THE CORPORATE GOVERNANCE AND COST OF EQUITY CAPITAL IN INDONESIA. Wisudanto* Putri Ayu Rachmawati*

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1 THE CORPORATE GOVERNANCE AND COST OF EQUITY CAPITAL IN INDONESIA Wisudanto* Putri Ayu Rachmawati* Djoni Budiarjo* *University of Airlangga, Surabaya, Indonesia Abstract This research examines the effect of disclosure, ownership structure and earnings announcement lag toward the cost of equity capital on manufacturing companies listed on the Indonesia Stock Exchange 2012 and The dependent variable in this research is cost of equity capital that measure by CAPM (capital asset pricing models), while independent variables are disclosure, public ownership, managerial ownership and earnings announcement lag. Control variables used are a market to book value ratio, market capitalization, leverage and ROE. Data observations in this research are 129 firms. The Result shows that disclosure and public ownership have a significantly negative effect toward the cost of equity capital, and earning announcement lag have a significantly positive effect toward the cost of equity capital. Meanwhile, managerial ownership has no significant effect toward cost of equity capital. It means that firm who have a high level of disclosure and public ownership, and lower earning announcement lag tends to have a lower cost of equity capital. Leverage and ROE have a significantly negative effect, and market capitalization has significantly positive effect toward cost of equity capital. Whereas market to book value ratio, have no significant effect on the cost of equity capital. Keywords: cost of equity capital, CAPM, disclosure, public ownership, managerial ownership, earnings announcement lag 1. Introduction Investors always rely on the information in analyzing the potential of business. It happens because of their many uncertainties in the business world. Accurate information needed to get an idea of the risks faced along with the return in the future. Investors will respond high risk by asking high returns. The rate of return expected by investors is capital costs that have to be paid by the company. Therefore, to maximize the value of the company, it is becoming increasingly relevant for them to lower their cost of capital. The common ways to reduce the cost of capital is corporate governance mechanisms (Dahlan, 2003). This is evidenced by the survey of McKinsey and Company (2002) that investors in emerging markets will pay

2 30% more for the shares of companies with good corporate governance, rather than shares of companies with corporate governance are rated doubtful. Corporate governance mechanisms which used in reducing the cost of capital is disclosure of financial statements Samaha & Azzam, (2015) and Tran, (2014). Disclosure of financial statements used by going public companies to attract funds from investors. Companies revealed mandatory and voluntary reports as an effort to reduce investors view of the company s risk. The quantity and quality of information disclosed are also critical to prevent information asymmetry (Samaha & Azzam, 2015). Several cases that prove the importance of disclosure are scandals involving major companies such as Worldcom, Enron, Rite Aid, HealthSouth, Global Crossing and Qwest Communications (Bodie, Kane, & Marcus, 2014), causing the decline of public confidence in financial statements and all parties involved therein. In Indonesia, a similar case occurred in PT Kimia Farma Tbk, and PT Indofarma Tbk. PT Kimia Farma Tbk has been proven to perform financial fraud by enlarging their profits. This proves yet effective implementation of corporate governance in the aspect of transparency in Indonesia. Plus survey by Price Water House Coopers and the Jakarta Stock Exchange (2002), quoted from Gusnardi (2010), which put Indonesia on the 12th under Thailand on standards of corporate governance in Asia and Australia which transparency is one of the judgment aspects. In previous studies, Lopes & de Alencar (2010), Samaha & Azzam (2015) and Tran (2014), reveals that the level of disclosure can measure disclosure of financial information. Understanding the level of disclosure here is not only focused on the quantity but also the quality of disclosure itself. Higher quality of disclosure can reduce information asymmetry between management and shareholders so that the regulatory process can run effectively, and shareholders can reasonably assess management performance. A high level of disclosure which implies low information asymmetry, investors will have confidence in the company, and they tend to estimates lower risk. The risk level reflects the rate of return for investors, which in turn will lower the company's cost of equity. A separate study that needs further investigation is ownership structure and its impact on the cost of equity capital. Companies with dispersed shareholders mean having a small concentration of ownership (Samaha & Azzam, 2015) and it is more likely to attract investors. Investors liked the state where the company does not have majority shareholders who get special access regarding company information and undue influence in the decision-making process (McKinsey and Company, 2002). In other words, the higher public ownership, the more it will decrease cost of equity capital of a company (Samaha & Azzam, 2015). Other corporate governance mechanisms that can reduce agency problem is managerial ownership (M. C. Jensen & Meckling, 1976). Shares ownership by management can help pooling of interest between shareholders and manager. When the proportion of managerial ownership increased, the better performance of the company. It is caused by the reduction of conflict between managers and investors would reduce agency cost due to the opportunistic behavior of managers decreased. The decrease agency cost impact on reducing the cost of equity of the company. Tran, (2014) proved this by showing a significant negative correlation between managerial ownership with the cost of equity.

3 Also, disclosure aspect that focuses on the timeliness of earnings announcement also has the potential to affect cost of equity capital. The longer the delivery, it will cause uncertainty among investors so that they will have expected cost of equity capital higher (Samaha & Azzam, 2015). The influence of earnings announcement lag is becoming increasingly important to investigate about the cost of equity capital due fact in 2011, 66% percent of companies in Indonesia do not submit annual financial statements on time. Then, in 2013, as many as 68% of businesses do not deliver the company's annual report on time or increased 2% from Therefore, based on the background described, authors are interested in studying the effect of disclosure, public ownership, managerial ownership and earnings announcement lag on cost of equity capital. 2. Theoretical background 2.1 Estimating cost of equity capital The cost of capital can be defined as the minimum rate of return required by the owner of capital. From standpoint of the owners of capital, cost of capital is the minimum rate of return on resources they have invested in the company. At company s side, cost of capital are costs that have to be paid by them as replacement for investor s capital. Therefore, cost of capital s size depending on the source of funds used in running the company (Sudana, 2011: 133). One component of the cost of capital is cost of equity capital that can be interpreted as the minimum rate of return for investor on their investment in a particular company. In this study, the cost of equity capital is the expected rate of return of all investors who operate in the market both insiders and outsiders (M. Jensen, 2003). Investors can expect returns in the future which is not yet known exactly in value because of the uncertainty (Jogiyanto, 2013: 252). Uncertainty occurs because not enough information available to be used as a basis for decision making. Therefore, the less information received, the higher investor s expectation in the rate of return. According to Jogiyanto (2013: 257), in determining expected return can use CAPM (Capital Asset Pricing Models). CAPM approach is also relevant for the discussion because variables which used in this study are also considering risk factor. CAPM approach for estimating the cost of equity capital had previously been used by Chen, Chen, & Wei (2003), Juniarti & Yunita (2005), Armadi & Anggraeni (2014), and Samaha & Azzam (2015). Cost of equity capital in Capital Asset Pricing Models (CAPM) can be calculated using the following equation: CoECi,t = Rf,t + βi (Rm,t - Rf,t) Whereas : CoECi,t = Cost of equity capital firm i in year t Rf,t = Risk free in t period Rm,t = Market return in t period βi = Beta firm i Market returns in this study was calculated using IHSG (composite stock price index). IHSG is a reflection of the stock market condition in Indonesia. The amount of Rm,t was calculated by the following equation:

4 IHSGt IHSGt 1 Rm,t = IHSGt 1 Whereas : Rm, t = Market return in t period IHSGt = Market index in t period IHSGt-1 = Market index in t-1 period The amount of βi in this study was calculated through regression of market model by the following equation: Ri,t = α + βi (Rm,t) + ε Whereas : Ri,t = Return firm i in t period α = Constanta βi = Beta firm i Rm,t = Market return in t period ε = Residual error 2.2 Disclosure and cost of equity capital Disclosure in this study is the level of disclosure in the annual report of the company. The information presented in annual report used by investors to make decision to invest in a company. This study uses the criteria of item disclosure of financial statements together with criteria researched by Samaha & Azzam (2015). The reason for using such criteria as Egypt and Indonesia are both developing countries with weak legal protection to minority shareholders (Johnson, Boone, Breach, & Friedman, 2000). While the disclosure criteria established by Francis, Khurana, & Pereira (2005), and Cheng, Collins, & Huang (2006) is applied in developed countries with strong legal protection and corporate governance mechanism. In this study, the disclosure criteria are checked to make sure that there is no mandatory item based on regulation in Indonesia. Guidelines used in seeing disclosures required in the annual report in Indonesia is the Bapepam Regulation No. Kep-431 / BL / 2012 dated 1 August 2012 regulation No. X.K.6. To calculate level of disclosure, this research using scoring method. Scoring in this study provide zero value to companies that do not disclose information, and one for companies that disclose information (Samaha & Azzam, 2015). The next step is adding the scores obtained by each company to obtain total score and then dividing it by the maximum score (37). Next, calculating disclosure index by the following equation: DISCi,t-1 = DDDDD,D 1 DD,D 1 Whereas: DISCi,t-1 = Disclosure level of firm i in year t-1 Ni, t-1 = Number of information disclosed by firm i in year t-1 k = Number of all possible information disclosed by firm (37) In 2004, Easley and O'Hara shows the relationship between public information, private information and cost of capital. Basically disclosure made by company aims to change private information to becomes public information. Public information is information that is known by all investors while private information known only to the parties within the

5 company (insiders) causing asymmetry of information occurs. Easley & O Hara (2004) mentions that company can affect cost of equity capital by increasing the accuracy and quantity of information disclosed (disclosure levels) to outsiders as well as insiders. Because cost of equity capital represent average expected rate of return both by insiders and outsiders, increase in disclosure levels will reduce information asymmetry, lowering risk premium, and thus also lowering cost of equity capital. Therefore, the description above supports hypothesis one in this study. H1 : Disclosure levels negatively affect the cost of equity capital. 2.3 Public ownership and cost of equity capital Companies that have a high concentration of ownership, the majority shareholders are insiders with direct access to private information (Samaha & Azzam, 2015). Therefore, the structure of corporate ownership may affect the cost of equity capital in a company. High distribution of shareholders (ownership dispersion) in a company indicates that ownership concentration by majority shareholders split in a small percentage. That matter gives benefit to minority shareholders because it reduces the containment of private information by majority shareholders (Samaha & Azzam, 2015). The majority shareholder has the power to influence management to make decision that would benefit them and detrimental to minority shareholders. Retention of information is an act that would harm minority shareholders. This can be reduced if the number of shareholders rose to more dispersed. In this study, ownership dispersion measured by stock which owned by the public to know the specific effect of minority shareholding to expected rate of return. The empirical results have been proven by Samaha & Azzam (2015) who found that the higher ownership dispersion, retention of private information by majority shareholder would be reduced so that the rate of return expected by investors also will decrease. Therefore, the description above supports the hypothesis two in this study. H2: Public ownership negatively affects the cost of equity capital. 2.4 Managerial ownership and cost of equity capital Management s interest and shareholders' interests are often at odds, so conflict may often happen between the two. This occurs because managers tend to prioritize their personal interest. Shareholders do not like the personal interests of managers because it will add cost to the company and lowering benefits its received. Conflicts of interest between managers and shareholders can be reduced or even eliminated if the manager has a share of the company (managerial ownership). Ramly, Majdi, & Rashid (2010) states that "when directors and managers own firm's shares, it will help to change their attitude from pure manager to owner-manager mentality." This means managers will seek to make decisions that maximize shareholder value because they now have same purpose. This implies that the rise in proportion of managerial ownership will decrease agency problem between managers and shareholders so that expected rate of return decrease or lowering cost of equity capital. Therefore, the description above supports the hypothesis of three in this study. H3: Managerial ownership negatively affects the cost of equity capital. 2.5 Earnings announcement lag and cost of equity capital Earnings announcement lag is an important component of the business aspects of corporate transparency as otherwise disclosed promptly; it will lose its relevance (Bushman, Piotroski, & Smith, 2004). The longer the company's earnings announcement

6 lag, asymmetry of information between management and shareholders will be increased. Earnings announcement which tends to lag a long time also led to increased uncertainty among investors and next leads to an increased expectation of rate of return by investor (cost of equity capital). Conversely, the shorter the lag earnings announcement will reduce the asymmetry of information, increasing the accuracy of the decision-making process so that the cost of equity capital to be down. This is supported by a study by Samaha & Azzam (2015) who found that the earnings announcement lag have a positive effect on the cost of equity capital. Therefore, the description above supports the hypothesis four in this study. H4: Earnings announcement lag positive effect on the cost of equity capital. 3. Research Design and Data 3.1 Data, Sample Selection, and Descriptive Statistics Population in this study are all manufacturing companies listed in Indonesia Stock Exchange (IDX) in 2012 and Manufacturing companies in 2013 were not included in the sample because there are outliers where the dependent variable can not be calculated. Sampling was done by using purposive sampling method. This sampling method specifically restricted only to the object of study that can provide information or to meet certain criteria set by the researchers. The criteria used are: 1. Company including manufacturing industries listed on the Indonesia Stock Exchange (IDX) in 2012 and The company publishes its annual report for the period 2011 and The Company does not have a negative equity value. 4. The company has a beta positive. 5. The company has the date data submission of annual financial statements published on the website of Indonesia Stock Exchange. The following table 1 is statistic descriptive of this study. Based on the table, it can be seen that the average minimum expected rate of return or cost of equity capital manufacturing companies in Indonesia amounted 12% average. The average disclosure level of each manufacturing company is 19%. The maximum value of disclosure level shows that most companies voluntarily disclose information by 57%. The average public ownership is 23%. The maximum value of public ownership means the company has the most public ownership up to 67%. Table 1: Statistic Descriptive Manufacturing Companies N Minimum Maximum Mean Std. Deviation CoEC DISC PUBL MANJ EAL MTB MC LEV ROE Valid N (listwise) 129

7 The average managerial ownership is 2.7% with a maximum value up to 70%, while many companies have managerial ownership 0%. Average earnings announcement lag is 83 days and the maximum value up to 188 days. Furthermore, the control variable are MTB which had an average of 1.3 times, average market capitalization was 27.61%, average of leverage was 1.95 times, and the average return on equity (ROE) was 5.7%. 3.2 Research Design This study was conducted to determine the effect of disclosure level, public ownership, managerial ownership and earnings announcement lag toward cost of equity capital. Model analysis of this study is controlled by market to book value, market capitalization, leverage and return on equity. Regression method used is multiple regression analysis with model as follows: CoECi,t = β0 +β1disci,t-1+β2publi,t-1+β3manji,t-1 +β4eali,t-1+β5mtbi,t-1 + β6mci,t-1 + β7levi,t-1 +β8roei,t-1+εi,t-1 Whereas : CoEC = Cost of equity capital DISC = Disclosure level PUBL = Public ownership MANJ = Managerial ownership MTB = Market to book value MC = Market capitalization LEV = Leverage ROE = Return on equity ε = Residual error 4. Results and discussions Table two shows the significance level of disclosure level (DISC), public ownership, earnings announcement lag (EAL), market capitalization (MC), leverage (LEV) and return on equity (ROE) of each is below 5%. This means that H0 rejected and H1 accepted, so the disclosure level, public ownership, earnings announcement lag and market capitalization, leverage and ROE significantly influence cost of equity capital. Coefficient disclosure level, showed a negative number, which means that these variables have a negative effect on cost of equity capital. The negative effect means that when company has a high level of disclosure, the cost of equity capital is going down. Furthermore, public ownership has a negative coefficient, which means that these variables have a negative effect on cost of equity capital. The negative effect means that when company has a high public ownership, the cost of equity capital is going down. Meanwhile, for earnings announcement lag has positive coefficient, which when companies increasingly need a long time to announcing its earnings, it will be caused cost of capital equity rise. Market capitalization also shows the results of positive coefficient, so the higher the market capitalization, the cost of equity capital will further increase as well. The significance level of managerial ownership variable and market-to-book value (MTB), as shown in Table 2 shows the value more than 5%. This means the two variables, one as independent variables and one control variable, does not have a significant effect on cost of equity capital. Coefficient determination, or R 2, is used to determine how much independent

8 variables can explain the dependent variable. Based on table 2, R 2 value obtained from the regression output is It shows that 20.6% of variable cost of equity capital can be explained by variations in the independent variables in this study, while the remaining 79.4% is explained by other variables not used in this study. Table 2: Result of Regression Analysis Variable Regression Coefficients Unstandardized Sig. t/2 Conclusion Constanta DISC Significant PUBL Significant MANJ Not Significant EAL Significant MTB Not Significant MC Significant LEV Significant ROE Significant R Dependent Variable: CoEC 4.1 Disclosure Level Effect on the Cost of Equity Capital The results showed that disclosure level significantly has negative effect on cost of equity capital. The negative relationship between disclosure level and cost of equity capital shows that when the percentage of disclosure level higher, it will result in the decreasing on cost of equity capital, and vice versa. The results of this study together with research result by Cheng et al. (2006), Skaife, Collins, & LaFond (2004), Lopes & de Alencar (2010), Samaha & Azzam (2015), and Tran (2014) concluded that the rise of disclosure level could generate lower cost of equity capital. The disclosure of private information to become public information caused a decline in information asymmetry. Furthermore, the company may affect their cost of equity capital by improving the accuracy and quantity of disclosed (disclosure levels) information to outsiders as well as insiders. The more transparent a company, meaning that the information gap between insiders and outsiders is reduced, thus helping investors in improving the quality of decision making and result in the rate of return expected by investors reduced. 4.2 Public Ownership Effect on the Cost of Equity Capital The results showed in Table two shows that public ownership significantly influences cost of equity capital at significance level of 5%. Thus, the above results prove the hypothesis. The results of this research together with Samaha & Azzam (2015) showed that public ownership has negative impact on cost of equity capital. According to Samaha & Azzam (2015), the greater public ownership that is used as proxy for ownership dispersion, would benefit minority shareholders due to lower private information held by the majority shareholder. Next, rate of return expected by investors or the company's cost of equity capital were also reduced. These results support the hypothesis proposed and for addition, the reduction of

9 private information, the agency problem between majority and minority shareholders can also be reduced. The higher public ownership means corporate ownership structure disperse evenly and ownership concentration is getting smaller. It leads to reduced majority shareholder attempt to get personal benefits which not favorable to minority shareholders. In other words, the majority shareholder no longer has the power to influence management decisions of companies to take steps that benefit them and detrimental to minority shareholders so that the rate of return required by investors will go down. 4.3 Managerial Ownership Effect on the Cost of Equity Capital The results in Table Two show that managerial ownership has no significant effect on cost of equity capital at a significance level of 5%. Thus, the above test results do not prove the hypothesis. The results of this study differ from Tran (2014) which showed that managerial ownership negatively impacts the company's cost of equity capital. According to Tran (2014), the greater managerial ownership will cause management more active to meet the interests of shareholders because now, they have common interest. Therefore, investors will be assured that management would act accordingly so that it will lower expected rate of return and lowering the cost of equity capital. However, this claim was not proven in this study. This is because the number of shares owned by managers in Indonesia is still relatively small. Companies whose managers have shares in this study amounted only 59 of the total 129 companies, so it cannot give significant effect on the cost of equity. Thus, the proportion of managerial ownership in the company's shares structure in Indonesia will not affect investors' decision when determining expected rate of return on investments they made. 4.4 Earnings Announcement Lag Effect on the Cost of Equity Capital The results showed that earnings announcement lag have significant positive effect on cost of equity capital. This positive relationship between earnings announcement lag and cost of equity capital shows that when it took a long time for company to announce its earnings, the higher cost of equity capital becoming, and vice versa. The results of this study together with Samaha & Azzam (2015) concluded that the increase in earnings announcement lag could cause cost of equity capital rose. These results indicate that the sooner companies to announce its earnings, it will further reduce information asymmetry between shareholders and management, as well as improve the quality of decision making. Also, the uncertainty among investors will also be reduced, so that led to lower investors expected rate of return on their investment. 4.5 Other Factors that Influence Cost of Equity Capital The results indicate that other factors such as market to book value does not affect the cost of equity capital, while the market capitalization of leverage and return on equity significantly affect the cost of equity capital. Market to book value (MTB) did not significantly affect cost of equity capital because MTB is not fully become a benchmark of company's growth opportunities. In addition, the MTB is only a momentary sentiment calculation while its long-term growth opportunities. Market capitalization has significant positive effect on cost of equity capital. This means that the larger company's market capitalization, the higher cost of equity capital. This can happen because the number of investors in Indonesia is small, approximately

10 only three hundred thousand investors, so despite the high market capitalization, the majority shareholders only control stock ownership. The majority shareholder using their power to retained information, causing cost of equity capital rose. Leverage is used to measure the level of corporate debt, and it has significant negative influence on the cost of equity capital. These results indicate that the higher leverage, the cost of equity capital is going down. Based on signal theory, companies that can generate profits tend to increase the amount of its debt, due to the additional interest payments will be replaced by income before taxes. The more successful a company, additional debt will only slightly increase the risk of bankruptcy. A rational investor would respond to the increase in debt as an increase in the value of the company and lead to lowering the rate of return they expect. Lastly, return on equity (ROE), which is used to measure level of profitability of the company, have significant negative effect on cost of equity capital. That is the higher the ROE, the company's cost of equity capital is going down. The higher profitability of the company, the lower cost of equity capital. Investors will be considering company with low risk because it can give definite positive returns, thereby reducing expected returns. 5. Conclusion Based on study of 129 companies listed on the Indonesia Stock Exchange in 2012 and 2014, then the resulting conclusions as follows: The results indicate that disclosure and public ownership negatively affect cost of equity capital, and earnings announcement lag positively affect cost of equity capital. While managerial ownership has no significant effect on cost of equity capital. This means that the higher disclosure and public ownership, as well as the lower earnings announcement lag of a company, the cost of equity capital will fall. References Armadi, H., & Anggraeni, M. (2014). Pengaruh Pengungkapan Sukarela pada Cost of Equity Capital dengan Asimetri Informasi sebagai Intervening Variable. Trikonomika Journal. Retrieved from Bodie, Z., Kane, A., & Marcus, A. J. (2014). Investments. McGraw-Hill/Irwin series in finance, insurance, and real estate. Retrieved from Bushman, R. M., Piotroski, J. D., & Smith, A. J. (2004). What determines corporate transparency? Journal of Accounting Research. Chen, K. C. W., Chen, Z., & Wei, K. C. J. J. (2003). Disclosure, Corporate Governance, and the Cost of Equity Capital: Evidence from Asia s Emerging Markets. SSRN Electronic Journal, (June 2003). Cheng, C. S. A., Collins, D., & Huang, H. H. (2006). Shareholder rights, financial disclosure and the cost of equity capital. Review of Quantitative Finance and Accounting, 27(2), Dahlan, A. (2003). Disclosure dan Corporate Governance: Suatu Tinjauan Teoritis. TEMA Volume IV. Retrieved from

11 Easley, D., & O Hara, M. (2004). Information and the cost of capital. Journal of Finance. Francis, J. R., Khurana, I. K., & Pereira, R. (2005). Disclosure incentives and effects on cost of capital around the world. Accounting Review. Gusnardi Pengaruh Sarbanes-Oxley Act dan Efektifitas Internal audit Departemen terhadap Pelaksanaan Good Corporate Governance. Pekbis Jurnal, Vol. 2, No. 1, March, pp Jensen, M. (2003). A theory of the firm: governance, residual claims, and organizational forms. Retrieved from 15&dq=Michael+C.+Jensen+A+THEORY+OF+THE+FIRM+Governance,+Residu al+claims,+and+organizational+forms+harvard+university+press+cambridge&ot s=4vihxhpdwx&sig=g92guajvwaux4gxcvzgubdg-k-0 Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), Johnson, S., Boone, P., Breach, A., & Friedman, E. (2000). Corporate governance in the Asian financial crisis. Journal of Financial Economics, 58(1-2), Juniarti, J., & Yunita, F. (2005). Pengaruh Tingkat Disclosure Terhadap Biaya Ekuitas. Jurnal Akuntansi Dan Keuangan. Retrieved from Lopes, A. B., & de Alencar, R. C. (2010). Disclosure and cost of equity capital in emerging markets: The Brazilian case. The International Journal of Accounting, 45(4), Mckinsey and Company McKinsey on Finance. McKinsey and Company Publishing. Ramly, Z., Majdi, H., & Rashid, A. (2010). Critical review of literature on corporate governance and the cost of capital : The value creation perspective. Africam Journal of Business Management, 4(11), Samaha, K., & Azzam, I. (2015). Disclosure, ownership structure, earnings announcement lag and cost of equity capital in emerging markets. Journal of Applied Accounting Research, 16, Retrieved from 2 Skaife, H., Collins, D., & LaFond, R. (2004). Corporate governance and the cost of equity capital. Available at SSRN Retrieved from Sudana, I Made Manajemen Keuangan Perusahaan Teori dan Praktik. Erlangga Publishing. Tran, D. H. (2014). Multiple corporate governance attributes and the cost of capital Evidence from Germany. The British Accounting Review, 46(2),

12 attachment Lampiran 2: Item Voluntary Disclosure Perusahaan Manufaktur 1 Statement of strategy / objectives: general/production 2 Statement of strategy / objectives: financial 3 ent of strategy / objectives: marketing 4 Statement of strategy / objectives: social 5 Significant events calendar 6 Impact of strategy on current results 7 Impact of strategy on future results 8 Qualitative forecast of sales 9 Quantitative forecast of sales 10 Qualitative forecast of profits 11 Quantitative forecast of profits 12 Qualitative forecast of cash flows 13 Quantitative forecast of cash flows 14 Assumption underlying the forecast 15 Age of directors 16 Other directorships held by the non-executive directors 17 Other directorships held by the executive directors 18 Improvement in product quality 19 Improvement in customer service 20 Distribution of marketing network for finished products 21 Geographical production - quantitative 22 Line of business production - quantitative 23 Competitor analysis - qualitative 24 Competitor analysis - quantitative

13 25 Market share analysis - quantitative 26 Discussion of company's R&D activities 27 Corporate policy on R&D 28 Location of R&D activities 29 Number employed in R&D 30 Breakdown of employees by line of business 31 Breakdown of employees by ethnic origin 32 Employees appreciation 33 Policy on communication 34 Recruitment problems and policy statements 35 Value added statement 36 Domestic and foreign shareholdings 37 Distribution of share holdings (types)