Does foreign board increase the companyâ€™s performance? the evidence from Indonesia

Muhammad Zhafran Joenoes; Rofikoh Rokhim

doi:10.14414/jebav.v22i2.1449

Authors

Muhammad Zhafran Joenoes Fakultas Ekonomi dan Bisnis, Universitas Indonesia
Rofikoh Rokhim Faculty of Economics and Business, Universitas Indonesia

DOI:

https://doi.org/10.14414/jebav.v22i2.1449

Keywords:

Board Diversity, Foreign Board, Company Performance

Abstract

This study examined the effect of foreign board members in promoting corporate governance and performance. This study used the fixed effect model from the panel data of 4,282 company-observations over the period of 2007-2017. This study found that the presence of foreign board has a significant and positive effect on the companyâ€™s performance measured by return on asset and return on equity ratios. On the other hand, the presence of Asian nationality board member was found to have negative significant effect on the companyâ€™s performance, and this is due to the companies having Asian Board members coming mostly from developing countries. In general, this research show that the presence of a foreign board member can bring differences to the companies and this affects their performance. This means that companies in Indonesia need to increase the number of foreign board of commissioners from outside Asian countries in order to increase their profitability.

Author Biography

Muhammad Zhafran Joenoes, Fakultas Ekonomi dan Bisnis, Universitas Indonesia

I'm a fresh graduate student from Faculty of Economics and Business, Universitas Indonesia, majoring in financial management

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