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680
THE EFFECT OF FINANCIAL PERFORMANCE ON THE VALUE OF
COMPANIES IN THE BANKING SECTOR: THE ROLE OF GOOD
CORPORATE GOVERNANCE AS A MODERATION VARIABLE
Riky Panca Putra Kusuma, Marlina Widiyanti, Shelfi Malinda, Mohamad Adam
Universitas Sriwijaya Palembang, Indonesia
mr_adam88@unsri.ac.id
Abstract
The purpose of this study is to obtain empirical evidence of the influence of profitability
(Return on Assets and Return on Equity), BOPO, Credit Risk (NPL ratio) and the role of
Good Corporate Governance as a moderating variable on the Value of Banking Companies
listed on the Indonesia Stock Exchange. The sampling technique used purposive sampling.
the research samples obtained totaled 13 companies with a research period from 2017-2021
so that there were 65 units of analysis. The research design was quantitative descriptive. The
analysis technique in this research is multiple linear regression analysis method with
interaction test. The results showed that ROA has a significant positive effect, ROE has a
significant negative effect on firm value. Meanwhile, BOPO, NPL and GCG have no effect
on company value. GCG as a moderating variable moderates ROE on firm value however, it
cannot moderate the effect of ROA, BOPO and NPL. The implication of this research is that
companies must pay attention to profitability and those that can affect stock prices so that
company value can increase.
Keywords
: ROA; ROE; BOPO; NPL; GCG; Company Value
INTRODUCTION
The main goal of a company according to the Theory of Firm is to maximize its wealth
or company value (Salvatore, 2005). So that if a company is considered to have value, the
company is valuable or in the sense that it has future prospects. The high value of the company
can provide maximum prosperity to the company owner or stakeholders. Company value is
one that causes the company to grow sustainably. Management carries out various efforts with
various policies to increase the value of the company which is reflected in its stock price where
the main goal is to increase the prosperity of owners and shareholders (Brigham &; Weston,
2018).
PThe Covid-19 virus epidemic has swept all parts of the World in Wuhan City, China.
This caused a health crisis and impacted finances from 2020 to the end of 2021 worldwide.
Various countries have issued several policies to overcome the crisis that is worse for their
countries. Furthermore, the Authority that supervises the Financial Industry in Indonesia also
issued several provisions to accelerate the recovery of the National Economy, including the
Financial Services Authority (OJK) through the Financial Services Authority Regulation
(POJK) Number 11/POJK.03/2020 dated March 13, 2020 concerning National Economic
Stimulus as a Policy Countercyclical The impact of the spread of Coronavirus Disease 2019,
so that the policy has an indirect effect on the increase in stock prices in 2020-2021.
Injuruty: Interdiciplinary Journal and Humanity
Volume 2, Number 8, August 2023
e-ISSN: 2963-4113 and p-ISSN: 2963-3397
The Effect of Financial Performance on the Value of Companies in the Banking Sector: The
Role of Good Corporate Governance as a Moderation Variable
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681
Source: Idx.co.id (data processed by the author)
Corporate Governance is one of the things that can increase the value of the company
(Suryani et al., 2020). In this study, GCG is measured by managerial ownership. Here are the
phenomena that occur between company performance and Good Corporate Governance to the
value of banking companies. Based on graph 1, there is a phenomenon in 2018-2019 where
ROA decreased from 1.59% to 1.48%, but the company's value increased from 101.42% to
102.15%. This is not in line with the signal theory proposed by (Spence, 1973) Explaining that
profitability can be a good signal (positive) for investors, because positive profitability
illustrates the company's good prospects so as to increase investor confidence in the company's
performance which ultimately contributes to an increase in the value of the company as
indicated by the increase in the price of the company's shares.
Phenomenon in 2018-2019 where ROE decreased from 10.12% to 8.60%, but the
company's value increased from 101.42% to 102.15%. In signal theory, it is indicated that
companies with increased and high profitability will have a positive effect on the value of the
company. This phenomenon is not in line with signal theory. A decrease in profitability will be
a bad signal for investors, which will reduce investor confidence which can result in a decrease
in company value marked by a decrease in stock value. in 2018-2019 which showed BOPO
increased from 57.37% to 63.52% accompanied by an increase in company value from
101.42% to 102.15%. According to Asriyani and Mawardi (2018) BOPO can be used to see
the level of efficiency of the company in using all its production factors. If the BOPO value is
high, it can be indicated that the bank is in a troubled state.
The phenomenon in 2017–2021 where NPLs tend to increase for 5 years and the
company's value fluctuates. The NPL variable shows the company's ability to manage its bad
loans. If the NPL value is high, it indicates a lot of non-performing loans and the company's
lack of ability to manage its credit risk. The phenomenon in 2020 to 2021 where managerial
ownership remained at 0.43% and the company's value increased from 98.53% to 105.78%.
This is not in line with Agency Theory from Jensen and Meckling (1976) who get that greater
managerial ownership can degrade agency cost.
Internal factors that affect the value of the company that are influenced by the stock price
that are influenced include dividend policy, the Company's financial performance, cash flow
information and profits. While external factors that affect stock prices include stock
transactions, deposit interest rates, social and political conditions of a country, macroeconomic
0,00%
20,00%
40,00%
60,00%
80,00%
100,00%
120,00%
2017 2018 2019 2020 2021
ROA ROE BOPO NPL GCG TOBINS'Q
The Effect of Financial Performance on the Value of Companies in the Banking Sector: The
Role of Good Corporate Governance as a Moderation Variable
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682
policies of a country, and determined by the forces of demand and supply in the capital market.
The more people who buy shares, the stock price will increase, and vice versa if more people
sell shares, the stock price will decrease.
The phenomenon of company value is an interesting thing to study, because there are
many factors that can affect changes in company value in the capital market both internal and
external. In this study, the author aims to determine the effect of company performance in the
banking sector as measured by profitability measured through the ratio of Return on Assets
(ROA), Return on Equity (ROE) and efficiency through the ratio of Operating Costs and
Operating Income (BOPO), as well as credit risk measured from the ratio of Non-Performing
Loans (NPL). In addition, there are moderator variables that can affect company value and
Good Corporate Governance (GCG) assessment of Company Value in the 2017-2021 period.
METHOD RESEARCH
The object of research was carried out on banking companies listed on the Indonesia Stock
Exchange in the 2017-2021 period. Data collection using purposive sampling techniques where
research samples were obtained as many as 13 companies. The research method used is a descriptive
method with a quantitative approach using Multiple Analysis Regression Interaction test, Classical
assumption test is carried out before hypothesis test so that the test results meet the criteria of BLUE
(Best Linear Unbiased Estimated). After that, hypothesis testing was carried out with statistical t tests,
F tests, and determination coefficient analysis. The model used in this study can be formulated as
follows:
Y = α + β1 XROA + β2 XROE + β3 XBOPO + β4 XNPL + β5 XGCG + ei ............... (Equation 1)
Table 1. Operational Definition and Variable Measurement
Variable
Definition
Formula
Meas
ure
Company
Value
Company values provide an overview of the
company's prospects (Brigham and Daves, 2016).
Tobin′s Q = (EMV + D)
/(EBV+D)
Ratio
ROA
Operating profit compared to assets (Brigham and
Houston, 2019).
ROA = Profit /Total
Assets(Brigham &
Daves, 2016)
Ratio
ROE
Profit versus all equities (Brigham and Houston,
2019).
ROE = Profit /Total
Equity(Brigham &
Daves, 2016)
Ratio
BOPO
BOPO, to measure the level of efficiency in carrying
out its operational activities Dendawijaya (2009).
BOPO = (Operating
Expenses)/(Operating
Income) x 100%
Ratio
NPL
NPLs are a percentage of non-performing loans
(Meydianawathi, 2007).
NPL = (Non-performing
Loans)/(Total Credits)
(Brigham & Daves,
2016)
Ratio
GCG
Managerial ownership can be interpreted as
shareholders on the part of management (effendi,
2016)
MAN= (manager's
shares)/(Qml
Outstanding shares)
Ratio
Source: data processed by the author from selected books
The Effect of Financial Performance on the Value of Companies in the Banking Sector: The
Role of Good Corporate Governance as a Moderation Variable
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683
RESULT AND DISCUSSION
Table 2 Descriptive Statistical Results
N
Minimum
Maximum
Mean
Std. Deviation
ROA
65
.00020
.03250
.0146015
.00875831
ROE
65
.00110
.17750
.0941231
.04993964
TOBINSQ
65
.22998
1.77857
1.0208334
.28155217
BOPO
65
.21465
1.22377
.6184359
.21995450
NPL
65
.00434
.07870
.0263390
.01521704
MILES
65
.00002
.04843
.0043941
.01248836
Valid N (listwise)
65
Source : SPSS 25.0 Data Processing Results
Classic Assumption Test Results
The normality test can be performed using Kolmogorov-Smirnov test. Distributed data
Data is not normally distributed. The way to overcome this is done outlier data after outlier
data is carried out, N = 47.The results of the multicollinearity test in the moderation model are
free from symptoms of multicollinearity. Deep heteroscedasticity test using White Test with
normal results. The autocorrelation test, the Durbin-Watson (dw) test, shows that the model
undergoes autocorrelation so that it is fixed with the dw d method so that the data is free from
autocorrelation.
Coefficient of Determination (Adjusted R2)
The coefficient of determination test aims to measure how far the ability of the
independent variable to explain the variation of the dependent variable (Ghozali, 2018). Based
on the results of the table below, the result of the value of the Adjusted R Square after
moderation is 0.170 or 17%.
The t-value test is used to measure how far the influence of one independent variable
individually in explaining the variation of the dependent variable (ghozali, 2018). The results
of t-value testing underlie the preparation of a research model which can be formulated as
follows:
TobinsQ = 0.262 + 0.177ROA – 0.191ROE + 0.039BOPO + 0.007NPL – 0.002KM
Furthermore, an interaction test was carried out to see the effect of GCG moderation
with the results of the following equations:
TOBINSQ = -0.239 - 0.071ROA – 0.051KM – 0.014ROA*KM (Interaction equation 1)
TOBINSQ = -1.482 - 0.964ROE – 0.231KM – 0.148ROE*KM (interaction equation 2)
TOBINSQ = 0.101 + 0.369BOPO + 0.012KM + 0.062BOPO*KM (interaction equation3)
TOBINSQ = 0.927 + 0.350NPL + 0.154KM + 0.061NPL*KM (interaction equation 4)
Table 3. t-Value Test Results after Moderation
Hypothesis
B
Sig
α
Result
H1
ROA has a significant positive effect on the value of the
company.
.097
.386
0.05
Accepted
H2
ROE has a significant negative effect on the value of the
company.
-
.253
.023
0.05
Rejected
H3
BOPO has no effect on company value
-
.223
.167
0.05
Rejected
H4
NPL has no effect on company value
-
.149
.149
0.05
Rejected
H5
GCG has no effect on company value
.081
.610
0.05
Rejected
The Effect of Financial Performance on the Value of Companies in the Banking Sector: The
Role of Good Corporate Governance as a Moderation Variable
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684
Hypothesis
B
Sig
α
Result
H6
GCG does not moderate ROA to company value
-
.014
.701
0.05
Rejected
H7
GCG moderates ROE on company value
-
.148
.003
0.05
Accepted
H8
GCG does not moderate BOPO on corporate value
.062
.387
0.05
Rejected
H9
GCG does not moderate NPLs against corporate value
.061
.120
0.05
Rejected
Source : SPSS 25.0 Output (Data processed by author)
The Effect of ROA on Company Value
Return on Assets (ROA) has a regression coefficient value of 0.177 with a positive or
unidirectional value with a significance of 0.014 < α 0.05. These results show that the variable
Return on Assets positive and significant effect on Company Value (H1 supported). Signal
Theory explains that profitability can be a good (positive) signal for investors, because positive
profitability illustrates the company's good prospects so as to increase investor confidence in
the company's performance which ultimately contributes to an increase in company value. The
results of this study are in line with Mudjijah et al (2019); Widiyanti et al (2019); Rusnaeni et
al (2022) found a significant positive influence of ROA on company value. However, the
results of this study are not in line with Alkhairani et al. (2020) found that profitability has a
significant negative effect on company value. Damaianti (2020); Saputri and Supramono
(2021) found that profitability has no effect on company value.
The Effect of ROE on Company Value
Return on Equity (ROE) has a regression coefficient value of -0.191 with negative or
opposite values with a significance of 0.010 < α 0.05. These results show that the variable
Return on Assets negative and significant effect on Company Value (H2 not supported). In
this study, the ROE value of banking companies for the 2017-2021 period tends to decrease,
which tends to reduce good prospects for companies. The results of the study are in line with
previous research by Yahya and Fietroh (2021); Pradina and Hasanah (2021); Shenurti et al.
(2022); explain ROE has a significant negative effect on the value of the Company.
The Effect of BOPO on Company Value
BOPO has a regression coefficient value of 0.039 with positive and unidirectional
values with a significance of 0.659 > α 0.05. These results show that the BOPO variable does
not have a significant effect on Company Value (H3 not supported). In this study, the data
from the value of BOPO is less than 80%, so the amount of BOPO does not affect the value of
the company owned. This also indicates that the bank is able to control and maintain the
efficiency of operating costs against operating income well, so that it will not interfere with
bank performance significantly and does not affect investors' assessment of the company's
value. The results of this study are in line with the results of previous research by (Asriyani
and Mawardi (2018); Kansil et al. (2021); Murwani and Taufiq (2022); Resia et al (2023)
which found that BOPO had no significant effect on company value. However, it is not in line
with research Halimah (2020) which found that BOPO had a positive and significant effect on
company value.
The Effect of NPL on Company Value
The Effect of Financial Performance on the Value of Companies in the Banking Sector: The
Role of Good Corporate Governance as a Moderation Variable
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685
NPL has a regression coefficient value of 0.007 with positive and unidirectional values
with a significance of 0.526 > α 0.05. These results show that the NPL variable does not have
a significant effect on Company Value (H4 is not supported). This research shows that the
insignificance of the influence of NPLs on company value is due to the credit risk generated
by banking companies is still said to be quite stable so that it does not interfere too much with
the magnitude of the company's profitability value, this will also not greatly affect investor
interest in investing in the banking industry. For investors, the most important thing is the
profitability of the banking company, if the bank has a large profit, the dividends received by
investors will increase (Melda et al., 2022). The results of this study are in line with the results
of the study Khamisah et al. (2020); Yuniarti et al (2022) which found that NPLs did not have
a significant influence on the value of the company.
The Effect of GCG on Corporate Value
Managerial ownership has a regression coefficient value of -0.002 with a negative or
opposite value and a significance of 0.756 > α 0.05. These results show that the variable of
Managerial Ownership does not have a significant effect on Company Value (H5 not
supported).
GCG moderates the Effect of ROA on Corporate Value
Moderation Z and X1Z more than 0.05 which can be interpreted that managerial
ownership is variable hModerator omologizer (potential moderation) means that the variable
has the potential to become a moderation variable. The conclusion from the regression results
above is that managerial ownership does not strengthen the effect of ROA on company value
(H6 is not supported).
GCG moderates the Effect of ROE on Corporate Value
The significance value of the moderation variable Z in equation 5 has a significance of
more than 0.05 but the interaction variable X2Z has a significance of less than 0.05 which can
be interpreted that managerial ownership is a pure moderator variable (potential moderation)
meaning it is a variable that moderates the relationship between the predictor variable and the
dependent variable where the pure moderation variable interacts with the predictor variable
without being the predictor variable. So it can be concluded that managerial ownership
strengthens the influence of ROE on company value (H7 supported).
GCG moderates BOPO's Influence on Corporate Value
The significance value of moderation variables Z and X3Z is more than 0.05 which can
be interpreted that managerial ownership is a moderator homologizer variable (potential
moderation) meaning that the variable has the potential to become a moderation variable. The
conclusion from the regression results above is that managerial ownership does not strengthen
the influence of BOPO on company value (H8 is not supported).
GCG moderates the Effect of NPLs on Corporate Value
The significance value of moderation variables Z and X3Z is more than 0.05 which can
be interpreted that managerial ownership is a moderator homologizer variable (potential
moderation) meaning that the variable has the potential to become a moderation variable. The
conclusion from the regression results above is that managerial ownership does not strengthen
the influence of NPLs on company value (H9 is not supported).
The Effect of Financial Performance on the Value of Companies in the Banking Sector: The
Role of Good Corporate Governance as a Moderation Variable
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CONCLUSION
This study concludes that ROE has a significant negative effect and ROA has a
significant positive effect on company value. BOPO, NPL, GCG have no effect. GCG does not
moderate ROA, BOPO and NPL but, rather, moderates ROE to company value. The coefficient
of determination of this study shows at 17% which means that the independent variable is only
able to explain the dependent variable with 17% while the remaining 83% is influenced by
other factors outside this model.
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Copyright holders:
Riky Panca Putra Kusuma, Marlina Widiyanti, Shelfi Malinda, Mohamad Adam
(2023)
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Injurity - Interdiciplinary Journal and Humanity
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