The Effect of Corporate Governance Mechanism on Cost of Equity Capital

摘要

This study aims to examine the effect of corporate governance mechanisms on cost of equity capital with earnings quality as a mediating variable. The corporate governance mechanism is affeced by the composition of independent commissioners and the size of the audit committee. This study adds a control variable in the form of intellectual capital disclosure and information asymmetry. The population in this study were manufacturing companies listed on the Indonesia Stock Exchange in 2017. The research samples were selected using the purposive sampling method with criteria used based on judgment sampling and obtained 91 companies that met the research criteria. The analytical method used is path analysis. The results showed that the composition of independent commissioners and the size of the audit committee had a positive effect on earnings quality. This is because the composition of independent commissioners and the size of the audit committee have a role in carrying out the supervisory function of management performance in producing company financial statements, especially company profits. However, the composition of independent commissioners and the size of the audit committee does not directly affect the cost of equity capital. This is due to the performance of the composition of independent commissioners and the size of the audit committee unable to guarantee management performance in reducing the cost of equity capital. In this study the level of the company's cost of equity capital is influenced by the quality of earnings. Earnings quality successfully mediates in full the influence of the composition of independent commissioners and the size of the audit committee on the cost of equity capital. The results of the study of the control variables of intellectual capital disclosure and information asymmetry have a positive effect on the cost of equity capital.