Acta Universitatis Danubius. Œconomica, Vol 8, No 6 (2012)

Abstract

Objectives: this study aims to examine the effect of the implementation of corporate governance on bond ratings and yields.

Approach: this study uses the sample of firms that issued bonds in Indonesia Stock Exchange during the period 2007-2011. Pool the Data observation period started on January 1, 2007 to December 31, 2011. Data obtained from PT PEFINDO ratings that bond rating is an independent institution in Indonesia. Data were analyzed by using logistic regression analysis (logit) and multivariate regression. Logit analysis is used to test the effect of corporate governance on bond ratings. Multivariate regression analysis is used to test the effect of corporate governance on bond yields.

Result: the results show that not all elements of corporate governance ratings and bond yields affect. The number of independent commissioners’ positive effect on bond ratings and a negative effect on bond yields. In addition, the existence of an audit committee, statistically significant negative effect on bond yields.

Implication: this shows that the existence of an audit committee is a variable to be considered by investors in the bond investment.

Keywords: corporate governance, bond ratings in Indonesia, bond yield

JEL Classification: M. 40; M. 41