The Effect of Quality of Internal Corporate Governance Mechanisms on Investors’ Confidence: Evidence Among Indonesian Sharia Compliant Companies

This study investigates the effect of the quality of internal corporate governance mechanisms and investor confidence. Various efforts for corporate governance reform have been conducted in order to enhance investor confidence. Previous evidences showed that investors do not always concern with information disclosure about internal corporate governance mechanisms. As such this study attempted to investigate the linkage between information about four attributes reflecting the quality of internal corporate governance mechanisms and investor confidence.Based on 227 Sharia compliant companies included in List of Sharia Securities (Daftar Efek Syariah/DES) in Indonesia, this study found that firms size has significant influence on investor confidence.Meanwhile, the quality of internal corporate governance mechanism has also significant effect on investor confidence but with different direction.Board Structure and Board Composition as two out of four attributes for the quality of internal corporate governance mechanisms were positively related, while the other two attributes that are Board Process and Board Characteristics were negatively related to investors’ confidence.This evidence implied that the quality of internal corporate governance mechanisms have some influence on investors’ confidence