Corporate Governance and Profitability: The Role of Cost of Capital as Mediation

Eka Febiyanti, Hersugondo Hersugondo

Abstract


This study aims to analyze the effect of internal corporate governance mechanisms with the cost of capital as mediating variable and profitability as a dependent variable in companies listed on the Indonesia Stock Exchange during period 2015 to 2020. This study uses secondary data collected from Bloomberg's financial data and the company's annual report. A total of 807 companies as a population by sampling with purposive sampling method in order to obtain 300 companies from various sectors. The analysis method employs a structural equation model Structural Equation Modeling (SEM) based on the Partial Least Square (PLS). Based on hypothesis testing through the t-statistical test with a bootstrapping method, the results show that corporate governance has a positive relationship with profitability, and the cost of capital has a fully mediating role in the relationship between corporate governance and profitability.


Keywords


Corporate governance, profitability, cost of capital, growth

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References


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DOI: https://doi.org/10.26905/jkdp.v26i2.7548

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Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

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