The effect of financial and non-financial performance on investors’ reactions: The role of corporate governance mechanisms as moderating

Intadaviqotul Minakh,Erwin Saraswati,Abdul Ghofar

doi:10.20525/ijrbs.v10i8.1501

Abstract

The purpose of this study is to examine the effect of financial and non-financial performance on investor reactions and the role of corporate governance mechanisms as moderating. The analysis technique used is the moderated regression analysis (MRA). The research population is manufacturing sector companies listed on the Indonesia Stock Exchange (IDX). Based on the purposive sampling method, 78 companies were selected as the samples (390 firm-year observations). The results of this study provide empirical evidence that the existence of financial and non-financial performance in a company can increase investor reactions. Institutional ownership plays a role in the relationship between financial performance and investor reactions. Meanwhile, independent commissioners, boards of directors, and audit committees have no role in the relationship between financial performance and investor reactions. And independent commissioners and institutional ownership can moderate the influence of non-financial performance on investor reactions. Meanwhile, the board of directors and audit committee cannot moderate the influence of non-financial performance on investor reactions.

Highlights

The capital market plays an important role in the economy which serves as an index of economic prosperity in a country (Rajabi et al, 2014)
One of them is the SRI KEHATI Index on the Indonesia Stock Exchange (IDX) showing stock prices that have increased in stock prices every year
This study aims to examine the effect of financial and non - financial performance on investor reactions moderated by corporate governance

Summary

Introduction

The capital market plays an important role in the economy which serves as an index of economic prosperity in a country (Rajabi et al, 2014). Investor reactions can describe a positive or negative response to the company. The increase in share prices of 25 issuers was recorded 10 percent higher which is committed to good financial performance and reducing carbon emissions. Investment decisions are basically influenced by sources of information on financial markets. One of the useful sources of data is financial reports, which are used to assist users and facilitate investors in making decisions (Widiatmoko et al, 2018). The high and low share value can be reflected through the company's performance which is seen through the financial performance of a company (Ayuni, 2016). Karamoy et al, (2020) show that the higher the financial performance, the better the company, so that this condition will increase investor confidence which will make stock prices rise. In gaining the trust of shareholders' interests, companies must develop policy strategies related to company value (Agrawal et al, 2020)

Objectives

Findings

Discussion

Conclusion