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INTRODUCTION
1. Background
Along with the development of the flow of globalization to make the information media
is a basic interest on decisions or actions that need to be done. As an issuer company that
periodically reports its accountability in its annual report. Advances in information
technology make the annual report as a medium of communication to all parties to explain
the achievement of corporate performance and prospects of the company in the future. So the
company's goal to stay sustainable can be fulfilled. Such information is generally used by
investors (shareholders) to invest capital so as to produce a return on capital invested. The
investors need to make an assessment of the capability or performance of the company in
generating returns in the future before investing. The success of a company can be seen in
the size of the companies with a total market value of equity held on the company's
performance.
In an effort to overcome these weaknesses, the Indonesia Stock Exchange (IDX) held
"Investor Day 2016" to encourage listed companies or issuers to apply good corporate
governance practices (Wartaekonomi.co.id). The Indonesian government also encourages the
implementation of GCG by forming the National Committee on Governance (NCG) is one of
the efforts made by the government. At the international level, the Organization for
Economic Cooperation and Development (OECD) has published some basic principles of
implementation of corporate governance that apply universally. Some of these principles
include the rights of shareholders to be properly and appropriately informed. The issuance of
GCG principles is intended to assist both OECD member countries and non-OECD members
in implementing GCG in their country, especially to provide guidance and advice for capital
markets, investors, companies and other parties that have a role in the process Development
of GCG.
Some institutions in Indonesia give appreciation to companies that are considered to have
applied GCG consistently (Makaryanawati, 2012). In 2016, the Indonesian Institute for
Corporate Governance (IICG) in cooperation with the SWA of 2001 has been Letting CGPI
survey as a tribute to the initiatives and results of the company's efforts in creating an ethical
business and dignity. Over the past 15 years the current survey has shown significant
progress in terms of the number of participants who each year continues to fluctuate and the
score is generally increasing.
In the current development of CGPI value is information that can be used by investors as
a material consideration and valuation of the stock so that it can trigger the movement of the
company's stock value. By reference to the CGPI, investors expect improvements in the
corporate governance will make the better performance of the company so as to provide an
increase in the company's value reflected in higher stock returns in the market (Main and
Abdul, 2013). Participating companies in CGPI consist of state-owned enterprises (BUMN /
BUMD), bank and non-bank financial institutions, syariah financial institutions, and BUMS.
As the state-owned enterprises in Indonesia is obliged to implement or practice the good
corporate governance. SOEs are obliged to apply it is contained in Article 44 (1) Regulation
of the Minister of State-Owned Enterprises PER-09 / MBU / 2012. SOEs shall take
measurements of the quality of GCG implementation implemented annually in the form of an
assessment of the implementation of GCG and evaluation of the follow-up recommendations
of improvements from the results of the previous assessment. The benefits of CGPI are done
to communicate what the company is doing in terms of good governance and can enhance the
company's reputation. The existence of CGPI is highly expected by investors, which can help
investors to facilitate the decision because it can see from the company's long-term business
plan.
Based CGPI votes awards as the best company in Indonesia, the writer is interested to
further investigate the extent to which the company's success both on the development of the
return of shares through a market value of equity and appraisal of the implementation of good
corporate governance that is sustainable and to help the national economy. Therefore, the
authors conducted a study entitled "The Effect of Good Corporate Governance of the
Market Value of Equity and Stock Return Implications Corporate Banking, Mining, and
Manufacturing are listed on the Indonesia Stock Exchange (BEI)".
2. Problem Formulation
Based on the background that has been described above, then the formulation of the
issues to be discussed in this study are as follows.
1. Whether the application of good corporate governance components affect the market
value of equity partially and simultaneously in banking, mining and manufacturing are
listed on the Indonesia Stock Exchange (BEI)?
2. Is the market value of equity effect on stock returns in the banking, mining and
manufacturing are listed on the Indonesia Stock Exchange (BEI)?
3. Whether the application of good components corporate governance impact on stock
returns over the market value of equity in banking, mining and manufacturing are listed
on the Indonesia Stock Exchange (BEI)?
3. Scope of Problem
This study has limitations not covering all areas. Some of the limitations of this study are
as follows.
1. The use of an intervening variable used formula with a market value of equity (MVE).
Independent variable Good corporate governance is using Corporate Governance
Perception Index (CGPI) with four phases (Self-assessment, documentation, papers
report, observation). Dependent variable using Stock returns of companies listed on the
Indonesian stock exchange.
2. This study was only performed on companies listed in Indonesia Stock Exchange and
follows the Corporate Governance Perception Index (CGPI). The period of the year used
from 2011-2015, as the period indicates the most actual conditions related to the
development of companies that follow the rating assessment by CGPI.
3. The research method used only descriptive statistics, classical assumption test, and path
analysis.
4. Objective Research
Based on the description of the background and the formulation of the problem, the
purpose of the authors conducted this study as follows.
5. Benefit Research
The expected benefits and contributions from the results of this study are as follows.
Research can provide input that the importance of knowing how to implement good corporate
governance, and market value of equity on stock returns so as to provide an overview and
considerations for the management of the company to be able to do better changes related to
enterprise information presented. This can minimize the risk that companies receive related to
the lack of investor confidence in the issuer company. So that the company can maintain its
domestic market from foreign competitors and expand its scope in order to cover the global
market.
This research can be used as a reference in facing the same problem and as a means of science
development. Because the authors acknowledge there are still many limitations owned and
published in this study, of course there are many variables or other factors that can support the
development of this research further.
3. For Investors
This research can be used to find out how the tendency of company performance terms of good
corporate governance and stock returns Companies to provide an overview and consideration
for investors to invest or not in the future. It is expected to contribute thoughts in the company's
assessment and help when making decisions for investment problems faced.
CHAPTER II
LITERATURE REVIEW
1. Agency Theory
The agency theory assumes that all individuals act on their own behalf. In the company
identifies the existence of parties companies that have various interests to achieve corporate
objectives such as, the issue of ownership of the company through the purchase of shares. In
financial management discusses the relationship between the separation between ownership
and management conducted by managers. Deegan (in Arifani, 2012) states, in the agency
relationship the manager is the party who has information about the company more than the
owner, resulting in information asymmetry is a situation where there are parties who have
more information from outsiders so beneficial to them. This agency relationship is prone to
conflict, ie personal conflicts of interest (agency conflict). This conflict occurs because the
owner of the capital tries to use the best possible funds with the least risk, while managers
tend to make fund management decisions to maximize the often conflicting profits and tend
to prioritize their own interests.
The mechanism used to minimize the conflict between investors and the management is
the application of good corporate governance (GCG). Perspective of agency theory is used to
understand the basic issues of C orporate Governanace and earnings management. The
separation of ownership by the principal to the control by agents in an organization tend to
cause conflict between principal and agent keagenen.
2. Corporate Governance
a. Transparency (Transparency)
b. Accountability (Accountability)
c. Responsibility (Responsibility)
e. Fairness (fairness)
In carrying out its activities, the company must always pay attention to the
interests of shareholders and other stakeholders based on the principle of fairness
and equality.
Some things needed to fulfill the implementation of Good Corporate Governance, as
follows.
3. Fair treatment among shareholders. In applying GCG, the company should treat
fairly among shareholders including minority shareholders and foreign
shareholders. All shareholders should be able to have the same opportunity to
seek redress for violations of their rights.
4. Stakeholder Role. Companies must recognize the right of stakeholders built under
law or collective agreements. Companies should also encourage active
cooperation between companies and stakeholders in creating wealth, employment
opportunities, financial sustainability of the company.
The successful implementation of GCG also has its own prerequisites. Here, there
are two factors that play a role, external and internal factors (Daniri, 2005).
1. External Factors
External factors are several factors that come from outside the company that
greatly affect the successful implementation of GCG, following external factors.
e. Another thing that is not less important as a prerequisite for the successful
implementation of GCG especially in Indonesia is the spirit of anti-
corruption that develops in the public environment where the company
operates with improvements in quality issues of education and expansion
of employment opportunities. It can even be said that improving the public
environment greatly affects the quality and score of the company in the
implementation of GCG.
2. Internal factors
The purpose of internal factors is the driving force for the successful
implementation of GCG practices originating within the company. Some of the
factors in question are.
a. The presence of corporate culture (corporate culture) which supports the
implementation of GCG in the mechanism and system management work
in the company.
b. Various regulations and policies issued by the company refers to the
application of the values of GCG.
c. The company's risk control management is also based on GCG standard
rules.
d. There is an effective auditing system within the company to avoid any
possible deviations.
e. The existence of information disclosure to the public to be able to
understand every movement and management steps in the company so that
the public can understand and follow every step of the development and
dynamics of the company from time to time.
The following are the benefits obtained with the implementation of Corporate
Governance.
1. With GCG the decision-making process will take place better so that it will
produce optimal decisions, improve efficiency and create a healthier work culture.
3. The value of firms in the eyes of investors will increase as a result of their
increased confidence in the managers of the companies they invest.
5. D nature GCG employees are placed as one of the stakeholders that should be
managed properly by the company, the employees' motivation and satisfaction are
also expected to rise.
The sequence of processes in the assessment stage of GCG research and ranking can be
explained as follows (IICG):
1. Self Assessment
Self Assessment is a process of objective assessment of a company on itself associated with the
alignment system GCG in all business processes through the establishment, implementation and
evaluation of the company's strategy to achieve corporate goals and objectives of sustainable
(strategic management). Self assessment carried out by filling the questionnaire by all
stakeholders of the company.
At this stage the company was asked to collect documents and evidence to support the
implementation of corporate governance in the company, as well as associated with the
alignment of corporate governance systems in business processes. For companies that have
submitted related documents to the previous year's CGPI administration, simply provide a
confirmation statement on the previous valid document, and if there is any change, the revised
document must be attached.
At this stage the company is asked to make an explanation of the company's activities in the
GCG system in the business process through the strategic management during the year in the
form of papers with the systematical arrangement that has been determined and then conducted
the discussion and question and answer.
4. Observation to Company
At this stage CGPI researchers will visit the participating companies' locations to examine the
certainty of aligning the GCG system in the company. Implementation of observation in every
participant company CGPI conducted maximum for (half) work day (3 hours) after
presentation, discussion, and question and answer. Companies requested to attend the
observation are representatives of the board of commissioners, boards of directors and
management.
The value of CGPI can be calculated by summing the final value of the above stages. The
results of research programs and ranking GCG implementation on the company participants
by providing scores in accordance with the guidelines that have been made.
CGPI ranking is divided into three categories based on the level of reliable performed based
on a survey of the practices of Corporate Governance CGC generate scores Performance
Index (CGPI) with a rating as follows.
Table 2.2 Rating List CGPI Rating
Very Trusted 100-85
Trusted 84-70
Quite Trusted 69-55
One of the benefits that can be obtained from the CGPI is because CGPI is one of the
information entered in the capital market. Information on CGPI is expected to have a positive
impact, especially with regard to investor confidence in the funds invested. The influence of
the CGPI announcement is likely to give investors a positive reaction and be able to change
investor expectations about the company concerned. Given such conditions, stock prices and
trading volume of shares in companies that enter the top ten CGPI will be higher than non
CGPI's top ten companies. In addition, the ranking of corporate governance in the form of
CGPI is possible the difference in reaction between the companies that entered the top ten
and ten non CGPI.
Market value of equity is one of the commonly used variables to explain the variation of
disclosure in the company's annual report. The size of a company viewed from the size of the
company that can be expressed in total assets, sales, and market capitalization. One can be
seen through the market capitalization, according to Saiful and Erlina (2010), the greater the
total assets, sales and market capitalization, the larger the size of the company. The greater
the asset, the more capital invested, the more sales the more the velocity of money and the
greater the market capitalization, the greater the company is known by the public. Of the
three variables, the researcher uses market capitalization to measure firm size.
According Miranty (2012), called the market capitalization or market value of equity to
reflect the current value of the company's assets, which is a measurement of the size of the
company. Market value of equity can be obtained from the calculation of the stock market
price multiplied by the number of shares issued (outstanding shares). Market value of equity
(market capitalization) is a measurement of the size of the company in which the company
could suffer a failure or success. Thus, market capitalization represents the total value of all
published shares available, with the calculation can be done by seeking multiplying the
number of shares outstanding at current market prices.
5. Stock Return
Stock return is the result obtained from the investment made by the investor. Return the
maximum is a cool thing every investor in the investment. Stock returns divided into two
Tirrenus return and expected return. Realized returns are returns that have occurred or have
been realized. Whereas, the expected return is the expected return of investors to be obtained
in the future and still be uncertain. Total Return is the overall return on an investment in a
particular period. Total Return is often referred to return alone. Total return consisting of
capital gain (loss) and yield.
Horne and Wachoviz (1998) defines the following returns "return as benefits related with
owner roomates cash dividend that includes the which I paid last year, togethterwith market
cost or capital gain appreciation shich is realization in the end pf the year". Meanwhile,
according to Jones (2004), "Return is the yield and capital gain (loss)". Where cash flow
yield is paid periodically to shareholders (in the form of dividends), and capita gain (loss) is
the difference aantara share price at the time of purchase by the share price at the time of
sale. Based on these opinions, it can be concluded that stock returns are obtained ownership
advantage investor or its investments, consisting of dividends and capital gain / loss.
Dividends are corporate profits distributed to shareholders in a given periodic. Capital gain /
loss during the period represents the difference between the original stock (beginning of
period) with the price at the end of the period. From such understanding can be underlined
bahw atingkat returns of a stock is not always a positive value when the stock price at the
moment is more rendag than the current share price the investor to make a purchase then the
rate of return of saam negative worth (capital loss).
6. Previous Research
Researchers used several similar research studies that researchers have done to support
this research. Where in the studies that have been done are a lot of evidence, that there is a
relationship between good corporate governance on stock returns over the size of the
company.
Table 2.3 Similar Research
No. Research Title Objects and Variables Discussion result
Companies that follow
corporate governance
perception index (CGPI)
Independent Variables:
Influence Of Good
Corporate Governance
Scores of corporate Good corporate governance
Through Shares Return
governance perception has a negative effect on stock
1 Price Earning Ratio, Debt
index (CGPI) returns over variable price
Equity and Return on
earning ratio.
Equity (David Nathanael
Dependent Variables:
Sutyanto, 2012)
Stock returns, price to
earnings ratio, debt to
equity ratio and return on
equity.
2 Effect of Good Corporate Companies that are rated Good Corporate Governance
Governance Toward Stock CGPI and listed on the significantly influence the
Return With Financial Indonesia Stock company's financial
Performance As an Exchange. performance, good corporate
intervening variable governance significant effect
(Nadha Adityara, 2014) Independent Variables: on stock returns, and the
company's financial
Scores of corporate performance has no effect on
governance perception stock returns. Hypothesis test
index (CGPI) results would imply that the
company's financial
Dependent Variables: performance can not mediate
the effect of Good Corporate
return stock Governance on stock returns.
Intervening Variables:
Financial Performance
proxyed with ROE.
Companies that are in the
LQ45 Index in Indonesia
Liquidity Effect of Stock
Stock Exchange (BEI). The absence of significant
Trading Stock Return
influence on the frequency of
Against Company That
Independent Variables: trading with stock returns.
Was In LQ45 Index in
Then the positive influence but
Indonesia Stock Exchange
3 Trade Frequency, Trade not significant to the volume of
Period 2009-2013
Volume, and Market trading with stock returns.
(Empirical Study On LQ45
Capitalization. Then no significant influence
Company In Indonesia
on market capitalization and
Stock Exchange). (Ni Luh
Dependent Variables: stock returns.
Nonik, et al, 2014)
Stock Return.
Manufacturing
companies listed on the
BEI
Influence of Good Implementation of good
Corporate Governance Independent Variables: corporate governance and
Performance Against significant positive effect on
Corporate Finance and Scores of corporate financial performance.
4
Market Value Participants governance perception However, the implementation
Corporate Governance index (CGPI). of good corporate governance
Perception Index (CGPI). did not affect the market value
(Istiqomah, 2009) Dependent Variables: of the company.
Control Variable:
Opportunity to grow
(growth), firm size (size),
and the company's debt
ratio (leverage).
Companies listed on the The results of this study to
Indonesia Stock simultaneously show the
Exchange which has a significant influence between
Influence Profitability,
score of corporate profitability, leverage, good
Leverage, Good Corporate
governance perception corporate governance, and the
Governance, and Firm Size
index (CGPI) size of the company to the
Of Company Value (Case
value of the company and
Study At Company Listed
Independent Variables: partially show profitability
On The Stock Exchange
5 variables significantly
Indonesia Has Score
Profitability, Leverage, influence the value of the
Corporate Governance
GCG, and the size of the company. However, leverage,
Perception Index (CGPI)
company. good corporate governance,
During the period from
and the size of the companies
2010 to 2013). (Nadya
Dependent Variables: showed no significant effect on
Pratiwi, et al 2014)
the value of the company both
The value of the before and after moderated by
company GCG.
7. Framework of Theoretical
The framework of thinking is a conceptual model of how theory relates to various factors
that have been identified as problems (Sugiyono, 2012). Based on the background, problem
formulation, and research objectives previously described, the authors developed the model
as the theoretical framework in this study, along with the drawing of the framework.
8. Formulation of Hypothesis
The hypothesis to be used in this study relates to the presence or absence of the influence
of independent variables on the dependent variable. The design of this research hypothesis to
prove whether the application of good corporate governance has a relationship with stock
returns by the size of the company, then performed statistical hypothesis testing as follows.
1. Effect of GCG Components Implementation on Market Value of Equity
The company's progress on the implementation of GCG can be seen from the
size of the company. Where the size of the company can be expressed in total assets,
sales, and market capitalization. Researchers used a market capitalization or commonly
called the market value of equity as a proxy on the size of the company. The larger the
market value of equity , the greater the size of the company and the higher the
company's stock price so known by the public (Virawati, 2009). The larger companies
more likely to have agency problems are more anyway, so it requires mechanisms of
good corporate governance is more stringent. Therefore, following an assessment
based on CGPI, the rating has been made by IICG generate performance based on the
quality of corporate governance that is expected to improve oversight for the company,
namely the assessment component.
a. self Assessment
b. Documentation
c. reports Papers
2. Completeness of the information contained in the paper will help write the
publication of corporate governance practices in the company as a series of
continuing implementation CGPI program each year.
a. Writing format
b. Writing system
d. The contents of the paper prepared by the parts that have been determined.
e. Presentation of the paper should pay attention to several aspects that are
used in assessing the quality of the presentation of papers.
3. Collection of Papers submitted in the form of so ft copy / file and hardcopy paper.
d. Observation
In general, any company that issued the shares has a goal to maximize the
wealth of company owners or shareholders. Shareholder value is measured by
multiplying the price of stocks and shares outstanding. Return the stock is a reflection
of the performance or value of the company and also a reflection of investor
confidence. Return the stock will move in line with the size of the company.
However, the management often have conflicting goals and interests with the
company's main objectives and ignore the interests of shareholders. The interest
difference resulted in the emergence of conflict called the agency conflict. Agency
conflict will lead to the opportunistic management will result in reported earnings
pseudo, and lead the company's value is reduced in the future (Herath, 2008). Such
actions indicate that a large company or a large company that has a size much
diminiati by investors. As the size of the company's proxy is the market value of
equity (MVE), which are generally large capitalization stocks that became the target
of investors to invest in the long term for the company's growth potential is increased
and the distribution of dividends as well as a relatively low risk exposure. Because
much demand, then the share price is generally higher relative so it will provide a
return that is higher as well. Based on the above hypothesis is formulated as follows:
RESEARCH METHODS
In this study, the authors chose the companies listed in Indonesia Stock Exchange (BEI)
and recorded in the Corporate Governance Perception Index (CGPI) 2011-2015. Companies
used as a population in this study are all companies listed on the Indonesia Stock Exchange
(IDX) which follows the CGPI assessment by IICG. The period used in this study, namely
the period 2011 to 2015. The method used in sample selection using conditional sampling
method, where the sample selection to specific criteria. The considerations used in the
research sample of this study as follows.
Based on the above consideration criteria, then the number of companies sampled in this
study as follows.
Table 3.1 Research Sample
No. Company name Securities Code
1 BMRI Bank Mandiri Tbk
2 BBNI Bank Negara Indonesia Tbk
3 BBRI Bank Rakyat Indonesia Tbk
4 BBTN Bank Tabungan Negara Tbk
5 NISP Bank OCBC Nisp Tbk
6 ANTM Aneka Tambang Tbk
7 PTBA Bukit Asam Mining Tbk
8 JSMR Jasa Marga Tbk
9 TINS Timah Tbk
Data collection method in this research is documentation study, that is studying document
related to all data needed in research. The author uses secondary data contain financial and
non-financial information through annual reports (annual report) which is derived from the
Indonesian Stock Exchange and the CGPI report published by IICG cooperate with SWA
magazine. The data retrieval in this study during the five periods intended to test stability
between the regression of 2011-2015.
In addition, to obtain and complete the study and theoretical basis in this study, the
authors do literature study by describing theories related to the discussion, studied previous
research journals, data obtained and presented by others, the internet, As well as resources
that have relevance to the discussion and literature related to the research.
This study was conducted to determine the effect of Good Governance corpoarte on
stock returns over the size of the companies listed on the Indonesian Stock Exchange (BEI)
and follow the rating CGPI 2010-2015.
Table 1.2 Operational Measurements and Research Variables
VARIABLES INDICATOR SCALE
Independent
Self Assessment Score results of the NOMINAL
Documentation assessments have been NOMINAL
Papers Report made based on several NOMINAL
Observation aspects of the assessment. NOMINAL
Intervening
The number of outstanding
Market Value of Equity NOMINAL
shares owned is multiplied
by the closing stock price
Dependent
The closing share price of
the current year was
reduced by the closing share
Stock return RATIO
price of the previous year
divided by the previous
year's stock price.
The variables that become the subject of this research consist of five independent
variables and one dependent variable, as follows.
1. Independent Variable
The independent variable is the variable that influences or causes the change or
the emergence of the dependent variable (Sugiyono, 2013). In this study, the
independent variables used are the result of corporate governance ratings category
perception index (CGPI) which categories this assessment is based on the
components of transparency, accountability, responsibility, independence and
fairness. Here are the CGPI free variables with the results of the rating categories.
b. Documentation
d. Observation
2. Intervening Variable
Based on the return, that the return of a stock is the same as the result of investment
by calculating the current stock price difference with the previous period regardless of
dividend, it can be written the formula (Ross et al., 2003: 238) as follows.
Where:
5. Method Analysis
The purpose of the data analysis is to obtain the relevant data that is researched and use
the result to solve a problem. One of the programs used for data processing was SPSS
(Statistical Product and Service Solution). SPSS is the most popular and widely used statistic
program in the world. Researchers use it for various purposes such as market research,
completion of research assignments (thesis, thesis, dissertation) and so on.
In this study, there are three variables to be studied, namely the independent variable for
Self Assessment, System Documentation, paper reports, and observations, intervening
variable for the market value of equity and the dependent variable is the stock return. Both
variables will be analyzed by multiple linear regression technique with SPSS software.
However, previously performed classical assumption test consisting of normality test,
multicollinearity, autocorrelation, and heterokedastisitas.
1. Descriptive Statistics
a. Normality Test
Normality tests are used to show that samples are drawn from normally
distributed populations. This study used normality test to know normal distributed
data or not and tested the normality of data used in histogram graph comparing
the cumulative distribution of the normal distribution. As it is well known that t
and f assume that the residual values follow the normal distribution. If this
assumption is violated then the statistical test becomes invalid for a small sample
count. To test the normality of data, this research uses graph analysis. Normality
testing through graph analysis is by analyzing the normal probability plot graph
that compares the cumulative distribution of the normal distribution. Normal
distribution will form a straight line diagonal, and the residual data pieces will be
compared with the diagonal line. The data is said to be normal if the data or the
largest points around the diagonal line and its distribution follow the diagonal
line, (Ghozali, 2012). In performing normality test using graph analysis and
statistical analysis. When using the method of statistical analysis, the data
normality was tested using one test-sample Kolmogorov-Smirnov Test (KS) where
the results of this calculation are two sides greater than 0.05 then, the data were
normally distributed (Sugiyono, 2013) and for normality graph analysis can be
detected by looking at the histogram of its residuals.
b. Multicolinearity Test
c. Autocorrelation Test
d. Heteroscedaticity Test
This test is used to test a regression model of variance inequality of the
residuals from another observation. A good regression model is that there is no
heterokedastisity. To find out used a scatter plot graph, namely by looking at
certain patterns on a graph (Ghozali, 2012). One way to detect the presence or
absence of heterokedastitas is to use a scatterplot chart between the predicted
value of the dependent variable (dependent) ie residual SRESID ZPRED
premises. When the significance probability value above five percent confidence
level and a scatterplot graph, the points spread above or below zero on the Y axis,
it can be concluded regression model did not contain any heterocedastity
(Ghozali, 2012).
3. Path Analysis
To test the intervening variable in this study used path analysis method (Path
Analysis). Path analysis is the need of multiple linear regression analysis to estimate
the causality relationship between predefined variables based on theory. In path
analysis there is a variable that doubles as independent in a relationship (Priyatno,
2014). However, it becomes dependent variable on other relationship considering the
existence of tiered causality relationship (Ghozali, 2012). To test the path analysis in
this study there are two substructures as follows.
Substructural I
Substructural II
Where:
SA = Self Assessment
SD = System Documentation
LM = Report of Paper
OB = Observation
RS = Return Shares
= Constants
'1 = Another factor that affects and is outside the study variables
'2 = Another factor that affects and is outside the study variables
4. Hypothesis Testing
Hypothesis testing in this study regression path analysis. Where this hypothesis
test is a decision-making method based on data analysis, either from controlled
experiments, or from observation (uncontrolled). The author uses hypothesis test as
follows.
The statistical test t basically shows how far the influence of the
explanatory variables or independent individual that corporate governance
mechanism is proxied by self-assessment, system documentation, reports the
paper, and observation in explaining the variation of the dependent variable,
namely the return stock with variable intervening, namely the size of the
company proxied by the market value of equity. Steps used to test the hypothesis
with t test was to determine the level of significance that used by 5% or ( ) =
0.05. If sig. T is greater than 0.05 then Ha is rejected. However if sig t is smaller
than 0.05 then Ha is accepted, it means there is significant influence between
independent variable with dependent variable (Ghozali, 2012)
c. Determination coefficient (R 2)