Factors Influencing Disclosure Index

1115 Table 3 Descriptive Statistics Variable Min Max Mean Std. Dev. P3LKE 0,146 0,560 0,286 0,063 CG_INDEX 0,461 0,804 0,605 0,067 RIGHT_SH 0,420 0,623 0,513 0,037 EQ_SH 0,528 0,944 0,826 0,074 ROLE_ST 0,333 1,000 0,586 0,149 DISC_TR 0,438 0,990 0,657 0,103 RESP_BRD 0,373 0,849 0,506 0,099 AUDIT 0,000 1,000 0,416 0,494 SIZE in Rp million 2.167 82.059 3.346 8.956 AGE 2,000 30,000 13,437 5,297 ROA -0,270 0,388 0,051 0,101 Valid N 190 1116 Tabel 5.6 Regression of Factors Influencing Disclosure Index Panel A P3LKE = a + a 1 CG_INDEX + a 2 AUDIT + a 3 SIZE + a 4 AGE + a 5 ROA + e 1a Variable Coeff. t-stat p-value C -0,473 -6,091 0,000 CG_SCORE 0,007 0,106 0,458 AUDIT -0,021 -2,499 0,007 SIZE 0,028 9,137 0,000 AGE 0,000 0,542 0,294 ROA 0,027 0,803 0,211 Adj. R2 0,441 F-stat 30,880 p-value F- stat 0,0000 Panel B P3LKE = b + b 1 RIGHT_SH + b 2 EQ_SH + b 3 ROLE_ST + b 4 DISC_TR + b 5 RESP_BRD+ b 6 AUDIT + b 7 SIZE + b 8 AGE + b 9 ROA + e 1b Variable Coeff. t-stat p-value C -0,450 -5,439 0,000 RIGHT_SH 0,158 1,570 0,059 EQ_SH -0,082 -1,625 0,053 ROLE_ST -0,073 -2,758 0,003 DISC_TR 0,081 1,803 0,037 RESP_BRD 0,051 0,997 0,160 AUDIT -0,016 -1,917 0,028 SIZE 0,025 8,359 0,000 AGE 0,000 0,717 0,237 ROA 0,034 1,041 0,150 Adj. R2 0.471 F-stat 19,713 p-value F- stat 0,000 1117 Contrary to expectation, AUDIT variable had significant negative influence towards P3LKE index. This result is opposite to the finding of Singhvi and Desai 1971 and Fitriany 2001 who in their research found that the scale of public accountant firms had positive influence in disclosure level. The correlation result untabulated shows that AUDIT had significant positive influence with P3LKE index, while multi-variants testing showed negative influence. This finding may be the result of a fairly strong positive correlation between SIZE and AUDIT. The correlation of AUDIT with SIZE is biggest compared to other independent variables in the equation 1a. Positive correlation between SIZE and AUDIT shows that big companies tend to choose to be audited by Big 4 PAF compared to small companies. Company size have significant positive influence on P3LKE index. This result supports the argument that states that bigger companies have bigger political cost so that they must and are able to do a broader disclosure in financial statements. This result is possible to be influenced by how P3LKE index was calculated where it accounted all items in the checklist so that bigger companies with more complex transactions are possible to have higher P3LKE index compared to smaller companies. AGE and ROA variables showed insignificant result which means the listing age of companies and profitability level do not have any effect on the disclosure level. This might be caused by the compulsory nature of P3LKE so age and company profitability did not affect it. Test result in panel B shows that 4 out of 5 components of CG have positive influence to disclosure level, i.e. rights of shareholders, equitable treatment of shareholders, role of stakeholders, disclosure and transparency. Only 1 component, that is responsibility of board, that does not have a significant effect on disclosure level. Based on the descriptive statistics explained on the previous part, it is identified that responsibility of board component is the CG index component with the lowest average value compared to other components. The low average value and the insignificancy of aforementioned CG component can indicate the ineffectiveness of board, both directors and commissioners, including company‘s disclosure practices.

5. Conclusion

P3LKE index for 2007 was rather low at approximately 28. The low P3LKE index average appeared to be evenly spread, revealed from the average value of deviation standard at 5-6. While the average P3LKE index for each industry, namely manufacture, real estate, trade, animal husbandry, transportation, telecommunication, 1118 plantation, hotel, construction, highway and investment, is: 27,59, 28,59, 26,81, 26,06, 30,39, 32,52, 32,01, 28,21, 24,64, 28,51, dan 38,81. The development of disclosure level P3LKE index tends to increase from 2001 until 2007. 2001 was the year when P3LKE was issued and in that year the disclosure level was the lowest at approximately 22. 2002 and the following years are the period where P3LKE has been implemented and showed an increase in disclosure to 25-27. Although there was an increase, it was not significant at just approximately 3-5. Test result in panel B showed that 4 out of 5 components of CG have positive influence to disclosure level, i.e. rights of shareholders, equitable treatment of shareholders, role of stakeholders, disclosure and transparency. Only 1 component, that is responsibility of board, that does not have a significant effect on disclosure level. That component is the CG index component with the lowest average value compared to other components. The low average value and the insignificancy of aforementioned CG component can indicate the ineffectiveness of board, both directors and commissioners, including company‘s disclosure practices. Furthermore, company size also has positive significant influence to P3LKE index. This result supports the argument that states that bigger companies have bigger political cost so that they must and are able to do a broader disclosure in financial statements. This result is possible to be influenced by how P3LKE index was calculated where it accounted all items in the checklist so that bigger companies with more complex transactions are possible to have higher P3LKE index compared to smaller companies. This research has several limitations. First, judgment is often needed which may cause subjectivity in determining whether a disclosure item in P3LKE is given a value of No not implementing or NA not applicable. Second, the research period to see the time series of P3LKE index development is limited to manufacture industry only and the research period to test factors influencing issuer‘s compliance of PγδKE is just 1 year only, in 2007. Third, CG index calculation is based only on secondary data, so that not all aspects of CG implementation in the company are obtained. The scope of items in the checklist is also not guaranteed to precisely show the effectiveness of a company‘s corporate governance implementation. δast, the exclusion of time log aspect in the research model. For example, CG implementation in year t will only affect the quality of disclosure in year t+1. This research has an implication for regulator in that they need to review the implementation of P3LKE and to give reward and punishment for the execution of that regulation, as well as to formulate P3LKE based on VIII.G.7 and PSAK and to