Do corporate governance, capital structure predict financial performance and firm value?(empirical study of Jakarta Islamic index)

Dian Ferriswara, Nur Sayidah and Edwin Agus Buniarto

Cogent Business & Management, 2022, vol. 9, issue 1, 2147123

Abstract: This study examines corporate governance, capital structure, financial performance, and firm value in the Jakarta Islamic Index. The technique of data analysis uses Partial Least Square (PLS), with structural equations (SEM) based on components or variants, on annual data from 2015 to 2021 to examine the variables that affect firm value on the Jakarta Islamic Index (JII). The findings show that two determinants significantly affect firm value from the five hypotheses proposed. Financial performance has a significant effect on firm value. Corporate governance and capital structure factors do not affect firm value, but corporate governance positively and negatively impacts financial performance. The practical implications of this study emphasize the critical role of corporate governance and capital structure in improving financial performance and firm value. Investors will respond to good corporate governance as a positive signal that the company is superior to other companies. The corporate governance variable has a significant effect on financial performance with a negative coefficient direction, indicating that corporate governance has not been implemented optimally in the proxy company with low proportion of independent commissioners and independent audit committees.

Date: 2022
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DOI: 10.1080/23311975.2022.2147123

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