The effect of solvency, activity and implementation of good corporate governance on profitability

Yan Nasution, and Citra Sukmadilaga
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Yan Nasution,: Pakuan University, Bogor, Indonesia
Citra Sukmadilaga: Padjadjaran University, Sumedang, Indonesia

Journal of Administrative and Business Studies, 2019, vol. 5, issue 1, 01-12

Abstract: The aim of this research is to find out the effect of solvency, activity, and implementation of good corporate gov- ernance on profitability of non-banking State Owned Enterprises which the IPO before 2012 and registered in Indonesia Stock Exchange in 2012 until 2017. The number of the research sample were 14 companies. The phenomenon of operational inefficiency of the company resulted in the loss of several State Owned Enterprises in that period. In this study profitability indicators use Return On Assets (ROA). While the debt of the State-Owned Enter- prises is increasingly swollen, especially those who get government assignments are feared that they will default. This is related to solvency as measured by using Debt to Equity Ratio (DER). While the inefficiency of companies in using and managing assets owned will only increase the burden of the company in the form of investment that does not bring profit. This is related to the activities measured by using Total Assets Turnover (TATO). The last is Good Corporate Governance (GCG) where corporate governance is seen as not yet optimal by State Owned En- terprise. As for corporate governance using the Audit Committee indicators. Based on the results of the study, it is concluded that DER, TATO, and GCG with the Audit Committee indicators have a significant effect on ROA in State Owned Enterprise registered on the IDX. The same result is also with partial test (t test), where DER has a significant effect on ROA, TATO has a significant effect on ROA, and GCG with the Audit Committee indicator has a significant effect on ROA.

Keywords: Solvency; Activity; GCG; Profitability (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:apb:jabsss:2019:p:01-12

DOI: 10.20474/jabs-5.1.1

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