Effectiveness of Good Corporate Governance and Corporate Social Responsibility Implementation on Potential Financial Distress

American Journal of Humanities and Social Sciences Research (AJHSSR) 2025
A J H S S R J o u r n a l P a g e | 142
American Journal of Humanities and Social Sciences Research (AJHSSR)
e-ISSN : 2378-703X
Volume-09, Issue-07, pp-142-152
www.ajhssr.com
Research Paper Open Access
Effectiveness of Good Corporate Governance and Corporate
Social Responsibility Implementation on Potential Financial
Distress
Angela Dirman1
, Sri Purwaningsih2
1.2
(Faculty of Economics and Business / Universitas Mercu Buana, Indonesia)
ABSTRACT : The research objectives to be achieved are to provide understanding and knowledge to the
public, especially investors and creditors, regarding the implementation of good corporate governance and
corporate social responsibility on the potential for financial distress and can be used as a reference for further
researchers and stakeholders (investors, creditors and government) in making relevant and reliable decisions.
The methods used are Descriptive Statistical Analysis, Classical Assumption Testing, and Hypothesis Testing to
obtain a comprehensive picture of the relationship between one variable and another, with data collection
techniques using the purposive sampling method. The population in the study were manufacturing companies in
the consumer goods sub-sector listed on the IDX which were carried out for 5 years of observation, namely
2018-2022. The results of the study showed that good corporate governance had a negative effect on financial
distress and corporate social responsibility had no effect on financial distress
Keywords : good corporate governance; corporate social responsibility; financial distress
I. INTRODUCTION
Companies that experience bankruptcy will begin with a condition where financial difficulties or
financial distress occur. Financial distress is an interesting topic in the field of finance and financial health as an
important indicator for users who are interested in knowing more about the company's performance
(Pernamasari et all, 2019). Information about financial distress is used by interested parties as an early warning
of problems that occur. So that companies and stakeholders can take anticipatory steps to deal with the worst
conditions that threaten the survival of the company.
In preventing bankruptcy in a company, management must take precautions as early as possible by
conducting bankruptcy analysis. One of the bankruptcy forecasting models is the Altman ZScore Model, where
this model was developed by Edward I Altman 1968 who is a financial economist. Edward Altman created a
model using a number of ratios in financial statements and analyzing several discriminants to predict the
bankruptcy of publicly traded manufacturing firms.
The manufacturing sector has a major impact on the economy. In the period 2016 to 2021, the
manufacturing sector was the largest contributor to Indonesia's Gross Domestic Product (GDP) compared to
other sectors. In 2021, the manufacturing industry's contribution to GDP reached 19.25% (BPS Indonesia,
2022). Despite the decline due to the Covid-19 pandemic, the manufacturing industry still plays an important
role in the economy. According to BKPM (2022), Indonesia's manufacturing industry has even become the
largest in ASEAN with a contribution of around 20.27% to the national economy. This shows a shift in
industrial development in Indonesia, from simply selling raw materials to processing them to produce finished
products. However, Indonesia is very vulnerable to financial difficulties. Since the Covid-19 pandemic emerged,
CNBC Indonesia recorded that several issuers on the Indonesia Stock Exchange (IDX) were affected and had an
impact on employee layoffs (PHK) and laying off staff, and cutting employee salaries in order to survive. Now
there are many public companies that are being sued for bankruptcy because their performance has declined due
to the pandemic. Causing the company to be unable to pay its obligations to consumers or creditors.
The Executive Director of the Indonesian Issuers Association (AEI) Samsul Hidayat assessed that the
many bankruptcy lawsuits experienced by issuers on the stock exchange were due to the impact of Covid-19.
Many issuers have recorded a decline in performance to the point of losses. So that they are unable to pay their
obligations to creditors and consumers. Furthermore, Samsul hopes that the conditions that have experienced a
slowdown due to Covid-19 can end. So that issuers can operate as before. Even so, not all issuers can recover in
the near future. Issuers oriented to exports and imports, for example, are still affected. Because the corona
pandemic has occurred in more than 200 countries. As a result, the flow of international trade goods is

hampered. This incident is not only in Indonesia. All issuers oriented to exports and imports will experience a
decrease in income. Meanwhile, CSA Research Institute Analyst Reza Priyambada assessed that issuers who are
involved in bankruptcy cases with their consumers will have a negative image in the eyes of investors and the
public. And, it raises concerns for parties who cooperate with these issuers.
According to the Minister of Finance Sri Mulyani Indrawati as reported by the internet media
(Finance.detik.com, 2018) stated the importance of companies building foundations and corporate governance.
To minimize the risk of bankruptcy, companies must implement corporate governance. Corporate governance
aims to create added value for all stakeholders, so that there is no conflict between the agent and principal which
has an impact on reducing agency costs (Santoso, 2017). Conflicts of interest that arise between the agent and
principal or what is known as agency conflict. These differences in interests can cause shareholders (principals)
to experience losses as a result of actions taken by the manager (agent) which have an impact on the company's
financial performance which will cause the company to experience financial distress. In other words, the
emergence of agency conflicts can increase the possibility of financial distress. Companies must implement
good corporate governance in their management, with good governance there is a small possibility that the
company will experience financial distress. The implementation of corporate governance is expected to be able
to increase supervision of management to encourage effective decision-making, prevent opportunistic actions
that are not in accordance with the interests of the company, and reduce information asymmetry between
management, shareholders, and creditors. Astrika, et all (2023) who studied the effect of Corporate social
responsibility, good corporate governance, tax aggressiveness on financial distress obtained the results that
corporate social responsibility and good corporate governance had an effect on financial distress. It is important
for companies to analyze the early signs of bankruptcy so that management can improve and investors prepare
for all possibilities that will occur. Financial difficulties are the responsibility of management in managing the
company. However, management has an obligation not only to pursue profits, but also to consider other aspects
such as social and environmental responsibility to the community.
The sample in this study was a manufacturing company in the consumer goods sub-sector listed on the
IDX during 2018-2022. Manufacturing companies in the consumer goods sub-sector produce basic goods that
are very important for the community, in line with population growth in Indonesia. Manufacturing companies
engaged in the consumer goods sector generally have various conditions that cannot be avoided in terms of
waste and various conditions in company activities. A conducive environment is certainly safe for companies
engaged in this field, but companies that have locations close to residential areas or dense access routes have
difficulty in responding to this. Companies need to establish social relations with the community to provide a
level of security for the good of both parties, as regulated in Law No. 40 of 2007 which requires every company
to carry out social and environmental responsibilities in various activities that are related to natural resources, of
course with the social environment.
The existence of a company that cannot be separated from the public makes topics related to Corporate
Social Responsibility important, especially for manufacturing companies. Several studies have shown that
Corporate Social Responsibility provides many benefits in the form of reducing costs, increasing employee
productivity, and providing a good image for the company. CSR can be used as a strategy for companies to
improve their image or a good image for the company. This is in line with the legitimacy theory where the
company will continue to strive to ensure that the company's behavior is in accordance with the norms in
society. With a good image, public trust can be increased, so that it can attract public interest in buying products
or services offered by the company, so that company sales increase and of course will have a positive impact on
financial performance. The better the financial performance, the lower the possibility of financial distress.
In a study conducted by Astrika (2023) it was found that corporate social responsibility and good
corporate governance had a negative effect on financial distress. Likewise, in the study by Pamungkas & Yosua
(2019) which stated that the implementation of good corporate governance had an effect on the company's
financial distress. Meanwhile, research conducted by Yanti, et all (2023) found that corporate social
responsibility had no influence on financial distress.
II.HEADING
The Influence of Good Corporate Governance on Financial Distress:
Corporate governance aims to create added value for all stakeholders, so that there is no conflict
between the agent and principal which has an impact on reducing agency costs. The difference in interests can
cause shareholders (principals) to suffer losses as a result of actions taken by managers (agents) which have an
impact on the company's financial performance which will cause the company to experience financial distress.
The obligation of public limited companies to report corporate governance that has been carried out by the
company creates transparency regarding the implementation of good corporate governance by the company. The
implementation of corporate governance means that it is considered capable of increasing supervision of management
to encourage effective decision-making, prevent opportunistic actions that are not in accordance with the company's
interests, and reduce information asymmetry between management, shareholders, and creditors.

The company must implement good corporate governance in its management, with good governance,
the company is less likely to experience financial distress. This is in line with the research of Pamungkas and
Yosua (2019) which states that the implementation of good corporate governance has an effect on the company's
financial distress conditions.
The following are the hypotheses proposed:
H1: Good Corporate Governance has an effect on Financial Distress.
The Influence of Corporate Social Responsibility (CSR) on Financial Distress:
The existence of a company that cannot be separated from the public makes topics related to Corporate
Social Responsibility important, especially for chemical sub-sector companies. Several studies have shown that
Corporate Social Responsibility provides many benefits in the form of reducing costs, increasing employee
productivity, and providing a good image for the company. CSR can be used as a strategy for companies to
improve their image or a good image for the company. This is in line with the legitimacy theory where the
company will continue to strive to ensure that the company's behavior is in accordance with the norms in
society.
With a good image, public trust can be increased, so that it can attract public interest in buying
products or services offered by the company, so that company sales increase and of course will have a positive
impact on financial performance. The better the financial performance, the lower the possibility of financial
distress. Research conducted by Astrika, et all (2023) obtained the results that corporate social responsibility has
an effect on financial distress
The following are the hypotheses proposed:
H2: Corporate Social Responsibility has an effect on Financial Distress.
Previous Research
Chairunesia (2020) this research proposal aims to analyze financial ratios through the ratio of
Profitability, Liquidity, and Solvency as well as the Good Corporate Governance Mechanism in predicting
financial distress. The number of samples used 47 companies in the basic industry and chemical sectors listed on
the Indonesia Stock Exchange with a research period of 2016-2018. The results of this study indicate that the
one that has a significant positive effect on the probability of a company experiencing financial distress is the
profitability ratio (Return on Asset-ROA), while the liquidity ratio (Current Ratio-CR) and the Audit Committee
have a significant negative effect on the probability of the company experiencing financial distress. Besides,
those that have a positive but insignificant effect on the probability of a company experiencing financial distress
are the Solvency Ratio (Debt to Equity Ratio-DER) and Independent Commissioners, while Institutional
Ownership has a negative but insignificant effect on the probability of the company experiencing financial
distress.
Astrika, et all (2023) who studied the influence of Corporate social responsibility, good corporate
governance, tax aggressiveness on financial distress obtained the results that corporate social responsibility and
good corporate governance have an effect on financial distress.
Research conducted by Yanti and Purwanto (2023) who studied corporate governance and corporate
social responsibility on financial distress obtained the results that the good corporate governance proxy that has
an influence on the possibility of financial distress is only 2 (two) variables, namely the independent board of
commissioners and managerial ownership. The results of the study stated that the independent board of
commissioners (DKI) and managerial ownership (KM) have a negative and significant effect on financial
distress. While other variables, namely the audit committee (KA), audit opinion (OA), institutional ownership
(KI), and corporate social responsibility (CSR) have no effect on the possibility of financial distress.
Research conducted by Yuyetta (2019) entitled "Analysis of the Influence of Corporate Governance
Mechanisms on the Probability of Financial Distress" states that managerial ownership (MANJ) has a negative
effect on financial distress. The greater the managerial ownership, the more it will encourage management to be
more responsible in managing the company, thus reducing the potential for financial distress.
III. INDENTATIONS AND EQUATIONS
In this study, the type of research used is causal research, which explains the influence of an
independent variable on the dependent variable. The independent variables in this study are good corporate
governance and corporate social responsibility, while the dependent variable is financial distress.
In this study, the type of research used is causal research, which explains the influence of an
independent variable on the dependent variable. The independent variables in this study are good corporate
governance and corporate social responsibility, while the dependent variable is financial distress.
The dependent variable in this study is financial distress which is measured using the Altman Z-Score
Formula. The independent variables in this study are Good Corporate Governance and Corporate Social

Responsibility. Good Corporate Governance is measured using the corporate governance index and Corporate
Social Responsibility is measured using the GRI Standard.
This study uses the Altman Zscore model for public companies as in the study of Pernamasari, et al.,
(2019) where shares or stocks of a company are traded openly or listed on the stock exchange. The formula used
is as follows:
Z = 1.2 (X1) + 1.4 (X2) + 3.3 (X3) + 0.6 (X4) + 1.0 (X5)
Where:
Z = Bankruptcy Index
X1 = Working Capital/Total Assets
X2 = Retained Earnings/Total Assets
X3 = Earning Before Interest and Taxes/Total Assets
X4 = Market Value of Equity/Book Value of Debt
X5 = Sales/Total Assets
Score Condition>299 Not Bankrupt; 1.81 – 2.99 Grey area; <1.81 Bankrupt
One way to determine the quality of corporate governance (CG) is by using the CG index. The CG
Index is an assessment of the implementation of CG in a company that measures the specified CG aspects
(Nengzih, 2017).
No Item Point disclosure items
1 Shareholders
1. Description of shareholder rights
2. Statement regarding guarantee of protection of shareholder rights, equal
treatment for all shareholders
3. Date of GMS
4. Results of GMS
2 Board of Commissioners
1. Names of members of the board of commissioners
2. Status of each member (independent commissioner or non-independent
commissioner)
3. Educational background and career of the board of commissioners
4. Description of the duties and responsibilities of the board of commissioners
5. Policy and amount of remuneration of members of the board of
commissioners
6. Mechanism and criteria for self-assessment of the performance of each
member of the board of commissioners
7. Number of meetings held
8. Number of attendance of each member of the board of commissioners in
meetings
9. Decision-making mechanism
10. Training program for the board of commissioners
3 Board of Directors
1. Names of members of the board of directors with their respective positions
and functions
2. Description of the duties and responsibilities of the board of directors
3. Educational background and career of members of the board of directors
4. Scope of work and responsibilities of each member of the board of directors.
Brief explanation of the work mechanism of the board of directors.
5. Decision-making mechanism
6. Delegation of authority mechanism
7. Policy and amount of remuneration of members of the board of directors
8. Number of meetings held by the board of directors
9. Number of attendance of each member of the board of directors in meetings
10. Mechanism and criteria for assessing the performance of members of the
board of directors
11. Training programs to improve the competence of the board of directors
The measurement of CSR disclosure is formulated as follows:
CSRI = ΣXi
Nj
Description:
CSRI = Corporate Social Responsibility Index of the company.
ΣXi = Dummy variable, 1 = if item I is disclosed, 0 = if item is not disclosed.
N = Number of items for the company, n≤136.
The population in this study were manufacturing companies in the consumer goods sub-sector listed on the
Indonesia Stock Exchange (IDX) in the period 2018 to 2022. The sample selection in this study used a
purposive sampling technique by considering the following criteria:

1. Manufacturing companies in the consumer goods sub-sector listed on the IDX during the study year.
2. Manufacturing companies in the consumer goods sub-sector that had a positive profit value during the study
year.
Based on these criteria, the sample to be used in this study is 22 manufacturing companies in the food, beverage
and cigarette consumer goods industry sector listed on the Indonesia Stock Exchange (IDX) during the period
(2018-2022).
Research Sampling Criteria
No. Sample Criteria Population
1 Manufacturing company in the food, beverage and cigarette consumer
goods industry sector which has been listed for 5 consecutive years on the
Indonesia Stock Exchange (BEI).
29
2 Manufacturing companies in the food, beverage and cigarette consumer
goods industrial sectors did not make a profit during the 2018-2022
period.
(7)
Number of Research Samples 22
Year of Research 5
Total Research Data 110
Source: www.idx.co.id (processed 2024)
The following is a list of companies that have met the research sample criteria, namely:
Sample List of Companies
No. Code Company Name
1 ADES Akasha Wira International Tbk
2 CLEO Sariguna Primatirta Tbk.
3 CAMP Campina Ice Cream Industry Tbk
4 KEJU Mulia Boga Raya Tbk.
5 ULTJ Ultra Jaya Milk Industry & Trading Company Tbk
6 BUDI Budi Starch & Sweetener Tbk
7 CEKA Wilmar Cahaya Indonesia Tbk
8 COCO Wahana Interfood Nusantara Tbk
9 GOOD Garudafood Putra Putri Jaya Tbk
10 HOKI Buyung Poetra Sembada Tbk
11 ICBP Indofood Cbp Sukses Makmur Tbk
12 INDF Indofood Sukses Makmur Tbk
13 MYOR Mayora Indah Tbk
14 ROTI Nippon Indosari Corpindo Tbk.
15 SKBM Sekar Bumi Tbk.
16 SKLT Sekar Laut Tbk
17 STTP Siantar Top Tbk
18 TBLA Tunas Baru Lampung Tbk
19 TGKA Tigaraksa Satria Tbk
20 GGRM Gudang garam tbk.
21 HMSP H.M. Sampoerna Tbk.
22 WIIM Wismilak Inti Makmur Tbk.
Source: data processed 2024
Data Analysis Method in this study uses quantitative analysis. In this study, multiple linear regression analysis is
used to reveal the relationship between independent variables and dependent variables. This process involves a
series of steps and certain analysis tools before it can be implemented. The analysis tools applied in the test can
be described as follows:
1. Descriptive Statistical Test
Descriptive statistics are statistical methods used to analyze data that has been collected and then presented in a
way that facilitates understanding, providing a complete picture of the variables being investigated.
2. Classical Assumption Test
According to Ghozali (2018: 159) To conduct multiple linear regression analysis, an examination of the
classical assumptions of statistics is required. This includes tests for normality, multicollinearity,
heteroscedasticity, and autocorrelation to assess the level of model accuracy.
3. Hypothesis Test
a. Coefficient of Determination Test (R2)
b. Simultaneous Significance Test (F Statistical Test)

c. Individual Parameter Significance Test (t Statistic Test)
d.Multiple Linear Regression Test
This multiple regression equation is usually used in this form, as shown below:
Y = α + β1GCG + β2CSR + e
Where:
Y = Financial Distress
b = Regression Coefficient
α = Constant
GCG = Good Corporate Governance
CSR = Corporate Social Responsibility
e = Variable outside the model (standard error)
IV.FIGURES AND TABLES
1) Descriptive Statistical Test
Descriptive statistical test was conducted to determine the minimum value, maximum value, average value,
and standard deviation produced by data processing with the SPSS version 22 program which is presented in
the following numeric table:
Descriptive Statistics Test Results
Descriptive Statistics
N Minimum Maximum Mean Std. Deviation
X1 110 ,32 ,92 ,7673 ,11959
X2 110 ,32 ,75 ,5725 ,09431
Y 110 1,43 42,78 6,8673 6,56947
Valid N (listwise) 110
Based on descriptive statistical tests it can be seen that:
1. The GCG variable where the results of the descriptive statistical analysis show that the minimum GCG
value is 0.32 or 32% is found in the company PT Wahana Interfood Nusantara Tbk in 2018, this means that
the implementation of CG in the company in 2018 was 32 %. The maximum GCG value is 0.92 or 92% in
the company PT Wismilak Inti Makmur Tbk in 2022, this means that the implementation of CG in this
company in 2022 will be 92%. The average GCG value is 0.7673 or 76.73%, which shows that the average
company used in this research has a GCG value of 76.73%. The GCG standard deviation value is 0.11959
or 11.959%.
2. The Corporate Social Responsibility variable is measured using GRI standards where the results of the
descriptive statistical analysis show that the minimum Corporate Social Responsibility value is 0.32 or 32%
for the company PT Ultra Jaya Milk Industry & Trading Company Tbk in 2021 and 2022, This is because
the company in 2021 and 2022 disclosed Corporate Social Responsibility activities amounting to 32% of
the 136 GRI standards disclosure items. The maximum Corporate Social Responsibility value of 0.75 or
75% is owned by PT Indofood CBP Sukses Makmur TBK in 2021 and 2022, this is because in that year the
company disclosed Corporate Social Responsibility activities of 75% of the 136 GRI standards disclosure
items. The average value of Corporate Social Responsibility is 0.5725 or 57.25%, which shows that 57% on
average of all companies used in this study disclosed an average of 77 items of Corporate Social
Responsibility activities. The standard deviation value of Corporate Social Responsibility is 0.09431 or
9.431%.
3. The Financial Distress variable which is measured using the Altman Z-score formula as a result of the
descriptive statistical analysis shows that the minimum Financial Distress value is 1.43 for the company PT
Wahana Interfood Nusantara Tbk in 2018, this means that in 2018 the company entered into the bankruptcy
category. The maximum value of Financial Distress was 42.78 for the company Ultra Jaya Milk Industry &
Trading Company Tbk in 2019, this means that the company in 2019 was in the non-bankrupt category. The
average value of Financial Distress is 6.8673. The standard deviation value of Financial Distress is 6.5694
2) Classic Assumption Test
a. Normality test
The data normality test aims to test whether the regression model, confounding variables or
residuals have a normal distribution. In this study, researchers used a two-way Kolmogorov-Smirnov
test so as not to cause differences in perception between one observer and another which often occurs
in normality tests using graphic analysis (one way). The following table presents statistical tests for
data normality:

Normality Test Results (Before Outliers)
One-Sample Kolmogorov-Smirnov Test
Unstandardized
Residual
N 110
Normal Parametersa,b
Mean ,0000000
Std. Deviation 6,41221882
Most Extreme Differences Absolute ,182
Positive ,182
Negative -,121
Test Statistic ,182
Asymp. Sig. (2-tailed) ,000c
a. Test distribution is Normal.
b. Calculated from data.
c. Lilliefors Significance Correction.
From the results of the normality test in the table above, it is known that the Asymp.sig.(2-tailed) result of
0.000 is smaller than 0.05, which indicates that the data contributes abnormally, so outlier testing is carried
out. The outlier test is carried out by looking at the box-plot graph, the numbers outside the boxpot are
observation numbers that need to be removed. The following is a table of normality test results after outlier
data:
Normality Test Results (After Outliers)
One-Sample Kolmogorov-Smirnov Test
Unstandardized
Residual
N 104
Normal Parametersa,b
Mean ,0000000
Std. Deviation 3,24919189
Most Extreme Differences Absolute ,071
Positive ,071
Negative -,064
Test Statistic ,071
Asymp. Sig. (2-tailed) ,200c,d
a. Test distribution is Normal.
b. Calculated from data.
c. Lilliefors Significance Correction.
d. This is a lower bound of the true significance.
Based on the results of the normality test using the one-sample Kolmogorov-Smirnov test in Table, it shows an
Asymp.Sig.(2-tailed) value of 0.200 which is greater than 0.05, so the data in this study states that the data is
normally distributed, so the data can be used. for further testing.
b. Multicollinearity Test
The multicollinearity test was carried out with the aim of testing whether the regression model found a
correlation in the independent variables. Multicollinearity test can be done in two ways, namely by looking
at:
1. Tolerance value and its inverse
2. VIF (Variance Inflation Factor)
If the tolerance is ≤ 0.10 or the same as a VIF value ≥ 10 then it indicates multicollinearity, and vice versa
(Ghozali, 2018: 107-111). The following are the results of the multicollinearity test in this study:
Multicollinearity Test Results
Coefficientsa
Model
Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
Collinearity Statistics
B Std. Error Beta Tolerance VIF
1 (Constant) 9,609 2,557 3,758 ,000
X1 -7,270 2,774 -,266 -2,620 ,010 ,902 1,108
X2 2,655 3,796 ,071 ,699 ,486 ,902 1,108
a. Dependent Variable: Y

Based on the results of the multicollinearity test in table, it is known that the tolerance value of the variable X1
(GCG) is 0.902 with a VIF value of 1.108; and the X2 (Corporate Social Responsibility) tolerance value is 0.902
with a VIF value of 1.108. Thus, the Tolerance value for all variables in this study is > 0.10 and the VIF value
for all independent variables is within the limits of this study < 10 so it can be concluded that there is no
multicollinearity in the independent variables in this study.
c. Autocorrelation Test
The autocorrelation test is used to determine whether or not there is a deviation from the classic
assumption of autocorrelation, namely the correlation that occurs between residuals in one observation and
other observations in the regression model. For autocorrelation testing, the Durbin Watson test (DW Test)
is used. This test is used by comparing the Durbin Watson value with the Durbin Watson table.
Autocorrelation Test Results
Model Summaryb
Model R R Square
Adjusted R
Square
Std. Error of the
Estimate Durbin-Watson
1 ,131a
,017 -,002 ,62634 2,096
a. Predictors: (Constant), LAG_LNX2, LAG_LNX1
b. Dependent Variable: LAG_LNY
Based on the test results, it is known that the Durbin Watson value resulting from the regression model is 2.096
with a sample size of 104 and the number of independent variables is (k=2) with a dU value (upper limit) of
1.7198, because the Durbin Watson value is 2.096 is between dU < d < 4-dU = 1.7198 < 2.096 < 2.2802. So it
can be concluded that in the regression model there is no autocorrelation.
2) Hypothesis Testing
a. Coefficient of Determination (R2)
The results of the coefficient of determination test from this research are as follows:
Coefficient of Determination Test Results (R2)
Model Summaryb
Model R R Square
Adjusted R
Square
Std. Error of the
Estimate
1 ,253a
,064 ,045 3,28120
a. Predictors: (Constant), X2, X1
b. Dependent Variable: Y
The table above shows that the coefficient of determination shows an R-square value of 0.253. This means
that 25.3% of the financial distress variable can be explained significantly by the good corporate
governance and CSR variables. Meanwhile (100% - 25.3%) = 74.7% of the amount of financial distress
can be explained by variables outside the model.
b. Simultaneous Significant Test (F Test)
This test shows whether all the independent variables included in the search model together provide a
significant influence on the dependent variable, where to test this hypothesis the F statistic is used with
a significance level of 0.05 (5%).
Simultaneous Significant Test (F Test)
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 74,099 2 37,050 3,441 ,036b
Residual 1087,397 101 10,766
Total 1161,496 103
b. Predictors: (Constant), X2, X1
From the results of the F test in table, it can be seen that the significant value is 0.036, where 0.035 < 0.05,
so it can be concluded that this multiple regression model is suitable for use.

c. Individual parameter significance test (T-Test)
This test shows how much influence the variable has independent of the dependent variable. In this
research, the basis for decision making uses a significance level of 0.05 (5%). If the significant value is >
0.05 then the hypothesis is rejected so the independent variable does not have a significant influence on the
dependent variable. Conversely, if the significant value is <0.05 then the hypothesis is accepted, then the
independent variable has a significant influence on the dependent variable.
T Statistical Test Results
Coefficientsa
Model
Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
1 (Constant) 9,609 2,557 3,758 ,000
X1 -7,270 2,774 -,266 -2,620 ,010 ,902 1,108
X2 2,655 3,796 ,071 ,699 ,486 ,902 1,108
Based on table it can be concluded that:
1) X1 (good corporate governance) has a significance value of 0.010, which means 0.010 < 0.05. This shows
that good corporate governance has a negative effect on financial distress, which means that the higher the
implementation of good corporate governance, the lower the risk of bankruptcy, so H1 is accepted.
2) X2 (CSR) has a significance value of 0.486, which means 0.486 > 0.05. This shows that CSR has no effect
on financial distress, so H2 is rejected.
d. Multiple Linear Regression Test
The multiple linear regression analysis test is used to test the influence of one or more independent
variables on a dependent variable. The following is a table presenting the results of multiple linear
regression tests:
Multiple Linear Regression Test Results
Coefficientsa
Model
Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
1 (Constant) 9,609 2,557 3,758 ,000
X1 -7,270 2,774 -,266 -2,620 ,010 ,902 1,108
X2 2,655 3,796 ,071 ,699 ,486 ,902 1,108
Based on the t-statistical test output results in table 13, the following regression model is used in this research:
Y = 9,609 – 7,270GCG + 2,655CSR + e
From the equation above it can be explained that:
1) The constant value in this research is 9.609, which indicates that GCG and Corporate Social Responsibility
are declared constant at the zero level, so the amount of financial distress (z-score) of the company is
9.609.
2) The regression coefficient value for the good corporate governance variable has a negative value of 7.270,
this means that if GCG is constant at zero level, then the amount of the company's financial distress is -
7.270. This reflects that the implementation of good corporate governance has a negative relationship with
financial distress, namely the greater the GCG value, the lower the risk of bankruptcy
3) The regression coefficient value for the Corporate Social Responsibility variable has a positive value of
2.655. This means that if CSR is constant at zero level, then the amount of financial distress (z-score) of
the company is 2.655. This reflects that Corporate Social Responsibility has a positive relationship with the
z-score value.
V. DISCUSSION
Based on the results of research that has been conducted regarding the effectiveness of implementing good
corporate governance and corporate social responsibility on financial distress in manufacturing companies in the
consumer goods industry sector listed on the Indonesian Stock Exchange in 2018-2022, it will be described as
follows:

1. The influence of good corporate governance on financial distress
Based on the results of research on testing accepted hypotheses, it was found that good corporate
governance has a negative effect on financial distress. This means that the higher the disclosure of good
corporate governance by a company, the lower the risk of bankruptcy. The mechanism in corporate
governance will be able to determine the goals and direction of the company as well as monitor the
achievement of goals. Optimal implementation of corporate governance will be able to improve company
performance so that the occurrence of financial distress can be minimized. The corporate governance
mechanism can minimize conflicts of interest which, according to agency theory, arise as a result of the
separation of interests between principal and agent. The results of this research are in line with research by
Yuliani and Rahmatiasari (2021) which states that good corporate governance influences financial distress.
2. The influence of Corporate Social Responsibility on financial distress
Based on the results of research on testing the rejected hypothesis, it was found that Corporate Social
Responsibility had no effect on financial distress. This means that the higher or lower the CSR disclosure
made by the company will not affect financial distress. CSR disclosure does not affect financial distress
because whatever the amount of CSR disclosed, the characteristics of CSR disclosure are more of a
company obligation. CSR disclosures by companies tend to be more related to ethical and operational
legality considerations. The results of this research are in line with research conducted by Safitri and
Nurcahyono (2024) which found that Corporate Social Responsibility had no effect on tax avoidance.
VI. CONCLUSION
Conclusion
Based on the research discussion that has been carried out by the author in the research entitled the
effectiveness of the implementation of good corporate governance and corporate social responsibility on
financial distress, it can be concluded that:
1. Good corporate governance has a negative effect on financial distress.
2. Corporate Social Responsibility has no effect on financial distress.
Suggestions
Based on consideration of the analysis results and conclusions described above, the author provides the
following suggestions:
1. Other researchers who will conduct research on the same topic are advised to add other possible
independent variables such as factors that influence financial distress.
2. Future researchers are advised to have a longer research period using different samples so that one
company can be compared to another.
3. To prevent the risk of bankruptcy, companies are expected to pay more attention to the factors that
determine the occurrence of financial distress.
VII. ACKNOWLEDGEMENTS
Praise and gratitude to Allah SWT for all His gifts and grace so that the author has completed the
research entitled "Effectiveness of Good Corporate Governance and Corporate Social Responsibility
Implementation on Potential Financial Distress".
The author would like to express his deepest gratitude to:
1. The Chancellor of Mercu Buana University for the opportunity given so that the author can carry out this
research.
2. The Institute for Research and Community Service LPPM Mercu Buana University which has funded this
research
3. The Head of Study Program of the Faculty of Economics and Business, the Head of the Accounting Science
Research Group, and the Head of the Mercu Buana University Research Center who have provided
motivation and direction so that this research can be completed on time
4. Fellow lecturers and researchers at Mercu Buana University who have provided very valuable input
5. All parties who have helped both morally and materially that the author cannot mention one by one who
have helped the author a lot in completing the research.
The author realizes that this writing is still far from perfect, so the author hopes to receive suggestions
and corrections. The author also hopes that the results of this study can contribute to the fields of accounting and
economics and can be used as a reference for further research.

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