The Mechanism of Corporate Governance, Financial Performance and Corporate Values in Sharia Companies in Indonesia

Abstract

Building corporate value is a right step to attract investors in sharia companies. Good corporate value can be obtained with good corporate governance. Good governance also improves the company’s financial performance. This study aims to determine the effect of corporate governance mechanism, which consist of institutional ownership, managerial ownership, independent boards, and board size, on financial performance and corporate value. The research population were companies listed on the JII (Jakarta Islamic Index) for the period of 2010-2017. The research used purposive sampling which resulted on obtaining 23 companies. The method of data analysis was SEM-PLS. The results of the direct influence test show that commissioners, directors, independent commissioners, and institutional ownership influence financial performance, while audit committees and managerial ownership do not. The test results also show that independent commissioners and financial performance have an effect on corporate value, while the size of the board, institutional and managerial ownership do not. The test results of indirect influence indicate that financial performance is capable of mediating the size of commissioners, directors, independent commissioners, and institutional ownership with the corporate value, but unable to mediate the audit committees and managerial ownership.