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D. Hypothesis Development
Hypothesis is considered as a tentative statement that proposes a possible explanation to some phenomenon or event. Based on the literature review
previously, the hypothesis development can be describes as:
1. Board of Director Size BOD to Firm Performance
Board size is the number of board of directors of the company which is generally composed of inside and outside members and responsible
to run company ‘s business. The total member of director must be adjusted
with the complexity of firm, but still considering the effectiveness of decision making. The previous studies conducted by Jensen 1993, Lipton Lorsch
1992 found that there is no significant influence between board of directors size on firm performance. It is because the company that has a large of board
of director size cannot do the coordination, communication, and decision- making better than the company that has a smaller board of director.
Other than that there also research conducted by Febriyanto 2013 Amyulianthy 2012, they find that Board of Directors size has influence the
Firm Performance. This is because having a large size of the board of directors will be able to improve the firm performance in a way that more members can
contributes to positive things. Therefore, the board‘s facilities will be better in monitoring the operation of the firm. According to Velnampy. 2013, An
effective board is one that facilitates the effective discharge of the duties imposed by law on the directors and adds value in a way that is appropriate to
the particular Company‘s circumstances. The board should be structured in
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such way that it: 1 has a proper understanding of the role and responsibilities, and competence to deal with the current and emerging issues
of the business. 2 Exercises independent judgment. 3 Encourages enhanced performance of the company. 4 Can effectively review and challenge the
performance of management.
H1: The Board of Director Size influence the Firm Performance 2.
The Board of Independent to Firm Performance
An Independent director also sometimes known as an outside director is a director member of a board of directors who does not have a material or
pecuniary relationship with company or related persons, except sitting fees. Independent Directors do not own shares in the company. Some sources
state non-executive directors are different from independent ones in that non- executive director are allowed to hold shares in the firm while independent
directors are not. In the study by Shukeri et al, 2012 found that there is negative effect between boards of independent towards the firm performance.
Different with the research done by Gani Jermias 2006 found that board independence is tied to company performance by looking at different
strategies. They find that board independence has a significantly more positive effect on performance for firms pursuing a strategy of cost efficiency
than for those pursuing a strategy of innovation.
H2: The Board of Independent influence the Firm Performance
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3. Managerial Ownership to Firm Performance
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