The Effect of Audit Quality Attributes on the Cost of Equity Capital (Empirical Study on Manufacturing Companies Listed In Indonesia Stock Exchange Year 2014-2016)

Abstract

This research aims to examine and analyze the effect of audit quality attributes on
the cost of equity capital. The audit quality attributes is measure by the size of the
public accounting firm, the industry specialty auditor and audit tenure. Meanwhile,
the cost of equity capital is measure by using the PE Ratio. The population in this
study is all manufacturing companies listed on Indonesia Stock Exchange on 2014-
2016. Sampling technique using purposive sampling method obtained by samples
237 companies during the year observation. The result showed that the variable
size of the public accounting firm and the industry specialization of the auditor
negatively affect the cost of equity capital. Meanwhile, audit tenure does not affect
the cost of equity capital. Based on the determination coefficient test (R2) obtained
the coefficient of determination with adjusted R2 of 0,527. These result show that
52,7% of variables cost of equity capital can be explained by the size of the public
accounting firm, the industry specialization of auditors and audit tenure. While, the
rest of 47, 3% is explained by other factors outside the model in this research.
Keywords: [audit quality attributes ; cost of equity capital]