IMPACTS OF MANAGERIAL ROLES AND FINANCIAL PERFORMANCES ON GOOD CORPORATE GOVERNANCE

Abstract

Recently, good corporate governance has become a very crucial issue in the administration of government agencies, especially in the financial management of the government budget. Result orientations in the financial statements contribute to the needs of managerial roles and financial performancesto attain optimal budget spending and efficient activities of government agencies. Based on the results of the external auditor of the Republic of Indonesia, there was no financial performance improvement of the agency for monitoring narcotics over the last five years. Therefore, this study aims to investigate the impacts of managerial roles of financial administrator and financial performances on the government internal control system and its impact on the implementation of better corporate governance, using the example of 125 the financial administrators in the agency for monitoring narcotics in the central office, Jakarta, Indonesia by using a survey methodology with purposive sampling methods. Data collection was carried out from November until December 2016. We follow the theoretical framework by Rohman (2007) and Mintzberg (1973) on financial manager role, Rohman (2007) and Kloot (1999) on financial performances, Government regulations No. 60 (2008) on the effectiveness of internal control systems, and Effendi (2009) on the implementation of good corporate governance principles including transparency, accountability, responsibility, independence, and fairness. Employing a Structural Equation Modelling (SEM), we find positive effects of managerial roles and financial performances on the effectiveness of internal control systems with the each construct reliability (CR) value of 2.439 and 2.199. Furthermore, the effectiveness of internal control systems, managerial roles of financial administrators, and financial performances have positive effects on implementations of good corporate governance with the each CR value of 3.003, 3.202, and 2.43. It implies that the agency for monitoring narcotics has been carrying out optimal management and financial accountability in order to support the implementation of good corporate governance.