Corporate governance, government intervention and performance of state owned enterprises, Indonesia

This study examines the relationship between corporate governance, government intervention as a moderating variable and firm performance of Indonesian State Owned Enterprises (SOEs). According to the survey, it is found that the position of the implementation of corporate governance in Indonesia was still the worst among 11 countries located in the Pacific region. Data from 63 SOEs were collected and processed using PLS structured equation modelling to gauge the extent of the relationship. The result demonstrates that the relationship of most corporate, government indicators with ROA is positive except for the Independent Commissioner and the Independent Director. The relationship is significant only on the Independence of Committees and Supervisory board size variables. The results for ROE are also almost the same as ROA’s. The relationship is positive for the Independent Director, Independence of Committees, Supervisory board size, Supervisory Board Meetings, Competence of Audit Committee, Reputation of Auditors and Audit Committee Meetings. The government intervention indicators of the appointment of senior executives, regulation and monitoring, and political pressure have positive effects on the relationship between certain corporate governance indicators and firm performance, but the influence is not significant. This result indicates that there are influences from the government to SOEs for good governance and performance. The study combines ten parameters of corporate governance and three parameters of government intervention to explore the performance of Indonesian SOEs that has added to the body of knowledge of corporate governance and the agency theory. The results of this study have practical implications for the Indonesian regulatory authorities to establish and revise the corporate governance practice standards tailored to the Indonesian unique background. The future direction of this research can be developed by changing or adding variables and broadening its scope.