The Impact of Board Size, Board Independency and Investment Opportunity on Debt Policy of Manufacturing Firms Listed on Indonesia Stock Exchange

Sahabuddin, Zainal Abidin and Hadianto, Bram (2017) The Impact of Board Size, Board Independency and Investment Opportunity on Debt Policy of Manufacturing Firms Listed on Indonesia Stock Exchange. In: The Sixth International Conference on Entrepreneurship and Business Management, 16-17 November 2017, Hanoi.

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Abstract

The implementation of good corporate governance is essential for firms listed on capital market. By doing it, firms will be trusted by investors and creditors so that they can obtain funds easily from both of them. This study focuses on how listed firms build their reputation before creditors via supervisory board. The effectiveness of supervisory board can be shownby its size and its independency.In this study, the test of investment opportunity impact on debt policy is done to prove that transfer of benefit from shareholders to debt holders does not exists. Therefore, the purpose of this study is to test an impact of board size, board independencyand investment opportunity on debt policy. The population of this study comes from manufacturing firms listed on Indonesia Stock Exchange. The firms as sample are taken from the population by using stratified random sampling method. Regression model with pooled data is used as method of data analysis. This study concludes that board size, board independency, and investment opportunity have a negative impact on debt policy. The negative impact of investment opportunity on debt policy shows that transfer of benefits does not occur in the relationship between two parties: shareholders and debtholders.

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Conference or Workshop Item (Paper)

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