The Effect of Good Corporate Governance on Firm Value

Abstract

Theory of firm implies that shareholder wealth should continue to increase over time to the maximum However, the opposite can happen if we refer to agency theory. Based on agency theory, management will maximize its own wealth so that management will choose the use of principles and assumptions in accounting that suit their interests. Good corporate governance can be a way to protect the interests of shareholders as owners of the company. This study was conducted to re-examine the effect of good corporate governance on firm value by using purposive sampling method for companies that were ranked as the most trusted and trusted companies during 2017-2019. A total of 16 companies were observed for 3 years. The results of this study found that good corporate governance has no significant effect on firm value. This may occur because the intended external stakeholders in the capital market do not utilize information regarding good corporate governance as the main consideration in making short-term investment-related decisions.