The role of corporate governance mechanisms, debt policy, profitability, and corporate social responsibility in strengthening company financial performance

Abstract

This research seeks to thoroughly examine the factors influencing the financial performance of firms listed on the SRI-KEHATI index of the Indonesia Stock Exchange from 2019 to 2023. This study employs a quantitative methodology utilizing the Ordinary Least Squares (OLS) technique to examine the impact of corporate governance mechanisms (specifically the presence of an audit committee and independent commissioners), profitability, corporate social responsibility (CSR) disclosure, and debt policy on financial performance of companies. The sample was chosen by purposive sampling to guarantee that the examined data aligned with the study's aims. The findings demonstrate that profitability, CSR disclosure, and debt policy have a favorable and substantial influence on firm financial performance. The presence of an audit committee has a substantial detrimental effect, while independent commissioners do not substantially influence financial performance. These results underscore the significance of agency theory, emphasizing the critical role of oversight measures and external openness in mitigating conflicts of interest between management and shareholders. In the realm of sustainability, these findings underscore the perspective that effective corporate governance and the incorporation of CSR initiatives transcend mere normative responsibilities. These techniques provide long-term methods for generating sustained economic benefit when executed correctly. This study's practical implications urge organizations to enhance internal supervision and strategically manage debt and CSR policies to foster responsibility and sustainably improve financial performance.