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THE EFFECT OF CORPORATE GOVERNANCE MECHANISM AND AUDIT QUALITY ON INFORMATION ASYMMETRY (Study on property and real estate Industry listed in the Indonesian Stock Exchange in 2009-2011) Sukma Shita Paramarini
[email protected] Majidah
[email protected] Telkom University
ABSTRACT
Information asymmetry is a condition in which there is an imbalance of information acquired by management (as agent) and information acquired by the shareholders and other stakeholders. In this condition, management tends to be more informed about the company rather than outsider including shareholders. Accordingly, management has the opportunity to deviates which might benefit themselves individually or collectively. This study aimed to determine the effect of corporate governance mechanisms and audit quality on information asymmetry with share price, return volatility and firm size as control variables. Research object is property and real estate firms which are listed in the Indonesian Stock Exchange - year 2009 until 2011. The study was categorized as causality descriptive verification. Selected samples based on purposive sampling method is 30 firms. The data used are secondary data. Data analysis method used is multiple linear regression analysis in which model were qualified of classical assumption test. The results showed that: (1) board size, board composition, audit committee size and ownership concentration as corporate governance mechanism along with audit quality simultaneously and significantly affect information asymmetry as much as 84.6%, (2) Partially, audit quality has significant negative effect on information asymmetry. Meanwhile, other variables showed no significant effect on information asymmetry. (3) Share price control variable has significant positive effect, return volatility has significant positive effect, while firm size has significant negative effect on information asymmetry. Keywords: corporate governance mechanism, audit quality, information asymmetry, bid-ask spread
I. Introduction Protection of shareholders in Indonesia is marked by the issuance of the Listing Regulation No. Kep-305/BEJ/07-2004 Equity and Law no. 40 of 2007 regarding Company in which the listed company is responsible for the disclosure of information. The existence of various laws that protect shareholders is in fact had not been able to prevent shareholders from dealing with authority abuse practices that can be harmful. In the end of 2008, Waskita Karya had been found to conduct financial manipulation by allocating multiyears revenue into certain year’s revenue. Another property and real estate company had also conducted conflict of interest act that has been reported by IDX in 2010 and 2011. Even with the high market demand at that time, if these phenomenons are not being evaluated and corrected, it could degenerate investors’ confidence upon real estate and property sector’s performance as a whole, not to mention the issue of property bubble. The problems that occur on the property and real estate industry is some form of problems that happens due to the separation between ownership and the company’s management. The separation of power theory was stated by Jensen and Mekling (1976) as the agency theory. When conflicts of interest arise between owners and company’s management, especially in conditions where there is asymmetry of information, there is a possibility that management did not act in accordance with the wishes of shareholders (Lin and Huang, 2011). In this case, management tends to be better informed of the company rather than outside parties including shareholders. Accordingly, management has the opportunity to make a financial manipulations that can benefit themselves individually and collectively, to the detriment of shareholders. Therefore, minimizing information asymmetry becomes so important (Scott , 2009). One way to realize the disclosure of information is through an internal mechanism or mechanisms of corporate governance within the company. One of which is monitoring. By monitoring, management will be difficult to hide information on the deviant behavior and negligence (Elbadry et al., 2010). This was confirmed by Lee et al. (2011) which states that shareholders of companies with poor corporate governance could suffer losses due to dishonest disclosure that led to the asymmetry of information . Several previous studies found a significant negative relationship between the independent directors, audit committee independence and size of the asymmetry of information commissioner (Kanagaretnam et al., 2007). However, Wisnumurti (2010) found that size and composition of board of comissionaire did not have significant effect on information asymmetry and earning management. Another research by Saeed (2012), also found contrast result, in which a significant positive relationship is occured between board size and asymmetry of information. In addition to the internal mechanism, external mechanisms are needed to supervise the company's disclosure (Walsh and Seward, 1990). In this case, the external auditor role is to ensure that shareholders accept the financial statements as a means of communicating financial information with adequate disclosure of the company management (Wahyuni and Fitriany, 2012). Zulaika (2009) stated that the auditing process is one of the mechanisms used to control the behavior of management. It will be effective if carried out by a qualified auditor, because a qualified auditor may detect misstatements or fraud better than low quality auditors (Owhoso et al., 2001). In some previous studies, specialist auditors are used as a proxy of audit quality (Almutairi et al, 2009; Primadita and Fitriany, 2012). Specialist auditors are more effective in detecting errors and irregularities that occurred in the financial statements, so they could assist the company in providing a better profit information (Wahyuni and Fitriany, 2012). 2
Research on the relationship between audit quality and information asymmetry previously by Clinch et al. (2010) showed a significant negative correlation between the asymmetry of information and audit quality proxy, ie. specialist auditors. However, another study by Dunn et al. (2000) showed that specialist auditors as a proxy for audit quality had no significant effect on the transparency of information. Based on the inconsistency showed in the previous paragraph and the phenomenon occured in property and real estate sector, the effectiveness of implemented corporate governance mechanism and audit quality in minimalizing information asymmetry become questionable. Therefore, the research questions of this paper are as follow: 1) Are corporate governance mechanism and audit quality simultaneoulsly affect the level asymmetric information in property and real estate sector?; 2) Does corporate governance mechanism have any partial effect on information asymmetry?; 3) Does audit quality have any partial effect on information asymmetry? II . Theory and Hypotheses Development 2.1 Theoritical Review 2.1.1 Agency Theory According to Jensen and Meckling (1976 ) agency theory is a theory that discusses the agency relationship. The definition indicates that the agent does not always make decisions that aim to meet the best interests of the principal. When conflicts of interest arise between them, especially in conditions where there is information asymmetry, then there will be the possibility of deceiving shareholders or management for not doing its job. 2.1.2 Information asymmetry According to Akerlof (1970) information asymmetry is a condition in which one party in a transaction has better information than the other party. This usually occurs in the management where the manager has better information than investors because of the internal users (management) have direct contact with the entity or his company and know the significant events that occur, so that its dependence on the information is not as much as external users. According to Porwal (2001: 53), there are two kinds of information asymmetry, namely: 1. Adverse selection, i.e that the managers and other people in usually know more about the state and prospects of the company than outside investors. And the fact that it may influence the decision to be taken by the shareholders who does not submit information to shareholders. 2. Moral hazard, i.e that the activities carried out by a manager is not entirely known to the shareholders and lenders. So that managers can take action without the knowledge of the shareholders in violation of the contract and the actual ethics or norms may not be worth doing. 2.1.3 Bid Ask Spread Bid-ask spread is the difference between the purchase price (bid) of investors with the highest selling price (ask) filed by companies or sellers of securities (Primadita and Fitriany, 2012). The increase in information asymmetry increase the risk of trade between market makers and informed traders and will reflect the bid- ask spread is higher for a security (Callahan et al., 1997). According to Huang and Stoll (1997), there are several components to form the bid - ask spread, among others: 1) Ordering processing costs ; 2) Inventory holding costs, and, 3) adverse selection.
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2.2 Theoretical Framework and Hypothesis Development 2.2.1 Mechanisms of Corporate Governance and Information Asymmetry A. The size of the Board of Commissioner (BOC) and Information Asymmetry Corporate Governance is a mechanism of rules, procedures and a clear relationship between the parties who took the decision and the parties who exercise control over the decision. Corporate Governance Mechanisms is directed to oversee and ensure the passage of the governance system in an organization (Ujiyantho , 2005). Corporate governance mechanisms in this study include (1) the size and composition of the BOC, (2) the size of the audit committee, and (3) the concentration of ownership. Size is defined as the sum BOC in which the members of BOC incorporated in the BOC of the company (Elbadry et al., 2010). The larger the size of the Board of Commissioners is, the more experts are included as the members. Klein (2002) in Kanagaretnam et al. (2007) states that the greater the size of the Board of Commissioners is, then the supervision of management will be more effective because the BOC has the ability to carry out more tasks than smaller BOC. Therefore, firms with greater BOC size can reduce the level of information asymmetry around earnings announcements . In a previous study, Kanagaretnam et al. (2007) found that the size of the Board of Commissioners has a significant negative effect on information asymmetry. This is supported by research Elbadry et al. (2010) which shows that the larger the size of the Board of Commissioners is, the higher its ability to minimize information asymmetry. H1A : The size of the Board of Commissioners effect Information Asymmetry B. Composition of the Board of Commissioners and Information Asymmetry The composition of the board of commissioners is regulated in Bapepam LK No. Kep-305/BEJ/07-2004. Restrictions on the composition of the independent board members by 30% is expected to able maintaining BOC’s independence. According Elbadry et al. (2010), an independent commissioner more effective in monitoring management and thus, motivate management to improve performance. In a previous study, Kanagaretnam et al. (2007) and Saeed (2012) found that the independence of the board of commissioners will reduce information asymmetry. Meanwhile, Fama and Jensen (1983) in Bakhshi et al. (2011) stated that the board members from outside of the company are less allied with management and tend to encourage the company to do a better disclosure to outside investors, therefore reducing the adverse selection component . H1B : The composition of the Board of Commissioners effect Information Asymmetry C. The size of the Audit Committee and the Information Asymmetry The size of the Audit Committee is the number of members of the Audit Committee. The more number of Audit Committee’s independent members are, the greater the presence of the non executive members (independent member) is occurred (Elbadry et al., 2010). Furthermore, Elbadry et al. (2010) stated that the higher level of independency in the audit committee is, the more effective audit committee's performance in implementing good corporate governance . Previous research by Becker - Blease and Irani (2008) in Bakhshi et al. (2011) showed that the size of the audit committee has an effect to minimize information asymmetry. While Elbadry et al. (2010) found that the number of members who are members of the Audit Committee decreased the information asymmetry . H1C :The Size of the Audit Committee effects Information Asymmetry
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D. Concentration of Ownership and Information Asymmetry Concentration of ownership showed the largest percentage of shares owned by the investor. The greater the concentration of ownership of shares is, the greater the influence of the investors to be able to drive management decisions to suit its interests against the interests of other stakeholders ( Elbadry et al., 2010). In a previous study, it is concluded that the concentration of ownership has a significant effect on information asymmetry because of the link between ownership concentration and the amount of informed trading (Byun et al., 2011). This is similar to Nekounam et al. (2012) which shows that in firms with concentrated share ownership, the largest shareholder has an access to and control over confidential information resulting in increased information asymmetry. H1D: Ownership Concentration effects Information Asymmetry 2.2.2 Audit Quality and Information Asymmetry Audit quality is defined DeAngelo (1981) as: " ... Market - assessed joint probability that a given auditor will both (1) discover a breach in the client 's accounting system and (2) report the breach . " Quality audit is to detect errors in financial statements more carefully. This is supported by Owhoso et al. (2001) which states that the audit will be effective, if done by a qualified auditor where as a qualified auditor may detect misstatements or fraud better than auditors with low quality. One of the factors that affect the competence of auditors are understanding of industry -specific conditions (Schauer, 2002). The audit is important in capital markets because the audit is one way to reduce information asymmetry and agency costs associated. This is due to a better audit quality is more likely to detect and avoid accounting errors and misstatements. So, it can be said that a good audit quality reduces information asymmetry more than the poor audit quality (Almutairi et al., 2009) Previous studies found a significant negative effect of audit quality is proxied by specialist auditors to information asymmetry (Primadita and Fitriany, 2012). This is because the auditor specialists are often assigned exclusively to a particular industry, so they have the experience and wider knowledge of the industry which became his specialty (Mayhew and Dunn, 2002). While the Almutairi et al. (2009) concluded that a decrease in the chance of private information contained in the companies audited by specialist auditors, is due to increased disclosure and audit quality. This can be seen by the decrease in the bid - ask spread (which is a proxy for measuring information asymmetry) in the companies audited by specialist auditors. H2 : Audit Quality Impact of Asymmetric Information III . Research methods This study is classified as descriptive research verification (Sekaran, 2011: 158). The company studied is sector of Property, Real Estate and Building Construction which are listed in the Indonesia Stock Exchange during 2009 to 2011. The research data is the sample from the purposive sampling technique and it is obtained 30 sample companies or 90 observations. The definition of variables in this study is as follows: A. Independent variables 1) Corporate Governance Mechanism; Corporate Governance Mechanisms and oversee directed to ensure the passage of the system of governance in an organization (Ujiyantho, 2005).
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a) The size of the Board of Commissioners (X1.1); The number of Commissioners who are members in the Board of Commissioners (Elbadry et al., 2010). It is proxied by the number of commissioners.
b) Composition of the Board of Commissioners (X1.2); The number of independent directors at least 30% (thirty percent) of the total number of commissioners (Bapepam, 2004). The measurement of it is using Percentage of commissioners from outside the company compared to the total number of commissioners.
c) The size of the Audit Committee (X1.3); The Audit Committee consists of at least one Independent Commissioner and at least two (2) other members are from outside of Publicly Listed Companies (Bapepam, 2004). It is proxied by the number of audit committee
members. d) Ownership Concentration (X1.4); Concentration of ownership is defined as the sum of the largest shareholder and the total shares held presentation (Hitt et. al, 2008). It is proxied by the percentage ownership of the largest shareholder in the company. 2) Audit Quality(X2); market-assessed joint probability that a given auditor will both (1) discover a breach in the client's accounting system and (2) report the breach (DeAngelo, 1981). The measurement is using specialists auditor, whose clients’ total assets is at least 30% of the total assets of the entire company in an industry. B. Control Variables 1) Return Volatility (X3); the uncertainty of the return on investment in shares (Prasetyo, 2006). The proxy of it is standard deviation of daily return. Its proxy is by Standard deviation of daily return. 2) Stock Price (X4); Costs incurred to purchase securities in the capital market (Prasetyo, 2006). It is measured by average daily trade price. 3) Firm size (X5); A scale in which companies are classified whether it is small or large using a variety of ways (Tarigan, 2011). Its proxy is natural logarithm of total assets. C. Dependent Variable 1) Information asymmetry (Y); Information asymmetry is a condition in which one party in a transaction has better information than the other party (Akerlof, 1970). The measurement of it is using average daily bid-ask spread during the study period Measurement scale used in this study is ratio scale, except for audit quality variable which uses nominal scale. This research analyzed by multiple regression with the following equation :
Description : BAS : annual bid-ask spreads UDK : board size KDK : the composition of the board of commissioners UKA : the size of the audit committee KK : concentration of ownership SPEC : specialist auditors PRICE : stock price VOL : return volatility SIZE : the size of the company VI . Data Analysis And Discussion 4.1 Descriptive Statistics
The descriptive statistic analysis is presented in table 4 below: Table 4. Descriptive Statistics Analysis 6
N
Minimum
Maximum
Mean
Std. Deviation
UDK
90
2.0000
8.0000
4.4000
1.3966
KDK
90
.2500
.6667
.4440
.0974
UKA
90
2.0000
4.0000
3.0667
.3284
KK PRICE VOL SIZE BAS Valid N (listwise)
90 90 90 90 90 90
.0585 50.0039 .0017 25.6277 .0044
.9288 1539.4715 .1582 30.5050 .4149
.4782 300.7994 .0507 28.3632 .0601
.2356 264.9503 .0352 1.1005 .0830
in Appendix 4 shows the average board size listed companies in the property and real estate sector according to the number of board members is at 4.4000 with a standard deviation of 1.3966. More than 50% of observations have commissioners above average. Thus, indicates that these companies have relatively commissioners with a large enough capacity to perform supervisory tasks and provide advice to the Board of Directors . Variable composition of the board of commissioners is 25% smallest owned by PT Adhi Karya (Persero)Tbk in 2009. The percentage is lower than the number required by the provisions of Bapepam No. Kep-305/BEJ/ 07-2004, in which independent commissioners’s composition from the total board members is at least 30%. However, other 98.89% observations have been complied to Bapepam. Variable sizes listed company's audit committee in the property and real estate according to the number of audit committee members is equal to 3.0667. Although as much as 88.89% companies have an audit committee size as the minimum amount, but this is quite reasonable, considering the low diversity of company size. Concentration of ownership of the company's variable indicates that many companies with ownership concentration below average , but the overall observation of only 13.04% observation that has the largest percentage of shareholding is less than 20%. This indicates that the concentration of ownership in the property and real estate industry tends to be concentrated, where shares in the listed companies controlled by one or more shareholders. In setting research specialist auditors, the authors found that for property and real estate industry, the minimum percentage of market share that is more appropriate to use to determine a specialist auditor is 10%, according to research by Ferguson and Stokes (2002) in Mayhew and Wilkins (2002). This consideration on the number of public accounting firms that perform audits in the industry with a market share that is very diverse, making it difficult for public accounting firms to gain market share greater than 30% in the industry. This is evidenced by the standard deviation value of the public accounting firm's market share is larger than the average value. Based on the test results in Table 4.3 (appendix 1), during the years of observation, the number of companies who use specialist auditor services is reasonably stable. However, in total, there are 53 observations or more than 50% of observations that do not use the services of a specialist auditor. This indicates that the quality of the audit of financial statements in the property and real estate industry is relatively low . Average variable asymmetry of information companies listed in the property and real estate according to the ratio of the bid- ask spread is equal to 0.0601 or 6.01% with a standard deviation of 0.0830. Of 65 the total observations, observations that have high levels of information asymmetry are below average. These results indicate that the degree of information asymmetry in the property and real estate industry has been relatively low. 7
Variable price of the stock has an average of Rp 300.7994 with a standard deviation of 264.9503. Based on the test results, there were 60 observations which are below average. The number of companies with low share prices indicate that the average stock price in the property and real estate industry is also relatively low. Return volatility variable has an average of 0.0507 with a standard deviation of 0.0352. From the overall observation, there are 64 observations that had an average return volatility below sector average property and real estate industry. The number of observations with a standard deviation of returns below the industry average, indicating that the industry return volatility is low. Means, fluctuations in the daily stock returns in the industry is quite stable. This indicates a low level of risk in transactions on industrial property stocks and real estate. The variable size of the company according to the average natural logarithm of total assets have an average of 28.3632 with a standard deviation of 1.1005. The results showed that although the size of the companies listed property and real estate industry was not very diverse, but they are relatively of large size. This indicates that company who owns more resource becomes the spotlight in the market. Thus, the company disclose more information than small-scale enterprises. 4.2. Classical Test Assumptions A. Normality test In this study, testing normality of data using non-parametric statistical test of Kolmogorov Smirnov. Kolmogorov-Smirnov test results presented in Appendix 2. Based on the normality test shows that the significance level is equal to 0.930 which is above 0.05. Thus the value of the residuals are normally distributed, so that the model of this research has been declared eligible of normality assumption. B. Multicollinearity test According Ghozalli (2011: 105) multicollinearity test aims to test whether the regression model found a correlation between the independent variables. This study uses tolerance value and VIF to detect the presence or absence of multicollinearity problems. Test results obtained is presented in Appendix 3 that illustrates all tolerance values is above 0.10 or equal to VIF values below 10. This suggests that there is no multicollinearity between the independent variables in the multiple linear regression model in this study. C. Autocorrelation test Autocorrelation test aims to test whether the linear regression model there is a correlation between the error in period t with bullies bully error in period t - 1 (previous) (Ghozalli, 2011: 110). Autocorrelation test results with the Durbin - Watson test is presented in Appendix. 4. Based on Durbin-Watson table at the 5% significance with a sample of 72 and the number of independent variables 8 (k = 8), the Durbin - Watson tables will provide value du = dl = 1.8706 and 1.3815. Therefore, the value of dw = 2.153 , then the regression model is the presence or absence of autocorrelation can not be inferred from the value of 4 - dU < dW < 4 - dL is 4 to 1.8706 < 2.153 < 4 to 1.3815. Based on these results, it can be concluded that the research data does not occur autocorrelation. D. Heteroscedasticity test Heteroscedasticity test aims to test whether the regression model of the residual variance inequality occurs from one observation to other observation (Ghozalli, 2011: 139). The statistical test was conducted by the author Glejser test. Heteroscedasticity test results by Glejser method presented in Appendix.5. It can be seen that of all the independent variables are not statistically significant, as evidenced by the level of significance of all independent variables > α = 5%. Thus, it 8
can be concluded that there is no heteroscedasticity in multiple linear regression models, so the regression model is appropriate. 4.3 Discussion A. The Effect of corporate governance mechanisms and audit quality simultaneously to the asymmetry of information Based on Appendix 6 and 7 is known The coefficient of determination (R2)=0.846 with a significance level 0.00 less than α=5%. This shows that board size, board composition, audit committee size, ownership concentration as corporate governance mechanism and audit quality simultaneously affect asymmetry of information. A. The Effect of corporate governance mechanisms and audit quality partially to the asymmetry of information 1) The Effect of Size of the Board of Commissioners on Information Asymmetry Based on the Appendix 8, It shows that β1=-0.002 with level of sig 0.367 more than α=5%. That means, the size of the board of commissioners does not affect information asymmetry. The results of this study are not consistent with the research by Kanagaretnam et al. (2007) who found that the size of the Board of Commissioners has significant negative effect on information asymmetry. Klein (2002) in Kanagaretnam et al. (2007) states that the greater the size of the BOC, the BOC has the ability to carry out more tasks than smaller BOC. Therefore, firms with greater BOC size can reduce the level of asymmetry information. Nevertheless, this shows that despite having a great working capacity, the board of commissioners in the property and real estate industry has not been able to carry out effective management oversight duties. 2) The Effect of Composition of the Board of Commissioners on Information Asymmetry Based on the Appendix 8, It shows that β2=-0.030 with level of sig 0.301 more than α=5% it is known that the composition of the board of commissioners does not affect the information asymmetry. The results of this study are not consistent with studies by Elbadry et al. (2010), Kanagaretnam et al. (2007), and Saeed (2012) who found that the independence of the board of commissioners will reduce asymmetry information. Veronica and Sidhartha in Wisnumurti (2010) reveals, the appointment of commissioners by the company may only be done to fulfill the obligation only, and not intended to enforce corporate governance in the company . Thus, the appointment of an independent commissioner impressed are not serious. Regardless of the performance of independent directors. In addition, the terms of the composition of at least 30% of independent directors may not have been high enough to cause the independent directors to dominate the measures taken by the board of commissioners. Thus, supervision of management becomes ineffective . 3) The Effect of Size of the Audit Committee on Information Asymmetry Based on the Appendix 8, It shows that β3=-0.007 with level of sig 0.324 more than α=5%, it means that the size of the audit committee does not affect the information asymmetry. These results are not consistent with studies by Elbadry et al. (2010). The results of the Elbadry et. al. study (2010) showed that the number of members who are members of the Audit Committee will decrease the information asymmetry. The results of this study demonstrate that the mechanism of the audit committee of the company is limited to the fulfillment of the formalities of existing regulations, namely to comply with Bapepam. Thus, although the company has an audit committee in accordance with Bapepam, but the role of audit committees in overseeing the audit process goes both by internal and 9
external auditors are not effective. Ineffective audit committee performance, are causing the failure of the audit committee's role in minimizing information asymmetry . 4) The Effect of Concentration of Ownership on Information Asymmetry Based on the Appendix 8, It shows that β4=-0.22 with level of sig 0.129 more than α=5%, it shows that the ownership concentration variables has no significant effect on information asymmetry. The results of this study are not consistent with the research by Byun et al. (2011) and Nekounam et.al. (2012) which showed a significant positive effect between concentration of ownership with the information asymmetry. This suggests that, among companies with centralized and distributed shareholding tendency did not show any difference in the level of significant information asymmetry. 5) The Effect of Audit Quality on Information Asymmetry Based on the Appendix 8, It shows that β5=-0.21 with level of sig 0.001 less than α=5%, it shows that the negatively affect audit quality to information asymmetry. The results of this study are consistent with previous studies that found a significant negative influence over audit quality which is proxied by specialist auditors to information asymmetry (Primadita and Fitriany, 2012). Meanwhile, in the research by Almutairi et al. (2009), it is concluded that a decrease in the chance of private information contained in the companies audited by specialist auditors, are due both to increased disclosure and audit quality. 6) The Effect of Stock Prices to Information Asymmetry Based on the Appendix 8, It shows that β6= 0.000067 with level of sig 0.000 less than α=5%, It shows this indicates that the stock price as a control variable has positive effect on information symmetry. These results are not consistent with the study conducted by (Almutairi et al, 2009). However, in this study, a positive relationship indicates that the holding cost (cost of ownership) component dominates the stock market, which increases the information asymmetry. 7) The Effect of Volatility Return on the Information Asymmetry Based on the Appendix 8, It shows that β7= 1.234 with level of sig 0.000 less than α=5%, the control variable return volatility has a positive effect on information asymmetry. This is consistent with research by Kanagaretnam (2009), and Bhushan (1989) and Schauer (1999) in Primadita and Fitriany (2012). The study, indicate that return volatility increases the likelihood of a gap between the desired expected return generated by the informed traders private information and public information with the expected return generated by public information only. This has encouraged the uninformed traders to protect themselves from losses suffered related to the volatility of the stock return is higher by increasing the bid- ask spread. This is consistent with the observation by the author, where the risk of investing in the property and real estate industry is quite low, and it is followed by a lower information asymmetry as well. 8) The Effect of Company Size on Information Asymmetry Based on the Appendix 8, It shows that β8= -0.16 with level of sig 0.000 less than α=5%. It means that firm size is significantly influence the information asymmetry. Test results indicate a negative effect between firm size and asymmetry of information. That is, the larger the size of the company, the lower the level of the enterprise information asymmetry . 10
The results of this study are consistent with Kanagaretnam et al . Research (2007) and Haniati and Fitriany (2010), in which the larger companies do a lot more disclosure, so that more can reduce the information asymmetry. This is because large companies have the ability to recruit skilled employees. Because of the magnitude of the resources of the company, then a large size company will become much more highlighted by the market and the general public. Revealing more information is part of the company's efforts to achieve transparency. Therefore, the bigger a company is, the smaller the degree of asymmetry. The test results are consistent with descriptive statistics were performed. The size of the real estate property industry companies is large enough, so that companies have lower information asymmetry as well. V. Conclusion, Research Limitation and Recoendation 5.1 Conclusion
Based on the research results, it can be concluded a few things as follows:
1) The size of the board of commissioners, composition of the board of commissioners, the size of the audit committee, and the concentration of ownership as corporate governance mechanism along with audit quality, stock price, return volatility, and firm size are simultaneously and significantly affect the information asymmetry. 2) The partial influence of each variable on asymmetry information, is as follows: a) Board size has no significant effect the asymmetry of information. b) Composition of the BOC has no significant effect on information asymmetry. c) Size of the audit committee has no significant effect on information asymmetry. d) Ownership concentration has no significant effect information asymmetry. e) Audit quality has significant negative effect on information asymmetry. f) Share price has significant positive effect on information asymmetry. g) Return volatility has significant positive effect on information asymmetry. h) Sized companies has significant negative effect on information asymmetry. 5.2 Research Limitation This study was only done on the property and real estate industry. Thus, research on other industry have to be conducted.
5.3 . Research Recomendation 1) For companies listed on the Indonesia Stock Exchange : a) The company needs to improve the effectiveness of the board of commissioners and functions of the audit committee in order to fulfill its function to protect the interests of shareholders and other stakeholders. Moreover, it also encourages voluntary disclosure of information relating to the company for both large and small companies, thus encouraging the establishment of a uniform transparency. b) This study found that specialist auditors proven to detect errors in financial statements more carefully and report bugs found in a more independent, so companies are advised to use specialist auditor services. 2) This study found that the presence of Bapepam LK (SEC) has not been able to streamline the functions of corporate governance mechanism, so that the Bapepam LK is advised to review the implementation of predefined rules relating to corporate governance mechanisms, not only in terms of quantity or where the organs but also the effectiveness of the role entire organ in minimizing information asymmetry and protect the interests of shareholders and parties related to the company. 11
3) For auditors, the study showed that the presence of specialist auditors can significantly encourage the achievement of transparency. Therefore, it is advisable for public accounting firms to continuously improve the competence, independence and credibility so as to improve its competitiveness in the industry. 4) For further research, it is suggested to examine the same variable in different industries for consistency proof
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Haniati, S. dan Fitriany. (2010). Pengaruh Konservatisme terhadap Informasi Asimetri dengan menggunakan Beberapa Model Pengukuran Konservatisme. Simposium Nasional Akuntansi XIII Purwokerto 2010. Hitt, M. A., Ireland, R. D., dan Hoskisson, R. E. (2008). Strategic Management: Competitiveness and Globalization Concept & Cases (Eighth Edition). USA: South-Western Cengage Learning. Huang, D. R., dan Stoll, H. R.(1997). The Components of the Bid-Ask Spread: A General Approach. The Review of Financial Studies Winter 1997, 10 (4), 995-1034. Jensen, M. C., dan Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics 1976, 3 (4), 305-360. Jiang, L., Jeny-Cazavan, A, dan Sophie, A. (2012). Who are Industry Specialist Auditor?. Diunduh dari http://www.halshs.archives-ouvertes.fr [21 Februari 2013] Kanagaretnam, K.., Lobo, G. J., dan Whalen, D. J. (2007). Does Good Corporate Governance Reduce Information Asymmetry Around Quarterly Earnings Announcements?. Journal of Accounting and Public Policy, 26(4), 497-522. Lee, S., Han, S. H., dan Kim, M. (2011). Information Asymmetry, Corporate Governance, and Shareholder Wealth: Evidence from Unfaithful Disclosures of Korean Listed Firms. Journal of Accounting and Public Policy. Lin, H., dan Huang, C. (2011). Exploring agency problems in corporate governance from the perspective of economic ethics of the capitalist market. African Journal of Business Management, 5(28), 111442 – 11449. Mayhew, B. W., dan Wilkins, M. (2002). Audit Firm Industry Specialization as a Differentiation Strategy: Evidence from Fee Charged to Firms Going Public. Auditing: A Journal of Practice and Theory, 22 (2), 33 - 52. Diunduh dari http://www.delvesgroup.com [20 Februari 2013] Nekounam, J., Nasr, M. D., Abdi, M., dan Goodarzi, M. (2012). Explain the Relationship between Ownership Concentration and Information Asymmetry Firms Accepted in Tehran Stock Exchange. Journa of Basic and Applied Scientific Research, 2(7), 7142 – 7146. Owhoso, V. E., Messier, W. F., dan Lynch, J. G. (2001). Error Detection by Industry-Specialized Teams during Sequential Audit Review. Journal of Accounting Research, 40(3), 883 – 900. Porwal, L. S. (2001). Accounting Theory (Third Edition). India: Tata McGraw-Hill. Prasetyo, H. (2006). Analisis Pengaruh Hari Perdagangan terhadap Return, Abnormal Return, dan Volatilitas Return Saham. Tesis Universitas Diponegoro: tidak dipublikasikan Primadita, I. dan Fitriany. (2012). Pengaruh Tenure Audit dan Auditor Spesialis terhadap Informasi Asimetri. Simposium Nasional Akuntansi XV, Banjarmasin. Saeed, S. S. (2012). Corporate Governance and Information Asymmetry Among UAE Listed Companies. Master Thesis, Universiti Utara Malaysia. Diunduh dari http://etd.uum.edu.my/ [1 Maret 2013] 13
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No
Appendix.1 The Calculation of Market Share Client of Auditor Specialist % Client Market share The Name of Public Accountant Firms 2009 2010 2011
1
Achmad, Rasyid, Hisbullah & Jerry - ARH & J
0,13%
0,10%
-
2
Anwar & Rekan - DFK International
0,09%
0,07%
0,07%
3
Aryanto, Amir Jusuf, Mawar & Saptoto – AAJ
14,98%
18,70%
19,35%
4
Benny, Tony, Frans & Daniel
-
-
0,25%
5
Budiman, Wawan, Pamudji & Rekan
-
-
0,09%
6
Doli, Bambang, Sudarmaji & Dadang
1,15%
0,88%
-
7
Drs. Binsar B. Lumbanradja
0,22%
0,21%
-
8
Drs. Daniel Hassa & Rekan
0,22%
-
-
9
Dwi SC Public Acountant
-
-
0,18%
10
Eddy Prakarsa Permana & Siddharta – EPPS
1,87%
-
-
11
Hadori Sugiarto Adi & Rekan – HLB
1,07%
5,75%
7,37%
12
Hasnil, M. Yasin & Rekan
-
0,22%
-
13
Hendrawinata, Eddy & Siddharta – Kreston International
-
1,62%
1,53%
14
Heru Pramono
0,20%
0,16%
-
15
Husni, Mucharam & Rasidi – HRM
4,09%
-
-
16
Jamaluddin – JAS
0,12%
0,12%
0,12%
17
Johan Malonda Astika & Rekan – Baker Tilly International
1,70%
2,50%
2,04%
18
Kosasih, Nurdiyaman, Tjahjo & Rekan – Geneva
1,52%
-
-
19
Kosasih, Nurdiyaman, Tjahjo & Rekan – Crowe Horwath
-
1,26%
11,19%
20
Maksum, Suyamto, Hirdjan & Rekan
-
0,07%
-
21
Mulyamin Sensi Suryanto – Moore Stephens
18,05%
17,57%
17,46%
22
9,40%
9,15%
8,94%
2,59%
2,75%
3,11%
24
Osman Bing Satrio & Rekan –Delloite Paul Hadiwinata, Hidajat, Arsono, Ade Fatma & Rekan – PKF Pieter, Uways & Rekan - KS Intl
4,14%
-
-
25
Purwantono, Suherman & Surja - Ernst & Young
19,26%
16,20%
17,82%
26
Rama Wendra - Parker Randall
3,08%
2,23%
-
27
Riza, Wahono & Rekan
3,00%
-
-
28
Soejatna, Mulyana & Rekan
-
3,27%
3,59%
29
Tanubrata Sutanto & Rekan - BDO Tjahjadi, Pradhono & Teramihardja – Morison International TOTAL Average Deviation Standard
4,34%
6,11%
6,88%
8,78%
11,08%
-
100% 4,55% 5,73%
100% 4,76% 6,00%
100% 6,25% 6,65%
23
30
15
Appendix.2 Normality test with Kolmogorov-Smirnov Unstandardized Residual N Normal Parametersa,b Most Extreme Differences
0E-7 .01861621
72 0E-7 .01865160
.064
.094
.064 -.046
.094 -.050 .543 .930
Kolmogorov-Smirnov Z Asymp. Sig. (2-tailed) a. Test distribution is Normal. b. Calculated from data. Appendix.3 Multicollinearity test with Tolerance and VIF values Model (Constant) PRICE VOL SIZE UDK KDK UKA KK SPEC
Collinearity Statistics Tolerance VIF .493 .855 .608 .589 .778 .923 .606 .580
2.027 1.170 1.645 1.698 1.285 1.083 1.650 1.724
Information not occur multicollinearity not occur multicollinearity not occur multicollinearity not occur multicollinearity not occur multicollinearity not occur multicollinearity not occur multicollinearity not occur multicollinearity
Appendix.4
Autocorrelation Test with the Durbin-Watson test after Outliers Omitted Data Model Summaryb Model R R Square Adjusted R Std. Error of the Durbin-Wa Square Estimate tson 1 .920a .846 .827 .01976 2.153 a. Predictors: (Constant), SPEC, KDK, UKA, VOL, SIZE, KK, UDK, PRICE b. Dependent Variable: BAS
16
Appendix.5 Heteroscedasticity Test with Metode Glejser Coefficientsa Model Unstandardized Standardized t Sig. Coefficients Coefficients B Std. Error Beta (Constant) .067 .050 1.337 .186 PRICE 8.420E-006 .000 .190 1.181 .242 VOL .083 .046 .221 1.812 .075 SIZE -.002 .002 -.151 -1.043 .301 UDK -.002 .001 -.217 -1.479 .144 KDK -.004 .016 -.028 -.215 .830 UKA -2.552E-005 .004 -.001 -.007 .995 KK .008 .008 .145 1.000 .321 SPEC .000 .004 .019 .131 .897 a. Dependent Variable: AbsRES_1 Appendix.6 Model Summaryb Model R R Square Adjusted R Std. Error of the Durbin-Watso Square Estimate n 1 .920a .846 .827 .01976 2.153 a. Dependent Variable: BAS b. Predictors: (Constant), PRICE, VOL, KDK, UKA, KK, UDK, SPEC, SPEC Appendix.7 ANOVAa Model Sum of Squares df Mean Square F Regression .136 8 .017 43.413 1 Residual .025 63 .000 Total .161 73 a. Dependent Variable: BAS b. Predictors: (Constant), PRICE, VOL, KDK, UKA, KK, UDK, SPEC, SPEC Appendix.8 Coefficient Unstandardized Standardized Coefficients Coefficients Model T B Std. Error Beta (Constant) .418 .087 4.819 PRICE 0.000067 .000 .386 5.492 VOL 1.234 .079 .831 15.562 SIZE -.015 .003 -.301 -4.750 1UDK -.002 .002 -.058 -.908 KDK -.030 .028 -.058 -1.043 UKA -.007 .007 -.051 -.995 KK .022 .014 .098 1.538 SPEC -.021 .006 -3.335 a. Dependent Variable: BAS
Sig. .000b
Sig. .000 .000 .000 .000 .367 .301 .324 .129 .001 17
18
