The Role of Independent Commissioners in ERM Disclosure

Oct 13, 2025 by leolavanderia.com.br 83 views

The Influence of Independent Commissioners, Auditor Reputation, Profitability, and Concentration of Ownership on the Disclosure of Enterprise Risk Management in Banking Companies Listed on the Indonesia Stock Exchange

Introduction

The disclosure of company risk management (ERM) is a crucial aspect for companies, especially in the banking sector that operates in a high-risk environment. In this context, a study has been conducted to analyze the influence of various factors, including independent commissioners, auditor's reputation, profitability, and ownership concentration, on ERM disclosure in banking companies listed on the Indonesia Stock Exchange (IDX) during the 2016 to 2018 period. This study aims to provide valuable insights on the factors that influence the disclosure of company risk management in the Indonesian banking sector.

Research Methodology

This study is included in the causal research category, where the variables tested consist of independent commissioners, auditor reputation, profitability, and ownership concentration as independent variables. Meanwhile, ERM's disclosure is used as a dependent variable. The data used in this study are sourced from the annual report published by each company through the official IDX website (www.idx.co.id). To analyze the influence between variables, hypotheses are tested statistically using multiple regression analysis.

The Role of Independent Commissioners in ERM Disclosure

Independent commissioners play a crucial role in ensuring that companies are transparent and accountable in their risk management practices. However, this study found that independent commissioners had a negative and significant influence on ERM disclosure. This may be caused by the inactivation of independent commissioners in encouraging companies to pay attention to risk disclosure. In other words, independent commissioners may not be actively involved in ensuring that companies are transparent in their risk management practices.

The Impact of Auditor Reputation on ERM Disclosure

Auditor reputation is another factor that influences ERM disclosure. This study found that auditor reputation had a positive and significant impact on ERM disclosure. This indicates that companies with auditors who have a good reputation tend to be more open in expressing their risk management. In other words, companies with reputable auditors are more likely to disclose their risk management practices.

The Effect of Profitability on ERM Disclosure

Profitability is another factor that influences ERM disclosure. This study found that profitability had a negative and significant influence on ERM disclosure. This may be caused by the fact that companies that prioritize short-term profitability tend to pay less attention to systematic risk management. In other words, companies that focus on short-term gains may not be willing to disclose their risk management practices.

The Influence of Ownership Concentration on ERM Disclosure

Ownership concentration is another factor that influences ERM disclosure. This study found that ownership concentration had a positive and significant impact on ERM disclosure. This indicates that companies with a high concentration of ownership can function as a supervisory mechanism that encourages companies to increase transparency in disclosure of risk.

Relevance and Implications

These findings have important implications for stakeholders in the banking sector. For companies, increasing auditors' reputation and considering more distributed ownership structures can be an effective strategy for increasing risk management disclosure. On the other hand, market supervisors, including the Financial Services Authority (OJK), can encourage an increase in the role of independent commissioners in encouraging better transparency.

Conclusion

Thus, this research provides valuable insights on the factors that influence the disclosure of company risk management in the Indonesian banking sector. This in-depth understanding of this influence will help companies and regulators to strengthen better risk management practices, which in turn will increase the competitiveness and stability of the banking sector in Indonesia. Through better disclosure of risk, investors and other stakeholders can make more informed and appropriate decisions.

Recommendations

Based on the findings of this study, the following recommendations are made:

Increase auditor reputation: Companies should strive to increase their auditor reputation by selecting reputable auditors who can provide high-quality audit services.
Distribute ownership: Companies should consider distributing ownership to increase transparency and accountability in their risk management practices.
Increase the role of independent commissioners: Market supervisors, including the Financial Services Authority (OJK), should encourage an increase in the role of independent commissioners in encouraging better transparency.
Strengthen risk management practices: Companies should strengthen their risk management practices by implementing effective risk management systems and processes.

Limitations of the Study

This study has several limitations that should be noted. Firstly, the study only analyzed the influence of independent commissioners, auditor reputation, profitability, and ownership concentration on ERM disclosure in banking companies listed on the IDX. Secondly, the study only used data from the annual report published by each company. Finally, the study only analyzed the influence of these factors on ERM disclosure during the 2016 to 2018 period.

Future Research Directions

Future research should build on the findings of this study by analyzing the influence of other factors on ERM disclosure. For example, future research could analyze the influence of corporate governance, board composition, and executive compensation on ERM disclosure. Additionally, future research could analyze the influence of ERM disclosure on company performance and risk management practices.

Conclusion

In conclusion, this study provides valuable insights on the factors that influence the disclosure of company risk management in the Indonesian banking sector. The findings of this study have important implications for stakeholders in the banking sector, including companies, regulators, and investors. By understanding the factors that influence ERM disclosure, companies and regulators can strengthen better risk management practices, which in turn will increase the competitiveness and stability of the banking sector in Indonesia.
Frequently Asked Questions (FAQs) on the Influence of Independent Commissioners, Auditor Reputation, Profitability, and Concentration of Ownership on the Disclosure of Enterprise Risk Management in Banking Companies Listed on the Indonesia Stock Exchange

Q: What is the purpose of this study?

A: The purpose of this study is to analyze the influence of independent commissioners, auditor reputation, profitability, and ownership concentration on the disclosure of enterprise risk management (ERM) in banking companies listed on the Indonesia Stock Exchange (IDX).

Q: What is the significance of this study?

A: This study is significant because it provides valuable insights on the factors that influence the disclosure of ERM in the Indonesian banking sector. The findings of this study have important implications for stakeholders in the banking sector, including companies, regulators, and investors.

Q: What are the independent variables in this study?

A: The independent variables in this study are independent commissioners, auditor reputation, profitability, and ownership concentration.

Q: What is the dependent variable in this study?

A: The dependent variable in this study is the disclosure of enterprise risk management (ERM).

Q: What is the research methodology used in this study?

A: The research methodology used in this study is causal research, where the variables tested consist of independent commissioners, auditor reputation, profitability, and ownership concentration as independent variables. Meanwhile, ERM's disclosure is used as a dependent variable. The data used in this study are sourced from the annual report published by each company through the official IDX website (www.idx.co.id).

Q: What are the findings of this study?

A: The findings of this study are as follows:

Auditor reputation has a positive and significant impact on ERM disclosure.
Ownership concentration has a positive and significant impact on ERM disclosure.
Independent commissioners have a negative and significant impact on ERM disclosure.
Profitability has a negative and significant impact on ERM disclosure.

Q: What are the implications of this study?

A: The implications of this study are as follows:

Companies should strive to increase their auditor reputation by selecting reputable auditors who can provide high-quality audit services.
Companies should consider distributing ownership to increase transparency and accountability in their risk management practices.
Market supervisors, including the Financial Services Authority (OJK), should encourage an increase in the role of independent commissioners in encouraging better transparency.
Companies should strengthen their risk management practices by implementing effective risk management systems and processes.

Q: What are the limitations of this study?

A: The limitations of this study are as follows:

The study only analyzed the influence of independent commissioners, auditor reputation, profitability, and ownership concentration on ERM disclosure in banking companies listed on the IDX.
The study only used data from the annual report published by each company.
The study only analyzed the influence of these factors on ERM disclosure during the 2016 to 2018 period.

Q: What are the future research directions?

A: The future research directions are as follows:

Analyzing the influence of corporate governance, board composition, and executive compensation on ERM disclosure.
Analyzing the influence of ERM disclosure on company performance and risk management practices.
Conducting a longitudinal study to analyze the influence of these factors on ERM disclosure over a longer period.

Q: What are the conclusions of this study?

A: The conclusions of this study are as follows:

The disclosure of ERM is an important aspect for companies, especially in the banking sector that operates in a high-risk environment.
The findings of this study provide valuable insights on the factors that influence the disclosure of ERM in the Indonesian banking sector.
The implications of this study have important implications for stakeholders in the banking sector, including companies, regulators, and investors.