The Indonesian Journal of Accounting Research
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Form over Substance: The Board Governance Practices in Indonesia
No full textThe study aims at investigating the decoupling behavior wherein firms tend to only adopt written policies formally, while they avoid implementing internal corporate governance mechanisms substantively. The analysis is focused on the area of the Board's responsibility. The sample consists of 487 firm-year observations having the ASEAN Corporate Governance Scorecard (ACGS) for the period 2013-2017. Using institutional theory, the research finds that fifty-seven percent (279 out of 487 observations) in the sample show decoupling behavior. Decoupling behavior is more pronounced in large firms with lower performance and higher leverage. Furthermore, the financial (banking) industry is less likely to behave decoupling due to the nature of the industry is highly regulated and enforced
The influence of Corporate Governance Practices on Financial Performance of Small and Medium-Sized Enterprises in Ghana
Full text linkThis study examined the influence of corporate governance practices on the financial performance of Small and Medium Sized Enterprises (SMEs) in Ghana. The study involved a survey of 320 owners/managers of SMEs through a stratified random sampling technique. The main instrument for the collection of data was a questionnaire whiles data was analysed using statistical tools such as mean and standard deviation as well as the use of multiple regression technique to answer the research questions. The results of the study showed that all the four areas of corporate governance practices examined in the study which include the size of the advisory board, the composition of the board, the managerial competence as well as financial disclosure and transparency were positively associated with financial performance of SMEs in Ghana. However, there is poor financial disclosure and transparency among SMEs in Ghana. Weak legal controls and law enforcement, and poor financial disclosure systems are some of the obstacles that affect the practice of corporate governance among SMEs. The study concludes that corporate governance practices of SMEs have significant impact on their financial performance. On the basis of the above findings and conclusion, it was recommended that shareholders of SMEs should ensure that their respective enterprises have active and sizeable advisory boards who meet regularly to support in the management of the firms. Also, managers of the firms should improve their managerial competence through training and development programmes as that affect performance of SMEs in Ghan
Financial Restatement Period: Internal and External Auditing Mechanism
No full textThe purpose of this study is to empirically scrutinise the effects of audit quality, audit report lag, and audit committee characteristic towards the length of financial restatements. The population analysed in this study involved companies listed on the Indonesia Stock Exchange from 2016 to 2018. Purposive sampling technique was employed in this research, and the total sample was 153 observations. Multiple regression analysis indicates that audit quality, audit report lag, and audit committee characteristic are statistically significant toward the length of financial restatements. The audit committee characteristic and audit report lag compress the length of financial restatements, while the audit quality extends the length of financial restatements.
Did the Accounting for Goodwill Create a Bubble?
No full textThis article investigates the accounting standards changes related to business acquisitions and the impact of those changes on the reported goodwill in the past 50 years. We observe that the amount of goodwill on companies’ balance sheets steadily increased before 2001 but has risen to new levels with the adoption of SFAS 141. Goodwill is now equal to about 30 percent of companies’ net assets compared to only about 7 percent in the 1980s. We examine whether the increased levels of goodwill could have resulted from changes in accounting standards. Specifically, we investigate the impacts of accounting regulations on goodwill reporting under three different regimes: APB 16 and 17, SFAS 141 and 142, and SFAS 141(R). We find that the increase in the reported value of goodwill is not a result of an increase in public companies’ acquisitions, as those have actually decreased over time. Further, the increase overlaps with the changes to the accounting for goodwill and the switch from goodwill amortization to impairment. Our findings are timely and important because the Financial Accounting Standards Board (FASB) has a concurrent project revisiting Identifiable Intangible Assets and Subsequent Accounting for Goodwill (FASB 2020). Our evidence urges caution in the reintroduction of goodwill amortization proposed by FASB, as the level of goodwill has increased dramatically despite FASB’s intentions to improve the quality of goodwill accounting and curtail management’s goodwill manipulation
Accounting Standards for Semi-Autonomous Agencies: Experiences and Lessons from Indonesia
Full text linkThe adoption of accrual accounting in government agencies has been so widespread. Following the global trend, Indonesian administration has implemented governmental accounting standards for its agencies. This study aims to explain accounting standards in the context of agencification, i.e. the use of semi-autonomous agencies to deliver public services. The paper explores formulation and implementation of accounting standards by investigating case studies from semi-autonomous agencies in Indonesia. The data were collected through semi-structured interviews with agency officials, policymakers, standards-setters, and experts. The results were analyzed through an inductive-deductive approach. The study shows that whilst accrual accounting has stimulated fundamental change on financial reporting in the agencies, thus dual accounting standards at the beginning of the adoption is considered unnecessary by agency managers, policymakers, and standard-setter. The research also finds a constraint in the accounting system design that could hinder agencies to improve their financial reporting
The Impact of Abusive Supervision and Locus of Control on Budgetary Slack
No full textPrevious research has shown that budgetary slack behavior is motivated by external factors based on employee preferences or internal factors. Abusive supervision and locus of control are two aspects that have the potential to be the cause of budgetary slack creation. This research aims to investigate the impact on the propensity of individuals (abusive supervision and locus of control) to execute budgetary slack. Furthermore, this research also explores the role of the individual locus of control through abusive oversight of the tendency to handle budgetary slack. Until now, no research has been conducted to investigate the role of the individual locus of control in reaction to abusive supervision that facilitates budgetary slack activity. This research used a 2 x 2 experimental method among 51 Accounting master students as participants to test the hypothesis. The findings show that the tendency to create budgetary slack is not significantly influenced by abusive supervision, whereas the locus of control has a major impact on the tendency to generate budgetary slack. Furthermore, it was also found that the propensity to create budgetary slack is influenced by interaction of abusive supervision and locus of control. In an attempt to reduce employee budget discrepancies, this analysis contributes empirically and theoretically by being the framework for consideration in the company
Off-Balance Sheet Analysis Toward Risk-Adjusted Performance
Full text linkAbstract: Off balance sheet is an activity undertaken by a financial institution, but not seen or recorded on the balance sheet because such activities do not cause or involve ownership of assets and the issuance of debt instruments (Saunders & Cornett 2003). Off Balance Sheet activities can be obtained through income derived from non-interest income. The off balance activity is initiated by the banking industry with the aim of creating diversification in obtaining optimal bank's returns. This study aims to investigate the effect of revenue diversification from off balance sheet activity toward Bank’s risk-adjusted performance. This research was conducted in several Commercial Banks in Indonesia. The data collection was based on purposive sampling and statistically analysed using Eviews version 9.2. The results of this research showed that revenue diversification from off balance sheet activity bears positive effects toward Commercial Bank’s risk-adjusted performance in Indonesia. Off balance sheet activity was measured by non-interest income reported in the income statement.. Keywords: off-balance-sheet, diversification, risk-adjusted, non-interestAbstrak— Off balance sheet adalah aktivitas yang dilakukan oleh institusi keuangan namun tidak nampak pada neraca karena aktivitas ini tidak menyebabkan dan melibatkan kepemilikan asset serta tidak menimbulkan penerbitan hutang (Saunders & Cornett 2003). Pendapatan dari aktivitas Off Balance Sheet dapat diperoleh melalui pendapatan yang berasal dari pendapatan-non bunga. Aktivitas off balance sheet dimulai oleh industri perbankan dengan tujuan menciptakan diversifikasi dalam memperoleh pengembalian bank yang optimal. Penelitian ini bertujuan untuk mengetahui bagaimana pengaruh diversifikasi pendapatan yang timbul dari aktivitas off balance sheet terhadap tingkat pengembalian berbasis risiko pada industri perbankan. Penelitian ini dilakukan di beberapa bank umum di Indonesia. Pengumpulan data berdasarkan purposive sampling dan dianalisis secara statistik menggunakan Eviews versi 9.2. Hasil penelitian menunjukkan bahwa diversifikasi pendapatan dari aktivitas off-balance sheet berpengaruh positif terhadap kinerja yang disesuaikan dengan risiko pada perbankan di Indonesia. Aktivitas off Balance sheet diukur melalui aktivitas yang menimbulkan pendapatan non-bunga yang dilaporkan pada laporan laba rugi. Kata Kunci: off-balance-sheet, diversifikasi, risiko, non-bung
Application of Personal Information Cash Flow (APIC) - Based Financial Practice Innovation as a Pillar of Financial Education
No full textThis research was conducted to prove that APIC-based financial learning practices can improve financial literacy, which also has a positive effect on inclusive financial management education. The grand theory used in this research is Behavioral Finance Theory. The sample of this research used an error rate of 5%; therefore, the sample obtained amounted to 347 people. This study used the design of R&D and also the design of media applications. The study was conducted using a mixed-method. Data analysis techniques used: 1) data eligibility test, 2) t-test through one-way ANOVA analysis and 3) simple regression. The results showed that: (a) the APIC work system that was developed had met the material and media validity requirements, (b) APIC-based financial learning practices were able to increase financial literacy, and (c) APIC-based financial literacy had a positive effect on the level of inclusive financial management
Management Control Systems, Organizational Culture and Village Credit Institution Financial Performance
No full textThis study aims to provide empirical evidence about the influence of misfit management control systems (levers of control) with organizational culture will negatively affect the financial performance of LPDs. This study uses a survey method (questionnaire) based on a sample of 149 LPD units in Buleleng Regency with purposive sampling criteria. The research respondents were all three LPD officers (penyarik, pemucuk and petengen) and one staff each from the credit and accounting department.. The research hypothesis suggests that each organizational culture orientation, namely clan, adhocracy, hierarchy and market shows a fit (through misfit values) with levers of control (belief, boundary, diagnostic and interactive control system) has a negative effect on LPD financial performance. The analysis technique uses OLS regression residual approach to testing the research hypothesis. The results showed that the hierarchical culture was able to have a fit (a small misfit value) with a management control system (levers of control) to influence the financial performance of the LPD
Financial Distress Prediction: The Ownership Structure and Management Agency Cost
No full textThis research aimed to predict the financial distress through ownership structure and management agency cost. The ownership structure was tested by managerial ownership and institutional ownership. Meanwhile, the management agency cost was tested by administrative cost ratio. The population of this research were all companies listed in Indonesia Sharia Stock Index year 2016-2018 by using purposive sampling technique. Based on the criteria that have been determined, the total samples were 129 companies. The analysis of the data in this research used logistic regression analysis. The results showed that institutional ownership has a significant negative effect towards the financial distress. Despite, the managerial ownership and management agency cost have a insignificant negative effect toward the financial distress