The Determinant of Good Corporate Governance on Firm Value: The Mediation Role of Financial Performance

Abstract

This study analyzes the effect of Good Corporate Governance (GCG) on firm value, with financial performance as a mediating variable. GCG is measured using the proportion of independent commissioners and the frequency of audit committee meetings. Firm value is proxied by Tobin's Q ratio, while financial performance is proxied by Return on Assets (ROA). The sampling technique employed is purposive sampling. The population consists of 69 companies listed in the LQ45 index on the Indonesia Stock Exchange during the 2020–2024 period, from which 23 companies were selected as the sample. The data used are secondary data obtained from annual and financial reports. Data analysis techniques include multiple linear regression, path analysis, and the Sobel test, with the assistance of IBM SPSS Statistics 26. The results show that the proportion of independent commissioners has a significant positive effect on firm value but does not significantly affect ROA. The frequency of audit committee meetings has a significant negative effect on both ROA and firm value. ROA has a significant positive effect on firm value. ROA does not significantly mediate the relationship between independent commissioners and firm value. However, ROA significantly mediates the relationship between the frequency of audit committee meetings and firm value.