Relevance of Good Corporate Governance and Financial Leverage on Firm Value

Abstract

Firm value is a certain condition that has been achieved by the company as a result of trust in the community and investor perceptions of the level of success of the company. The implication of good corporate governance is one way to increase firm value. In addition, one of the company's funding sources came from debt. The smaller the debt in a company, the investors will be happy to provide funding because the company's profits will be used more as dividends and that will increase the value of the company. This study aims to analyze relevance of good corporate governance (institutional ownership, managerial ownership, the proportion of independent commissioners, the number of audit committees) and financial leverage on firm value. The population in the study is a manufacturing company with the number of samples according to the calculation of the Slovin formula carried out during 2016 - 2017 as many as 117 data. The results of this study indicate that the number of audit committees has a significant effect on firm value, while institutional ownership, managerial ownership, the proportion of independent commissioners and financial leverage have no significant effect on firm value

Keywords: mechanism good corporate governance, financial leverage, firm value

DOI: 10.7176/RJFA/10-14-13

Publication date:July 31^st 2019