Corporate scandals, leadership traits, and governance: insights from indonesian state owned enterprises (2021-2022)

Dedi Permana; Rien Agustin Fadjarenie

doi:10.29210/020244590

Corporate scandals, leadership traits, and governance: insights from indonesian state owned enterprises (2021-2022)

Dedi Permana

⁽¹⁾, Rien Agustin Fadjarenie ⁽²⁾,
(1) Universitas Mercu Buana

Indonesia
(2) Universitas Mercu Buana

Indonesia

Corresponding Author

DOI : https://doi.org/10.29210/020244590

Full Text:

Language : en

Abstract

The discourse on Good Corporate Governance (GCG) has increasingly become a focal point in the contemporary business landscape. State-Owned Enterprises (SOEs), as pivotal contributors to the Asian economy, continue to enhance their corporate governance frameworks to meet global standards. However, over the past few years, several Indonesian SOEs have been embroiled in corruption scandals and governance lapses, attracting substantial media scrutiny. This study investigates the impact of Corporate Scandals, Board Nationality, Industry Specialization, and CEO Narcissism on the enhancement of GCG Scores in Indonesian SOEs during the 2021-2022 period. Employing a quantitative research approach, secondary data were extracted from the annual reports of 143 Indonesian SOEs. Through purposive judgment sampling, 79 firms were selected for analysis. The study utilized multiple linear regression analysis via SPSS version 25 to examine the relationships among the variables. The empirical findings reveal that Corporate Scandals, Board Nationality, Industry Specialization, and CEO Narcissism collectively exert a significant influence on GCG Score improvements. Individually, each variable also demonstrates a substantial impact on governance enhancement. Notably, these four factors account for 67% of the variations in GCG Scores, suggesting that the remaining 33% is attributable to other determinants beyond the scope of this study. These results underscore the critical need for Indonesian SOEs to strengthen their governance mechanisms, mitigate unethical corporate practices, and cultivate leadership attributes that align with sound governance principles. Future research should explore additional variables influencing GCG performance to provide a more comprehensive understanding of corporate governance dynamics in emerging markets.

Keywords

Corporate Scandal ;Board Nationality;Industry Specialize;CEO Narcissism ;Good Corporate Governance

References

A. A. Zaid, M., Wang, M., Adib, M., Sahyouni, A., & T. F. Abuhijleh, S. (2020). Boardroom nationality and gender diversity: Implications for corporate sustainability performance. Journal of Cleaner Production, 251. https://doi.org/10.1016/j.jclepro.2019.119652

Ahn, J. S., Assaf, A. G., Josiassen, A., Baker, M. A., Lee, S., Kock, F., & Tsionas, M. G. (2020). Narcissistic CEOs and corporate social responsibility: Does the role of an outside board of directors matter? International Journal of Hospitality Management, 85. https://doi.org/10.1016/j.ijhm.2019.102350

Ainun, M. B., Tyasha, ) ;, & Sari, A. M. (2024). Ekombis Review-Jurnal Ilmiah Ekonomi dan Bisnis The Influence of CEO Characteristics on the Corporate Gov-ernance Index (CGI) with Corporate Secretary Characteristics as a Moderating Variable ARTICLE HISTORY. Ekombis Review: Jurnal Ilmiah Ekonomi Dan Bisnis, 12(1), 1027–1036. https://doi.org/10.37676/ekombis.v12i1

Aulia Fadilah, & Yuni Rosdiana. (2024). Pengaruh Environmental, Social dan Governance (ESG) Disclosure terhadap Kinerja Perusahaan. Bandung Conference Series: Accountancy, 4(1), 300–306. https://doi.org/10.29313/bcsa.v4i1.11584

Awolowo, Ifedapo Francis and Garrow, Nigel and Clark, Murray C. and Chan, Dora. (2018) Accounting Scandals: Beyond Corporate Governance. 9th Conference on Financial Markets and Corporate Governance (FMCG). http://dx.doi.org/10.2139/ssrn.3101057

Bansal, A., Samontaray, D. P., Aljalahma, A. K. A., & Khadim, D. T. (2023). Does the Board Influence the Bank’S Performance? an Islamic & Commercial Banking Experience. International Journal of Professional Business Review, 8(3), 1–17. https://doi.org/10.26668/businessreview/2023.v8i3.1080

Cecchetti, I., Allegrini, V. and Monteduro, F. (2018), "The Role of Boards of Directors in Transparency and Integrity in State-Owned Enterprises", Hybridity in the Governance and Delivery of Public Services (Studies in Public and Non-Profit Governance, Vol. 7), Emerald Publishing Limited, Leeds, pp. 53-87. https://doi.org/10.1108/S2051-663020180000007001

Cragun, O. R., Olsen, K. J., & Wright, P. M. (2020a). Making CEO Narcissism Research Great: A Review and Meta-Analysis of CEO Narcissism. Journal of Management, 46(6), 908–936. https://doi.org/10.1177/0149206319892678

Dmuchowski, P., Dmuchowski, W., Baczewska-Dąbrowska, A. H., & Gworek, B. (2023). Environmental, social, and governance (ESG) model; impacts and sustainable investment – Global trends and Poland’s perspective. Journal of Environmental Management, 329, 117023. https://doi.org/10.1016/J.JENVMAN.2022.117023

Del Giudice, A., & Rigamonti, S. (2020). Does audit improve the quality of ESG scores? Evidence from corporate misconduct. Sustainability (Switzerland), 12(14). https://doi.org/10.3390/su12145670

Fadillah Syahnur, O., & Elmi, F. (2023). Good Corporate Governance Principles act as Mediators of the Influence of Organizational Commitment, Leadership, and Organizational Culture on Employee Performance. International Journal of Indonesian Business Review , 2 (2), 2827–9840. https://doi.org/10.54099/ijibr.v2i2.720

Falah, LJ, & Mita, AF (2020). The Role of CEO Narcissism on ESG Disclosure in ASEAN-5 Countries. Journal of Accounting and Finance Research , 8 (2), 393–404. https://doi.org/10.17509/jrak.v8i2.26367

Ghozali, I. (2018). Multivariate Analysis Application with the IBM SPSS Program. 25 (S. Raharjo, Ed.; 1st ed., Vol. 1). Diponegoro University Publishing Agency.

Goyal, R., Kakabadse, N., & Kakabadse, A. (2019). Improving corporate governance with functional diversity on FTSE 350 boards: directors' perspective. Journal of Capital Markets Studies, 3(2), 113–136. https://doi.org/10.1108/jcms-09-2019-0044

Hatane, S. E., Wiyono, F., & Tarigan, J. (2020). Capital Structure and Board Characteristics in Firm Performances of Indonesian LQ45 Companies. The Indonesian Journal of Accounting Research, 23(2), 213 240. http://doi.org/10.33312/ijar.477

Iannuzzi, A. P., Dell’Atti, S., D’Apolito, E., & Galletta, S. (2023a). Nomination committee characteristics and exposure to environmental, social and governance (ESG). https://doi.org/10.1108/CG-03-2022-0119

Ismail, R. A., Zaki, O., & Abou-El-Sood, H. (2023). Executives' narcissism and decision making: reviewing 20 years of accounting literature. Journal of Humanities and Applied Social Sciences, 5(2),120–143. https://doi.org/10.1108/jhass-09-2022-0115

Kementerian Badan Usaha Milik Negara Republik Indonesia. (2023). Tata Kelola Kegiatan Korporasi BUMN. PER-2-MBU-03-2023.

Masriani, I., Setiawan, R., & Wibowo, W. (2022). Effect Of The Number Of Commissioners And Proportion Of Independent Commissioners On Public Company Performance. Eksis: Jurnal Riset Ekonomi Dan Bisnis, 17(1), 105–124. https://doi.org/10.26533/eksis.v17i1.988

Mauliddah, N., & Sari, T. A. M. (2023). Good Corporate Governance Dalam Memprediksi Profitabilitas Perusahaan Pertambangan Yang Go Public Di Indonesia. Equilibrium: Jurnal Ekonomi-Manajemen-Akuntansi, 18(1), 111. https://doi.org/10.30742/equilibrium.v18i2.2538

McLaughlin, C., Armstrong, S., Moustafa, M. W., & Elamer, A. A. (2021). Audit committee diversity and

corporate scandals: evidence from the UK. International Journal of Accounting & Information Management, 29(5), 734–763. https://doi.org/10.1108/IJAIM-01-2021-0024

Mohamed, Tailab., Nourhene, BenYoussef., Jihad, Al-Okaily. (2023). Firm performance as a mediator of the relationship between CEO narcissism and positive rhetorical tone. Journal of Financial Reporting and Accounting. https://doi.org/10.1108/JFRA-06-2022-0224

Munthe, D. E. B., Erwin, K., & Yuliati, T. (2024). The Influence of Corporate Governance and Leverage on The Integrity of Financial Statements with Firm Size as a Moderation Variable. International Journal of Research and Review, 11(1), 598–609. https://doi.org/10.52403/ijrr.20240167

Nguyen, Q., Kim, M. H., & Ali, S. (2023). Corporate governance and earnings management: Evidence from Vietnamese listed firms. International Review of Economics and Finance, 89, 775–801. https://doi.org/10.1016/j.iref.2023.07.084

Nguyen, L. T. M., & Nguyen, P. T. (2023). The board profiles that promote environmental, social, and governance disclosure–Evidence from S&P 500 firms. Finance Research Letters, 55. https://doi.org/10.1016/j.frl.2023.103925

OECD (2023), G20/OECD Principles of Corporate Governance 2023, OECD Publishing, Paris, https://doi.org/10.1787/ed750b30-en.

Onguka, D., Iraya, C. M., & Nyamute, W. L. (2021). Corporate governance, capital structure, ownership

structure, and corporate value of companies listed At the Nairobi Securities Exchange. European Scientific

Journal, 17(15), 300–334. https://doi.org/10.19044/esj.2021.v17n15p300

Oyugi, F. O., Iraya, C., Onsomu, Z., & Odock, S. (2024). The Intervening Influence of Internal Controls on the Relationship Between Board Practices and Performance of Government Owned Entities in Kenya. Journal of Applied Business and Economics, 26(1), 10–18. https://doi.org/10.33423/jabe.v26i1.6807

Riera, M., & Iborra, M. (2023). Looking at the darker side of the mirror: the impact of CEO's narcissism on corporate social irresponsibility. European Journal of Management and Business Economics. https://doi.org/10.1108/EJMBE-09-2022-0289

Sugianingrat, I. A. P. W. (2021). Minimizing Fraudulent Behavior Through Trikaya Parisudha Based Leadership and Good Corporate Governance. Matrik: Jurnal Manajemen, Strategi Bisnis Dan Kewirausahaan, 15(1), 123-136. https://doi.org/10.24843/MATRIK:JMBK.2021.v15.i01.p11

Sun, X., Cifuentes-Faura, J., Xiao, Y., & Liu, X. (2024). A good name is rather to be chosen: The impact of CEO reputation incentives on corporate green innovation. Business Strategy and the Environment, 33(3), 2413–2431. https://doi.org/https://doi.org/10.1002/bse.3607

Suryadi, S., & Fadjarenie, A. (2022). The Effect of Board of Directors Narcism, The Board of Directors' Bonus Scheme, And The Ceo's Duality on Financial Reporting Quality. Journal Research of Social, Science, Economics, and Management, 2 (03),249–259. https://doi.org/10.36418/jrssem.v2i03.262

Sutawikara, A. T., Mulyani, S., Azis, Y., & Farida, I. (2021). The Effect of Ethical Leadership on Performance

with GCG as an Intervening Variable (study on fertilizer distributors in Indonesia). Academy of Strategic

Management Journal, 20, 1–10.

Tibiletti V, Marchini PL, Furlotti K, Medioli A. (2021). Does corporate governance matter in corporate social responsibility disclosure? Evidence from Italy in the "era of sustainability". Corp Soc Responsib Environ Manag. 28: 896-907. https://doi.org/10.1002/csr.2097

Uwuigbe, O. R., Olorunshe, O., Uwuigbe, U., Ozordi, E., Asiriuwa, O., Asaolu, T., & Erin, O. (2020, September). Corporate governance and financial statement fraud among listed firms in Nigeria. In IOP conference series: earth and environmental science (Vol. 331, No. 1, p. 012055). IOP Publishing. https://iopscience.iop.org/article/10.1088/1755-1315/331/1/012055/pdf

Zhang, J. (2018). Public Governance and Corporate Fraud: Evidence from the Recent Anti-corruption Campaign in China. J Bus Ethics 148,375–396. https://doi.org/10.1007/s10551-016-3025-x

Article Metrics

Abstract Views : 170 times

PDF Downloaded : 0 times

Refbacks

There are currently no refbacks.