THE INFLUENCE OF MANAGEMENT AGENCY COST ON POTENTIAL FINANCIAL DISTRESS MODERATED BY INDEPENDENT COMMISSIONERS

Abstract

This study aims to see the effect of management agency costs on the potential for financial distress with an independent commissioner as a moderating variable. This study uses moderated regression analysis with a random effect model to test the research hypothesis on property and real estate companies listed on the Indonesia Stock Exchange in 2017-2022. The sample selection method used was purposive sampling so that a sample of 360 observations was obtained. The results of the study show that the higher the management agency cost will have an impact on potential financial distress, because it disrupts the company’s financial stability which is intended for operational activities and reduces the profits that the company should receive. In addition, there are findings that independent commissioners are unable to moderate the effect of management agency cost on potential financial distress, because the size of the proportion of independent commissioners does not guarantee the effectiveness of oversight of company management.  The existence of exploitation of company assets for management's personal interests can worsen the company's financial condition. Therefore, the effectiveness of supervision over the management of the company needs to be improved through internal control by independent commissioners who are competent and responsible for carrying out their roles.