P3LKE Index Results and Discussion

1112 increase but it is relatively insignificant at 3-5 from the period prior to P3LKE implementation. Table 1 P3LKE Index Descriptive Statistics Year 2007 Industry N Mean Std. Dev. Manufacture 118 27,59 4,69 Real Estate 32 28,59 5,97 Trade 29 26,81 5,58 Animal Husbandry 10 26,06 5,85 Transportation 9 30,39 4,85 Telecommunication 6 32,52 6,66 Plantation 6 32,01 7,52 Hotel 4 28,21 9,52 Construction 3 24,64 7,56 Highway 2 28,51 1,74 Investment 9 38,81 11,76 Total – including Investment 228 28,34 6,12 Total – not including Investment 219 27,91 5,40 Table 2 Manufacture Industry P3LKE Index Years 2001-2007 Year P3LKE Index 2001 21,98 2002 25,97 2003 27,18 2004 27,28 2005 24,94 2006 26,24 2007 27,19 1113 Graphic 1 Manufacture Industry Disclosure Level Development Years 2001-2007 Based on the abovementioned result the compliance level towards P3LKE is still insufficiently high. This finding needs to be of Bapepam- δK‘s attention as the stock market regulator that issued this PγδKE regulation and also of IDX‘s. Bapepam-LK and IDX need to do a more stringent supervision regarding public companies compliance of P3LKE and to find out the problems faced by those companies in implementing P3LKE. Other than that, one of the things that caused low disclosure level as explained above is the numerous items in the checklist with NA value. This is important because often it is not easy to perform a disclosure because indeed that transaction is not applicable for the aforesaid company or because the company has that transaction but for one reason or another did not disclose it No. If this issue can be identified then P3LKE index calculation no longer need to include items with NA value but only items with Yes or No values. To discover the problems faced by companies in implementing P3LKE and the difficulty in awarding No or NA value and also the opinions of related parties of the abovementioned Bapepam‘s regulation a Focus Group Discussion was conducted with various public accountants from different Public Accountant Firms PAF. A public accountant is an independent party who audited a company‘s financial statement to assert an opinion about the fairness of financial statements, therefore they are in a position of ample understanding about company disclosure and the problems in P3LKE implementation. 1114 Based on the aforementioned FGD several things are acquired: 1. The absence of disclosure for certain items in a financial statement may be caused by several things: a. Transaction does not exist in the company b. The value is immaterial, thus no need for disclosure 2. P3LKE must refer to VIII.G.7 and PSAK, because P3LKE is not a standard but a reporting model. 3. Since several standards in PSAK have been revised since 2002, then P3LKE must be revised periodically so that it is always up to date with the newest accounting standard.

4.2 Factors Influencing Disclosure Index

Descriptive statistic of the variables used can be seen at Table 3. P3LKE index value is approximately 28. While CG index value is adequate at 60.5 and the variation in sample is fairly low at approximately 6.7. Whereas for the highest average value of the 5 components of CG index is in the Equitable Treatment of Shareholders component, the lowest in Board Responsibilities component. The low value in Board Responsibility component may indicate the ineffectiveness of the board, both directors and commissioners, in the company. Only 41.6 of companies were audited by Big 4 PAF while the rest were audited by non Big 4 PAF. The size of the companies varied, the smallest had a total asset of Rp 2,167 million and the largest had Rp 82,059 million. Company age also varied from companies that had just been listed in IDX 2 years and ones that had been listed for 30 years. While if seen from profitability level, the average ROA is small at only 5.1. Table 4 provides a regression result of factors influencing disclosure level using P3LKE index. Examination result in Panel A shows that CG index does not prove to have positive influence to P3LKE index. This result is contrary to Haniffa Cooke 2002 who found that corporate governance practices had positive influence towards disclosure. To see if there are any CG components affecting P3LKE index will be seen in the next examination. 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