THE IMPLEMENTATION OF CORPORATE GOVERNANCE AND ENTERPRISE RISK MANAGEMENT: EVIDENCE IN CONCENTRATED OWNERSHIP CONTEXT

Abstract

Good Corporate Governance (GCG) has not been able to solve agency problems in several countries which have a majority of concentrated ownership. Enterprise risk management (ERM) is one of the most popular strategies to mitigate the risks in a firm. This study aims to examine the relationship between CG and ERM in the context of concentrated ownership. The sample study obtained 115 observation banks who listed in Indonesia Stock Exchange, which have concentrated ownership. The resulting study using multiple linear regression statistics methods reveal that Independent Commissioners, Auditor Reputation, Audit Committee, Concentrated Ownership, and leverage have a significant relationship to ERM. While the size of the board of commissioners, the presence of RMC and firm size showed no significance. These results provide evidence that companies with concentrated ownership have a higher level of risk management disclosure. The greater the level of concentration of ownership in the company, the stronger the demand for identifying risks that may be faced, such as financial, operational, reputation, regulatory, and information risk. Thus, the regulator needs to improve the policy related to the implementation of GCG and RMC.