Corporate Governance and Firms Value:

From the Board Diversity and Board Compensation Perspective

mpirical Studies on Listed Companies in The Indonesian Stock Exchanges

Nadia Khairani and Devianti Yunita Harahap

Universitas Padjadjaran, Bandung, Jawa Barat, Indonesia

Keywords: corporate governance, firm value, board diversity, board compensation.

Abstract: Recently, as markets globalize, listed companies in Indonesia must look ahead and find the ways to boost

value for their shareholders. This study investigates the impact of board diversity and board compensation as

the proxy of corporate governance to firm’s value. We used 216 companies listed in the IDX that disclosed

the relevant information about the member of board of commissioners. We propose board diversity (gender,

accounting background education or certification, foreigner and age); and board compensation (percentage of

the commissioner’s compensations among the company’s net income before tax); will affect the firm’s value

(Tobin’s Q). The study employs regression analysis to investigate the empirical data. The result proved the

board of commissioners’ gender and age did not increase firm’s value, meanwhile other indicators as

accounting background education or certification and foreigner did increase the firm’s value. We proved that

the board compensation did significantly increase the firm’s value.

1 INTRODUCTION

Firm value can provide maximum shareholder wealth

if the company's stock price keeps rising. That the

higher firm value of represent the wealthier of the

owner. Corporate governance is related to firm value,

the composition of the Board of Commissioners and

the Board of Directors is one of the key related to this

issue (Kusumastuti, Supatmi, and Sastra, 2008).

Meanwhile, Indonesia regulation and laws require the

company having two Boards on the organizational

structure of the company that is the Board of

Commissioners and the Board of Directors. The

Board of Commissioners may affect the firm value

since they have an active role in strategic and

financial decision-making, such as mergers and the

acquisitions of changes in capital structure,

appointments and dismissal of Directors in

accordance with POJK No. 33 of 2014 Article 7.

One of the keys to create a good corporate

governance by diversifying the Board of

Commissioners, Board diversity can be based on

different educational backgrounds, gender, race, age

and group, which believed that it will lead to the more

heterogeneous and solid Board of Commissioners.

The greater the diversity of members of the Board of

Commissioners can lead to more conflict, but the

difference is a strength that will provide an alternative

solution to diverse problems (Tuggle, Schnatterly,

and Johnson, 2010).

The phenomenon that occurs in Indonesia is the

implementation of ASEAN Economic Community

(AEC), which will affect the employment

opportunities in every ASEAN countries, Rahmawan

(2016). In addition, Rini Soemarno as Minister of

State-Owned Enterprises (SOEs) said that, there is a

discourse, which says the foreigners may allow to sit

in strategic positions and top executives in State-

Owned Enterprises (SOEs), Sindonews.

Continuing with the phenomenon of board

diversity in Indonesia, gender equality is an

interesting and never-ending issue. A research

conducted by the Center for Governance, Institution

and Organization (CGIO) National University of

Singapore Business School (NUS) shows that, of 424

companies listed in the IDX only 40% have women

members of the Board of Directors or

Commissioners. The results of the study prove that

the Board of Commissioners of companies led by

women or has women as a member, significantly tend

to take a stand for the stakeholders’ interest and also

have the ability to cooperate and collaborate and can

470

Khairani, N. and Harahap, D.

Corporate Governance and Firms Value: From the Board Diversity and Board Compensation Perspective - Empirical Studies on Listed Companies in The Indonesian Stock Exchanges.

In Proceedings of the 2nd International Conference on Economic Education and Entrepreneurship (ICEEE 2017), pages 470-478

ISBN: 978-989-758-308-7

build consensus that is considered effective to make

the right decision (Keller and Price, 2011).

The development of globalization not only

encourages the movement of capital and investment

flows to various parts of the world but also the

migration of the population or the movement of labor

between countries. The movement of labor takes

place because investments made in other countries

generally require direct supervision by the

owner/investor. Based on survey by Bank Indonesia

in 2009 the majority of foreign workers in Indonesia

have undergraduate education background (62.4%)

and Master/S2 (25.8%).This corresponds to the data

which indicates that most of the foreign workers in

Indonesia occupy the position of professionals and

technicians.

In Indonesia, 80% of members of the Board of

Commissioners are 40 years of age or older. In

accordance with Barker III and Mueller (2002) study

that the company prefers the Board of Commissioners

by the age of 40 years or more, the older the Board of

Commissioners, the greater the tendency to have

more experiences and practices, which can be

attributed to skill-based competencies (Reed and

DeFillippi, 1990).

Board compensation or remuneration is the

reward given by the company to the individual as a

consideration; the rewards can be salary, wages,

bonuses, incentives or other benefits. The board

compensation is expected to be a controlling

mechanism of manager's deviant behavior, in this

context is Board of Commissioners. If the

performance of the Board of Commissioners is good,

it is expected that the firm's value will also improve.

Board compensation covers all forms of awards,

whether financial or nonfinancial (Ittner, Larcker, and

Meyer, 2003).

Based on the description above, the problem

identification are:

 How does board diversity affect to the firm

value?

 How does board compensation affect to the firm

value?

 How does the board diversity and board

compensation simultaneously affect to the firm

value?

Therefore, this study aims to:

 To analyze and find empirical evidence

regarding the influence of board diversity in the

Board of Commissioners on the firm value,

 To analyze and find empirical evidence on the

influence of board compensation in the Board of

Commissioners on the firm value, and

 To analyze and find empirical evidence

regarding the influence of board diversity and

board compensation in the Board of

Commissioners that simultaneously affect to the

firm value.

2 LITERATURE REVIEW

Signalling theory is a theory related to the delivery of

positive or negative signals by company management

to the capital market. The Company submits and

publishes information of the company’s performance

to the capital market to reduce information

asymmetry and also expects the market to respond the

information as a good or bad signal. Based on

signalling theory, the existence of women, the

existence of foreign citizens, different educational

background and level of independence will give a

positive signal that the company has practiced a good

corporate governance (Wijaya and Suprasto, 2015).

The underlying assumption that board diversity

and board compensation can influence the firm value

can be traced in resource dependence theory. This

theory argues that in order to survive the company

must obtain competent resources. In line with the

arguments of some researchers explaining that

organizations are externally dependent on resources

(Salancik and Pfeffer, 1978).

According to agency theory, one of the

responsibilities of the BOC to satisfy the important

role of monitoring executive management actions, to

ensure efficiency and protect the interests of

stakeholders (Carter, Simkins and Simpsons, 2003).

2.1 Board Diversity

Kusumastuti, Supatmi, and Sastra (2008) has

conducted previous research examined the

relationship between board diversity to firm value, by

focusing the research on the Board of Directors,

because the Board of Directors has a direct

relationship and role to the firm value which

represented by shareholders. The study examined

demographic diversity (gender, race, age). Gender

issues become an important issue especially in

European countries and the United States. Another

study conducted by Carter, Simkins and Simpsons

(2003) indicates that his research is not only from the

point of view of the proportion of women and

minorities, but also analyzed citizenship status,

formal education background, age and compensation

of the Board of Commissioners. There are three

empirical evidence related to board diversity, first,

Corporate Governance and Firms Value: From the Board Diversity and Board Compensation Perspective - Empirical Studies on Listed

Companies in The Indonesian Stock Exchanges

471

diversification can enhance creativity and innovation.

Second, diversification provides an effective solution

to problem solving. Heterogeneity in councils can

lead to more conflict, but is an alternative solution to

a problem and can lead to accuracy in assessing the

possible consequences of alternatives taken. Third,

the spread can increase effectiveness in the leadership

of the company.

: Board Diversity affects Firm Value

2.1.1 The existence of Women on the Board

of Commissioners

The presence of women in top management positions

is one of the indicators of Good Corporate

Governance in some countries around the world. This

is in accordance with the increasing number of female

Board of Commissioners in several countries in the

world, such as North America, Australia and some

European countries which shows that the presence of

women in commissioner positions will have a higher

Return on Equity (ROE), higher book value or

markets and improved growth rates (Suisse, 2012).

Some arguments also support the proposition that

greater diversity, providing the possibility of bringing

benefits to the firm for various reasons. Women are

considered to have a "feeling" with a cognitive style

that focuses on harmony (

Hurst, Rush, and White, 1989)

and the ability to facilitate the spread information

(Earley and Mosakowski, 2000). They are also

considered "tough" because they have to face various

challenges before taking up positions as Board of

Commissioners so that they gain great appreciation

from the environment if they hold the position

(Krishnan and Park, 2005). Related research on the

positive impact with presence of women in top

executive positions was also conducted by Keller and

Price (2011) which explains that 72% of board

members are aware that with the existence of gender

distribution in Board of Commissioners is associated

with improved corporate performance and firm value.

1.1

: The existence of Women in the Board of

Commissioners affects the Firm Value

2.1.2 The Existence of Foreign Citizens in

the Board of Commissioners

With increasing globalization, foreign investors have

the opportunity to buy larger shares in local

companies (Oxelheim and Randøy, 2003). This

occurs since many investors or foreign investors who

invest a lot in Indonesia. The impact is the migration

of the population or the movement of labor between

countries. Labor movement occurs because in general

foreign companies need experts who can provide

direct supervision. Therefore, companies with foreign

share ownership tend to have heterogeneous council

members, in the presence of foreign citizens to the

Board of Commissioners may provide a problem of

cross-cultural communication (Lehman and DuFrene,

2008) and interpersonal conflict. On the other hand,

ethnic diversity on the Board of Commissioners is

expected to bring a competitive advantage to the

company. In the case of developing countries, Ararat,

Aksu, and Tansel Cetin (2010) provides evidence that

the diversity of citizenship in the board of directors in

Turkey impacts on higher market to book ratio and

Tobin's Q.

1.2

: The existence of foreign citizens in the Board

of Commissioners affects the Firm Value

2.1.3 The Accounting Education

Background or Certification of Board

of Commissioner

Based on the code of good corporate governance, it is

important for the members of the Board of

Commissioners to have an educational background

which is relevant to the business activities. By having

business and or economic knowledge, Board

members will have better ability to manage the

business and make business decisions compared to

Board members who have no business and economy

knowledge, and this will affect the firm value

(Kusumastuti, Supatmi, and Sastra, 2008)

Tirtarahardja and La Sulo (2005), found that

"Education as labor preparation is defined as an

activity to guide learners to have a basic skill for

work". One of the components of diversity in the

Board of Commissioners is the educational

background. The roles of the Board of

Commissioners witch have educational background

and certification of accounting may affect the

business performance and firm value. Even though

the company still requires outside resources to

prepare the financial statements, by having members

of Board that understands accounting or business

which has accounting background or Accounting

certificate can understand and analyze the figures in

the company's financial statements, these Board

members will not be easy to manipulate or deceive by

unscrupulous parties that will harm the company by

falsifying the figures in the financial statements.

1.3

: Board of Commissioners’ Background

Accounting Education or Certification affect the

Firm Value.

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472

2.1.4 The Age of the Board of

Commissioners

Age may be considered a proxy for experience and

risk-taking levels, it also indicates that younger

members of the Board of Commissioners have a

tendency to perform risky strategies (Herrmann and

Datta, 2005). In addition, companies with younger

Board of Commissioners will experience higher

growth compared to their partners with the older

Board of Commissioners. This is understandable

because of the tendency to be risk averse (Barker III

and Mueller, 2002). Older BoCs in China have a

significant impact in some company measurement

proxies, such as Return on Assets (ROA), cumulative

returns and abnormal returns. Older Board members

tend to have more experience and practice (Reed and

DeFillippi, 1990).

The definition of young age for the Board of

Directors and Board of Commissioners is an age not

more than 60 years old at the time of taking the

position. However, since Indonesia has a different life

expectancy, the young age of the Board of

Commissioners is not more than 50 years.

1.4

: The age of the Board of Commissioners

affects the Firm Value

2.2 Board Compensation

Board compensation is the reward given by the

company to the individual as a consideration, in a

form of a salary, bonus, incentive or other allowance.

So far, the issue of board compensation is still

interesting to discuss. The main reason why board

compensation is rife is because the high

compensation received by the Board of

Commissioners is not in line with the company's

performance. Compensation itself has the purpose to

motivate members of the Board, especially the Board

of Commissioners in order to improve the company’s

performance. If the performance of the company

increases, the firm value will increase along with the

rising of shareholders’ wealthiest. However, in

reality, many of the Board of Commissioners are

highly compensated, but not accompanied by

improved performance of the company so that it can

cause problems and protests from related parties. The

compensations for members of the Board of

Commissioners expected to be a mechanism to

control the deviant behavior of members of the Board.

The managerial labor market will waive opportunities

for Board members who do not perform well and

behave strictly from the shareholders of the

companies they manage.

: Board compensation affects the Company Value

2.3 Firm Value (Tobin’s Q)

Firm Value or Enterprise Value is an economic

measurement that reflects the value of the company

as a whole. Firm value is one of the basic matrices on

business valuation, financial modelling, accounting,

portfolio analysis, and others. This value needs to be

measured to compare firms with different capital

structures. There are several ratios to measure the

market value of a company, one of which is Tobin's

Q. To measure firm value in this research Tobin's Q

ratio was used as proxies.

This ratio is a concept that shows the current

financial market estimates of the return value of every

investment dollar. The ratio derived from Market

Value Equity, which is earned by multiplying the

number of shares outstanding by the closing price of

the shares, multiplied to Total Debt, and then divided

by Total Assets. If Tobin's Q above one indicates that

an investment in an asset produces a profit that gives

a higher value than investment expenditure (Putri,

2015). Thus, the greater the value of Tobin's Q

indicates that the company has a good growth

prospect. This occurs because the greater the market

value of the firm's asset compared to the book value

of the firm's assets, the greater the willingness of the

investor to issue more sacrifices to own the company,

on the other hand if Tobin's Q ratio is below one, the

investment is not attractive. The greater the value of

Tobin's Q ratio can indicate that the company has

good growth prospects and has a large intangible

asset.

This ratio is considered to provide the best

information, since Tobin's Q included all elements of

debt and equity capital of the company, not only

ordinary shares and the company's equity is included

but the entire asset of the company. By taking into

account all the assets of the company, it means that

the company is not only focused on one type of

investor, such as equity investor, but also to the

creditor. The source of the company's operational

financing is not only from equity but also from loans

(Darmadi, 2010;2011).

3 METHODS

3.1 Data Collection Methods

Secondary data was used in this research. The data

used are data in the company's annual report and other

Corporate Governance and Firms Value: From the Board Diversity and Board Compensation Perspective - Empirical Studies on Listed

Companies in The Indonesian Stock Exchanges

473

information that can be accessed publicly. While

financial data for the purpose of calculating Tobin's

Q can be collected from The Indonesian Stock

Exchange’s (IDX) website in 2013 and 2014. Data

collection methods are literature research and

documentation.

The population in this study is 463 companies

which listed in IDX in 2013 and 2014. The sample

used is 216 based on certain research criteria.

3.2 Operationalization of Variable

Variables used in this study, consisting of

independent variables, and the dependent variable.

The independent variables in this research are board

diversity and board compensation. Dependent

variable in this research is firm value.

Table 1: Operationalization of variable.

Variable

Notation

Scale

Board Diversity (X

)

Women's Directors (X

1.1

)

WOM

Ratio

Foreign Citizenship (X.

1.2

)

FRGN

Ratio

Accounting Graduates or

Accounting Certification

(X.

1.3

)

ACC

Ratio

Age (X.

1.4

) AGE Average

Board Compensation

)

COMP

Ratio

Firm Value (Tobin’s Q) (Y)

TOBIN

Control Variable

Board size

BSIZE

Ratio

Firm Size

FSIZE

Ratio

3.3 Hypothesis Testing

The design of hypothesis testing is done to test and

prove the variables in this study. The hypothesis to be

tested in this study relates to the presence or absence

of the influence independent variables (X1 and X2)

on the dependent variable (Y).

Partial Hypothesis

: β1 ≥0 There is no significant effect of

board diversity on firm value.

: β1 < 0 There is a significant effect of

board diversity on firm value

: β2 ≥ 0 There is no significant effect of

board compensation on firm value.

: β2 < 0 There is a significant effect of

board compensation on firm value.

Simultaneously Hypothesis

: β1=β2=β3= 0 There is no

significant effect

of board diversity

and board

compensation on

firm value.

: There is at least one β ≠ 0 There is a

significant effect

of board diversity

and board

compensation on

firm value.

3.4 Data Analysis Method

This research uses multiple regression analysis, to test

whether board diversity and board compensation as

independent variable have effect on dependent

variable that is firm value. Multiple regression

models in this research are as follows:

Y = 3,306 – 10,662X1.1 + 0,946X1.2 + 9,872X1.3 –

0,053X1.4 + 0,518X2

Information:

Y = Firm Value

Β1 = Coefficient of regression of board diversity

Β2 = Regression coefficient of board compensation

Β3 = Company value regression coefficient

X1 = Board diversity

X2 = Board compensation

E = Error Term

4 RESULTS AND DISCUSSION

4.1 Descriptive Analysis

4.1.1 Descriptive Analysis Board Diversity

4.1.1.1 Women's Directors

Table 2: An overview of the board of commissioners of

women in companies listed on IDX for the period 2013-

2014.

Year

Number of

Companies

Number of Board of

Commissioners

2013 81 37.5% 108 11.8%

2014 76 35.2% 103 11.2%

In 2013 there were 81 (37%) of 216 companies had

women member of the Board of Commissioners, and

total the women member of the Board of

Commissioners in 2013 are 108 (11.8%). In 2014

there are 76 (35%) of 216 companies had women

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474

member of the Board of Commissioners, and total the

women member of the Board of Commissioners in in

2014 are 103 (11.2%).

4.1.1.2 Foreign Citizenship

Table 3: Description of the board of commissioners of

foreign citizenship in companies listed on the stock

exchange period 2013-2014.

Year

Number of

Companies

Number of Board of

Commissioners

2013 63 29.2% 134 14.6%

2014 62 28.7% 139 15.2%

In 2013 there are 63 (29%) of 216 companies had

foreign members of Board of Commissioners, and the

number of foreign members in 2013 are 134 (14.6%).

In 2014 there are 62 (28%) of 216 companies had

foreign members of Board of Commissioners, and the

number of foreign members in 2014 are 139 (15.2).

4.1.1.3 Accounting Graduates or Accounting

Certification

Table 4: Description board of commissioners accounting

graduates or accounting certification in companies listed on

BEI period 2013 – 2014.

Year

Number of

Companies

Number of Board of

Commissioners

2013 74 34.3% 95 10.4%

2014 61 28.2% 75 8.2%

In 2013 there are 74 (34%) of 216 companies have

member of Board of Commissioners which has

accounting background education or accounting

certification, and the number of accounting graduates

or accounting certified members in 2013 are 95

(10.4%). In 2014 there are 61 (28%) of 216

companies have member of Board of Commissioners

which has accounting background education or

accounting certification, and the number of

accounting graduates or accounting certified

members in 2014 are 75 (8.2%).

4.1.1.4 Age

Table 5: The average age of the board of commissioners of

companies listed on IDX for the period 2013 – 2014.

Year

Average Age

Youngest

Age

Oldest Age

2013 57.7

32 84

2014 57.5

37 85

In 2013 the average age of the Board of

Commissioners of Companies Listed on IDX is 57.7

years old and in 2014 is 57.5 years old, it shows that

most of the Board of Commissioners are over than 50

years old.

4.1.2 Board Compensation

Table 6: Description of board compensation in companies

listed on BEI period 2013-2014.

Year

The Compensation Stated

in the Report

Average

Compensation

2013 137 63.43 12,079,114,327

2014 153 70.83 21,318,218,153

In 2013 there were only 137 (63,43%) companies that

disclose compensation for the Board of

Commissioners. There was an increasing number in

2014; there are 153 (70.83%) companies that disclose

compensation given to the Board of Commissioners.

The average value of compensation in 2013 is

Rp12.079.114.327 and increased by

Rp9.239.103.826 in 2014.

4.1.3 Firm Value (Tobin’s Q)

Table 7: Company value (Tobin’s q) on companies

registered on IDX for the period 2013 – 2014.

N Min Max Mean Std.

Deviation

Tobin’s Q

2013

216 0.34 36.5

2.0457 3.51744

Tobin’s Q

2014

216 0.32 32.0

1.9705 3.25167

4.2 Statistical Test Analysis

The coefficient of determination is a value that states

the influence of simultaneously independent

variables to the dependent variable. The independent

variables are WOM, FOREIGN, AGE, ACC, and

Corporate Governance and Firms Value: From the Board Diversity and Board Compensation Perspective - Empirical Studies on Listed

Companies in The Indonesian Stock Exchanges

475

COM, and the dependent variable is TOBIN (Y).

Using SPSS.21, the following outputs are obtained:

Table 8: Coefficient of determination (KD).

Model Summary

Model R

Square

Adjusted

Square

Std.

Error of

the

Estimate

Durbin-

Watson

1 0.689

0.488 0.482 2.401013 1.708

a. Predictors: (Constant), WOM, FRGN, ACC, AGE,

COMP

b. Dependent Variable: TOBIN

The table 8 shows that the coefficient of

determination or R-square is 0.488 or 48.8%. This

indicates that 48.8% of TOBIN Q were effected by

WOM, FRGN, ACC, AGE, and COMP

simultaneously. Where the rest is influenced by other

variables not examined in this study.

4.3 Partial Hypothesis Test (T Test)

By using SPSS.21, partial test results as follows:

Table 9: Partial hypothesis (Test T).

Coefficients

Model

Unstandardized

Coefficients

Standardized

Coefficients

t sig

Std.

Error

Beta

constant

3.306 0.458 7.222 .000

WOM -10.662 2.015 -0.691 -5.292 .000

FRGN 0.964 0.243 0.369 3.885 .000

ACC 9.872 0.846 0.493 11.676 .000

AGE -0.053 0.009 -0.459 -5.999 .000

COMP 0.518 0.045 0.410 11.504 .000

a. Dependent Variable: TOBIN

To draw conclusion on the test performed, the

calculated t-value will be compared to the t-table

value in the t distribution table. The test results

indicate that the t

value

of the WOM variable is -5.292

ttable

(-1.965), according to the hypothesis testing

criteria that H0 is rejected and H1 is accepted. This

means, partially WOM have a significant effect on

TOBIN. The t

value

of FRGN variable is 3.885>t

table

(1.965), according to the hypothesis testing criteria

that H0 is rejected and H1 accepted. This means,

partially FRGN have a significant effect on TOBIN.

The t

value

of ACC variable is 11.676>t

table

(1.965),

according with the hypothesis testing criteria that H0

is rejected and H1 is accepted. The t

value

of AGE

variable is –5.999<-t

table

(-1.965), according with the

hypothesis testing criteria that H0 is rejected and H1

is accepted. This means, partially AGE have a

significant effect on TOBIN. The t

value

of COM

variable is 11.504>t

table

(1.965), according to the

hypothesis testing criteria that H0 is rejected and H1

is accepted. This means partially, COM have a

significant effect on TOBIN.

4.4 Research Discussion

4.4.1 The Influence of Board Diversity to

Firm Value

4.4.1.1 The Influence of Women Existence on

Proportion of Board of Commissioners to

Firm Value

The test results indicate that the proportion of female

members of the Board of Commissioners in the

composition of the Board of Commissioners has a

significant negative effect to firm value as measured

by Tobin's Q. The result confirms the previous

research conducted by Kusumastuti, Supatmi, and

Sastra (2008), Darmadi (2011). Negative correlations

indicate that the greater percentage of female

commissioner’s member will have an impact on the

declining value of the company.

However, the negative result is very low so there

are several approaches that can be used to explain

these negative findings. Firstly, most companies

analyzed in this research do not have female members

of the Board of Commissioners (11,8% in 2013 and

11,2%in 2014), thus affecting the low number of

women in the sample. Secondly, according to the

phenomenon raised, the companies listed in IDX

mostly are the family business and the existence of

women to the Board of Commissioners based on

family relationships with controlling shareholders,

not because of skills or experience.

4.4.1.2 The Influence of Foreign Citizenship on

Proportion of Board of Commissioners to

Firm Value

The test results indicate that the proportion of Board

of Commissioners member who is a foreign citizen

has positive and significant influence on firm value as

measured by Tobin's Q. The result is contrary with the

previous research conducted by Darmadi (2011),

Wijaya and Suprasto (2015) that showed negative

results. Positive correlation indicates that the greater

percentage of members of the Board of

Commissioners, who are foreigners, will have a

positive impact on the increase in firm value.

According to the phenomenon raised, the foreigners

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476

is considered more disciplined and detailed in solving

the problems.

4.4.1.3 The Influence of Members of Board of

Commissioners Having Accounting

Background or Accounting Certification

to Firm Value

The test results show that members of the Board of

Commissioners with an Accounting background or

Accounting Certification have a positive and

significant influence on the firm value as measured

by Tobin's Q. The results of this test is similar to the

hypothesis that was formed at the beginning of this

study, however different result has been drawn. A

positive correlation indicates that the greater

percentage of members of the Board of

Commissioners with an accounting background or

Accounting Certification will have an impact on the

increase in firm value.

According the phenomenon raised, every

company from cooperative to multinational company,

needs the accountant. Decision-making or company

policy is highly dependent on information provided

by an accountant.

4.4.1.4 The Influence of the Age of the Board of

Commissioners on Firm Value

The test results indicate that the age group of

members of the Board of Commissioners has a

negative and significant influence on firm value as

measured by Tobin's Q. This results confirms the

previous research conducted by Kusumastuti,

Supatmi, and Sastra (2008), which provides results

that the age group of members of the Board of

Commissioners has no significant effect on

profitability ratios and corporate value.

Negative correlation indicates that the greater the

average age of the Board of Commissioners or the

older members of the board of commissioners, will

have an impact on the declining of firm value. Due to

the negative effect of old age on the firm value, it is

allegedly that the older a person, more health

problems are encountered, which in turn will lead to

decreased intellectual ability (Kusumastuti, Supatmi,

and Sastra, 2008). In Indonesia, there is a

phenomenon that the position of commissioner is also

held by the owner of the company or the controlling

shareholder who has entered the old age, which often

less attention and less effective monitoring frequency

for the development of the company.

4.4.2 The Influence of Board Compensation

to Firm Value

The test results show that the presence of board

compensation will give positive and significant

influence on the value of the company as measured

by Tobin's Q.

The test results support the predefined initial

hypothesis by Darmadi (2011). A positive correlation

indicates that the greater the board compensation

given to the Board of Commissioners will have an

impact on the firm value.

The results of this study support the assumption

that providing higher compensation to the Board of

Commissioners or the Board of Directors can

improve the performance of board members so as to

provide added value to the company. Thus, the

company should provide compensation equal to the

Board of Commissioners so that the board members

feel well appreciated so that their performance will

increase.

It can also be linked to the theory of motivation,

that every individual will be affected by a certain

motivation, in this context is earning a higher income.

4.4.3 The Influence Board Diversity and

Board Compensation Simultaneously

to Firm Value

The test results show that the existence of board

diversity and board compensation will give a

significant effect on the value of the company as

measured by Tobin's Q. The results of these tests

show that the board diversity to the firm value gives

a positive influence on the existence of members of

the Board of Commissioners who are foreigners and

accounting education background and accounting

certification. However, it negatively affects the

existence of female council members and the age

group of members of the Board of Commissioners.

Test results show that board compensation has a

positive and significant influence on firm value, and

simultaneously board diversity and board

compensation have a positive and significant affect to

firm value.

5 CONCLUSIONS

There is significant influence of board diversity on

company value on companies listed on IDX in 2013

and 2014. There is a negative and significant

influence on the existence of female members of the

Board of Commissioners on the firm value listed on

the IDX in 2013 and 2014. There is a positive and

Corporate Governance and Firms Value: From the Board Diversity and Board Compensation Perspective - Empirical Studies on Listed

Companies in The Indonesian Stock Exchanges

477

significant influence on the presence of members of

the Board of Commissioners who are foreigners

against the firm value listed on the IDX in 2013 and

2014. There is a positive and significant influence on

members of the Board of Commissioners with

accounting or accounting certification background on

the firm value listed on the IDX in 2013 and 2014.

There is a negative and significant influence on the

age group of members of the Board of

Commissioners on the firm value listed on the IDX in

2013 and 2014. There is a positive and significant

influence of the board compensation on the firm value

of the company on companies listed on the IDX in

2013 and 2014. Simultaneously, the board diversity

and board compensation have a positive and

significant influence on the firm value in companies

listed on the IDX in 2013 and 2014.

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