Gadjah Mada International Journal of Business
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Inflation Dynamics in Indonesia: Equilibrium Correction and Forward-Looking Phillips Curve Approaches
Get PDFA series of relatively high inflation characterize Indonesian economy, especially during the economic crisis. Economists generally agree that high inflation is one of the major economic problems, and that economic authorities need to cope with such a problem. Therefore, it is essential to understand the behavior of inflation in Indonesia. The aim of this paper is to estimate the inflation dynamics in Indonesia using equilibrium correction and forward-looking Phillips Curve approaches. Previous empirical studies show that the equilibrium correction or backward-looking approach may explain the inflation dynamics in Indonesia. The backward-looking specification does not have to be the proper model even if the fact shows that the specification holds. The major innovation of this paper is the application of a forward-looking Phillips curve model. The empirical results—estimated using the Generalized Method of Moments (GMM)—show that the forward-looking Phillips Curve approach dominates the backward-looking behavior. It indicates that after a credible monetary policy announcement, for instance, the former model predicts that economic agents will change their behavior quickly. Therefore, the policy will affect the economy more rapidl
Alliance formation: A Study of the Malaysian Automobile Supporting Industry
Get PDFCompetition in global industries is shifting increasingly from inter-firm rivalry to rivalry between networks of firms. Strategies of individual firms are thus contingent on the degree of interdependence that exists between them and the parent firm in the network. The present study examines the effect of network affiliation on a member firm’s decision to enter a foreign market and international strategic alliance formation. Affiliate firms have two options available to them: (1) enter into a competitive strategic alliance with a competitor or (2) enter into a symbioticstrategic alliance with the parent firm of the network organiza-tion. We tested this assertion using data from archival sources on sixty-five Japanese automobile suppliers that had set up strategic alliances in Malaysia and that belonged to various inter-organizational networks. Results indicate that when affili-ate firms are dependent on the parent firm, they prefer to form symbiotic strategic alliances. Conversely, affiliate firms prefer competitive strategic alliances with competitors when they are not dependent on the parent firm. ALLIANCE FORMATIONA Study of the Malaysian Automobile Supporting IndustryKeywords: automobile industry; joint venture; mode of entry; networks; strategic alliance
The Response of Performance to Merger Strategy in Indonesian Banking Industry: Analyses on Bank Mandiri, Bank Danamon, and Bank Permata
Get PDFThis study analyzes the responses of performances of BankMandiri, Bank Danamon, and Bank Permata to merger strategy.This paper harnesses the quantitative approach with structuralbreak analysis method and impulse response function. Theplausible findings indicate that the merger of Bank Permataproduces a better performance response in comparison to theconsolidation of Bank Mandiri and the merger of Bank Danamon.The merger of Bank Permata does not result in performanceshocks, and the structural break does not prevail either. On theother hand, the consolidation of Bank Mandiri and the mergerof Bank Danamon result in structural breaks, particularly in thespread performance. In order to return to the stable position, themergers of Bank Mandiri and Bank Danamon require a longertime than does the merger of Bank Permata. This researchindicates that for large banks, the mergers and acquisitions(retaining one existing bank) will deliver a better performanceresponse than will the consolidations (no existing bank).Keywords: impulse response function; merger; structural brea
Sources of Labor Growth in Malaysian Manufacturing Sector
Get PDFThe manufacturing sector plays an important role in Malaysianindustrial development. High growth rates and technology expan-sion in the manufacturing sector resulted in a substantial increasein demand for labor. This process of rapid growth and changes in thedemand for labor were also accompanied by changes in laborstructure and skills. At the same time, the range of activities andproducts became more diversified and, correspondingly the compo-sition of manpower sub sectors changed significantly. This studyemployed the input-output Structural Decomposition Analysis (SDA).The analysis computed the compositional manpower change as aresult of decomposition. The result of this study indicates thatsources of labor growth in the manufacturing sector were favored bychanges in the final demand structure. Within the changes in thefinal demand structure, changes in domestic demand structure werethe dominant source of employment growth between 1978 and 1991and the overall period 1978-2000. However, from 1991 to 2000,employment change was due mainly to changes in export structure.Changes in the structure of domestic demand had a relatively strongand increasing effect on service workers, production and relatedworkers, transport equipment operators, laborers, and clerical andrelated workers during the 1978-1991 period. Changes in the exportstructure were the main factor that had an increasing effect on the employment of high skill workers and sales workers. However,during the second sub period of 1991-2000, manpower growth wasexports structure driven.Keywords: input-output; labor; manufacturing; structural decomposition analysi
Survey on the Use of Derivatives in Indonesia
Get PDFThis paper provides survey evidence on the use of derivatives among firms listed on the Indonesian Stock Exchange. The finding shows that the participation rate in the use of derivatives is 28.8 percent, much lower than those found in developed countries. For the derivatives non-users, insignificant risk exposure is reported as the most important rationale for not using derivatives. Consumer goods industry constitutes the largest proportion of firms using derivatives. The majority of respondents utilize derivatives to hedge against financial risks rather than to speculate. Foreign currency risk and interest rate risk are the most important types of risks faced with by respondents. Using the Chi-square and the Fisher’s exact tests, the result corroborates the size effect hypothesis, where the use of derivatives is more popular among large firms than small firms. A SURVEY ON THE USE OF DERIVATIVES IN INDONESIAKeywords: derivatives; hedging; risk managemen
The Influence of Multinationality on Determinants of Change in Debt Level: Empirical Evidence from Indonesia
Get PDFThis study aims to investigate whether: (1) the change in debt level is affected by agency problems, the probability of bankruptcy, firm size, and profitability; (2) the change in debt level is affected by multinationality (i.e., multinational corporations (MNCs) or domestic corporations (DCs)) and whether multinationality affects the relationship of agency problems, probability of bankruptcy, size, and profitability to the change in debt level. This study finds that in general, the change in debt level is negatively affected by the probability of bankruptcy and size. Furthermore, the changes in debt level for Indonesian MNCs are negatively affected by the probability of bankruptcy, firm size, and profitability. The negative effects of size and profitability on the change in debt level support the view of the Pecking Order Theory. However, for domestic companies, none of the determinants has a significant effect on the change in debt level. We also find that: (1) only size has a negative influence on the change in debt level when we include all interactive terms in the model; (2) if we include one interactive variable at a time, the probability of bankruptcy, firm size, and profitability have negative influences on the change in debt level; in addition, a positive impact of agency problems on the change in debt level is more pronounced for MNCs compared to DCs. Overall, we conclude that multinationality affects the relationship between agency problems and the change in debt level.Keywords: capital structure; Indonesia leverage; multinational corporation
The Pro-poor Policy of Microfinance in Indonesia
Get PDFThis paper discusses and proposes the policy issues associated with the development of microfinance industry in Indonesia. Despite its capability of financing small-scale businesses, the development of the microfinance industry is far behind that of commercial banks. The policy focus on developing sound financial practices of microbanks has ignored the role of semi-formal and informal microfinance institutions (MFIs) in serving poor people. Compliance with the sound banking practices could inevitably drive microbanks away from serving the poor. Regarding the capability of informal and semi-formal MFIs of outreaching the poor, the challenges to microfinance policy in Indonesia is to develop inclusive financial systems through which the progress of microbanks goes in a parallel direction with the developments of semi-formal and informal MFIs, such as cooperatives and rotating saving and credit associations (ROSCAs)
Corporate Social Responsibility and Marketing: What Works and What Doesn’t
Get PDFMany companies choose to portray themselves as seeking the moral high ground and playing active role in society. This introduces an idea of corporate social responsibility. It has been argued that corporate social responsibility enhances corporate image (attitudinal dimension) and financial performance. However, some studies find negative impact of corporate social responsibility. Thus, it is debatable whether or not it pays organizations to play active role in society. This paper explores the importance of trust for making corporate social responsibility works. This paper also evaluates attitude and intention within relative attitudinal framework. The associations between trust, attitude and intention are also discussed and reviewed. Finally, a set of managerial implications is developed to address the problems peculiar to the corporate social responsibility and marketing
Fraudulent Financial Statement: Evidence from Statement on Auditing Standard No. 99
Get PDFThe goals of this study are to empirically identify fraud risk factors and construct a model to predict the likelihood of financial statement frauds based on SAS No. 99. Employing logistic regression on 143 firms, this research finds that fraud risk factor proxies for Pressure—net profit/total assets—and Opportunity— inventory/total assets ratio, related party transactions, and Big 4—are significantly associated with fraudulent financial statements, whereas none of the fraud risk factor proxies for Rationalization is significantly associated with fraudulent financial statements. Consistent with prior research, it seems that the likelihood of fraudulent financial statements is easier to be observed publicly using fraud risk factor proxies for Pressure and Opportunity rather than Rationalization. The constructed model can correctly classify firms with a relatively high success rate
Model of Islamic Monetary Operation for Liquidity Management in Islamic Banking: Case of Indonesia 2000-2009
Get PDFThe paper attempts to construct the model of islamic monetary operation for liquidity management in islamic banking. Particularly, the model investigates variables that determine the role of the central bank in managing liquidity. Firstly, it explores the related conventional models and chooses one to find general variables involved in monetary operations for managing liquidity. Secondly, it formulates the islamic model after considering the islamic monetary operation principles, characteristics of both islamic monetary instruments and Indonesian islamic banking industry. Specifically, it models Bank Indonesia’s islamic monetary instrument called Bank Indonesia Sharia Certificate (SBIS). Thirdly, the model points out that the volume of SBIS is influenced by reserves requirement, currency in circulation, and prior auctions of SBIS. It means that the application of islamic OMO is not significantly different from monetary instrument in conventional OMO. Therefore, the paper suggests the issuance of islamic investment monetary instruments to implement the ideal islamic monetary instrument and OMO