The Impact of Corporate Governance on Financial Performance: Evidence from Indonesia

Abstract

This study investigates the impact of corporate governance on the financial performance of publicly listed companies in Indonesia, highlighting the significance of effective governance practices in enhancing organizational success. Utilizing empirical data from 100 firms, the research reveals a positive correlation between corporate governance and key financial metrics, including Return on Assets (ROA), Return on Equity (ROE), and net profit margin. The findings indicate that companies with robust governance frameworks are better positioned to utilize their resources efficiently, leading to improved profitability and increased shareholder value. Furthermore, the study emphasizes the growing demand for transparency and accountability in corporate practices within Indonesia's evolving market landscape. The implications extend to policymakers, suggesting the need for initiatives that promote best practices in corporate governance, such as mandatory training for board members and enhanced disclosure requirements. By fostering an environment conducive to good governance, the government can enhance the stability and attractiveness of the investment climate. In conclusion, this research contributes to the existing literature on corporate governance and serves as a call to action for corporate leaders and policymakers to prioritize governance as a fundamental component of business strategy and economic development in Indonesia.