THE ROLE OF FINANCIAL PERFORMANCE TO MEDIATE THE EFFECT OF CORPORATE GOVERNANCE ON FIRM VALUE

Corporate Governance is one of the company's assets that is capable of being a characteristic which reflects the values that built the company. The governance that carried out continuously will affect work pattern and company performance. One of the company's performance is financial performance. As quantitative information, ffinancial performance is needed by investors for investment decisions making. Financial performance in ratios more easily comparable. The indicators of financial performance, one of them is Debt to Equity Ratio (DER) that used in this research. The previous study stated that corporate governance has a significant effect on the financial performance. Whereas, a good financial performance will affect the firm value. So, the aim of this research was to analyse the role of financial performance, proxies by Debt to equity ratio as the mediating variable of the effect of corporate governance on the firm value with price to book value as the proxy. The population of this research are all Indonesian companies listed in Corporate Governance Performance Index (CGPI) in 2012-2014 as many as 32 companies. The samplings used purposive sampling technique and get 22 companies with 66 analysis units. Documentation technique used to collect the data which analysed by path analysis using Structural Equation Modelling (SEM) by Wrap PLS. The results showed that financial performance could be mediating the effect of corporate governance on firm value; proved by there is a significant effect of corporate governance on financial performance and financial performance on firm value, but there is no significant effect of corporate governance on firm value.