Corporate Governance and Financial Distress: A Comprehensive Analysis of Indonesian Manufacturing Companies

Abstract

Aims: This study aims to find empirical evidence and analyze the effect of institutional ownership, managerial ownership, independent commissioner, board of directors, audit committe on financial  distress. In addition, this  research  can also  be  used  as  a  reference  for  further  researchers  as  well  as  a  reference  for  stakeholders (investors, creditors, and the government) in making relevant and reliable decisions. Study Design:  The  method  used  is  quantitative  research  with  secondary  data  taken  from  the company's financial statements with data collection techniques using purposive sampling. Place and Duration of Study: The study was conducted on 19 manufacturing companies listed on the Indonesia Stock Exchange for the period 2010 – 2021. Methodology: The method used in this research is explanatory with a quantitative approach and the sampling used is purposive sampling. Explanatory analysis is used to explain the relationship between variables Institutional ownership, Managerial Ownership, Independent Commissioners, Board of Directors, Audit Committee. Results: The results of this study indicate that: (1) Institutional Ownership have a negative effect on Financial Distress. (2) Managerial Ownership have a negative effect on effect on Financial Distress. (3) Independent Commissioners have a negative effect on effect on Financial Distress. (4) Board of Directors has a negative and significant effect on Financial Distress. (5) Audit Committee have no effect on Financial Distress. Conclusion: Based on the conclusion of the effect of good corporate governance on financial distress, it can be seen that GCG implementation can improve company performance, especially financial performance and reduce the risk of financial distress and in general GCG implementation can increase investor confidence. Conversely, the implementation of low Corporate Governance will reduce investor confidence and can be a factor that prolongs the economic crisis.