Corporate Governance and Financial Distress: Indonesian Perspective

Dhania Nur Ad’ha, Nur Diana, Dewi Diah Fakhriyyah

Abstract


This research aims to analyze the influence of corporate governance mechanisms on financial distress in companies listed on the LQ45 Index of the Indonesia Stock Exchange during the 2020–2023 period. The corporate governance variables examined include institutional ownership, managerial ownership, independent commissioners, and profitability. The study uses a quantitative approach with secondary data obtained from company financial statements and annual reports. The sample consists of 17 companies continuously listed in LQ45 over four years, selected through purposive sampling. Financial distress is measured using the Altman Z-Score model, while the analytical method employed is multiple linear regression using SPSS 27. The results show that institutional ownership and profitability have a significant effect in mitigating financial distress. Meanwhile, managerial ownership and independent commissioners do not have a significant effect on financial distress. These findings contribute to the development of agency theory and signal theory by emphasizing the role of corporate governance in predicting and preventing financial crises in companies.

Keywords: Corporate governance, institutional ownership, managerial ownership, independent commissioner, profitability, financial distress, altman z-score.


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References


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