THE EFFECT OF CEO POWER AND CORPORATE GOVERNANCE ON INCREASING FIRMS CREDIT RATINGS

Abstract

Credit ratings still interesting issue in corporate finance literature as source of information in quickly evaluating of corporate debt securities (bond). The purpose of this study is to investigate the effect of CEO power and corporate governance on firm’s credit ratings at financial industry listed in Indonesia stock market for the period 2014 – 2018. This study uses secondary data gather from official website of Indonesia Capital Market and Financial Services Authority with sample is 17 financial firms. This research using ordinal logit regression to explain the effect of CEO power and corporate governance on firm’s credit ratings. The result show that CEO power and corporate governance have important role in increase firms credit ratings. Older CEO able to increase firm’s quality and push enhancement of credit ratings. Strong corporate governance will increase firm’s financial position through step-up of monitoring of management action to promote effective decision making and reduce asymmetry information that can push increase of firm’s credit ratings.