THE EFFECT OF CORPORATE GOVERNANCE MECHANISM ON BOND RATINGS OF PUBLIC COMPANIES IN INDONESIA

Abstract

Corporate governance mechanism is a system of corporate governance,
which refers to the division of authority between all parties (shareholders, management
and board of directors) that determines the direction and financial performance.
This study aimed to determine the effect of corporate governance mechanisms
are proxied by institutional ownership, independent commissioners, managerial
ownership, quality audit and the audit committee of the company’s bond ratings on
Indonesian public.  The population in this study is that corporate bonds listed on the
Indonesia Stock Exchange and is still in circulation from 2008 to 2010. Method of
sampling done by purposive sampling method, and based on the criteria specified
then the number of samples were 140 samples. Hypothesis testing techniques used
multiple linear regression analysis with the tools of SPSS version 18.0 applications.
The results showed that: (1) corporate governance mechanisms are proxied by an
independent commissioner, audit quality and audit committee significant positive
effect on bond ratings. (2) two other proxy of institutional ownership and managerial
ownership is not a significant positive effect on corporate bond ratings.  Based on
the results of the study suggested further research to investigate using other proxies
of corporate governance mechanisms such as by using the Corporate Governance
Perception Index (CGPI) as additional variables that are used in this study.