The Effect of Local Value on Financial Performance in Digital Society Era

摘要

The digital era reduces the boundaries obstacles between societies. However, the local value still has role because the value encourages the management to behave ethically. The aim of this study is to provide empirical evidence about the important role of local wisdom value to encourage the optimal financial company performance. This study uses the local value, such as Islamic Value, that has recognized formally by Indonesia Government as Jakarta Islamic Index. Management considers the Islamic Sharia as local wisdom value of Indonesian to behave ethically. The result shows that local value has significant positive effect to financial performance. The result also supported by the finding that corporate governance score that has formulated globally is insignificant different between the members of Jakarta Islamic Index and Non Jakarta Islamic Index. The result implies that local wisdom can be considered on digital era as the part of corporate governance formulation because it captures the certain region characteristics. This study contributes to agency theory through the awareness of management on local value emerged from local wisdom value to align with shareholder's interest. This study also contributes to the implementation of corporate governance practice, because the local wisdom value can become the social enforcement for management to behave ethically.