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ANALYSIS THE INFLUENCE OF INSTITUTIONAL
OWNERSHIP, MANAGERIAL OWNERSHIP,
INDEPENDENT COMMISSIONERS, AND AUDIT
COMMITTEE IN RECEIVING GOING CONCERN
AUDIT OPINION
(A CASE STUDY: MANUFACTURE – BASIC INDUSTRY
LISTED IN IDX PERIOD 2010-2014)
SKRIPSI
By
Shierly
008201200009
A skripsi presented to the Faculty of Business President University in partial
fulfillment of the requirements for Bachelor Degree in Economics, Major in
Accounting
President University
Cikarang Baru – Bekasi
Indonesia
2016
i
PANEL OF EXAMINERS APPROVAL SHEET
Herewith the Panel of Examiners declare that the skripsi entitles “Analysis the
Influence of Institutional Ownership, Managerial Ownership, Independent
Commissioners, and Audit Committee in Receiving Going Concern Audit
Opinion (A Case Study: Manufacture – Basic Industry Listed in IDX Period
2010-2014)” submitted by Shierly, Accounting Study Program, and Faculty of
Business, has been assessed and proved to pass the Oral Examination
ii
RECOMMENDATION LETTER OF SKRIPSI
ADVISOR
The skripsi prepared and submitted by
Name : Shierly
Student ID : 008201200009
Faculty : Business
Study Program : Accounting
Field of Study : Quantitative
Skripsi Title : Analysis the Influence of Institutional Ownership,
Managerial Ownership, Independent Commissioners, and
Audit Committee in Receiving Going Concern Audit
Opinion (A Case Study: Manufacture – Basic Industry
Listed in IDX Period 2010-2014).
Has been reviewed and found to have satisfied the necessities for Oral Defense as
partial fulfillment of the requirements for Bachelor Degree in Economics–
Faculty of Business.
Cikarang, Indonesia, January 24, 2016
iii
DECLARATION OF ORIGINALITY
This skripsi entitled “Analysis the Influence of Institutional Ownership,
Managerial Ownership, Independent Commissioners, and Audit Committee in
Receiving Going Concern Audit Opinion (A Case Study: Manufacture – Basic
Industry Listed in IDX Period 2010-2014)” is originally written by me on my own
research and has never been used for any other purpose before. I therefore request
the skripsi for Oral Defense.
Cikarang, Indonesia January 24, 2016
iv
ANALYSIS THE INFLUENCE OF INSTITUTIONAL
OWNERSHIP, MANAGERIAL OWNERSHIP,
INDEPENDENT COMMISSIONERS, AND AUDIT
COMMITTEE IN RECEIVING GOING CONCERN
AUDIT OPINION
(A CASE STUDY: MANUFACTURE – BASIC INDUSTRY
LISTED IN IDX PERIOD 2010-2014)
ABSTRACT
The purpose of this research is to examine effect of corporate
governance role to the possibility of company in receiving going concern
audit opinion by auditor. The independent variables used in this study are
Proportion of Institutional ownership, Managerial Ownership,
Independent Commissioners, and Audit Committee.
This research used 68 manufacturing companies in basic industry,
which listed on Stock Exchange in the period 2010-1014 as sample. The
samples were selected using purposive sampling method and obtained 39
companies with 5 periods to run for analysis. With total of 195, the data
were analyzed using logistic regression analysis model.
The result shows that proportion of institutional ownership
influence possibility of company receives going concern audit opinion. On
other hand, proportion of managerial ownership, independent
commissioner, and audit committee has no effect on issuance of going
concern audit opinion. This study only use Corporate Governance to
analyze the probability of going concern audit opinion, so for further
research is expected to add another corporate governance variables,
financial variables, and obtain the complete data from IDX central office
in Jakarta.
Keywords: Corporate Governance, Institutional Ownership, Managerial
Ownership, Independent Commissioner, Audit Committee, Going Concern
Audit Opinion.
v
ACKNOWLEDGEMENT
Thanks to God Almighty for His blessing to keep the author stay healthy
physically and mentally. His blessing made the author to finish this skripsi entitled
“Analysis the Influence of Institutional Ownership, Managerial Ownership,
Independent Commissioners, and Audit Committee in Receiving Going Concern
Audit Opinion (A Case Study: Manufacture – Basic Industry Listed in IDX Period
2010-2014)” on time. Furthermore, it would not have been possible to write this
thesis without help and support of the kind people around the Author. Therefore,
the author would like to express her respect and gratitude. it is possible to give
particular mention here:
1. Mr. Dr. Djadja Sukirman, Ak., MBA., CA., CFrA, as the supervisor who
always gave his time to provide guidance, advice, and ideas for
preparation of this skripsi. Thank you for all of your effort, guidance, and
patience.
2. Misbahul Munir, MBA., Ak., CPMA., CA, as the Head of Accounting
Study Program.
3. Mr. Drs. Gatot Imam Nugroho, Ak., MBA and Mr. Dr. Sumarno Zain,
S.E., Ak., MBA to taught the author in understanding audit and skripsi.
4. Beloved brother, Harry Anderson who had encouraged, heard my concern,
and helped me all the time in his busy time. Thank you for your life
support.
5. Support from father and mother in finishing this project
6. My bestfriend Indah Permata Sari. Thank you for your patience in hearing
my story and always encourage me mentally.
7. Babas & Ojis Group that always encourage each other to finish the skripsi.
8. Rica Mandasari Sembiring who always accompany me as an accounting
skripsi fellow that through same hardship with the author. Thank you for
your randomness in encouraging each other.
9. Colleagues in PwC Indonesia, Teresa Devi loviana, Yorji Immanuel,
Alyssa, Stevanie, Firman Dermawan, and Amanda Sarasvatty whose
vi
always asking when I will join PwC again. This question has become my
strength to finish my skripsi.
10. Sarbaenah (a.k.a Ardena), my new friend in BaoHan FC who always chat
me in every random occasion.
11. Manga artist who always issue many illustration through book and
website. Their artworks are inspiring for my illustration and mood
boosterfor my power during the skripsi process.
12. Friends of Accounting batch 2012 which cannot be mentioned one by one.
13. Employees in Accounting Department who always assist the student in
terms of administration.
May God Almighty repay kindness for those who helped, and always gives His
blessing to all of us, and hopefully this skripsi can be useful for future
development.
Cikarang, 22 January 2016
Shierly
Researcher
vii
TABLE OF CONTENT
PANEL OF EXAMINERS APPROVAL SHEET ............................................... i
RECOMMENDATION LETTER OF SKRIPSI ADVISOR ............................ ii
DECLARATION OF ORIGINALITY .............................................................. iii
ABSTRACT .......................................................................................................... iv
ACKNOWLEDGEMENT .................................................................................... v
TABLE OF CONTENT ...................................................................................... vii
LIST OF TABLES ............................................................................................... ix
LIST OF FIGURES .............................................................................................. x
CHAPTER I INTRODUCTION .......................................................................... 1
I.1. Research Background ................................................................................... 1
I.2. Problem Identification and Statement........................................................... 5
I.3. Research Scope and Limitation .................................................................... 5
I.3.1. Research Scope ...................................................................................... 5
I.3.2. Research Limitation ............................................................................... 6
I.4. Research Objectives ...................................................................................... 6
I.5. Research Benefit ........................................................................................... 7
I.5.1. Practical Benefits ................................................................................... 7
I.5.2. Theoretical and Academic Benefit ........................................................ 7
CHAPTER II LITERATURE REVIEW ............................................................ 8
II.1. Theoretical Review ...................................................................................... 8
II.1.1. Agency Problem ................................................................................... 8
II.1.2. Audit Opinion ....................................................................................... 9
II.1.3. Going Concern Audit Opinion ........................................................... 11
II.1.4. Corporate Governance ........................................................................ 14
II.2. Previous Research ..................................................................................... 19
II.3. Theoretical Framework ............................................................................. 24
II.4. Hypotheses ................................................................................................ 24
II.4.1. Proportion of Institutional Ownership ................................................ 24
II.4.2. Proportion of Managerial Ownership ................................................. 25
II.4.3. Proportion of Independent Commissioners ........................................ 26
II.4.4. Audit Committee ................................................................................ 26
CHAPTER III RESEARCH METHODOLOGY ............................................ 27
viii
III.1. Research Method ...................................................................................... 27
III.2. Operational Definition ............................................................................. 27
III.2.1. Dependent Variable ........................................................................... 27
III.2.2. Independent Variable ........................................................................ 28
III.3. Research Instrument ................................................................................. 29
III.4. Sampling Design ...................................................................................... 29
III.5. Data Analysis ........................................................................................... 31
III.5.1. Descriptive Statistics ......................................................................... 31
III.5.2. Logistic Regression ........................................................................... 31
III.5.3. Hypotheses Testing ........................................................................... 34
CHAPTER IV ANALYSIS OF DATA AND INTREPRETATION OF RESULTS 36
IV.1. Research Sample Data ............................................................................. 36
IV.2. Data Analysis ........................................................................................... 36
IV.2.1. Descriptive Analysis ......................................................................... 36
IV.2.2. Logistic Regression ........................................................................... 37
IV.3. Hypotheses Test ....................................................................................... 41
IV.3.1. F-Statistical Test ............................................................................... 41
IV.3.2. Coefficient of Determination (Nagelkerke R2) ................................. 42
IV.4. Interpretation of Results ........................................................................... 44
IV.4.1. Hypotheses Test 1 ............................................................................. 44
IV.4.2. Hypotheses Test 2 ............................................................................. 45
IV.4.3. Hypotheses Test 3 ............................................................................. 46
IV.4.4. Hypotheses Test 4 ............................................................................. 47
CHAPTER V CONCLUSION AND RECOMMENDATION ........................ 49
V.1 Conclusion .................................................................................................. 49
V.2 Recommendation ........................................................................................ 50
REFERENCES
APPENDICES
ix
LIST OF TABLES
Table 2. 1 Previous Research ................................................................................ 19
Table 3. 1 Research Variables and Measurement ................................................. 28
Table 3. 2 Sampling Process ................................................................................. 30
Table 4. 1 Descriptive Statistics ............................................................................ 36
Table 4. 2 Hosmer and Lemeshow Test ................................................................ 37
Table 4. 3 Overall Model Fit ................................................................................. 38
Table 4. 4 -2 Log Likelihood 1 .............................................................................. 38
Table 4. 5 -2 Log Likelihood 2 .............................................................................. 39
Table 4. 6 Omnibus Test ....................................................................................... 40
Table 4. 7 Classification Table ............................................................................. 41
Table 4. 8 Simultaneous Test Results ................................................................... 42
Table 4. 9 Cox and Snell R2 and Nagelkerke’s R
2 ................................................ 42
Table 4. 10 Hypotheses Testing ............................................................................ 43
x
LIST OF FIGURES
Figure 2. 1 Going Concern Evaluation Flowcharts ............................................... 13
Figure 2. 2 The Three Main Areas of Focus or the Audit Committeee ............... 18
Figure 2. 3 Research Model .................................................................................. 24
1
CHAPTER I
INTRODUCTION
I.1. Research Background
The competition in global business that becomes fiercer every period
makes company not only optimally generate profit, but in search of its viability in
market or in other words, going concern. The bankruptcy due to accounting
manipulation by Enron, Worldcom, and Xerox had effected the global economic
into a crisis. Indonesia got the effect because of this crisis such as the decreasing
of Indonesia currency and stock price index. During crisis, many companies
cannot maintain its capability as a going concern. Now, the companies try to
optimize its performance to avoid financial difficulty to maintain its business and
get non-going concern audit opinion from auditor.
The researcher wants to know groundwork for going concern opinion was being
researched in this paper. Given from author’s internship experience, account
receivable was define as a base for auditor in determine auditor judgement in
giving going concern audit opinion. Further findings revealed corporate
governance, market trend, and debt settlement are factors along with account
receivable, in conclude audit opinion.
The definition of Going Concern. Comply with SAK (Standar Akuntasi
Keuangan, 2009) in Hartas et. al. (2012) Going Concern is a sustainability of the
business entity. An Entity assume not in purpose or willing to liquidate, or
decreasing the business material scale. Therefore, every entity is not only focus in
generate the profit but also to keep their ability as a going concern.
Based on American Institute of Certified Public Accountant (AICPA, 2012) AU-
C Section 570, the auditor’s responsibility is to evaluate whether there is
substantial doubt about the entity’s entity ability to continue as a going concern
for a reasonable period of time.
2
Going concern problems can be overcome by the presence of Corporate
Governance mechanism, which has the function to ensure the company
management, is in accordance with the policy. Corporate governance will work as
a control mechanism in managing the business to develop the survival of the
company as a player in the competitive market.
Organization of Economic Cooperation and Development (OECD, 2004) defined
corporate governance as a procedures and processes according to which an
organization is directed and controlled. The corporate governance structure
specifies the distribution of rights and responsibilities among the different
participants in the organization – such as the board, managers, shareholders and
other stakeholders – and lays down the rules and procedures for decision-making.
Corporate Governance involves a set of relationships between a company’s
management, its board, its shareholders and the other stakeholders. Corporate
governance also provide the structure through which the objectives of the
company are set, and the means of attaining those objectives and monitoring
performance are determined (OECD Principles of Corporate Governance, 2015)
Regarding Richard Anderson & Associates (2009), recall the purposes of
Corporate Governance. The financial Reporting council (FRC) Combined Code
sets out the purpose of Corporate Governance as follow:
“Good corporate governance should contribute to better company performance by
helping a board discharge its duties in the best interests of shareholders; if it is
ignored, the consequence may well be vulnerability or poor performance. Good
governance should facilitate efficient, effective and entrepreneurial management
that can deliver shareholder value over the long term.” (Source: FRC, Combined
Code, June 2008)
Hartas et. al. (2012) define one of the function of Good Corporate Governance.
Corporate Governance mechanism will ensure if the company’s management
always in line with regulation. The elements that will measure the corporate
3
governance mechanism is managerial ownership, institutional ownership,
independent commissioners, and audit committee.
Beside the going concern problem, Corporate Governance mechanism will
anticipate the agency problem, which is will arise an asymmetry information and
conflict between manager and shareholders. Fama (1983) and hart (1995) in
Zureigat et. al. (2014) explain the separation between managers and shareholders
of firms leads to conflict of interest. Agency theory cannot completely resolved by
contracts because its costly and difficult to write and impose the complete
contracts. Because of the imperfect contract, the role of corporate governance
have arisen to limit such a conflicts and assist the firm to protect their investment
to ensure continuity.
Hartas et. al. (2012) took an explanation from Jensen and Meckling (1976).
Jensen and Meckling (1976) define agency theory as a misalignment between the
interest of the agent (shareholders) and the principal (CEO). The agent have
authority to monitor the company’s operational so, the agent will have more
information that the principal (asymmetry information).
As stated earlier, agency theory which is can lead into going concern problem, can
be reduced by the existence of corporate governance. In this research, the
corporate governance proxies are Institutional Ownership, Managerial Ownership,
Independent Commissioner, and audit Committee.
Tarjo (2008) in Nasution (2012) explained the institutional ownership have a role
in minimize the agency theory conflict. The presence of institutional investor
considered has an effective monitoring role in management decision. Institutional
ownership will do the monitoring, which is will ensure their prosperity of share.
The influence of institutional ownership is being pushed by their massive
investment in market share. The higher of ownership, the higher its monitoring by
institutional investor which is will prevent the opportunistic act.
4
Bangun et.al. (2012) described the managerial ownership and institutional
ownership are comprise in corporate governance mechanism to resolve the agency
theory. The more share percentage owned by management, they will be motivated
to work harder and focusing in increasing the company’s value. At this point, the
conflict of interest will be decreasing because management will synchronize each
of the company interest.
Arifin et. al. (2013) state the Independent Commissioner has the best portion in
carrying out the monitoring function so that good corporate governance of the
company is created. Based on Decision of Board of Directors of the Jakarta Stock
Exchange Inc. Number: Kep-305/BEJ/07-2004, company should has Independent
Commissioner at least 30% (thirty percent) of overall Board of Commissioners
member.
Kumala (2015) state the committee audit as one of the corporate governance. In
Komite Nasional Kebijakan Governance (KNKG 2006), audit committee has a
purpose to assist board of commissioner in assessed the effectiveness of its
responsibility and authority. Based on “Surat Edaran BAPEPAM No. SE-
03/TM/2000” explained the member of audit committee in Indonesia public
company at least three member acknowledge by independent commissioner with
two people from external that must be independent (Setiawan, 2011).
This research aims to examine the effect of corporate governance on company’s
going concern audit opinion. This study is an extended version from the study that
has been done by Adjani and Rahardja. (2013) that examines the role of corporate
governance in Indonesia. They use variables of corporate governance such as
managerial ownership, institutional ownership, and independent commissioners.
In this study audit committee is added as a part of corporate governance and
extended length of the period which is from 2010-2014.
5
I.2. Problem Identification and Statement
A stated earlier in the background, the researcher want to the “source” behind
the going concern audit opinion beside account receivables. So as the conclusion
the researcher aimed is to analyze the influence of corporate governance and
entity characteristics in the companies that were listed in Indonesia Stock
Exchange (IDX) for the basic industry for the period 2010-2014. The researches
need to find out whether the Institutional Ownership, Managerial Ownership,
Independent Commissioners, and Audit committee influence the company in
getting going concern audit opinion. Thus, the statement is “What is the influence
of the Institutional Ownership, Managerial Ownership, Independent
Commissioners, and Audit committee for the entities ‘going concern audit
opinion?”
1. How does the size of the proportion of institutional ownership in an entity
influence the company going concern opinion?
2. How does the size of the proportion of managerial ownership in an entity
influence the company going concern audit opinion?
3. How does the size of the proportion of independent commissioners in an
entity influence the company going concern audit opinion?
4. How does the audit committee influence the company going concern audit
opinion?
5. How does the size of the proportion of institutional ownership, managerial
ownership, independent commissioners, and audit committee
simultaneously influence the company going concern audit opinion?
I.3. Research Scope and Limitation
I.3.1. Research Scope
This research is entitled “Analysis the Influence of Institutional
Ownership, Managerial Ownership, Independent Commissioners, and Audit
Committee in Receiving Going Concern Audit Opinion (A Case Study:
Manufacture – Basic Industry Listed in IDX Period 2010-2014)”. The research
6
will analyze the influence of corporate governance and entity characteristics on the
acceptance of going concern audit opinion.
I.3.2. Research Limitation
This study has limitations that can be considered for further researched:
1. The researched companies are limited only in the companies that run the
business on manufacturing sector, classify in basic industry.
2. Many companies did not provide the necessity information regarding the
variables that being researched and as the result, many companies cannot
be included in the research. The period of this study is only five years that
is unable to analyze the trend of the company’s going concern audit
opinion for a long-term period.
I.4. Research Objectives
The objectives of this study are:
1. To identify the influence of institutional ownership proportion toward
company going concern audit opinion.
2. To identify the influence of managerial ownership proportion toward
company going concern audit opinion.
3. To identify the influence of independent commissioner proportion in the
board toward company going concern audit opinion.
4. To identify the influence of audit committee toward company going
concern audit opinion.
5. Have an empirical test on the influence of the proportion of institutional
ownership, managerial ownership, independent commissioner, and audit
committee simultaneously toward company going concern audit opinion.
7
I.5. Research Benefit
I.5.1. Practical Benefits
There are several practical benefits of this study
1. For Company’s Management
This study can be used as an assessment of company’s performances and
have management a consideration in making decision that can be used to
maintain its going concern for the future.
2. For investor
The disclosure of going concern can influence the interest of investor to
make a decision to invest in certain company.
3. For Accountant
This study can be used as a material for discussion and reference by the
auditor to do an audit process, especially in giving the audit opinion.
I.5.2. Theoretical and Academic Benefit
1. Increase accreditation of President University’s Accounting study program
2. Develop and enhance the knowledge of corporate governance that related
to the going concern opinion stated by auditor.
8
CHAPTER II
LITERATURE REVIEW
II.1. Theoretical Review
II.1.1. Agency Problem
Han (2012) define agency problem as a contractual relationship between
principals and agents. Under the contracts, agents are obligated to run company by
its shareholder’s will. However, both parties are self-utility maximizers and
monitor is not strong enough, agents may not behave in the best interests of
principals sometimes. Thus comes the classical topic upon corporate governance –
agency problem.
Han (2012) with definition by Berle & Means (1932) define agency problem in
that was firmly discussed in their published article which illustrating corporate
architectures. They state that, as the providers of cash flow in a company are
different from the decision makers which led to an agency problem between the
firm’s owners and controllers. For the owners, it is important for them to well
motivate the managers to behave in the interest of shareholders instead of wasting
corporation’ resources to satisfy their own interests.
Further study in Adjani and Rahardja. (2013) define an agency relationship by
Jensen & Meckling (1976) as a contract under the owner (principals) engage the
management (agent) to perform some service in the company on their behalf,
which involves delegating some authority to the agent. At this point, the agent has
more information regarding the company than the principal itself – information
asymmetries.
The existence of information asymmetries cause some problem proceed from the
principal difficulties in monitoring and controlling the agent. The problems are:
1 Moral Hazard
It happens because of the conflict of interest between agent and
principal that lead into agent fraudulent action to the principal.
9
2 Adverse Selection
This condition happens because the agent knows more information
regarding the real condition and its prospect rather than the
principal. The effect is in investing decision making that will
disadvantageous the principal.
The agent presence as a party that know more about the company information
rather than principal itself, there will be a fraudulent action by manipulate the data
regarding the company’s condition (which is a form of moral hazard by manager).
The purpose is to issue financial report free from material error and not being
given an audit opinion going concern by the auditor and at the end it can optimize
the agent’s interest.
Information Asymmetries between agent and principal will cause adverse
selection. The principal have less information regarding company than agent
which is will affect investment decision making because the principal maybe will
cancel its investment. The negative effect of going concern will occur, so auditor
will consider giving the going concern audit opinion will higher.
Many thought regarding corporate governance come in contact with agency
theory. Many publicly traded companies have a large controlling shareholder.
While the presence of a controlling shareholder can reduce the agency problem by
closer monitoring of management, weaknesses in the legal and regulatory
framework may lead to the abuse of other shareholders in the company. Abusive
self-dealing occurs when persons having close relationships to the company,
including controlling shareholders, exploit those relationships to the detriment of
the company and investors (OECD – Principles of Corporate Governance 2015).
II.1.2. Audit Opinion
Hartas (2012) define audit opinion according by SPAP (2004) as a part of
audit report over an entity’s financial report and main information of audit report.
Auditor must independent when he/she give an assessment and opinion over the
10
financial report. The opinion given by auditor is stated free from material error
over the statement of financial position, income statement, retained earning, and
cash flow which are agree with a legal accounting principles.
Based on Auditing book – A Risk Based Approach to Conducting a Quality Audit
by Johnstone, Gramling, and Rittenberg (2014 p. 689-703) state 5 type of audit
opinion with its condition:
1. Unqualified Opinion
Standard unqualified audit reports on financial statements following the
PCAOB’s reporting standard can be issued only if:
There are no material violations of GAAP.
Disclosures are adequate.
The auditor was able to perform all of the necessary procedures.
There was no change in accounting principles that had a material
effect on the financial statements.
The auditor does not have significant doubt about the client
remaining a going concern.
The auditor is independent
2. Unqualified Opinion with Explanatory Language
There are five situations in which an auditor may choose to issue an
unqualified audit report with explanatory language. Explanatory language
would be used to explain the following:
A justified departure from GAAP
Inconsistent application of GAAP
Substantial doubt about the client being a going concern
The emphasis of some matter, such as unusually important
subsequent events, risks, or uncertainties associated with
contingencies or significant estimates
Reference to other auditors
3. Qualified Opinion
11
There are three situations in which an auditor will issue a qualified report.
These situations occur when there is:
A material unjustified departure from GAAP that is not pervasive
Inadequate disclosure that is not pervasive
A scope limitation such that the possible effects on the financial
statements of undetected misstatements, if any, could be material
but not pervasive.
4. Adverse Opinion
An auditor issue an adverse report when the financial statements contain a
pervasive and material unjustified departure from GAAP, including a lack
of important disclosures that is pervasive. An adverse opinion should be
expressed when the auditor believes that the financial statements taken as
a whole are not presented fairly in conformity with GAAP. This can
happen when a significant number of items in the financial statements
violate GAAP. For example, if the auditor believes that the client is no
longer a going concern, GAAP may require the financial statements to
reflect liquidation values. If the items ae presented in accordance with
normal going-concern accounting, the statements are not fairly presented.
Such opinion are very rare. When issuing an adverse opinion, the opinion
paragraph should refer to a separate paragraph that provides the basis for
the adverse opinion.
5. Disclaimer Opinion
An auditor issues a disclaimer of opinion report in the following
situations:
A scope limitation exists
Substantial doubt exists about the client being a going concern
The auditor lacks independence
II.1.3. Going Concern Audit Opinion
Zureigat et. al. (2014) define Going concern that based on Malaysian
International Accounting (2008) as “an entity the is ordinarily viewed as
continuing business for the foreseeable future with neither the intention not the
12
necessity of liquidation ceasing trading or seeking protection from creditors
pursuant to laws or regulation. When company faces financial difficulties such as
inability to fulfill its commitments and suffer losses, the external auditors’ role
becomes high importance in evaluating the ability of the company to continue.
This will protect the interest of the financial statement users and help them to
make their investments decisions. Ultimately, this could also protect the social
and economic stability in Jordan. Furthermore, if the accountant does not provide
the needed information, to the external auditor, definitely he will be unable to
evaluate the companies’ going concern and may not give the right decision to the
investors.
Adjani and Rahardja (2013) define the Audit Opinion Going Concern based on
SPAP 2004 (Standar Profesional Akuntan Publik) as an opinion gave by auditor to
make sure if the entity have ability to maintain its sustainability. Assessment and
opinion regarding the entity sustainability by auditor are important for investor to
make an investment decision.
The entity’s going concern is related with the management ability to carry out and
maintaining the business to survive in the market as long as possible. Going
concern opinion will the first assumption to describe the condition of company.
Indicators of potential Going-concern problems: (SPAP SA section 341)
Negative trends; negative cash flow from operating activities, recurring
loss
Internal matters; loss of key personnel, employees strikes
External matters; new legislation, pending litigation, loss of franchise
Other miscellaneous matters; inability to pay dividend, violation of law
Significant changes in the competitive market
If auditor have consideration on the condition and found any findings regarding
entity’s ability to maintain its sustainability, auditor will give unqualified opinion
13
with explanatory language, qualified opinion, adverse opinion, or disclaimer
opinion.
Yes
Disclaimer
Unqualified opinion with
explanatory paragraph
about the going concern
of the entity on the
Emphasis of Matter
Qualified or
Adverse
Opinion
Does the
management’s plan
can be effectively
done?
Yes
Does the
management’s plan
can be effectively
done?
Unqualified
Opinion
No Disclaimer
Is there any
plant from
management
to mitigate
it?
The auditor is
doubt about the
going concern of
the company
Are there any
condition and/or
even which affect
the entity’s going
concerns?
SA Section
508
(PSA
No.29)
No
Ye
s
No
Yes
No
No Yes
Figure 2. 1
Going Concern Evaluation Flowcharts
Source of Figure: Triputra (2013)
14
II.1.4. Corporate Governance
Spinos (2013), in state the basic purpose of corporate governance
mechanisms is to limit the potential agency costs that happen within the company
(Shleifer and Vishny (1997)). Agency costs could happen from insignificant level
of goal incongruence and misunderstanding between management and
shareholders. Thus, the basic assumption is that every party acts for his own
benefit and interest.
From Indonesia corporate governance manual first edition (2014 p.30-31) - There
is no single definition of corporate governance that can be applied to all situations
and jurisdictions. The various definitions that exist today largely depend on the
institution or author, country and legal tradition.
International Finance Corporation (IFC) defines corporate governance as “the
structures and processes for the direction and control of companies.” The
Organization for Economic Cooperation and Development (OECD), which 1999
published its Principles of Corporate Governance, offers a more detailed
definition of corporate governance as:
“The internal means by which corporations are operated and controlled
[...], which involve a set of relationship between a company’s management, its
board, its shareholders, and other stakeholders. Corporate governance also
provide the structure through which the objectives of the company are set, and the
means of attaining those objectives and monitoring performance are determined.
Good corporate governance should provide proper incentives for the board and
management to pursue objectives that are in the interest of the company and
stakeholders, and should facilitate effective monitoring, thereby encouraging
firms to use resource more efficiently”.
Most definitions that center on the company itself (an internal perspective) do,
however have certain elements in common, which can be summarized as follows:
Corporate governance is a system of relationships, defined by structures
and processes.
15
These relationships may involve parties with different and sometimes
contrasting interests.
All parties are involved in the direction and control of the company
All this is done to properly distribute rights and responsibilities – and thus
increase long –term shareholder value
II.1.4.1. Institutional Ownership
Adjani and Rahardja (2013) stating in according of Permatasari (2011), the
proportion of shares that owned by institution such as bank, insurance company,
and investment company. Jensen & Meckling state that institutional ownership
has an important role in minimize the agency problem that occur between
management and shareholder. Institutional ownership will increase and optimize
monitoring action.
In Bangun (2011), Machmud & Djakman (2008) explain the higher of
institutional ownership will also, increasing act of monitoring from institutional
investor so, opportunistic action by manager will be prevented.
Hartas (2012) define institutional ownership based on Beiner et.al (2008) as the
right of votes owned by the institution. Institutional ownership has a certain better
monitoring function rather that individual ownership so, institutional ownership
affecting management’s performance.
According to Chung & Zhang (Journal of Financial and Quantitative Analysis
Vol.46, 2011), despite of free-rider problem, institutional investors have much
stronger incentive to monitor companies that they own than individual investors
because of their larger stakes in those companies, especially if exit cost is costly
(i.e., large trading costs). Bushee and Noe (2000) in Chung & Zhang (2011)
suggest that institutional investors prefer firm with better disclosure ranking to
reduce monitoring costs.
16
II.1.4.2. Managerial Ownership
Adjani and Rahardja (2013) define managerial ownership based on Gideon
(2005) as shares owned by management from overall company shares managed by
company. The bigger proportion of managerial ownership will reduce agency
problem in company. Therefore, the interest between manager and shareholder
will be same because manager will increase company’s value and keep its
viability.
Bangun (2011) define managerial ownership based on Downes & Goodman
(1999) as shareholder or owner in company that is influence in decision-making.
The conflict of interest between manager and shareholder will be higher when
managerial ownership of company is insignificant (Jensen & Meckling 1976). On
contrary, bigger managerial ownership will make manager more productive in
maximizing company’s value (Anggraeni 2006:8). The company’s manager will
disclose its social responsibility in order to raise company’s image though
manager will sacrifice many resources for the social responsibility (Gray et. al.,
1988).
II.1.4.3. Independent Commissioners
As from definition of agency theory state that there is different interest
between agent and principal therefore, from independent party must tak
monitoring role. Independent Commissioner is such an example to make the agent
work as an order from the principal and not cause any fraudulent action that lead
into amount of loss affecting to majority and minority shareholder.
The presence of independent commissioner have been arranged by Bursa Efek
Jakarta in Kep-361/BEJ/06-2000 on July 1, 2000 which is stated about the
proportion of Independent Commissioner must at least 30% of overall
commissioner board. Independent Commissioner is a part of board of
commissioner that has not affiliation with management, other commissioner
member, and shareholder. In addition, independent commissioner are free from
business relationship (or any kind of relationship) that can affect its independency
(Komite Nasional Kebijakan Governance, 2006)
17
Jakarta Stock exchange though its regulation on July 1st, 2010 has determined the
existence of independent commissioners which is explained as companies that
listed in stock exchange should have independent commissioners. Minimum
requirements for independent commissioners is 30% of all members of board
commissioners. Criteria for independent commissioners are as follows (FCGI,
2006):
1. Independent commissioners are from outside of the company.
2. Independent commissioners are not having affiliation with the main board
of company, commissioner, management, or shareholder in that company
itself.
3. Independent commissioners are not having direct or non-direct business
association.
4. Independent commissioners are not have double position as another
company director that has affiliation with related company
5. Independent commissioners should understand the capital market’s laws
and regulations.
II.1.4.4. Audit Committee
Based on Indonesia Corporate Governance Manual (2014), the board of
Commissioners is encouraged to establish an Audit Committee, as it is
increasingly seen as essential element of the corporate governance structure in
many countries. Indonesia CG Code Part IV 3.7 stipulated that in carrying out its
duty, the Board of Commissioners may forms committees. Any proposal from the
committees shall be submitted to Board of Commissioners for approval.
According to Regulation Number IX.I.5, for publicly listed companies, state-
owned enterprises, province and region-owned companies, companies that raise
and manage public funds, companies of which products or services are widely
used by public, and companies with extensive influence on environment, an Audit
Committee shall be established, whereas other committees are formed as required.
The purpose of Audit Committee is to assist supervisory function of the Board of
Commissioners to oversee the integrity of company’s financial statements,
External Auditor’s qualifications and independence, and performance of internal
18
audit function and External Auditor at other hand prepare report that OJK rules
require to be included in company’s annual proxy statement.
Board of Commissioners’ Audit Committee safeguards company by questioning
executive bodies regarding the way in which financial reporting responsibilities
are handled, as well as by ensuring that correction action are ensure to be taken.
The audit committee oversees the company’s relations with External Auditor.
(Indonesia Corporate Governance Manual, 2014).
Members of the Audit Committee must be financial literate. An experienced
individual who is a financial expert should chair the audit committee. The
independence, aptitude and leadership skills of leader are crucial for committee’s
success. According to Regulation Number IX.I.5, for public listed company, the
head of the Audit Committee shall be independent commissioner. (496-498).
The Audit Committee typically focuses on financial reporting, risk management,
internal and external auditing.
Source of Figure: The Indonesia Corporate Governance Manual – First
Edition (2014)
Based on the regulation of Bapepam-LK no. IX.1.5 regarding “Pembentukan dan
Pedoman Pelaksanaan Kerja Komite Audit.” From the regulation, audit committee
in company must at least three members and one of the members is Independent
Commissioner which is also act as the Audit Committee leader and other
Audit Committee
Risk Management Financial Reporting Internal & External Audit
Figure 2. 2
The Three Main Areas of Focus for the Audit Committee
19
members are from outside company. There are also state about trequirement of
Audit committee:
a. Audit Committee must have high integrity, skill, knowledge, and
sufficient experience, which are in line with his/her study
background. In addition, has a good communication skill.
b. Have a background study of accounting or finance.
c. Have sufficient knowledge and understand the financial report.
d. Have sufficient knowledge about capital market.
e. Not the member of Public Accounting Firm, Law Consultant, or
other consultation services in the time of six months before
selected by Commissioner.
f. Not have authority and responsibility to planning, leading, or
controlling the company’s activity in the time of 6 months before
selected by commissioner, except by Independent Commissioner.
g. Audit committee not have any share in the company.
h. Not have family relationship.
i. Not have business relationship related the company business.
II.2. Previous Research
Previous researches that have been done regarding corporate governance
to acceptance of going concern audit opinion in Table 2.1 as follows:
Table 2. 1
Previous Research
Title Author Variable Result
Analisis Pengaruh
Corporate
Governance terhadap
Kemungkinan
Pemberian Opini
Audit Going
Concern oleh
Auditor Independent
Adjani, E. D.
Rahardja, S.
(2013)
Independent
Commissioners
Managerial
Ownership
Institutional
Ownership
Independent
Commissioners
and Institutional
Ownership not
significantly
influence for
auditor in
giving going
concern audit
opinion.
20
Managerial
Ownership
significantly
influence for
auditor in
giving going
concern audit
opinion.
The Influence of
Corporate
Governance,
Intellectual Capital
of Financial
Performance and
Firm Value of Bank
Sub-Sector
Companies Listed at
Indonesia Stock
Exchange in Period
2008-2012
Arifin, J.,
Suhadak.,
Endang S. A.,
Zainul A.,
Corporate
Governance
Intellectual
Capital
Firm Value
Corporate
governance
have an effect
not significant
on intellectual
capital in the
sub-sector
banks
companies
Disclosure of
Intellectual
capital have an
effect not
significant on
corporate
governance of
banking sub-
sector
companies
Corporate
Governance
have a
significant
effect in
negative
direction on
financial
performance in
banking sub-
sector
companies
Corporate
governance
have a
21
significant
effect in
negative
direction on
firm value in
banking sub-
sector
companies
Disclosure of
Intellectual
Capital
significantly
influences the
financial
performance.
Capital in
banking sub-
sector
companies
Disclosure of
intellectual
capital
significant
effect on firm
value banking
sub-sector
companies
Financial
Performance
have an
significant
effect on firm
value in sub-
sector banking
companies
Pengaruh Prior
Opinion,
Pertumbuhan dan
Mekanisme
Corporate
Governance pada
Pemberian Opini
Audit Going
Sulistya, A.F.
Sukartha, D. T.
(2013)
Prior Opinion
Company
Growth
Independent
Commissioners
Prior Opinion
has positive
influences for
auditor in
giving going
concern audit
opinion.
22
Concern. Audit Committee Company
Growth has
negative
influences for
auditor in
giving going
concern audit
opinion
Independent
Commissioners
is not
significantly
influence for
auditor in
giving going
concern audit
opinion.
Audit
Committee is
not significantly
influence for
auditor in
giving going
concern audit
opinion.
Pengaruh Komisaris
Independent, Komite
Audit, dan
Kepemilikan
Institutional
terhadapa OPini
Audit asumsi Going
Concern.
Ravyanda, M., G.
Dwi, E., D.
Zubaidah, S.
Independent
Commissaries
Audit
Committee
Institutional
Ownership
Logistic
Regression
show there is no
significance
influence
through going
concern audit
opinion.
The Role of Foreign,
Family Ownership
and Audit
Committee in
Evaluating the
Company as a Going
Concern: Evidence
from Jordan
Zureigat, B., N.
Fadzil, F., H.
Ismail, S., S., S.
(2014)
Foreign
Ownership
Family
Ownership
Audit
Committee
The relationship
between foreign
ownership and
going concern
evaluation is
negative but
not significant.
There is
significant
23
relationship
between family
ownership and
going concern.
There is a
positive and
significant
direction of the
relationship
between audit
committee and
going concern.
The Effect of
Corporate
Governance on the
Company’s going
Concern Audit
Opinion
Triputra, B. Institutional
Ownership
Managerial
Ownership
Independent
Commissioners
The Corporate
Governance
Committee
Institutional
Ownership has
a negative and
significant
effect on the
company’s
going concern
audit opinion.
Independent
commissioners,
has positive and
non-
significance
effect on the
company’s
going concern
audit opinion.
Managerial
ownership and
Corporate
Governance
Committee has
negative and
non-significant
effect on the
company’s
going concern
audit opinion.
24
II.3. Theoretical Framework
The research is done to investigate the influence of corporate governance
using the proxies Institutional Ownership, Managerial Ownership, Independent
commissioners, and audit committee, for the companies which is listed in IDX in
getting the going concern audit opinion. The theoretical framework of the research
is shown below.
II.4. Hypotheses
II.4.1. Proportion of Institutional Ownership
Agency theory explained there is authority delegation from principal to
agent in order to run the company. In Addition, there is principal interest to gain
more return from its investation. Because of that, the principal need to monitor the
activities and the process of management to take a decision and have in line with
each of the interest.
As for institutional ownership, earlier findings were consistent with Bushee et.al
(2014) in Journal of Management Accounting Research Vol.26, No.2 (2014)
(pp.123-149), investigate the association between total institutional ownership and
firms’ corporate governance mechanisms. Despite a number of potential
Audit Opinion
Going Concern
H2
H1
H3
Independent Variable Dependent Variable
Institutional Ownership
Managerial Ownership
Independent Commissioners
Audit Committee H4
Figure 2. 3
Research Model
25
incentives that institutional investors have to tilt their portfolios toward firms with
“better” governance mechanism, Bushee et. al (2014) find little evidence of an
association between total institutional ownership and corporate governance. There
is weak evidence that firms “better” board characteristics have higher levels of
total institutional ownership, but they find no association between shareholder
rights and total institutional ownership. Given the lack of an overall relation, they
identify institutions that exhibit strong revealed preferences for governance
mechanism to provide stylized facts on the proportion, influence, and
characteristics of institutional investors that are sensitive to governance in their
investment decisions and monitoring activities
Therefore, the resulted hypothesis:
H1: The proportion of institutional ownership negatively influences the
company’s going concern audit opinion.
II.4.2. Proportion of Managerial Ownership
According to Agency Theory, there are conflict of interest between the
principal and the agent. In order to overcome agency problem, there is a need of
incentive mechanism to motivate the management to act according to principal’s
interest, means managerial ownership. Managerial ownership is a total of share
own by management from overall shares managed by company. If there is a
bigger proportion of managerial ownership, the agency problem can be decreased
so, the auditor highly chance to give audit opinion going concern become smaller.
Iskandar et. al (2011) in Adjani and Rahardja (2013) found that the management
equity ownership has a negative significant relationship with going concern.
There is capsize relationship between managerial ownership with going concern
problems that can be represent going concern opinion. This research is in line with
Linoputri (2010) in Adjani and Rahardja (2013) which is explain the increasing of
managerial ownership will make auditor give audit opinion non going concern.
Thus, the second hypothesis is:
H2: The proportion of managerial ownership negatively influences the
company’s going concern audit opinion.
26
II.4.3. Proportion of Independent Commissioners
Based on Agency theory, there are conflict of interest between the
principal and the agent, so it need supervisor to monitor it from the Independent
party or Independence commissioners. Independence commissioners will monitor
the management to make sure the management act according the principal interest.
According to empirical study by Setiawan (2011) in Adjani and Rahardja (2013),
there is negative influence from independence commissioners to company’s audit
opinion going concern. Followed by Iskandar et al., (2011) in Adjani and
Rahardja (2013) stated that the commissioners proportion has negative influence
to company’s audit opinion going concern. The bigger proportion of
independence commissioners will give better monitoring action so, the auditor
highly chance to give audit opinion going concern become smaller. Therefore,
based on the explanation, the conclusion for the third hypotheses is:
H3: The proportion of independent commissioners negatively influences
the company’s going concern audit opinion.
II.4.4. Audit Committee
Ramadhany (2004) in Sulistya and Sukahrta (2013) state the independent
Audit Committee will minimize the management pressure to get unqualified
opinion when the auditor feels right to give going concern audit opinion. So, the
bigger proportion of audit committee, the smaller probability for company to get
going concern audit opinion. The research done by Carcello and Neal (2000) in
Sulistya and Sukartha (2013) state about the presence of inside and grey director
(commissioner/ director from management) will minimize the probability from
auditor to give going concern audit opinion especially for the company that has a
financial problem even the company has audit committee.
Al-Khabash (2008) in Zureigat et. al. (2014) revealed that the level of corporate
governance is low particularly with the lack of an audit committee. In Ravyanda
(2015), the audit committee has negative influence for auditor to asses, give, and
evaluate the company in getting going concern audit opinion.
H4: The Audit Committee negative influences the company going
concern audit opinion.
27
CHAPTER III
RESEARCH METHODOLOGY
III.1. Research Method
The researcher use quantitative method with the hypotheses that aim to
test the influence of corporate governance with Institutional Ownership,
Managerial Ownership, Independent commissioners, and Audit Committee as the
proxy against the granting of the audit opinion of going concern. The purpose of
quantitative research is to develop the theories and hypotheses by using
mathematical method. There are measurement process which is will provide the
fundamental relationship between empirical observation and mathematical
expression of quantitative relationships.
III.2. Operational Definition
III.2.1. Dependent Variable
The dependent variable for this study is Going Concern Opinion (GCO).
The dependent variable is measured by using dummy variable. Code 1 for audit
opinion going concern, while code 0 is for audit opinion non-going concern. The
purpose why the researcher use dummy variables is to quantified the qualitative
variables which is in this research is the going concern audit opinion. Variable
dummy only has two values, 1 and 0.
The going concern opinion is restricted on unqualified opinion with explanatory
paragraph. The explanatory paragraphs in going concern opinion emphasizes the
auditor’s judgement regarding the significant uncertainty in company’s ability to
run its operations for the future. In other side, the non-going concern audit opinion
is limited only in unqualified opinion without explanatory paragraph (clean
opinion). Researcher give limitation on the variables to get more proportional
sample to be analyzed.
28
III.2.2. Independent Variable
This study has four independent variables that are tested on the acceptance
of going concern audit opinion by the company. The four independent variables
are:
a. Institutional Ownership (Ins_Own)
In this study, institutional ownership is represented by the largest
percentage of shares owned by an institution. Institutional ownership can
be calculated by using the total percentage of the share that owned by
shareholders institution from overall share that being issued. The
institution can be government, domestic institution, or any outside country
institution.
b. Managerial Ownership (Man_Own)
The managerial ownership is resulted from the sum of percentage of share
owned by the members of the board of directors and commissioners.
c. Proportion of Independent Commissioner (Ind_Com)
Independence Commissioner proportion can be calculate by using the
percentage of the number of independent commissioner from the total size
of the board members in the company. According to KEP-362/BEJ/06-
2000 on July 1 2000 stated that the requirement total minimum of
Independence Commissioners is 30% of the total of Board of
Commissioners.
d. Audit Committee
The presence of Audit committee can be calculated by the total of audit
committee in board of committee divided by the total of board of
committee in the company.
Table 3. 1
Research Variable and Measurement
Variable Measure Scale
Dependent
GCO
Opinion issued by Public
Accountant
Nominal Scale:
Going Concern Opinion =1
Non Going concern Opinion =
0
29
Independent
INS_OWN
Proportion ownership by
institutional shareholder Ratio
MAN_OWN Proportion of ownership
by managerial shareholder Ratio
IND_COM Proportion of Independent
Commissioner in Board of
Commissioner
Ratio
AU_COM Proportion of Audit
Committee in Board of
Commissioner
Ratio
The statistical analysis of this research in order to test the hypothesis is
using logistic regression. Performed by SPPS for Windows version 22.0.
III.3. Research Instrument
Documentation method is used as a data collection method. The data
collection, which is a secondary data, is performed directly by quoting or
recording data from annual reports, financial statements, and websites of
researched company. The data are financial and non-financial information which
are presented in company’s annual report and audited financial statements. The
data is obtained from:
1. Financial statements and annual reports of listed manufacturing in basic
industry (real sector) companies for years 2010-2014.
2. Access of IDX website (www.idx.co.id) and www.sahamok.com.
3. Website of the firms.
III.4. Sampling Design
This study use purposive sampling. The sample of research is listed
manufacture companies specialized at basic industry at Indonesia Stock
Exchange. The researcher use basic industry as the sample because of the data
completion and information consistency. In manufacture especially basic industry,
it has met the certain requirement of the SPSS which is minimum of 25 samples.
30
At this point, the researcher also found several samples with additional paragraph
regarding going concern.
Purposive sampling, also known as judgmental, selective or subjective
sampling, is a type of non-probability sampling technique.
The condition that necessary to make a company as the sample are:
1. The company is listed at Indonesia Stock Exchange and run the business in
the real sectors for the years 2010-2014.
2. The company issues financial statements and annual reports that have been
audited includes auditor’s opinion especially for going concern audit
opinion for the year 2010-2014 respectively.
3. The annual report that disclose company’s Corporate Governance
information. This information are the composition of shareholder, the
board of commissioners, independent commissioners, and audit committee
within the company. The sampling process can be seen in Table 3.1 below:
Table 3. 2
Sampling Process
Description Number of
Companies
Companies which run business in manufacturing sector
specialize in basic industry (Real sector) and listed as of 31
December 2014
68
Data is incomplete (28)
Number of Samples 39
The number of samples for 5 years research (2010-2014) 195
Manufacturing companies focused in basic industry which are listed in the
Indonesia Stock Exchange since 2010-2014 are 68 companies. Several companies
are exclude from the list of the sample because do not meet the criteria of
sampling. From the table, 28 companies do not have complete data. Number of
sample 5 years is 195.
31
III.5. Data Analysis
III.5.1. Descriptive Statistics
In research, descriptive is important to give a simple explanation of our
research. As an addition, with descriptive statistics will easier the reader to read
the summary of the research. The function of descriptive statistic to give a
description of the data that is shown by mean, standard deviation, variant,
maximum, minimum, sum, range, qurtois, and skewness.
Descriptive statistics is used to describe the research’s variables. This research use
descriptive statistics which is consist of Maximum value, Minimum value, mean,
and standard deviation of each variable that will be used (Ghozali, 2005).
Descriptive statistic is the method related with gathering and presentation of the
data with quantitative value use variable, statistics, distribution, and graphic,
without probability formula (Walpole, 1993; Correa-Prisant, 2000; Dodge, 2006).
III.5.2. Logistic Regression
In this research, the test and hypotheses are using logistic regression to test
if the probability happen in dependent variable can be predicted by the
independent variable (Ghozali, 2005). The researcher uses logistic regression
because the independent variable is the combination of metric and non metric
(nominal).
Logistic Regression did not use normality test and classic assumption test
(Ghozali, 2007:225). Also, Logistic Regression not use heteroscedasity which is
the dependent variable not use heteroscedasity for each independent variable
(Gujarati, 2003, in Sutedja et al., 2010).
This study use Logistic Regression model with the analysis equation as below:
𝐿𝑛 𝐺𝐶
𝐺𝐶 − 1=∝ + 𝛽1IN_COMM + 𝛽2MAN_OWN + 𝛽3𝐼NST_OWN
+ 𝛽4AU_COM + 𝑒
Where:
32
𝐿𝑛 𝐺𝐶
𝐺𝐶 − 1
Audit Opinion, are audit opinion going concern (the value of
1) and audit opinion non-going concern (the value of 0).
∝ Constanta
IND_COMM The percentage of Independent Commissioners from the
total of Board of Commissioners.
MAN_OWN Proportion of share that own by Board of Management.
INST_OWN Share percentage that is owned by the institution from
overall modal share that being issued.
AU_COM The percentage of Audit Committee from the total of Board
of Commissioner.
𝑒 Error
Hypotheses testing use logistic regression analysis because in the research the
dependent variable is measures by dummy variable so, the researcher choose
logistic regression to test the influence of the 4 independent variables which are:
Independent Commissioner, Managerial Ownership, Institutional Ownership, and
Audit Committee through going concern opinion.
III.5.2.1. Hosmer and Lemeshow’s Goodness of fit test
The feasibility of regression model evaluated by Hosmer and Lemeshow’s
which is show the capability of the model to explain the data.
The hypotheses to assess the feasibility of the model is:
H0 : There is no disparity between the model with the data
Ha : There is disparity between the model with the data
If the Hosmer and Lemeshow statistic same with or less than 0.05, H0 rejected.
Then, if the value is more than 0.05 H0 is cannot be rejected and the model can
predict the observation value or the model is accepted because it is corresponds
with the observation data. (Ghozali, 2005).
III.5.2.2.Assessing the Overall model (Overall Model Fit)
The first analysis is asses the overall model toward the data. The
hypotheses to assess the model fit are:
H0: The hypotheses Model is fit with the data
33
Ha: The hypotheses Model is not fit with the data
From the hypotheses if the model fit the data, H0 must be accepted or Ha must
rejected. Statistic used that based on Likelihood (L) of the model is the probability
of the model represent the inputted data. To test the null hypotheses and
alternative hypotheses, L is transformed to -2LogL. With alpha 5%, to assess the
model fit is:
If -2LogL < 0,05, H0 rejected and Ha accepted, it means the model is fit
with the data.
If -2LogL > 0,05, H0 accepted and Ha rejected, it means the model is not
fit with data.
The reduction value of -2 Log Likelihood (-2LL) between Block No. 0 with Block
No. 1 show the hypotheses’ model is fit with the data (Ghozali, 2005). If there is a
decreasing of Log Likelihood, it means a good regression model.
III.5.2.3.Coefficient Determination (R2)
Cox and Snell's R2 is a measures that imitates the coefficient of
determination (R2) in multiple regression that use likelihood estimation technique
with maximum value less than 1. Nagelkerke's R2 is coefficient Cox and Snell's
R2 modification to ensure the value is between 0 and 1. To ensure the value, it can
divided the Cox and Snell's R2 value with the maximum value. The researcher did
this test to find out how capable the independent variable’s variability to clarify
the dependent variable’s variability (Ghozali 2007:233).
III.5.2.4. Classification Table
Classification table show the prediction power of the regression model to
predict the probability of the auditor to give going concern audit opinion. Form
the column, there are two value prediction of variable dependent which are going
concern audit opinion (1) and non-going concern audit opinion (0). From the row
section show the real observation of dependent variable which are going concern
audit opinion (1) and non-going concern audit opinion (0).
34
III.5.2.5. Hypotheses Test
The hypothesis testing is done with logistic regression. Assessing the
hypotheses in this research are:
H0: Variable Independent has no significant influence in giving going
concern audit opinion.
Ha: Variable Independent has significant influence in giving going concern
audit opinion.
The criteria to take the conclusion are:
If the t significant value < 0, 05, H0 rejected, Ha accepted.
If the t significant value > 0, 05, H0 accepted, Ha rejected.
The hypotheses testing is done by compare the probability value (sig). if the
significant value less than 0,05, the regression coefficient is significant at the level
of 5% which is mean reject H0 and accept Ha. It means the independent variable
has significant influence to dependent variable.
III.5.3. Hypotheses Testing
The data that has been obtained from the annual financial reports of the
company is being processed and calculated on Microsoft Excel before it is
analyzed by statistics software IBM Statistical Package for Social Science (SPSS)
version 22. SPSS is a software package used for statistical analysis that is use by
researches to manage and calculate a wide variety of statistics. In this research,
SPSS is to used to analyze descriptive statistics, binary logistics, and, hypotheses
testing.
III.5.3.1. F-Statistical Testing
In Ayudia (2014) F Statistic Test show whether the independent variables
includes in the model have a simultaneous influence on dependent variable
(Ghozali, 2006). The testing steps are as follows:
1. Formulate hypothesis
H0: b1 = b2 = b3 = 0 means there is no effect of the independent variables
(X1, X2, X3, X4) to the dependent variable (Y).
2. Basis for decision making
35
If the probability > 0.05, then H0 is accepted means no effect
If the probability < 0.05, then H0 is rejected means influential
If the F-count ≥ F-table, then H0 is rejected means influential
If the F-count ≤ F-table, then H0 is accepted, it means no effect
III.5.3.2. Coefficient of Determination Test
R squared (R2) is a statistic that will give information regarding the
goodness of fit of a model. In regression, the R2 coefficient of determination is a
statistical measure of how well the regression line approximates the real data
points. Value of 1 in R2 indicates that the regression line perfectly fits the data.
36
CHAPTER IV
ANALYSIS OF DATA AND INTREPRETATION OF
RESULTS
IV.1. Research Sample Data
This chapter show the statistical analysis perform by SPSS to know the
effect of institutional ownership, managerial ownership, independent
commissioners, and audit committee on company’s going concern audit opinion
in the real sector of manufacturers (basic industry) that listed at Indonesia Stock
Exchange from 2010 to 2014. The study conducted on 195 audited financial
statements and annual reports. Sampling method used is purposive sampling.
IV.2. Data Analysis
IV.2.1. Descriptive Analysis
Before the samples are being analyzed, the object of descriptive research
will appear in the table 4.1 below:
Table 4. 1
Descriptive Statistics
Descriptive Statistics
N Minimum Maximum Mean Std. Deviation
GCO 195 0 1 .05 .221
INS_OWN 195 .22 .96 .6716 .14887
MAN_OWN 195 .00 .26 .0142 .05005
IND_COM 195 .25 .67 .3849 .08426
AU_COM 195 .33 1.50 .8024 .28374
Valid N (listwise) 195
Source: Constructed on SPSS 22 (2016).
Companies that received going concern audit opinion were 10 companies
in the past 5 years, or an average number of 5% each year. The result of the
analysis by descriptive statistics show the average proportion of shares held by
Institutional Ownership by 67%. This results demonstrate the high level of
concentration of institutional ownership in Indonesia. The average percentage of
37
Managerial Ownership is 1.4%, which is show the low percentage of share owned
by the management.
Then, descriptive statistics shows the average percentage of Independent
Commissioners in the company by 38.5%, which is shows the number of
independent commissioners in companies already comply with Securities and
Exchange Commission (BAPEPAM). As the theory told before, the minimum
percentage requirement of independent commissioners is by 30%. The number of
companies which has Audit Committee is 80% from the sample population. It
indicates the high presence of Audit committee in the companies.
IV.2.2. Logistic Regression
IV.2.2.1. Hosmer and Lemeshow Goodness of Fit Test
Testing the logistic regression model feasibility can be done by Hosmer
and Lemeshow Goodness of Fit Test which is measure by Chi-Square.
Significance probabilities that are obtain can be compared with the level of
significance ɑ 0.05%. Hypotheses to assess the feasibility of the regression model
are:
H0: Model can explain the data.
Ha: Model cannot explain the data.
Reject H0 if significant value < 0.05
Table 4. 2
Hosmer and Lemeshow Test
Hosmer and Lemeshow Test
Step Chi-square df Sig.
1 5.753 8 .675
Source: Constructed on SPSS 22 (2016).
If the value of significant is greater than 0.05, the model can be accepted because
it is appropriate for the result. From the table 4.2, the significant value is 0.675
which is greater than 0.05. Thus, the model can be approved. With assurance of
67.5%, the logistic regression model can explain the data.
38
IV.2.2.2. Overall Model Fit Test
Overall Model Fit is to assess if the model used in this research in
accordance with the observed data. In the overall model fit, there are some
measures used. The measurers and its result is below.
Table 4. 3
Overall Model Fit
Measurement Result
-2 Log Likelihood 1 78.886
-2 Log Likelihood 2 42.282
Cox and Snell’s R2 0.171
Nagelkerke’s R 0.514
Classification Table 96.9%
Hosmer and Lemeshow’s Goodness of Fit 67.5%
The result of SPSS provides two values -2 Log Likelihood. The first model is only
includes the Constant which is 96.069 (table 4.4). The second model with -2 log
likelihood value for the model with constant and independent variables 42.600
(table 4.5).
Table 4. 4
-2 Log Likelihood 1
Iteration Historya,b,c
Iteration -2 Log likelihood
Coefficients
Constant
Step 0 1 95.843 -1.795
2 80.394 -2.541
3 78.916 -2.862
4 78.886 -2.916
5 78.886 -2.918
6 78.886 -2.918
a. Constant is included in the model.
b. Initial -2 Log Likelihood: 78.886
c. Estimation terminated at iteration number 6 because
parameter estimates changed by less than .001.
Source: Constructed on SPSS 22 (2016).
39
Table 4. 5
-2 Log Likelihood 2
Iteration Historya,b,c,d
Iteration
-2 Log
likelihood
Coefficients
Constant INS_OWN MAN_OWN IND_COM AU_COM
Step 1 1 87.857 -1.201 -1.105 -.083 2.023 -.784
2 61.482 -1.112 -2.702 -.531 4.969 -2.075
3 50.367 -.470 -4.503 -3.187 8.263 -4.020
4 44.964 .851 -6.359 -12.349 10.324 -6.278
5 42.858 2.860 -8.361 -26.843 10.440 -8.261
6 42.414 4.270 -9.561 -40.009 9.782 -9.337
7 42.346 4.602 -9.846 -50.959 9.582 -9.563
8 42.321 4.602 -9.841 -62.266 9.579 -9.565
9 42.308 4.584 -9.820 -76.803 9.585 -9.555
10 42.297 4.562 -9.794 -100.982 9.592 -9.543
11 42.289 4.538 -9.766 -145.499 9.600 -9.530
12 42.284 4.534 -9.761 -197.310 9.601 -9.527
13 42.283 4.533 -9.761 -250.359 9.601 -9.527
14 42.282 4.533 -9.761 -305.315 9.601 -9.527
15 42.282 4.533 -9.761 -363.314 9.601 -9.526
16 42.282 4.533 -9.761 -426.003 9.601 -9.526
17 42.282 4.533 -9.761 -495.450 9.601 -9.526
18 42.282 4.533 -9.761 -573.468 9.601 -9.526
19 42.282 4.533 -9.761 -660.245 9.601 -9.526
20 42.282 4.533 -9.761 -753.686 9.601 -9.526
a. Method: Enter
b. Constant is included in the model.
c. Initial -2 Log Likelihood: 78.886
d. Estimation terminated at iteration number 20 because maximum iterations has been reached. Final solution
cannot be found.
Source: Constructed on SPSS 22 (2016).
40
The decreasing of -2 Log Likelihood 1 and -2 Log Likelihood 2 with the result of
36.605, also can be seen in Omnibus Test of Model Coefficient in table 4.5 below.
Table 4. 6
Omnibus Test
Omnibus Tests of Model Coefficients
Chi-square df Sig.
Step 1 Step 36.605 4 .000
Block 36.605 4 .000
Model 36.605 4 .000
Source: Constructed on SPSS 22 (2016).
The decrease in this -2LL values show a good regression model or in other words,
the hypothesized model fits the data. On the table above, researcher obtained
significant value of 0.000, which is smaller than alpha 0.05. it means, the
independent variable (Institutional Ownership, Managerial Ownership,
Independent Commissioner, and Audit Committee) influence the dependent
variable (Going Concern audit opinion).
IV.2.2.3. Classification Table
Classification table is use to determine the predictive power of the regression
model to predict the probability of going concern audit opinion which is show by
percentage. The classification table shows the probability that the company which
received going concern audit opinion is amounted to 50%. So, by using regression
model there are 5 companies are expected to receive going concern audit opinion
from the total of 10 companies that received going concern audit inion. The result
form SPSS from table 4.7 show the classification’s correctness by 96.9% based on
the model.
41
Table 4. 7
Classification Table
Classification Tablea
Observed
Predicted
GCO Percentage
Correct
0 1
Step 1 GCO 0 184 1 99.5
1 5 5 50.0
Overall Percentage 96.9
a. The cut value is .500
Source: Constructed on SPSS 22 (2016).
IV.3. Hypotheses Test
IV.3.1. F-Statistical Test
The F Statistic Test is used to test whether all independent variables are
significantly influencing the dependent variable simultaneously.
H0: b1 = b2 = b3 = b4 = 0
Company’s corporate governance, institutional ownership,
managerial ownership, independent commissioner, and audit
committee simultaneously do not influence the probability of going
concern audit opinion acceptance.
Ha: b1 ≠ b2 ≠ b3 ≠ b4 ≠ 0
Company’s corporate governance, institutional ownership,
managerial ownership, independent commissioner, and audit
committee simultaneously influence the probability of going
concern audit opinion acceptance.
42
Table 4. 8
Simultaneous Test Results
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 1.328 4 .332 7.730 .000b
Residual 8.159 190 .043
Total 9.487 194
a. Dependent Variable: GCO
b. Predictors: (Constant), AU_COM, MAN_OWN, IND_COM, INS_OWN
From the regression test result in table 4.9 above, the value of F-count is
amounted 7.730 > F-table of 2.42 with the p-value of 0.000 which is smaller than
0.05, then H0 is rejected. It means that when the company’s corporate governance
with institutional ownership, managerial ownership, independent commissioner,
and audit committee as the proxy are being tested simultaneously will
significantly influence the probability on acceptance of the going concern audit
opinion.
IV.3.2. Coefficient of Determination (Nagelkerke R2)
Table 4. 9
Cox and Snell R2 and Nagelkerke’s R
2
Model Summary
Step -2 Log likelihood
Cox & Snell R
Square
Nagelkerke R
Square
1 42.282a .171 .514
a. Estimation terminated at iteration number 20 because maximum
iterations has been reached. Final solution cannot be found.
From SPSS output value (table 4.6) of Cox and Snell R2 with 0.171 and
Nagelkerke’s R2
with the value of 0.51. It means, the variability of dependent
variable can be explained by the independent variable is equal to 51.4%, while the
remaining 48.6% is explained by other variables such as the change of auditors,
financial condition, and others.
43
IV.3.3. Variables in the Equation
Table 4. 10
Hypotheses Testing
Variables in the Equation
B S.E. Wald df Sig. Exp(B)
Step 1a INS_OWN -9.761 4.685 4.341 1 .037 .000
MAN_OWN -753.686 95707.385 .000 1 .994 .000
IND_COM 9.601 7.279 1.740 1 .187 14778.538
AU_COM -9.526 3.439 7.673 1 .006 .000
Constant 4.533 4.336 1.093 1 .296 93.065
a. Variable(s) entered on step 1: INS_OWN, MAN_OWN, IND_COM, AU_COM.
Hypotheses Testing
𝐿𝑛 𝐺𝐶
𝐺𝐶 − 1= 4.533 − 9.761 𝐼𝑁𝑆 𝑂𝑊𝑁 − 753.686 𝑀𝐴𝑁 𝑂𝑊𝑁
+ 9.601 𝐼𝑁𝐷 𝐶𝑂𝑀 − 9.526 𝐴𝑈 𝐶𝑂𝑀 + 𝑒
The variables of Institutional Ownership shows the regression coefficient
amounted to -9.761 with the probability of 0.037 < 0.05 which means that the
Institutional Ownership affects significantly to the provision of going concern
audit opinion. For Managerial Ownership result, it show the regression coefficient
amounted to -753.686 with the probability of 0.994 > 0.05 which means that the
Managerial Ownership does not has a significance effect on the provision going
concern audit opinion. Another proxy of corporate governance, Independent
Commissioner has significance of 9.061 with the probability of 0.187 > 0.05
which means that the Independent Commissioner does not has a significant effect
on the provision going concern audit opinion. The variable of Audit Committee
shows the regression coefficient of -9.526 and probability of 0.006 > 0.005 which
means that for Audit Committee does not significantly affect the provision of
going concern audit opinion.
44
IV.4. Interpretation of Results
IV.4.1. Hypotheses Test 1
H1: The proportion of institutional ownership negatively influences the
company’s going concern audit opinion.
The first hypotheses aim to test whether the institutional ownership
negatively influences on the company’s going concern audit opinion. The result
on Table 4.8 shows for the hypotheses 1 for the variables institutional
ownership (INS_OWN) produces p-value with significant number 0.037 with the
variable coefficient is -9.761. Thus, it can be concluded that institutional
ownership has value less than ɑ = 0.05 and the hypotheses is accepted. The result
shows Institutional Ownership significantly has negative influence the company’s
going concern audit opinion.
The result is in line with Hartas (2012) which is has negative beta with coefficient
less than ɑ = 0.05. With a bigger proportion of company’ institutional ownership
can give pressure for management to maintain the financial condition. At this
point, institutional ownership is expected to monitor the decision taken my
management to prevent the bankruptcy. The company with bigger institutional
ownership will minimize the probability in getting going concern audit opinion.
This result also in line with Triputra (2013) where the significance is 0.02 which
is less than ɑ = 0.05. it describes that institutional ownership in the company is
one of the factor that influence company to avoid the risk of not being able to
stay in business. In Triputra (2013) predicts the share ownership structure’s effect
to capital structure. The more concentrated share ownership, companies tend to
reduce the debt when need the working capital. Working capital requirements is
derived from institutional owners with equity instead of debt or any loan. The
management will be more cautious in borrowing, because if the amount of debt is
too high, it will lead to the risk which is financial distress that can affect the going
concern of the company. The increase of capital by institutional owners will also
45
affect to the effectiveness control of management in using the capital from
institutional owners.
IV.4.2. Hypotheses Test 2
H2: The proportion of managerial ownership negatively influences the
company’s going concern audit opinion.
The second hypotheses aim to test whether the managerial ownership
negatively influences on the company’s going concern audit opinion. The result
on Table 4.8 shows for the hypotheses 2 for the variables managerial ownership
(MAN_OWN) produces p-value with significant number 0.994 and variable
coefficient is -753.686. Thus, it can be concluded that institutional ownership has
value greater than ɑ = 0.05 and the hypotheses is rejected. The result shows
Managerial Ownership does not significantly influences the company’s going
concern audit opinion.
The result shown by Hartas (2011) also indicate that the managerial ownership
has negative effects on the company’s going concern audit opinion. In line with
agency theory, human only priority their self-interest and ignore other people
interest so, the manager as a human will act opportunistically to priority its
interest and ignore other interest. Management which has bigger share in the
company has tendency to expropriation (seizure of private party for the state’s
purposes, with little or no compensation to the property’s owner) the company
asset for self interest (Febrianto, 2011).
The result is in line with Januarti (2008) in Triputra (2013). Managerial ownership
does not effect on the acceptance of going concern audit opinion. Although
managerial ownership apparently has a control function through the mechanism of
managerial ownership, it does not give guarantee for not accepting going concern
audit opinion. In addition, due to the low percentage of the average managerial
ownership which is equal to 1.4% is unable to motivate the manager to improve
the performance of the company.
46
IV.4.3. Hypotheses Test 3
H3: The proportion of independent commissioners negatively influences
the company’s going concern audit opinion.
The third hypotheses aim to test whether the independent commissioner
negatively influences on the company’s going concern audit opinion. The result
on Table 4.8 shows for the hypotheses 3 for the variables independent
commissioner (IND_COM) produces p-value with significant number 0.187 and
positive variable coefficient is 9.601. Thus, it can be concluded that Independent
Commissioner has value greater than ɑ = 0.05 and the hypotheses is rejected. The
result shows Independent Commissioner does not significantly influences the
company’s going concern audit opinion.
The proportion of Independent commissioner in the company is not significantly
dominant. As the result, independent commissioner role in taking decision is not
had an effect. In addition, the presence of independent commissioner is just to
fulfill the requirement in the regulation and ending with not fulfill its purpose.
Arief Effendy (2008) state there is constraint in independent commissioner which
are weak competency and integrity. Also, maybe its presence only for the reward
because of family or acquaintance relationship (in Hartas 2011).
There is no significantly influences between Independet Commissioner with going
concern opinion. The research that has been done by Sulistya and Sukharta (2013)
also prove it. Based on Peraturan Bapepam LK no. IX.1.5 state that company has
at least one Independent Commissioner. As the result from observation, the
proportion of independent commissioner has no influence in amelioration of
company financial condition.
In Ravyanda (2015) state that the institutional party only controlling and
managing the management action and not the independent auditor in giving going
concern audit opinion. From Triputra (2013) state about the regulation requires
minimum number of Independent Commissioner is 30% of the number of the
Board of Commissioners. This regulation enables the different practice in
47
fieldwork. The company can have only one independent and two non-independent
boards of commissioner that make the independent commissioner cannot perform
its function properly because he/she works alone.
Sylvia and Sidharta (2005) in Triputra (2013) state that the appointment of an
independence board of commissioner can only done by the company to meet with
the required regulations but it is not intended to enforce Good Corporate
Governance (GCG) in the company. This condition is also confirmed by the
survey result from Boediono Gideon (2005) that stated the strong control of the
company’s founder and majority shareholders makes the commissioner is not
being independent. The control function which is the responsibility of the board of
commissioner becomes ineffective. the existence of independent commissioner is
unable to increase the effectiveness of the monitoring action which is carried out
by the commissioner.
IV.4.4. Hypotheses Test 4
H4: The Audit Committee negative influences the company going
concern audit opinion.
The fourth hypotheses aim to test whether the audit committee negatively
influences on the company’s going concern audit opinion. The result on Table 4.8
shows for the hypotheses 4 for the variables audit committee (AU_COM)
produces p-value with significant number 0.06 and negative variable coefficient is
-9.526. Thus, it can be concluded that Audit Committee has value greater than ɑ =
0.05 and the hypotheses is rejected. The result shows Audit Committee is not
significantly influences the company’s going concern audit opinion.
The result from calculation is in line with Ravyanda (2015) which is state that
audit committee in the company did not influence independent auditor in evaluate
and giving going concern audit opinion.
The research that has been done by Sulistya and Sukartha (2013) also in line with
Ravyanda (2015). It can be happen because the audit committee responsibility is
48
directly for board of commissioner not for company management. As the result,
audit committee cannot directly involve in solving the company financial or
operational problem and cannot directly do the corrective action if there are any
deviations in the company.
49
CHAPTER V
CONCLUSION AND RECOMMENDATION
V.1 Conclusion
In this final chapter of the research, the researches draw the conclusion and
recommendation. The study is conducted empirically to examines the influences
of corporate governance on the company’s going concern audit opinion by the
auditor specifically for manufacture (basic industry) that are listed in IDX for
2010-2014 period. There are four independent variables in this study to test the
company’s going concern audit opinion. The four independent variables are
institutional ownership, managerial ownership, proportion of independent
commissioners, and audit committee.
The results shows in this research are:
1 The proportion of institutional ownership is proven negatively
influences on the company’s going concern audit opinion. The
result likely due to the big proportion of institutional ownership in
the company which is will minimize the probability in getting
going concern audit opinion.
2 The proportion of managerial ownership is not significantly
influences the company’s going concern audit opinion. The result
likely because of self-interest nature and expropriation of the
management.
3 The proportion of independent commissioner is not significantly
influences the company’s going concern opinion. It can be from
the independent commissioner that is not dominant in the company
which is led to weak of competency
4 The presence of audit committee in the company is not
significantly influences the company’s going concern audit
opinion. The result may come because of audit committee
responsibility is directly for board of commissioner not the
management.
50
V.2 Recommendation
Based on conclusions and limitations, the researchers can give the
recommendation as follows:
1. For company’s management
The managerial ownership may want to evaluate its integrity. Because of
different interest, business activity and management can be interrupted.
The addition of the independent commissioner should not be a mere of
formality. Independent commissioner should be encouraged to participate
in taking decision. Audit committee is also a part of company so, it may
involve in solving the company financial or operational problem.
2. For investor
The investor may need to take a good look at auditor report especially if
there is an additional paragraph for going concern audit opinion. The
disclosure of going concern can influence the interest of investor to make
a decision to invest in certain company
3. For accountant
Accountant may discuss for the study regarding the audit opinion
especially in going concern audit opinion. Reference may be added from
auditor because there is no exact reason for company to get going
concern audit opinion.
4. For Theoretical and Academic purposes
The researches who are going to research in relation of audit opinion
topic of going concern opinion with corporate governance as the proxy
should add another variable such as family ownership or financial
variable to see from profitability point of view. In addition, the
researcher may asses the implementation effectiveness of corporate
governance. Furthermore, the data regarding the sample (especially
annual report) is not complete. The research may obtain the data at IDX
central office in Jakarta or visit the company. The data used in this
research is only limited to the information from company’ annual
financial report, the future researches are suggested to gather information
from more various sources outside companies’ annual financial reports
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APPENDICES
GET
FILE='C:\Users\shierly\Desktop\PRESIDENT\Semester 10\SPSS\EDIT\Sample.sav'.
DATASET NAME DataSet1 WINDOW=FRONT.
DESCRIPTIVES VARIABLES=GCO INS_OWN MAN_OWN IND_COM AU_COM
/STATISTICS=MEAN STDDEV MIN MAX.
Descriptives
[DataSet1] C:\Users\shierly\Desktop\PRESIDENT\Semester 10\SPSS\EDIT\Sample.sav
Descriptive Statistics
N Minimum Maximum Mean Std. Deviation
GCO 195 0 1 .05 .221
INS_OWN 195 .22 .96 .6716 .14887
MAN_OWN 195 .00 .26 .0142 .05005
IND_COM 195 .25 .67 .3849 .08426
AU_COM 195 .33 1.50 .8024 .28374
Valid N (listwise) 195
LOGISTIC REGRESSION VARIABLES GCO
/METHOD=ENTER INS_OWN MAN_OWN IND_COM AU_COM
/CLASSPLOT
/PRINT=GOODFIT CORR ITER(1)
/CRITERIA=PIN(0.05) POUT(0.10) ITERATE(20) CUT(0.5).
Logistic Regression
Notes
Output Created 22-JAN-2016 03:05:21
Comments
Input Data C:\Users\shierly\Desktop\PRESIDENT\Semest
er 10\SPSS\EDIT\Sample.sav
Active Dataset DataSet1
Filter <none>
Weight <none>
Split File <none>
N of Rows in Working Data File 195
Missing Value Handling Definition of Missing User-defined missing values are treated as
missing
Syntax LOGISTIC REGRESSION VARIABLES
GCO
/METHOD=ENTER INS_OWN
MAN_OWN IND_COM AU_COM
/CLASSPLOT
/PRINT=GOODFIT CORR ITER(1)
/CRITERIA=PIN(0.05) POUT(0.10)
ITERATE(20) CUT(0.5).
Resources Processor Time 00:00:00.03
Elapsed Time 00:00:00.05
Case Processing Summary
Unweighted Casesa N Percent
Selected Cases Included in Analysis 195 100.0
Missing Cases 0 .0
Total 195 100.0
Unselected Cases 0 .0
Total 195 100.0
a. If weight is in effect, see classification table for the total number of cases.
Dependent Variable Encoding
Original Value Internal Value
0 0
1 1
Block 0: Beginning Block
Iteration Historya,b,c
Iteration -2 Log likelihood
Coefficients
Constant
Step 0 1 95.843 -1.795
2 80.394 -2.541
3 78.916 -2.862
4 78.886 -2.916
5 78.886 -2.918
6 78.886 -2.918
a. Constant is included in the model.
b. Initial -2 Log Likelihood: 78.886
c. Estimation terminated at iteration number 6 because
parameter estimates changed by less than .001.
Classification Tablea,b
Observed
Predicted
GCO
Percentage Correct
0 1
Step 0 GCO 0 185 0 100.0
1 10 0 .0
Overall Percentage 94.9
a. Constant is included in the model.
b. The cut value is .500
Variables in the Equation
B S.E. Wald df Sig. Exp(B)
Step 0 Constant -2.918 .325 80.768 1 .000 .054
Variables not in the Equation
Score df Sig.
Step 0 Variables INS_OWN 11.278 1 .001
MAN_OWN .847 1 .357
IND_COM 2.776 1 .096
AU_COM 15.975 1 .000
Overall Statistics 27.291 4 .000
Block 1: Method = Enter
Iteration Historya,b,c,d
Iteration
-2 Log
likelihood
Coefficients
Constant INS_OWN MAN_OWN IND_COM AU_COM
Step 1 1 87.857 -1.201 -1.105 -.083 2.023 -.784
2 61.482 -1.112 -2.702 -.531 4.969 -2.075
3 50.367 -.470 -4.503 -3.187 8.263 -4.020
4 44.964 .851 -6.359 -12.349 10.324 -6.278
5 42.858 2.860 -8.361 -26.843 10.440 -8.261
6 42.414 4.270 -9.561 -40.009 9.782 -9.337
7 42.346 4.602 -9.846 -50.959 9.582 -9.563
8 42.321 4.602 -9.841 -62.266 9.579 -9.565
9 42.308 4.584 -9.820 -76.803 9.585 -9.555
10 42.297 4.562 -9.794 -100.982 9.592 -9.543
11 42.289 4.538 -9.766 -145.499 9.600 -9.530
12 42.284 4.534 -9.761 -197.310 9.601 -9.527
13 42.283 4.533 -9.761 -250.359 9.601 -9.527
14 42.282 4.533 -9.761 -305.315 9.601 -9.527
15 42.282 4.533 -9.761 -363.314 9.601 -9.526
16 42.282 4.533 -9.761 -426.003 9.601 -9.526
17 42.282 4.533 -9.761 -495.450 9.601 -9.526
18 42.282 4.533 -9.761 -573.468 9.601 -9.526
19 42.282 4.533 -9.761 -660.245 9.601 -9.526
20 42.282 4.533 -9.761 -753.686 9.601 -9.526
a. Method: Enter
b. Constant is included in the model.
c. Initial -2 Log Likelihood: 78.886
d. Estimation terminated at iteration number 20 because maximum iterations has been reached. Final solution
cannot be found.
Omnibus Tests of Model Coefficients
Chi-square df Sig.
Step 1 Step 36.605 4 .000
Block 36.605 4 .000
Model 36.605 4 .000
Model Summary
Step -2 Log likelihood
Cox & Snell R
Square
Nagelkerke R
Square
1 42.282a .171 .514
a. Estimation terminated at iteration number 20 because maximum
iterations has been reached. Final solution cannot be found.
Hosmer and Lemeshow Test
Step Chi-square df Sig.
1 5.753 8 .675
Contingency Table for Hosmer and Lemeshow Test
GCO = 0 GCO = 1
Total Observed Expected Observed Expected
Step 1 1 20 20.000 0 .000 20
2 20 20.000 0 .000 20
3 20 19.998 0 .002 20
4 20 19.995 0 .005 20
5 20 19.980 0 .020 20
6 20 19.942 0 .058 20
7 21 21.646 1 .354 22
8 19 19.163 1 .837 20
9 21 18.287 0 2.713 21
10 4 5.989 8 6.011 12
Classification Tablea
Observed
Predicted
GCO
Percentage Correct
0 1
Step 1 GCO 0 184 1 99.5
1 5 5 50.0
Overall Percentage 96.9
a. The cut value is .500
Variables in the Equation
B S.E. Wald df Sig. Exp(B)
Step 1a INS_OWN -9.761 4.685 4.341 1 .037 .000
MAN_OWN -753.686 95707.385 .000 1 .994 .000
IND_COM 9.601 7.279 1.740 1 .187 14778.538
AU_COM -9.526 3.439 7.673 1 .006 .000
Constant 4.533 4.336 1.093 1 .296 93.065
a. Variable(s) entered on step 1: INS_OWN, MAN_OWN, IND_COM, AU_COM.
Correlation Matrix
Constant INS_OWN MAN_OWN IND_COM AU_COM
Step 1 Constant 1.000 -.505 .001 -.689 -.582
INS_OWN -.505 1.000 .000 -.144 .072
MAN_OWN .001 .000 1.000 .000 -.002
IND_COM -.689 -.144 .000 1.000 .218
AU_COM -.582 .072 -.002 .218 1.000
Step number: 1
Observed Groups and Predicted Probabilities
160 + + I I
I I
F I0 I R 120 +0 +
E I0 I
Q I0 I U I0 I
E 80 +0 + N I0 I
C I0 I
Y I0 I 40 +0 +
I0 I
I0 I I00000 I
Predicted ---------+---------+---------+---------+---------+---------+---------+---------+---------+----------
Prob: 0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1 Group:
000000000000000000000000000000000000000000000000001111111111111111111111111111111111111111111111111
1
Predicted Probability is of Membership for 1
The Cut Value is .50 Symbols: 0 - 0
1 - 1
Each Symbol Represents 10 Cases.
Coefficientsa
Model
Unstandardized Coefficients
Standardized
Coefficients
t Sig. B Std. Error Beta
1 (Constant) .200 .090 2.206 .029
INS_OWN -.276 .108 -.186 -2.552 .011
MAN_OWN -.021 .302 -.005 -.069 .945
IND_COM .506 .181 .193 2.800 .006
AU_COM -.196 .057 -.251 -3.462 .001
a. Dependent Variable: GCO
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 1.328 4 .332 7.730 .000b
Residual 8.159 190 .043
Total 9.487 194
a. Dependent Variable: GCO
b. Predictors: (Constant), AU_COM, MAN_OWN, IND_COM, INS_OWN
Manufacture – Basic Industry 2010
GCO INS_OWN MAN_OWN IND_COM AU_COMM
AKKU 0 0.65 0.01 0.50 1.50
ALKA 0 0.79 0.00 0.50 0.75
ALMI 0 0.72 0.02 0.40 0.60
AMFG 0 0.51 0.00 0.33 0.67
ASII 0 0.75 0.00 0.45 0.76
BRNA 0 0.22 0.11 0.29 0.56
BUDI 0 0.72 0.00 0.33 1.00
CPIN 0 0.74 0.00 0.40 1.00
CTBN 0 0.61 0.00 0.40 0.60
ETWA 0 0.66 0.00 0.33 1.00
FASW 0 0.52 0.00 0.33 1.00
FPNI 0 0.95 0.00 0.50 1.50
IGAR 0 0.79 0.00 0.33 1.00
INAI 0 0.63 0.00 0.40 0.60
INKP 1 0.48 0.00 0.44 0.33
INRU 0 0.91 0.00 0.50 0.75
INTP 0 0.51 0.00 0.43 0.43
IPOL 0 0.72 0.00 0.33 1.00
JPRS 0 0.89 0.16 0.50 1.50
KDSI 1 0.49 0.00 0.50 0.75
KIAS 0 0.69 0.00 0.33 0.50
KRAS 0 0.80 0.00 0.50 0.60
LION 0 0.69 0.00 0.33 1.00
LMSH 0 0.78 0.26 0.33 1.00
NIKL 0 0.50 0.00 0.33 0.67
SIAP 0 0.53 0.00 0.33 1.00
SIPD 0 0.69 0.00 0.67 1.33
SMCB 0 0.41 0.00 0.57 0.43
SMGR 0 0.51 0.00 0.40 0.60
SPMA 0 0.59 0.00 0.40 0.60
SRSN 0 0.68 0.00 0.33 0.56
SULI 0 0.66 0.00 0.40 0.60
TIRT 0 0.64 0.00 0.50 1.50
TKIM 0 0.60 0.00 0.43 0.43
TOTO 0 0.52 0.00 0.33 1.00
TPIA 0 0.78 0.00 0.33 0.50
TRST 0 0.65 0.00 0.33 1.00
UNIC 0 0.47 0.00 0.43 0.67
YPAS 0 0.89 0.00 0.33 1.00
Manufacture – Basic Industry 2011
GCO INS_OWN MAN_OWN IND_COM AU_COMM
AKKU 0 0.85 0.00 0.33 1.00
ALKA 0 0.79 0.00 0.50 0.75
ALMI 0 0.72 0.02 0.40 0.60
AMFG 0 0.51 0.00 0.33 0.67
ASII 0 0.75 0.00 0.45 0.36
BRNA 0 0.22 0.11 0.33 0.50
BUDI 0 0.71 0.00 0.33 1.00
CPIN 0 0.74 0.00 0.40 1.00
CTBN 0 0.73 0.00 0.40 0.60
ETWA 0 0.66 0.00 0.25 0.75
FASW 0 0.52 0.00 0.33 1.00
FPNI 0 0.95 0.00 0.50 1.00
IGAR 0 0.79 0.00 0.33 1.00
INAI 0 0.63 0.00 0.40 0.60
INKP 1 0.53 0.00 0.44 0.33
INRU 0 0.91 0.00 0.50 1.00
INTP 1 0.49 0.00 0.43 0.43
IPOL 0 0.72 0.00 0.33 1.00
JPRS 0 0.89 0.16 0.50 1.00
KDSI 0 0.49 0.00 0.50 1.50
KIAS 0 0.94 0.00 0.33 0.50
KRAS 0 0.80 0.00 0.40 0.60
LION 0 0.69 0.00 0.33 1.00
LMSH 0 0.78 0.26 0.33 1.00
NIKL 0 0.35 0.00 0.33 0.67
SIAP 0 0.53 0.00 0.33 1.00
SIPD 0 0.69 0.00 0.67 1.33
SMCB 1 0.41 0.00 0.43 0.57
SMGR 0 0.51 0.00 0.33 0.50
SPMA 0 0.59 0.00 0.40 0.60
SRSN 0 0.68 0.00 0.33 0.56
SULI 0 0.66 0.00 0.40 0.60
TIRT 0 0.64 0.00 0.50 1.50
TKIM 1 0.60 0.00 0.43 0.43
TOTO 0 0.52 0.00 0.33 0.75
TPIA 0 0.59 0.00 0.33 0.50
TRST 0 0.65 0.00 0.33 1.00
UNIC 0 0.47 0.00 0.33 0.50
YPAS 0 0.89 0.00 0.33 1.00
Manufacture – Basic Industry 2012
GCO INS_OWN MAN_OWN IND_COM AU_COMM
AKKU 0 0.85 0.00 0.33 1.50
ALKA 0 0.79 0.00 0.50 0.75
ALMI 0 0.72 0.02 0.40 0.60
AMFG 0 0.51 0.00 0.33 0.67
ASII 0 0.75 0.00 0.42 0.75
BRNA 0 0.51 0.10 0.29 0.56
BUDI 0 0.81 0.00 0.33 1.00
CPIN 0 0.74 0.00 0.40 1.00
CTBN 0 0.60 0.00 0.40 0.60
ETWA 0 0.66 0.00 0.25 0.75
FASW 0 0.52 0.00 0.33 1.00
FPNI 0 0.95 0.00 0.50 1.00
IGAR 0 0.79 0.00 0.33 1.00
INAI 0 0.63 0.00 0.40 0.60
INKP 1 0.53 0.00 0.44 0.33
INRU 0 0.91 0.00 0.50 0.75
INTP 0 0.51 0.00 0.43 0.53
IPOL 0 0.72 0.00 0.33 1.00
JPRS 0 0.89 0.16 0.50 1.00
KDSI 0 0.76 0.00 0.50 1.50
KIAS 0 0.96 0.00 0.33 0.50
KRAS 0 0.80 0.00 0.40 0.60
LION 0 0.69 0.00 0.33 1.00
LMSH 0 0.78 0.26 0.33 1.00
NIKL 0 0.35 0.00 0.33 0.67
SIAP 0 0.53 0.00 0.33 1.00
SIPD 0 0.69 0.00 0.67 1.33
SMCB 0 0.81 0.00 0.50 1.00
SMGR 0 0.51 0.00 0.50 0.67
SPMA 0 0.59 0.00 0.40 0.60
SRSN 0 0.68 0.00 0.33 0.75
SULI 0 0.66 0.00 0.40 0.60
TIRT 0 0.64 0.00 0.50 1.50
TKIM 0 0.60 0.00 0.43 0.56
TOTO 0 0.52 0.00 0.25 0.75
TPIA 1 0.59 0.00 0.29 0.71
TRST 0 0.65 0.00 0.33 1.00
UNIC 0 0.47 0.00 0.33 0.50
YPAS 0 0.89 0.00 0.33 1.00
Manufacture – Basic Industry 2013
GCO INS_OWN MAN_OWN IND_COM AU_COMM
AKKU 0 0.85 0.00 0.33 0.67
ALKA 0 0.80 0.00 0.25 0.75
ALMI 0 0.72 0.02 0.50 0.75
AMFG 0 0.51 0.00 0.33 0.67
ASII 0 0.75 0.00 0.30 0.75
BRNA 0 0.51 0.00 0.38 0.56
BUDI 0 0.81 0.00 0.33 1.00
CPIN 0 0.74 0.00 0.33 1.00
CTBN 0 0.60 0.00 0.33 0.50
ETWA 0 0.66 0.00 0.25 0.75
FASW 0 0.52 0.00 0.33 1.00
FPNI 0 0.95 0.00 0.33 1.00
IGAR 0 0.79 0.00 0.33 1.00
INAI 0 0.63 0.00 0.25 0.75
INKP 1 0.53 0.00 0.44 0.33
INRU 0 0.90 0.00 0.50 0.75
INTP 0 0.51 0.00 0.43 0.53
IPOL 0 0.72 0.00 0.33 1.00
JPRS 0 0.89 0.16 0.50 1.00
KDSI 0 0.76 0.00 0.50 1.50
KIAS 0 0.96 0.00 0.33 0.50
KRAS 0 0.80 0.00 0.40 0.67
LION 0 0.69 0.00 0.33 1.00
LMSH 0 0.78 0.26 0.33 1.00
NIKL 0 0.35 0.00 0.33 0.67
SIAP 0 0.53 0.00 0.33 1.00
SIPD 0 0.69 0.00 0.33 1.33
SMCB 0 0.81 0.00 0.50 0.50
SMGR 0 0.51 0.00 0.43 0.57
SPMA 0 0.59 0.00 0.40 0.60
SRSN 0 0.68 0.09 0.38 0.75
SULI 0 0.52 0.01 0.33 1.00
TIRT 0 0.64 0.00 0.33 1.00
TKIM 0 0.60 0.00 0.43 0.56
TOTO 0 0.52 0.00 0.25 0.75
TPIA 0 0.55 0.00 0.29 0.71
TRST 0 0.65 0.00 0.33 1.00
UNIC 0 0.47 0.00 0.33 0.50
YPAS 0 0.89 0.00 0.33 1.00
Manufacture – Basic Industry 2014
GCO INS_OWN MAN_OWN IND_COM AU_COMM
AKKU 0 0.77 0.00 0.33 1.00
ALKA 0 0.80 0.00 0.50 0.75
ALMI 0 0.72 0.02 0.50 0.75
AMFG 0 0.51 0.00 0.33 0.67
ASII 0 0.75 0.00 0.36 0.67
BRNA 0 0.51 0.00 0.29 0.43
BUDI 0 0.81 0.00 0.33 1.00
CPIN 0 0.74 0.00 0.33 0.83
CTBN 0 0.60 0.00 0.33 0.50
ETWA 0 0.66 0.00 0.25 0.75
FASW 0 0.51 0.00 0.40 0.60
FPNI 0 0.95 0.00 0.50 1.50
IGAR 0 0.79 0.00 0.33 1.00
INAI 0 0.65 0.00 0.50 0.75
INKP 1 0.53 0.00 0.44 0.33
INRU 0 0.90 0.00 0.50 0.75
INTP 0 0.51 0.00 0.43 0.43
IPOL 0 0.72 0.00 0.33 1.00
JPRS 0 0.89 0.16 0.50 1.00
KDSI 0 0.76 0.00 0.33 1.50
KIAS 0 0.96 0.00 0.33 0.50
KRAS 0 0.80 0.00 0.33 0.67
LION 0 0.69 0.00 0.33 1.00
LMSH 0 0.78 0.26 0.33 1.00
NIKL 0 0.55 0.00 0.33 0.67
SIAP 0 0.82 0.00 0.25 0.75
SIPD 0 0.69 0.00 0.67 1.00
SMCB 0 0.81 0.00 0.50 0.50
SMGR 0 0.56 0.00 0.29 0.57
SPMA 0 0.59 0.00 0.40 0.60
SRSN 0 0.68 0.12 0.38 0.63
SULI 0 0.53 0.01 0.33 1.00
TIRT 0 0.63 0.00 0.33 1.00
TKIM 0 0.60 0.00 0.43 0.57
TOTO 0 0.60 0.00 0.40 0.60
TPIA 0 0.55 0.00 0.29 0.71
TRST 0 0.65 0.00 0.50 0.50
UNIC 0 0.63 0.00 0.33 0.33
YPAS 0 0.89 0.00 0.33 0.67