Impact of Corporate Governance on Credit Rating

DOI

10.2991/iac-17.2018.44How to use a DOI?

Keywords

Credit Rating; Board; Institutional Ownership; Blockholders; Audit Committee; External Auditor

Abstract

This study aims to examine whether corporate governance affects a firm’s credit rating. Corporate governance is examined from the aspects of company structure (number of directors, number of commissioners, and proportion of independent commissioners), ownership structure (institutional ownership, number of blockholders), audit committee, and external auditor. Using a sample of 168 firms listed in the Indonesia Stock Exchange (IDX) during the period 2009-2013, this study found that increasing board size, institutional ownership, audit committee and external auditor size have positive effects on a firm’s credit rating, while increasing the proportion of outside directors and the size of blockholders has a negative effect. This research found that the number of directors has a quadratic inverse "U"-shape relation with credit ratings, with the maximum point at 4,589. To a certain extent, the greater the number of directors, the higher the credit rating, because the monitoring and decision making will be more effective. However, when the optimum point (five people) is reached, additional directors will decrease the credit rating due to coordination problems.

Copyright

© 2018, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Christi Karolina Tarigan
AU  - Fitriany Fitriany
PY  - 2017/08
DA  - 2017/08
TI  - Impact of Corporate Governance on Credit Rating
BT  - Proceedings of the 6th International Accounting Conference (IAC 2017)
PB  - Atlantis Press
SP  - 248
EP  - 253
SN  - 2352-5428
UR  - https://doi.org/10.2991/iac-17.2018.44
DO  - 10.2991/iac-17.2018.44
ID  - Tarigan2017/08
ER  -