Corporate Governance and Financial Performance: The Moderating Role of Managerial Ownership

I Kadek Bagiana; Putu Pande R. Aprilyani Dewi; Made Denny Oktaryana; Putu Ayu Anggya Agustina

doi:10.38043/jiab.v11i1.7442

Authors

I Kadek Bagiana Universitas Mahasaraswati Denpasar, Indonesia
Putu Pande R. Aprilyani Dewi Universitas Pendidikan Nasional, Indonesia
Made Denny Oktaryana Politeknik Negeri Kupang, Indonesia
Putu Ayu Anggya Agustina Universitas Terbuka, Indonesia

DOI:

https://doi.org/10.38043/jiab.v11i1.7442

Keywords:

Asset Growth, Investment Opportunity Set, Managerial Ownership, Return on Assets

Abstract

This study investigates the role of managerial ownership as a primary internal governance mechanism in moderating the impact of growth dynamics on firm profitability within a capital-intensive industry. Focusing on Indonesian energy companies listed on the Indonesia Stock Exchange during 2022–2024, the study investigates the effects of the Investment Opportunity Set (IOS) and Asset Growth (AG) on financial performance (ROA) and tests Managerial Ownership (MOWN) as a moderating variable. Using a balanced panel of 39 firms (117 firm-year observations) and applying moderated regression analysis within a panel-data framework, the estimation indicates that IOS is negatively and significantly associated with ROA, suggesting that higher market-implied growth opportunities coincide with lower contemporaneous profitability in the sampled period. In contrast, AG shows a positive and significant effect on ROA, implying that realized asset expansion is, on average, associated with improved profitability. Managerial ownership does not exhibit a significant direct effect on ROA, however it plays a contingent role through interaction effects. Specifically, MOWN weakens the negative IOS–ROA relationship and dampens the positive AG–ROA relationship, indicating that managerial equity stakes condition how growth expectations and realized expansion translate into profitability. These findings extend agency-based insights on investment efficiency in high CAPEX settings and offer practical implications for boards and investors regarding the governance conditions under which growth becomes more or less profitable.

Downloads

Download data is not yet available.

References

Achmad, F. S. P., & Widoretno, A. A. (2025). Sustainability disclosure, governance, and financial performance in determining firm value. Jurnal Akademi Akuntansi, 8(4), 552-575. https://doi.org/10.22219/jaa.v8i4.42744

Al-Hiyari, A., Kolsi, M. C., Lutfi, A., & Shakkour, A. S. (2024). Information asymmetry and dividend payout in an emerging market: Does corporate governance quality matter?. Journal of open innovation: technology, market, and complexity, 10(1), 100188. https://doi.org/10.1016/j.joitmc.2023.100188

Amiraslani, H., Deller, C., Ittner, C. D., & Keusch, T. (2025). Board risk oversight and environmental and social performance. Journal of Accounting and Economics, 79(2-3), 101754. https://doi.org/10.1016/j.jacceco.2024.101754

Ararat, M., Claessens, S., & Yurtoglu, B. B. (2021). Corporate governance in emerging markets: A selective review and an agenda for future research. Emerging Markets Review, 48, 100767. https://doi.org/10.1016/j.ememar.2020.100767

Bhatta, B. (2025). Insider ownership and investment efficiency. International Journal of Finance & Economics, 1–17. https://doi.org/10.1002/ijfe.70084

Boshnak, H. A. (2024). Ownership concentration, managerial ownership, and firm performance in Saudi listed firms. International Journal of Disclosure and Governance, 21(3), 462-475. https://doi.org/10.1057/s41310-023-00209-0

Brigham, E. F., & Houston, J. F. (2022). Fundamentals of financial management (16th ed.). Cengage Learning.

Cheng, L. T., & Wang, J. W. (2021). Equity ownership and corporate transparency: International evidence. International Review of Economics & Finance, 76, 143-165. https://doi.org/10.1016/j.iref.2021.03.005

Cheng, P., Li, L., Tong, W. H., & Tsai, C. (2025). The intangible shift: Redefining the dynamics of market-to-book ratios. Journal of Corporate Finance, 102850. https://doi.org/10.1016/j.jcorpfin.2025.102850

Chiang, Y. M., & Chang, P. R. (2022). Overinvestment, ownership structure, and directors' and officers’ liability insurance. International review of economics & finance, 78, 38-50. https://doi.org/10.1016/j.iref.2021.11.002

Dang, T. H. N., Balli, F., Balli, H. O., & Nguyen, H. (2024). Firm productivity in the Energy-electricity sector over the last two decades with crisis: The role of cross-listing. Energy Economics, 130, 107309. https://doi.org/10.1016/j.eneco.2024.107309

Dorigoni, S., & Anzalone, G. A. (2024). Production of energy from renewable sources and financial performance of European utilities: A panel-data analysis. Energy Policy, 194, 114323. https://doi.org/10.1016/j.enpol.2024.114323

Duong, H. K., Wu, Y., Schiehll, E., & Yao, H. (2024). Environmental and social disclosure, managerial entrenchment, and investment efficiency. Journal of Contemporary Accounting & Economics, 20(3), 100435. https://doi.org/10.1016/j.jcae.2024.100435

Fathi, S., Mohammadin, Z., & Azarbayjani, K. (2025). Corporate finance signaling theory: an empirical analysis on the relationship between information asymmetry and the cost of equity capital. International Journal of Disclosure and Governance, 22(3), 629-643. https://doi.org/10.1057/s41310-024-00261-4

Field, A. (2018). Discovering statistics using IBM SPSS Statistics (5th ed.). SAGE.

Guthrie, G., & Hobbs, C. (2021). How managerial ownership and the market for corporate control can improve investment timing. Journal of Banking & Finance, 128, 106154. https://doi.org/10.1016/j.jbankfin.2021.106154

Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2019). Multivariate data analysis (8th ed.). Cengage.

International Energy Agency. (2023). Navigating Indonesia’s power system decarbonisation with the Indonesia Just Energy Transition Partnership. IEA.

International Energy Agency. (2024). World Energy Investment 2024. IEA.

Iwasaki, I., Ma, X., & Mizobata, S. (2022). Ownership structure and firm performance in emerging markets: A comparative meta-analysis of East European EU member states, Russia and China. Economic Systems, 46(2), 100945. https://doi.org/10.1016/j.ecosys.2022.100945

Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American economic review, 76(2), 323-329. https://www.jstor.org/stable/1818789

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X

Kashani, S. M., & Mousavi Shiri, M. (2022). The role of corporate governance in investment efficiency and financial information disclosure risk in companies listed on the Tehran stock exchange. Journal of risk and financial management, 15(12), 577. https://doi.org/10.3390/jrfm15120577

Komite Nasional Kebijakan Governance. (2021). Pedoman Umum Governansi Korporat Indonesia (PUGKI). KNKG.

Kong, Q., Li, R., Wang, Z., & Peng, D. (2022). Economic policy uncertainty and firm investment decisions: Dilemma or opportunity?. International Review of Financial Analysis, 83, 102301. https://doi.org/10.1016/j.irfa.2022.102301

Lubis, R. K., Darmadi, S., Pratiwi, T. A., Windara, P. F., Lutvian, S., & Firas, R. (2025). Managerial ownership as a corporate governance mechanism in shaping leverage decisions: insights from Indonesia. Cogent Business & Management, 12(1), 2473043. https://doi.org/10.1080/23311975.2025.2473043

Myers, S. C. (1977). Determinants of corporate borrowing. Journal of financial economics, 5(2), 147-175. https://doi.org/10.1016/0304-405X(77)90015-0

Natto, D., & Mokoaleli-Mokoteli, T. (2025). Short- and long-term impact of governance on firm performance in emerging and developed economies: A comparative analysis. International Journal of Disclosure and Governance, 22, 831–848. https://doi.org/10.1057/s41310-024-00271-2

Nyiwul, L., Hu, Z., Koirala, N. P., & Wasson, H. (2025). Economic uncertainty and renewable energy investment. International Economics and Economic Policy, 22(3), 48. https://doi.org/10.1007/s10368-025-00675-7

Organisation for Economic Co-operation and Development. (2023). G20/OECD principles of corporate governance 2023. OECD Publishing.

Organisation for Economic Co-operation and Development. (2025). OECD Corporate Governance Factbook 2025: Indonesia (Country Note). OECD Publishing.

Rizka, N. R., & Ulfida, D. (2024). Asset Growth and Firm Performance: The Moderating Role of Asset Utilization. BAJ: Behavioral Accounting Journal, 7(2), 88–105. https://doi.org/10.33005/baj.v7i2.352

Wang, J., & Zhu, S. (2025). Impact of economic policy uncertainty on corporate investment efficiency: Moderating roles of financing constraints and financialisation. International Review of Economics & Finance, 98, 103897. https://doi.org/10.1016/j.iref.2025.103897

World Bank. (2023). Indonesia’s electricity network: Strengthening and transforming for a better future. World Bank.

Xie, Z., Ali, H., Kumar, S., Naz, S., & Ahmed, U. (2024). The impact of energy-related uncertainty on corporate investment decisions in China. Energies, 17(10), 2368. https://doi.org/10.3390/en17102368

Yadav, A. S., & Yadav, I. S. (2025). The impact of country-and firm-level governance on capital allocation efficiency: New evidence from India. Journal of Financial Stability, 78, 101407. https://doi.org/10.1016/j.jfs.2025.101407

Yu, J. (2024). Factors affecting return on assets in the renewable energy sector during supply chain disruptions. Journal of Risk and Financial Management, 17(6), 253. https://doi.org/10.3390/jrfm17060253

Zhang, Y., Kong, D., & Liu, H. (2024). Internal governance and investment efficiency: The role of non-CEO executives. International Review of Financial Analysis, 96, 103764. https://doi.org/10.1016/j.irfa.2024.103764