Journal of Economics, Finance and Accounting Studies ISSN: 2709-0809 DOI: 10.32996/jefas Journal Homepage: www.al-kindipublisher.com/index.php/jefas Copyright: © 2022 the Author(s). This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC-BY) 4.0 license (https://creativecommons.org/licenses/by/4.0/). Published by Al-Kindi Centre for Research and Development, London, United Kingdom. Page | 25 | RESEARCH ARTICLE The Effect of Good Corporate Governance and Intellectual Capital Mechanism On Financial Performance with Profit Management as A Mediation Variable Sarah Septia Fatimah 1 ✉ and Erna Setiany 2 12 Faculty of Economics and Business, Universitas Mercu Buana, Jakarta, Indonesia Corresponding Author: Sarah Septia Fatimah, E-mail: sarah.septia@gmail.com | ABSTRACT This study aimed to determine the influence of good corporate governance and intellectual capital mechanisms on financial performance with profit management as a mediating variable for the industrial sector listed on the Indonesian stock exchange in 2018 – 2021. The sample was selected using a purposive sampling technique so that 34 companies (188 company years) met the criteria selected as sample. Data analysis techniques were performed using multiple regression and hypothesis testing using eviews 9 and the sobel test. Based on the results of multiple regression analysis with a significance level of 5%, this study shows that only the independent board of commissioners and audit quality variables have a significant effect on financial performance. Other variables have no effect on financial performance. In this study, earnings management is not able to significantly mediate the influence between GCG and intellectual capital. | KEYWORDS Good Corporate Governance Mechanism, Intellectual Capital, Profit Management, Financial Performance | ARTICLE INFORMATION ACCEPTED: 02 March 2023 PUBLISHED: 18 March 2023 DOI: 10.32996/jefas.2023.5.2.3 1. Introduction The company's financial performance is an achievement that the company has achieved in a certain period that reflects the level of health of the company. Financial Performance is the performance of management, which is the expansion of financial value and estimated benefits. A company's performance can be assessed by analyzing its financial statements. The company's financial statements are a reflection of the good or bad condition per company in one period. The company's financial performance is a manifestation of the principles of good corporate governance. Performance per company can be measured using financial performance, which is proxied using the profitability ratio, which is a ratio to assess the company's ability to seek profit (Kasmir,2014). Managers can influence reported profit levels by engaging in profit management practices. Profit management is concerned with the selection of accounting methods carried out by managers in financial reporting to increase profits or lower profits to suit the interests of managers or the interests of the company and the parties involved in the contract (Kanakriyah,2017). When the company's profit increases, this will affect the market's response to the value or price of the company's shares so that the stock price increases. This rising share price reflects the prosperity of shareholders, or it can be said that shareholders benefit from the increase in the share price "because the stock price is the result of judgments in investment decisions, funding, and dividend policies. One of the efforts in achieving the company's goals is the increase in Intelectual Capital, known as intellectual capital. Intellectual literacy is a concept that can provide new knowledge-based resources and describe intangible assets that, if used optimally, allow companies to carry out their strategies effectively and efficiently (Gita & Wahyudi, 2021).