Corporate Fraud and Value of Firm : Empirical Evidence From Indonesia Capital Market

Abstract

Insider ownership and leverage has inter-substitute function to reduce negative effect of agency on value of firm. In the present of corporate fraud, the substitute function mechanism is neither sufficient nor efficient of corporate fraud on value of firm. This study aims develop substitute hypothesis, agency cost, and good corporate governance that related to value of firm. Empirical research results show there is substitute relationship between insider institutional ownership and leverage as theory expected. In the present of corporate fraud, leverage could reduce negative effect of corporate fraud on value of firm. While higher insider institutional ownership leads less value of firm. Independent commissioners play role important in implementing good corporate governance that lead more value of firm. Firm without independent commissioners less effective to prevents negative effect of corporate fraud on value of firm.