Factors Affecting the Financial Performance of Companies Based on Agency Theory

Abstract

This study examines the factors that influence a company’s financial performance based on agency theory. There were 5 independent variables used in this study, namely institutional ownership, insider ownership, board size, company size, and debt ratio, as well as the dependent variable, namely the company’s financial performance measured using Tobin’s Q ratio. This study used a quantitative approach using multiple linear regression analysis methods with a sample of 357 non-financial companies listed on the Indonesia Stock Exchange over the 2013-2017 period. Data processing used Eviews, where the results showed that institutional ownership, insider ownership, board size, company size, and debt ratio simultaneously had a significant positive effect on Tobin’s Q. However, if the variables were tested separately, it was found that institutional ownership, insider ownership, and debt ratio had a significant positive effect on Tobin’s Q, while firm size had a significant negative effect on Tobin’s Q and board size had no significant effect on Tobin’s Q.