Sustainability of Agriculture: An Analysis Based on Financial Performance and Good Governance

Abstract

Strategy to achieve food security is crucial for all countries around the world. This becomes more important for Indonesia as the fourth most populous country. This study evaluates Indonesia’s agricultural sustainability as one of the food security programs. In specific, the evaluation is based on micro-economics point of view by analysing the financial performance of the agricultural industries. This study also examines the role of ownership and external auditors as corporate governance instruments controlling a company achieving its ultimate objective. Conducting a quantitative study and examining Indonesia listed companies for the period of 2003-2018, the results show that most of Indonesia’s listed agricultural companies are not sustained as they were in bankruptcy zone. The ability of companies to manage the costs and commitment to do investments create value for the future, and the role of foreign ownership as one of governance instruments is found to be able to prevent agricultural companies from bankruptcy. The findings bring practical implications on the importance of financial literacy for managers of agricultural industries and good corporate governance practice to ensure the sustainability of agriculture.