Benefits of Research INTRODUCTION

13 give the opportunity to the manager to do earning management, so that it will mislead shareholders about the companys economic performance. Corporate governance is a concept based on agency theory that is expected to serve as a tool to provide assurance to investors that they will receive a return on the funds they had invested. Corporate governance is closely related to how to make the investors believe that managers will give benefit to them, by believing in that the manager will not misuse the invested fund to the illegal projects. Besides that, corporate governance also relates to how the investors control the managers Siallagan and Machfoedz, 2006. Special authority in every region in Indonesia in implementing corporate governance is based on Law no. 5 of 1974 on the Principles of Governance in the Region, as well as explaining the relationship between central and local government. After the implementation of policies to implement regional autonomy in Indonesia through Law no. 22 of 1999 as amended by Law no. 32 of 2004 on Regional Government has change a paradigm and a very basic structure, especially the local government relations Executive with the Regional Representatives CouncilDPRD Legislative. In this relationship, the Legislative delegates authority to run the government to the executive. 14 Agency problems that arise among executives tend to maximize utility self- interest in the creating or composing the local budget, because they have the advantage of information information asymmetry. As a result, executives tend to do budgetary slack. This happens due to the executive try to secure its position in the government in the point of view of legislative and the public people, even for the sake of the next election, but budgetary slack of APBD is more for personal interest among executives self-interest rather than for the benefit of society. Latifah, 2010.

2. Good Corporate Governance

a. Concept of Good Corporate Governance Good Corporate Governance indefinitely as a system which has authority and as a control to add value for all of stakeholders. As principal of corporate governance have interest for all shareholders and stakeholders in corporate governance. Understand of corporate governance according to the Turnbull Report in the UK April 1999 Corporate Governance is a company ’s system of internal control, which has principal to the management ’s risk which are significant to fulfill of its business objectives to safeguard the company ’s asset and enhancing over time the value of the sharehold ers’ investment. The Implementation involved development of GCG, have two related aspects, namely: hardware and software. The hardware includes the