Audit Quality, Auditor Specialization, and Sustainability Reporting: Their Impact on Cost of Capital Moderated by Company Size of the Kompas 100 Index in the Indonesia Stock Exchange Market

Abstract

The capital market has become an attractive instrument for both local and foreign investors. This study aims to analyze and provide empirical evidence regarding the influence of audit quality, auditor specialization, and sustainability reporting on the cost of capital. Additionally, it investigates how company size moderates the relationship between these variables and the cost of capital. The study focuses on companies listed in the Kompas 100 Index on the Indonesia Stock Exchange (IDX) from 2018 to 2022. A quantitative approach is employed, utilizing secondary data available from the IDX (www.idx.go.id), specifically from company annual reports. Data collection involved recording relevant information from the annual reports of each company. The population of the study comprises companies included in the Kompas 100 Index, with a sample selected through non-probability sampling (purposive) with the criteria of being listed in the Kompas 100 Index for the consecutive periods of 2018 to 2022, sample resulted 54 companies. The data analysis method applied is Moderated Regression Analysis (MRA). The results reveal that audit quality has a negative effect on the cost of capital, while auditor specialization shows no significant effect. Furthermore, sustainability reporting also has a negative effect on the cost of capital. As for the moderating variable, company size successfully moderates the relationship between audit quality and the cost of capital, but it does not moderate the effect of auditor specialization or sustainability reporting on the cost of capital.