THE EFFECT OF CORPORATE GOVERNANCE ON THE COMPANY’S GOING CONCERN AUDIT OPINION

Abstract

This study aims to investigate the effect of corporate governance on the company’s going concern audit opinion on Indonesian listed manufacturing companies at Indonesia Stock Exchange from 2007 to 2011. There are many prior researches related to the effect of corporate governance mechanism on the company’s going concern audit opinion. The inconsistency of result and timing differences urge the researcher to make a study about this topic. The proxies for good corporate governance are institutional ownership, managerial ownership, the proportion of independent commissioner and the presence of corporate governance committee. There are also financial ratios used as variable control in this research. They are leverage ratio, current ratio, and return on asset ratio. The data collection is performed by purposive sampling by directly quoting the information from annual reports and financial statements. The data is analyzed using logistic regression to test the hypothesis on this study. There are three main findings resulted in this study. First, institutional ownership affects negatively on the company’s going concern audit opinion. Second, the proportion of independent commissioners has positive effect on the company’s going concern audit opinion. Third, the managerial ownership and the existence of the Corporate Governance Committee have negative effect but not significant on the company’s going concern audit opinion. The data which used in this study is limited on manufacturing company listed in Indonesia Stock Exchange and the data is five years. The researcher recommends changing some independent variables on this study and expanding the type of company and the period of data used.