Location, Working Capital, Corporate Governance, and Profitability: The Case of Indonesian Manufacturing Firms
This study scrutinizes the effect of location, working capital and corporate governance toward return on assets (ROA) in Indonesian manufacturing firms. 61 manufacturing firms listed on the Indonesia Stock Exchange were taken as samples in this study. The results show that location does not affect manufacturing firms’ profitability. Furthermore, this study proves that working capital management, as measured by current ratio (CR) and quick ratio (QR), has a positive and significant influence on return on assets (ROA), but cash ratio (CR) and the cash conversion cycle does not have a significant influence on return on assets (ROA). This study also found that the Good Corporate Governance Index (GCGI) has a positive and significant influence on return on assets (ROA) in Indonesian manufacturing firms.
Albis, N., & Álvarez, I. (2017). A comparative analysis of the innovation performance between foreign subsidiaries and owned domestic firms in Colombian manufacturing sector. Journal of Globalization, Competitiveness & Governability, 11(2), 20-41.
Ameer, R. (2012). Impact of cash holdings and ownership concentration on firm valuation: Empirical evidence from Australia. Review of Accounting and Finance, 11(4), 448-467. https://doi.org/10.1108/14757701211279196
Aqil, M., Ahmed, R., Vveinhardt, J., & Streimikiene, D. (2019). Factors Influencing the Profitability of Heavy Vehicle Industry: A Case of Pakistan. Montenegrin Journal of Economics, 15(1), 61-72. https://doi.org/10.14254/1800-5845/2019.15-1.5
Bagchi, B., & Chakrabarti, J. (2014). Modeling liquidity management for Indian FMCG firms. International Journal of Commerce and Management, 24(4), 334-354. https://doi.org/10.1108/IJCoMA-10-2012-0065 https://doi.org/10.1108/IJCoMA-10-2012-0065
Barbosa, N., & Louri, H. (2005). Corporate Performance: Does Ownership Matter? A Comparison of Foreign- and Domestic-Owned Firms in Greece and Portugal. Review of Industrial Organization, 27(1), 73-102. https://doi.org/10.1007/s11151-005-4920-y
Bolek, M., & Wili'nski, W. (2012). The influence of liquidity on profitability of Polish construction sector companies. e-Finanse: Financial Internet Quarterly, 8(1), 38-52.
Brigham, E. F., & Houston, J. F. (2012). Fundamentals of Financial Management. Cengage Learning.
Cheung, Y.-L., Connelly, J. T., Limpaphayom, P., & Zhou, L. (2007). Do investors really value corporate governance? Evidence from the Hong Kong market. Journal of International Financial Management and Accounting, 18(2), 86-122. https://doi.org/10.1111/j.1467-646X.2007.01009.x
Chong, W. L., Ting, K. H., & Cheng, F. F. (2016). The impacts of corporate governance on the performance of reits in Singapore. Journal of Real Estate Literature, 24(2), 319-344. https://doi.org/10.1080/10835547.2016.12090431
Durrah, O., Rahman, A. A. A., Jamil, S. A., & Ghafeer, N. A. (2016). Exploring the Relationship between Liquidity Ratios and Indicators of Financial Performance: An Analytical Study of Food Industrial Companies Listed in Amman Bursa. International Journal of Economics and Financial Issues, 6(2), 435-441.
Ernayani, R., Oktiviana, S., & Robiyanto, R. (2017). The Effect of Return on Investment, Cash Ratio, and Debt to Total Assets Towards Dividend Payout Ratio (A Study Towards Manufacturing Companies Listed in Indonesia Stock Exchange). Advanced Science Letters, 23(8), 7169-7199. https://doi.org/10.1166/asl.2017.9328
Gupta, P. P., Kennedy, D. B., & Weaver, S. C. (2009). Corporate governance and firm value: Evidence from Canadian capital markets. Corporate Ownership & Control, 6(2-3), 293-307. https://doi.org/10.22495/cocv6i3c2p4
Handriani, E., & Robiyanto, R. (2018a). Corporate Finance and Firm Value in The Indonesian Manufacturing Companies. International Research Journal of Business Studies, 11(2), 113-127. https://doi.org/10.21632/irjbs.11.2.113-127
Handriani, E., & Robiyanto, R. (2018b). Investment Opportunity and Industrial Growth in Indonesia. International Journal of Business and Society, 19(2), 295-312.
Handriani, E., & Robiyanto, R. (2019). Institutional ownership, independent board, board size, and firm performance: evidence from Indonesia. Contaduría y Administración, 64(3), e118. https://doi.org/10.22201/fca.24488410e.2018.1849
Hintošová, A. B., & Kubíková, Z. (2016). The effect of the degree of foreign ownership on firms' performance. Review of Economic Perspectives, 16(1), 29-43. https://doi.org/10.1515/revecp-2016-0003
Hoang, T. V. (2015). Impact of Working Capital Management on Firm Profitability: The Case of Listed Manufacturing Firms on Ho Chi Minh Stock Exchange. Asian Economic and Financial Review, 5(5), 779-789. https://doi.org/10.18488/journal.aefr/2015.5.5/102.5.779.789
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360. https://doi.org/10.1016/0304-405X(76)90026-X
Keown, A. J., Scott, D. F., Martin, J. D., & Petty, J. W. (2008). Dasar-Dasar Manajemen Keuangan. Jakarta: Salemba Empat.
Kinkyo, T., Inoue, T., & Hamori, S. (2016). Financial Linkages, Remittances, and Resource Dependence in East Asia. Singapore: World Scientific. https://doi.org/10.1142/9737
Leng, A. C. A. (2004). The Impact of Corporate Governance Practices on Firms' Financial Performance: Evidence from Malaysian Companies. ASEAN Economic Bulletin, 21(3), 308-318. https://doi.org/10.1355/AE21-3D
Mai, M. U. (2017). Mediation of CSR and Profitability on the Influences of GCG Mechanism to the Firm Value. Jurnal Keuangan dan Perbankan, 21(2), 253-264. https://doi.org/10.26905/jkdp.v21i2.393
Muharam, H., Mawardi, W., Handriani, E., Puryandani, S., & Robiyanto, R. (2020). Corporate Governance Structure and Firm Performance in the Indonesian Capital Market. Quality - Access to Success, 21(174), 22-27.
Munawir, S. (2007). Analisa Laporan Keuangan. Yogyakarta, Indonesia: Liberty.
Orazalin, N., Mahmood, M., & Lee, K. J. (2016). Corporate Governance, Financial Crises and Bank Performance: Lessons from Top Russian Banks. International Journal of Business and Society, 16(5),798-814. https://doi.org/10.1108/CG-10-2015-0145
Owusu, A., & Weir, C. (2016). The governance-performance relationship: evidence from Ghana. Journal of Applied Accounting Research, 17(3), 285-310. https://doi.org/10.1108/JAAR-06-2014-0057
Purnamawati, I. G. A., Yuniarta, G. A., & Astria, P. R. (2017). Good Corporate Governance dan Pengaruhnya Terhadap Nilai Perusahaan Melalui Corporate Social Responsibility Disclosure. Jurnal Keuangan dan Perbankan, 21(2), 276-286. https://doi.org/10.26905/jkdp.v21i2.505
Rehman, M. Z., Khan, M. N., & Khokhar, I. (2015). Investigating Liquidity-Profitability Relationship: Evidence from Companies Listed in Saudi Stock Exchange (Tadawul). Journal of Applied Finance & Banking, 5(3), 1-11.
Riyanto, B. (2011). Dasar-Dasar Pembelanjaan Perusahaan (4th ed.). Yogyakarta, Indonesia: BPFE UGM.
Robiyanto, R., Putra, A. R., & Lako, A. (2019). The effect of corporate governance and intellectual capital toward financial performance and firm value of socially responsible firms. Contaduría y Administración, 66(1), 1-29. https://doi.org/10.22201/fca.24488410e.2021.2489
Ruangchoengchum, P. (2017). Performance Measurement that Affects SMEs Business Profits: Case Study of SMEs in Khon Kaen Province. ABAC Journal, 37(1), 26-42.
Safdar, M. Z., Awan, M. Z., Ahmed, Z., Qureshi, M. I., & Hasnain, T. (2016). What Does Matter? Liquidity or Profitability: A Case of Sugar Industry in Pakistan. International Journal of Economics and Financial Issues, 6(S2), 144-152.
Samiloglu, F., & Akgun, A. I. (2016). The Relationship between Working Capital Management and Profitability: Evidence from Turkey. Business and Economics Research Journal, 7(2), 1-14. https://doi.org/10.20409/berj.2016217492
Sayidah, N. (2007). Pengaruh kualitas corporate governance terhadap kinerja perusahaan publik. Jurnal Akuntansi dan Auditing Indonesia, 10(1), 1-9.
Shah, S., Tahir, S. H., Ullah, A., & Iqbal, A. (2016). The Impact of Investment Diversification on Firm Performance. Abasyn Journal of Social Sciences, 20(S), 300-311. https://doi.org/10.24312/paradigms110105
Tahir, M., & Anuar, M. B. A. (2015). The determinants of working capital management and firms performance of textile sector in Pakistan. Quality & Quantity, 50(2), 605-618. https://doi.org/10.1007/s11135-015-0166-4
Talpová, S. Ž. (2016). Do they Compete Differently? Strategies of MNEs and Domestic Companies in the Environment of the Czech Republic. Trends Economics and Management, 10(27), 67-79. https://doi.org/10.13164/trends.2016.27.67
Thornblad, D. B., Zeitzmann, H. K., & Carlson, K. D. (2018). Negative Denominators in Index Variables: The Vulnerability of Return on Equity, Debt to Equity, and Other Ratios. The Electronic Journal of Business Research Methods, 16(1), 1-10.
Copyright Transfer Statement for Journal
1) In signing this statement, the author(s) grant UNIMAS Publisher an exclusive license to publish their original research papers. The author(s) also grant UNIMAS Publisher permission to reproduce, recreate, translate, extract or summarize, and to distribute and display in any forms, formats, and media. The author(s) can reuse their papers in their future printed work without first requiring permission from UNIMAS Publisher, provided that the author(s) acknowledge and reference publication in the Journal.
2) For open access articles, the author(s) agree that their articles published under UNIMAS Publisher are distributed under the terms of the CC-BY-NC-SA (Creative Commons Attribution-Non Commercial-Share Alike 4.0 International License) which permits unrestricted use, distribution, and reproduction in any medium, for non-commercial purposes, provided the original work of the author(s) is properly cited.
3) For subscription articles, the author(s) agree that UNIMAS Publisher holds copyright, or an exclusive license to publish. Readers or users may view, download, print, and copy the content, for academic purposes, subject to the following conditions of use: (a) any reuse of materials is subject to permission from UNIMAS Publisher; (b) archived materials may only be used for academic research; (c) archived materials may not be used for commercial purposes, which include but not limited to monetary compensation by means of sale, resale, license, transfer of copyright, loan, etc.; and (d) archived materials may not be re-published in any part, either in print or online.
4) The author(s) is/are responsible to ensure his or her or their submitted work is original and does not infringe any existing copyright, trademark, patent, statutory right, or propriety right of others. Corresponding author(s) has (have) obtained permission from all co-authors prior to submission to the journal. Upon submission of the manuscript, the author(s) agree that no similar work has been or will be submitted or published elsewhere in any language. If submitted manuscript includes materials from others, the authors have obtained the permission from the copyright owners.
5) In signing this statement, the author(s) declare(s) that the researches in which they have conducted are in compliance with the current laws of the respective country and UNIMAS Journal Publication Ethics Policy. Any experimentation or research involving human or the use of animal samples must obtain approval from Human or Animal Ethics Committee in their respective institutions. The author(s) agree and understand that UNIMAS Publisher is not responsible for any compensational claims or failure caused by the author(s) in fulfilling the above-mentioned requirements. The author(s) must accept the responsibility for releasing their materials upon request by Chief Editor or UNIMAS Publisher.
6) The author(s) should have participated sufficiently in the work and ensured the appropriateness of the content of the article. The author(s) should also agree that he or she has no commercial attachments (e.g. patent or license arrangement, equity interest, consultancies, etc.) that might pose any conflict of interest with the submitted manuscript. The author(s) also agree to make any relevant materials and data available upon request by the editor or UNIMAS Publisher.