An empirical study on the UK. Corporate Ownership and Control, 18(3, special issue), 337–347. https://doi.org/10.22495/cocv18i3siart8
Evelyne, T., Imelda, E., & Hidajat, N. C. (2024). The Effetct of Capital Structure on Firm Value wtih Profitabilty as Variable Mediator in Industrial Companies Listed on The IDX. International Journal of Application on Economics and Business, 2(3), 227–235.
Fajarwati, E., & Witiastuti, R. S. (2022). Board of Directors Structure and Firm Performance: Evidence from Indonesia and Malaysia. Management Analysis Journal, 11(1), 8–21. https://doi.org/10.15294/maj.v11i1.51672
Gati, V., Nasih, M., Agustia, D., & Harymawan, I. (2020). Islamic index, independent commissioner and firm performance. Cogent Business and Management, 7(1). https://doi.org/10.1080/23311975.2020.1824440
Hamam, M. D., Layyinaturrobaniyah, L., & Herwany, A. (2020). Capital Structure and Firm’s Growth in Relations to Firm Value at Oil and Gas Companies Listed in Indonesia Stock Exchange. Journal of Accounting Auditing and Business, 3(1), 14. https://doi.org/10.24198/jaab.v3i1.24760
Harahap, C. D., Juliana, I., & Lindayani, F. F. (n.d.). The Impact of Environmental Performance and Profitabilty on Firm Value. Indonesian Management and Accounting Research, 17(01).
Hosny, K., & Elgharbawy, A. (2022). Board Divesity and Financial Perfomance: Empirical Evidence form The United Kngdom. Accounting Research Journal, 35(4), 561–580.
Jihadi, M., Vilantika, E., Hashemi, S. M., Arifin, Z., Bachtiar, Y., & Sholichah, F. (2021). The Effect of Liquidity, Leverage, and Profitability on Firm Value: Empirical Evidence from Indonesia. Journal of Asian Finance, Economics and Business, 8(3), 423–431. https://doi.org/10.13106/jafeb.2021.vol8.no3.0423
Joh, S. J., Sudiono, R. R., Haryono, L., & Adelina, Y. E. (2020). The Diversity of Board of Directors Characteristics and Firm Value: Analysis From Indonesian Public Companies. Journal of Applied Accounting Taxation, 5(2), 233–245.
Jonnius, J., & Marsudi, A. S. (2021). Profitability and Firm Value. Dinasti International Journal of Management Science, 3(1), 23–47.
Leman, W., Suriawinata, I. S., & Noormansyah, I. (2020). The Effect of Capital Structure, Profitability and Company Size on Value of Companies In The Automotive Industry Sector Listed on IDX 2014-2018. Indonesian Journal of Business, Accounting and Management, 3(2), 77–82. https://doi.org/10.36406/ijbam.v3i2.601
Lestari, R. A. (2021). Gender Diversity, Board Composition, Intellectual Capital and Its Effect on Firm Performance. Management Analysis Journal, 10(1), 62–76. https://doi.org/10.15294/maj.v10i1.45522
Loh, L., Nguyen, T. T., & Singh, A. (2022). The Impact of Leadership Diversity on Firm Performance in Singapore. Sustainability (Switzerland), 14(10), 1–14. https://doi.org/10.3390/su14106223
Lückerath-Rovers, M. (2013). Women on boards and firm performance. Journal of Management and Governance, 17(2), 491–509. https://doi.org/10.1007/s10997-011-9186-1
Makhlouf, M. H., Laili, N. H., Basah, M. Y. A., & Ramli, N. A. (2017). Board of Directors’ Effectiveness and Firm Performance: Evidence from Jordan. Research Journal of Finance and Accounting, 8(18), 23–34. https://www.researchgate.net/publication/320130813
Man, C. S., & Kong, T. T. (2011). Gender diversity in boardroom and firm financial performance:evidence from hong kong. N.D, April, 1–50. http://libproject.hkbu.edu.hk/trsimage/hp/08031657.pdf
Marquez-Cardenas, V., Gonzalez-Ruiz, J. D., & Duque-Grisales, E. (2022). Board gender diversity and firm performance: evidence from Latin America. Journal of Sustainable Finance and Investment, 12(3), 785–808. https://doi.org/10.1080/20430795.2021.2017256
Masriani, I., Setiawan, R., & Wibowo, W. (2022). Effect of the Number of Commissioners and Proportion of Independent Commissioners on Public Company Performance. Eksis: Jurnal Riset Ekonomi Dan Bisnis, 17(1), 105–124. https://doi.org/10.26533/eksis.v17i1.988
Nguyen, H., & Faff, R. (2007). Impact of Board Size and Board Diversity on Firm Value; Australian Evidence. Corporate Ownership & Control, 4(2), 24–32.
Nikolić, J., Nielsen, J. E., & Peković, J. (2022). Board Structure and Bank Performance: The Mediating Role of Intellectual Capital. Naše Gospodarstvo/Our Economy, 68(2), 28–42. https://doi.org/10.2478/ngoe-2022-0009
Noland, M., & Kotschwar, B. (2016). Is Gender Diversity Profitable? Peterson Institute for International Economics, February. http://www.who.int/goe/data/en/
Ntim, C. G. (2016). Corporate governance, corporate health accounting, and firm value: The case of HIV/AIDS disclosures in Sub-Saharan Africa. International Journal of Accounting, 51(2), 155–216. https://doi.org/10.1016/j.intacc.2016.04.006
Nursetya, R. P., & Nur Hidayati, L. (2021). How Does Firm Size and Capital Structure Affect Firm Value? Journal of Management and Entrepreneurship Research, 1(2), 67–76. https://doi.org/10.34001/jmer.2020.12.01.2-7
Ochego, E. machero, Omagwa, J., & Muathe, S. (2019). Corporate Governance, Financial Performance and Firm Value; International Journal of Finance & Banking Studies (2147-4486), 8(4), 41–48. https://doi.org/10.20525/ijfbs.v8i4.608
Ogabo, B., Ogar, G., & Nuipoko, T. (2021). Ownership Structure and Firm Performance: The Role of Managerial and Institutional Ownership-Evidence from the UK. American Journal of Industrial and Business Management, 11(07), 859–886. https://doi.org/10.4236/ajibm.2021.117053
Oktari, V., Mela, N. F., & Zarefar, A. (2018). The Influence of Good Corporate Governance on Company Value in Jakarta Islamic Index Companies. Jurnal Akuntansi Dan Bisnis, 11(1), 69–78.
Oxelheim, L., & Randøy, T. (2003). The impact of foreign board membership on firm value. Journal of Banking and Finance, 27(12), 2369–2392. https://doi.org/10.1016/S0378-4266(02)00395-3
Ozdemir, O. (2020). Board diversity and firm performance in the U.S. tourism sector: The effect of institutional ownership. International Journal of Hospitality Management, 91(February), 102693. https://doi.org/10.1016/j.ijhm.2020.102693
Reschiwati, R., Syahdina, A., & Handayani, S. (2020). Effect of Liquidity, Profitability, and Size of Companies on Firm Value. Utopia Praxis Latinoamericana, 25.
Saha, R., & Maji, S. G. (2022). Board human capital diversity and firm performance: evidence from top listed Indian firms. Journal of Indian Business Research, 14(4), 382–402. https://doi.org/10.1108/JIBR-08-2021-0289
Setiawan, R., Handiliastawan, I., & Jafar, R. (2020). Commissioner board characteristics, ownership concentration, and corporate performance. Jurnal Keuangan Dan Perbankan, 24(2), 131–141. https://doi.org/10.26905/jkdp.v24i2.3827
Shukeri, S. N., Shin, O. W., & Shaari, M. S. (2012). Does Board of Director’s Characteristics Affect Firm Performance? Evidence from Malaysian Public Listed Companies. International Business Research, 5(9), 120–127. https://doi.org/10.5539/ibr.v5n9p120
Simanullang, C. D., Edward, Y. R., Ginting, R. R., & Simorangkir, E. N. (2021). The Effect of Return On Assets (ROA) and Return On Equity (ROE) On Company Value With Capital Structure As Moderating Variables In Banking Companies Listed On The Indonesia Stock Exchange. International Journal of Business, Economics and Law, 24(6), 129–134. www.idx.co.id
Simionescu, L. N., Gherghina, Ş. C., Tawil, H., & Sheikha, Z. (2021). Does board gender diversity affect firm performance? Empirical evidence from Standard & Poor’s 500 Information Technology Sector. Financial Innovation, 7(1). https://doi.org/10.1186/s40854-021-00265-x
Song, H. J., Yoon, Y. N., & Kang, K. H. (2020). The relationship between board diversity and firm performance in the lodging industry: The moderating role of internationalization. International Journal of Hospitility Management, 86. https://doi.org/10.1016/j.ijhm.2020.102461
Sudiyatno, B., Puspitasari, E., Nurhayati, I., & Rijanti, T. (2021). The Relationship Between Profitability and Firm Value : Evidence From Manufacturing Industry in Indonesia. International Journal of Financial Research, 12(3). https://doi.org/10.5430/ijfr.v12n3p466
Sukendri, N., & Aryawati, N. P. A. (2021). Firm Value Performance: Profitability Perspective and Capital Structure at State Owned Bank. Jural Aplikasi Akuntansi, 6(1), 140–150. https://doi.org/10.29303/jaa.v6i1.110
Sukesti, F., Wibowo, E., & Prakasiwi, A. (2018). The Factors that Influence on Firm Value and Company Performance as Mediation Variables (Study Manufacturing Companies period 2015-2017). International Conference of Economics, Management, Accounting and Business. https://doi.org/10.4108/eai.8-10-2018.2288692
Sutrisno, S., & Fella, H. N. (2020). Women on Board, Political Connection and Firm Value on Value (Case Study on Companies in Indonesia Stock Exchane). Modus, 32(2), 95–109.
Sutrisno, S., & Mohamad, M. (2019). Board diversity and firm performance: cases in sharia capital market of Indonesia. Jurnal Siasat Bisnis, 23(2), 83–90. https://doi.org/10.20885/jsb.vol23.iss2.art1
Umar, Anggraeni, R. N., & Haryani, S. (2020). The Influence of Capital Structure and Profitability on Firm Value on Property and Real Estate Sector in Indonesia Stock Exchange. International Journal of Health, Economics, and Social Science, 1, 184–195.
Usry, A. K., Arniati, T., & Muslchah. (2022). The Effect of Board of Commissioner on Firm Value Wtih Capital Structure as Intervening Variable. Jurnal PELITA, 7(1), 73–91.
Utama, C. A., & Utama, S. (2019). Board of Commissioners in Corporate Governance, Firm Performance, and Ownership Structure. International Research Journal of Business Studies, 12(2), 111–136. https://doi.org/10.21632/irjbs.12.2.111-136
Welson, W., & Muhadi, W. . (2020). Corporate governance structure and firm performance in the indonesian capital market. Advances in Economics, Business and Management Research, 21(174), 22–27.
Widiatmoko, J. (2020). Corporate Governance Mechanism and Corporate Social Responsibility on Firm Value. Relevance: Journal of Management and Business, 3(1), 13–25. https://doi.org/10.22515/relevance.v3i1.2345
Wilsen, D., & Stella, S. (2022). Factors affecting Firm Value of Miscellaneous Industry Companies on Indonesia Stock Exchange. Media Bisnis, 14(1), 75–84. https://doi.org/10.34208/mb.v14i1.1684
Yang, D., & Wang, J.-J. (2018). The Relationship between the Board Structure and Corporation Performance --- based on the Manufacturing Industry. Advance in Economics, Business and Management Researc, 60(Icmesd), 41–49. https://doi.org/10.2991/icmesd-18.2018.7
Zakaria, A., Mardiyati, U., & Pena, C. Dela. (2022). The impact of foreign and independent commissioners on bank performance: empirical evidence from Indonesia. Global Advances in Business Studies, 1(1), 43–54. https://doi.org/10.55584/gabs001.01.5