THE INFLUENCE OF CORPORATE GOVERNANCE STRUCTURE TOWARD UNDERPRICING VALUE FOR INITIAL PUBLIC OFFERING COMPANIES LISTED IN INDONESIA PERIOD 2012-2015

Abstract

Using company data retrieved from ICAMEL for 89 IPO (Initial Public Offering) companies that sought to be listed on Indonesian Stock Exchange (IDX) from 2012-2015, this research study examines the influence of corporate governance structure (composition of board size, composition of board independence and auditor reputations) toward level of underpricing. This study is present the existence of properly boards at the time of IPO in signalling its performance as indicator to potential investors. Contrary to the hypothesis of this study, the results indicate that composition of board independence is positively and significantly associated with the level of underpricing. It concludes that larger number of independent commissioner on boards are not effective in signalling the monitoring boards activity to mitigate asymmetric information, so increasing of underpricing level cannot be prevent. On the other hand, variables of composition of board size and auditor reputation indicate negatively and significantly associated with the level of underpricing. Finally, this study finds that board size and auditor reputation can mitigate the asymmetric information by signalling its existence. Thus, the result present is supporting evidence that corporate governance structures are likely to help potential investors in assess quality-value of IPO companies.