Independent Variable Dependent Variable

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6. Operational Variable

Operational variable is a way to set up a concept and how the concept should be measured so that there are variables that can lead to other problems of a variable depends on the situation and the condition of other variables. Operational variables based on the nature of the attributes of the object observed in the study, can form both qualitative and quantitative researchers made merely for the purpose of research, after understanding the attributes based on the support of various runways. The variables used in this study are divided into two, namely, the independent variable and the dependent variable. The Independent variables are The Size of Board Director BOD, The Size of Board of Independent BOI, Managerial Ownership MO and Institutional Ownership IO while the dependent variable is the firm performance measured by Return on Assets ROA.

a. Independent Variable

The independent variable is the type of variables that influence another variable or variables suspected as the cause of the dependent variable Indriantoro and Supomo, 2009. The independent variables used in this research are: 1. Board of Directors BOD is fully responsible for the management of the company effective and efficient in order to achieve the companys goals. Therefore, According to Linck et al 2008 Board of Directors size measured by the number of Board of Directors member in the company. 53 2. The Board of Independent BOI is defined as who have no position in the management team and no direct business or benefit links within the firm Ma Tian, 2009. According to Jenny Jung-wha Lee Zhihua Zang 2010 the independent director are measures by the number of independent directors divided by the total number of board members. 3. Managerial ownership is the ownership by the shareholders who have a management position in the company like directors and commissioners. According to Setyawan, 1999 cited in Faisal, 2004 The Managerial ownership measured by the total percentage of managerial ownership in a company. 4. Institutional Ownership is ownership by the government, financial institutions, incorporated institutions, foreign institutions, and other institutions in a company. According to Muwaningsari 2007 stated that the Institutional ownership is measured by the total percentage of institutional ownership in a company.

b. Dependent Variable

The dependent variable is type of variables that explained or influenced by other variables or variable expected as a result of the independent variable Indriantoro Supomo, 2009. Dependent variable used in this research is the firm performance. The firm performance is measured by Return on Assets ROA. This is aims to examine the amount of the net income after tax that can be earned for every profit assets in the company. So that ROA is an important as the profitability ratio because it measures the efficiency with 54 which the companies manage the investments in assets and use them to generate a profit. According to Clarkson et al cited in Ismail Shukeri 2014 the result shows that it is not surprise there are many past of international studies have used ROA to represent the organization‘s performance including in Malaysian context. ROA measures the amount of profits relative to the firm-level investment in total assets. Returns the ratio of assets related to the category of financial asset management ratios. Net profit was taken from the income statement and total assets were taken from the balance sheet. The formula of return on assets equals with the percentage of company net income divided by the value of the total assets for the accounting period. Clarkson et al cited in Ismail Shukeri 2014 the greater the value of the ratio, the better a company is performing. However, merely determining a company‘s return on asset ratio is insufficient to get a good understanding on how a business is doing. 55 Table 3.2 Summary of The Operational Variables in This Research NO VARIABLES INDICATOR SCALE 1 Board of Directors BOD The number of Board of Directors members Ratio 2 The Board of Independent BOI The number of independent directors divided by the total number of board members. Ratio 3 Managerial ownership MO The percentage of managerial ownership in a company. Ratio 4 Institutional Ownership IO The percentage of institutional ownership in a company. Ratio 5 Firm Performance ROA Return on assets equals the company net income divided by the value of the total assets times 100 percent. Ratio 56

CHAPTER IV RESULT AND ANALYSIS

A. General Description of Research Object

Before a discussion on the influence of good corporate governance indicator such as board of director, board of independent, managerial ownership and institutional ownership on the company performance, first considered data from each company. Data from each company transferred into statistics. There are manufacturing companies listed on Bursa Malaysia in the year 2010-2014. In this study has determined that a sample of 300 companies in the period 2010-2014 because it has met the criteria. The company then sought a sample of board of director, board of independent, managerial ownership, institutional ownership and return on assets of each company. Companies that become the sample are the companies that fulfill the criteria of the sample in this research: 4 Manufacturing companies consistently publish an annual report in 2010-2014. 5 Companies disclose information on corporate governance in the annual report such as The Size of Board of Director BOD, The Size of Board of Independent BOI, Managerial Ownership and Institutional Ownership IO 6 The financial report of the companies should experience the profit in their net income after tax, this is because in this research to calculate the firm performance by ROA Return on Assets.