Determinants of Stringent Corporate Governance: Evidence from Companies Selected in the Indonesian Institute for Corporate Governance
Abstract
In Indonesia, corporate governance becomes increasingly important after the financial crisis. There are several regulations relating to the implementation of good corporate governance both issued by Bank Indonesia (BI), the Financial Services Authority (OJK), and the decree of the Minister of State Owned Enterprises. There is also a non-governmental organization that every year made the corporate governance practices index of public companies, namely The Indonesian Institute for Corporate Governance (IICG).
This study investigates the determinants of stringent corporate governance at firm level among Indonesian listed companies, in order to identify the firm characteristics that are associated with the probability of stringent of the firm's corporate governance implementation. This study is based of 93 firms as sample and firms listed in Indonesian Stock Exchange and include in IICG in 2008-2012.
The analysis method used logistic regression model. The dependent is a dummy variable of corporate governance, which is one if firm has stringent corporate governance and zero otherwise. The result show that profitability, leverage, firm size and institutional ownership effect positively on the probability of stringent corporate governance implementation. The business risk and sales growth effect negatively on the probability of stringent corporate governance implementation. The type of industry has no effect on the probability of stringent corporate governance implementation.
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