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The Effect of Good Corporate Governance on Company Performance and
Market Performance of BUMN Companies Go Public in 2014-2018
Introduction:
The Indonesia Stock Exchange (IDX) is a system of meeting bidders and buyers in
corporate securities trading transactions. Changes in a country's stock exchange will have an
impact on changes in other countries' exchanges regionally and globally (Endri, 2009). State
exchanges that have strong fundamental performance will affect exchanges owned by small
countries. The response of this inter-exchange relationship can be represented through the stock
price index between countries. Stock price movements on global exchanges will be quickly
responded by the Indonesian stock exchange, this can be seen from the composite stock price
index (JCI). In Figure 1 it can be seen that the movement of the global index; Europe, Middle
East and Africa regional index; Americas regional index; Asia Pacific regional index; ASEAN
regional index; JCI has the same pattern, the conclusion can be drawn that each index between
countries responds to each other. Changes in the JCI represents the movement of stock prices of
each sector of companies in Indonesia, but this is not reflected in the stock prices of publicly
listed state-owned companies.
`State-owned companies going public do not respond quickly to stock price movements
in Indonesia and globally compared to non-SOE companies. In 2017, stock prices on global and
regional indices increased, but stock prices in publicly listed state-owned companies decreased.
The development of State-Owned Enterprises (BUMN) going public has grown rapidly for 5
(five) years, namely 2014-2018. The total assets of BUMN companies going public increased
from 2016 amounting to IDR 138,991 billion to in 2018 amounted to Rp 235,048 billion. The
total equity of state-owned companies going public as the company's wealth also increased in the
same period of years and reached Rp 44,224 billion in 2018. This development is not in
accordance with the market performance of publicly listed BUMN companies which has
decreased, namely in 2015 by -0.269 and in 2018 by -0.052. The movement of stock returns
reflects that the growth in investment value in publicly listed BUMN companies has decreased or
decreased the rate of return for investors. The decline in stock prices in this five-year period is
due to negative sentiment by investors on the financial performance of state-owned companies
going public. Investors will certainly invest in companies that have good corporate performance.
Company performance can be seen from the disclosure of the company's financial statements.
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The Price to Book Value (PBV) value in go public and non-SOE companies is above the
value of 1, this means that the share price offered by go public and non-SOE companies is an
expensive share price. A high share price is expected to result in a high stock return, this is not
reflected in publicly listed BUMN companies due to a decrease in share prices. The decline
explains that the company's management has been unsuccessful in managing the company to
create profits for shareholders. The Price Earning Rario (PER) value in non-SOE companies is
quite stable in 2014-2018, in contrast to BUMN companies going public has decreased. In 2016
the PER ratio was negative, this assumed a loss or the company was unable to generate profits.
The financial statements of publicly listed BUMN companies show that the value of ROA, ROE,
PBV, and PER has decreased from 2014-2018 (Figure 3). The ability of publicly listed state-
owned companies to earn profits/profits from the use of all its assets and its equity has decreased.
This decline explains that the company is not efficient in generating profits. The calculation of
profits in state-owned companies going public using ROA, ROE, PBV, and PER ratios as
indicators of company performance has decreased (Figure 2) and stock price returns as an
indicator of market performance in state-owned companies going public has also decreased
(Figure 1). This is in accordance with the research of Edhi and Elif (2015) proving the results
that company performance with the ratio of dividends per share, dividend payout ratio, price to
book value, debt to equity ratio, net profit margin and return on assets simultaneously and
partially affects the stock price as a market performance ratio. The financial statements of SOEs
going public can be seen in Figure 3.
The performance of company management is not only assessed from the financial aspect,
namely market performance and company performance which is the basic basis for investors in
investing their capital but needs to be considered non-financial aspects. One of the non-financial
aspects is the implementation of good corporate governance (GCG). The concept of GCG arises
as an effort to overcome selfish management behavior and as a control tool to enable the creation
of a balanced distribution of profits and wealth for stakeholders and create efficiency for the
company. The ratio in the financial statements is an assessment of the company in making a
profit, so the BUMN company going public has an expensive share price but the profit generated
is low and unstable for the coming year. Profit is an important thing that will be considered by
investors, this creates information asymmetry between management and company owners.
Circumstances This misalignment is a form of agency problem, which is the difference in
interests between management and company owners.
Ways to improve the quality of financial statements and reduce agency problems need to
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be done good corporate governance (GCG). The implementation of GCG in BUMN companies
going public as a public company is regulated in the financial services authority (OJK)
regulation No. 21 /POJK.04/2015, every public company (Tbk.) is obliged to implement good
corporate governance (GCG). In particular, the implementation of GCG in commercial banks is
regulated in the financial services authority regulation No. 55 /POJK.03/2016. The
implementation of GCG in SOEs is generally determined by 6 basic guidelines, namely: (1)
effective implementation of laws and regulations, (2) separate state actions by owners and
managers, (3) shareholders are treated fairly, (4) stakeholder relations are maintained, (5)
transparency and adequate publication, (6) Board of Commissioners' responsibilities (OECD,
2005).
Indonesia in the implementation of good corporate governance (GCG) from 2010 to
2018 ranks last among 12 countries, namely Australia, Hong Kong, Singapore, Malaysia,
Taiwan, Thailand, India, Japan, Korea, China, and the Philippines by the Asian Corporate
Governance Association (ACGA 2018). ACGA is an international independent organization that
measures GCG implementation in Asia Pacific countries. The score explains that the
implementation of good corporate governance (GCG) in Indonesia is still very low compared to
other countries as seen from the declining scores from 2016 and 2018 (Table 1).
ACGA's calculations are already relevant to the state of GCG in Asia. The ACGA goes beyond
simply calculating corporate governance, but also produces analysis on new laws and
regulations, investor engagement and corporate practices. ACGA engages in direct discussions
with financial regulators, stock exchanges, institutional investors and public companies (private
and state) on practical issues that affect the governance of companies regulatory environment and
the adoption of better corporate governance practices in Asia. In table 1, the ACGA may also
reflect the low state of GCG implementation in Indonesian state-owned companies.
Pranoto (2010) states that there are three constraining factors in the implementation of
GCG in SOEs. First, conflicting interests between government and management. Second, there is
a political tendency in the selection of directors, resulting in limited management power. Third,
limited management performance due to the lack of attractive incentive system. The corporate
governance mechanism is divided into two, namely internal mechanisms and external
mechanisms. The internal mechanism of GCG is company control through company regulations
and policies so that company performance management increases (Syakhroza, 2005). So, the
implementation of GCG can improve company performance. Company performance can be
measured using profitability ratios in obtaining profits for the company and the rate of return for
investors (Kasmir, 2012). In the research of Nurcahyani et al. (2013), GCG is measured based on
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CGPI and company performance as measured using ROA and ROE as profitability ratios in
CGPI participating companies on the IDX including state-owned companies going public. The
results of the study say that ROA and ROE simultaneously affect GCG. Other research results
regarding GCG in Commercial Banks also show that GCG has a negative effect on PBV (Aditya,
2015). GCG has a negative effect on PER in the automotive sub-sector in Belliena's research
(2016). So, the financial statements (Figure 2) reflect that the performance of BUMN companies
going public is weakening. If based on previous research, it can be assumed that the weakening
of company performance can be caused by poor implementation of GCG in state-owned
companies.
Furthermore, GCG in the form of external mechanisms has a relationship with market
performance conditions, namely controls formed by capital markets, product markets, and labor
markets (Syakhroza, 2005). Market performance is an indicator used to measure the prospects of
a company. Calculating this market performance can be seen from the company's market value
(Muallifin and Priyadi, 2016). The calculation of firm value can use stock price returns as an
indicator of market performance. According to Black et al. (2006) in Malik (2012), every
company that carries out good governance (GCG) can signal that the company will carry out
good management, so that it will affect the company's share price. Handayani and Yasa's
research (2015) shows that there is a positive relationship between GCG and stock prices, this is
in accordance with the GCG mechanism externally affecting market performance. The decline in
share prices in state-owned companies going public can be assumed to be due to poor GCG
implementation. In accordance with the assessment of GCG Indonesia by ACGA from 2010-
2018 there is political interference and a high level of corruption, it should be noted that some of
the shares of BUMN companies go public are owned by the government as operators and
regulators.
Based on previous research on the influence of company performance on market
performance, strengthening GCG both internally and externally can strengthen this relationship.
Research by Muliani et al. (2014) said that GCG as moderation strengthens the relationship
between company performance and firm value, one of which reduces the company's performance
agency problem. The decline in the performance of BUMN companies going public due to
agency problems, namely the conflict of interest by the government as an operator and
regulator, shows that the implementation of GCG in BUMN companies going public is still
weak which will lead to weakening stock prices as an indicator of market performance.
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Problem Formulation
The market performance of publicly listed state-owned companies did not react in
accordance with the performance of other countries' stock markets, namely in 2017 all indices
increased but the share prices of publicly listed state-owned companies decreased. The decline in
market performance of publicly listed SOE companies may be due to weak company
performance. Total assets of BUMN go public companies increased from 2016 amounting to Rp
138,991 billion to 2018 amounting to Rp 235,048 billion and total equity also increased in the
same year period and reached Rp 44,224 billion in 2018. Although the total wealth owned by
BUMN Go Public companies has increased, it is not supported by the net profit earned by the
company. The decrease in net profit can be seen from the ROA and ROE ratios in BUMN
companies going public during the 2014-2018 period showing that the company's performance
has decreased. The highest profit decline in 2016 with a PER value of -1.94, it is assumed that
there is a loss company. The company's declining performance has an impact on the market
performance of BUMN Go Public companies, which can be seen in the stock returns obtained,
namely in 2015 amounting to -4.94. 0.269 and in 2018 it was -0.052.
Indications of a decline in company performance and market performance of Go Public
BUMN companies from 2014-2018 can be assumed that the implementation of GCG has not
been optimal, because company management performance is not only assessed from financial
aspects but needs to consider non-financial aspects, namely good corporate governance (GCG).
BUMN Go Public companies are companies whose shares are mostly owned by the state. As the
largest shareholder, the government acts as an operator. The government also acts as a regulator
by issuing several policies regarding the implementation of good GCG in BUMN, one of which
is the Regulation of the Minister of BUMN PER-09 / MBU / 2012. The implementation of GCG
supervised by the government should make the company's performance good and be reflected in
the stock price as market performance. The ineffectiveness of the implementation of good
corporate governance mechanisms in state-owned companies going public is in accordance with
the Asia-wide GCG assessment report conducted by ACGA, Indonesia is always ranked last out
of 10 countries and has the lowest score. The issues that ACGA institutions always find are
political interference and the level of corruption during the period 2010 to 2018.
Nofitasari (2015) said that State-Owned Enterprises allow the implementation of GCG
only as a formality and has not been fully implemented in BUMN. This research needs to review
the implementation of GCG in state-owned companies going public as a public company by
looking at the implementation of GCG in state-owned companies.
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(i) Does company performance affect the market performance of state-owned companies going
public? (ii) Does GCG affect company performance and market performance of state-owned
companies going public? (iii) Can GCG be a moderating variable in the relationship between
company performance and market performance of state-owned companies going public?
Good Corporate Governance (GCG)
The Forum for Corporate Governance in Indonesia (FCGI) defines CG as a set of rules
used to regulate the relationship between shareholders, company management, creditors,
government, employees, and other internal and external stakeholders relating to their rights and
obligations, or in other words, a system that regulates and controls the company. CG can also be
defined as a mechanism based on regulations or other factors that have an influence in directing
and controlling the company, and ensuring that all parties involved in the company do what is
their right and obligation (Mai, 2010). Based on the definition previously stated, it can be
concluded that CG is a rule and structure applied in the company to ensure the fulfillment of the
obligations of each party in the company CG has the aim of producing added value for investors,
creditors, and other parties who have an interest in the company (stakeholders) (FCGI, 2000).
Parties classified as stakeholders for the company consist of the board of directors, board of
commissioners, employees, as well as government and society.
The purpose of establishing good corporate governance (GCG) is to create a market that
is efficient, transparent and in accordance with laws and regulations (National Committee on
Governance Policy, 2006). Good CG implementation is characterized by the creation of non-
overlapping policies, procedures, instructions and structures that can confuse workers (Bastomi
et al., 2017). CG is a mechanism needed to solve agency problems in companies (Baker and
Jabbouri, 2015; Shamsabadi et al., 2016). This is because CG can serve as a tool to monitor and
control the activities of managers (Ehikioya, 2015). Mai (2010) reveals that the target of CG
control is discreation and decision management, because CG can be used to supervise the
behavior of managers to use resources that can benefit the company. CG is able to help
shareholders to force managers to manage company resources into profitable productive
ventures, resulting in a better return on investment to shareholders (Ehikioya, 2015).
Strengthening CG in the company can align various interests and also reduce information
asymmetry. Companies with good CG will send signals to investors about the small potential for
information asymmetry and conflicts of interest between shareholders and managers, so as to
provide wealth for company shareholders, and be able to increase firm value (Cheng et al.,
2014).
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In the basic framework of CG, the implementation of CG principles is based on 3 (three)
important pillars, including strong internal control, independent internal audit, and external audit
in providing feedback on the effectiveness of the internal control process contained in the
company. (Wijayanti and Mutmainah, 2012). The implementation of the CG mechanism in the
company must be carried out in every aspect of the business and based on several principles. The
National Committee on Governance Policy (2006) mentions five GCG principles that must be
applied in the company, namely:
1. Transparency
Based on the principle of transparency, companies need to provide material and relevant
information, so that it can be accessed by all interested parties in the company. The form of the
principle of transparency in the implementation of GCG is the presentation of information in a
timely, clear, accurate manner based on the principle of openness.
2. Accountability
Accountability is an act of accountability for performance in a reasonable and transparent
manner. Therefore, the management of the company must be carried out correctly, measurable,
and in line with the interests of the company, the interests of shareholders and the interests of
other parties.
3. Responsiveness
Responsibility is the company's attitude in complying with laws and regulations and
carrying out responsibilities to society and the environment, in order to create business
sustainability in the long term.
4. Independence
Independence is the implementation of company management that is carried out
independently, to avoid intervention and mutual domination in company organs.
5. Fairness and equality
The management of the company must be carried out with due regard to the interests of
shareholders and other interested parties in accordance with the principles of fairness and
equality.
CG control mechanisms in the company are divided into two types (World Bank, 1999),
namely internal control mechanisms and external control mechanisms. The internal control
mechanism is a control mechanism carried out using elements within the company, which
consists of the board of commissioners, board of directors, audit committee, and share ownership
by managers. External mechanisms are control mechanisms that are carried out using elements
that exist outside the company's organization, including capital markets, funders, consumers, and
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regulators.
The Indonesian Institute for Corporate Governance (IICG):
The Indonesian Institute for Corporate Governance (IICG), established on June 2, 2000,
is an independent institution that conducts dissemination and development of good corporate
governance in Indonesia. The main activity carried out is to conduct research on the
implementation of good corporate governance, the result of which is the corporate governance
perception index (CGPI). The Corporate Governance Perception Index (CGPI) is a research and
ranking of the implementation of good corporate governance in public companies listed on the
Stock Exchange Indonesia (IDX). The implementation of the corporate governance preception
index (CGPI) is based on the idea of the importance of knowing the extent to which public
companies have implemented good corporate governance. corporate governance preception
index (CGPI) is held annually, for the first time in 2001 and the corporate governance preception
index (CGPI) collaborates with the National Committee on Governance Policy (KNKG).
Assessment and aspects measured in the corporate gorvernance preception index (CGPI) is the
development of measuring instruments owned by the Indonesian institute for corporate
gorvernance (IICG), guidelines and principles of good corporate gorvernance published by the
OECD and from various sources, as well as legal instruments governing the application of the
principles of good corporate gorvernance. The research methodology used includes four stages
of research involving internal and external stakeholders of the company.
One indicator of corporate governance in Indonesia can be used the results of the corporate
governance preception index (CGPI) conducted by the Indonesian institute for corporate
governance (IICG). In general, new issuers are willing to take part in the corpotate gorvernance
preception index (CGPI) survey if their financial performance is relatively good and they are not
experiencing material problems in the presentation of financial statements so that the issuer has
enough confidence to be surveyed. Companies listed in the corporate gorvernance rating score
have proven to have implemented good governance and directly increase the value of their
shares.
The result of the corporate governance preception index (CGPI) research and ranking
program is an assessment and ranking of the implementation of good corporate governance in
participating companies by providing scores and weighting values based on the references that
have been made. The corporate gorvernance preception index (CGPI) assessment includes four
stages with different value weights. The four stages are self-assessment, collection of company
documents, preparation of papers and achievements and observation of the company. The
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ranking of the corporate governance preception index (CGPI) is designed into three categories
based on the level of trustworthiness that can be explained according to the application score,
namely very trustworthy, trustworthy, and fairly trustworthy...
GCG Structure Based on Board of Commissioners Size:
The board of commissioners is part of the internal control mechanism in CG that is used
to ensure the achievement of company goals, and ensure the implementation of the company's
operational activities properly. Based on Law Number 40 of 2007, the definition of the board of
commissioners is a corporate organ whose duty is to supervise in general and or specifically, and
provide advice to the board of directors in running the company. The membership function of the
board of commissioners can be viewed through the service and control functions it provides
(Darwis, 2009). Based on the service function, it is known that the board of commissioners has a
function in providing advice and consultation to management. Meanwhile, based on the control
function, the function of the board of commissioners is to control the opportunistic actions of
managers and align the interests of principals and agents (Jensen, 1993).
The achievement of good company performance can be determined through the
implementation and management of good CG in the company (Darwis, 2009). In this case, it
means that good CG practices help companies reduce the risk of fraud that may be committed by
management. CG practices are also able to help foster investor confidence to invest in the
company, so that it has an effect on improving company performance.
GCG Structure Based on Size of Independent Board of Commissioners:
Independent commissioners are members of the board of commissioners who do not have
financial, management, share ownership and / or family relationships with other members of the
board of commissioners, directors and / or controlling shareholders or other relationships that
can affect their ability to act independently (Bank Indonesia Regulation Number 8/4 / PBI /
2006). The presence of an independent board of commissioners is an independent representative
of shareholders and represents the interests of investors (Puspitasari and Ernawati, 2010). The
presence of an independent board of commissioners in the company can have a positive effect on
company performance, because the independent board of commissioners has a role in carrying
out the supervisory function of management actions, and is able to contribute to the company's
performance effective in the decision-making process by the board of directors, so that the
company's performance is better (Sulistyawati and Triyani, 2015).
The existence of an independent board of commissioners will provide a more effective
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capacity to advise, monitor and discipline company executives (Ntim, 2011). However, the
existence of an independent board of commissioners can also be ineffective in improving
company performance, because independent commissioners are people from outside who have
relatively limited knowledge about the company, and sometimes their opinions are not heard
more by the board of directors and the board of commissioners (Wijayanti and Muthmainnah,
2012).
GCG Structure Based on Audit Committee:
The audit committee is an individual or individuals in the company who are independent
and do not involve themselves in the management of the company's management, and have
sufficient experience to carry out the supervisory function effectively (FCGI). According to the
National Committee on Govenance Policy (2006), the task of the audit committee is to assist the
board of commissioners to ensure: (1) the presentation of the company's financial statements
fairly based on accounting principles, (2) the implementation of the company's internal control
structure properly, (3) the implementation of audit activities in accordance with predetermined
standards, (4) the implementation of follow-up on audit findings by management.
The size of the audit committee contained in the company can effectively control the
opportunistic actions of managers, because the size of the audit committee reflects the amount of
skills, experience and expertise (Elmagrhi, 2017). The role of the audit committee as a CG
structure will be more effective when its size is higher, because it illustrates the number of
human resources that can be used in solving problems and monitoring financial reporting and
procedures (Adinehzadeh and Jaffar, 2013).
GCG Structure Based on Institutional Ownership:
Institutional ownership is part of the CG external monitoring mechanism. Institutional
ownership is share ownership by other institutions or institutions such as banks, insurance
companies, or pension funds (Sari et al., 2013). The increase in institutional ownership in the
company reflects the amount of monitoring carried out by institutional investors, so this method
can be a reliable mechanism in providing motivation for managers to improve company
performance (Wijayanti and Muthmainnah, 2012).
Financial Ratio:
According to Cashmere (2013), financial ratios are activities that compare the numbers in
the financial statements by dividing one number by another. Comparisons can be made between
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one component and a component in one financial report or between components that exist
between financial statements. Then the numbers being compared can be numbers in one period
or several periods. The results of these financial ratios are used to assess management
performance in a period whether it reaches the target as set or vice versa. In addition, it is also to
assess management's ability to empower the company's resources (assets) effectively and
efficiently.
In practice, there are several types of financial ratios that can be used to measure the
performance of a company. Each type of ratio used will give a certain meaning about the desired
position. The following are the types of financial ratios, namely: Liquidity Ratio (current ratio,
quick ratio, cash ratio, cash turnover ratio, and Inventory to Net Working Capital), Activity Ratio
(receivable turnover, days of receivable, inventory turnover, working capital turnover, fixed
assets turnover, and assets turnover), Solvency Ratio (debt to assets ratio, debt to equity ratio,
long term debt to equity, times interest earned, and fixed charge coverage), Profitability Ratio
(profit margin on sales, return on investment, return on equity, and earnings per share), Growth
Ratio, and Valuation Ratio (Kasmir, 2013).
Financial ratios as a measure of company performance which is the result of the
application of CG which consists of short-term performance and long-term performance, as a
form of accountability from management to show the company's ability to process and allocate
resources contained in the company, as well as a means of decision making (Kumaat, 2013).
Economic Value Added (EVA):
According to Rodoni and Ali (2010), economic value added (EVA) is a method of
measuring the company's financial performance that measures whether or not there is added
value for funders with the success of management in generating profits in a period. The concept
of EVA comes from the ability of company managers to generate returns (added value) for
investors. Where economic value added is the difference from net operating profit after tax
minus the cost of capital. The definition of economic value added (EVA) according to Young
and O'Byrne (2001) is a performance measurement based on the idea of economic profit (also
known as residual income) which states that wealth is only created when a company covers
operating costs and capital costs. In this sense, economic value added is really just an alternative
way to review company performance. This definition is considered too narrow, as it overlooks
the contribution of economic value added to the company's performance value-oriented corporate
management.
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According to Brigham and Houston (2006), economic value added (EVA) is an estimate
of the actual economic profit of the business for the year in question, and is very much different
from accounting profit. EVA reflects the residual profit that remains after the cost of all capital,
including equity capital, has been deducted. Whereas accounting profit is determined without
charging for equity capital.
Economic value added (EVA) provides a good measure of the extent to which a company has
added to shareholder value. If a company's managers focus on EVA, it can help ensure that they
are operating the company in a manner consistent with the goal of maximizing shareholder
wealth.
Market Value Added (MVA):
According to Young and O'Byrne (2001), market value added is the difference between
the market value of the company and the total capital invested in the company. Market value
added illustrates the success of managers in investing the capital that has been entrusted to the
company. The market value of equity is the multiplication of the market price of the company's
shares by the number of shares outstanding. The market price used is the annual market price
obtained from the stock market price listed at the end of the year period. Meanwhile, the number
of shares outstanding is the number of company shares held by investors during the annual
period.
Market value added (MVA) according to Brigham and Houston (2006) is shareholder
wealth that is maximized by minimizing the difference between the market value of the
company's shares and the amount of equity capital that has been provided by shareholders. As
we all know, maximizing shareholder wealth is the main goal of most companies. This goal will
certainly benefit shareholders, but it will also help to ensure that limited resources are allocated
efficiently, which will benefit the economy.
Meanwhile, according to Husnan and Pudjiastuti (2006), market value added (MVA) is
the prosperity of shareholders can be maximized by maximizing the difference between the
market value of equity and equity (own capital) submitted to the company by shareholders
(company owners).
Based on the opinions of several experts above, it can be concluded that market value
added is a measurement of company performance created for shareholders, where market value
added is the difference between the market value of the company's shares and the total capital
that investors have invested in the company.
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Agency Theory:
The theory of agency problems was first proposed by Jensen and Meckling in 1976 in
"Theory of firm: Managerial behavior, agency costs and ownership structure". This theory is
motivated by the separation between ownership and control of the company. Control of a
company that is not under the control of the owner, will raise the possibility of potential conflicts
in the relationship between owners (principals) and managers (agents) or what is called agency
problems. In an agency relationship (the relationship between the principal and the agent), the
agent is contracted to represent while protecting and promoting the interests of the principal from
other stakeholders (Ehikioya, 2015). Shareholders delegate authority to management to manage
the company in order to improve the welfare of shareholders. However, in reality, agents have a
personal interest to prioritize increasing their own welfare. Setiawan (2014) concluded that the
agency problem is based on a clash of interests between the insider (the party authorized to
control the company effectively) and the outsider of the company (the party that does not have
the authority to control the company effectively).
Eisenhardt (1989) suggests that agency theory is based on several assumptions, namely:
1. Selft interest
According to human nature, both managers and shareholders have an interest in
prioritizing their own interests over the interests of others. The principal has an interest in
continuing to be able to increase the income he has through the contract he makes with the agent,
while the manager also has an interest in prioritizing his own interests in order to maximize
utility.
2. Bounded rationality
Bounded rationality relates to the limited capacity of human thinking regarding the
perception of the future.
3. Risk aversion
Based on human nature, it is known that humans are more likely to avoid risk. Agency
problems in companies can occur due to information asymmetry (assymetri information)
between managers and shareholders, namely circumstances that cause the acquisition of
unbalanced information between agents and principals. The manager as the party who manages
the company has accurate information about the condition of the company, while the principal as
the party who does not directly manage the company has limited information about the condition
of the company. Information asymmetry causes managers to behave opportunistically through
their actions that prioritize their own interests and do not provide benefits to shareholders
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(Jensen and Meckling, 1976). Jensen and Meckling (1976) explain two problems that may arise
from information asymmetry:
a. Adverse Selection
In an organization/company, managers as company managers have accurate information
regarding the conditions and prospects of the company compared to parties outside the company
(including principals). This then encourages managers to make a decision that is not conveyed to
the principal. According to Mai (2010), adverse selection actions are carried out by managers by
manipulating, or hiding information presented to investors.
b. Moral Hazard
Moral hazard relates to actions taken by managers that violate contracts, outside the
knowledge of the principal, and violate norms. This is done to pursue personal gain and override
the welfare of the owner (Mai, 2010). One example of moral hazard that occurs due to agency
problems in the company is overinvestment (Setiawan, 2015). According to Jensen (1986),
managers have a tendency to take opportunistic actions (managerial opportunism), namely the
attitude of managers who prefer to hold cash funds in the company, which can provide more
additional income, as well as for investment in projects that only increase personal prestige
without bringing benefits to shareholders. This is done because managers as agents have an
incentive to increase the size of the company beyond its optimal capacity (Jensen, 1986).
Brush et al. (2000) states that there are three premises that build agency theory. First, the
motivation of managers in fulfilling their own self-interest and maximizing their personal wealth,
Second, the FCF available in the company is a form of inefficiency and causes managerial waste.
Third, weak implementation of CG can increase agency costs to shareholders.
Actions taken to overcome agency problems will cause cost consequences known as
agency costs. Agency costs will be borne by both parties, both agents and principals. According
to Jensen and Meckling (1976), agency costs consist of three groups, namely:
a. Monitoring cost, which is the cost that arises and becomes the burden of the principal in
order to oversee management actions. An example of monitoring costs is spending on
management audit activities.
b. Bonding costs, which are costs incurred by the agent and have a binding nature and limit
the actions of the agent so as not to harm the welfare of the principal. Bonding costs are incurred
to provide certainty that the agent will act in the interests of shareholders, and will not jeopardize
the interests of the principal. Examples of bonding costs are executive stock options (ESOP),
bonuses, or promotions.
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c. Residual loss, which is a decrease in the level of welfare of agents and principals due to
agency relationships.
Signaling Theory:
Jama'an (2008), signaling theory suggests how a company should signal to users of
financial statements. This signal is in the form of information about what management has done
to realize the wishes of the owner. Signals can be in the form of promotions or other information
stating that the company is better than other companies. Signal theory explains that signaling is
done by managers to reduce information asymmetry. Managers provide information through
financial statements that they apply conservatism accounting policies that produce higher quality
earnings because this principle prevents companies from exaggerating profits and helps users of
financial statements by presenting earnings and assets that do not overstate.
According to Maria (2006), the quality of investor decisions is influenced by the quality
of information disclosed by the company in the financial statements. The quality of information
aims to reduce information asymmetry that arises when managers are more aware of internal
information and future prospects of the company than external parties. Information in the form of
published corporate bond ratings is expected to signal the financial condition of a particular
company and describe the possibilities that occur related to the debt owned.
Signal theory can also help the company (agent), owner (principal), and outside the
company reduce information asymmetry by producing quality or integrity of financial statement
information. To ensure that interested parties believe in the reliability of the financial
information submitted by the company (agent), it is necessary to obtain opinions from other
parties who are free to provide opinions on financial statements (Jama'an, 2008).
Previous Research:
Research conducted by Tefanus (2012) who conducted research on the effect of corporate
governance on the company's financial performance as measured by EVA successfully showed
that the implementation of GCG in the company has an influence on the company's financial
performance as measured by EVA. Contrary to Anton's research (2012) which conducted
research on the effect of GCG with control variables of company size and growth opportunities
on financial performance as measured by EVA Momentum stated that partially the application of
GCG has no effect on the company's financial performance as measured by EVA Momentum.
This is consistent with Siahaan's research (2008) which states that there is a negative relationship
16
between the implementation of GCG and the company's financial performance as measured by
EVA. Uyun's research (2014) states that the implementation of GCG has no effect on banking
financial performance as measured by EVA.
Saidi (2007) states that companies with GCG tend to have a high market value,better
access to funding, as well as a higher credit rating. Sukasih and Susilawati (2011) state that the
implementation of good corporate governance in companies listed on the Indonesia Stock
Exchange will improve the company's financial performance and the capital market. Several
empirical studies have found that EVA is more influential on stock returns than traditional
accounting measures (ROA, ROE, EPS). Lehn and Makhija (1996) concluded that EVA and
MVA are effective performance measures and have more relationship with stock returns than
ROA, ROE and return on sales (ROS).
Framework of Thought:
Good corporate governance (GCG) is a system that regulates and controls companies
that can provide and increase company value to shareholders (Purwani, 2010). All State-Owned
Enterprises (SOEs) are required to implement GCG principles as stipulated in the Decree of the
Minister of SOEs KEP-117/M-MBU/2002. The implementation of CG mechanisms that affect
company performance and market performance. In this case, company performance is economic
value added (EVA), market performance is market value added (MVA). GCG as a moderating
variable on company performance and market performance. The objectives of this study can be
obtained by processing data using panel data analysis. After obtaining the research results, it is
necessary to determine the appropriate managerial implications.
Effect of Company Performance on Market Performance
EVA provides a good measure of the extent to which a company has added to
shareholder value. If a company's managers focus on EVA, it can help ensure that they are
operating the company in a manner consistent with the goal of maximizing shareholder wealth.
According to Mertayasa (2014), the results showed that return on assets has no significant effect
partially on market value added, while economic value added has a significant effect partially.
The results of this study also concluded that return on assets and economic value added have a
significant effect simultaneously on market value added. While the results of research from
Febriyanti (2014), show that return on equity, earnings per share, dividend per share, and
economic value added have a significant effect both partially and simultaneously on market
value added.
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H0 : Firm performance has no positive effect on market performance
H1 : Firm performance has a positive effect on market performance
The Effect of GCG on Company Performance
The success of the corporate governance mechanism is reflected in the company's
performance, which can be measured from financial ratios. Company performance can also be
measured based on economic value added (Lambert, 2001; Ittner and Larcker, 2001 cited from
Sunarto, 2003).
Hidayati and Setiawan's (2012) research on the effect of good corporate governance on
financial performance shows that GCG has a positive influence on financial performance with
economic value added (EVA) indicators. This research is in line with Veno's (2015) research
which also shows that GCG has a positive effect on the company's financial performance. Based
on the description above, the hypothesis can be concluded as follows:
H0 : GCG has no positive effect on company performance
H2 : GCG has a positive effect on company performance
Effect of GCG on Market Performance
Market value added (MVA) shows the market performance of a company. This
measurement method can illustrate how much the company is capable of capital owned by
investors because it involves stock prices as its main component. Companies that implement
good corporate governance will provide protection to shareholders and increase the company's
market value. Saidi (2007) states that companies with GCG tend to have a high market value,
better access to funding, and a higher credit rating. Black et al. (2003), said that corporate
governance is an important factor in explaining the market value of 515 public companies in
Korea. The results show that the implementation of good corporate governance leads to high
corporate market value.
H0 : GCG has no positive effect on market performance
H3 : GCG has a positive effect on market performance
The Effect of Company Performance Through GCG on Market Performance
GCG variable as a corporate governance that will maximize the value of the company in
the market. Good corporate governance describes how management efforts manage their assets
and capital well in order to attract investors. The management of assets and capital of a company
can be seen from its financial performance. If the management is done well, it will automatically
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increase the value of the company. An increase in company performance is also expected to
increase the stock price The company as an indicator of market performance, so that the
company value increases. Based on this description, the alternative hypothesis proposed is as
follows.
H0 : Company performance does not have a positive effect through GCG on market performance
H4 : Firm performance is positively related through GCG to market performance
Overview of State-Owned Enterprises
State-Owned Enterprises (SOEs) are one of the important pillars in driving the country's
economy. According to Law No. 19 of 2003, SOEs are business entities that are wholly or
partially owned by the state through direct statements derived from separated state assets. Since
2001, all state-owned companies have been under the supervision and management of the
Ministry of SOEs. The Ministry of SOEs in carrying out its functions is led by the Minister of
SOEs. Based on Presidential Instruction No. 7 of 1967, SOEs are divided into three forms,
namely, a company (Persero), a public company (Perum), and a ministerial company (Perjan).
State-owned companies listed on the Indonesia Stock Exchange (IDX) are only limited liability
companies whose capital is in the form of shares. The share ownership by the government is
either wholly or partially owned with a minimum of 51%. Currently the number of state-owned
companies is 118 companies and among them there are 20 companies that have gone public.
The object of this research is BUMN, because the function of BUMN has a direct impact on the
welfare of society and the state as the largest shareholder. The implementation of GCG in
BUMN companies going public as a public company is regulated in the financial services
authority (OJK) regulation No. 21 /POJK.04/2015, every public company (Tbk.) is obliged to
implement good corporate governance (GCG). In particular, the implementation of GCG in
commercial banks is regulated in the financial services authority regulation No. 55
/POJK.03/2016. Good implementation of GCG in BUMN is the right example so that other
companies can follow the implementation of GCG. This study uses go public BUMN companies
as research objects, with certain criteria in determining the sample. Based on the results of
purposive sampling, a sample of 19 SOEs was obtained, as shown in Table 4.
Best Model Selection:
Testing good corporate governance (GCG) and company performance (EVA) on market
performance (MVA) uses panel data regression by finding the best model. The first test was
conducted with the chow test (appendix 1). The results obtained in this test are the Prob value on
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the cross section F of 0.000 where the value is smaller than alpha 10%, so the decision to reject
H0 is taken.
The selected model is fixed effect. Then testing the model using the Hausmann test,
namely the pooled model and random model like the previous model. The results obtained in the
Hausmann test (appendix 2) show a Prob value of 1.0000 where the value is greater than alpha
10%, so the decision was made to accept H0 , namely the selected model is Random effect. After
knowing all the results show Random effect, the selected model is Random effect.
is Random effect.
Testing good corporate governance (GCG) on company performance (EVA) using panel
data regression with common effect, fixed effect, and random effect estimation and continued
with testing the best model. The results of the chow test in appendix 3 show the Prob result of
0.000, the conclusion that can be drawn is to reject H0 , that is, the selected model is fixed effect
because the value is smaller than alpha 10%. The next test is using Hausmann test to compare
Pooled model with Random model. Results The Hausmann test in appendix 4 shows the Prob
value of the cross section F of 0.5198 where the value is greater than the alpha of 10%, so the
decision is taken to accept H0 that the selected model is Random effect. After knowing all the
results show Random effect then the selected model is Random effect.
Furthermore, the best model test is carried out on the model of the effect of company
performance (EVA) on market performance (MVA) moderated by good corporate governance
(GCG) variables using panel data regression by finding the best model. This test is conducted to
analyze the indirect relationship between company performance (EVA) and market performance
(MVA) which is moderated by good corporate governance (GCG) variables. The chow test
results in appendix 5 show a prob value of 0.0000, which means that the value is smaller than
alpha 10%, so the decision is made to reject H0 or the good corporate governance (GCG) model.
indicating a Fixed Model. The next thing to do is the Hausmann test for test the comparison of the
Fixed model with the Random Model. The results of the Hausmann test (appendix 6) show the
Prob value on the random cross section of 1.000 where the value is greater than the alpha set at
10%, the decision was taken to accept H0 , namely the selected model is Random effect. After
knowing the results show Random effect, the selected model is Random effect.
Classical Assumption Test:
This classic assumption test is carried out to see that the regression model carried out has
fulfilled a significant and representative relationship. The classical assumption test carried out in
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the study of the effect of GCG on company performance and market performance, namely the
normality test, heteroscedasticity test, autocholinearity test, and multicollinearity test which are
detailed below.
Normality Test
Normality testing carried out in Eviews software is using the Jarque Bera test. Normal or
not can be seen in the z value or Probability. Data distribution graphs were carried out on the
three research models. In the model of the influence of GCG and company performance (EVA)
on market performance (MVA) using the Jarque Bera test. Normal or not can be seen in the z
value or its probability. The results show a Probability value of 0.068120 or the value is greater
than the alpha set at 5%, so the decision taken is to accept H0 or the data spreads out.
normal.
The z value or Probability in the second model, namely the GCG influence model on
company performance (EVA), is 0.088269 with the Jarque Bera test. The distribution of data in
the second model can be said to be normally distributed in accordance with the first model and
also shows that there is no tendency on one side, namely the right side and the left side, as can be
seen in Figure 6.
In model III, namely the effect of company performance (EVA) with moderated GCG
variables on market performance (MVA), a normality test is carried out with the Jarque Bera
test. The probability result obtained is 0.0000, according to the concept of central limit theory, it
says that the greater the amount of data, the more normal the distribution formed. The
distribution of data on the effect model of company performance (EVA) with moderated GCG
variables on market performance (MVA) can be seen in Figure.
Heteroscedasticity Test:
In panel testing, the effect of GCG and company performance (EVA) on market
performance (MVA) does not see the assumption of heteroscedasticity, because the calculation
of the model has considered the weight of each different cross section, which means that the
panel model has taken into account heteroscedasticity. Panel testing then seen in Table 5 shows
the sum squared resid weighted < sum squared resid unweighted. The panel test shows that the
sum squared resid weighted value of 7.12E+28 is smaller than the sum squared resid unweighted
value of 5.07E+29. This shows that the model is homogeneous.
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Multicollinearity Test:
The next test carried out is the multicollinearity test. This test aims to determine whether
the regression model found a correlation between the independent variables. The test results can
be done only on the model of the influence of GCG and company performance (EVA) on market
performance (MVA) see the table below.
The multicollinearity results show that the VIF value is less than 10, so there is no
multicollinearity. This explains that the GCG variable and the company performance variable
(EVA) as independent variables have no relationship (correlation). In the model of the effect of
GCG on company performance (EVA), it is not necessary to test for multicollinearity because
there is only one independent variable, while in the model of the effect of company performance
(EVA) moderated by the GCG variable on market performance (MVA), this test is not carried
out because the two variables are interrelated.
The Effect of Good Corporate Governance (GCG), Company Performance on Market
Performance:
GCG variables have no effect on company performance, then further testing the effect of
GCC variables and company performance on market performance. The concept of GCG as an
external mechanism will affect its market performance and company performance will affect
market performance. Random effect model results on the effect of GCG and company
performance on market performance show Rsquare of 0.044518 or it can be said that the
independent variables, namely GCG and company performance (EVA) of 4.45% are able to
explain the diversity of market performance variables (MVA). Furthermore, the variable
relationship is tested with the F test (simultaneously) and the T test (partially). The F test results
show a probability value of 0.000000 whose value is smaller than alpha, which is 10%, the
conclusion drawn is to reject H0 or there is a joint influence on the market performance variable
(MVA). The T test results on the GCG variable produce a t statistic value of -0.432936 and a
prob value of 0.6661, this shows that the prob value is greater than the alpha of 10% which
indicates accept H0 or GCG has no effect on market performance (MVA). Table 9 shows the
results of testing this model.
Table 9 Model Test of the Effect of Good Corporate Governance (GCG) and Company
The results of the study say that the GCG mechanism has no influence on market performance as an
independent variable. These results are not in accordance with Saidi's research (2007) which states that
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companies with GCG tend to have a high value in the market (market value), better access to funding, and
a higher credit rating as well, this is because investors strongly believe in the information that BUMN
companies go public are well managed according to GCG principles, so this will be reflected in the share
price of BUMN go public as an indicator of its market performance.
The company performance variable (EVA) produces a t statistic value of 2.066782 and a prob
value of 0.0416. This shows the prob value is smaller than the alpha of 10% which indicates
reject H0 or company performance (EVA) has a direct effect on market performance (MVA).
This shows that a 1% increase in company performance (EVA) will result in a direct effect on
market performance (MVA).
increase in market performance (MVA) by 5.430322%. Companies that obtain a positive EVA
value as a ratio of company performance mean that the profit of the company is greater than the
profit of the company.
The company's return is greater than its capital cost which provides welfare for
shareholders (Young and O'Byrne, 2001). This is in accordance with research conducted by Jack
et al. (2015) which states that company performance (EVA) has a positive and significant effect
on market performance (MVA) directly. The greater the EVA value, the greater the profit earned
compared to the cost of capital, so that investors will be interested in investing and this will be
reflected in its market performance. GCG can moderate the effect of company performance on
market performance at 10% alpha. The implementation of GCG in state-owned companies going
public can strengthen the company's performance conditions so that market performance is good.
These results support signaling theory which states that management should signal good news or
bad news in accordance with the company's performance to prevent information asymmetry. If
the company's performance condition is bad, management should signal bad news with the aim
of providing information in accordance with GCG principles (transparency, accountability,
responsibility, independence, fairness and equality).
The Effect of Good Corporate Governance (GCG) on Company Performance (EVA):
The concept of the internal mechanism of good corporate governance (GCG) will have
an influence on company performance. The better the implementation of GCG in the company
will have a good impact on company performance. The results of this study indicate that the
GCG variable is able to explain company performance as seen from the Rsquared value of
0.004482. The GCG influence model on company performance, namely the Random effect
obtained is good. Then test the influence or not of the GCG variable on company performance.
The influence test can be done with the T test (partially), because the independent variable tested
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is only the GCG variable. The GCG independent variable produces a t statistic value of -
0.475158 and a prob value of 0.6358. This shows that the prob value is greater than alpha of
10%, which indicates accept H0 or GCG has no effect on company performance.
(EVA). The results of the model test can be seen in the table below.
The results of this study are in accordance with the research results obtained by Purwani
(2010) that there is no direct influence of GCG on company performance (EVA) in companies
listed on the IDX and IICG in 2004-2008. This is inconsistent with the concept of a positive
influence of GCG on company performance by internal mechanism. GCG as an independent
variable cannot affect company performance (EVA) directly, but there are other variables that
can affect company performance (EVA). Theoretically, other variables that can affect company
performance (EVA) are fundamental factors (profitability after tax and capital structure) and
macroeconomics (interest rates and stock beta). This concept is in accordance with the research
of Afrieni and Fernos (2019), showing that the level of ROA profitability, interest rates, capital
structure, and beta stocks has an influence on company performance (EVA). This is supported by
Nugraha's research (2013), showing that capital structure (DAR, DER and LDER) has a
significant influence on company performance (EVA) in Kompas 100 Index companies in 2009-
2011.
The results of this study illustrate that the implementation of GCG in state-owned
companies is still not effective in influencing company performance. GCG elements consisting
of shareholder rights, the board of commissioners, independent commissioners, audit committees
and internal audit, information disclosure have not been able to carry out supervisory functions
professionally to improve company performance. There are indications that state-owned
companies implement GCG mechanisms only in compliance with government regulations,
namely in the financial services authority (OJK) regulation number 21 /POJK.04/2015. The legal
nature and soft sanctions in the implementation of GCG mechanisms are only as a code of
conduct or business ethics, so that GCG enforcement in BUMN companies is quite weak.
Although the elements of the GCG score are fulfilled, the implementation of its functions is still
hampered. The performance of state-owned companies has more negative EVA. Negative EVA
means that the use of capital or profit is inefficient. It can also indicate that there is self interest
by the government as regulator and operator in this case corruption, collusion and nepotism
(KKN). Self interest by the government is one of the assumptions of agency theory (Eisenhardt,
1989).
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The Effect of Company Performance on Market Performance Moderated by Good
Corporate Governance (GCG):
The results of this study indicate that GCG as an independent variable has no significant
effect on company performance and market performance. This is not in accordance with the
concept of GCG both in terms of internal and external mechanisms. Government policies that
require state-owned companies to carry out GCG are not reflected in the results of this study, so
GCG variables are tested as moderating the effect of company performance on market
performance. The random effect panel data model produces an Rsquared value of 6.68% or it can
be said that the independent variable, namely company performance moderated by GCG, is
3.85% able to explain the diversity of market performance variables. Furthermore, testing the
effect of GCG as moderating the relationship between company performance and market
performance with the T test with a t statistic value of 2.064595 and a prob value of 0.0417 This
shows that the prob value is smaller than the alpha of 10% which indicates reject H0 or GCG is
able to moderate the effect of performancecompany (EVA) well against market performance
(MVA). Coefficient value of 0.0157 indicates that GCG moderates company performance (EVA)
positively and significantly on market performance (MVA).
The independent variable of company performance (EVA) moderated by GCG results in
GCG variables having no influence on market performance (MVA) as an independent variable
(Table 8), but has an influence on market performance (MVA) as an independent variable market
performance (MVA) as a moderating variable or reinforcing the effect of company performance
(EVA) on market performance (MVA). If the company's performance (EVA) value is greater
supported by good GCG, the market performance (MVA) will also be greater. So, in this case the
implementation of good GCG will further strengthen the positive influence of company
performance (EVA) on market performance (MVA). This is in accordance with the research of
Muliani et al. (2014) said that GCG as a moderating variable strengthens the effect of company
performance on firm value.
Managerial Implications:
The results showed that GCG as an independent variable could not directly affect
company performance (EVA) and market performance (MVA), but GCG as a moderating
variable could further strengthen the positive influence of company performance (EVA) on
market performance (MVA). This further encourages state-owned companies going public to
implement optimal GCG. BUMN go public companies that implement GCG well are able to
25
achieve benefits for stakeholders and reduce agency problems and information asymmetry.
The government as a regulator requires BUMN companies to go public to carry out GCG, so
that it becomes part of the culture in the company. Based on the results of the study, BUMN
companies in implementing GCG mechanisms only just avoid sanctions or just do regulations
issued by the government. This can be seen from the fulfillment of each criterion in the
calculation of the GCG score, but has not yet had an effect on company performance and market
performance according to the concept of GCG. Sanctions and weak monitoring are the cause of
the lack of willingness of BUMN companies to go public to implement GCG. The government is
expected to further strengthen monitoring of publicly listed SOEs in implementing optimal GCG
in accordance with GCG principles (transparency, accountability, responsibility, independence,
fairness and equality) in each GCG element (shareholder rights, board of commissioners,
independent commissioners, audit committee and internal audit, disclosure of information to
investors) by imposing real sanctions on companies that do not implement it. State-owned
companies that go public can also monitor GCG implementation policies through a compliance
management system.
The government, society, and companies as part of publicly listed state-owned companies
need to implement GCG. Cases of corruption that still exist in state-owned companies indicate
that the implementation of GCG is not good. One of the systems that can reduce corruption is the
whistle blowing system. This system aims as a means of reporting activities that indicate fraud, in
this case KKN. The more supervision of GCG implementation in public SOEs is expected to
further encourage the implementation of GCG in a sustainable manner, so that it becomes part of
the culture of public SOE companies.
CONCLUSIONS:
BUMN is a state-owned enterprise as one of the pillars of building the national economy,
has a very large stakeholder, including all Indonesian people. Although the government has a
role as regulator and operator in BUMN companies. The mechanism of good corporate
governance (GCG) has no influence on company performance, because the elements of the
internal mechanism (shareholder rights, board of directors, independent commissioners, audit
committee and internal audit, disclosure to investors). GCG has not been effective in carrying
out its functions and duties, so it has no effect on company performance. Many state-owned
companies implement GCG mechanisms only in compliance with government regulations,
namely in the financial services authority (OJK) regulation No. 21 /POJK.04/2015, namely the
26
implementation of GCG in state-owned companies going public as public companies and
specifically the implementation of GCG in commercial banks is regulated in the financial
services authority regulation No. 55 /POJK.03/2016. Government intervention also weakens the
implementation of GCG in state-owned companies. This government intervention creates self-
interest for political interests (government bureaucracy). This self-interest is one form of
assumption of the agency problem.
BUMN companies in implementing GCG are still mandatory, so awareness of GCG to
become a culture within the company must continue to be improved. The results showed no
effect of GCG variables on firm performance (EVA) and market performance (MVA). GCG
mechanisms have not been able to increase profitability (net income after deducting capital and
operating costs) and the value of BUMN companies in the capital market directly. Corporate
performance variables (EVA) affect market performance (MVA) both directly and indirectly
through GCG as a moderating variable at alpha 10%. Although GCG as an independent variable
has no effect on market performance (MVA), as a moderating variable it can reinforce the
positive effect of company performance on market performance (MVA). This is in accordance
with signaling theory which states that signaling by management in accordance with the
condition of the company's performance to avoid information asymmetry will be reflected in its
market performance. Information asymmetry can be avoided with good GCG implementation.
This explains that the implementation of GCG in state-owned companies going public will
support or strengthen good company performance, so that market performance for shares of
state-owned companies going public will be good.
