Impact of board of directors on financial performance and the existence of risk management as an intervening variable

Abstract

This study investigates the effect of the board of directors on financial performance, either directly or indirectly through the existence of risk management in Indonesia.This study presents empirical investigation of 31 nonfinancial Indonesia listed companies from 2010 to 2016. This study utilizes the Structural Equation Modeling (SEM) model. The results of the SEM model find that there is a significant positive effect of the existence of risk management and the tenure-Chief Executive Officer (CEO) on financial performance. However, CEO duality has a significant negative effect on financial performance. The results also find that the effect of CEO duality and board size are significant positive on financial performance through the existence of risk management. It is one of the first papers to investigate the effect of board of directors and financial performance, either directly or indirectly through the existence of risk management in Indonesia.