Does Leverage Mediate the Effect of Corporate Governance on Firm Performance: Indonesian Case
Irfan Dwisaputra, Eko Rizkianto, Zuliani Dalimunthe
Faculty of Economics and Business, University of Indonesia, Jakarta 10430, Indonesia, irfan.dwisaputra[at]gmail.com
Abstract
This research examines the relationship between corporate governance mechanisms such as board size, board independence, female directorship, ownership concentration, directors ownership and audit reputation on firm performance and examines the effect of financial leverage in mediating corporate governance and firm performance. This research was conducted on 113 manufacturing companies listed on the Indonesia Stock Exchange during 2013-2017 with a total of 565 observations. Panel data regression using the STATA 15.0 program is done to test the hypothesis. We find that board size has a positive effect on firm performance, while female directorship and ownership concentration have a negative effect on firm performance. Financial leverage partially mediates the effect of board size and ownership concentration on firm performance. This study contributes to corporate governance literature, especially factors that can mediate the relationship between corporate governance and firm performance.
Keywords: corporate governance; good corporate governance; firm performance; financial leverage
Topic: Management