Corporate governance and firm’s value: An empirical study in listed companies in the emerging market

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Abstract

The incorporation of corporate governance (CG) in Indonesian society necessitates consideration of the socio-cultural values that exist and evolve within individual lives. The foundation of the Indonesian state, Pancasila, embodies the socio-cultural ideals of the Indonesian people. The five CG-relevant Pancasila principles are divinity, human rights, nationality, leadership, and social welfare. Pancasila corporate governance (PCG) is CG that incorporates Indonesian cultural values. The association between PCG and firm value (FV) is investigated in this study. Up to 66 samples were collected for the years 2009 through 2018 after the sample was chosen based on specific criteria. The declaration of the five Pancasila principles serves as a proxy for PCG. Tobin’s Q serves as a gauge for a company’s worth. Multi-regression analysis was employed in data analysis. This study concluded that while nationality and divinity had no effect on FV, human rights, leadership, and social welfare did have a substantial impact on FV. The single most important factor in the creation of corporate governance is the national culture and values. It stems from national cultures and beliefs that permeate the community and have an impact on relationships within it. It is expected to be a norm in the neighborhood.

Keywords: Divinity, Human Rights, Nationality, Leadership, Public Welfare, Firm’s Value

Authors’ individual contribution: Conceptualization — M. and H.S.; Methodology — Y.S. and M.T.; Validation — Y.S. and U.K.; Formal Analysis — Y.S. and M.T.; Investigation — H.S. and U.K.; Data Curation — M. and U.K.; Writing — Original Draft — M.T. and U.M.; Writing — Review & Editing — M. and H.S.; Visualization — M. and Y.S.; Supervision — H.S. and M.T.; Project Administration — M. and Y.S.; Funding Acquisition — M. and H.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G32, G41, M14, M41

Received: 01.04.2023
Accepted: 20.09.2024
Published online: 25.09.2024

How to cite this paper: Mukhtaruddin, Saftiana, Y., Susanto, H., Teguh, M., & Kalsum, U. (2024). Corporate governance and firm’s value: An empirical study in listed companies in the emerging market. Corporate Law & Governance Review, 6(3), 60–71. https://doi.org/10.22495/clgrv6i3p7