Corporate Governance Perception Index (CGPI) and Cost of Debt

Corporate Governance Perception Index (CGPI) is the ranking of good corporate governance by Indonesian
Institute for Corporate Governance (IICG) with SWA magazine. Companies that follow the CGPI survey showed
a willingness to become a trusted and open. This effort should be perceived positively by stakeholders. Some
previous researches showed that a corporate governance has a significant impact on the lowering the cost of debt
(Piot & Piera 2007; Sengupta & Bhojraj 2003; Ashbaugh & Skaife et al 2006). Therefore, this paper is aimed to
search the benefit of GCG implementation to the cost of debt. All companies listed on the Indonesia Stock
Exchange (IDX) which have a GCG score for survey period 2004-2009 are selected as a research sample. Other
variables such as Debt to Asset (DA), Return on Asset (ROA), Sales Growth (Sgrowth), Firm Size (Fsize and
Market to Book (MTB) are considered as control variables. The results do not support the hypothesis. Several
explanations, including the low level of creditor’s confidence to the good corporate governance practices have
been discussed to support the research findings.
Keywords: Corporate Governance Perception Index (CGPI), CG Score, Cost of Debt, Firm Size