ANALYSIS OF THE EFFECT OF COMPANY SIZE, AGE, GOVERNANCE, AND OPERATING COSTS ON THE FINANCIAL PERFORMANCE OF FINANCING COMPANIES IN INDONESIA
Main Article Content
Budiyono
Harjum Muharram
Conventional finance companies are an important part of the non-bank financial industry in Indonesia, which functions in financing investment, working capital, and public consumption. As a financial institution that supports national economic growth, its financial performance needs to be continuously analyzed and improved. This study aims to examine the effect of company size, company age, corporate governance, and operating costs on the financial performance of conventional finance companies in Indonesia. The method used in this study is a quantitative method using secondary data obtained from the annual financial reports of conventional financing companies registered with the Financial Services Authority (OJK) for the period 2019–2023. From a population of 179, 141 financing companies met the purposive sampling criteria, resulting in a total of 705 observations. After outlier trimming was carried out because there were indications of normality and heteroscedasticity problems, the final data analyzed were 495 observations. The analysis was carried out with SPSS 26.00 software using the multiple regression analysis method. The results of the study indicate that company size has a positive and significant effect on financial performance (ROA) (sig. 0.000; t-stat 3.713), company age has a significant positive effect on financial performance (ROA) (sig. 0.003; t-stat 2.953), corporate governance has a significant positive effect on ROA (sig. 0.007; t-stat 2.690), and operating costs have a negative effect on financial performance (ROA) (sig. 0.068; t-stat -1.832). The coefficient of determination (R² square) value of 0.109 indicates that the independent variables are able to explain 10.9% of the variation in financial performance of finance companies proxied by ROA. The implications of this study emphasize the importance for finance companies to expand their company scale and control operating costs strictly in order to improve financial performance. This study also opens up opportunities for further research to expand the scope of other factors, such as external macroeconomic factors that can affect the financial performance of finance companies in the future
Abubakar, A. M., Chauhan, A., & Mutalib, H. A. (2022). Corporate governance mechanisms and financial performance: Evidence from emerging economies. Corporate Governance: The International Journal of Business in Society, 22(4), 714–732. https://doi.org/10.1108/CG-02-2021-0052
Aebi, V., Sabato, G., & Schmid, M. (2021). Risk management, corporate governance, and bank performance in the financial crisis. Journal of Banking & Finance, 52, 1–22. https://doi.org/10.1016/j.jbankfin.2014.07.002
Ahmed, E. R., & Nasr, M. A. (2020). Board size, corporate governance and firm performance: Evidence from Egyptian SMEs. Academy of Accounting and Financial Studies Journal, 24(3), 1–10.
Ahmed, S., & Wang, M. (2020). Firm size and profitability: Evidence from Chinese manufacturing SMEs. International Journal of Financial Research, 11(3), 27–36. https://doi.org/10.5430/ijfr.v11n3p27
Alabdullah, T. T. Y. (2021). Corporate governance and firm performance: Recent developments and future directions. Corporate Governance and Organizational Behavior Review, 5(2), 24–34.
Al-Homaidi, E. A., Tabash, M. I., Farhan, N. H. S., & Almaqtari, F. A. (2020). The effect of firm characteristics on profitability: Evidence from listed firms in emerging market. International Journal of Business and Management, 15(3), 25–38. https://doi.org/10.5539/ijbm.v15n3p25
Almajali, A. Y., Alamro, S. A., & Al-Soub, Y. Z. (2012). Factors affecting the financial performance of Jordanian insurance companies listed at Amman stock exchange. Journal of Management Research, 4(2), 266–289.
Al-shami, S. A., Damayanti, R., Adil, H., Farhi, F., & Al mamun, A. (2024). Financial and digital financial literacy through social media use towards financial inclusion among batik small enterprises in Indonesia. Heliyon, 10(15), e34902. https://doi.org/10.1016/j.heliyon.2024.e34902
Al-Matari, Y. A., Al-Swidi, A. K., & Fadzil, F. H. B. (2022). Board characteristics and firm performance: A review from the Gulf Cooperation Council countries. Journal of Accounting in Emerging Economies, 12(1), 1–23. https://doi.org/10.1108/JAEE-02-2020-0030
Al-Shattarat, B., Atawnah, A., Hussainey, K., & Al-Haddad, L. (2022). Board characteristics and firm performance: Evidence from MENA countries. International Journal of Accounting & Information Management, 30(3), 402–426. https://doi.org/10.1108/IJAIM-04-2021-0081
Aladwan, M. S. (2015). The Impact Of Bank Size On Profitability “An Empirical Study On Listed Jordanian Commercial Banks. European Scientific Journal, Vol. 11, N.
Bai, X., Cheng, L., & Iris, Ç. (2022). Data-driven financial and operational risk management: Empirical evidence from the global tramp shipping industry. Transportation Research Part E: Logistics and Transportation Review, 158(January). https://doi.org/10.1016/j.tre.2022.102617
Balasubramanian, S.A., Radhakrishna, G.S., Sridevi, P., & Natarajan, T. (2019). Modeling corporate financial distress using financial and non-financial variables: The case of Indian listed companies. International Journal of Law and Management, 61(3–4), 457–484. https://doi.org/10.1108/IJLMA-04-2018-0078
Brigham, E.F., & Houston, J.F. (2021). Fundamentals of Financial Management (16th ed.). Boston: Cengage Learning.
Bringas-Fernández, V., López-Gutiérrez, C., & Pérez, A. (2024). B-CORP certification and financial performance: A panel data analysis. Heliyon, 10(17). https://doi.org/10.1016/j.heliyon.2024.e36915
Buzgurescu, O.L.P., & Elena, N. (2020). Bankruptcy Risk Prediction in Assuring the Financial Performance of Romanian Industrial Companies. Contemporary Studies in Economic and Financial Analysis, 104, 19–28.
Ceylan, Isil Erem, Ceylan, Fatih, & Yapa, K. (2017). The Relationship between Bank Size and Profitability: An Investigation on Deposit Banks in Turkey. Global Issues In Social Sciences: Different Perspective-Multidisciplinary Approaches.
Ceylan, Isil Erem, Fatih, & Yapa, K. (2017). The Relationship between Bank Size and Profitability: An Investigation on Deposit Banks in Turkey. Global Issues In Social Sciences: Different Perspective-Multidisciplinary Approaches,.
Deloof, M. (2003). Does working capital management affect profitability of Belgian firms? Journal of Business Finance & Accounting, 30(3‐4), 573–588. https://doi.org/10.1111/1468-5957.00008
Elamer, A.A., Ntim, C.G., Abdou, H., & Pyke, C. (2020). Sharia supervisory boards, governance structures and operational risk disclosures: Evidence from Islamic banks in MENA countries. Global Finance Journal, 44, 100450. https://doi.org/10.1016/j.gfj.2019.100450
Ferilli, G. B., Altunbas, Y., Stefanelli, V., Palmieri, E., & Boscia, V. (2024). Fintech governance and performance: Implications for banking and financial stability. Research in International Business and Finance, 70(PB), 102349. https://doi.org/10.1016/j.ribaf.2024.102349
Gartia, U., Panda, A.K., Hegde, A., & Nanda, S. (2024). Environmental Social Governance and Financial Performance: A Symbiotic Relationship in Indian Manufacturing. Cleaner Production Letters, 100076.
Ghozali, I. (2016). Ghozali, Imam. 2016. Application of Multivariate Analysis with SPSS Program. Semarang: UNDIP Publishing Agency. Multivariate Analysis with SPSS Program.
Gopal, M., & Schnabl, P. (2020). The Rise of Finance Companies and FinTech Lenders in Small Business Lending. SSRN Electronic Journal, (March). https://doi.org/10.2139/ssrn.3600068
Growe, G., DeBruine, M., Lee, J. Y., & Tudon Maldonado, J. F. (2014b). The Profitability and Performance Measurement of US Regional Banks Using the Predictive Focus of the “Fundamental Analysis Research”", Advances in Management Accounting (Advances in Management Accounting. Emerald Group Publishing Limited, Bingley, pp. 189-237, 2014, Vol. 24.
Habib, AM (2023). Do business strategies and environmental, social, and governance (ESG) performance mitigate the likelihood of financial distress? A multiple mediation model. Heliyon, 9(7), e17847.
Hanifah, MS (2020). The Influence of Corporate Governance on Financial Performance of Islamic Banks in Indonesia. Diponegoro Journal of Accounting, Vol. 9, No.
Jensen and Meckling. (1976). Theory of the Firm: Management Behavior, Agency Cost and Ownership Structure. Journal of Financial Economics. Journal of Financial Economics., V.3, No. 4.
Kafetzopoulos, D. P., & Gotzamani, K. D. (2022). Operational efficiency and firm performance: Evidence from financial services in Europe. International Journal of Productivity and Performance Management, 71(1), 1–22. https://doi.org/10.1108/IJPPM-07-2020-0382
Khan, A., Muttakin, M.B., & Siddiqui, J. (2021). Corporate governance and corporate social responsibility disclosures: Evidence from an emerging economy. Journal of Business Ethics, 161(3), 789–810.
Khrawish, H. A. (2021). The determinants of commercial banks' profitability: Evidence from Jordan. International Journal of Academic Research in Accounting, Finance and Management Sciences, 11(1), 145–153.
Klapper, L.F., & Love, I. (2004). Corporate governance, investor protection, and performance in emerging markets. Journal of Corporate Finance, 10(5), 703–728. https://doi.org/10.1016/S0929-1199(03)00046-4
Krause, R., Semadeni, M., & Cannella, A. A. (2020). CEO Duality: A Review and Research Agenda. Journal of Management, 46(6), 1075–1099. https://doi.org/10.1177/0149206319893013
Lee, H., & Kim, M. (2020). Operational cost structure and firm performance in the financial Lee, J., & Kim, H. (2020). Operational efficiency and firm performance: Evidence from financial service companies. International Journal of Financial Studies, 8(3), 35. https://doi.org/10.3390/ijfs8030035
Lee, Y., & Kim, S. (2020). Operational efficiency and performance in financial firms. The North American Journal of Economics and Finance, 51, 101093. https://doi.org/10.1016/j.najef.2019.101093
Li, Y., & Lin, A. (2024). Assessing the impact of green finance on financial performance in Chinese eco-friendly enterprises. Heliyon, 10(7), e29075. https://doi.org/10.1016/j.heliyon.2024.e29075
Liu, F., Yu, Y., Fang, Y., Zhu, M., Shi, Y., & Xiao, S. (Simon). (2024). Lean strategy in SMEs: Inventory leanness, operational leanness, and financial performance. Asian Journal of Shipping and Logistics, 40(2), 109–117.
Maher, M., & Andersson, T. (1999). Corporate Governance: Effects on Firm Performance and Economic Growth. Electronic Journal.
Mohtar, Shahimi, & Noordin, M.A. (2018). Age: Does it Matter for Firms to Perform. International Journal of Academic Research in Business and Social Sciences, Vol. 4, no.
Mubeen, M., Han, D., Abbas, J., Hussain, I., & Ataul Haq, M. Z. (2020). Corporate social responsibility and firm performance: The mediating role of customer satisfaction and customer loyalty. Sustainability, 12(9), 4563. https://doi.org/10.3390/su12094563
Muhammad, M., & Ismail, N. (2022). Firm size and financial performance: Evidence from the manufacturing sector in Malaysia. International Journal of Academic Research in Business and Social Sciences, 12(1), 543–557.
Mutamimah, M., Cahyani, AD, & Putri, AR (2021). The effect of firm age and firm size on profitability: Evidence from Indonesia. Journal of Management Science, 9(3), 671–679. https://doi.org/10.23917/jim.v9i3.12856
Nguyen, H., Pham, C., Le, H., & Vo, D. (2021). The impact of firm size on performance: Evidence from Vietnamese listed firms. Cogent Economics & Finance, 9(1), 1911430.
Nunes, P. M., Serrasqueiro, Z., & Sequeira, J. M. (2009). Profitability of newly born, micro, small and medium-sized firms. Small Business Economics, 37(2), 103–122. https://doi.org/10.1007/s11187-009-9248-2
Pfeffer, J., & Salancik, G. R. (1978). The External Control of Organizations: A Resource Dependence Perspective. Harper and Row.
Raharjaputra, H. (2019). Financial Management and Accounting. Jakarta: Salemba Empat,.
Rayman-Bacchus, L., & Martinez, F. (2022). The syncretism of environmental and social responsibility with business economic performance. Management of Environmental Quality: An International Journal, 23(6),
Rwakihembo, T., Kusemererwa, C., & Nuwagaba, A. (2023). Firm Age and Financial Performance: The Firm Life-Cycle Theoretical Perspective of Private Limited Companies in Uganda.
Ruspandi Hasan and Rusdayanti Asma. (2016). Factors Affecting the Profitability of Finance Companies in Indonesia. Journal of Management Insights, Vol. 2, No. 1, 2016.
Sadiq, M., & Gebba, T.R. (2022). Financial performance, firm value, transparency and corporate governance. Evidence from family-owned businesses in UAE. Transnational Corporations Review, 14(3), 286–296. https://doi.org/10.1080/19186444.2021.1938496
Samosir, FC (2018). Effect of Cash Conversion Cycle, Firm Size, and Firm Age on Profitability. Journal of Applied Accounting and Taxation, Vol. 3, no.
Saona, P., Muro, L., San Martín, P., & Alvarado, N. (2020). Board structure and firm value: A comparative analysis between US and Chilean firms. International Review of Economics & Finance, 69, 708–729.
Serrasqueiro, Z., & Nunes, P. M. (2008). Performance and size: Empirical evidence from Portuguese SMEs. Small Business Economics, 31(2), 195–217. https://doi.org/10.1007/s11187-007-9092-8
Shara, MM, Ali, MH, & Rahman, RA (2022). The influence of firm age on financial performance: Empirical evidence from Bangladesh. Asian Journal of Economics, Business and Accounting, 22(6), 16–25.
Stinchcombe, A. L. (1965). Organizations and Social Structure. In J. G. March (Ed.), Handbook of Organizations. Chicago: Rand McNally.
Shereen MA, Khan S, Kazmi A, Bashir N, SR (2020). COVID-19 infection: Origin, transmission, and characteristics of human coronaviruses. J Adv Res., 24(April):
Sindhu, MI, Windijarto, Wong, WK, & Maswadi, L. (2024). Implications of corporate social responsibility on the financial and non-financial performance of the banking sector: A moderated and mediated mechanism. Heliyon, 10(9), e30557. https://doi.org/10.1016/j.heliyon.2024.e30557
Sjödin, D., Parida, V., & Kohtamäki, M. (2019). Relational governance strategies for advanced service provision: Multiple paths to superior financial performance in servitization. Journal of Business Research, 101(March), 906–915. https://doi.org/10.1016/j.jbusres.2019.02.042
Sugiyono. (2015). Educational Research Methods Quantitative, Qualitative, and R&D Approaches. Bandung: Alfabeta.
Sujanto, RY, Herrera, SGM, & Negash, YT (2024). Enhancing environmental sustainability in a Circular Waste Bioeconomy: A hierarchical framework driven by operational efficiency and agro-energy management. Cleaner and Circular Bioeconomy, 9(October), 100115. https://doi.org/10.1016/j.clcb.2024.100115
WTLau, E. (2014). "Empirical Test of A New Product Evolutionary Cycle. Journal of Product & Brand Management, Vol. 23 No.
Wang, Y., Chen, L., & Cui, M. (2024). What explains the operational efficiency of listed commercial banks in China? Evidence from a three-stage DEA-tobit modeling analysis. Heliyon, 10(13), e33716.
Wati, Peni Setiyo, Mulyadi, JMV, Rachbini, W. (2019). Determinants of Financial Performance with Size as Moderation. Ecodemica Journal, Vol. 3, No. 1, 2019.
Yang, C., & Jiang, X. (2021). Firm age and financial performance: Evidence from China's new third board market. Emerging Markets Finance and Trade, 57(1), 90–105. https://doi.org/10.1080/1540496X.2019.1695593
Yang, Y., Zhang, X., & Li, J. (2021). Digital transformation, operational cost efficiency and firm performance in the financial sector. Journal of Business Research, 134, 500–510. https://doi.org/10.1016/j.jbusres.2021.05.012
Yasser, QR, Mamun, AA, & Hook, M. (2021). Board characteristics and corporate financial performance: A meta-analytic review. Corporate Governance: The International Journal of Business in Society, 21(2), 230–245. https://doi.org/10.1108/CG-09-2019-0276
Yunfei, He. (2021). Board Structure, State Ownership, Firm Age and Corporate Performance in Crisis Evidence from China, Advances in Economics, Business and Management Research,. Atlantis Press, Vo. 178,.
