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Archives of Business Research – Vol. 10, No. 4
Publication Date: April 25, 2022
DOI:10.14738/abr.104.12022. Simandjuntak, J. B. P., & Murwaningsari, E. (2022). The Moderating Effect of Company Size on Audit Committee and Intelectual
Capital Toward Corporate Value. Archives of Business Research, 10(04). 1-13.
Services for Science and Education – United Kingdom
The Moderating Effect of Company Size on Audit Committee and
Intelectual Capital Toward Corporate Value
J. B. P. Simandjuntak
Faculty Economics and Business Trisakti University, Jl.
Kyai Tapa No.1, Tomang, Grogol Petamburan, Jakarta 11440, Indonesia
Etty Murwaningsari
Faculty Economics and Business Trisakti University, Jl.
Kyai Tapa No.1, Tomang, Grogol Petamburan, Jakarta 11440, Indonesia
ABSTRACT
In this study, to analyze the effect of Audit Committee, and Intelectual Capital
toward Company values. And also analyzes the impact of Company Size as a
moderating variable that strengthens or weakens the relationship between the
effects of Audit Committee, Intecetual capital toward Company values. The
researcher collects empirical study data from the companies using secondary data
taken from the annual reports of companies listed on the Indonesia Stock Exchange
(IDX). This study used a purposive sampling technique and obtained as many as 53
companies in accordance with predetermined criteria. Then analyzes them using
the Statistical Package for the Social Sciences. A total of 265 units of data analysis
that meet the criteria and can be used as samples in this study. This study only takes
secondary data from the annual reports of company’s in the Indonesia stock
exchange. Company Size as a moderator between Audit Committee and Intellectual
Capital toward Corporate Value in companies listed on the Indonesia Stock
Exchange is still little researched. So this research will not only fill in the current
gaps in the literature but also spark new academic debates, but this study will also
contribute to the practice of Corporate Value. This study reveals that Audit
Commitee and Intellectual Capital have a positive and significant effect on
Corporate Value. Meanwhile, the role of the Company Size as a moderating variable
have strengthens the influence between Audit Commitee and Corporate Value from
before being moderated by the Company Size.
Keywords: Audit Committee, Intelectual Capital, Company Size, Corporate Value
INTRODUCTION
Company management as well as investors or shareholders are interested parties and are
closely related to the value of the company. The financial manager must find the funds that the
company needs and manage and manage the company's finances effectively to maximize the
value of the company (Kasmir, 2016).
The phenomenon related to the value of the company is the rise and fall of stock prices.
Throughout 2020, the Composite Stock Price Index (JCI) had dropped to its lowest point at the
level of 3,989 on March 23, 2020. The fall in the stock market was caused by the impact of the
Covid-19 pandemic. However, the JCI rose again and reached the level of 5,979 at the close of
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Archives of Business Research (ABR) Vol. 10, Issue 4, April-2022
Services for Science and Education – United Kingdom
trading this year, Wednesday, December 30, 2020, year to date (YTD), the JCI only fell by 5.09
In terms of sectoral indexes, almost all indexes weakened. The agriculture sector index fell
1.74%, basic and chemical industries fell 5.84%, miscellaneous industries fell 11.7%, and
consumer goods fell 10.7%. Then, the infrastructure, financial, and manufacturing sectors
weakened by 12%, 1.59%, and 9.22%, respectively. The trade, services and investment sector
index fell 0.45%. Mining sector to 23.6%.
Company Size or company size is a scale where the size of the company can be classified
according to various ways, including: total assets, log size, stock market value, number of
employees, and others. Capital can be interpreted as capital based on the knowledge owned by
the company. Bontis (2000) in Ismiyati and Hamidya (2017) says intellectual capital is the
entire knowledge of employees and companies that contribute to a company's sustainable
competitive advantage. Intellectual capital is part of intangible assets or intangible assets.
Pulic (1998) introduced a method to measure intellectual capital indirectly, namely the Value
Added Intellectual Coefficient (VAICTM) method. The method is used to assess the efficiency of
added value as a result of the company's intellectual abilities. The company has good
intellectual capital in its management which has an impact.
The audit committee has a very important and strategic role in maintaining the credibility of
the process of preparing financial statements as well as maintaining the creation of an adequate
corporate supervision system and the implementation of good corporate governance. With the
functioning of the audit committee effectively, the control over the company will be better so
that agency conflicts that occur due to management's desire to improve their own welfare can
be minimized.
The solvency ratio is the ratio used to measure the extent to which the company's assets can be
financed with debt (Kasmir, 2017). One of the solvency ratio calculations is the Debt to Equity
Ratio (DER). The higher the DER ratio, the higher the use of debt rather than own capital.
According to Chotimah and Amanah (2013) in their research results it was found that the Debt
to Equity Ratio (DER) had a significant effect on firm value. Meanwhile, Rahardjo and Jusriani
(2013) stated that the debt policy variable (DER) did not have a significant effect on firm value.
Based on this background, the researcher has formulated the problems in this study, including:
(i). Does the Audit Committee affect the value of the company in manufacturing industry
companies listed on the Indonesia Stock Exchange for the 2016-2020 period; (ii) . Does
Intellectual Capital affect the firm value of manufacturing industry companies listed on the
Indonesia Stock Exchange for the 2016-2020 period; (iii) Can Company size moderate the
influence of the Audit Committee on the value of the company in the manufacturing industry
listed on the Indonesia Stock Exchange for the 2016-2020 period; (iv) Can Compnay Size
moderate the influence of intellectual capital on manufacturing industries listed on the
Indonesia Stock Exchange for the period 2016-2020.
This research was conducted based on data released by the Indonesia Stock Exchange (IDX)
related to the financial statements of companies listed on the Indonesia Stock Exchange in
2016-2020 in the manufacturing industry. The theoretical significance of this research is
expected to be able to contribute to the development of signaling theory, stakeholders, in sector
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Simandjuntak, J. B. P., & Murwaningsari, E. (2022). The Moderating Effect of Company Size on Audit Committee and Intelectual Capital Toward
Corporate Value. Archives of Business Research, 10(04). 1-13.
URL: http://dx.doi.org/10.14738/abr.104.12022
companies listed on the Indonesia Stock Exchange (IDX). In practical terms, the results of this
study are expected to provide input for stakeholders and business people.'
This research is expected to provide many benefits for many parties, including: (1) Researchers
can add insight into the influence of intellectual capital and the audit committee on company
value; (2) Companies or businesses are expected to provide benefits in efforts to increase these
variables in corporate development; (3) For further researchers, it is hoped that this research
can be used as a reference for comparison with other research.
LITERATURE REVIEW
Signal Theory
Signaling theory suggests how a company should give signals to users of financial statements.
Signal theory is a sign given by a company to investors as a clue about how to view the
company's prospects. Companies with profitable prospects will avoid selling shares and will
seek new capital in other ways, one of which is by using debt (Brigham and Houston, 2014:
186). The company urges to provide information because there is information asymmetry
between the company and outsiders because the company knows more about the company and
its future prospects from outsiders (investors and creditors) (Wolk et al, 2013). Lack of
information to outsiders about the company causes them to protect themselves by charging a
low price for the company.
Firms can increase firm value by reducing information asymmetry. One way to reduce
information asymmetry is to provide signals to outsiders, one of which is in the form of reliable
financial information and will reduce uncertainty about the company's future prospects (Wolk
et al, 2013). Agency Theory (Agency Theory) Agency theory is a theory that defines the
relationship between principals and agents.
Agency theory
Agency theory explains that the agency relationship is a contract in which one or more people
(principles) orders another person (agent) to perform a service on behalf principal and
authorizes the agent to make the best decision for the principle. Jensen and Meckling (1976)
explain that the agency relationsip is a relationship where the owner of the company
(principles) entrusts the management of the company by another person, namely the manager
(agent) in accordance with the interests of the owner (principlals) by delegating some decision
making authoruty to the manager.
Stakeholder Theory
Jensen (2001) states that management decisions must pay attention to stakeholders to increase
the value of the company. Stakeholders also have rights to actions taken by the company's
management, as do shareholders (Waryanti, 2009). Stakeholder theory was coined by Freeman
in 1984 and Jones in 1995, which stated that a business can be understood as an association of
stakeholders (customers, suppliers, employees, and so on) that together build success in a
business (Freeman et al., 2010).
Audit Committee
An audit committee consisting of independent parties and knowledgeable in finance and
accounting tends to support the auditor's opinion (Carcello and Neal, 2000). The audit