INVESTIGATING EFFECT OF APPOINTING BOARD OF COMMISSIONER MEMBER WITH MILITARY/POLICE BACKGROUND ON FIRM VALUE AND PEFORMANCE (Empirical Investigation on Indonesia Listed Coal Mining Company Year 2006 - 2016)

• Main Author: Rifa Wahyudi, Gian
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/41648
• Institution: Institut Teknologi Bandung

Minister of BUMN, Rini Soemarno, stated that people with military/police background are prioritized to be commissioner in business sectors that has high conflict potential, such as coal mining sector. Their existence could be a solution for social issue such as land acquisition and thuggery. Reasons behind the strategy are related to cost efficiency, which furtherly affects firm performance and firm value; since firm value is the main objective of board of commissioner. Since there are researches state that return on equity (ROE) has positive and significant effect on firm value, and ROE could explain overall key performances of the firm based on DuPont Identity, this research aims to investigate the effect of appointing commissioner with military/police background on firm value and performance, how several key performances affect firm value before and after the appointment, and what happens after selected coal mining companies appoint the commissioner with military/police background strategy. Firm value is measured by Tobin’s Q and firm performances are measured with net profit margin (NPM), total assets turnover (TATO), and equity multiplier (EM); as those 3 ratios able to explain firm performances based on DuPont Identity. This research uses purposive sampling on Indonesia public listed coal mining companies in IDX categorized in Jakarta Stock Industrial Classification (JASICA) with several criteria resulting 4 companies that meet the criteria. Financial data gathered from Indonesia Stock Exchange (IDX) and Indonesia Capital Market Directory (ICMD) within 2006 – 2016 period. Three years before and after the appointment financial data are analyzed by using difference test and panel regression as the main analysis method. The result of the research: 1) There is no significant difference of Tobin’s Q after the appointment; 2) There are changes of effect of performances on firm value: before the appointment, no independent variable partially has significant effect on firm value; after the appointment, NPM has positive significant effect on firm value. NPM, TATO, and EM simultaneously have positive significant effect in both before and after the appointment regression model. 4) There is no significant difference on Tobin’s Q after the appointment is caused by no significant difference found on NPM after the appointment, as the variable is the only independent variable that has significant effect on Tobin’s Q after the ii commissioner appointment. Even though there is significant difference on EM, this variable has no significant effect on firm value after the appointment. Keywords: board of commissioner, value, performance, coal mining, DuPont Identity