Governance and internationalisation on firm performance: A case study in Indonesia and Malaysia

Authors

DOI:

https://doi.org/10.46661/rev.metodoscuant.econ.empresa.10865

Keywords:

Corporate governance, Internationalization, board size, female commissioner, financial performance

Abstract

Objective: This study aims to determine the effect of governance practices and the degree of internationalization on companies in Indonesia and Malaysia. Research on governance in Indonesia is interesting because of its inconsistent law enforcement and the existence of dominant family ownership that can expropriate external shareholders. Research Design & Methods: This study uses a sample of manufacturing companies located in Indonesia and Malaysia. The study uses panel data using independent governance variables and degree of internationalization. Findings: The results showed that governance variables using the proxy of independent commissioners, the board size, and the presence of female commissioners influence financial performance. At the same time, governance as of a proxy for the frequency of board meetings does not affect financial performance. The degree of internationalization found results that also affect financial performance. Companies that enter the international market also need good governance. Implications & Recommendations: Practical implications, Investors are expected to consider corporate governance and internationalization aspects when investing. As the research results presented previously show, several variables, such as independent commissioners, commissioner size, and export ratio, also affect company performance. Investors, especially in Indonesia, are advised to invest in companies with the optimal number of independent commissioners to get maximum returns. In addition, investors are advised to choose companies with the optimal number of boards of commissioners to maximize company performance. Contribution & Value Added: The research contributes by using a combination of corporate governance and internationalization issues that can benefit the company and the national economy.

Downloads

Download data is not yet available.

References

Ahmad, M., Raja Kamaruzaman, R. N. S., Hamdan, H., & Annuar, H. A. (2020). Women directors and firm performance: Malaysian evidence post policy announcement. Journal of Economic and Administrative Sciences, 36 (2), 96– 109. https://doi.org/10.1108/JEAS-04-2017-0022

Ahmadi, A., Nakaa, N., & Bouri, A. (2018). Chief Executive Officer attributes, board structures, gender diversity and firm performance among French CAC 40 listed firms. Research in International Business and Finance, 44, 218–226. https://doi.org/10.1016/j.ribaf.2017.07.083

Ain, Q. U., Yuan, X., Javaid, H. M., Usman, M., & Haris, M. (2021). Female directors and agency costs: evidence from Chinese listed firms. International Journal of Emerging Markets, 16 (8), 1604–1633. https://doi.org/10.1108/IJOEM-10-2019-0818

Al-Matari, E. M. (2020). Do characteristics of the board of directors and top executives have an effect on corporate performance among the financial sector? Evidence using stock. Corporate Governance (Bingley), 20 (1), 16– 43. https://doi.org/10.1108/CG-11-2018-0358

Al-Saidi, M. (2021). Board independence and firm performance : evidence from Kuwait. International Journal of Law and Management, 63 (2), 251–262. https://doi.org/10.1108/IJLMA-06-2019-0145

Al Farooque, O., Buachoom, W., & Sun, L. (2019). Board, audit committee, ownership and financial performance–emerging trends from Thailand. Pacific Accounting Review, 32 (1), 54–81. https://doi.org/10.1108/PAR-10- 2018-0079

Alnasser, S. (2012). What has changed? The development of corporate governance in Malaysia. Journal of Risk Finance, 13 (3), 269–276. https://doi.org/10.1108/15265941211229271

Arosa, B., Iturralde, T., & Maseda, A. (2012). The role of board structure as an internal control mechanism in non-listed firms, Innova Ciencia 4 (2), 29–43.

Bhagat, S., & Bolton, B. (2019). Corporate governance and firm performance: The sequel. Journal of Corporate Finance, 58, 142–168. https://doi.org/10.1016/j.jcorpfin.2019.04.006

Cahyadi, R. T., Purwanti, L., & Mardiati, E. (2018). Pengaruh Profitabilitas, Dewan Komisaris, Komisaris Independen dan Risiko Idiosinkratis terhadap Dividend Payout Ratio, Jurnal Economia, 14 (1), 99. https://doi.org/10.21831/economia.v14i1.19404

Chadys, P. A. O., Sulung, L. A. K., & Admeinasthi, M. B. (2018). Pengaruh Internasionalisasi, Afiliasi Bisnis, dan Research & Development Terhadap Kinerja Perusahaan Manufaktur di Indonesia. Jurnal Siasat Bisnis, 22 (1), 62–75. https://doi.org/10.20885/jsb.vol22.iss1.art4

Chou, C. H., Lee, J. M., Teng, Y. M., & Lee, H. L. (2021). What is the impact of corporate governance on the food industry at different thresholds of internationalization? A review. Agricultural Economics (Czech Republic), 67(1), 21–32. https://doi.org/10.17221/272/2020-AGRICECON

Contractor, F. J., Kundu, S. K., & Hsu, C. C. (2003). A three-stage theory of international expansion: The link between multinationality and performance in the service sector. Journal of International Business Studies, 34 (1), 5–18. https://doi.org/10.1057/palgrave.jibs.8400003

Dharmadasa, P., Gamage, P., & Herath, S. (2014). Corporate Governance and Firm Performance: Evidence from Sri Lanka. Journal of Finance and Bank Management, 21 (1), 7–31. https://doi.org/10.15640/jfbm.v3n1a16

Erena, O. T., Kalko, M. M., & Debele, S. A. (2021). Corporate governance mechanisms and firm performance: empirical evidence from medium and large-scale manufacturing firms in Ethiopia. Corporate Governance (Bingley), 22 (2), 213–242. https://doi.org/10.1108/CG-11-2020-0527

Fryges, H., & Wagner, J. (2010). Exports and profitability: First evidence for German manufacturing firms. World Economy, 33 (3), 399–423. https://doi.org/10.1111/j.1467-9701.2010.01261.x

Fuzi, S. F. S., Halim, S. A. A., & Julizaerma, M. K. (2016). Board Independence and Firm Performance. Procedia Economics and Finance, 37 (16), 460–465. https://doi.org/10.1016/s2212-5671(16)30152-6

Gunawan, C. C., Murhadi, W. R., & Utami, M. (2019). A study on the effects of good corporate governance – gender diversity on the company performance. Advances in Social Science, Education and Humanities Research, 308, 32–25. https://doi.org/10.2991/insyma-19.2019.9

Hanafi, M. M., Setiyono, B., & Sanjaya, I. P. S. (2018). Ownership structure and firm performance: evidence from the subprime crisis period. Corporate Governance (Bingley), 18 (2), 206–219. https://doi.org/10.1108/CG-10-2016- 0203

Hanh, L.T.M., Kiong-Ting, I.W., Kweh, Q.L., & Hoanh, L.T.H. (2018). Board Meeting Frequency and Financial Performance: A Case of Listed Firms in Vietnam. International Journal of Business and Society, 19 (2), 464-472. https://core.ac.uk/download/pdf/188217226.pdf

Huang, L., & Marciano, D. (2020). Interdependence Relationship of Internationalization—Performance in Manufacturing Firms Listed in Indonesia Stock Exchange and Chinese Stock Exchanges. 115(Insyma), 416– 421. https://doi.org/10.2991/aebmr.k.200127.085

Jensen, M. C. (1993). The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems. The Journal of Finance, 48 (3), 831–880. https://doi.org/10.1111/j.1540-6261.1993.tb04022.x

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360. https://doi.org/10.1016/0304-405X(76)90026-X

Kao, M. F., Hodgkinson, L., & Jaafar, A. (2019). Ownership structure, board of directors and firm performance: evidence from Taiwan. Corporate Governance (Bingley), 19(1), 189–216. https://doi.org/10.1108/CG-04-2018- 0144

Komite Nasional Kebijakan Governance (KNKG). (2006). Pedoman Umum Good Corporate Governance. Jakarta.

Lipton, M., & Lorsch, J. W. (1992). A Modest Proposal for Improved Corporate Governance. The Business Lawyer, 48, 59–77.

Lu, J. W., & Beamish, P. W. (2001). The internationalization and performance of SMEs. Strategic Management Journal, 22 (6–7), 565–586. https://doi.org/10.1002/smj.184

Lukito, E.N., Murhadi, W. R., & Wijaya, L. I. (2024). Good Corporate Governance In Non-Financial Sector Companies On The Indonesian Stock Exchange. JIAFE (Jurnal Ilmiah Akuntansi Fakultas Ekonomi), 10 (1), 13-22. https://doi.org/10.34204/jiafe.v10i1.9007

Malik, M. S., & Makhdoom, D. D. (2016). Does corporate governance beget firm performance in Fortune Global 500 companies? Corporate Governance (Bingley), 16(4), 747–764. https://doi.org/10.1108/CG-12-2015-0156

Mishra, R. K., & Kapil, S. (2018). Board characteristics and firm value for Indian companies. Journal of Indian Business Research, 10 (1), 2–32. https://doi.org/10.1108/JIBR-07-2016-0074

Murhadi, Werner R. (2021). The Effects of Corporate Governance on Company Performance and Dividends in Three Asean Countries. Media Ekonomi Dan Manajemen, 36(2), 230. https://doi.org/10.24856/mem.v36i2.2224

Murhadi, Werner Ria, Azaria, D., & Silvia Sutedjo, B. (2021). Board Diversity and Financial Performance in Indonesia. Journal of Entrepreneurship & Business, 2 (2), 86–95. https://doi.org/10.24123/jeb.v2i2.4537

Naghavi, N., Pahlevan Sharif, S., & Iqbal Hussain, H. Bin. (2021). The role of national culture in the impact of board gender diversity on firm performance: evidence from a multi-country study. Equality, Diversity and Inclusion, 40 (5), 631–650. https://doi.org/10.1108/EDI-04-2020-0092

Nasir, N. A. M., & Hashim, H. A. (2020). Corporate governance performance and financial statement fraud: evidence from Malaysia. Journal of Financial Crime, 28 (3), 797–809. https://doi.org/10.1108/JFC-09-2020-0182

Ntim, C. G., Soobaroyen, T., & Broad, M. J. (2017). Governance structures, voluntary disclosures and public accountability: The case of UK higher education institutions. Accounting, Auditing and Accountability Journal, 30 (1), 65–118. https://doi.org/10.1108/AAAJ-10-2014-1842

Octosiva, F., Theresia, M., & Hidayat, A. A. H. (2018). Pengaruh Independensi, Kompetensi, dan Partisipasi Dewan Komisaris terhadap Kinerja Keuangan Perusahaan. Studi Akuntansi Dan Keuangan Indonesia, 1 (2), 210–231.

Pacheco, L. (2019). Internationalization effects on financial performance: The case of portuguese industrial SMEs. Journal of Small Business Strategy, 29 (3), 97–116.

Pletzer, J. L., Nikolova, R., Kedzior, K. K., & Voelpel, S. C. (2015). Does gender matter? female representation on corporate boards and firm financial performance - A meta-analysis. PLoS ONE, 10 (6), 1–20. https://doi.org/10.1371/journal.pone.0130005

Puni, A., & Anlesinya, A. (2020). Corporate governance mechanisms and firm performance in a developing country. International Journal of Law and Management, 62 (2), 147–169. https://doi.org/10.1108/IJLMA-03-2019-0076

Queiri, A., Madbouly, A., Reyad, S., & Dwaikat, N. (2021). Corporate governance, ownership structure and firms’ financial performance: insights from Muscat securities market (MSM30). Journal of Financial Reporting and Accounting, 19 (4), 640–665. https://doi.org/10.1108/JFRA-05-2020- 0130

Ramadan, M. M., & Hassan, M. K. (2021). Board gender diversity, governance and Egyptian listed firms’ performance. Journal of Accounting in Emerging Economies, 12 (2), 279–299. https://doi.org/10.1108/JAEE-02-2021-0057

Satria, Y., Mahadwartha, P. A., & Ernawati, E. (2020). The Effect of Gender Diversity on Company Financial Performance. Advances in Economics, Business and Management Research, 115, 470–475. https://doi.org/10.2991/aebmr.k.200127.094

Shan, Y. G. (2019). Managerial ownership, board independence and firm performance. Accounting Research Journal, 32 (2), 203–220. https://doi.org/10.1108/ARJ-09-2017-0149

Singla, C., & George, R. (2013). Internationalization and performance: A contextual analysis of Indian firms. Journal of Business Research, 66 (12), 2500–2506. https://doi.org/10.1016/j.jbusres.2013.05.041

Smith, N., Smith, V., & Verner, M. (2006). Do women in top management affect firm performance? A panel study of 2,500 Danish firms. International Journal of Productivity and Performance Management, 55 (7), 569–593. https://doi.org/10.1108/17410400610702160

Tanjung, M. (2020). A cross-firm analysis of corporate governance compliance and performance in Indonesia. Managerial Auditing Journal, 35 (5), 621– 643. https://doi.org/10.1108/MAJ-06-2019-2328

Teti, E., Dell’Acqua, A., Etro, L., & Volpe, M. (2017). The impact of board independency, CEO duality and CEO fixed compensation on M&A performance. Corporate Governance (Bingley), 17 (5), 947–971. https://doi.org/10.1108/CG-03-2017-0047

Utama, C. A., Utama, S., & Amarullah, F. (2017). Corporate governance and ownership structure: Indonesia evidence. Corporate Governance (Bingley), 17 (2), 165–191. https://doi.org/10.1108/CG-12-2015-0171

Vithessonthi, C., & Racela, O. C. (2015). Intensity on Firm Performance. Journal of Multinational Financial Management, 34, 1–18. http://dx.doi.org/10.1016/j.mulfin.2015.12.001

Downloads

Published

2025-09-10

How to Cite

Murhadi , W. R., Setiawan, S. S., & Ernawati, E. (2025). Governance and internationalisation on firm performance: A case study in Indonesia and Malaysia . Journal of Quantitative Methods for Economics and Business Administration, 1–15. https://doi.org/10.46661/rev.metodoscuant.econ.empresa.10865

Issue

In press

Section

Articles

License

Copyright (c) 2024 Werner R. Murhadi , Shiendy S. Setiawan, Endang Ernawati

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Submission of manuscripts implies that the work described has not been published before (except in the form of an abstract or as part of thesis), that it is not under consideration for publication elsewhere and that, in case of acceptance, the authors agree to automatic transfer of the copyright to the Journal for its publication and dissemination. Authors retain the authors' right to use and share the article according to a personal or instutional use or scholarly sharing purposes; in addition, they retain patent, trademark and other intellectual property rights (including research data). 

All the articles are published in the Journal under the Creative Commons license CC-BY-SA (Attribution-ShareAlike). It is allowed a commercial use of the work (always including the author attribution) and other derivative works, which must be released under the same license as the original work.

Up to Volume 21, this Journal has been licensing the articles under the Creative Commons license CC-BY-SA 3.0 ES. Starting from Volume 22, the Creative Commons license CC-BY-SA 4.0 is used.