DLSU Business & Economics Review Vol 26 No.2
FROM THE EDITOR:
Tereso S. Tullao, Jr.
Editor-in-Chief
RESEARCH ARTICLES:
Determinants of Cash Holding of Listed Manufacturing Companies in the Indonesian Stock Exchange
Muhammad Arfan
Syiah Kuala University, Banda Aceh, Indonesia
[email protected]
Hasan Basri, Risma Handayani, M. Shabri Abd. Majid, Heru Fahlevi
Syiah Kuala University, Banda Aceh, Indonesia
Azimah Dianah
Ar-Raniry Islamic State University (UIN Ar-Raniry), Banda Aceh, Indonesia
Year: January 2017
Volume: 26 No. 2
Pages: 1–12
Abstract:
This study is primarily aimed at identifying significant factors that affect the level of cash holding of 77 manufacturing companies listed in the Indonesian Stock Exchange for the period 2009 to 2013. Factors normally identified in the literature that affect cash holding, including the levels of growth opportunity, networking capital, and financial leverage of firms, are examined in the study. Other than these variables, this study also incorporated the profitability and capital expenditure of the firms as controlled variables. Out of 138 manufacturing companies, 77 companies were selected as sample of the study using the purposive sampling technique. Secondary data were gathered from the companies’ annual reports and analysed using panel regression of the Generalized Least Square (GLS) estimation model. This study empirically found that the level of growth opportunity has a positive effect, while the networking capital has an insignificant effect and financial leverage has a negative effect on cash holding of the companies, respectively. As for the controlled variables, profitability is recorded to have a positive effect, whereas capital expenditure has a negative effect on cash holding of the companies, respectively. These findings implied that in managing the level of cash holding, the manufacturing companies should take into consideration the importance of companies’ growth opportunity, financial leverage, profitability, and capital expenditure.
The Role of Gender and Ethnic Diversity on the Performance of Malaysian Private Companies
Rayenda Khresna Brahmana, Mohd Waliuddin Mohd Razali, and Hui Wei You
Universiti Malaysia Sarawak, Malaysia
[email protected]
Year: January 2017
Volume: 26 No. 2
Pages: 13–24
Abstract:
This study examines the effect of gender diversity and board diversity on Malaysian firm performance. This study is different from other studies because instead of using publicly listed companies, it uses 3,735 private companies over 2009–2014. We find that gender has no significant effect on the firm performance but firm’s characteristics such as firm age, firm’s size, liquidity, and leverage have significant effects on the firm performance. Our research further indicates that ethnic diversity in the board of directors may give better performance to companies. This research implies two important findings for the policy makers. First, the encouragement of gender equality to private companies by policy maker may fail as it does not have any impact. Second, policy maker should not consider ethnic diversity in the board as part of policy because it may reduce the firm performance.
Does Diversification Lead to Better Loan Portfolio Returns? Empirical Evidence from Indonesian Banks
Apriani Dorkas Rambu Atahau
Universitas Kristen Satya Wacana, Jawa Tengah
[email protected]
Tom Cronje
Curtin University, Australia
Year: January 2017
Volume: 26 No. 2
Pages:25–40
Abstract:
The composition of the loan portfolios of Indonesian banks are analysed in this study to determine whether loan diversification or loan focus strategies lead to better loan portfolio returns. This study is based on secondary data obtained from the Indonesian Banking Directory of the Indonesian Central Bank, as well as commercial bank annual reports provided by Infobank magazine and the Indonesian Banking Development Institute. Data pertaining to 109 commercial banks for the period 2003 to 2011 were analysed using non-parametric testing of means and panel data regression. The research findings indicate that the loan portfolios of government-owned, domestic-owned, and foreign-owned banks in Indonesia differ in terms of the extent of their diversification to different economic sectors. Furthermore, a significant positive relationship exists between economic sector loan diversification and loan portfolio returns. However, similar results were not found for loan type diversification.
Financial Performance and Sharia Compliance: A Comparative Analysis of Indonesian and Malaysian Islamic Banks
Heru Fahlevi, Irsyadillah and Putra Randa
Syiah Kuala University, Banda Aceh – Indonesia
[email protected]
Year: January 2017
Volume: 26 No. 2
Pages: 41–52
Abstract:
The purpose of this paper is to evaluate the financial performance and the sharia conformity of Indonesian and Malaysian Islamic banks. In particular, the study aims to expand the approach of Islamic banks performance assessment by adding two models of sharia conformity measurements, that is, Sharia Conformity and Profitability (SCnP) and Sharia- Compliant Indicator (SCI). The SCnP model unveiled that the studied Islamic banks generally conform with the sharia principles, although they were relatively less profitable. The Malaysian banks performed financially better during the period of study, but the Indonesian Islamic banks conformed more to the Islamic principles. In addition, the SCI Index uncovered different level of disclosure among the Islamic banks.
Investigation of Sufficiency Economy Philosophy Reporting in Thailand
Muttanachai Suttipun and Sureerat Saefu
Prince of Songkla University, Thailand
[email protected]
Year: January 2017
Volume: 26 No. 2
Pages: 53–65
Abstract:
The aims of this research are to investigate the extent and level of sufficiency economy philosophy (SEP) reporting in the annual reports of companies listed on the Stock Exchange of Thailand (SET) and to determine the relationships between corporate characteristics, SEP reporting, and financial performance. Content analysis is used to quantify SEP reporting in the 2012 annual reports of 222 Thai SET-listed companies, while descriptive analysis is employed to describe the type and level of SEP reporting. The relationships between corporate characteristics, SEP reporting, and financial performance are investigated using a correlation matrix and path analysis. The findings show that all the sampled firms included SEP reports in the annual reports. The SEP reporting in reasonableness principle is the most common reporting followed by morality condition, self-immunity principle, knowledge condition, and moderation principle. The SEP reporting is 945.92 average words in Thai corporate annual reports. Company size and type of auditor play a significant role in SEP reporting. In addition, SEP reporting and the degree of leverage are significantly related to firms’ financial performance.
Measuring Customers’ Perception in Bancassurance Channel Using Psychometric Scale
Ranjit Singh and Mousumi Choudhury
Assam University (A Central University), India
[email protected]
Year: January 2017
Volume: 26 No. 2
Pages: 67–86
Abstract:
The study attempts to investigate the customers’ perception towards bancassurance channel. Customers’ perception towards bancassurance is studied by considering six attributes, namely, compliance, tangible infrastructure, reliability, responsiveness, assurance, and empathy. The study is based on primary data collected using structured questionnaire from the customers buying life insurance policy of SBI Life through different branches of State Bank of India in Guwahati City of Assam. Cronbach’s alpha is used to test the reliability of the questionnaire. Other statistical tools like Mean, Standard Deviation, Kolmogorov-Smirnov, and Friedman test were used to arrive at suitable conclusion. The study finds that customers have favourable perception regarding reliability, responsiveness, empathy, and assurance of bancassurance channel. Customers perceive that bank’s tangible infrastructure is adequate for providing insurance service and the bank has moderate compliance with insurance related rules and regulations. Favourable customers’ perception towards bancassurance channel is very important as it is expected to bring more customers for the bank.
Financial Integration in Money Markets: Evidence from SAARC Region
Abdul Rafay, FCA and Saqib Faridy
University of Management & Technology (UMT), Pakistan
[email protected]
Year: January 2017
Volume: 26 No. 2
Pages: 87–114
Abstract:
The primary purpose of the study was to investigate the extent of financial integration between the four major money markets (Pakistan, India, Sri Lanka, and Bangladesh) in the SAARC region. To determine the association between these money markets, this study deployed variety of robust time series techniques such as JJ Co-integration Test, Granger Causality Test, Impulse Response Functions (IRF), and Variance Decomposition Analysis (VDC). Monthly data for the period 2007–2015 was utilized for the data analysis whereas Call Money rates and Interbank rates were used as proxies of money markets. The empirical findings confirmed the presence of long term relationship between the nominal interest rates in SAARC region. Additionally, the results also unveiled the existence of bi-directional causal relationship between the money markets of Pakistan, India, and Sri Lanka. It was also found that Bangladesh’s money market is most rigid and unresponsive to other markets in the region. This study also confirmed the existence of robust ingredients for formulation of a monetary union in the SAARC region.
Independence of Audit Ethical Decision Making Process: A Case of Indonesia
Negina Kencono Putri, Wiwiek Rabiatul Adawiyah & Bambang Agus Pramuka
Universitas Jenderal Soedirman, Indonesia
[email protected]
Year: January 2016
Volume: 26 No. 2
Pages: 115–124
Abstract:
This study aimed to test whether there is a change in the level of independence of auditors when they are exposed to some level of work pressure related to morality and ethics, in three levels of work pressure and the threat of litigation. The study used a quasi-experimental method design with Chi-square test and regression as statistics analysis which involved professional auditors in Indonesia. The results showed that the independence of auditors who become participants in this study was not affected, despite being faced with situations that threaten their continuity in getting future assignments from the client. The auditors were still able to maintain their independence, with the attitude of conservatism and the need to maintain credibility. In addition, there are no significant differences related to the independence, of moral and ethical auditors, both when they are at a low level of work pressure, medium, or high. Since this study only uses a quasi-experimental method, further research can be developed using other research methods, such as survey methods. This research is a new research in the field of auditing and accounting ethics, especially to the context of Indonesia since the enactment of Act Number 5 Year 2011 that regulates Public Accountants.
An Econometric History of Philippine Trade: 1810–1899
Luisito C Abueg
De La Salle University, Manila, Philippines
[email protected]
Year: January 2017
Volume: 26 No. 2
Pages: 125–146
Abstract:
An econometric “verification” of historical accounts of Philippine international trade and economic liberalization during the 19th century using econometric analysis to correlate historical accounts from official and other historical sources from Spanish era of Filipinas (majority of Luzon and Visayas trading centers). This paper also aims to assess macroeconomic trends and institutional analyses of Philippine colonial trade of the 19th century (with consequences to the 20th century Philippine economic development experience) using the perspective of econometric methodology.
Effects of Affluence on Rising Household Carbon Emission in the Philippines: An Application Using Quantile Regression Approach
Moises Neil V. Seriño
Visayas State University
[email protected]
Year: January 2017
Volume: 26 No. 2
Pages: 147–157
Abstract:
This study investigates whether rising affluence affects carbon emission differently by considering the distribution of households based on the level of emission. Whereas there are several empirical studies that examine this issue with mean based regression approach, limited studies have investigated the effect of affluence on the quantiles of household emission controlling for several household characteristics. Employing the methods of quantile regression, results show that rising affluence affects household emission differently. The effect is more pronounced among households in the upper emission quantile as compared to households in the lower emission quantile. This suggests that an increase in income translates to higher increase in emission among households with relatively higher level of emission compared to households with lower level of emission. With this, policy makers should take caution in devising policies mitigating climate change by capping emission because the distributional implications of such policies will vary depending on how carbon intensive the household consumption is.
Another Look at Demand-Side Digital Piracy
Andrea L. Santiago
Asian Institute of Management
[email protected]
Year: January 2017
Volume: 26 No. 2
Pages: 159–173
Abstract:
Technological improvements made it easier for individuals to download files for personal use. From one end, the clear message is that piracy is wrong and attention should be drawn to crushing piracy with education and disincentives. On the other end of the spectrum is the view that anything that can be accessed online is free. This paper encapsulates the major discussions on digital piracy thus far. It also looks at alternative ways to approach the debate so that more creative solutions can be developed without compromising on the basic principle that the creator of an idea or product deserves to enjoy the fruits of his or her labor.
In its simplest form, digital piracy refers to obtaining without the explicit consent of the intellectual property owner, digital content for sale or personal use (Wagner & Sanders, 2001). There are two sides of digital piracy. Demand-side digital piracy refers to the purchase of illegal copies, or the personal use of unpurchased copies, of digital content. Supply-side digital piracy enters the realm of counterfeiting with actual intent to earn profits while defrauding rightful owners of what is due them. The scope of this paper is limited to demand-side digital piracy due to the overwhelming breadth and complexity of the subject.