The main objective of this research is to investigate whether there are a significant relationship beÂ¬tween corporate governance and agency-problem-reducing variables. The corporate governance is concern on all stakeholdersâ€™ interest while the agency variables are concern on one of the most important stakeholdersâ€™ that is the stockholders-interest. Theoretically, there should be a significant relationship between the corporate governÂ¬ance and the agency-problem-reducing variables. Using 52 Indonesian listed companies in 2001 that had been investigated by Indonesian Institute for Corporate Governance (IICG) for the companiesâ€™ practice of corporate governance and presented on SWA Magazine, this research found that no relationship between the corporate governance and the agency-problem-reducing variables. There are some possible explanations for this finding. First, reducing agency problems does not perceived (by investor) affecting the companiesâ€™ practice of corporate governance. Second, the bonding mechanisms to reduce the free cash flows by increasing the dividend payment or increasing the debt and monitoring by the independent board of directors are not an effective mechanism to reÂ¬duce agency problems. So these mechanisms do not correlate to the companiesâ€™ practice of corporate governÂ¬ance. Third, the score of corporate governance released by IICG are not valid. Further investigations are needed to find the true explanation.
Key words: Corporate Governance, Masalah Agensi