THE IMPACT OF CORPORATE GOVERNANCE ON THE ABILITY IN PREVENTING FINANCIAL DISTRESS: EVIDENCE FROM INDONESIA AND MALAYSIA CONSUMER GOODS

Hatane, Saarce Elsye and Tarigan, Josua and CHANDRA, NATHALIA (2018) THE IMPACT OF CORPORATE GOVERNANCE ON THE ABILITY IN PREVENTING FINANCIAL DISTRESS: EVIDENCE FROM INDONESIA AND MALAYSIA CONSUMER GOODS. In: 24th EBES Conference, 12-01-2018 - 12-01-2018, Bangkok - Thailand.

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Abstract

This research study investigates the impact of corporate governance on the ability in preventing financial distress in the context of Indonesia and Malaysia consumer goods companies. Corporate governance components used are board-structures, managerial ownership, and gender diversity. Board structures consist of board size and board independence composition. The corporate governance components are hand-made collection from reading the annual report of each company and collecting the information needed. The ability in preventing in financial distress is measured by the modified concept of business failure by Pindado, Rodriguesb, & De La Torre (2008). It is measured by profitability (EBIT), financial expense (FE) and retained earnings (RE). This research study examines the consumer goods companies in Indonesia and Malaysia for the period of 2011 to 2015 with the total sample of 24 Indonesia companies or 120 firm-years observations and 98 Malaysia companies or 490 firm-years observations. The findings of this research study present mixed results. Board structure has a significant impact on the ability in preventing financial distress in Indonesia whereas it was found no significant impact in case of Malaysia companies. On contrary, there is no significant impact on managerial ownership in Indonesia; while Malaysia�s result shows there is a significant impact. Additionally, this study found that there is a significant impact on gender diversity on the ability in preventing financial distress in both Indonesia and Malaysia. Gender diversity also serves as a moderating variable in both countries even though the type of moderation between both countries are different.

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