The Financial Crisis Impact on Firm Performance, Financial Decision and Corporate Governance of Indonesia Listed Firms

Abstract

The purpose of this study is to investigate the impact of global financial crisis on firm performance, financial decision and corporate governance of the Indonesian listed firms. The financial data are retrieved from Reuters Data stream and annual reports for 212 firms over the period 20032013. Hence, the data is a balanced panel data with 2332 observations. The impacts of the financial crises on the research variables are tested using a special two-way cell-means (ANOVA) model of each of the research variables by Time-Period, and Sectors. The factor Time-Period (TP) has three levels, namely before, during and after crises, respectively and the factor Sector has two levels; Manufacturing and Service sectors respectively. The findings of cell-mean parameter show that market performance (TOBINS_Q) is lower during crisis period compared to before and after crisis period, indicating the mean parameters are significantly greater than its mean during the crisis period for both sectors. Meanwhile, accounting performance (ROA) appears to have lower mean parameter during crisis period compared to after crisis. However, based on the coefficient of firm performance, the impact of financial crisis is more on the market performance and less on the accounting performance. The findings also show that investment is lower during crisis period compared to before and after crisis period, while leverage is lower during crisis compared to before crisis period for both sectors. Interestingly, the results show that financial crisis had no impact on dividend per share, while free cash flow and corporate governance are less impacted by the financial crisis. This study extends the current understanding of firm performance, financial decision and corporate governance by providing new empirical evidence of the impact of financial crisis by sector.