Effects Of Asymmetric Information, Transaction Cost To Corporate Governance, And Public Organization Performance (Study In Local Water Company In Malang Regency)

Abstract

Governing government sector is not quite different with managing a company. When the purpose of private sector is to corporate stability and long-lasting profit ability, in fact the purpose of public sector is not much different. The purpose of public sector is to improve community welfare and community trust to government. Welfare itself could be accomplished if the implementation of the development program itself gives positive impact for the society. (Sifia from Aswanto, 2010) When regional autonomy law is applied, Regional Government-owned Enterprise (BUMD) has potential which should be developed more through professional management by merging the characteristic of public service and profit orientation. Realizing good BUMD requires commitment from all parties from Regency/City Government as the owner and the manager of BUMD. From profit oriented aspect, BUMD (Malang Regency’s PDAM) is one of the support and source of district own revenue (PAD), on the other hand PDAM is one of public organization which function is to provide clean water as one of public’s commodity. Corporate governance becomes an important issue in managing PDAM in Malang Regency since PDAM has a role as BUMD, which is given mandate to carry-out task from Malang Regency’s Government in performing agency function, is feared to create many discrepancies in public business by asymmetric information which frequently occurs in the connection of some agencies which affects public organization performance in Malang Region PDAM. Using Structural Equation Model (SEM), an analytical tool, using asymmetric information and transaction cost as independent variable, with corporate governance as intervening variable and public organization performance as dependent variable, the result of this research shows that transaction cost variable and asymmetric information has significant influence toward corporate governance, asymmetric information variable and transaction cost has indirect influence toward public organization performance through corporate governance variable, governance variable gives significant influence to public organization performance variable.