THE INFLUENCE OF CORPORATE GOVERNANCE ON THE INTELLECTUAL CAPITAL DISCLOSURE: A STUDY ON INDONESIAN PRIVATE BANKS

The release of bank’s intellectual capital is one of the important elements of bank’s annual reports. Although it is not presented adequately in the annual reports, voluntary disclosure of bank’s intellectual capital relatively represents the response to the needs of greater information for the users. This research aims to see the influence of corporate governance on the intellectual capital disclosure based on a case study on private banks in Indonesia. The variables to be examined in the research include the Composition of Independent Commissioners as well as The Competence of Audit Committee and Risk Oversight Committee. The samples were taken using purposive sampling, considering particular criteria. As many as 62 banks are selected to be taken as research samples. The data were analyzed us-ing multiple linear regression analysis method. The result of a partial test shows that the Composition of Independent Commissioners has a positive and significant influence on the intellectual capital disclosure; the Competence of Audit Committee has a positive and significant influence on the intellectual capital disclosure; and the Competence of Risk Oversight Committee does not influence the intellectual capital disclosure. Meanwhile, the result of a simultaneous test shows that the Composition of Independent Commissioners, the Competence of Audit Committee, and the Competence of Risk Oversight Committee significantly influence the intellectual capital disclosure.


INTRODUCTION
A company's main goal is to maximize the profits for the shareholders.However, the company also has the obligation to contribute to the community in general.To accommodate the company's obligation, a system called Corporate Governance can be implemented.In Indonesia, according to the Law No. 40 of 2004 regarding Limited Liability Company, the company is required to report its corporate governance to the public.Such obligation leads the company to disclose more information, as disclosure and transparency are the cores of corporate governance.This is understood as Intellectual Capital Disclosure.
Intellectual Capital Disclosure is one of the elements of voluntary disclosure.Although it is considered insignificant in an annual report, it has enough capacity to respond to the users' needs for greater in-formation.Although the Government has issued the regulation on the implementation of intellectual capital disclosure as stated in International Accounting Standard (IAS) 38 or Article 19 of Indonesian Financial Accounting Standard (PSAK in Indonesian), the shareholders are not fully aware of the potential of intellectual capital.It is evident in the low number of companies listed on the Indonesia Stock Exchange, particularly banks, performing Intellectual Capital Disclosure.
Research on the practices of Intellectual Capital Disclosure in the annual reports of public companies in Indonesian context is interesting to conduct (Purnomosidhi, 2005).First, it is because of the unavailability of standards on the items included in the intangible assets to be managed, measured, and disclosed, either through mandatory disclosure or through voluntary disclosure.Second, it is to look for detailed information in the management of intellectual capital, ranging from summary, measurement, to disclosure in the financial statements of the company.Third, the business sector in Indonesia lacks competitive excellence, leading to the low competitiveness and lack of ability to keep the company's survival.
Singh and Zahn (2008) used an index to measure Intellectual Capital Disclosure, which is based on the similarity of research objects.The index consists of 81 items classified into six categories: resources (28 items), customers (14 items), information technology (6 items), processes (9 items), research and development (9 items) and strategic statements (15 items).The index of ICD is adapted from Beaulieu et al. (2002), Bukh et al. (2005a) and Williams (2001).
Based on the research conducted by Uzliawati (2015), the rate of Intellectual capital disclosure reached the percentage of 52%.It was higher than the result of previous research by Suhardjanto and Wardhani (2010), which was 34%.The increase shows that banking has become aware of the importance of intellectual capital disclosure.Corporate governance is one of the factors influencing intellectual capital disclosure, for one of the principles is to prevent any fraud of the internal part of the company, particularly banking.Intellectual capital disclosure in a company is one of the implications of the implementation of good corporation governance, stating that company is required to consider the stakeholder interests in order to avoid information asymmetry between the internal party and the stakeholder.
In this study, Corporate Governance is selected as one of the factors influencing Intellectual Capital Disclosure.It is one of the monitoring tools to prevent fraud in the internal parties of the companies, especially banking, in using and disclosing the intellectual capital.Intellectual Capital Disclosure of the company is one of the implications of the implementation of good corporate governance stating that companies are required to consider the stakeholders' interests to prevent asymmetric information between internal parties and the stakeholders.The company's decision makers have fiduciary duty to take the full advantage of the intellectual capital, not only of the financial and physical capitals.
The Composition of Independent Commissioners, the Competence of Audit Committee, and the Competence of Risk Oversight Committee are treated as the indicators to proxy the variables of Corporate Governance as mentioned in the copy of the Regulation of Financial Services Authority No. 55/POJK03/2016 on the implementation of commercial banks governance.Besides, Corporate Governance is a range of relations between the company management, board, shareholders, and other parties having their interests in the company.Hence, it is known as the indicators included in the board of the corporate governance.
The study is necessary to be conducted in the Indonesian context because there has not been established a standardized guideline to measure the Intellectual Capital Disclosure and has not been implemented by the banks in Indonesia for its newness.The aims of the study are to find out the in-fluence of the Composition of Independent Commissioners, the Competence of Audit Committee, and the Competence of Risk Oversight Committee on the Intellectual Capital Disclosure, and the influence of those three indicators on the Intellectual Capital Disclosure simultaneously.
National private banks are taken as the object of this research.Financial sector is an ideal object for the research.A financial sector company, particularly banking, takes more advantage from its intellectual resources, compared to other sectors.However, businesses in banking, especially those dealing with a large sum of funds, are prone to fraud.
The research is interesting to carry out in the context of Indonesia because there has not been a standardized guideline to measure intellectual capital disclosure.Besides, not many researches have been conducted on this subject.Based on the background, the researcher will answer the question of "Do the Composition of Independent Commissioners, Audit Committee Competence, and Monitoring Committee Competence influence Intellectual Capital Disclosure?"

Composition of Independent Commissioners
The Regulation of the Financial Services Authority No. 55/POJK.03/2016,Part I, Article 1, Paragraph (4) states: "Independent Commissioner is the member of Board of Commissioners, that is not related to the financial, committee, share ownership, and/or the family of members of directors, members of other Boards of Commissioners, and/or controlling shareholders, or to the bank that may affect its capability in performing independently.Board of Commissioners is a form of internal control mechanism in making the decision to ensure the suitability of management behavior with the expectation of the company owner.Independent Commissioner means the member of a Board of Commissioners who has no affiliation to the directors, members of other Boards of Commissioners, and controlling shareholders and who is independent from business relation or other relations that may affect their ability to act independently".Haniffa and Cooke (2005) stated that the higher the number of independent commissioners in the board, the more they play their role in the wider disclosure in the purpose of creating relevant value of intellectual capital for the stakeholders.Savitri (2016) found that independent commissioners together with institutional ownership and public accounting correlate with the integrity on the financial statement.Therefore, Nasir and Abdullah (2004) concluded in their research that there is a positive significant correlation between independent commissioners and a disclosure.The empiric fact found that independent commissioners are positively correlated to the disclosure of internal structure/internal capital (Cerbioni & Parbonetti, 2007).Li et al. (2008) also found positive significant correlation between independent commissioners and intellectual capital disclosure.

H1: The Composition of Independent
Commissioners significantly influences Intellectual Capital Disclosure.

Competence of Audit and Risk Oversight Committees
The

METHODS
The research belongs to associative types, which aim to see the correlation or the influence among variables in the research. http://dx.doi.org/10.21511/bbs.13(4).2018.06

Population, sample and sampling technique
The population of this research includes national private banks listed in the Financial Services Authority, which consists of 75 banks.The samples are part of the population treated as the object of the research.In this research, the samples are selected using purposive sampling methods with the following criteria: 1) having published an annual report of 2012-2016; and 2) completing the financial data.
Based on the criteria, 62 banks were selected to be used as the samples.The research focuses on the data provided in the annual reports of the national private banks obtained from the official websites of each bank.

Data types
Data are a set of information necessary to make a decision.Kuncoro (2009, p. 145) suggests several kinds of data: 1) quantitative data, which are measured using numerical unit (number); and 2) qualitative data, which cannot be measured using numerical scale.
The data used in this research were quantitative in the forms of financial statements and annual reports issued by national private banks.

Data source
Kuncoro (2009, p. 145) states that data sources can be classified into: 1) primary data, which are obtained through field survey using all methods of ordinal data collecting; and 2) secondary data, which are obtained in data collecting and published to the users.
In this research, the data used are of secondary type.The data source includes the publication in the forms of annual reports and financial statements of the national private banks published on the official websites of each bank.

Data collecting technique
The research data were collected using documentation methods, collecting and analyzing the data and the necessary documents.They are in the forms of annual reports and financial statements

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Electronic copy available at: https://ssrn.com/abstract=3308020 obtained from the official websites of each bank.Table 1 presents the operational definition of the variables used in the research.

Composition of Independent Commissioners
Based on the descriptive statistic test presented in Table 2, it is known that the minimum score of the Composition of Independent Commissioners is 33 and the maximum is 100.Thus, the composition ranges from 33 to 100 with the mean of 60.68 and the standard deviation of 11.089.The mean is higher than the standard deviation, meaning that the score distribution of composition is good.The data is homogeneous where the gap between the minimum and the maximum scores of variable during the period of research is small.

Competence of the Audit Committee
Based on the descriptive statistics test (see Table 2), it is known that the minimum score of the Competence of the Audit Committee is 0.50 and the maximum is 1.Thus, the composition ranges from 0.50 to 1 with the mean of 0.9859 and the standard deviation of 0.07366.The mean is higher than the standard deviation, meaning that the distribution of the score of the competence is good.The data is homogeneous, where the gap between the minimum and the maximum scores of the variable during the period of the research is small.

Competence of the Risk Oversight Committee
Based on the descriptive statistics test presented in Table 2, it is known that the minimum score of the competence of the Risk Oversight Committee is 0.75 and the maximum is 1.Thus, the composition ranges from 0.75 to 1 with the mean of 0.9977 and the standard deviation of 0.02300.The mean is higher than the standard deviation, meaning that the distribution of the score of the competence is good.The data is homogeneous, where the gap between the minimum and the maximum scores of the variable during the period of the research is small.

Intellectual Capital Disclosure
Based on the descriptive statistics test presented in Table 2, it is known that the minimum score of the Intellectual Capital Disclosure is 16.05 and the maximum is 50.62.Thus, the composition ranges from 16.05 to 50.62 with the mean of 34.9662 and the standard deviation of 6.92190.The mean is higher than the standard deviation, meaning that the distribution of the score of the intellectual capital disclosure is good.The data is homogeneous, where the gap between the minimum and the maximum scores of the variable during the period of the research is small.

Result description
All variables show tolerance > 0.1 and the score of VIF < 10.The tolerance coefficient of Independent Commissioners is 0.974 higher than 0.1 and the VIF of 1.027 is smaller than 10 (Table 3).Tolerance coefficient of the competence of the Risk Oversight Committee is 0.910 higher than 0.1 and VIF of 1.098 is smaller than 10.It proves that multicollinearity does not occur to all independent variables of this research.Therefore, the regression model is appropriate to use in the research.
According to Table 3, the equations of multiple linear regression with the three independent variables are: The regression equation can be explained as follows: 1 Electronic copy available at: https://ssrn.com/abstract=3308020Besides, the research's negative result shows that the number of independent commissioners in the board of commissioners increases.Therefore, the Intellectual Capital Disclosure conducted by a bank or a certain company will decrease.

Competence of Audit Committee
Based on 1. National private banks are expected to focus more on the Intellectual Capital Disclosure in their annual reports, thereby completing the Intellectual Capital in accordance with the available items.
2. Further studies need to be conducted in order to improve the limitation of this research and to develop the research using other factors or other independent variables apart from this research that may influence the Intellectual Capital Disclosure.

Figure 1 .
Figure 1.Conceptual framework (Ho & Wong, 2001)ancial Services AuthorityNo.55/POJK.03/2016PartIV,Article41,explains that there are two independet parties in Audit Committee: accounting or finance and banking or law experts.As for the Risk Oversight Committee, there should be independent party that consists of professionals in risk management.Savitri (2016)found that "independency has no moderating effect on the relationship between managerial ownership and the Audit Committee in the integrity of financial statements".Audit Committee is a board of an operational committee responsible for monitoring the financial statements and disclosure.Effective audit committee should improve internal control and act to decrease the agency cost.Besides, it serves as strong controlling tool to improve intellectual capital disclosure valuable for the company.The existence of an audit committee relates to reliable financial statement, to quality improvement, and to disclosure(Ho & Wong, 2001).

Table 1 .
Operational definition The Composition of Independent Commissioners is the members of the Board of Commissioners who are not related to the financial, committee, share ownership, and/or family of the members of the Board of Directors, members of other Boards of Commissioners and/ or controlling shareholders, or any relation to the bank that may affect their ability to act independently.The Composition of the Independent Commissioners can illustrate the level of independence and objectiveness of the board in making the decision.The independence of the Board of Commissioners is stated in the percentage of the members of independent commissioners compared to the total number of the members of the Board of Commissioners (Subramaniam et al., 2009).

Table 2 .
Results of the descriptive statistic test Source: Processed data of the research result (2018).Note: N -number of data; Min -variable smallest score; Maxvariable greatest score; Mean -variable mean.

Table 3 .
The higher the X1, the higher the Y. Multicollinearity statistics test results, multiple linear regression test results, and T-test statistic results.
Source: Processed data of the research result (2018).Note: a means dependent variable: Intellectual Capital Disclosure.

Table 4 .
FANOVA a Statistic test resultsSource: Processed data of the research result (2018).As shown inTable 3, the significance level of regression coefficient value of the Competence of Audit Committee is 0.014.It is below 0.05 or sig value < α.Other than probability value or sig value, other method to use is t-value of calculation compared to the t-value of the table.In this case, t-count is 2.474, while the t-table is 1.97214.It means t-count > t-table.Thus, H0 is rejected and H1 is accepted.In other words, the Competence of Audit Committee significantly influences the Intellectual Capital Disclosure.Based on Table 3, it is also known that the significance level of the regression coefficient value of the Competence of Risk Oversight Committee is 0.236.It is above 0.05 or sig value > α.Other than probability value or sig value, other method to use is t-value of calculation compared to the t-value of the table.In this case, t-count is -1.188, while the t-table is 1.97214.It means t-count < t-table.Thus, H0 is accepted and H1 is rejected.In other words, the Competence of Risk Oversight Committee does not have any significant influence on the Intellectual Capital Disclosure.

Table 3
, also stated that the company size significantly influences the Profit Management.In this case, the committee is different from the size.Meanwhile, a research byUtomo and  Chariri (2015)found that the size of a company influences the Intellectual Capital Disclosure.Therefore, the result of the present research is against other variable, which is the size of the company.In short, the competence of the members does not influence the Intellectual Capital Disclosure of the bank or a certain company.Based onTable 4, F-count is 5.180 with the significance probability of 0.02.It is evident that the score is below 0.05.In accordance with the consideration of decision making in F-test, the Composition of Independent Commissioners (X1), Competence of Audit Committee (X2), and Competence of Risk Oversight Committee (X3) simultaneously and significantly influence the Intellectual Capital Disclosure.Therefore, the number of Independent Commissioners, the Competence of Audit Committee Members, and the Competence of Risk Oversight Committee Members simultaneously influence the Intellectual Capital Disclosure of a bank or a certain company.CONCLUSION Based on the hypothesis test and the above discussion, it can be concluded that the Composition of Independent Commissioners (X1) negatively and significantly influences the Intellectual Capital Disclosure of national private banks in 2016.The research shows that the increasing number of Independent Commissioner Members will decrease the Disclosure.The Competence of Audit Committee (X2) significantly influences the Intellectual Capital Disclosure of national private banks in 2016.The results show that the Competence of Audit Committee Members influences the Intellectual Capital Disclosure of national private banks.The Competence of Risk Oversight Committee (X3) does not significantly influence the Intellectual Capital Disclosure of national private banks in 2016.It shows that the Competence does not influence the Disclosure.Simultaneously, the Composition of Independent Commissioners (X1), the Competence of Audit Committee (X2), and the Competence of Risk Oversight Committee (X3) influence the Intellectual Capital Disclosure of national private banks in 2016.Based on the study result, it is suggested that: