Analysis of the Effect of Governance and Research and Development on Probability of Default
Abstract
Research on the probability of default is always very interesting because it is related to the goals of companies that want to live on, this study aims to examine and analyze which variables are important in this study consisting of the audit committee and managerial ownership who are members of governance, as well as the R & D variables. In influencing the probability of default either directly or indirectly by using the mediating variable Current Ratio estimated results (CRh), to predict the probability of default. This study uses Multiple Discriminant Analysis (MDA) in determining the value of the default probability, while the estimation analysis uses two-stage regression. The regression estimation results conclude that the governance variable on the audit committee has no direct effect on the probability of default, while the CRh mediation becomes significant. The managerial ownership variable which is part of the governance variable has a significant effect both directly and indirectly through CRh mediation, as well as the R&D variable which also has a significant effect on the probability of default either directly or indirectly. This study produces a model in which CRh as a mediator can signal the probability of default on non-financial variables such as governance and R&D. The results of this study contribute to early detection of the probability of default of any non-financial variables that affect both governance and R&D. This model was developed to anticipate the occurrence of bankruptcy by detecting the probability of default by using non-financial variables with CRh as mediation which is supported by model tests with Hosmer-Lemeshow and ROC.
References
Altman, Edward I. ; Hotchkiss, E. (2006). Corporate Credit Scoring-insolvency Risk Models. In Corporate Financial Distress and Bankruptcy. John Wiley & Sons, Inc. https://doi.org/10.1002/9781118267806.ch11
Altman**, Edward I.; Haldeman, Robert G. ; Narayanan, P. (1977). ZETATM analysis A new model to identify bankruptcy risk of corporations. Journal of Banking and Finance, 1(1), 29–54. https://doi.org/10.1016/0378-4266(77)90017-6
Altman, E. I. (1968). Financial Ratios, Discriminant Analysis and Prediction of Corporate Bankruptcy. The Journal of Finance, 23(4), 589–609.
Beaver, W. H. (1966). of Failure Financial Ratios as Predictors. Journal of Accounting Research, 4(1966), 71–111. http://www.jstor.org/stable/2490171
Berk, Jonathan; DeMarzo, P. (2014). Corporate Finance (D. Battista (ed.); 3rd ed.). Pearson.
Bragoli, Daniela; Cortelezzi, Flavia; Giannoccolo, Pierpaolo; Marseguerra, G. (2019). R&D Investment timing, default and capital structure. Review of Quantitative Finance and Accounting, 0123456789. https://doi.org/10.1007/s11156-019-00807-6
Buchdadi, A. D., Oktafianto, E., & Mardiyati, U. (2018). Pengaruh R&D Expenditure Terhadap Firm Performance Pada Perusahaan Yang Terdaftar Di Bei Periode 2003-2015. JRMSI - Jurnal Riset Manajemen Sains Indonesia, 9(2), 337–351. https://doi.org/10.21009/jrmsi.009.2.09
Chen, M.-Y. (2011). Bankruptcy prediction in firms with statistical and intelligent techniques and a comparison of evolutionary computation approaches. Computers and Mathematics with Applications, 62(12), 4514–4524. https://doi.org/10.1016/j.camwa.2011.10.030
Cherkasova, V., & Kurlyanova, A. (2019). Does corporate R&D investment support to decrease of default probability of Asian firms? Borsa Istanbul Review, 19(4), 344–356. https://doi.org/10.1016/j.bir.2019.07.009
Ciampi, F. (2015). Corporate governance characteristics and default prediction modeling for small enterprises. An empirical analysis of Italian firms. Journal of Business Research, 68(5), 1012–1025. https://doi.org/10.1016/j.jbusres.2014.10.003
Damodaran, A. (2015). Applied Corporate Finance (J. Hollenbeck (ed.); 4th ed.). John Wiley & Sons, Inc.
Dance, Mesak; I Made, S. (2019). Financial Ratio Analysis in Predicting Financial Conditions Distress in Indonesia Stock Exchange. Russian Journal of Agricultural and Socio-Economic Sciences, 86(2), 155–165. https://doi.org/10.18551/rjoas.2019-02.18
Djohanputro, B. (2012). Manajemen Risiko Korporat Terintegrasi (S. F. Manalu (ed.)). PPM.
Ekananda, M. (2019). Ekonometrika Dasar (2nd ed.). Mitra Wacana Media.
Fernando, Jayasurya Mahapatabendige Ruwani; Li, Leon; Hou, G. (2019). Financial versus Non-Financial Information for Default Prediction: Evidence from Sri Lanka and the USA. Emerging Markets Finance and Trade, 00(00), 1–20. https://doi.org/10.1080/1540496X.2018.1545644
Fernando, J. M. R., Li, L., & Hou, Y. (Greg). (2018). Corporate governance and default prediction: a reality test. Applied Economics, 51(24), 2669–2686. https://doi.org/10.1080/00036846.2018.1558351
Hilaliya, T., & Margaretha, F. (2017). Peran Corporate Governance dalam Menurunkan Kebangkrutan pada Perusahaan di Indonesia. Jurnal Akuntansi, 21(3), 391. https://doi.org/10.24912/ja.v21i3.267
Hosmer, D. W., Lemeshow, S., & Sturdivant, R. X. (2013). Applied Logistic Regression: Third Edition. In Applied Logistic Regression: Third Edition. https://doi.org/10.1002/9781118548387
Hotchkiss, E. S. (1995). Postbankruptcy Performance and Management Turnover. The Journal of Finance, L(1), 3–21. http://www.jstor.org/stable/2962304 Accessed:
James, C. (1995). The Society for Financial Studies When Do Banks Take Equity in Debt Restructurings ? Author (s): Christopher James Source: The Review of Financial Studies, Vol. 8, No. 4 (Winter, 1995), pp. 1209-1234 Published by: Oxford University Press. Spo. 8(4), 1209–1234. http://www.jstor.org/stable/2962304 Accessed:
Kalyani, Sushil; Mathur, N. (2019). Does Corporate Governance Affect the Financial Performance and Quality of Financial Reporting of Companies ? A Study on Selected Indian Companies. Business Governance and Society, 105–125. https://doi.org/https://doi.org/10.1007/978-3-319-94613-9_7
Kumari, P., & Pattanayak, J. K. (2017). Linking earnings management practices and corporate governance system with the firm’s financial performance A study of Indian commercial banks. Journal of Financial Crime, 24(2), 223–241. https://doi.org/10.1108/JFC-03-2016-0020
Lakshan, A.M.I.; Wijekoon, W. M. H. N. (2012). Corporate governance and corporate failure. Procedia; Economics and Finance, 2nd Annual International Conference on Accounting and Finance (AF 2012), 2, 191–198. https://doi.org/10.1016/S2212-5671(12)00079-2
Latan, H. (2014). Aplikasi Analisis Data Statistik untuk Ilmu Sosial Sains dengan STATA (Kesatu). Bandung: Alfabeta.
Li, Huajing; Tang, J. (2017). Technological human capital, firm innovativeness, and entrepreneurial success: the moderating role of seeking and receiving external funding. World Review of Entrepreneurship, Management and Sustainable Development, 13(1). https://doi.org/DOI: 10.1504/WREMSD.2017.080761
Li, Y., & Wang, Y. (2018). Machine Learning Methods of Bankruptcy Prediction Using Accounting Ratios. Open Journal of Business and Management, 06(01), 1–20. https://doi.org/10.4236/ojbm.2018.61001
Liang, T., & Mo, X. (2017). Research on the Relationship between Managerial Overconfidence and Corporate R & D Investment in the Context of Financing Constraints. Open Journal of Business and Management, 05(01), 22–33. https://doi.org/10.4236/ojbm.2017.51003
Luqman, Rabia; Ul, M., Tabasum, S., & Khakwani, M. S. (2018). Probability of financial distress and proposed adoption of corporate governance structures: Evidence from Pakistan. Cogent Business & Management, 5(1), 1–14. https://doi.org/10.1080/23311975.2018.1492869
Martin, Pospisil; Jiri, S. (2019). Bankruptcy, Investment, and Financial Constraints. Working Paper, 8(5), 55.
Pemerintah, B. (2008). Menyelamatkan Industri dari Dampak Krisis (Issue 05). https://www.bappenas.go.id/files/2413/5027/3724/bab-2handbook-2009050509__20090518110628__1.pdf
Platt, Harlan D. ; Platt, M. B. (2002). Predicting corporate financial distress: Reflections on choice-based sample bias. Journal of Economics and Finance, 26(2), 184–199.
Saidat, Z., Silva, M., & Seaman, C. (2019). The relationship between corporate governance and financial performance: Evidence from Jordanian family and nonfamily firms. Journal of Family Business Management, 9(1), 54–78. https://doi.org/10.1108/JFBM-11-2017-0036
Sari, D. P. (2017). Ini Daftar Perusahaan Yang Pailit Sepanjang 2017. Bisnis.Com. https://kabar24.bisnis.com/read/20171228/16/721762/ini-daftar-perusahaan-yang-pailit-sepanjang-2017
Suhadak, S., Mangesti Rahayu, S., & Handayani, S. R. (2019). GCG, financial architecture on stock return, financial performance and corporate value. International Journal of Productivity and Performance Management. https://doi.org/10.1108/IJPPM-09-2017-0224
Widarjono, A. (2016). Ekonometrika Pengantar dan Aplikasinya (Keempat). UPP STIM YKPN.
Widhiadnyana, I. K., & Dwi Ratnadi, N. M. (2019). The impact of managerial ownership, institutional ownership, proportion of independent commissioner, and intellectual capital on financial distress. Journal of Economics, Business & Accountancy Ventura, 21(3), 351. https://doi.org/10.14414/jebav.v21i3.1233
Wruck, K. H. (1990). Financial distress, reorganization, and organizational efficiency. Journal of Financial Economics, 27(2), 419–444. https://doi.org/10.1016/0304-405X(90)90063-6
You, H., & Meng, Q. (2018). Research on the “Stickiness” Relationship between R & D and Profitablity of “Unicon” Company—Data Based on the AI Concept Stocks. Open Journal of Business and Management, 06(04), 938–943. https://doi.org/10.4236/ojbm.2018.64068
Zutter, Chad J.; Smart, S. B. (2019). Principles of Managerial Finance (C. Fenn (ed.); Fifteenth). Pearson.
Copyright (c) 2020 International Journal of Science and Society
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
.png)
.jpg)
.png)
.png)
.png)
.png)
1.png)
.jpg)
-modified.png)
-modified.png)
-modified.png)
