Issue

Vol 38 No 1 (2023): January

Date Log

Submitted
Apr 13, 2022
Accepted
Nov 29, 2022
Published
Jan 24, 2023
Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Copyright

Upon acceptance of an article, authors transfer copyright to the JIEB as part of a journal publishing agreement, but authors still have the right to share their article for personal use, internal institutional use, and for any use permitted under the CC BY-SA license

Open Access

Articles are freely available to the public without any subscription with permitted reuse. For open access articles, permitted third party (re)use is defined by the following Creative Commons user licenses: Creative Commons Attribution (CC BY-SA).

Characteristics of a Good Board of Directors for Indonesian SOEs Performance

https://doi.org/10.22146/jieb.v38i1.4410
Dian Kusuma Wardhani
diankusumawardhani@lecturer.undip.ac.id
Department of Business and Finance, Vocational School, Diponegoro University, Semarang, Indonesia, 50241
Wiwik Supratiwi
Department of Accounting, Faculty of Economics and Business, Airlangga University, Surabaya, Indonesia, 60286

Corresponding Author(s) : Dian Kusuma Wardhani

diankusumawardhani@lecturer.undip.ac.id

Journal of Indonesian Economy and Business, Vol 38 No 1 (2023): January

Abstract

Introduction/Main Objectives: This research aims to empirically show the positive influence of the board of directors' characteristics on company performance, proxied by female directors, political connections, economic and/or business educational backgrounds, and education levels. Background Problems: Essential characteristics are required to produce quality strategies because they directly affect the performance of SOEs, and Regulation PER-8/MBU/08/2020 of the Minister of SOEs restruc­tures the BOD to increase the proportion of women. Novelty: This research measures SOEs' performance from their financial, adminis­trative, and operational aspects. It comprehensively assesses the dual function of SOEs as public servants and producers of state profits. Research Methods: A total of 245 Indonesian state-owned enterprises were examined between 2014 and 2019 using panel regression with the random effect model. The companies’ performance data were obtained from the Information Management and Documentation Officer (PPID) of the Ministry of SOEs of the Republic of Indonesia (RI). Finding/ Results: The results show that female directors and political connections positively influence the performance of SOEs. According to the robust­ness test, directors with economic and/or business education backgrounds positively influence the financial performance, and the higher the education level is, this negatively influences the performance of SOEs. Conclusion: Essentially, this research supports the plan of the Minister of SOEs to increase the proportion of women on the boards of directors. The findings also prove that political connections strengthen the personal qualities of SOE directors, whether they are female or not.

Keywords

female directors political connections education background education level company performance
Wardhani, D. K., & Supratiwi, W. (2023). Characteristics of a Good Board of Directors for Indonesian SOEs Performance. Journal of Indonesian Economy and Business, 38(1), 1-18. https://doi.org/10.22146/jieb.v38i1.4410
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX
References
  1. Abatecola, G. Cristofaro, M. (2018). Hambrick and Mason’s “Upper Echelons Theory”: evolution and open avenues. Journal of Management History.
  2. Altuwaijri, B. M. Kalyanaraman, L. (2020). CEO education-performance relationship: Evidence from Saudi Arabia. Journal of Asian Finance, Economics and Business, 7(8), 259-268.
  3. Ananda, A. (2020). Biro Komunikasi Perum Peruri. Retrieved from: https://www.cnnindonesia.com/ekonomi/20200108190904-92-463601/peruri-cetak-uang-peru-dibayar-rp255-miliar
  4. Arbar, T. F. (2020). Disentil Sri Mulyani, 2 dari 7 BUMN Tekor Mulai Cetak Laba. Retrieved from: https://www.cnbcindonesia.com/market/20200627142307-17-168484/disentil-sri-mulyani-2-dari-7-bumn-tekor-mulai-cetak-laba
  5. Astami, E. W., et al. (2010). The effect of privatisation on performance of state‐ owned‐enterprises in Indonesia. Asian Review of Accounting, 18(1), 5-19. doi:10.1108/13217341011045971
  6. Baskaran, S., et al. (2020). Earnings manage-ment: a strategic adaptation or deliberate manipulation? Journal of Financial Crime.
  7. Bennouri, M., et al. (2018). Female board directorship and firm performance: What really matters? Journal of Banking & Finance, 88, 267-291.
  8. Bertrand, M., et al. (2018). The cost of political connections. Review of Finance, 22(3), 849-876.
  9. Bureau of Communications of Perum Peruri. (2019). Peruri Torehkan Laba Bersih Konsolidasian Rp288 Miliar pada 2018 [Press release]. Retrieved from: https://www.peruri.co.id/press-release/206/peruri-torehkan-laba-bersih-konsolidasian-rp288-miliar-pada-2018#:~:text=Peruri%20Torehkan%20Laba%20Bersih%20Konsolidasian%20Rp288%20Miliar%20pada%202018,-11%20June%202019&text=Jakarta%20%E2%80%93%20Pada%202018%20Perusahaan%20Umum,yang%20mencapai%20Rp3%2C48%20triliun.
  10. Chadwick, I. C. Dawson, A. (2018). Women leaders and firm performance in family businesses: An examination of financial and nonfinancial outcomes. Journal of Family Business Strategy, 9(4), 238-249.
  11. Chancharat, S., et al. (2019). Board structure, political connection and firm performance: Evidence from Thailand.. International Journal of Business and Society, 20(3), 1096-1111.
  12. Chen, R., et al. (2021). Do female directors enhance R&D performance? International Review of Economics & Finance, 74, 253-275. doi:https://doi.org/10.1016/j.iref.2021.03.003
  13. Cheng, L. T., et al. (2010). Management demo¬graphy and corporate performance: Eviden¬ce from China. International Business Review, 19(3), 261-275.
  14. Chong, L.-L., et al. (2018). Corporate risk-taking and performance in Malaysia: the effect of board composition, political connections and sustainability practices. Corporate Governance: The International Journal of Business in Society.
  15. Conyon, M. J. He, L. (2017). Firm performance and boardroom gender diversity: A quantile regression approach. Journal of Business Research, 79, 198-211.
  16. Elsharkawy, M., et al. (2018). Now you see me: diversity, CEO education, and bank performance in the UK. Investment Management and Financial Innovations.
  17. Fan, Y., et al. (2019). Women on boards and bank earnings management: From zero to hero. Journal of Banking & Finance, 107, 105607.
  18. Formigoni, H., et al. (2020). Board of directors characteristics and disclosure practices of corporate social responsibility: a compa¬rative study between Brazilian and Spanish companies. Social Responsibility Journal.
  19. Hambrick, D. C. (2007). Upper echelons theory: An update. In: Academy of Management Briarcliff Manor, NY 10510.
  20. Hambrick, D. C. Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of management review, 9(2), 193-206.
  21. Harjoto, M. A. Rossi, F. (2019). Religiosity, female directors, and corporate social responsibility for Italian listed companies. Journal of Business Research, 95, 338-346.
  22. Harymawan, I. (2018). Why do firms appoint former military personnel as directors? Evidence of loan interest rate in militarily connected firms in Indonesia. Asian Review of Accounting.
  23. Harymawan, I., et al. (2019). The role of political connections on family firms’ performance: Evidence from Indonesia. International Journal of Financial Studies, 7(4), 55.
  24. Harymawan, I., et al. (2019). CEO busyness and firm performance: evidence from Indonesia. Heliyon, 5(5), e01601.
  25. Harymawan, I., et al. (2020). How does the presidential election period affect the performance of the state-owned enterprise in Indonesia? Cogent Business & Manage¬ment, 7(1), 1750330.
  26. Hoobler, J. M., et al. (2018). The business case for women leaders: Meta-analysis, research critique, and path forward. Journal of management, 44(6), 2473-2499. doi:10.1177/0149206316628643
  27. Hu, Y., et al. (2020). The agency cost of political connections: Evidence from China's File 18. Pacific-Basin Finance Journal, 64, 101426.
  28. Idris, M. (2019). Daftar 7 BUMN yang Tetap Rugi Meski Sudah Disuntik PMN. Retrieved from: https://money.kompas.com/read/2019/12/21/142657926/daftar-7-bumn-yang-tetap-rugi-meski-sudah-disuntik-pmn?page=all
  29. Kanakriyah, R. (2021). The impact of board of directors' characteristics on firm perfor¬mance: a case study in Jordan. The Journal of Asian Finance, Economics and Business, 8(3), 341-350.
  30. Kaur, R. Singh, B. (2018). CEOs’ characteristics and firm performance: a study of Indian firms. Indian Journal of Corporate Governance, 11(2), 185-200.
  31. King, T., et al. (2016). What's in an education? Implications of CEO education for bank performance. Journal of Corporate Finance, 37, 287-308.
  32. Kuo, H.-C., et al. (2018). The role of education of directors in influencing firm R&D investment. Asia Pacific Management Review, 23(2), 108-120.
  33. Latimaha, R., et al. (2019). Examining the Linkages between Street Crime and Selected State Economic Variables in Malaysia: A Panel Data Analysis. Jurnal Ekonomi Malaysia, 53(1), 59-72.
  34. Laucereno, S. F. (2021). Erick Mau 'Didik' Komisaris BUMN yang Nggak Pengalaman di Korporasi. Retrieved from https://finance.detik.com/berita-ekonomi-bisnis/d-5523520/erick-mau-didik-komisaris-bumn-yang-nggak-pengalaman-di-korporasi
  35. Lee, T., et al. (2021). Does TMT composition matter to environmental policy and firm performance? The role of organizational slack. Corporate Social Responsibility and Environmental Management, 28(1), 196-213.
  36. Lev, B., & Zarowin. (1999). P14_Boundaries_Financial_Reporting_1.pdf
  37. Lim, K. P., et al. (2019). Women directors and performance: evidence from Malaysia. Equality, Diversity and Inclusion: An International Journal.
  38. Low, D. C., et al. (2015). Board gender diversity and firm performance: Empirical evidence from Hong Kong, South Korea, Malaysia and Singapore. Pacific-Basin Finance Journal, 35, 381-401.
  39. Mahrofi, Z. (2020). Erick Thohir akan perbesar komposisi perempuan di jajaran direksi BUMN. Retrieved from: https://www.antaranews.com/berita/1796885/erick-thohir-akan-perbesar-komposisi-perempuan-di-jajaran-direksi-bumn
  40. McGuinness, P. B., et al. (2017). CSR performance in China: The role of board gender and foreign ownership. Journal of Corporate Finance, 42, 7299.
  41. Morresi, O. (2017). How much is CEO education worth to a firm? Evidence from European firms. PSL Quarterly Review, 70(282).
  42. Mun, S., et al. (2020). The impact of CEO educational background on corporate cash holdings and value of excess cash. Pacific-Basin Finance Journal, 101339.
  43. Nakavachara, V. (2020). CEOs and graduate business education. Journal of Education for Business, 95(2), 73-80.
  44. Nekhili, M., et al. (2017). Gender-diverse board and the relevance of voluntary CSR reporting. International Review of Financial Analysis, 50, 81-100.
  45. Pan, X. Tang, H. (2020). Are both managerial morality and talent important to firm performance? Evidence from Chinese public firms. International Review of Financial Analysis, 73, 101602.
  46. Perum Peruri. (2019). Laporan Tahunan 2019. Retrieved from
  47. Post, C. (2015). When is female leadership an advantage? Coordination requirements, team cohesion, and team interaction norms. Journal of Organizational Behavior, 36(8), 1153-1175.
  48. Pratama, A. M. (2020, 26 Oktober 2020). Erick Thohir Ingin Tambah Porsi Wanita dan Milenial di Posisi Direksi BUMN. KOMPAS. Retrieved from: https://money.kompas.com/read/2020/01/17/125639926/erick-thohir-ingin-tambah-porsi-wanita-dan-milenial-di-posisi-direksi-bumn#:~:text=JAKARTA%2C%20KOMPAS.com%20%2D%20Menteri,jajaran%20direksi%20perusahan%2Dperusahaan%20BUMN.
  49. Pucheta-Martínez, M. C. Gallego-Álvarez, I. (2019). Do board characteristics drive firm performance? An international perspective. Review of Managerial Science, 1-47.
  50. Saeed, A. Ziaulhaq, H. M. (2019). The Impact of CEO Characteristics on the Internatio-nalization of SMEs: Evidence from the UK. Canadian Journal of Administrative Sciences/Revue Canadienne des Sciences de l'Administration, 36(3), 322-335.
  51. Saleh, M. W., et al. (2021). Does board gender enhance Palestinian firm performance? The moderating role of corporate social responsibility. Corporate Governance: The International Journal of Business in Society.
  52. Sharma, P., et al. (2020). Impact of political connections on Chinese export firms' performance–Lessons for other emerging markets. Journal of Business Research, 106, 24-34.
  53. Srikandi BUMN. (2021). Srikandi BUMN Berbagi Perspektif Kepemimpinan Perem-puan di BUMN dalam RUMI-U Master-class: Women in Leadership. Retrieved from https://srikandibumn.org/2021/06/srikandi-bumn-berbagi-perspektif-kepemimpinan-perempuan-di-bumn-dalam-rumi-u-masterclass/
  54. Ullah, I., et al. (2019). Do gender diversity and CEO gender enhance firm’s value? Evidence from an emerging economy. Corporate Governance: The International Journal of Business in Society.
  55. Urquhart, A. Zhang, H. (2021). PhD CEOs and firm performance. European Financial Management.
  56. Utami, I., et al. (2019). Fraud diamond, Machia¬vellianism and fraud intention. International Journal of Ethics and Systems, 35(4), 531-544. doi:10.1108/IJOES-02-2019-0042
  57. Wu, H., et al. (2018). Politically connected CEOs, firm performance, and CEO pay. Journal of Business Research, 91(169-180).
  58. Zhang, C. (2017). Political connections and corporate environmental responsibility: Adopting or escaping? Energy Economics, 68, 539-547.
Read More
Author biographies is not available.
Download this PDF file
PDF
Statistic
Read Counter : 1299 Download : 2072