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The effect of corporate governance structure on financial difficulties

Author

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  • Wuryan Andayani

    (University of Brawijaya, Indonesia)

  • Dalila Daud

    (UiTM Cawangan Negeri Sembilan, Malaysia)

Abstract

This study aims to examine the effect of Corporate Governance Structure (CG) and Corporate Social Responsibility (CSR) on Financial Difficulties. The contribution of this research is to explore the truth of CG goals and achieve quality CSR reporting and can provide solutions to conditions before and when companies experience financial difficulties and provide things that are considered important to anticipate the possibility of financial difficulties. CG in this study uses the size of the audit committee and independent commissioners, then CSR is measured by the quality of CSR disclosure. The data analysis method used is multiple linear regression. The results of this study are the audit committee has no effect on financial difficulties but the independent commissioner has a negative effect on financial difficulties. The contribution of the proportion of independent directors apparently contributed more to the proportion of the number of audit committees. The proportion of the audit committee is not able to minimize or even be a solutive effect on the financial difficulties of companies in Indonesia. The audit committee is a form of responsibility for compliance with government regulations only. The test results also support the influence of CSR on financial difficulties assuming that the quality of CSR disclosure has a significant negative effect on corporate financial difficulties. Disclosure and implementation of CSR activities can have an effect to minimize if in the future the company experiences financial difficulties, the guarantee of funds will remain well distributed so as to minimize the financial difficulties experienced by the company

Suggested Citation

  • Wuryan Andayani & Dalila Daud, 2020. "The effect of corporate governance structure on financial difficulties," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 7(3), pages 1803-1818, March.
    • Handle: RePEc:ssi:jouesi:v:7:y:2020:i:3:p:1803-1818
    DOI: 10.9770/jesi.2020.7.3(24)
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    References listed on IDEAS

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    1. Henri Servaes & Ane Tamayo, 2013. "The Impact of Corporate Social Responsibility on Firm Value: The Role of Customer Awareness," Management Science, INFORMS, vol. 59(5), pages 1045-1061, May.
    2. Siti Nuryanah & Sardar M. N. Islam, 2015. "Corporate Governance and Financial Management," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-43561-3.
    3. Paul C. Godfrey & Craig B. Merrill & Jared M. Hansen, 2009. "The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis," Strategic Management Journal, Wiley Blackwell, vol. 30(4), pages 425-445, April.
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    Cited by:

    1. Iman Harymawan & Fajar Kristanto Gautama Putra & Bayu Arie Fianto & Wan Adibah Wan Ismail, 2021. "Financially Distressed Firms: Environmental, Social, and Governance Reporting in Indonesia," Sustainability, MDPI, vol. 13(18), pages 1-18, September.

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    More about this item

    Keywords

    quality; disclosure; corporate governance; corporate social responsibility; audit committee; independent commissioner;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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