Abstract
The correlation between theoretical and empirical of corporate governance (CG) and corporate financial performance (CFP) is not there without controversy. This paper aims to determine the moderating effects of corporate social responsibility (CSR), on the relationship between corporate governance and corporate financial performance. The sample of this research are banking companies that are listed on Indonesia Stock Exchange between the period of 2010-2014, taken by using purposive sampling method. Moderated Regression Analysis (MRA) analysis was used in this study. The results of this study indicate that corporate governance affects the company's financial performance positively. Aspects of corporate governance such as audit committees and number of board meetings have a positive relationship with financial performance, but there is no relationship from the aspect of independent board of commissioners. Furthermore, CSR can only strengthen the positive relationship between the number of board of commissioners’ meetings and the financial performance of the company. The frequency intensity of board of commissioners’ meetings can increasingly address corporate governance reforms by improving and realizing social responsibility as part of sustainability innovation by optimizing media and CSR reporting methods.
Highlights
A company’s financial performance is heavily affected by how serious the company incorporating good corporate governance (GCG)
The findings indicate that CG guidelines are related to the company's financial performance
Whilst Caesari et al (2016) found CG and corporate financial performance (CFP) has a negative relationship. This means that the implementation of CG resulted in a decrease in the company's financial performance
Summary
A company’s financial performance is heavily affected by how serious the company incorporating good corporate governance (GCG). Corporate governance (CG) has been a popular topic of discussion within the developed and developing countries. Company adopts CG to ensure corporate accountability to shareholders and to improve the transparency of its financial statements (Tariq & Abbas, 2013). According to Wahyudin & Solikhah (2017) stated that after the crisis in mid-1997 in Asian countries, including in Indonesia, awareness of the importance of corporate governance has been increasing. In implementing good corporate governance, it is necessary to meet the trust of the community and the international world as an absolute requirement for the company to be able to have a good and healthy growth to achieve the ultimate goal, which is to improve financial performance
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