Problem Formulation Research Objectives

13 Because of these differences in interests, each party trying to increase the benefits for themselves. Principal wants maximum return on investment as soon as possible and that one of them is reflected by the increase in the portion of the dividend for each share owned. Agents want their interests accommodated by providing compensation, bonuses, incentives, or adequate remuneration for its performance. Principal assess the achievements agent based on its ability to maximize profits allocated to dividend. The higher the earnings, the stock price and dividend, then the agent is considered successful in increasing the performance so well that it deserves a high incentive Elqorni, 2009. To minimize the conflict of interest between the agent and the principal, it takes an independent third party as a mediator in the relationship between principal and agent. This third party is used to monitor the behavior of the manager agent is already acting in accordance with the wishes of the principal. Auditor is deemed capable of bridging the interests of the principal parties stakeholders with the manager agent in managing the corporate finance Setiawan, 2006: 62.

2. Signaling Theory

Theory suggests how should a company gives a signal to the financial report. This signal in the form of information about what has 14 been done by management to realize the wishes of the owner. The signal can be information states that the company is better than the other companies and other information Subraminiam, et al., 2009. Signaling theory stated that a good quality manufacturing company would deliberately give a signal to the market, so the market is expected to distinguish a quality company bad. In order for the signal to be effective, it must be captured the market and perceived as good, and not easily imitated by companies that are of poor quality Lianto, 2010. Signaling theory is rooted in the pragmatic accounting theory which focuses on the influence of information on changes in user behavior information. One of the information that can be used as the signal is the announcement made by an issuer. This announcement will be able to affect the price fluctuations of securities company issuers that do announcements. Companies that have a belief that the company has good prospects in the future will tend to communicate the news to the investors Lianto, 2010.

3. Corporate Governance

Corporate Governance was first introduced by the Cadbury Committee in 1992 in a report that became known as the Cadbury Report. This report will then be a decisive turning point in the world of corporate governance practices,