The signalling role of audit committee characteristics and the cost of equity capital

Appuhami, Ranjith

doi:10.1108/par-12-2016-0120

Cited by 18 publications

(31 citation statements)

References 64 publications

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“…These results are in accordance with signaling theory which states that any information is a signal to shareholders that can affect company funding (Beyer et al, 2010;Appuhami, 2018). The signal given by the company encourages shareholders to reduce the rate of return (costs for the company) is not proven.…”

Section: Disclosure Level Moderates the Influence Of Earnings Managemsupporting

confidence: 85%

The influence of earnings management and asymmetry information on the cost of equity capital moderated by disclosure level

Kiswanto

Fitriani

2019

Jurnal Keuangan Dan Perbankan

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Company value can be increased by minimizing the cost of equity capital. The cost of equity capital is the rate of return required by investors in accordance with company condition. The purpose of this study was to analyze the influence of earning management and asymmetry information on the cost of equity capital with disclosure level as the moderating variable by presenting Company Size, Market Capitalization, Leverage, and Profitability as the control variables. The population of the study was 148 manufacturing companies listed on the Indonesia Stock Exchange with the total unit of analysis was 330. Then, hypotheses were analyzed with software Eviews 9. The results of the study showed that earning management, asymmetry information, company size, profitability, and disclosure level had significant influences on the cost of equity capital for both large and small companies. Then, it also showed that disclosure level was able to moderate the influence of earning management on the cost of equity capital, but it was not able to moderate the influence of asymmetry information on the cost of equity capital both large and small companies. It was interesting because the coefficients of influence were different based on the company size. On small companies, the influence of disclosure level on asymmetry information was negative. How to Cite: Kiswanto, & Fitriani, N. (2019). The influence of earnings management and asymmetry information on the cost of equity capital moderated by disclosure level.

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Section: Disclosure Level Moderates the Influence Of Earnings Managemsupporting

confidence: 85%

The influence of earnings management and asymmetry information on the cost of equity capital moderated by disclosure level

Kiswanto

Fitriani

2019

Jurnal Keuangan Dan Perbankan

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“…The cost of equity capital is one of the key considerations for investment decisions because it captures, systematically, the investors' perception of risk. Good corporate governance can reduce the risk exposure of external investors and, hence, the cost of equity capital (Appuhami, 2018;Chen et al, 2011;Dao et al, 2013;Gupta et al, 2018;Zhu, 2014). Dao et al (2013), for example, find that the cost of equity capital is lower in US firms with more experienced audit committee members.…”

Section: Introductionmentioning

confidence: 99%

“…Gupta et al (2018) show that firm-level corporate governance attributes are associated significantly and negatively with the cost of equity capital in Common Law countries with high levels of financial development. Drawing on the signalling theory, Appuhami (2018) finds that an adequately equipped audit committee signals the credibility of the effective monitoring process and, hence, reduces the cost of equity capital in Australia [2]. However, few studies have explored the relationship between audit committee members' ownership composition and the cost of equity capital.…”

Section: Introductionmentioning

confidence: 99%

Audit committee ownership and the cost of equity capital

Habib

Bhuiyan

2021

MAJ

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Purpose This paper aims to investigate whether audit committee ownership (consisting of both equity holdings and option holdings) is associated with the cost of equity capital. Design/methodology/approach This paper uses regression analysis to examine the association between audit committee ownership and the cost of equity capital. The data set consists of 2,825 firm-year observations for companies listed on the ASX between 2001 and 2015. This paper also conducts tests to explore the mediating effects of financial reporting quality, firm performance and the risk of reporting problems, on the relation between audit committee ownership and cost of equity capital. Findings The analyses reveal that audit committee ownership reduces the firm’s cost of equity and, thereby, support the incentive alignment view. However, the association is driven primarily by audit committee equity ownership, with option holdings having an insignificant effect. This paper also finds that firm performance mediates the association between audit committee ownership and the cost of equity capital. Practical implications Findings of the existing corporate governance research relating to the cost of equity capital and audit committee ownership remain sparse in the context of “comply-or-explain” types of regulatory environment, like that of Australia. The findings indicate that principle-based discretionary governance arrangements, e.g. compensating audit committee members with company equity, may bring benefits to firms in terms of cheaper financing. Regulators, scholars and practitioners are invited to consider further the comprehensive implications of the structure and transparency of audit committee incentives on the effective functioning of security markets. Originality/value The effects of audit committee ownership on the cost of equity capital are an issue of direct economic consequence for equity investors. The main finding of this study, namely, that a firm with higher audit committee share ownership is likely to benefit from a lower cost of equity capital, therefore adds value to the limited extant literature.

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“…Hal ini sejalan dengan teori yang menyatakan bahwa Komite audit akan meningkatkan kredibilitas di mata pemegang saham, yang mengarah pada penilaian pasar saham yang lebih tinggi dan akibatnya biaya modal ekuitas yang lebih rendah. Hasil penelitian ini sejalan dengan penelitian Appuhami (2018). Dari hasil pengujian variabel moderasi, KOMITE_KA memiliki pengaruh positif dengan nilai koefisien sebesar 0.197264 dan memiliki nilai sig 0.0211 < 0.05 maka H8 diterima, yaitu Komite audit memperkuat hubungan antara pengaruh kualitas audit terhadap Biaya Modal.…”

Section: Definisiunclassified

Pengaruh Asimetri Informasi, Kualitas Audit, Leverage, Likuiditas, Dan Profitabilitas Terhadap Biaya Modal Perusahaan Dengan Komite Audit Sebagai Variabel Moderasi

Caisari¹,

Herawaty²

2019

semnas

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<p>Penelitian ini bertujuan untuk menguji pengaruh asimetri informasi, kualitas audit, leverage, likuiditas, dan profitabilitas terhadap biaya modal dengan komite audit sebagai variabel moderasi. Sampel yang digunakan dalam penelitian ini adalah perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia periode 2014 hingga 2018. Dengan menggunakan purposive sampling, didapatkan jumlah perusahaan yang menjadi sampel dalam penelitian ini berjumlah 22 perusahaan dengan total 110 pengamatan. Model analisis data yang digunakan adalah regresi berganda data panel dengan menggunakan software Eviews. Berdasarkan hasil penelitian, hanya kualitas audit dan komite audit yang berpengaruh negatif signifikan terhadap biaya modal, sedangkan asimetri informasi, leverage, likuiditas, dan profitabilitas tidak mempunyai pengaruh signifikan terhadap biaya modal. Variabel moderasi komite audit dalam penelitian ini terbukti hanya memperkuat pengaruh antara variabel kualitas audit terhadap biaya modal, sedangkan pengaruh moderasi komite audit terhadap pengaruh variabel asimetri informasi, leverage, likuiditas, dan profitabilitas terhadap biaya modal tidak terbukti mempunyai pengaruh yang signifikan.</p>

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The signalling role of audit committee characteristics and the cost of equity capital

Cited by 18 publications

References 64 publications

The influence of earnings management and asymmetry information on the cost of equity capital moderated by disclosure level

The influence of earnings management and asymmetry information on the cost of equity capital moderated by disclosure level

Audit committee ownership and the cost of equity capital

Pengaruh Asimetri Informasi, Kualitas Audit, Leverage, Likuiditas, Dan Profitabilitas Terhadap Biaya Modal Perusahaan Dengan Komite Audit Sebagai Variabel Moderasi

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