The Influence of Corporate Governance Structures on Financial Distress: A Study of Coal Mining Companies
Abstract
The purpose of this research was to analyze the effect of corporate governance mechanisms on financial distress, through the measurement of board of directors, board of commissioners, independent ownership structures and managerial ownership structures. The sample consisted of coal mining companies listed on the Indonesian Stock Exchange from 2013 to 2017 and a purposive sampling method was used. Data were analyzed using descriptive analysis and multiple linear regression. The results confirmed that the size of the board of commissioners and institutional ownership had no effect on conditions of financial distress. This was possible because the board of commissioners functions as supervisor in the company, but sometimes it did not carry out its role to its full potential. Meanwhile, institutional ownership was expected to encourage more optimal supervision of management performance so that agency costs could be minimized, but this could not be proven. The size of the board of directors had a significantly positive effect on finances distress. The size of the board of directors could indicate collusion in the company and thus the possibility of experiencing financial distress was greater. Managerial ownership had a significantly negative effect on conditions of financial distress. With an increase in ownership by managers, managers could immediately feel the benefits and losses of the decisions taken.
Keywords: board size, the company’s health condition, corporate governance, financial distress, the Altman Z-Score, the number of boards.
References
[1] Abbasi, M., Kalantari, E. and Abbasi, H. (2012). Impact of Corporate Governance Mechanisms on Firm Value Evidence from the Food Industry of Iran,Journal of Basic and Applied Scientific Research. 2(5) p. 10.
[2] Bodroastuti, T. (2009). Pengaruh Struktur Corporate Governance Terhadap Financial Distress. Jurnal Ilmiah Aset, vol. 11, issue 2, pp. 170–182.
[3] Crutchley, C. E., et al. (1999). Agency Problems and the Simultaneity of Financial Decision Making: The Role of Institutional Ownership. International Review of Financial Analysis, vol. 8, issue 2, pp. 177–197.
[4] Darwis, H. (2009). Corporate Governance Terhadap Kinerja Perusahaan. Jurnal Keuangan Dan Perbankan, vol. 13, issue 3.pp 1-10
[5] Dechow, P. M., Sloan, R. G. and Sweeney, A. P. (1996). Causes and Consequences of Earnings Manipulation: An Analysis of Firms Subject to Enforcement Actions by the SEC. Contemporary Accounting Research, vol. 13, issue 1, pp. 1–36.
[6] Deviacita, A. W. and Achmad, T. (2013). Analisis Pengaruh Mekanisme Corporate Governance Terhadap Financial Distress. Diponegoro Journal of Accounting, vol. 11, issue 2, pp. 1–15.
[7] Dewi, L. C. and Nugrahanti, Y. W. (2014). Pengaruh Struktur Kepemilikan Dan Dewan Komisaris Independen Terhadap Nilai Perusahaan (Studi Pada Perusahaan Industri Barang Konsumsi Di Bei Tahun 2011–2013). issue 18, p. 16.
[8] Dp, E. N. (2007). Analisis Pengaruh Praktek Tata Kelola Perusahaan (Corporate Governance) Terhadap Kesulitan Keuangan Perusahaan (Financial Distress): Suatu Kajian Empiris. Jurnal Bisnis Dan Akuntansi, vol. 9, issue 1, pp. 88–108.
[9] Hanifah, O. E. and Purwanto, A. (2013). Pengaruh Struktur Corporate Governance Dan Financial Indicators Terhadap Kondisi Financial Distress. Diponegoro Journal of Accounting„ pp. 648–662.
[10] Jensen, M. C. and Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, vol. 3, issue 4, pp. 305–360.
[11] Siallagan, H. and Machfoedz, M. (2006). Mekanisme Corporate Governance, Kualitas Laba Dan Nilai Perusahaan. Presented at Simposium Nasional Akuntansi 9 Padang, Indonesia: SNA DK
[12] Sutedi, A. (2011). Good Corporate Governance.Jakarta: Sinar Grafika.
[13] Tjager, I. N. (Ed.). (2003). Corporate Governance: Tantangan Dan Kesempatan Bagi Komunitas Bisnis
Indonesia. Jakarta:Prenhallindo.
[14] Wardhani, R. (2007). Mekanisme Corporate Governance Dalam Perusahaan Yang Mengalami Permasalahan Keuangan. Jurnal Akuntansi Dan Keuangan Indonesia, vol. 4, issue 1, pp. 95-114–114.
[15] Widyasaputri, E. (2012). Analisis Mekanisme Corporate Governance Pada Perusahaan Yang Mengalami Kondisi Financial Distress. Accounting Analysis Journal, vol. 1, issue 2,pp 1-20