Title: The Mediating Role of Growth Opportunity in Good Corporate Governance-Stock Return Relationship
Authors: Rakha Wardhana, Bambang Tjahjadi, Yani Permatasari
Affiliations: Faculty of Economics and Business, Universitas Airlangga , Indonesia
Publisher: Investment Management and Financial Innovations Business Perspectives
Abstract
Improving the welfare of its owner or shareholder and maximizing shareholder value through increasing firm's value should be one of the goals in establishing a company. As a result, it becomes essential for the company to continue to increase its value in order to retain the trust of its shareholders, for example by conducting good corporate governance (GCG). On the other hand, from the owner's point of view, it is important to not only evaluate the corporate governance, but also to take a look at the firm's growth opportunity, because it basically reflects the management's productivity. Studies related to the influence of corporate governance on stock returns have been extensively carried out before. Similarly, this research is related to the influence of growth opportunity on stock returns. However, it is still difficult to find studies that combine these three variables, therefore this study aims to know the influence of good corporate governance on stock returns directly and indirectly through the firm's growth opportunity by using sample data of 92 observations Corporate Governance Perception index lists in Indonesia Stock Exchange for 2010–2014. The analysis method of this research is the quantitative approach by hypothesis testing through path analysis performed with SmartPLS 3.0. The direct hypothesis results showed that: (1) good corporate governance did not have a significant influence on the firm's growth opportunity while; (2) it also had a negative influence and did not have a significant influence on stock returns, and (3) the firm's growth opportunity had a significant influence on stock returns. However, the indirect hypothesis results show that the firm's growth opportunity could not mediate the relationship between good corporate governance and stock returns.
Keywords: corporate governance, stock returns, growth opportunity
