Does Investment Efficiency Bridge Corporate Governance and Firm Value? Evidence from Indonesian Non-Financial Firms (2022–2024)
DOI:
https://doi.org/10.35870/ijmsit.v6i2.8374Keywords:
Corporate governance, Investment efficiency, Firm value, Mediation analysis, Indonesia Stock ExchangeAbstract
This study examines the effect of corporate governance mechanisms board meeting frequency (BMF), independent commissioners (IC), and ownership concentration (OC) on firm value, and tests whether investment efficiency (EI) mediates this relationship among non-financial companies listed on the Indonesia Stock Exchange (IDX). The study addresses a persistent inconsistency in prior governance firm value findings and the limited attention given to investment efficiency as a transmission channel in the Indonesian context. Using purposive sampling, a balanced panel of 300 non financial firms observed from 2022 to 2024 (900 firm year observations) was analyzed through a two-way fixed effects model with firm-clustered standard errors, complemented by bootstrap-based mediation testing (5,000 replications) combining the Baron and Kenny (1986) approach and the Zhao, Lynch, and Chen (2010) classification. The results show that BMF, IC, and OC each have a significant positive effect on both investment efficiency and firm value, and that investment efficiency itself significantly enhances firm value. All three governance mechanisms exhibit complementary (partial) mediation through investment efficiency, though the mediated share varies substantially: 40.0% for IC, 36.7% for BMF, and only 5.8% for OC, indicating that board-related mechanisms operate more strongly through capital-allocation channels than ownership structure does. Findings remain robust across outlier trimming, alternative variable measurement, and subsample analyses, though a lagged-mediator test suggests part of the investment efficiency firm value linkage may be contemporaneous. These findings extend agency theory-based governance research by demonstrating investment efficiency as a genuine, quantifiable transmission mechanism and offer practical implications for boards, regulators, and investors in emerging capital markets.
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