Title: THE EFFECT OF CORPORATE GOVERNANCE, FIRM SIZE AND CAPITAL STRUCTURE ON FINANCIAL PERFORMANCE: A STUDY OF STATE-OWNED ENTERPRISES LISTED IN THE INDONESIA STOCK EXCHANGE DURING PERIOD OF 2013-2016
Abstract: The purpose of this study is to examine and explain the effect of Corporate Governance, Firm Size and Capital Structure on Finacial Performance.This research is explanatory or confirmatory which provides a causal explanation or influence between variables through hypothesis testing.The data analysis method uses Generalized Structured Component Analysis (GSCA).The research findings show that Firm Size and Capital Structure have a positive and significant effect on Financial Performance.Corporate Governance variables have a positive and not significant effect on Financial Performance. KEY WORDSCorporate governance, firm size, capital structure, financial performance.Corporate Governance is a system, process and set of regulations that are built to direct and control the company so as to create a good, fair and transparent relationship between stakeholders in the company.The implementation of consistent corporate governance will improve the quality of the company's financial statements.Management will tend not to manipulate financial statements, because there is a need to comply with various applicable accounting rules and principles and transparent presentation of information.Zarkasyi (2008) states that Corporate Governance is a means to make companies better, among others by inhibiting practices of corruption, collusion, nepotism, increasing budget discipline, utilizing supervision, and encouraging efficient management of the company.Companies that implement Corporate Governance have good financial performance, this is because the company has implemented the principles of Corporate Governance namely transparency, accountability, fairness and responsibility.These principles make shareholders feel the positive impact of the trust that arises.This confidence arises due to the optimism of the shareholders towards the company so that the goals expected by the shareholders occur.Good management makes management work optimally so that optimal financial performance is achieved Several empirical studies that have been conducted related to the effect of corporate governance with the company's financial performance as conducted by Nur 'ainy et.al (2013) show that the application of corporate governance can directly influence company performance as measured by Economic Value Added, and also shows the effect indirectly through company size.Furthermore Fidanoski et al. ( 2013) in his study showed that only board size is positively related to bank profitability as measured by Return On Assets.Furthermore, research shows a negative relationship between board independence and Return on Assets and Return on Equity Signaling Theory states how a company should give signals to users of financial and non-financial statements.Through this signal information can be found about the company's current and future conditions.Signals can be a comparison between the pros and cons of one company with another company.Signaling Theory also explains the effect of company size on financial performance.Large companies tend to distribute high dividends to maintain reputation among investors.According to Myers and Majluf (1977), companies would prefer to use debt to suppress the information asymmetry that can occur.In addition, according to