Abstract
Corporate governance concept became stronger in Indonesia after the economic crisis that occurred in 1997 because of lack of legal, unestablished accounting and auditing standards, underegulated capital market, weak supervision of the Commissioners and the neglect of minority rights. To solve these problems, companies implemented corporate governance concept so that access to low cost-debt financing will be easily obtained. Therefore, corporate governance is a factor that cannot be ignored in decision making for creditors. This study aimed to analyze the effect of Good Corporate Governance (Board of Commissioners, Audit Committee, Managerial Ownership and Institutional Ownership) on Cost of Debt in companies listed in Indonesian Institute for Corporate Governance 2010-2013. The samples used were 10 companies. This research method is using path analysis to see the direct and indirect effect between Good Corporate Governance and Cost of Debt through Corporate Governance Perception Index as intervening variable. The results of this study showed that the variables of Good Corporate Governance (Board of Commissioners, Audit Committee, Managerial Ownership and Institutional Ownership) partially and simultaneously does not have a significant effect to the Cost of Debt in companies listed in Indonesian Institute for Corporate Governance 2010-2013.
Highlights
1.1 BackgroundThe concept of corporate governance began to strengthen in Indonesia after the economic crisis that occurred in 1997 were caused by weak law, accounting and auditing standards are not yet established, the capital market is still underegulated, weak supervision commissioner, and the neglect of minority interest (Kusumawati & Riyanto, 2005 ). Johnson et al (2000) show that countries with weak legal protection for minority shareholders affected by the crisis more severe than countries with strong legal protection. Mitton (2002) found that corporate governance has a strong positive impact on the company's performance during the financial crisis
This study aimed to analyze the effect of Good Corporate Governance (Board of Commissioners, Audit Committee, Managerial Ownership and Institutional Ownership) on Cost of Debt in companies listed in Indonesian Institute for Corporate Governance 2010-2013
The results of this study showed that the variables of Good Corporate Governance (Board of Commissioners, Audit Committee, Managerial Ownership and Institutional Ownership) partially and simultaneously does not have a significant effect to the Cost of Debt in companies listed in Indonesian Institute for Corporate Governance 2010-2013
Summary
1.1 BackgroundThe concept of corporate governance began to strengthen in Indonesia after the economic crisis that occurred in 1997 were caused by weak law, accounting and auditing standards are not yet established, the capital market is still underegulated, weak supervision commissioner, and the neglect of minority interest (Kusumawati & Riyanto, 2005 ). Johnson et al (2000) show that countries with weak legal protection for minority shareholders affected by the crisis more severe than countries with strong legal protection. Mitton (2002) found that corporate governance has a strong positive impact on the company's performance during the financial crisis. Mitton (2002) found that corporate governance has a strong positive impact on the company's performance during the financial crisis. Based on these phenomena implementation of Good Corporate Governance (GCG) becomes important to be consistently applied. According Forum for Corporate Governance Indonesia (FCGI), GCG can be defined as a set of rules that govern the relationship between shareholders, managers, creditors, government, employees, and stakeholders other internal and external relating to the rights and obligations. GCG implementation is expected to improve oversight of management to encourage effective decision making, prevent opportunistic actions that are inconsistent with the interests of the company and reduce the asymmetry of information between the executive and the stakeholders of the company. Implementation of GCG that goes well is expected to increase public confidence in the company, in particular investors and creditors
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