The role of the board of director with political connection for increasing the firm value

• Published in: Accounting (North Vancouver) Vol. 6; no. 7; pp. 1285 - 1290
• Main Authors: Idris, Fahmi, Buchdadi, Agung Dharmawan, Muttaqien, Muhammad Rizqi, Hariguna, Taqwa
• Format: Journal Article
• Language: English
• Published: Growing Science 2020
• ISSN: 2369-7393; 2369-7407
• DOI: 10.5267/j.ac.2020.8.023

This study examines the impact of independent board of directors, executive compensation, and political connections on firm performance in one of the biggest democracy countries in South East Asia. Company performance is measured by return on assets (ROA), and firm value is measured by Tobin's Q. Meanwhile, as an independent variable we use several good corporate governance variables, namely the board of directors, executive compensation variable and political connections. Company data are from companies listed in LQ45 index which means the best stock performance in Indonesia capital market. The finding shows the crucial role of independent board of director and political connection for enhancing the firm value. Findings indicate an independent board of director can improve company performance. Meanwhile, executive compensation can provide motivation to increase company value, but has other motivations in improving company performance. Meanwhile, political connections can improve company performance and value. Thus, this study emphasizes the crucial role of the experience and the connection of the board of directors in improving the value of the firm.