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Corporate governance mechanism and profitability: A special assessment on the board of commissioners and audit committee

Author

Listed:
  • Yunan Najamuddin

    (Department of Accounting, Faculty of Business and Economics, Universitas Islam Indonesia, Indonesia)

  • Laraswati Laraswati

    (Department of Accounting, Faculty of Business and Economics, Universitas Islam Indonesia, Indonesia)

  • Johan Arifin

    (Department of Accounting, Faculty of Business and Economics, Universitas Islam Indonesia, Indonesia)

  • Neni Meidawati

    (Department of Accounting, Faculty of Business and Economics, Universitas Islam Indonesia, Indonesia)

  • Muamar Nur Kholid

    (Department of Accounting, Faculty of Business and Economics, Universitas Islam Indonesia, Indonesia)

Abstract

This study aims to examine the effect of corporate governance mechanisms on the percentage of profits in manufacturing companies. The population in this study is manufacturing companies in the industrial & chemical sector, which are listed on the Indonesia Stock Exchange (IDX) during the 2017-2019 period. The samples were selected using the purposive sampling method and resulted in 34 manufacturing companies in the industrial and chemical sectors. Data were taken from the Indonesia Stock Exchange for the 2017-2019 period. The independent variable in this study is corporate governance with a focus on the board of commissioners and the audit committee, while the dependent variable is the effect of profit percentage on manufacturing companies. This study used simple linear regression analysis. From the regression analysis in this study, the two corporate governance proxies which include the board of commissioners and the audit committee have a significant positive effect on company profits. These results provide evidence that the existence of a board of commissioners and an audit committee in manufacturing companies in Indonesia has been effectively associated with the company’s profit percentage gain. Key Words:corporate governance mechanism, board of commissioners, audit committee, profitability

Suggested Citation

  • Yunan Najamuddin & Laraswati Laraswati & Johan Arifin & Neni Meidawati & Muamar Nur Kholid, 2022. "Corporate governance mechanism and profitability: A special assessment on the board of commissioners and audit committee," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(4), pages 239-245, June.
    • Handle: RePEc:rbs:ijbrss:v:11:y:2022:i:4:p:239-245
    DOI: 10.20525/ijrbs.v11i4.1773
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    References listed on IDEAS

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    2. Denis, Diane K. & McConnell, John J., 2003. "International Corporate Governance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(1), pages 1-36, March.
    3. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    4. Mahdi Salehi & Mohammad Tahervafaei & Hossein Tarighi, 2018. "The effect of characteristics of audit committee and board on corporate profitability in Iran," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 34(1), pages 71-88, February.
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