Corporate performance and executive compensation in Indonesia

Abstract

The performance of a company can be determined by several factors like corporate governance and risk management. Adequate corporate governance will create a good corporate climate that makes company able to achieve its maximize profits. The purpose of this study is to examine the influence of the size of audit committees, audit committee expertise, institutional ownership, corporate performance and its impact on executive compensation. This study uses purposive sampling method. The research sample is 86 of manufacturing companies listed on the Indonesian Stock Exchange from 2013 to 2015. Data analysis method used structural equation modeling (SEM) with WarpPLS 6. The results showed that the number of audit committee personnel and audit committee's expertise had no effect on company performance. However, institutional ownership affects the performance of the company. Furthermore, company performance does not contribute significantly to executive compensation. This study is useful for corporate internal system and gives policy makers a better understanding of corporate performance from management perspective. Furthermore, this paper contributes to the literature by identifying the role of audit committee characteristics, institusional ownership, and executive compensation in company performance.