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THE PERFORMANCE OF BANKS IN INDONESIA: THE EFFECT OF AUDIT
COMMITTEE.
BOARD OF COMMISSIONERS.
AND PROPORTION OF
INDEPENDENT COMMISSIONERS
Oleh Eka Yeni Salasatie1*.
Eko Haryanto2.
Iwan Fakhruddin3.
Bima Cinintya Pratama4 1,2,3,4Universitas Muhammadiyah Purwokerto Email: 1yenieka962@gmail.
Abstract This research was conducted to examine the factors that influence company performance, especially those related to the role of corporate governance.
With good corporate governance, company performance can grow.
This study aims to determine the effectiveness of implementing good corporate governance through the existence of an audit committee, a board of commissioners, and an independent board of commissioners in improving performance.
ROA is used to measure company performance.
This study focuses on conventional banks registered with OJK in Indonesia from 2019-2021.
Purposive sampling was used for the sampling technique, and 41 samples were Multiple linear regression was the analytical method used to test the hypothesis.
Keywords: Audit Committee.
Board of Commissioners.
Independent Commissioner.
Company Performance INTRODUCTION In an increasingly competitive business era, companies are required to maintain and improve their performance.
Company company's situation as a whole in a certain period as a result of implemented policies that can affect the activities and productivity of companies that utilize all company resources (Pardanawati et al.
, 2.
To achieve good company performance, a good corporate governance mechanism is needed (Rahmawati & Sukmaningrum, 2.
The Indonesian Institute Governance reveals that good corporate governance consists of several structured systems and efforts that are implemented in response to a company's vital objectives to increase the company's growth consistently over a long period of time (Bukhori & Raharja.
Muslih, 2.
For investors, information about company performance is a medium that can be used to predict the company's prospects in the Declining performance in the company will result in decreased profits generated.
if the profits generated decrease, investors will be reluctant to invest in the company.
The implementation of good corporate governance requires several important components, namely the audit committee, the board of commissioners, and a proportion of independent board members.
In addition, there is a ratio analysis that can measure a company's performance, especially within the scope of Indonesian banking, namely the ratio analysis of Return On Assets (ROA) as measured by assets whose funds mostly come from public savings funds so that Return On Assets (ROA) representative measurement of banking financial performance (Munir, 2.
The first factor that influences company performance in this study is the audit The audit committee is tasked with ensuring that all financial information before it is published to all stakeholders is accurate and reflects the actual situation within the company (Hussain et al.
, 2.
The audit committee can be seen from the size or number a.
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2 September 2023 a of members owned by each company.
The size of the audit committee is considered to have an impact on the performance of the company because if it is larger, it can carry out its duties and obligations more effectively and efficiently than an audit committee with a smaller size.
The second factor is the board of In Indonesia, the board of commissioners, also known as the supervisory board, is a group of individuals appointed by the shareholders to oversee the company's management and provide direction in strategic decision-making.
The board of commissioners is responsible for ensuring that the company's activities comply with relevant laws and regulations and that management acts in the best interest of the company and its Commissioners can provide oversight over financial reporting, internal control, and risk management, which can help ensure that financial decisions are made responsibly and with the best interests of the company and its shareholders in mind.
And the third factor is the proportion of independent commissioners.
According to Boedex .
, independent commissioners are members of the board of commissioners who are not affiliated with directors, other members of the board of commissioners, or controlling shareholders and are free from business relationships or other relationships that may affect their ability to act independently or solely in the interests of the LITERATURE REVIEW Agency Theory Agency theory was first put forward by Michael C.
Jensen and William H.
Meckling This theory discusses the relationship between the principal and the agent.
What is meant by a principal is a company owner or shareholder, while an agent is a company An agency relationship occurs when the principal .
gives authority to the agent .
to make decisions about running the company.
This relationship between principal and agent can lead to information asymmetry.
This can be because the agent has more information about the condition of the company than the principal.
Corporate Governance.
Corporate management mechanism based on agency The application of the concept of corporate governance is expected to give trust to agents .
in managing the wealth of owners .
, and owners will become more confident that agents will not commit fraud for the welfare of agents (Darwis, 2.
Corporate governance mechanisms include internal mechanisms .
oard structure and managerial ownershi.
and external mechanisms .
nstitutional In addition, to build an effective monitoring and control system within a company, two parties are needed, namely the audit committee and the independent Audit Committee The Indonesian Audit Committee Association (IKAI) defines an audit committee as a committee that works professionally and independently and is formed by the board of thus, its task is to assist and strengthen the function of the board of commissioners in carrying out the supervisory function of the processes of financial implementation, and corporate governance in Arrangements regarding the number of audit committees for issuers and public companies are regulated in BAPEPAM-LK Regulation No.
IX.
Establishment of Audit Committee Work Implementation Guidelines.
Under this regulation, issuers and public companies are required to form an audit committee of at least three people, one of whom is an independent a Juremi: Jurnal Riset Ekonomi ISSN 2798-6489 (Ceta.
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commissioner of the company and acts as The audit committee's impact on chairman of the audit committee.
company performance Board of Comissioners The presence of an audit committee The board of commissioners, also within a corporation will enhance management referred to as the supervisory board, is a group performance since the audit committee's of individuals appointed by shareholders to oversight will mitigate or overcome the rise of oversee a company's management and provide financial report manipulation and tightening guidance in strategic decision-making.
The Additionally, committees make sure that managers disclose responsibility of ensuring that the company's firm results in an ethical manner.
make sure activities comply with applicable laws and the company's performance is met (Amaliyah regulations while ensuring that management and Herwiyanti, 2.
acts in the best interest of the company and its Compared to audit committees with Similar to a board of directors, fewer members, those with more members an effective board of commissioners can play frequently become distracted and exhibit a significant role in shaping a company's lower levels of participation.
A tiny audit financial performance.
Commissioners can committee, on the other hand, won't be provide oversight over financial reporting, efficient because there won't be enough internal control, and risk management, which background and expertise in business and can help ensure that financial decisions are financial reporting.
a righteous audit made responsibly and with the best interests of the company and its shareholders in mind.
H1: The Audit Committee has a positive Independent Board of Commissioners effect on company performance The Independent Board The board of CommissionersAos Commissioners is comprised of members who impact on company performance are not financially, managerially, or otherwise The board of commissioners is a body related to other members of the board, appointed by the principal with the purpose of directors, controlling shareholders, or any overseeing the company's GCG practices, other parties that could potentially influence supervising the directors, and providing their independent judgment.
As noted by recommendations on the directors' policies Christin et al.
, the presence of (Kartorahardjo and Yuliati, 2.
The independent commissioners is believed to efficacy and efficiency of the board of provide an objective and impartial oversight commissioners' performance in overseeing function for the company, which can management can improve the sense of responsibility in managing the company's Independent commissioners can fulfill a operations and resources more carefully and crucial role in reviewing financial reports and seriously, consequently optimizing profits.
ensuring that businesses adhere to best When earnings rise, so does financial practices and regulatory requirements, thus Furthermore, fraud due to promoting transparency and accountability opportunistic conduct by management may be within the organization.
Their valuable adequately managed and reduced, hence contributions can support the management lowering agency concerns.
team and help to maintain the integrity of the H2: The Board of Commissioners has a company's operations.
positive effect on company performance a.
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2 September 2023 a The Proportion of Independent CommisionersAos impact on company The commissioners, like the commissioners, serves as a supervisory agency but has no strong contact with the company's shareholders, who have the ability to monitor and protect minority shareholders and play an essential part in decision-making.
According to the findings of Purnomo et al.
and Intia & Azizah .
, the board of commissioners has a positive effect on financial performance.
More independent commissioners will provide a higher level of monitoring, reducing the potential of managers engaging in methods to profit themselves while improving the company's financial performance.
As a result, the study hypothesis is H3 : The proportion of independent Commissioners has a positive and RESEARCH METHODS The descriptive research method was employed in this study.
Descriptive research is undertaken to discover and explain the features of the variables researched in a given context.
Descriptive research is defined as research that is undertaken to discover the value of an independent variable, either one or more independent variables, without drawing comparisons or linking to other variables (Harefa et al.
, 2.
The Population and the Sample This research's population is the banking industry, which publishes financial statements in the year of study.
Purposive sampling was utilized, which means selecting firms based on certain criteria, such as audit committees, boards of commissioners, and independent commissioners, with the sample consisting of 41 conventional bank companies listed on the IDX between 2019 and 2021.
Operational Variables Company performance ROA is significant for businesses since it measures a company's capacity to create net profit based on its assets (Saputra, 2022.
Wiranthie & Putranto, 2.
Furthermore.
Amelia and Sunarsi .
defined return on assets (ROA) as a metric that gauges a company's success in producing profits.
As a result, the higher the ROA, the better the company's success since the rate of return is ROA (Return of Asset.
= (Net Income / Total Asset.
x 100% Audit Committee The size or number of members held by each corporation reveals the audit The size of the audit committee is said to have an impact on the company's performance since the larger the audit committee, the more effectively and efficiently it can carry out its duties and responsibilities when compared to smaller audit committees.
A larger audit committee is also deemed more competent, owing to the rise in size.
The audit committee will be made up of several people with diverse talents (Al-Okaily & Naueihed.
Audit Committee = The number of members of the Audit Committee in the Board of Commissioners The amount of members of the board of commissioners in the corporation determines the size of the board of The following formula is used to determine the size of the Board of Commissioners:
Board of Commissioners = Total Members of the Company's Board of Commissioners Proportion Independent Commissioners The proportion of members of the board of commissioners who come from outside of the company from all sizes of the company's board of commissioners is used to a Juremi: Jurnal Riset Ekonomi ISSN 2798-6489 (Ceta.
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figure out the independent board of independent commissioner has a positive and According to Sam'ani .
significant effect on company performance.
The possessed by principals and agents concerning the company's situation is referred to as information asymmetry in agency theory.
The RESULTS AND DISCUSSION presence of asymmetry can influence earnings Hypothesis Testing Results management behavior.
therefore, proper Table 1.
Hypothesis Test Results corporate governance is required.
According Coefficientsa Unstandardized Standardized to Jensen and Meckling, there is a conflict of Coefficients Coefficients t Sig.
interest between the agent and the principal in Model Error Betas every connection, resulting in agency costs.
(Constan.
-4,857 .
According to study results, the audit Audit Committee 013 committee has an important role to enhancing -1,432 .
Commissioners company performance, particularly from a Independent Commissioner control standpoint.
Having an efficient audit Dependent Variable: ROA committee is a key component of The multiple linear of this study are as implementing good corporate governance.
follows, based on the regression coefficient audit committee is in charge of monitoring table above:
financial reports and external audits.
Y (KP) = - 0.
013 (KA) Ae 0.
005 (DK)
The board of commissioners has no 0.
343 (KI)
effect on company performance.
Supervising Because the audit committee variable's and directing management performance is the regression coefficient is positive, any increase responsibility of the board of commissioners.
in the audit committee variable will enhance An excessive number of commissioners in an company performance.
According to the organization results in less optimal and hypothesis test results, the audit committee effective supervision and management and variable has a significance value of 0.
will cause various difficulties, especially in As a result, it is possible to infer that the communication and coordination among audit committee has a positive and significant effect on corporate performance.
Meanwhile.
Because the board of commissioners commissioners have a significant influence on variable has a positive regression coefficient, company performance, which means that the any increase in the board of commissioners more independent commissioners a company has, the better its financial performance.
The hypothesis show that the board of commissioners variable has a commissioners a company has, the worse its significance value of 0.
132 > 0.
As a result, financial performance.
It is possible to the board of commissioners has no effect on conclude that increasing the number of company performance.
Because This is because the more there commissioner variable coefficient is positive, are, the greater the degree of monitoring will be, reducing the chance of managers engaging commissioner variable enhances corporate in techniques to benefit their own management The independent commissioner while improving the company's financial variable has a significance value of 0.
performance (Farida, 2.
As a result, it is possible to infer that the a.
ISSN 2798-6489 (Ceta.
Juremi: Jurnal Riset Ekonomi ISSN 2798-6535 (Onlin.
Vol.
3 No.
2 September 2023 a CONCLUSION Based on the results of the research and hypothesis testing, it is possible to conclude:
The audit committee has a positive and significant effect on company The board of commissioners has no effect on company performance Independent commissioners have a positive and significant effect on company performance.
Suggestion Future researchers who want to do more research on company performance might use a longer entirely period so that the outcomes of this research are better.
additional to characteristics like as ownership structure, good corporate governance, activity ratios, capital structure, and other variables that might impact company performance.
DAFTAR PUSTAKA