THE IMPACT OF BOARD OF DIRECTORS CHARACTERISTICS ON FINANCIAL PERFORMANCE IN MANUFACTURING COMPANIES ON IDX

This study aims to determine the impact of the demographic characteristics of the director on the company's financial performance. The demographic characteristics used are age of the director, proportion of female directors, educational background of directors, and tenure of directors. This research begins with data collection. Collected data is in the form of secondary data obtained by downloading from the IDX, the downloaded data is the annual report of manufacturing companies 2017-2019 period. After that, the data were analyzed using multiple linear regression. Age of directors, proportion of female directors, educational background of directors, and tenure of directors were measured using proportions. The company's financial performance is measured using return on assets.


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The third factor is educational background of the directors. Educational background is related to the diversity of perspectives on the knowledge and expertise of the board of directors (Fernandez, Rodriquez and Pawlak 2014). According to Akpan and Amran (2014) stated that the highest educational background master's degree owned by members of the board of directors can help make better decisions so as to improve company performance. Ujunwa (2012) found a significant positive impact between directors with a PhD education background on financial performance. Research by Ujunwa is also supported by research conducted by Kim and Song (2016). Cambrea et al. (2017) who found that educational background of directors had a significant positive impact on financial performance. However, Adnan et al. (2016), said that educational background of directors had a significant negative impact on financial performance as measured by ROA and ROE. The research of Fernandez, Rodriquez and Pawlak (2014) also supports the significant negative impact of directors' educational background on financial performance as measured by ROA and ROS. Meanwhile, another study conducted by Bhagat, Bolton and Subramanian (2010) revealed that educational background of directors has no significant impact on financial performance.
The fourth factor is tenure of directors. According to Harrison and Klein (2007), tenure of directors is related to experience, information base and social network ties. The accumulated experience, information base, and social network ties can be considered to represent organizationally relevant knowledge. Differences in tenure are implied in the behavior of members of the board of directors to develop good corporate governance, so that the impact of demographic characteristics will be reflected in the company's financial performance. Fujianti (2018). Merika (2016). Van Ness, Miesing and Jaeyoung (2010) said that tenure of directors has a significant positive impact on the company's financial performance. However, Lu and Peng (2010) revealed that tenure of directors has a negative impact on short-term financial performance, but there is no significant impact on long-term financial performance. Tanikawa and Jung (2018). Muller (2014). Azar, Rad and Botyari (2014) found that tenure of directors has a significant negative impact on financial performance.
Previous studies have shown different results, therefore this study will examine the impact of the age of the directors, the proportion of female directors, the educational background of the directors, and tenure of the directors on the financial performance of manufacturing companies listed on the Indonesia Stock Exchange.
The renewal of this research is to use the upper echelon theory as a theory that supports the grand theory of good corporate governance. Upper echelon theory is used as the basis for selecting members of the board of directors based on demographic characteristics. With the selection of the right directors, it can improve the quality of decision making to create good corporate governance. Good corporate governance can improve company performance.

Hypothesis Development
Age is seen as experience. The older the age, the more experiences, values, skills, and perceptions that are believed to increase a person's ability to produce better performance. Carter (2003) in Abdullah, and Ismail (2013) argues that the age of directors is important for decision making. Santrock (1995) in Novitasari (2018) reveals that the age group of 34-50 years is the healthiest, calmest, most self-controlled group, and has a sense of responsibility. Tulung and Ramdani (2016) also say that psychologically people aged 40 years are considered to have more experience in thinking and seeing things. It can be concluded from the two studies above, that a good age for directors is between 34 years to 50 years. Darmadi (2011) said that the age of directors has a significant positive impact on financial performance. H1: The older the directors, the higher company's financial performance.
The female director is able to bring change in a positive direction. Differences in managerial behavior between men and women provide several benefits in decision making that increase management effectiveness and ultimately affect the company's financial performance (Dezso and Ross, 2012). H3 : The higher the educational background of directors, the higher the company's financial performance. Barkena and Shvyrkov (2007) in Tanikawa and Jung (2018) say that tenure of directors implies different skills and perspectives, indicating that the board of directors has different information, have better performance than boards of directors who serve for shorter periods, directors with longer tenures can help build good relationships with stakeholders to plan and implement long-term strategies that will improve the company's financial performance. Fujianti (2018). Merika and Triantafyllou (2016). Van Ness, Miesing, and Jaeyoung (2010) said that the tenure of directors has a significant positive impact on company performance.
H4 : The higher tenure of directors, the higher the company's financial permformance.

Methods:-
The data in this study are secondary data collected and taken from annual reports on manufacturing companies listed on the Indonesia Stock Exchange (IDX). Age of directors, proportion of female directors, educational background of directors, and tenure of directors can be seen in the annual report section on directors profile. The population of this study are manufacturing companies listed on the Indonesia Stock Exchange for three years, from 2017 to 2019. The sampling method in this study is purposive sampling with the following criteria  Financial performance (ROA) has a minimum value -0.07. This means that the company's lowest ability to generate net loss from total assets is -7%. The ROA maximum value in this study is 0.14 which indicates that the company's highest ability to generate net income from total assets is 14%. ROA average value is 0.042350 indicates that the average company in the manufacturing sector for the 2017-2019 period in obtaining net profit is 42%. In addition, the standard deviation of ROA is 0.040474, which indicates that the sample company ROA data has a low level of variability.   Based on the results of hypothesis analysis in table 3, it can be concluded that the age of directors has no impact on financial performance. Proportion of female directors has no impact on financial performance. Educational background of directors has a significant positive impact on financial performance. Tenure of directors has no impact on financial performance.

Age of directors and financial performance
Results of hypothesis analysis indicate that the age of directors has no impact on financial performance. This shows that age of directors who are old or young does not cause an increase in financial performance. A person's age is related to openness to ideas of alternative perspectives on various problem solving, but different views can also lead to conflict. Conflicts that occur can make it difficult to carry out a cooperative relationship. The average age of the directors is 53 years with a standard deviation of 5.062817, which means that the members of the directors are dominated by the middle-aged group. This middle-aged person tends not to want to change so that his experience is getting less and less because he is just in the same place. In addition, the age of directors has no impact on financial performance because the research data obtained is only for a period of 3 years, so that many companies have not change the composition on the board. Financial performance changes every year, but the characteristics of age have the same pattern. From this 3-year data, it can also be seen that the experience of directors at the age of early adulthood (18-40 years) is less supportive to improve the financial performance of the current company.

Proportion of female directors and financial performance
Results of the research hypothesis in table 3 show that the proportion of female directors has no impact on financial performance. The results of the hypothesis reveal that the number of female directors does not cause an increase in financial performance. The proportion of female directors in the company has an average of 0.114, which means that the position of director is dominated by male directors. The proportion of female directors as a minority causes the positive side of female directors to be less than optimal. female also have a tendency to be more comfortable in the safe zone and try to avoid risk compared to men, so there are fewer female directors compared to male directors

Educational background of directors and financial performance
Results of hypothesis analysis in table 3 show that the educational background of directors has a significant positive impact on financial performance. This shows that the educational background of directors plays an important role in increasing financial performance. This is because the knowledge and expertise of directors with a high educational background, has more ability to solve problems and make the best decisions for the company. With superior knowledge and skills, it can provide benefits such as helping companies develop unique processes and products through strategies that are difficult to imitate, being able to search for more complete information resulting in a richer collection of information for strategic decision making. Frey and Detterman (2004) in King, Srivastav and Williams (2016) suggest that directors who graduate from schools that require a high average score to enter the school, show better managerial abilities.

Tenure of directors and financial performance
Results of hypothesis analysis indicate that tenure of directors has no impact on financial performance. This shows that the length of tenure does not cause an increase in financial performance. Tenure of directors with a long term is filled by directors who have an family relationship. The maximum value of tenure of directors is 24 years with an average tenure is 7.49, proving that the appointment of the same director occurs repeatedly. The appointment of the same director may be because the appointed director has an affiliation with the majority shareholder. There is a phenomenon in Indonesia, where giving a director position to someone is not based on competence and professionalism, but as a respect or appreciation, so it can be said that the selection of directors does not make a significant contribution to the progress of the company because it does not have these factors (Sudana and Aristina, 2017). This causes no change in performance. The minimum value for tenure of directors is 0.00, the meaning is there are directors who have just served in the company, these newly appointed directors have not contributed to improving performance. In addition, tenure of directors has no impact on financial performance because the data obtained is only for a period of 3 years, so that many companies have not change the composition on the board. Financial performance changes every year, but the characteristics of tenure have same pattern.  (2014) found that the tenure of directors has a significant negative impact on financial performance.

Managerial Implications
Good corporate governance is needed in agency relations. Good corporate governance serves to assure the capital owners that managers will not commit fraud, steal, embezzle the funds, or invest funds in other projects that are not profitable. Problems that occur can incur costs. These costs are incurred to monitor the managers performance. Good coporate governance mechanisms can reduce the occurrence of opportunistic behavior of managers, provide satisfaction to capital owners, and improve company performance. The composition of managers must be determined, chosen properly to support the creation of good coporate governance. According to the upper echelon theory, the selection of the composition of managers can take in to account with demographic characteristics. Decision making in selecting managers based on appropriate demographic characteristics is expected to meet the 128 rules of good corporate governance, with good corporate governance, it is hoped that it will create an equal relationship between the relevant shareholders and improve the company's performance.

Conclusion:-
Based on hypothesis analysis, it was found that the age of directors, proportion of female directors and the tenure of directors had no effect on financial performance, so the older the directors, the greater the proportion of female directors and the longer tenure of directors in a company had no impact on financial performance. Meanwhile, educational background has a positive impact on financial performance. It can be concluded that the higher the educational background of the directors, the better the financial performance.
The educational background of the board of directors contributes to improving financial performance because the knowledge and expertise of the board of directors with a high educational background has more ability to solve problems, make decisions and have better managerial abilities.