The Effect of Financial Performance on Company Value with Good Corporate Governance as a Moderation Variable

Abstract

Numerous studies demonstrate that financial performance has a significant impact on a company's value. The progress of science, however, revealed that Good Corporate Governance tends to have a significant effect in the value of organizations whose financial performance is influential. This study's objective is to examine the relationship between financial performance and the value of a company, with good corporate governance serving as a moderating variable. The observation period for this quantitative investigation was between 2017 and 2020. This study utilizes secondary data. Analytical instruments employing Descriptive Statistics, Inferential Statistics, Partial Least Square Model Analysis (PLS), Model – Outer Model Evaluation (Convergent Validity Test and Reliability Test), Model Evaluation – Inner Model, and Hypothesis test. Using Smart PLS, each variable is analyzed. This study is anticipated to provide information on the extent to which the function of Good Corporate Governance adds to the value of the company, among other things. The results of this research will be able to provide suggestions for how each firm could approach the application of Good Corporate Governance in its annual report. The results indicated that financial success had no meaningful impact on the company's worth. Good corporate governance cannot increase the correlation between a company's financial performance and its market value. This renders Good Corporate Governance incapable of balancing financial success and corporate value.