The Impact Corporate Governance Quality, Institutional Ownership on Firm Value and Risk Taking Behavior

Abstract

The study aims to analyze the effect of corporate governance quality and institutional ownership on value of firm and risk taking behavior. Corporate governance quality is the ranking of good corporate governance by Indonesian Institute for Corporate Governance (IICG). The firm value is measured by price to book value (PBV) and risk taking behavior (RISK) is measured by stadard deviation of monthly stock price. The sample of firm is obtained from the annual report of good corporate governance rating by IICG for the year 2008-2012. The data is collected use pooled data from Indonesian Capital Market Directory and Yahoo Finance. The multiple regressions models are applied to test the effect of corporate governance quality, institutional ownership and various financial ratio on firm value and risk taking behavior. The result showed the quality of good corporate governance has a positive effect on firm firm value and negative effect on risk taking behavior. Implication of this study indicates that quality of good corporate governance is important determinants to firm value and risk takingbehavior, and good signal for potensial investor.The institutional ownership has not effect on firm value and risk taking behavior. Implications of these findings support the hypothesis of strategic alignment and conflict interest hyphothesis.