|
One principle of corporate governance is disclosure and transparancy. This principle stipulates that relevant and reliable disclosure is made on all material matters regarding the corporation. By applying this principle, information asymmetry can be reduced and thus negative consequences of adverse selection and moral hazard problems can be minimized. This paper assesses the extent of regulation on disclosure in Indonesia and reviews the evidence on the disclosure level among publicly listed companies in Indonesia. In Indonesia private mechanisme to control the negative consequences of information asymmetry is not effective since the role of board of directors/commissioners and banks/creditors is minimum in monitoring the firms actions. Further, the capital and labor markets are not well developed. Without proper regulation, the amount of information produced by these companies, as expected, is inadequate. In recent years, there has been significant improvement in the regulation of disclosure in Indonesia. Badan Pengawas Pasar Modal (Capital Market Monitoring Agency) has issued a number of rules that enforce disclosur and that protect the interest of minority shareholders. The accounting standards area harmonized with the international accounting standards while the due process in preparing the standards has been intensified. Empirical evidences, however, find that in general the disclosure level among publicity listed companies in Indonesia is low. Even for mandatory disclosure, the compliance rate is not satisfactory. This low level of disclosure despite the enhancement of disclosure requirement by the regulating bodies suggests that the enforcement of the regulation needs to be improved. The paper concludes with some policy recommendations to improve the disclosure level in Indonesia |
