Final Proceeding ICCG 2017 25 Januari PDF

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TABLE OF CONTENTS
Table of Contents ................................................................................................ ............ i
Greetings from the Rector of Universitas Riaug .................................................. ......... vii
Greetings from the Dean of Faculty of Economics and Business, Universitas

Riau ...................................................................................................................... ........ viii
Greetings from the Conference Chair ................................................................... .......... ix
Greetings from Accounting Research Institute (ARI) Universiti Teknologi

Mara, Malaysia ..................................................................................................... ............x
Greetings from Institute of Public Enterprise (IPE) India .................................... .......... xi
Greetings from Institute of Indonesian Chartered Accountant (IAI) Riau

Region ................................................................................................................... ......... xii
Greetings from University of Daffodil Human Research Development Institute

Daffodil International University ......................................................................... ........ xiii
Greetings from Malaysian Institute of Corporate Governance (MICG) Malaysia ........ xiv
Keynote Speakers ................................................................................................. ..........xv
Message From Scientific Committee ................................................................... ........ xvi
Internal Governance, Accountability and Sustainable Performance of Social

Enterprised by Nur Aima Shafie, Zuraidah Mohd Sanusi, Razana Juhaida Johari,
Mustaffa Mohamed Zain, and Lee Teck Heang ............................................................... ............1
CSR and Carroll Pyramid: A Case Study on Three CSR Award Indonesia 2016
Winners by Temy Setiawan, and Ari Purwanti .............................................................. ............2
Implementation of Corporate Social Responsibility (CSR) To Support Good

Governance of Domestic Investment Companies in North Sumatera Province
by Azizul Kholis, Nasirwan, and Ramdhansyah .............................................................. ......... 11
The Influence of Good Corporate Governance, Corporate Social Responsibility

and Firm Size on the Firm Value with Earning Response Coeffecient as
Moderation by Enni Savitri, Volta Diyanto, , and Nik Herda Nik Abdullah ...................... ......... 15
Investment Awareness among Young Generation by Azlan Ali, Zainal Azhar b

Zainal Azim, Juliza bt Mohamed, Amirul Syafiq bin Ghazali and Hafezali Iqbal
Hussain ........................................................................................................................... .......... 26
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Implementation of Corporate Social Responsibility and Sustainability in the
Small and Medium Enterprise Sector by R .K. Mishra, and Deepti Chandra ............ ......... 27
The Antecedent Satisfaction with Price as a Moderating Variable in Consumer

of Omah Wedangan Solo by MD Rahadhini, and Diana Hendrawati ........................ ......... 28
Information System and Service Quality: An Empirical Study of Their Impact

on End-Users Satisfaction ERP Systems by Andreas, Riska Natariasari, and Enni
Savitri .............................................................................................................................. ......... 37
Public Service Delivery on Basic Education in Banjarmasin by Maulana Rizky,

Dwi Atmono, and Muhammad Rahmatullah.................................................................... ..........38
Duties of Directors: International Comparison Vs India by Kiranmai J, R K.

Mishra ............................................................................................................................. ......... 39
Public Finance and Corporate Governance by Kiranmai J, R K. Mishra .................. ......... 40
Whistleblowers’ Role in Mitigating Fraud of Malaysian Higher Education

Institutions by Kristine Belaja, Intan Salwani Mohamed, Nabilah Rozzani ................ ..........41
Ethical Ideologies, Personality Traits and Whistle blowing Intention:

Examining the Mediating Role of Whistle blowing Judgment in Public Sector
by Intan Salwani Mohamed, Kristine Belaja, Nabilah Rozzani, and Noor Hidayah Ab Aziz .. ..........42
Effect of Audit Technology on Fraud-Risk Task Performance of Government

Auditors by Mohd-Daniel Mohd-Nassir, Zuraidah Mohd-Sanusi, Erlane K. Ghani
and Professor Rob McCusker .................................................................................. ..........43
Evaluation on the Effectiveness of Whistle blowing System by Atika Zarefar,

and Tobi Arfan ........................................................................................................ ..........44
Analysis of Factors That Have Effect on Intensity for Internal Whistle Blowing
(Empirical Study on Local Government Organization Regency of Kepulauan
Meranti, Riau, Indonesia) by Meilda Wiguna, and Eka Hariyani ............................ ..........45
Professional Skepticism and Tax Officers’ Fraud Risk Judgment: The

Moderating Effect of Gender by Nurliyana Haji Khalid, and Zuraidah Mohd
Sanusi ............................................................................................................................. ......... 54
Implementation Evaluation: A Future Direction in Money Laundering

Investigation by Salwa Zolkaflil, Normah Omar, and Sharifah Nazatul Faiza Syed
Mustapha Nazri ...................................................................................................... ..........55
Related Party Transactions and Subsidiaries in Tax Heaven Toward the

Occurrence of Fraudulent Financial Reporting by Zulaikha Amirah Johari,
Normah Omar, and Suhaily Hasnan ......................................................................... ..........56
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Fraud Detection Ability: The Effect of Red Flags, Professional Skepticism and
Fraud Triangle by Rita Anugerah, Raisya Zenita, Muhammad Rasuli, Lollyta lovalia,
and Annisya Pratiwi ................................................................................................ ..........57
Fraud Triangle: The Effect of Financial Statement Fraud by Yesi Mutia Basri ,
Zirman , and Al Azhar A .......................................................................................... ..........58
Analysis on Competencies and Situational Support on Performance

Effectiveness of Forensic Accountants in Malaysia by Dr Norazida Mohamed,
Associate Professor by Dr.Zuraidah Mohd Sanusi, Nur Hamizah Binti Hasnan,and
Lee Teck Heang ...................................................................................................... ..........59
Examining the Roles of Religiosity, Ethical Behaviour and Leadership To

Whistle Blowing Intention: Empirical Finding From Malaysian Royal Custome
by Jamaliah Said, Mohd Naim Shaffie, Ruhaya Atan, and Marhamah Rafidi .............. ..........60
The Machiavellian Character, Ethical Environment and Personal Cost in Their

Impact to Whistle Blowing Intention (Empirical Study on Samsat of Pekanbaru
City and Rokan Hulu Regency) by Raja Adri Satriawan Surya , Arumega Zarefar ,
and Nanda Fito Mela............................................................................................... ..........61
Influence of Retaliation, Negative Guilty Emotion, Negative Shamefulness

Emotion And Organizational Commitment toward Intention to Do Whistle
blowing by Yunita Anisma, Rheny Afriana Hanif, Fajar Odiatma, and Arumega
Zarefar ................................................................................................................... ..........62
Ar- Rahnu Usage in Economic Development of Ummah in Selangor by Azlan

Ali, Zainal Azhar b ZainalAzim, Julizabt Mohamed, Amirul Syafiq bin Ghazali and
Hafezali Iqbal Hussain ............................................................................................ ..........63
Non Halal Income Phenomenology Study as Source and Use of Qardhul Hasan
in Islamic Perspective by Harkaneri, Hana Reflisa, and Henni Indrayani ................ ..........64
The Influence of Good Corporate Governance on Company Value in Jakarta

Islamic Index Companies in Indonesia Stock Exchange 2012-2016 by Vera
Oktari, and Nanda Fito Mela ................................................................................... ..........78
Study Analysis of Factors Affecting Financial Performance of Islamic

Microfinance Institutions in Pekanbaru by Ahmad Fauzan Fathoni, and Haryetti .. ..........79
Analysis of the Receipt of The Income Tax Article 4 Paragraph (2) before and
after the Implementation of The Goverment Regulation Number 46 Year 2013
by Muhammad Habib Gunawan, Yefni, and Suci Nurulita ......................................... ..........80
Independence of Supervision to The State-Owned Banks towards Good

Corporate Governance by Andrew Shandy Utama .................................................. ..........81
The Analysis on the Influence of Service Quality and the Effectiveness of

Account Representative Supervision on Corporate Taxpayers Compliancewith
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Account Representative Competence as Moderating Variable at the Pratama
Tax Office Lubuk Pakam by Suhaila Husna Samosir, and Horia Siregar .......... ..........88
Ownership Structure and Firm Performance: Tax Avoidance as a Moderating

Variable by Vince Ratnawati, Azhari. S , Nita Wahyuni, and Desmond Freddy.......... ........104
Preliminary Evidence: The Decoupling Effect of Manufacturing Industries’

Carbon Emissions on Firm Competitiveness in Riau Province, Indonesia by
Andewi Rokhmawati and Haryetti ............................................................................ ........105
Comparative Study on Finance-Growth Nexus in Malaysia and Indonesia: Role

of Institutional Quality by Kazi Sohag, Jamaliah Said, and Normah Omar .............. ........106
The Effect of Human Resources, Commitment, Communication and

Bureaucratic Structure on The Successful Implementation of Transparent and
Accountable Village Fund Allocation by Kamaliah, Elfi Ilham, and Ahmad Rifqi .. ........107
Community Economic Development Planning Model Dumai by Machasin,

Taufiqurrahman, and Dewita Suryatiningsih ............................................................. ........108
The Effect Of Audit Committee Through Value Company Mediated By

Management Profit Of The Banking Company Listed In Indonesia Stock
Exchange In 2011-2015 by Yuniarti, Amir Hasan, and Andewi Rokhmawati ..... ........109
The Effectiveness of Audit Committee Attributes towards Earnings Quality of

Malaysian Listed Firms by Aziatul Waznah Ghazali, Mohamed Nurullah, Salma
Ibrahim, Zuraidah Mohd Sanusi, and Norhayati Mohamed
.............................................................................................................................. 124
The Relevance of Earnings Management, Free Cash Flow and Industry on

Market Performance: Evidence from Malaysia by Mohd Taufik Mohd Suffian,
Amir Hakim Osman, Zuraidah Mohd Sanusi, and Zulkifli Mohd Ghazali .................... 125
Earnings Management Effect with The Appearance of Audit Industry

Specialisation, Market Share and Size by Hanis Athirah Zulkefeli, Nor Balkish
Zakaria, Jamaliah Said, and Leny Nofianti ............................................................... 126
Effectiveness of Local Financial Management by Hardi, Vince Ratnawati, and

Arridho Abduh ........................................................................................................ 127
The Effect of Profitability, Dividend Policy, Debt Policy, and Firm Age on
Firm Value in The Non Bank Financial Industry Period 2014-2016 by
Vidiyanna Rizal Putri, and Arinie Rachmawati.......................................................... 128
Determinants from Timeliness of Financial Statements on Listing Companies

in Indonesia Stock Exchange Period 2010-2015 by Rosita Wulandari, and
Holiawati................................................................................................................ 140
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Influence of Economic Value Added and Market Value Added to Stock Price
on Banking Companies Listed in The Indonesian Stock Exchange on 2012-
2015 by Dika Putra Gumay, and I KomangArthana ................................................. 161
Liquidity, Growth and Profitability of Non-Financial Public Listed Malaysia: A

Malaysian Evidence by Nik Noor Ayu Nik Hussin, Mazurina Mohd Ali , Erlane K
Ghani and Halil Paino ............................................................................................. 174
The Influence of Company Policy and Profitability to Firm Value by Rofika,

and Zulbahridar ...................................................................................................... 175
Audit Report Lag Analysis at Mining Companies Listed in Indonesian Stock

Exchange 2012-2016 by Sari Angriany Natonis, and Sarinah Joyce Margaret
Rafael..................................................................................................................... 176
Analysis of Factors That Have Effect on Disclosure of Sustainability Report

(Empirical Study on Listed Companies in IDX 2013-2015) by Adhitya Agri, and
Devi Safitri .................................................................................................................... 177
The Effect of Human Resources Competency and Implementation of

Government Accounting Standards on the Quality of Financial Accountability
and the Quality of Financial Statements as an Intervening Variable by Alfiati
Silfi, Kamaliah, and Nurul Badriyah......................................................................... 189
The Effect of Company Characteristics to Disclosure in Annual Report of The

Company by Novita Indrawati, Edfan Darlis, and Al Azhar L .................................. 190
Analysis of Factors Affect the Quality of Bengkalis Regency Government

Financial Statements by Julita, and Susilatri .......................................................... 191
Achieving Business Sustainability through Comprehensive Value Creation: An

Empirical Findings from Malaysian Government Linked Companies by Nik
Herda Nik Abdullah, Jamaliah Said, and Enni Savitri ................................................ 192
Hedging Local Product: Optimization of Products Processed Food Sago Subtitution

Competitively Global the Case of Kepulauan Meranti Provinsi Riau by Marhadi,
Idjang Tsarsono, and Yusnarida Eka Nizmi .................................................................... 193
Toward Whole of Government Applying Activity Based Management in One

Stop Licensing Service Office at Provincial Level of East Nusa Tenggara Moni
Wehelmina Muskanan, SE., MPA., by Drs. Markus Bunga, M.Agr. Christien. C.
Foenay, SE., M.Si., Herly M. Oematan, SE.,M.Si........................................................ 194
The Relationship among Management Control System, Strategy and Firm

Performance: Indonesian Evidence by Ria Nelly Sari, Dewi Junita, Rasuli,
Yusralaini & Susilatri .............................................................................................. 214
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Factors Affecting Going Concern Statement Opinion at LQ 45 Listed
Companies in Indonesia Stock Exchange by Valerio Rodrigues Bahan, and
Sarinah Joyce Margaret Rafael ................................................................................ 215
Micro Business Development Strategies for Aero City Opportunities in

Majalengka by Ellen Rusliati, Mulyaningrum, and Mujibah A. Sufyani ..................... 234
The Impact of Knowledge Management, Entrepreneurship and Cultural Motifs

of the Community in Improving the Performance of Women's Micro
Enterprises in Pelalawan District, Riau Province by Susi Hendriani, Yulia Efni,
and Ezky Tiyasiningsih ............................................................................................ 235
The Moderating Effect of the Understanding of Accounting Information

Systems on Audit Complexity, Time Budget Pressure and Audit Quality
Relationship by Elfi Ilham, Kamaliah, and Aunurrafiq ............................................ 236
The Effect of Clients Charismatic to Auditor's Client Acquiescence in KAP

Pekanbaru, Padang and Batam by Pipin Kurnia, and Sem Paulus Silalahi .............. 237
Developing Enterprise Risk Management Index for Public Companies by Enny

Nurdin Sutan Maruhun, Ruhaya Atan, Sharifah Norzehan Syed Yusuf, and Jamaliah
Said........................................................................................................................ 238
The Effect of Corporate Governance Mechanism, Third Party Funds and Credit
Risk on Sharia Banks’ Financial Performance by Firm Size and Leverage as
Controlling Variables by Faradilla, Yulia Efni, and Andewi Rokhmawati ................ 239
Analysis of Factors Affecting Risk Management Disclosures by Hariadi , and

Rusli ............................................................................................................................... 252
Investigation of The Disposition Effect and Herding Behaviour on Investors`

Portfolio Ferformace by Ahmad Fauzan Fathoni, Henni Noviasari, and Arwinence
Pramadewi ............................................................................................................. 253
The Role of Higher Education in Producing Young Enterprises by Ahmad

Mardalis, Fauzan, and Imron Rosyadi ..................................................................... 254
Budgetary Participation and Its Impact on Individual Performance by

Yuliansyah Yuliansyah, Intan Oktri Agtia, Biana Adha Inapty and Nafsiah Mohamed . 266
Analysis of customer satisfaction Level On Service Quality And Customer

Relationship and And The Effect Toward Customer Loyalty In Bank Riau
Kepri Syariah Pekanbaru Branch by Deny Danar Rahayu, Lilis Setyowati , Reza
Pahlevi ................................................................................................................... 267
The Conference Organizing Committee ............................................................... 268
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Greetings from the Rector of Universitas Riau
Assalamualaikum Warahmatullahi Wabarakatuh.
It is my distinct honor to extend a very warm welcome to

the keynote speaker, invited speakers, presenters, and
participants of the 9 ICCG 2017 in Pekanbaru. I will also
use this opportunity to extend my heartiest congratulations
to the organizing committee from Faculty of Economics
and Business, Universitas Riau with its collaborators,
Institute of Indonesia Chartered Accountants (IAI),
Accounting Research Institute (ARI) Universiti Teknologi
Mara Malaysia, Institute of Public Enterprise India (IPE),
Human Research Development Institute
Daffodil International University, Dhaka, Bangladesh, and Malaysian Institute of

Corporate Governance (MICG) for initiating this collaboration, which serves as a stage
for the presenters, and also participants to share their knowledge and experiences on an
international level.
Corporate governance affects all of the company's stakeholders, whether internally and
externally. Internally, there would be clearer accountability, better-defined
responsibilities and greater Greetings from the Rector of Universitas Riau protection of
company interests. These enable companies to capitalize on business opportunities in
economic upturns and, equally important, to tide them over in economic downturns.
Externally, companies with good corporate governance also have easier access to
cheaper capital, from both the debt market and the equity market. Organizations that
failed to implement good corporate governance will result in massive problems being
exposed by whistleblowers, which can result in a public relations and legal nightmare,
possibly tarnishing your brand beyond repair. Finally, welcome and enjoy the
conference.
Thank you
Prof. Dr. Ir. Aras Mulyadi, DEA

Rector, Universitas Riau
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Greetings from the Dean of Faculty of Economics and Business,
Universitas Riau
It gives me a great pleasure to welcome you all to the 9 th

ICCG, 2017 in Pekanbaru. This is the first time, and a
great opportunity for Universitas Riau to be the host for
this event.
The 9th ICCG 2017 carries out the theme “Elevating
Accountability and Sustainability of Public and Private
Entities through Good Governance”, which is very
relevant with the today's progressive and aggressive
business environment. With so much attention focusing
on business practices, it is imperative for a company to
implement a good corporate governance for their
success.
We need to take a closer look at two of these principles: transparency and trust.
Businesses today are held to incredibly high standards by its stakeholders, especially the
shareholders and customers. Being honest and open about process and operations counts
a great deal. Both shareholders and consumers want to see companies operating with
integrity.
Corporate governance allows companies to put their positive traits on display. With
their intentions made visible to all, companies are more likely to be held accountable for
their behavior and actions. “Good corporate governance is a competitive advantage.”
Without it, a company cannot reach its potential, and that makes corporate governance
indispensable.
This is a great opportunity for us to learn and share the knowledge on that stance.
Finally, I wish everyone a pleasurable time, and once again a very warm welcome to the
9th ICCG 2017.
Thank you,
Dr. Hj. Sri Indarti, SE, M.Si
Dean, Faculty of Economics and Business, Universitas Riau
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Greetings from the Conference Chair
On behalf of the organizing committee, I am deeply

honoured to welcome all of you to the 9th International
Conference on Corporate Governance, ICCG 2017. The
conference is held in conjunction with Universitas Riau
55th Anniversary. This year's conference theme is
“Elevating Accountability and Sustainability of Public and
Private Entities through Good Governance”. This
conference addresses the concern to put the problem and
idea about corporate governance issues to be discussed
and hope this event will facilitate us to enhance ideas,
suggestions, experiences and knowledge transfer among
practitioners, academicians and public. In addition, this
event will promote for the further studies and actions that
lead to better understanding of the issue that needs for
development, especially in good corporate governance.
This occasion marks a historic moment for Faculty of Economics and Business,
Universitas Riau (FEB UNRI), in particular for having an opportunity to organize this
conference jointly with Institute of Indonesia Chartered Accountants (IAI),
Accounting Research Institute (ARI) Universiti Teknologi Mara Malaysia, Institute of
Public Enterprise India (IPE), Human Research Development Institute Daﬀodil
International University Dhaka, Bangladesh, and Malaysian Institute of Corporate
Governance (MICG). It is an honor for Faculty of Economics and Business,
Universitas Riau to work together with such well recognized institutions.
I would like to take this opportunity to thank all speakers, presenters, moderators and
participants for joining this event and wish you a pleasant conference. I hope that your
stay in Pekanbaru will be a joyful and unforgettable experience. I also would like to
express my appreciation to all of organizing committee members for their commitment
and eﬀort in ensuring the success of ICCG 2017.
Warm regards,
Prof. Dr. Ria Nelly Sari

ICCG 2017 Conference Chair
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Greetings from Accounting Research Institute (ARI) Universiti Teknologi Mara,
Malaysia
In recognition of the increasing awareness and aspirations

of good governance, the Accounting Research Institute is
delighted and honored to jointly organize the 9
International Conference on the Corporate Governance
(ICCG) 2017 alongside with Faculty of Economics and
Business, Universitas Riau; Institute of Indonesian
Chartered Accountants; Institute of Public Enterprise
(IPE) India; Malaysian Institute of Corporate Governance
(MICG), Malaysia; and University of Daffodil,
Bangladesh.
My sincerest congratulations to Faculty of Economics and Business, Universitas Riau

for successfully organizing this prestigious event the advocacy of good governance
have been considerably highlighted globally. Strengthening the robustness of the
corporate governance framework and practices has become even more important in
today's environment of greater uncertainty and heightened risks. Presently, the
discourse on good governance is often accompanied with the notion of accountability
and sustainability. Fostering pragmatism of integrated good governance is crucial in
creating economic opportunity and sustainability for both private and public sector.
Themed “Elevating Accountability and Sustainability of Public and Private Entities
through Good Governance”, this year's conference highlighted the core principles that
should be implemented in all government agencies, corporate and private
organizations to further strengthen their commitment towards a fair, transparent
business and social environment. It is my hope that this annual conference serves as a
platform for delegates to present new research, build professional networks, participate
in intellectual dialogues, and leverage on the knowledge base of both scholars and
practitioners.
Best wishes
Professor Dr Normah Haji Omar

Director of Accounting Research Institute (ARI)
Universiti Teknologi MARA
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Greetings from Institute of Public Enterprise (IPE) India
Corporate Governance is an umbrella term. The corporate

governance provides a framework of trust, transparency
and accountability. Corporate failures, global crisis and
economic liberalization have opened doors for the
evolution of changes in the corporate eco-system.
Governance provides the structure through which
corporations set and pursue their objectives, while
reflecting the context of the social, regulatory and market
environment.
In a narrower sense, it describes the formal system of accountability of corporate

directors to the owners of companies. In its broader sense, the concept includes the
entire network of formal and informal relationships involving the corporate sector and
the consequences of these relationships on society in general. There are very many
challenges, many companies still practice the 'box-ticking' style of corporate
governance and it is difficult to measure the real quality of corporate governance in
companies. Good corporate governance is a journey and not a destination. Ultimately,
the focus of corporate governance is to provide a foundation for the development of
capital markets and help investors build wealth. Institute of Public Enterprise, Center
for Corporate Governance for the past eight years has tried to address many issues
concerning good governance. The 9th International Conference on Corporate
Governance would broadly discuss issues such as public finance, CG & CSR, media
and governance, public service delivery, risk management, etc. On behalf of the
organizing team, I wish the conference a great success.
Best wishes,
Prof. Ram Kumar Mishra

Director, Institute of Public Enterprise, India
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Greetings from Institute of Indonesian Chartered Accountant (IAI)
Riau Region
It is an honor for the Institute of Indonesia Chartered

Accountants, Riau Chapter, to welcome all the speakers,
presenters and participants to this International
Conference Corporate Governance. I believe that this
event will benefit us as professional accountants through
updating our knowledge on corporate governance. The
study on good corporate governance began to develop
since the 1997, when monetary crisis hit Indonesia.
It is important to understand that good governance is supported by the post-New Order

government to revitalize the State and State-Owned Enterprises by making various
Laws and Government Regulations. However, the Laws and Regulations made have
not addressed the basic issue, instead it created "new problems" that had never been
thought before. This condition is exacerbated by a global trend in the early 21 st
century. Criticism and increasing distrust of bureaucracy and corporations are not only
plagued in developing countries like Indonesia and other ASEAN countries but also in
developed Countries. Some instruments such as executive remuneration, audit
committee, internal control, and shareholder are instruments that should be developed
to support the creation of Good Corporate Governance.
Finally, we hope that through this event, we can find and share the ideas and thoughts
for the development of knowledge about good corporate governance.
Regards
Drs. Hardi, SH.,MM.,MH.,Ak.,CPA.,CA

Chairman, IAI Riau Region
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Greetings from University of Daffodil Human Research Development
Institute Daffodil International University
The motivation for strengthening good governance for

both private and public sector is well established. Being
highly visible entities, any lapse or failure in the
governance of financial institutions, whether real or
perceived, would attract adverse public reaction and could
severely affect reputation and public confidence. Good
governance remains a complex subject, despite the much
advancement that has been made over the years. In the
aftermath of financial crises, corporate governance
standards and practices often come under public scrutiny,
especially the regulators.
However, real change cannot be dictated by regulation alone. This is neither
sustainable nor possible. Instead, principles of good governance need to be deeply
woven into the fabric – or DNA – of an organisation. Additionally, a broad consensus
and progress are needed to elucidate related societal issues.
The 9th International Conference on Corporate Governance provide an opportunity for
scholars as well as practitioners to come together and focus on research and
stakeholders' concerns related to good governance. Furthermore, it is my hope that as
we venture into the future, this conference will steer a dialogue towards developing a
deeper understanding of the contemporary issues that confront the industry and yield
new perspectives and insights around governance issues. I would also like to take this
opportunity to congratulate the Universitas Riau, Indonesia on their success in hosting
9th ICCG and effort in promoting good governance policy at least among the
participative countries. I would also like to congratulate and acknowledge the co-
organizers, Fakultas Ekonomi, Universitas Riau; Accounting Research Institute (ARI);
Ikatan Akuntansi Indonesia; Institute of Public Enterprise (IPE) India; and Malaysian
Institute of Corporate Governance (MICG)Malaysia.
Best wishes
Professor Dr. Farid A. Sobhani

Dean of Human Resource Development Institute
Daffodil International University
xiii
Greetings from Malaysian Institute of Corporate Governance
(MICG) Malaysia
It is an honor for MICG to be a co-host for the 9th ICCG

2017. It is my great pleasure to welcome all delegates to
this conference. I believe this conference provides a good
avenue for both public and private sectors to learn from
each other on new developments on governance matters.
The conference theme 'Elevating Accountability and

Sustainability of Public and Private Entities through
Good Governance' is relevant and timely in view of the
fast changes in the global business today and the
technology disruptions.
'Good governance flows from ethical business practices even without legislation'. So
the fundamental question is 'What are the responsibilities of business beyond
satisfying shareholders?' We need to think of a strategic approach to sustainability that
can have a positive impact on a company's bottom line, even when times are
challenging. Sustainability should be viewed as an umbrella that encompasses
environmental quality, social justice, business ethics, governance, employee health
and safety, diversity and philanthropy.
Worldwide, public and private organizations have agreed to the benefits of having
sound corporate governance. This leads to my hope that all participants shall fully
utilize the valuable insights and ideas from the conference to take back to their
organization.
To all presenters and participants, I wish you all a fruitful deliberation.
Thank you.
Dato' Yusli Mohamed Yusoff

President, Malaysian Institute of Corporate Governance (MICG), Malaysia
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Keynote Speakers
Prof. Dr. H. Muhammad Nasir, PhD, Ak, CA is the

Minister of Research Technology and Higher Education
(2014-2019). Prior to that, he was a rector of Diponegoro
University, Semarang for the period 2014-2018 until sworn in
as Minister on October 26, 2014. He is a professor in the field
of Behavioral Accounting and Management Accounting,
Faculty of Economics and Business, University of
Diponegoro, Semarang, Central Java. He is also known as a
budget expert and a professional accountant.
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Message from Scientific Committee
With the theme of Good Governance for Public and Private Entities: Elevating
Accountability and Sustainability, the Faculty of Economics and Business, Universitas
Riau proudly organized the International Conference on Corporate Governance (the 9th
ICCG 2017). This conference was conducted in collaboration with Accounting
Research Institute (ARI) Universiti Teknologi Mara, Malaysia; Institute of Public
Enterprise, India; the Indonesian Institute of Accountants (IAI), Human Research
Development Institute, Daffodil International University, Dhaka, Bangladesh and
Malaysian Institute of Corporate Governance (MICG) on 28-29 November 2017, at
Hotel Pangeran, Pekanbaru, Indonesia. The aim of this conference was to share and
disseminate research findings in corporate governance discipline and its related areas,
and to foster dialogue among various stakeholders related to corporate governance.
We receive 93 abstracts from 93 authors, but after reviewing process, we only

consider 70 abstracts that are presented in the conference. After careful peer reviews of
all these papers, the scientific committees recommend that there are thirty two articles
that are met the criteria of International Journal of Economics and Management
(IJEEM), Journal of International Studies (JoIS), Management of Accounting Review,
and Asia Pacific Management Accounting Journal (APMAJ). The selected articles are
now being reviewed. Articles that are being reviewed are not included in this
proceeding. There were some authors that consider not publishing their articles in this
proceeding.
As the team of scientific committees of the conference, we would like to express

our sincere thanks to many individuals who have contributed a lot to the paper
reviewing works. We hope that the proceeding benefit to all participates and has a
contribution to the development of knowledge.
Scientific Committee
Dr. Rita Anugrah, MAFIS, Ak., CA (Universitas Riau, Indonesia)

Assoc. Prof. Dr. Zuraida Mohd Sanusi (ARI UiTM, Malaysia)
Assoc. Prof. Dr. Jamaliah Said (ARI UiTM, Malaysia)
Prof. Dr. Farid A Sobhani (University of Daffodil, Banglades)
Dr. J Kiranmay (Institute of Public Interprize, India)
Vera Oktari, SE., M.Ak., Ak., CA (Universitas Riau, Indonesia)
Ifa Adina Yafiz, SE., MARCOM (Universitas Riau, Indonesia)
xvi
Internal Governance, Accountability and Sustainable
Performance of Social Enterprise
Nur Aima Shafie1, Zuraidah Mohd Sanusi2, Razana Juhaida Johari3, Mustaffa
Mohamed Zain4, and Lee Teck Heang5
1
Faculty of Accountancy & Accounting Research Institute, Universiti Teknologi MARA
2
Accounting Research Institute, Universiti Teknologi MARA
3
Faculty of Accountancy, Universiti Teknologi MARA
4
Accounting Research Institute, Universiti Teknologi MARA
5
Help University, Kuala Lumpur
ABSTRACT
Social enterprise is a hybrid organization with multiple double bottom line goals (social
and profit goal). The crusade of social enterprise aids the society and the community to
alleviate the poverty and help the needy. The upsurge on misappropriation of fund either
by the founder and employees within the organization signal an issue of accountability
and weak controlling mechanisms which create public anxiety. Sustainability for social
enterprises is highly dependent on the trust of the public especially donors and
investors, and public trustare mainly based on accountability of the organization. Unlike
any other form of business such as public company and a private company,
accountability and internal governance of social enterprise is different due to their
multiple double bottom line goals. This in turn leads to, among others, the problem of
sustainable performance in social enterprise. The pursuit for sustainable performance is
increasingly evident in Malaysia as there is now a growing demand for continuous and
going concern performance by stakeholders and people at large. The sample of this
study consists of NPOs which operate as social enterprise established in Malaysia and
registered with either Registrar of Society or Company Commission of Malaysia. A
total of 86 questionnaires out of 150 distributed questionnaires were returned. Based on
the result of multiple regression analysis, it was found that there is a positive
relationship between accountability, internal governance proxied by internal control and
corporate structure with sustainable performance. The result from the study can help
regulators and the authority bodies to effectively monitor these organizations in order to
improve the non-profit sector transparency and accountability and can be used to attract
others in seeing the importance of the third sector in providing services that cannot be
supplied by the government or even profit organizations towards the community.
Keywords: internal governance, internal control, corporate structure, accountability,

sustainable performance, social enterprises
1
CSR and Carroll Pyramid: A Case Study on Three CSR Award
Indonesia 2016 Winners
TemySetiawan1*, and Ari Purwanti2

1
Universitas Bunda Mulia, Lodan Raya,14430, Jakarta, Indonesia
2
Universitas Islam AsSyafiyah, JatiWaringin Raya, 17411, Bekasi, Indonesia
ABSTRACT
Currently, CSR disclosure to stakeholders in Indonesia has been done by many

companies. Such disclosures are integrated in the annual report or produced as a report.
Many motives underlie the disclosures. The purpose of this study is to describe the
company's profile and CSR disclosure motives of the winning company of CSR Award
Indonesia 2016 in accordance with the Carroll pyramid. Company’s disclosures will be
analyzed using the 10 principles developed by the United Nations Global Compact
(UNGC). This study will analyze the data of the three companies who won CSR Award
Indonesia 2016 from 2011 to 2015 using the corresponding indicators which are in
accordance to the 10 principles of the UNGC. The data source is financial reports and
sustainability reports. The analyses of the three companies that become the object of
analysis have disclosed sustainability information that is in accordance with the 10
principles of the UNGC. When associated with the CSR disclosure motive based on
Carroll pyramid, the company has economic, legal, and ethical motives. Philanthropic
motive is not much expressed. Another finding shows that the three companies being
analyzed engaged in mining and automotive. Carroll's pyramid which was introduced in
1976 describes the motive of CSR. The concept of this theory has been widely used in
CSR research. This study discusses CSR disclosure of the 3 companies who won the
Indonesia CSR Award in 2016, and is associated with the motive according to Carroll's
pyramid.
Keywords: CSR, Indonesia, sustainability, Carroll's Pyramid, UNGC
1. INTRODUCTION
The issue of CSR is not a new issue. This issue has been discussed since 1950 and
began to develop in the early 2000s (Porter and Kramer, 2002; Cannon, 2012). CSR
issues related to sustainability are the concern of business and academic practitioners
(Kotler and Lee, 2005, McWilliams et al., 2006). Therefore, CSR activities are not only
necessary but they also need to be communicated to stakeholders since the stakeholder
pressure on corporate social and environmental responsibility is higher (Wilmshurst and
Frost, 2000; Deegan, 2002; Ahmad and Sulaiman, 2004; Palazzo and Richter, 2005;
O'Riordan and Fairbrass, 2008).
Corporate Social Disclosure (CSD) becomes the company's medium of
communication with its stakeholders (Walter, 2014; Lii and Lee, 2012). The company
uses CSD to show the its CSR motives. CSD can be integrated in the annual report
(Neu, Warsame and Pendwell, 1998; Halme and Huse, 1997; Santema andVan De Rijt,
2001) or presented through individual reports such as sustainability reports (Gunawan,
*corresponding author : setiawantemy@gmail.com
2
2015; Davis-Walling and Batterman, 1997; Williams and Ho Wern Pei, 1999; Line,
Hawley and Krut, 2002; Yuen and Yip; 2002; Raar, 2002). Therefore, the preparation of
CSD becomes important for companies in communicating with stakeholders. It can
present the company's corporate image for stakeholders (Rae and Rouse, 2001).
NCSR sees this as something positive. In 2016, NCSR announced the 2016 CSR
Award winner in March. This award is the eight of its kind since it was first held in
2008. One aspect of the assessment is the existence of CSD in annual and sustainability
report.
This research seeks to analyse the company's motives in conducting CSR based on
its disclosure in the annual report and sustainability report. The subjects in this study are
the three companies who won the CSR Award 2016 which was announced in March
2016. This research is necessary because of the limited qualitative research that analyses
CSD linkage with company motive as observed through Carroll's pyramid (Carroll,
2006).
2. LITERATURE REVIEW
2.1. CSR Disclosure
There are so many definitions related to CSR in terms of aspects to be
highlighted. Carroll and Buchholtz (2000) describe a CSR definition that is in line with
the concept of the CSR pyramid (Carroll, 1991): CSR leads to economic, legal, ethical
and philanthropic expectations of a company by society at any given time. Another
definition developed (Porter and Kramer, 2011) describes CSR as an expectation that
must be met by the company to get the public’s attention which will eventually led to
the company being able to operate in the community.
CSR should be communicated in the form of CSD to stakeholders to obtain an
indirect "operating license" from the community. If the community does not benefit
from CSR, the company will face operational constraints facing the goal achievement
(Porter and Kramer, 2006).
CSD will be described in a CSR report which is integrated in an annual or isolated
report, or company website. CSD is a corporate disclosure that demonstrates the process
of inclusion of social and environmental aspects in business operations and their
interaction with stakeholders (Perez, 2015). The information disclosed in the CSD is
part of the interaction between ethical companies and their stakeholders as a form of
legitimacy for corporate behavior and will have an impact on the company's positive
reputation (Michelon, 2011; Othman et al., 2011; Li, Wang and Cai, 2011; Colleoni,
2013). The existence of a positive reputation of the company will have an impact on the
economic performance of the company (Garriga and Mele, 2004). It is therefore
imperative that CSD companies maintain long-term existence through company
reputation.
2.2. Carroll’s Pyramid

Carroll (1979, 1991, 2006) explains that there are four motives for the
implementation of CSR; economic, legal, ethical and philanthropic responsibility.
1) Economic Responsibility
Companies as business organizations must be able to not only achieve corporate
profits but also improve regional and global economies. At this stage, Carroll (1991) has
stated that corporate responsibility is not limited to only the internal interests of
shareholders but also in regional/sectoral economies. CSR is one of the company's
3
strategy in achieving its economic responsibility. CSR is seen as a necessary counter-
achievement for the company. In the short term, CSR should have economic value for
the company, i.e. helping the marketing of products and services, and improving the
company image for customers and society. If a company can achieve its targeted
earnings, or even surpasses it, then, of course, the company will be able to help the
surrounding, regional and even global economy.
2) Legal Responsibility
Another motive of CSR implementation is that companies seek to avoid legal
costs. Currently, the awareness of the importance of CSR implementation is demanded
by stakeholders. The Government seeks to issue laws relating to environmental
exploration and protection of employees and communities. In addition to the legal cost,
of course there are social sanctions for the company. CSR activities are expected to
meet stakeholder expectations so that companies are not subjected to economic or social
sanctions.
3) Ethical Responsibility
At a later stage, a company's motive to conduct CSR is to achieve the common
wellness for all stakeholders. CSR is used as a tool of the company in creating common
prosperity for everybody involved (utilitarianism). This common good is not only for
human but for all elements of life (ecocentrism). The CSR motive in this regard is the
company's ethical step that is not limited to the fulfillment of legal liability.
4) Philanthropic Responsibility
The philanthropic responsibility is the highest level of the Carroll's pyramid.
Carroll explains that the company running at this level no longer doing CSR on ethical
interests, but it does it for more than that. The company runs it for the benefit of society
and the environment. The existence of the company will improve the quality of life.
Corporate CSR is not something mandatory but is part of the community itself.
Figure 1. Carroll’s Pyramid

Source: Carroll (2016)
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2.3. United Nations Global Compact (UNGC)
The United Nations Global Compact is a worldwide initiative for companies to
promote sustainability as one of their performance goals. Currently, UNGC consists of
13,000 corporate participants and other stakeholders in more than 170 countries. Ten
principles that are the focus of UNGC are grouped into 4 categories: Human Rights (1st
and 2nd principles); labor (3rd - 6th principles); the environment (7th - 9th principles)
and anti-corruption (10th principle).
3. METHODS
This is a descriptive qualitative research and it is done by taking 3 research
subjects; they are the companies who won Indonesia CSR Award 2016. The research
objects are the annual report and sustainability report of the observation period of 2011
to 2015. The analysis method used is comparative descriptive approach.
4. FINDINGS AND ARGUMENT

Table 1 Companies' Descriptions
Description PT Adaro Petronas PT Astra
Internasional
Award Category Platinum Gold Silver
Type(s) of industry MOG MOG Automotive
Founded 1982 1974 1957
ISE Listing 16 July 2008 - 4 April 1990
Table 1 above provides an overview of the three companies that are the subject of
the study. They are PT Adaro as the winner of Platinum category; Petronas with Gold
category, and PT Astra International with silver category. What can be implied from the
three companies above is that the three companies are in the category of high density
industry. In Indonesia, companies in the high density industry category are required to
conduct CSR and disclose it. The rules governing them include: Limited Liability
Company Regulation number 40 of 2007 which explains that companies which are
directly involved in natural resources related activities must perform CSR and may be
financed by the company on the basis of propriety and fairness. In addition, there is the
CSR Regulation number 47 of 2012, which requires the company to disclose the CSR in
its annual report and have it held accountable in a general meeting of shareholders.
Regulation number 23 of 2010 also stressed that the company must conduct activities of
empowerment and development of the surrounding communities affected by the
company's operations and report to the local government periodically; Article 1 point 7
of Act No. 5 of 1984 on Industrialization in article 21 of the Industrial Law & Article 87
paragraph 1 of Act No.35 of 2009 on the Protection and Management of the
Environment.
Looking at the details, it shows that the three companies have been operating for
more than 30 years. Certainly the going concern of the company is an important thing
that the company considers in paying attention to social and environmental
performance. The companies which are listed on ISE are only PT Adaro and PT Astra
International; it has the meaning that the ratings in CSR Award Indonesia are not
limited to companies listed on the Indonesia Stock Exchange.
5
4.1. PT Adaro
In compliance with the principle of UNGC, PT Adaro conducts objective
employee's assessment and performance development by ignoring the background
factors of employees such as: religion, gender and ethnicity. In addition, PT Adaro is
seriously responding to changes in government regulations such as Law No. 19 of 2012
on labour rights. Although within the company, there is no specific policy on human
rights, but human rights are reflected in the company's vision and mission and are
embodied in a code of ethics that is co-signed by the management, employees, and other
relevant stakeholders. The management is aware that the potential for human rights
violations will have a negative impact on long-term business continuity.
In addition, the company does not hire employees under the age of 18 years and
reduce the use of dangerous explosives. This is evident in the 2013 sustainability report
which explains that there has been a decrease in the use of used lubricants for
explosions in 2013 by 47.3 thousand kilograms, which is a drastic drop from 121.38
thousand kilograms in 2012.
In addressing corruption, there is no specific training for management or
employees, but the company deals with it by performing monitoring through internal
audit and by doing the "I LOVE MORE ADARO" campaign that emphasizes integrity,
meritocracy, openness, respect, and excellence. All employees are required to
understand and apply these values, which are expected to prevent employees from
committing disgraceful acts, including corruption. To identify the risks or incidents of
corruption, the internal audit team went directly to operational areas in Wara, Tutupan,
Paringin, Kelanis and Dahai. In addition, the company is also open to outside reports
regarding allegations of employee corruption. Over the past two years, the internal audit
team identified three incidents of employee corruption in Dahai. Of the three incidents,
two occurred in 2012 and one in 2013. The three cases ended with the dismissal of
corrupt employees. In addition to employee corruption incidents, the audit team also
found a corruption incident involving the contractor, which ended with the termination
of the contract.
In further analysis of the company's motives according to the Carroll's pyramid,
the CSD in annual reports and sustainability reports makes it clear that the company's
efforts are aimed at achieving the company's economic stability for long-term
sustainability and government regulatory compliance. The ethical domain that is being
highlighted is more to the environment, but the disclosure that leads to the philanthropic
motive is not highlighted.
4.2. Petronas
The undertaken effort which were in line with the UNGC principle, based on its
disclosure in the annual report and sustainability report 2012 to 2015, is to respect the
right of the local population in obtaining employment. Therefore, the partnership
program is a superior program since it prioritizes local contents, inclusion of required
skills, and remuneration of income for local residents. With good cooperation with local
communities, the company is expected to grow.
In addition, the development of employees is provided in the form of training. As
described in the 2014 sustainability report, in terms of employee skills and career
development, Petronas has employed an Employment Value Proposition (EVP)
program. In addition, Petronas has this Institution of Vocational Institution Sponsorship
and Training Assistance (VISTA) which has been established since 1992 to foster
6
skilled workers for the Oil and Gas industry continuously. Petronas invested roughly
around RM65.5 million for the VISTA program which is in collaboration with 22
vocational institutions under the federal government and various state government
agencies. In addition to other programs in the field of human resources development,
Petronas has a Graduate Employability Enhancement Scheme (GEES) program which is
in partnership with the Malaysian government and the company in providing soft skill
training for graduates during the one-year education period to support the company's
career and the position entrusted to it. In 2015, Petronas was awarded the 100 leading
Malaysian company in The Graduate Employer of the Year Award 2015 for its role in
improving the quality of human resources.
In relation to the environment, since 2011 Petronas has campaigned the "I Save
Fuel" program and it is implemented by MISC to monitor and reduce fuel consumption
and reduce CO2 emissions of fleet vessels in their operation. During the reporting
period, MISC saved 4.52% of the fuel, which is equivalent to 28,457 metric tons (MT).
In addition, the CO2 emissions are reduced to 89,070 MT. MISC is invested
substantially in Green Technology to improve energy savings and emissions reductions.
This program has contributed in o.21% of fuel savings or CO 2 emissions reduction of
4103 MT.
In further analysis of the motives in relation to Carroll's pyramid, it is generally
seen that the CSD in 2011 to 2015 is directed towards achieving cost efficiency, ethics
and philanthropy through the development of human assets. Although not much
explained related to the legal motive, Petronas has indeed ensured compliance with
various related regulations. Petronas shows a clear direction on CSR to continuous
improvement of human and environmental quality.
4.3. PT Astra International

PT Astra International's CSD seems to have met many of the principles of UNGC.
Among other things, the attention toward the employment issue is clearly documented
and in line with the applicable regulations. PT Astra International Tbk 2012-2013
Company Regulation Book that has been updated and ratified in 2011 has also been
socialized to all Astra board of directors and employees. Together, this regulation serves
to prevent unhealthy employment practices, such as underage or forced labor and
discrimination and ethical/behavioral deviations against individuals or minority groups
within the Astra Group environment. As a result, Astra Group's employee turnover rate
is well controlled, reaching 4.2% throughout 2011. From the company's CSD, PT Astra
has a very low turnover rate if compared to similar business industries. In observing
employee's loyalty, PT Astra conducts Employee Opinion Survey (EOS) regularly every
2 years. In addition, other regular events such as Family Day/Employee Gathering,
extracurricular activities in sports & arts are aimed at fostering bonds, mutual ownership
and strong appreciation between employees and their families and the Company. Since
2012, Astra has revealed that reliable Human Resources have become one of the main
determinants of Astra's success to date. Managing over 197,434 employees is certainly a
challenge for the company. However, with the high commitment of all layers of
employees with the philosophy of "Winning Concept, Winning System and Winning
Team," PT Astra International believes the quality of human resources can be improved
and support all activities in the Strategic Triple Roadmap.
In addition, PT Astra is in line with the regulations on minimum age of
employment so that there is no underage workforce. It also offers wage in accordance
7
with the minimum wage regulations, ensures no racial/ethnic/religious/gender
distinction in positioning, and provides equal career development for all employees in
accordance to their competencies and regulated standards. Other excellent programs
developed by PT Astra in 2015 are Astra Leadership Development Program and AMDI
program which organizes competence improvement such as Astra Basic Management
Program (ABMP), Astra First-line Management Program (AFMP), Astra Middle
Management Program (AMMP), Astra Senior Management Program (AsrMP), Astra
General Management Program (AGMP), Astra Executive Program (AEP) and Astra
Advanced Executive Program (AAEP), and Integrated Talent Development (ITD).
With the attention toward the environmental aspect, within the period of 2011 -
2012, TAM's overall efficiency program has achieved results above target, i.e. reducing
energy use by 3.3% and packaging materials by 5.3% and carbon emissions by 5.4%.
When quantified, this efficiency is realized in the form of savings 3,380 trees, reduction
of 35.27 tons CO2 emissions, and cost savings of Rp 4.8 billion. In 2014, Astra
discloses that the Green Strategy is embodied in the Company's Strategic planning,
which considers the aspects of Environment, Health and Safety. In 2014, the adoption of
the policies set forth in 2014 Corporate Policy 2014 is as follows:
The application of Astra Green Company to BIRU minimum for all subsidiaries,
natural resource efficiency of at least 5% per unit of product compared to 2013 through
the implementation of cleaner production program and the use of renewable energy,
execution of energy efficiency program and the lowering of GHE emissions by 2%,
implementation of Extended Producer Responsibility programs, compliance of
PROPER regulation through "Road To be Green PROPER", implementation of
Behavior Based Safety (BBS) program and implementation of Contractor Safety
Management System (CSMS) in internal company as part of "Zero Workplace
Accident" program. In 2015 Astra revealed that Astra Green Company (AGC) is built
on the concept that in every business decision making, the management consciously
considers the matter of environmental protection, occupational safety and health of the
stakeholders. AGC is an Astra assessment tool to monitor the achievement of the
company against the pillars of management system, namely Green Strategy, Green
Process, Green Product and Green Employee as well as the achievement of critical
points in the field of Environment, Health and Safety, and Legal Compliance.
The explanation above explains that the CSR motive of the company has reached
the stage of philanthropy that illustrates the role of the company as an economic agent
which will be useful for the society and the environment. The company not only strives
to maintain financial success with cost efficiency, adhere to legal regulation for the sake
of existence and ethics as an entity in society but also contribute to creating better life
and living standard.
5. CONCLUSIONS
This study provides an overview of the profile of the company who won
Indonesia CSR Award 2016. The three winners for the category of platinum, gold and
silver, is involved in the industry that is categorized as high density industry. The three
companies have been established for over 30 years. This research opens another
research gap on whether companies that promote going concern is influenced by
stakeholder trust which is based on CSD. The companies two of which are listed on ISE
listing. Petronas is a Malaysian company operating in Indonesia. The three companies'
disclosures have met the sustainability standards disclosed in the 10 principles of
8
UNGC. Issues which have become the company's attention are on the aspects of human
rights, labour and the environment. However, for anti-corruption disclosure, there isn't
much discussion on it in both annual reports and sustainability reports.
When associated with the motives of the company in the Carroll's pyramid, the
three companies show economic, legal and ethical motives, but not yet on philanthropic
motives. Further research can determine factors that affected these motives of CSD.
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10
Implementation of Corporate Social Responsibility (CSR) to Support Good
Governance of Domestic Investment Companies in North Sumatera Province
Azizul Kholis1*), Nasirwan2*), and Ramdhansyah

Accounting Department, Faculty of Economics, Universitas Negeri Medan, Indonesia
ABSTRACT
This study aims to determine the determinants of CSR implementation, potential data,
and optimization of the management of CSR funds issued by domestic investment
companies (PMDN) in the Province of North Sumatra. Urgency of this research is
considering the need for regulation related to channeling CSR funds company to be
more targeted, not overlapping and become more optimal The population are Domestic
companies in North Sumatera province. The sample technique used is Purposive
Sampling by establishing 5 (five) regencies/cities as research sample with special
criteria, namely Medan City, Deli Serdang, Asahan Regency, Mandailing Natal
Regency. Using survey 47 companies was analysis of this research using descriptive
statistics and factor analysis to determine the factor loading of determinants CSR
activities by looking at the score as a determinant of corporate CSR policy. Conclusion
this research is external factor has higher factor loading more than external factor; it
means CSR activity is influenced by stakeholder factor. The research result is also
expected to be beneficial for North Sumatera provincial government as one of reference
in making academic manuscript of arranging regulation related to fund management of
CSR at the Provincial level. Suggestion for further research is can be done at owner
state companies.
Keywords: CSR, Good Governance
INTRODUCTION
Initially the business world assumes that the company is only faced with the
responsibility that stands on only single bottom line, which is the value of the company
that is reflected in the company's financial performance, but in its development the
company must also pay attention to the social and environmental aspects (triple botton
line). The company is no longer just doing economic activities to create profit (profit) in
maintaining the continuity of its business, but also has responsibility to society (social)
and the environment. The social responsibility of the business sector known as
Corporate Social Responsibility (CSR) is a form of corporate awareness as an effort to
improve its relationship with the community and its environment.
Trinidad and Tobaco Bereau of Standards (TTBS) defines corporate social
responsibility as a "business commitment to act ethically, operate legally and contribute
to economic improvement along with improved quality of life of employees and their
families, local communities and the wider community (Sankat , Clement K, 2002 in
ICSD 2004). Where there are 5 main components of the various definitions of CSR that
exist, namely: economic, social, environmental, stakeholders and voluntarism. With the
existence of CSR, the company is no longer just doing economic activities to create
*Corresponding auhor: azizul_kholis@yahoo.com, nasir.albi@gmail.com
11
profit (profit) in maintaining the continuity of its business, but also has responsibility to
society (social), Consumer, mass media, and environment (Wibisono, 2007) external
factors company. Internal and external factors then encourage business management
based on Agency Theory is the agency theory that only explains the relationship
between the owner and manage (Management).
This is one of the things that then encourage business management based on
Agency Theory is perfected with the emergence of Stakeholder Theory, which explains
the relationship of outside parties who also have interests to the company, so the logical
consequence is the existence of the extension of corporate responsibility (Corporate
Responsibility), with the assumption the basis that the achievement of corporate
objectives is not only in the interests of Principles and Agents, but also very closely
related to other stakeholders, and the setting of the environment in which the company
is located if traced from some previous research, many factors influence CSR. For
example, in research conducted by Amran and Devi (2008) mentions at least there are
six internal factors that are indicated to affect the application of CSR in Malaysia. The
Factors are foreign shareholder, government shareholding, dependence on government,
dependence on foreign partner, industry, size, and profitability.
For external factors, at least it can refer to Henrique and Sadosrky (1999) research
on 750 companies in Canada as embodiment of corporate management perception to
stakeholders. Then Maksum (2003), who has tested the government regulation variable,
community pressure (Press Press), Mass Media Pressure. For external factors at least it
can refer to Henrique's research and Another study conducted by Stead (1996) adds
customer variables (consumers), and research conducted by Turner and Stephenson
(1994) also includes environmental information variables as a contribution factor that
influences the importance of corporate social responsibility. Another study conducted
by Stead (1996) adds customer variables (consumers), and research conducted by
Turner and Stephenson (1994) also includes environmental information variables as a
contribution factor that influences the importance of corporate social responsibility.
Cowen et al. (2006) in Hackston & Milne (1999), Retno (2006) says that consumer-
oriented companies are expected to provide information on social responsibility as this
will enhance corporate image and increase sales
Formulation of the problem Based on the identification of the above problem then
the formulation of research problems proposed is 1. How much CSR fund is managed
by PMDN Company in North Sumatera province every year? 2. How is the compliance
of CSR implementation to PMDN companies?
LITERATUR REVIEW
Corporate Social Reasonability (CSR)
World Bank (Bank Dunia) defined, 2010, CSR is commitment of business to
contribute to sustainable economic development working with employees and their
representatives, the local community and society at large to improve quality of live, in
ways that are both good for business and good for development. What is meant by this
definition is that CSR is a business commitment to play a role in economic development
that can work with employees and their representatives, surrounding communities and
the broader community to improve the quality of life, in a way that is both business and
development. The development of CSR in developing countries has been studied by
Visser (2008) and can be seen in Figure 2.3. The following CSR pyramid:
12
CSR definition by International Finance Corporation (IFC), 2000: "Commitment of
the business world to contribute to sustainable economic development through cooperation
with employees, their families, local communities and the wider community to improve
their lives through ways that are good for both business and development.
Hypothesis:
Ha : External factor more dominant than internal factor to support implemented of CSR
METHODS
This research was conducted in 5 (Five) Regency Town in North Sumatera
Province. Medan City as the main target of research location because many PMDN
companies are located in Medan City. The study time is planned for 5 (five) months
starting from June to October 2017. In general, the number of investors who enter each
year for domestic capital investment companies (PMDN), and the value of investments
and has been implemented in the Province of North Sumatra within the period of 2011-
2016 can be seen in Table 1 below:
Year Number
2011 48
2002 38
2013 18
2014 67
2015 21
2016 39
Sum 231
Source: BPPM Provinsi Sumatera Utara, 2016
The development of investment value of PMDN both still in the realization stage
that has been realized in North Sumatra for 2012-2016 can be seen in Table here
Year Amount of Investment
2012 2.943.093,92
2013 12.047.929,86
2014 2.024.885,56
2015 1.662.522,50
2016 9.163.446,19
Total 27.841.878,03
Source: BPPM Provinsi Sumatera Utara, 2016
13
The development of PMDN investment continues to experience ups and downs
in the last five years, both from the number of projects and the amount of funds realized.
However in 2013 there is an increase in the value of approved and realized investments.
This is of course very closely related to central government policies that provide ease of
investment for PMDN companies who want to run business activities throughout
Indonesia. The Central Government itself through the Ministry of Affairs has revoked
local regulations that hamper investment throughout Indonesia. The realization of
PMDN investment activity in North Sumatra does increase every year but the increase
is not followed by the realization of investment inflows, because investors who have
signed the investment license are still many who do the assessment or feasibility study
first. Of course, investors do not want to lose due to have included such large capital
and also mobilization of machine or equipment because it cannot carry out its operation
hence investor will experience loss. Of the 33 districts / municipalities in North
Sumatra, PMDN only operates in 21 districts / municipalities only, this happens because
it is tailored to the potential investment in each region. Distribution of PMDN as listed
in table 2 below.
No Regions/Cities Amount of PMDN

1 Langkat 11
2 Pak-pak Bharat 8
3 Medan 85
4 Deli Serdang 58
5 Serdang Bedagai 2
6 Tanah karo 7
7 Dairi 0
8 Toba Samosir 2
9 Batubara 7
10 Asahan 9
11 Labuhan Batu 16
12 Simalungun 7
13 Samosir 0
14 Nias 0
15 Padang Lawas Utara 0
16 Nias Selatan 7
17 Tapanuli Selatan 7
18 Tapanuli Utara 2
19 Sibolga 0
20 Tapanuli Tengah 2
21 Binjai 0
Sum 231
14
Table. 3.Investment characteristic in business field:
NO BUSSINES FIELD INVESTMENT (Rp.TRILION)

1 Mining 1.778.450,52
2 Chemical and Pharmacy 1.883.769,24
3 Food and Agriculture 865.776,44
4 Services 931.648,20
5 Others Industries 357.508,52
6 Food Industries 333.759,84
7 Real Estate 188.701,84
8 Wood Industries 36.734,88
9 Metal Industries 2.988,16
10 Non Metal Industries 2.763,12
11 Restaurants and Hotels 1.405,92
12 Constructions 1.002,24
13 Paper industries 5.178,24
Total 6.389.687,16
No Statement Loading Factors

Companies stated CSR become a Performance 0,67
1 CSR Budgeting program every year 0,60
Good relationship with internal and external stakeholder 0,45
Performance indicators must be report in periodic 0,50
Companies must commitment on CSR Programe 0,75
2 CSR Activities program must consistent 0,80
CSR integration on companies program 0,79
CSR budgeting yearly 0,76
Business regulation to stake holder orientation 0,43
3 Involve Management to Environmental 0,67
Engagement of internal on CSR program 0,55
Company reputation with social objective 0,82
4 Social Performance continuous program 0,80
Goal of CSR campaign for companies reputation 0,77
Commitment of all employment so CSR support 0,67
5 Company policy for employment 0,57
Supporting Employment 0,49
Government urgency to Support CSR program 0,77
6 Government Shareholder 0,80
Government must provide regulation so that the CSD can run 0,83
Firms must provide sponsorship for any societies’ programs 0,77
7 Societies’ empowerment of firms is important 0,80
Firms must provide charity to societies 0,83
Customers survive 0,77
8 Customer participation in CSR 0,83
Services and product orientation 0,80
Mass media support 0,83
9 CSR Advertising 0,75
Good relationship between Companies and media 0,75
15
DISCUSSION
Base on table 4 above, the first phase of the questionnaire was distributed from
August 15 to August 30, 2017 with multistage step sampling. Phase 1 is a sample of
sending questionnaires to all companies as research population through assistance from
subdivision of PMDN of Promotion and Investment Board of Pemprov North Sumatra.
Then phase 2 from September 4 to September 20, 2017 scheduled Visits pick up
questionnaires to PMDN company by way of direct door to door company PMDN as
data collection activities. The results of the temporary Return of the entire questionnaire
are 11 Companies. Response test of bias will be conducted to test whether the answer of
questionnaire stage 1 (one) with phase 2 (two) still remain consistent. For consistency
test, the answer of questionnaire of phase 1 (one) with phase 2 (two) is done by non
response bias test, that is divide data to two groups of return stage of questionnaire.
Based on the calculation of data with SPSS version 21 software can be detailed
calculation results.
Hypothesis testing finding that External factor more dominant than internal factor to
support implemented of CSR, so can declare that Hypothesis accept.
Based on FGD results with Stakeholders obtained information:
1. Potential Corporate CSR PMDM in North Sumatra Rp. 2 Billion s / d Rp 3 Billion
per year
2. Activities undertaken are still focused on social activities
3. CSR funding activities in education are still minimal.
4. There is no CSR regulation by the Regional Government
Opportunities of cooperation with universities for CSR are very prospect.
CONCLUSION
Based on the description and analysis in the previous chapter it can be concluded
that the external factors have higher factor loading values than internal factors, meaning
that CSR activities are influenced by stakeholder factors. The results of the study are
also expected to be useful for the North Sumatra provincial government as one of the
references in the preparation of academic manuscripts of regulations related to the
management of CSR funds. The benefit of this research for universities is to know the
sources of corporate CSR funds that can be collaborated for the advancement of
education, as well as the results of this study also has contributed to the study of
management accounting science and corporate social responsibility. Research outputs
include: (1) Potential Data of CSR (2) CSR Fund Management System (3) Draft
Proposed CSR Management Mechanism in PMDN Company.
ACKNOWLEDGEMENTS
This Research funding by DRPM Ministry of Research and Higher Education, Republic
of Indonesia, grant’s program of 2017
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Undang-Undang Tentang Perseroan Terbatas, UU NO. 40,
18
The Influence of Good Corporate Governance, Corporate Social Responsibility and
Firm Size on the Firm Value with Earning Response Coeffecient as Moderation
Enni Savitria, Volta Diyantob, , and Nik Herda Nik Abdullahc

a,b
Department of Accounting, Faculty of Economics and Business Universitas Riau, Indonesia
c
Faculty of Accountancy, Universiti Teknologi MARA. Puncak Alam 43200, Malaysia
ABSTRACT
One of management policies is to increase the firm value through stock prices, which is
the prosperity of the owners and shareholders. This study aims to determine the effect of
good corporate governance, corporate social responsibility and firm size to firm value
with Earning Response Coeffeciont (ERC) as moderation. This research used secondary
data of financial statement and stock price data from 23 samples of mining companies
listed in Indonesia Stock Exchange from 2010 to 2014. The data were analysed through
Moderated Regression Analysis and the results showed that Good Corporate
Governance which measured by the Managerial Ownership and Firm Size have
significant impact on firm value. Meanwhile, Corporate Social Responsibility that
measured by Global Reporting Initiative (GRI) indicator was found does not affect the
firm value. The findings also indicated that the Earning Response Coefficient was able
to moderate the influence of Managerial Ownership and Firm Size to Corporate Value.
However, it is found that the influence of Corporate Social Responsibility to Firm Value
does not moderate by the Earning Response Coefficient.
Keywords: Good Corporate Governance; Corporate Social Responsibility; FirmSize,

Firm Value; Earning Response Coefficient.
1. INTRODUCTION
The mining industry is an industry that commonly concentrates on the
exploitation of crops which is then processed to obtain valuable outcomes and is finally
sold to earn desired profits by the management of the company.
The dynamic development of the world economyrequires a well-rounded
corporate management. A company should always endeavor tosustain and increase its
performance in every sector as an anticipation of increasingly fierce business
competition.
Generally, one of the companies’ goal is to maximize the corporate values as
reflected in its share price. The value of a company is the price a prospective buyer is
willing to pay- if it is sold by the company. Various policies attempted by the
management to improve the firm’s value through boosting the prosperity for its owner
and shareholders are depicted on the share price. The mining sector has so far not shown
any strengthening indication. The situation is aggravated by the absence of incentives
from the government and market. Specifically, the mining sector dominated by coal has
not yet designated any indications of increasing price in the coal commodity. The
continuously decreasing price of coal results in detriment to the company. Moreover,
the dropping trend of coal commodity prices caused investors to gradually shift their
investment to other promising sectors. There are numerous factors influencing the rise
and fall of a corporate values such as good corporate governance, corporate social
responsibility andthe size of the company.
19
The profit quality is a central and crucial part of the accounting profession.
Investors, creditors, and other authorities take a decision based on the financial report.
Provided that the presented profit quality is not reliable, there would be a greater
possibility of stakeholders to no longer trust the job as an accountant.
2.1. Agency Theory
Jensen and Meckling (1976) stated that the relationship between shareholders and
a manager provides such a thorough picture of the agency relationship. This agency
correlation relates to the segregation of ownership and control within the company
structure.
2.2. Corporate Values

Corporate values are the prevailing market values or prices of the company's
common stocks (Brigham, 2011). The value is completely fundamental, because the
higher the rate of a firm, the better the wealth of shareholders. Grounded on a theory of
the firm, the main purpose of a company is to improve its values. In conducting the
assessment towards the corporate stock value, there are three types of important
judgment, involving book value, market value, and intrinsic value (Jogiyanto, 2015).
2.3. Corporate Social Responsibility

Kotler and Nancy (2005) defined Corporate Social Responsibility or CSR as an
employer’s duty to formulate policy, make a decision, or keep on desired intentions, in
terms of society’s purposes and values. Each business decisions and actions are taken on
the grounds, or at least in part, beyond the direct economic or technical interest of the
company.
2.4 Hypothesis Development

Jensen and Meckling (1979) stated that one way to reduce agency costs is to
increase ownership of shares by management. The proportion of stock ownership
controlled by managers may affect company policy. Managerial ownership will aligns
management interests and shareholders, so it will benefit directly from wrong decisions.
H1 : Managerial Ownership affects the value of the company.
Corporate social responsibility is expressed in a report called Sustainability
Reporting. CSR can be sustained if the program created by a company really is a joint
commitment of all the elements that exist within the company itself. Without a strong
commitment and support of the employees, these programs will not be able to
implement properly. By engaging employees intensively, the value of these programs
will give a meaning to the company.
H2 : Corporate Social Responsibility affect the value of the company
The size of the company can be measuredbythe value of the total assets.The
larger size of companyhas a tendency for more investors to pay attention to the
company. This is due to large companies tending to have more stable conditions. This
stability attracts investors to own shares of the company.
H3: Company Size effect on the value of the company
Agency problem is mitigated if managers have an ownership interest in the
company (Jensen & Meckling, 2009). The ownership of the shares by management will
align the interests of the management and owners of the company, thereby reducing
20
agency conflict. Managerial ownership is the ownership of shares of the management as
shareholders who actively participate in the decision making.
H4::Managerial Ownership effect on the Company Value Earning Response coefficient
as moderating
By applying CSR, it is expected that the company will be getting social
legitimacy and maximize its financial strength in the long term. Corporate social
responsibility is expressed, among other things in the report that called
the Sustainability Reporting. CSR can be sustained if a program created by a company
is really a joint commitment of all the elements that exist in the company.
H5: Earning Response Coefficient moderates the effect of Corporate Social
Responsibility effect on Firm Value
Firm Size in the issue of the ERC is used as a proxy on price informationon stock
price. More information on the large company, will increase the ERC in the long
term. The information available throughout the year at large companies allows market
participants to interpret the information contained in the financial statements more
perfectly, so as to predict cash flows more accurately and reduce uncertainty.
H6: Earning Response Coefficient moderates the effect of Size Companies on firm value
3. METHODS
3.1. Data Collection
The research object was the Go Public mining industries appearing on the
Indonesian Stock Exchange, which published the financial report data in 2010 – 2014.
The research population was mining industries listedon the Indonesian Stock Exchange.
There were 23 miningcompanies selected as the sample. Moderated Regression
Analysis (MRA) was employed to analyze the data. The following is the regression
equation made in this research:
Y = α + β1 X1 + β2 X2 + β3 X3 + β4 X4 + β5 X1.X4 + β6 X2.X4+ β7 X3.X4+ ε (1)
where:
Y : Corporate values
A : Constant
1 – 7 : Regression Coefficient
X1 : Managerial ownership
X2 : Corporate Social Responsibility
X3 : Corporate size
X4 : Earning Response Coefficient
X 1 X 4: Interaction between managerial ownership and Earning Response Coefficient
X 2 X 4: Interaction between Corporate Social Responsibility and Earning Response
Coefficient
X 3 X 4:Interaction between Corporate size and Earning Response Coefficient
ε : Error
4. FINDINGS AND DISCUSSION

4.1 Result
There were 5 variables examined in this research, namely Managerial Ownership
(X1), Corporate Social Responsibility (X2), Corporate Size (X3) and Earning Response
Coefficient (X4) as well as Corporate values (Y). The explanation of the development of
research variables during research period of 2010 to 2014 is presented in the Table 1
below.
21
Table 1. Descriptive Statistical Analysis of Research Variables
N Minimum Maximum Mean Std. Deviation
Managerial Ownership 115 0.00 57.55 4.13 13.15
Corporate Social 115 3.57 100.00 48.61 28.92
Responsibility
Corporate Size 115 21.84 32.09 28.83 2.01
Earning Response Coefficient 115 -1.61 10.22 .4384 2.41
Corporate values 115 0.04 213.01 3.43 19.99
Valid N (list wise) 115
Subsequent to the accomplishment of the descriptive statistical test, classical

assumption test is then conducted. The test includes a normality test, auto-correlation,
and heteroscedasticity (Table 2).
Table 2. Classical Assumption Test Result

Test Result Result Description
Normality Test Result Asymp. Sig. = 0,059 > 0,05 The data are normally distributed
Auto-correlation Test The value of dw = 1.353 The value ranges between -2 and +2,
Result indicating that there is no positive and
negative auto-correlation in this research
model.
Heteroscedasticity Managerial Ownership (Sig. 0,364); The regression model within this
Test Result Corporate Social Responsibility research designates no
(Sig. 0,532); Corporate Size (Sig. heteroscedasticity.
0,403); Earning Response
Coefficient (Sig. 0,749); X1X4
(Sig. 0,549); X2X4 (Sig. 0,148);
X3X4 (Sig. 0,057);
Further, the hypothesis testing was conducted using Moderated Regression

Analysis (MRA). The result of the test is shown in the following table:
Table 3. Moderated Regression Analysis Test Result

Model Coefficient t Sig. Description
(Constant) 30.271 5.709 0.000 -
Managerial Ownership 0.453 2.313 0.023 significant effect
Corporate Social Responsibility -0.011 -1.428 0.157 no significant effect
Corporate Size -0.981 -5.359 0.00 significant effect
Earning Response Coefficient 40.721 5.092 0.00 significant effect
X1X4 0.472 2.161 0.034 significant effect
X2X4 -0.013 -1.457 0.149 no significant effect
X3X4 -1.350 -5.029 0.000 significant effect
22
4.2 Discussion
1. The Influence of Managerial Ownership on Corporate Values
The data show that the managerial ownership has a positive correlation. This
indicates that the lower the managerial ownership, the smaller is the corporate values.
On the contrary, the greater the managerial ownership, the higher the corporate values
will be. Jensen and Meckling (1979) posited that one of the effective ways in reducing
agency cost is by increasing the share ownership done by the management. The
proportion of share ownership controlled by the manager can actually affect the
corporation's policy. The managerial ownership will thus affiliate management
importance and shareholders’ status so that resulting in direct profits even gained from
an incorrect decision.
2. The Influence of Corporate Social Responsibility on Corporate values
Due to negative correlation indicated by the Corporate Social
Responsibility(CSR), thus the smaller the CSR, the higher the corporate values will be,
and vice versa. The corporate values will be continuously sustained if the company
keeps taking into account on the economic, social, and environmental issues. This is
because sustainability is obtained from the balance among such matters. Those
dimensions can be encountered in the implementation of Corporate Social
Responsibility done by a company as a mode of its responsibility and concern towards
environment surrounded the firm. A survey carried out by Booth-Harris Trust Monitor
in 2001,in Sutopoyudo (2015),demonstrated that majority of consumers will leave a
product that has an unpleasant image, or negatively reported. Briefly, various
advantages can be obtained by applying corporate social responsibility, such as the
customers’ and investors’ enjoyment to the products.
3. The Influence of Corporate Size towards its Value
Similar to CSR, the size of a company in this research indicates a negative
correlation. It implies that the smaller the size of the company, the higher the value will
be. Conversely, if the corporate size is big, then its value is going down. The corporate
size, in particular, gives a significant influence on the corporate values. The corporate
size within this research reflects its magnitude, which can be observed through its total
assets. The bigger the corporation size, the greater the tendency of investors to provide
investment. A large company or corporation is believed to have a more stable condition,
which therefore attracts investors to procure its share. This condition is also assumed to
be the precursor of share price increase in the capital market. Moreover, investors have
a considerable expectation to a large corporation, like the dividend acquisition. A
corporate share request rise may elicit an increase in the share price in the capital
market, indicating that the firm indeed has enormous and huge worth.
4. The Influence of Managerial Ownershipon Corporate values with Earning
Response Coefficient as the Moderating Variable.
The interaction of managerial ownership with the Earning Response Coefficient
depicts a positive correlation. Earning Response Coefficientis capable of fortifying the
effect of managerial ownership to the corporate values. Hence, it can be deduced that
Earning Response Coefficientcan straightforwardly bridge the influence of managerial
ownership (X1) to the corporate values. Furthermore, the proportion of stakeholder
controlled by the manager can catalyze the company’s policy. Managerial ownership
will aligns management interests and shareholders (outsider ownership). With this
structure, it can hopefully provide direct profits of the determined decision and that ease
the company in bearing the consequences of the wrong verdict. A research project done
23
by Midiastuty and Machfoedzs (2003) discovered a positive and significant correlation
between managerial ownership and ERC as the proxy of profit quality.
5. The Influence ofCorporate Social Responsibility on Corporate values with Earning
Response Coefficient as the Moderating Variable.
From the research result, it was found that the Corporate Social Responsibility's
interaction with the Earning Response Coefficientreveals a negative correlation. Thus,
Earning Response Coefficient unable to strengthen the effect of Corporate Social
Responsibilityto the corporate values. Therefore, it can be directly concluded that the
Earning Response Coefficient has no potential in moderating the force of Corporate
Social Responsibility towards the corporate values. The negative influence of CSR to
ERC signifies the investors’ appreciation of CSR information written in the annual
corporate report. This outcome is implicitly supported by a study conducted by
Kartadjumena (2010), saying that CSR has an extensively negative influence to ERC.
The CRS accomplishment is going to develop corporate values-seen from share price
and earning, as a result of investors’ investment.
6. The Corporate’s Size Effect towards its Value with Earning Response Coefficient
as the moderating.
The interaction between corporate size with Earning Response
Coefficientdenotes a negative correlation. Earning Response Coefficient could intensify
the influence of corporate size to the corporate values. Therefore, Earning Response
Coefficient is apparently capable of facilitating the influence of corporate size
(X3)towardscorporate values.
Additionally, the corporate size in ERC issue is used as a proxy of share price
information. The more information available at large corporates, the better the long-
term improvement of ERC. The accessible information in the entire year at the big
corporations allow the market to accurately interpret data on the financial report, this
allowsthem to predict the cash flow precisely and also decrease uncertainty. Thus, the
corporate size in this research mirrors the extent or scale of the corporation itself, which
can be noticed from the total of assets.Hence, the bigger the corporate size, the greater
the tendency of investors in giving investment. A large company or corporation is
believed to have a more stable condition, which therefore attracts investors to procure
its share.
5. CONCLUSIONS
Based on the research outcomes, several conclusions can be made as follows:
a. The managerial ownership has a significant influence towards the corporate values.
The rise and fall of managerial ownership afford meaningful impacts to the increase
or decrease of corporate values.
b. Corporate Social Responsibilityhas no noteworthy impact to the value of a
company. The ups and downs of Corporate Social Responsibilitygive no substantial
effect on the degree of a corporate values.
c. The size of a company/corporate indeed has a significant influence on the corporate
values.
d. Earning Response Coefficient can facilitate the effect of managerial ownership
towards the corporate values. This signposts that Earning Response Coefficient is
able to reinforce the relationship between managerial ownership and the value of the
company.
24
e. Earning Response Coefficientcannot moderate the power of Corporate Social
Responsibility towards the corporate values. In other words, Earning Response
Coefficient deteriorates the correlation between Corporate Social Responsibility and
the corporate values.
f. Earning Response Coefficientcould bridge the force of a corporate size to its value.
Having said that, Earning Response Coefficient intensifies the relation between
corporate size and its value.
Suggestions
a. Further, researchers are expected to enlarge the size of the sample thus allowing the
results to have stronger and broader generalization.
b. The object of the research is also important to be extended. The research may be
conducted for the whole go-public corporations so that the generating a more
various sample.
c. The variable of the research is also subject to be intensified for it has a major
influence on the values of a company.
REFERENCES
Brigham, Eugene F and Joel F. Houston. (2011).Financial Management, Eleventh
Edition.Erlangga: Jakarta
Ghozali, Imam. (2015).Multivariate Analysis Application With IBM SPSS Programme
23, Eighth Edition.Diponegoro University: Semarang
Jogiyanto, Hartono. (2015). Portofolio Theory and Investment Analysis, Tenth Edition.
BPFE: Yogyakarta
Jensen & Meckling. (1976).The Theory of The Firm: Managerial Behaviour, Agency
Cost, and Ownership Structure. Journal of Financial and Economics 3 (4), 305-360
Kartadjumena, Eriana. 2010. The Influence Voluntary Disclosure Of Financial
Information and CSR Disclosure Toward Earning Response Coefficient (Survey
onManufacturing Companies in BEI 2008-2009). The 4thPPM National Conference
on Management Research, ISSN: 2086-0390, Jakarta, On November, 25th 2010.
Kotler, Philip and Nancy Lee, 2005. Corporate Social responsibility : Doing the Most
Good for your Company and Your Cause, New Jersey : john Wiley and Sons. Inc.
Midiastuty, Pranata Puspa, and Mas’ud Machfoedz. 2003.Analysis Of Relation
Corporate Governance Mechanism andEarnigs Management Indication.
Symposium National Of Accountancy Sixth Journal.
Sutopoyudo. 2015. Influence Applied Corporate Social Responsibility Toward
Profitability . Retrieved from: sutopoyudo.wordpress.com.
25
Investment Awareness among Young Generation
Azlan Alia*, Zainal Azhar b Zainal Azimb, Juliza bt Mohamedb, Amirul Syafiq bin
Ghazalib and Hafezali Iqbal Hussainc
a
UniversityColleage of Technology Sarawak, Malaysia
b
Faculty of Business, Universiti Selangor, Malaysia
c
Universiti Kuala Lumpur Business School, Malaysia
ABSTRACT
Young generation these days are more creative and technology savvy than the older
generation socially and financially. One particular question may arise on whether this
generation is concerned and aware about their financial status in future and investment.
This research seeks to examine the awareness towards investment among young
generation. This study used primary data by questionnaire and the sample chosen are the
young generation aged from 18 to 28 years old. Based on our reading in the literature of
awareness, there are three independent variables identified; financial literacy, personal
interest, and environment that relate to the dependent variable, the awareness on
investment. The objective of this is to examine the relationship awareness and the fore-
mentioned independent variables. The result revealed that the key driven on investment
among young generation significantly based on independent variable selected. Finally,
the limitations and recommendations are included to help further researchers to have a
better finding of the result.
Keywords: Awareness, Environment, Financial Literacy, Investment, Personal

Interest, Young Generation
26
Implementation of Corporate Social Responsibility and Sustainability in the Small
and Medium Enterprise Sector
R .K. Mishra, and Deepti Chandra

Institute of Public Enterprise, Hyderabad
ABSTRACT
The practice of CSR in India still remains within the philanthropic space. It has moved
from institutional building (educational, research and cultural) to community
development through various projects. India has a very young population of youth with
about 65% of the population below the age of 35. With youth comes more openings and
India need to focus on sustainable opportunities for them and the future generations.
Social Responsibility for the corporation must not start and finish with allocation of
percentage of profit and to invest in a few projects. It needs to extend into the overall
functionality of the organization. Micro, Small and Medium Enterprises (MSME) sector
has surface as an extremely vibrant and dynamic sector of the Indian economy over the
last five decades. MSMEs not only play vital role in providing large employment
opportunities at reasonably low capital cost than large industries but also assist in
industrialization of rural & backward areas, thereby, reducing regional imbalances,
assuring more equitable distribution of national income and wealth. MSMEs are
harmonizing to large industries as ancillary units and this sector contributes to a great
deal to the socio-economic development of the country. CSR clause in the Companies
Act, 2013 covers companies that have a net profit of five cores INR and above, it is
expected that while micro-enterprises will not qualify, many small and medium
enterprises (SMEs) will. The CSR activities of these enterprises are determined by the
individual interests of promoters who hold a majority of financial stake in the business.
They tend to be in group and engaged in similar business activities. While the quantum
of revenue accessible for CSR with individual SMEs is expected to be small, all eligible
companies in a specific geographical cluster, who single handed as well as jointly
impact the same community, can team their resources to generate a generous CSR fund.
This area gives the opportunity to analyses the alternative of undertaking joint CSR
activities by SMEs. This collaboration can also be utilized by other companies to take
full advantage of the impact of their CSR initiatives while reducing the operational costs
for fund management. Research has restated the significance of collaboration and the
role of SMEs in making easy the CSR domain in the country. It is believed that CSR
shall be useful for the SMEs, which will not be a shortcut to business accomplishment,
but an investment that would pay off in the long run.
Keywords: Corporate Social Responsibility, Sustainability, Small and Medium

Enterprise
27
The Antecedent Satisfaction with Price as a Moderating Variable in Consumer of
Omah Wedangan Solo
MD Rahadhini, and Diana Hendrawati

Faculty of Economics, Slamet Riyadi University Surakarta
ABSTRACT
Solo is known as a city which offer varies of culinary that’s emerged from the fusion of
heritage culinary with the Javanese culture. One of the most interesting culinary in Solo
is wedangan. The consumers who visit the wedangan, enjoy drinks and typical foods
offered with the thought of gathering up with their family/friends/colleagues. This study
aims to analyze: 1) the effect of product quality, service quality, and price on customer
satisfaction; 2) the effect of product quality, service quality on customer satisfaction
with price as moderating variable. This research is performed through a survey, using
qualitative and quantitative data. The data source used primary and secondary data. The
population in this study is the consumer of Omah Wedangan Solo. The sample method
is accidental sampling with 100 respondents. Questionnaires are used in data collection.
Methods of data analysis are using multiple linear regressions, and the test of absolute
difference. The results showed that product quality, service quality, and price have an
influence on customer satisfaction; while the price does not moderate the effect of
product quality and service quality to customer satisfaction. Suggestions for Omah
Wedangan Solo is to add new variety in their menu, maintain the taste of the product,
increase the number of waiters, and maintain a competitive price to attract consumer
visits and increase customer satisfaction.
Keywords: Product Quality, Service Quality, Price and Satisfaction
INTRODUCTION
Omah Wedangan Solo realize the opportunity regarding the need in consumers
where they are not only looking for the enjoyment of eating the dishes but also want the
right place to spend time with family or friends, combined with enjoying drinks and
foods that are not too heavy especially in the evening until midnight. Customer
satisfaction is one of the important things in marketing, because a consumer, who
satisfied with the product, will continue to buy and use the product. Consumers will also
notify the others - their friends or relatives, regarding their experience in consuming the
products that have been consumed. Conversely, if customers are not satisfied with the
product they tend to switch to other products. Factors such as product quality, service
and price are the main factors in measuring the consumer satisfaction.
Product quality is the company's efforts to meet the customer expectations
through the products that they offer (Kotler, 2012). Product quality is associated with
Omah Wedangan's ability to maintain the quality of its products. Every wedangan
business offers different product and characteristic that able to distinguish their product
with the competitor similar products so that the product has its own uniqueness,
distinction, and competitiveness to reach the targetted market.
Service is considered as actions or activity which offered by a party to another
party that's essentially intangible and does not result in any ownership (Kotler, 2012).
28
The implementation of services in wedangan business - Omah Wedangan, meaning they
will provide qualified services that in accordance with the needs and desires of their
consumers. A service quality that's in accordance with the needs and desires of
consumers will make the consumer satisfied and tend to not switch to other places.
Price is the amount of money that needs to be paid to receive some combination
of products and services "(Swastha and Irawan, 2007). Price is a factor to consider
before making a product purchase. Product factors must also be considered because
everything that's offered to the market is generally to meet the needs and desires and
also to obtain the consumer satisfaction.
The findings of research conducted by Jayanti, Utomo, and Murwani (2013)
stated that there is an influence of service quality on the customer satisfaction.
Sembiring, Suharyono and Kusumawati (2014) revealed that product quality and service
quality have an influence on the customer satisfaction. Basith, Kumadji, and Hidayat
(2014) research show that the influence of product quality and service quality influences
consumer satisfaction. While research of Shartykarini, Firdaus, and Rusniati (2016)
present that the variable of price, product quality, and service quality affecting the
satisfaction of cafe visitors. This study use price as a moderating variable, which still
hasn't yet been used by the previous researcher especially in the culinary related topic.
The background in selecting Omah Wedangan Solo as the object of this study is the
consideration that the business reflect a modern wedangan which provides a
comfortable atmosphere, clean and lower price of food and drink compared to other
wedangan places.
LITERATURE REVIEW
1. Product Quality
Product quality is the ability of an item to deliver results/performance that
matches or exceed customer expectations (Kotler, 2012). Product quality is the ability of
a product to meet and satisfy the needs of a customer who buys or uses the goods or
services. The quality of this product is also an assessment of a product, the quality of the
product relates to the sacrifice made by the customers relatively to what they receive.
There are eight dimensions of product quality, namely:
a. Performance: the basic characteristics of a product.
b. Features: special complementary characteristics that can give additional experience
on product usage.
c. Reliability: probability of failure or damage to the product within a certain period
of time.
d. Conformance: level of conformity of products with predefined standards.
e. Durability: the amount of product usage before the product must be replaced.
f. Service Ability: speed and ease of repair, as well as the competence and
friendliness of service staff.
g. Ecstatic: concerning the appearance of products that can be assessed with the five
senses (taste, smell, sound, and so on)
h. Perceived Quality: perceived quality judged by the seller's reputation (Tjiptono,
2008).
2. Service Quality
Quality of service is how far the difference between reality and customer
expectations of the services they received (Lupiyoadi, 2013). Service quality is a special
29
standard where its availability, performance, reliability, maintainability, and
characteristics can be measured (Yamit, 2015). Service quality can be known by
comparing the perceptions of consumers on services received with the expected actual
service on the attributes of a company's services. There are five service quality
dimensions: reliability, responsiveness, assurance (belief or ability to provide service
guarantee), empathy (understanding of consumer desires), and tangibles (physical
appearance of service) (Kotler, 2012). Good service quality is often said to be one very
important factor in the success of a business. Hence, the quality of service can provide
some benefits both for the consumers and for the business itself in the long run.
3. Price
Price is a statement over a product value. Value is the ratio or ratio between the
perceived benefits and the cost associated with obtaining a product (Tjiptono, 2006).
The price of a product measures the size of one's satisfaction with the product
(Gitosudarmo, 2010). The price is actually a value expressed in units of currency over a
particular good. Price is a way for a seller to differentiate its offer from competitors, so
that pricing can be considered as part of the differentiation function of goods in
marketing. The price works in helping buyers to get the highest expected benefits or
utilities based on their purchasing power.
The price of an item may also affect the company's marketing program. The
principles of pricing are as follows:
a. Companies should consider a number of factors in setting the product price. This
consideration includes the selection of pricing objectives, determining demand
levels, cost estimation, analyzing the established prices and products offered by
competitors, selecting pricing methods, and determining the final prices.
b. Companies should not always seek maximum profit through maximum pricing but
can be achieved by maximizing current income, maximizing the market control or
other possibilities.
c. Marketers should understand on how is the demand response in the price changes.
d. Different types of costs should be considered in setting prices, including direct and
indirect costs, fixed and variable costs, and other costs.
e. Competitor prices will affect the level of demand for services offered, thus, the
price of competitors should also be considered in the pricing process.
f. Various ways or variation of existing pricing includes market, acquisition goals,
acceptable value, psychological factors and other prices.
g. After establishing the pricing structure, the company adjusts the price using
psychological prices, promotional discounts price, and product prices mix
(Hurriyati, 2010).
Companies must set their product prices appropriately in order to succeed to sell
their product. Price is the only element of the marketing mix that provides income for
the company, while the other three elements (product, distribution, and promotion) lead
to cost. In addition, pricing is a flexible marketing mix, meaning it can be changed. The
purpose of pricing is to achieve the target return on investment or the level of net sales
of a company, maximize the profit, competition tools, especially for similar companies,
30
balancing the price itself, as a determinant of market share, because with a certain price
the increase or decrease in sales can be estimated (Gitosudarmo, 2010)
4. Customer Satisfaction
Satisfaction is the consumer's judgment of a product features that fulfill a
satisfying needs at a pleasant level, either below or above expectation (Lupiyoadi,
2013). Satisfaction is the feeling of pleasure or disappointment of a person arising from
comparing the perceived performance of a product (or outcome) to their expectations
(Keller and Kotler, 2009). Consumer satisfaction is a post-purchase evaluation where
the selected alternatives provide outcomes equal or more than the customer
expectations, whereas dissatisfaction arises when the results obtained do not meet
customer expectations (Tjiptono, 2006).
Customer satisfaction is a behavioral response, in the form of evaluation or
customer post-purchase assessment on appearance and the performance of a product
compared with the needs and expectations of the product. This can lead to consumer
satisfaction, repurchase, and loyalty, further, the customer satisfaction is strongly
influenced by the perception and expectations of consumers of a product. The factors
that affect customer satisfaction are services, equipment or facilities, employee
education, and effective handling of consumer complaints (Tjiptono, 2006). Some
methods that can be performed to measure and monitor customer satisfaction are
complaints and suggestions system, customer satisfaction survey, ghost shopping and
customer cost analysis (Tjiptono, 2006). In this study the hypotheses are developed as
follows:
H1: Product quality has an influence on consumer satisfaction
H2: Service quality has an influence on consumer satisfaction
H3: Price has an influence on consumer satisfaction
H4: Price moderate the influence of product quality on consumer satisfaction
H5: Price moderate the influence of service quality on consumer satisfaction
RESEARCH METHOD
This research is performed through a survey in Omah Wedangan Solo. In this
study, the data use qualitative data and quantitative data. Data sources used primary data
and secondary data source. The research population is the consumer of Omah
Wedangan Solo, while the research sample consists of 100 respondents with accidental
sampling technique. Data collection techniques are using questionnaires and literature
study. The data analysis is performed using multiple linear regression tests, t-test, F-test,
the coefficient of determination.
FINDING AND ARGUMENTATIONS

Research Instrument Test and Classic Assumption Test
The test result of research instrument using product moment Pearson correlation
for variables that consist of product quality (X1), service (X2), price (X3) and consumer
satisfaction (Y) are given 5 questions each, it's indicated that all question items of
product quality, service, price and customer satisfaction are declared valid because the
p-value is <0,05. While the reliability test result indicated that product quality variable
(0,852), service (0,751), price (0,744) and consumer satisfaction (0,829) are found to be
reliable because the Cronbach alpha is >0,60.
The result of the classic assumption test is proven to pass the multicolinearity test,
autocorrelation test, heteroscedasticity test, and normality test.
31
Table 1. Result of Classic Assumption Test
Classic Assumption
Test Result Conclusion
Tolerance (0.781; 0.846;0.896) > 0.10; VIF
Multicolinearity test Free of multicolinearity
(1.280; 1.181; 1.117) < 10
Autocorrelation test p (0.159) > 0.05 Free of autocorrelation
Heteroscedasticity test p (0.059; 0.480; 0.599) > 0.05 Free of heteroscedasticity
Normality test p (0.818) > 0.05 Normally distributed
Source: Primary data processed, 2017
Result of Multiple Regression Test
Multiple linear regression tests are used to know the effect of independent
variables (product quality, service quality, and price) on the dependent variable
(consumer satisfaction).
Table 2. Result of Multiple Linear Regression Test
Variable Coefficient T value Significance
(Constant) 1.551 0.711 0.479
Product Quality 0.364 4.385 0.000
Service 0.346 4.017 0.000
Price 0.271 2.896 0.005
F = 28.025 0.000
2
Adjusted R = 0.450
1. Multiple Linear Regression Test

The test result is formulated as:
Y = 1,551 + 0,364X1 + 0,346X2 + 0,271X3
The regression formulation is interpreted as follows:
a. Constanta (a) = 1.551 marked positive, means product quality, service quality
and price equal to zero (0) thus the consumer satisfaction is positive.
b. b1 = 0.364 marked positive, meaning that if product quality variable is improved
then consumer satisfaction also increase.
c. b2 = 0.346 marked positive, means if the variable service quality is improved
then customer satisfaction also increased.
d. b3 = 0.271 marked positive, meaning that when the variable price more in
accordance with the wishes of consumers then the consumer satisfaction will
increase.
2. Result of T-Test
a. Test results of product quality obtained t value as 4.385 and p value of (0.000) <
0.05 meaning that product quality have significant influence on customer
satisfaction.
b. Test results of service quality obtained t value as 4.017 and p value of (0.000) <
0.05 meaning that service quality have significant influence on customer
satisfaction.
c. Test results of price obtained t value as 2.896 and p value of (0.005) < 0.05
meaning that price have significant influence on customer satisfaction.
32
3. Model Validity Test
The test results obtained F value of 28.025 and p value as (0.000) < 0.05 thus the
model is valid to be used in predicting the influence of product quality, service
quality and price on customer satisfaction.
4. Coefficient Determinant
The test result obtained adjusted R2 = 0.450 meaning that the contribution of
product quality, service quality and price variable influence on the customer
satisfaction is 45.0%; while 55.0% is influenced by other variables that’s not
included in this study.
5. Regression Test with Moderation Variable
Regression testing with moderatiing variable is used to know the moderation
influence of price variable in affecting product quality and service quality to the
customer satisfaction. The results of the absolute difference test 1 can be seen in
table 3.
Table 3. Absolute Difference Test 1

Zscore: Product Quality 1.538 5.826 0.000
Zscore: Price 0.750 2.841 0.005
absX1_X3 -0.239 -0.756 0.452
Based on the result, the equation of absolute difference test 1 is written as follows:
Y = 1.538ZX1 + 0.750ZX3 – 0.239[absX1_X3]
The result is obtained absX1_X3 with p value as 0.452 > 0.05; thus, price does not
moderate the influence of product quality on the consumer satisfaction.
The result of the absolute difference test 2 can be seen in the table 4.
Table 4. Absolute Difference Test 2

Zscore: Service Quality 1.407 5.419 0.000
Zscore: Price 1.011 3.921 0.000
absX2_X3 -0.044 -0.120 0.905
Based on the result, the equation of absolute difference test 2 is written as follows:
Y = 1.407ZX2 + 1.011ZX3 – 0.044[absX2_X3]
The result obtaining absX2_X3 with p value as 0.905 > 0.05; thus, price does not
moderate the influence of service quality on the consumer satisfaction.
The findings obtained from this study are as follow:
1. Product Quality Influence on Consumer Satisfaction
The results showed that product quality influence on customer satisfaction
has a t-value of 4.385 and p-value as 0.000 <0.05, thus H1 is supported. This means
that product quality can improve consumer satisfaction, this might due to several
factors among others: it has a good taste, enough portions for consumers and
various menu variations. These findings support the research of Sembiring,
33
Suharyono, and Kusumawati (2014); Montung, Sepang, and Adare (2015);
Shartykarini, Firdaus, and Rusniati (2016) which states that product quality has an
influence consumer satisfaction. The implication of the research is Omah
Wedangan Solo should maintain their product taste so that it'll attract the
consumers to revisit their business.
2. Service Quality Influence on Consumer Satisfaction
The result of this research shows that the service influence on consumer
satisfaction has a t-value equal to 4.017 with p-value 0.000 <0.05 thus H2 is
supported. This means that the service is able to increase consumer satisfaction, this
might be due to the fast service that's performed by the employees. These findings
support the research of Jayanti, Utomo, and Murwani (2013); Sembiring,
Suharyono, and Kusumawati (2014); Montung, Sepang and Adare (2015);
Shartykarini, Firdaus and Rusniati (2016) which states that service quality
influences consumer satisfaction. The implication of the research is Omah
Wedangan Solo should improve their service by adding cashier because at a
crowding-time the customer still faces a long queue to pay.
3. Price Influence on Consumer Satisfaction
The results showed that the price influence on customer satisfaction has a t-
value of 2.896 and p-value as 0.005 <0.05 thus H3 is supported. This means that the
price is able to increase consumer satisfaction because the setting of price was in
accordance with consumer purchasing power. These findings support the study of
Montung, Sepang, and Adare (2015) which states that prices do influence consumer
satisfaction. The implication of the finding is Omah Wedangan Solo should
maintain their price so they can reach various layers of society.
4. Influence of Product Quality on Consumer Satisfaction with Price as moderating
variable
The results showed that the price does not moderate the influence of product
quality on customer satisfaction with a p-value of 0.452> 0.05 so H4 is not
supported. Price does not reinforce the effect of product quality on customer
satisfaction because consumers feel with the existing product quality and price that
has been provided was able to attract the consumer interest and have been able to
make the consumers feel satisfied with the existence of Omah Wedangan Solo, and
if consumers are satisfied then consumers are expected to come back in the future.
The implication of this finding is Omah Wedangan Solo should add a new variety
of food with an affordable price so that people can be more attracted to come.
5. Influence of Service Quality on Consumer Satisfaction with Price as moderating
variable
The results showed that the price does not moderate the influence of service
quality on the customer satisfaction with p-value as 0.905> 0.05, so H5 is not
supported. Price does not reinforce the influence of service quality on customer
satisfaction because consumers felt the service and price that has been provided was
able to attract the consumer interest and have been able to make the consumers
satisfied with the existence of Omah Wedangan Solo Surakarta. Where consumers
sometimes have a desire to have dinner with a relaxed atmosphere, thus prices aren't
considered as a matter as long as the services provided are good. The implications of
the research suggest Omah Wedangan Solo is to improve their service quality
through performing a faster delivery of food that's ordered by the consumer because
34
the faster the consumer get the order while also offered a competitive price will
increase their satisfaction and making them be interested to revisit the business.
CONCLUSION
This research concluded that product quality, service quality, and price have an
influence on the customer satisfaction in Omah Wedangan Solo. This means that the
quality of the product that's able to increase the consumer satisfaction includes good
taste, adequate portion, and various menu variations. Similarly, good service and quick
response from the employees; and price that's in accordance with the buying power of
the consumers are also able to increase the customer satisfaction.
Price does not moderate the influence of product quality and service quality on the
customer satisfaction, thus, price does not strengthen the influence of product quality
and service quality on the customer satisfaction. It's because consumers feel that the
quality of products and prices that exist today was able to attract the consumer interest
and have been able to make the consumers satisfied with the existence of Omah
Wedangan Solo Surakarta. In accordance with the service, the services and prices that
exist today already able to attract consumer interest and have been able to make the
consumers feel satisfied. Hence, Price is not considered as a constraint for consumers in
consuming a product, because the service they received is good.
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(Hidangan Istimewa Kampung) di Kota Surakarta)) Sebagai Usaha Kecil
Menengah Berbasis Kerakyatan”.Jurnal Sainstech Politeknik Indonusa Surakarta.
Vol. 1 No 2, h. 1-12.
Swastha, Basu dan Irawan. 2007. Manajemen Pemasaran Modern. BPFE. Yogyakarta.
Wan I Lee, and Chi Lung Lee, 2011, “An Innovative Information and Relationship
Between Service Quality, Customer Value, Customer satisfaction, and Purchase
Intention”, International Journal of innovative Computing Information and
Control, Vol 7, No 7(a).
36
Information System and Service Quality: An Empirical Study of Their Impact on
End-Users Satisfaction ERP Systems
Andreas*, Riska Natariasari, and Enni Savitri

Department of Accounting, Faculty of Economics and Business Universitas Riau Indonesia
ABSTRACT
ERP systems are the integrated information system that can be applied in various
organizations both business and non business organizations. For business organization it
covers the entire functional enterprise that includes accounting and finance, production,
sales, purchasing, personnel and other functions. These functions are separated by
software modules and interconnected with the integrated data center. Implementation of
ERP systems does not always provide satisfaction for end-users. This paper examine the
quality information systems and service that impact on ends users satisfaction
specifically banking companies located in Pekanbaru-Indonesia. Data analysis results
reveal that the information systems and service quality partially affect end-users
satisfaction ERP systems and thus this finding, remind the designers of ERP systems to
improve the quality of information systems and service users friendly.
Keywords: ERP system, service quality, ends users, satisfaction
*)
Corresponding author: tanandreas61@gmail.com
37
Public Service Delivery on Basic Education in Banjarmasin
Maulana Rizky, Dwi Atmono, and Muhammad Rahmatullah

Economic Education Department Faculty of Teacher Training and
EducationLambungMangkuratUniversity
ABSTRACT
The purpose of this paper is to describe and analyze public service delivery on basic
education held by State Elementary School in Banjarmasin. Focus of this paper is the
availability of the teacher (government employees) who served to provide teaching in
State Elementary School in Banjarmasin. The method of this paper is qualitative
descriptive. The data of this paper is primary and secondary data. Primary data is survey
and interview with the headmaster of State Elementary School in Banjarmasin.
Secondary data is the public service delivery on education authorities of Banjarmasin.
The findings revealed that the description of public service delivery on basic education
held by state elementary school in Banjarmasin is not good enough because there is a
shortage of teacher (government employees) in Banjarmasin as many as 779 teachers
spread across 5 districts in Banjarmasin, to overcome this problem the school lifting
contract teachers. This solution is able to cover deficiencies in quantity, but the quality
is still in doubt. This happens because of the lack of educational background and the
low salary received by contract teachers between 300.000-500.000 rupiahs per month.
Keywords: Public Service Delivery, Basic Education, Teacher, Salary
38
Duties of Directors: International Comparison Vs India
Kiranmai J, R K. Mishra
ABSTRACT
Corporate Governance (CG) is the system by which companies are directed and
controlled. These governance structures identify the distribution of rights and
responsibilities among different participants in the corporation. CG includes the
processes through which corporations' objectives are set and pursued in the context of
the social, regulatory and market environment. CG practices are affected by attempts to
align the interests of stakeholders. To achieve better CG practices, the boards need to
oversee the functions of the organization and ensure that they continue to operate in the
best interests of all stakeholders. The roles of Boards are broadly discussed in three fold
viz. to govern; to direct; to supervise and control. The present paper has been designed
to discuss the broad framework of CG practices and the duties enacted by the regulators
through Acts in selected countries. The paper makes a comparison of the best practices
with respect to the duties and responsibilities of boards and board committees. The
paper enables to find gaps and review the existing process by meeting the global
standards. The main objectives of the paper are to: understand corporate governance
practices and codes of countries under reference; list down the various provision that are
existing in the Companies Act with respect to the duties and responsibilities of boards
and board committees of countries under reference; compare the legal frameworks with
respect to the duties and responsibilities of boards and board committees; highlight the
case studies of the companies with respect to the duties and responsibilities of boards
and board committees.
Keywords: Corporate Governance, Duties of Directors, Board Committees.
39
Public Finance and Corporate Governance
Kiranmai J, R K. Mishra
ABSTRACT
As Corporate Governance (CG) refers to the system by which corporations are directed
and controlled, it could help achieve the PF objectives for a country. This paper makes
an attempt to discuss whether Corporate Governance contributes to the attainment of
Public Finance objectives. The present paper would discuss the past practices of public
finance in India, phases-wise improvement, evolution of budgetary system, working of
public financial management system and its impact on the exchequer.
Keywords: Public Finance, Corporate Governance.
40
Whistleblowers’ Role in Mitigating Fraud of Malaysian Higher Education Institutions
KristineBelaja1, IntanSalwaniMohamed2, NabilahRozzani2*

1
Faculty of Accountancy, Universiti Teknologi MARA, 42300 Bandar Puncak Alam, Malaysia
2
Accounting Research Institute, Universiti Teknologi MARA, 40450, Shah Alam, Malaysia
ABSTRACT
Fraud evokes a visceral response in us. It is an abuse of our belief towards fair treatment
among fellow human beings. Financial scandals in the years 2000 and 2001 involving
major organizations, also conflict of interest disputes in the financial services industry
had triggered investor’s confidence in the stock market to deteriorate melodramatically.
Similarly, budget cut experienced by these institutions might lead to financial scandals
and possibilities of fraud, as they need to survive within the means of these allocations
to ensure that they are operating smoothly, also to uphold their reputation. In order to
keep up with the latest advancements in education to facilitate with teaching and
learning environment, this budget cut might not be favorable to the financial stability of
the universities. With the rise of fraud cases in many sectors in Malaysia, whistle
blowing study is deemed significant to concurrently emphasizing on the important
function of whistle blowing action as internal control mechanism of an organization. In
reality however, individuals who are aware of unlawful activity of his or her peer group
members would face a challenging ethical dilemma. Therefore, the current study aims
to discuss possible fraud occurrences that might happen in the setting of Malaysia
higher education sector, as well as exploring the importance of whistleblowers as the
primary source of information to investigators while looking into fraud cases involving
universities.
Keywords: Integrity; Whistle blowing; Higher Education Institutions
*)
Corresponding author : nabilah.rozzani@gmail.com
41
Ethical Ideologies, Personality Traits and Whistle blowing Intention: Examining
the Mediating Role of Whistle blowing Judgment in Public Sector
Intan Salwani Mohamed1, Kristine Belaja2, Nabilah Rozzani2, and Noor Hidayah Ab
Aziz3*
1
Accounting Research Institute, Universiti Teknologi MARA, 40450, Shah Alam, Malaysia
2
Faculty of Accountancy, Universiti Teknologi MARA, 42300, Puncak Alam, Malaysia
3
Faculty of Accountancy, Universiti Teknologi MARA, 85000, Segamat, Malaysia
ABSTRACT
In making decisions on whether to whistle blow or not, the issue of whether the
individual factors influence the intention to whistle blow is always asked. Profit and
non-profit organizations which are victimized by fraudulent activities and the fact that
whistle blowing is a widely held device in identifying fraud; motivates a person to
decide whether to whistle blow or not. In reality however, individuals who are aware of
unlawful activity of his or her peer group members would face a challenging ethical
dilemma. They can simply ignore these wrongdoings and do nothing at all, or otherwise
they could talk to other employees and make a report internally or outside of the
organization. Other than that, they could also confront the offender directly, and try to
encourage him or her to undo their inappropriate actions. Or, they may choose another
alternative of “peer reporting”, which encompasses the revelation of objectionable
actions to someone with a perceived authority to stop the activity. Knowing his or her
influence to whistle blow is crucial in creating a better workplace and builds robust
internal control in a firm, and thus ensuring business prosperity. The present study
attempts to discuss on factors which would influence whistle blowing intention on
account department staffs from selected public universities in Malaysia. These factors
include three individual level factors of ethical ideology (idealism and relativism),
personality traits (conscientiousness, openness to experience, extraversion,
agreeableness, neuroticism), and whistle blowing judgment, all with regards to peer
reporting. A conceptual framework is developed in accordance to the issues discussed
in this paper.
Keywords: Whistle blower, Personality, Public Sector
*
) Corresponding author: noorh469@johor.uitm.edu.my
42
Effect of Audit Technology on Fraud-Risk Task Performance of Government Auditors
Mohd-Daniel Mohd-Nassir1, Zuraidah Mohd-Sanusi2, Erlane K. Ghani3 and

Professor Rob McCusker4
1,3
Faculty of Accountancy, UniversitiTeknologi MARA (UiTM)
2
Accounting Research Institute, UniversitiTeknologi MARA (UiTM)
4
Division of Community and Criminal Justice, De Montfort University, UK
ABSTRACT
The main objective of the study is to examine the direct and interactional effects of
audit technology and task structure on the fraud risk task performance of public sector
procurement by government auditors. This paper adopts a 2 X 2 factorial research
experimental design engaging 151 government auditors. The government auditors were
assigned to assess fraud risk using either the full or emerging level of audit technology.
The results show that audit technology and task structure significantly influences the
fraud risk task performance. The results also show a significant interaction between
audit technology and task structure. However, this study only examines the important
types of tasks in performing fraud risk. Other factors such as individual characteristics
and competencies could be integrated for future studies. Implementation of audit
technology will increase the fraud risk task performance and the public's confidence
towards the auditor's competence. By using the task-technology fit (TTF) theory in the
fraud risk task of public sector procurement; this study provides an understanding of the
relationship between task characteristics, technology characteristics and performance.
Keywords: Fraud Risk Task Performance, Auditor Judgment, Audit Technology, Task
Structure
43
Evaluation on the Effectiveness of Whistle blowing System
Atika Zarefar, and Tobi Arfan

Politeknik Caltex Riau, Jl. Umban Sari No.1, 28265, Pekanbaru, Indonesia
ABSTRACT
The purpose of this study is to measure the effectiveness of an institution’s whistle

blowing system. In this research, the writer took the whistle blowing system users of
Financial and Development Supervisory Board (BPKP) as the samples, especially the
internal users. Internal users are reflected by 127 BPKP employees who work in that
office. The method used is quantitative descriptive. The results show that the
effectiveness of whistle blowing system at BPKP, especially internal whistle blowing, is
68%. This 68% of effectiveness level reflects that whistle blowing system at BPKP is
quite effective
Keywords: Whistle blowing System, Effectiveness, Quantitative Descriptive
44
Analysis of Factors That Have Effect on Intensity for Internal
Whistle Blowing (Empirical Study on Local Government
Organization Regency of Kepulauan Meranti, Riau, Indonesia)
Meilda Wiguna, and Eka Hariyani

Department of Accounting, Faculty of Economics, Universitas Riau, Indonesia
ABSTRACT
This research examines the effect of organizational commitment, professional

commitment, moral intensity, personal cost, ethics environment on intensity for internal
whistle blowing. This research uses primary data by the questioner. Data is analyzed by
using multiple regressions with 125 respondent samples of local government
organization office staff/employee in the regency of Kepulauan Meranti, Riau,
Indonesia. Results shows that organizational commitment have an effect on intensity
for internal whistle blowing, professional commitment have effect on intensity for
internal whistle blowing, moral intensity have effect on intensity for internal whistle
blowing, and personal cost have effect on intensity for internal whistle blowing as well
as ethics environment have effect on intensity for internal whistle blowing.
Keywords: Intensity for Internal Whistle blowing, Organizational Commitment,

Professional Commitment, Moral Intensity, Personal Cost, Ethics
Environment
1. INTRODUCTION
Fraudulent includes the action of breaking law, regulation, and constitution done
for fraud purposes. It is done intentionally for the advantages or disadvantages of an
organization by internal or external party (SPAI, 2004:63). There is a way to solve
fraudulent in institution/company or organization. It is whistle blowing
implementation. Whistle blowing is the appropriate way to prevent frauds in
accounting.
Based on KNKG (Komite Nasional Kebijakan Governance [National Committee
of Governance Policy] 2008) in Pedoman Sistem Pelaporan Pelanggaran [Guidance
of fraudulent reporting system]; whistle blowing is disclosure of breaking and against
the law, unethical/unmoral, and other actions that can be harmful to the organization or
stakeholders. Whistle blowing is done by employees or leader of the organization and
disclosed to organization leader or other institution that can take actions on those
frauds.
There are some factors that have an effect on someone to have intensity for
internal whistle blowing. The first factor is organizational commitment. High
commitment organization refers to high employee’s loyalty on his/her organization.
According to Robbins and Judge (2008:100), organizational commitment is the level of
how far staff/employee takes a side of an organization as well as its objectives, and on
the desire to maintain membership in the organization. Moorhead and Griffin (2013:73)
defines organizational commitment as an attitude that reflects on how far an individual
45
knows about and engages to his/her organization. An individual has high commitment
may see him/herself as a true organization member.
The second factor that has an effect on intensity for internal whistle blowing is
professional commitment. Professional commitment is individual loyalty level of
his/her profession as be perceived by the individual. Professionalism has some
meanings. First one, professionalism means expertise, have certain qualities,
experiences in a certain field, or received compensation for doing expertise. Someone
that can be called as a professional if has followed certain education that leads to certain
expertise or qualification. Second one, professionalism refers to working standard,
which is moral principles and the profession ethics. Moral principles, as society general
norms set, lead staff/employee to behave according to life structure as professional.
Third one, professional can be seen as moral. Moral level can differ between one to
another employee. Moral and attitude to honor the profession ethic is very individually
(Sagara, 2013).
The third factor that has an effect on intensity for internal whistle blowing is
moral intensity. Moral intensity related to concept of behavior control perception in the
theory of planned behavior. Behavior control perception is belief that perception had by
someone coming from self control of behavior perception (Hendriadi, 2012). It is not
easy to employee be a whistle blower. If an organization employee or a member reports
fraudulent based on point of view of revenge or sanctions risk by another organization
employee or member, then intention to do whistle blowing will be decreased. It is called
as personal cost, and personal cost will be the fourth factor in this research to explain
the intensity for internal whistle blowing. Magnus and Viswesvaran (2005) shows that
thread of revenge has negative correlation with intensity for internal whistle blowing.
Fifth factor that have an effect on intensity for internal whistle blowing is ethic
environment. It consists of behavior standard, of professional for practice and idealistic
purposes (Putri dan Laksito, 2013: 3). Ethic environment can also be defined as the
organization ethic commitment that related to institution perception on moral values.
Organizational commitment and Intensity for Whistle blowing
Robbins and Judge (2007) defines commitment as condition where someone takes
a side on organization as well as its objectives and on desire to maintain membership in
the organization. Based on Hatmoko (2006), organizational commitment is employee’s
loyalty on organization by maintaining goals, organization values, sadness, or desire to
be part of organization as well as to hold in organization.
Staff/employees that have been committed on organization will shows positive
attitude and behavior to the organization. Staff/employee will have fighting spirit for
organization, tries hard to increase performance, and have strong belief to fulfill
organization objective (Kuryanto, 2011). Staff/employee that have high organizational
commitment will have high sense of belonging to organization, so he/she will have no
doubt to do whistle blowing because he/she is sure that his/her action will protects
46
organization from destruction. Based on above explanation, research hypothesis is as
followed:
H1: Organizational commitment has effect on intensity for internal whistle blowing
Professional commitment and Intensity for Whistle blowing

Professional commitment is belief and acceptance of profession objective and
ready to gives high efforts on his/her name (Elias, 2008). Elias (2008) suggests the
importance of professional commitment study for carrier as main issue in profession life
and professional commitment have important implication in individual and
organizational level. The higher professional commitment and anticipative level, the
more likely staff/employee considers whistle blowing as important thing, and the higher
possibility of whistle blowing. Based on theory and previous research, research
hypothesis is as followed:
H2: Professional commitment has effect on intensity for internal whistle blowing.
Moral Intensity and Intensity for Whistle blowing

Moral intensity is a construct of characteristics that describe extension of issues
related to main moral issue in a situation that have effect on individual perception of
ethic problem and behavioral intention. Jones (1991), quoted by Novius and Arifin
(2008), identifies moral intensity that have effect on decision making process and level
of varied moral intensity. Someone that have high moral intensity is more likely to
reports fraudulent action because of responsibility feeling to do so, while low moral
intensity have no responsibility feeling to reports fraudulent action. Based on above
explanation, research hypothesis is as followed:
H3: Moral intensity has effect on intensity for internal whistle blowing.
Personal Cost and Intensity for Whistle Blowing

Personal cost is employee’s point of view on revenge and sanction risk by other
organization member that can reduce intention to report wrong doing (Schutlz et al.,
1993) quoted by Bagustianto and Nurkholis (2015). Employee’ intention is low because
high personal cost leads potential whistleblower to do silence because they consider
people responses that resist on wrongdoing reporting in the organization.
Employee feels internal whistle blowing is needed, but he/she cannot do it
because high revenge risk and difficulties to find the similar job in the future, moreover,
if law warranty is not clear yet. It can be raised as well because the employee is less
knows about wider social responsibility that related to whistle blowing. Based on above
explanation, research hypothesis is as followed:
H4 : Personal cost has effect on intensity for internal whistle blowing.
Ethic Environment and Intensity for Whistle Blowing

Ethic that used as a basic consideration for whistle blowing case is
utilitarianism ethic, includes consideration of how far and big disadvantages and
47
advantages for organization if there is employee reports or ignores fraudulent (Keraf,
1998:177). Research of Dalton and Radtke (2012) focuses on ethic environment. There
are six factors that have an effect on ethic environment, which are change mission
values, leadership and management value, similar groups, procedures or rules and code
of ethic, training ethic, reward and punishment. Good ethic environment indicates good
effect on intensity for whistle blowing. Based on theory review and previous research,
hypothesis is as follows:
H5: Ethic environment has an effect on intensity for internal whistle blowing.
Independent Variable (X)
Organizational Commitment (X1)
Professional Commitment (X2)

Dependent Variable
(Y) Moral Intensity (X3) Intensity for Internal
Whistle blowing
Personal Cost (X4)
Ethic Environment (X5)
Figure 1. Variables
3. METHODS
Data Collection
In order to examine effect of organizational commitment, professional
commitment, moral intensity, personal cost, ethic environment on intensity for internal
whistle blowing; this research performs survey by questioner. Questioners are given to
125 respondents of Local Government Organization Kepulaun Meranti Regency, Riau,
Indonesia. Consideration for choosing Kepulauan Meranti Regency is case of Tohor
River in Kepulauan Meranti Regency. Corruption of Tohor River street development in
PU office Kepulauan Meranti leads to country losses about IDR 3.4 billion. Based on
the report, inspection of High Attorney General Officer finds working package done by
PT DMF is not finished as is should be.
Sampling characteristics are as followed:
1. All staffs/employees work in OPD/Local Goverment Organizational Kepulauan
Meranti Regency.
2. Staffs/employees include in not more than class 3 type and below (have no certain
important position).
3. Years of service not less than 5 years in same OPD.
Variable Measurement
Measurement of whistle blowing uses likert scale of statement indicators for
staff/employee of OPD Kepulauan Meranti Regency, Riau, Indonesia (Ajzen, 1991).
48
Measurement model of variable follows questioner model of Ajzen (2002), Park and
Blenkinsopp (2009), Winardi (2013) that have been modified. There are 16 items of
questions to assess whether respondent have high intensity for whistle blowing.
Questions consist of intention, willingness, plan, and high effort to do whistle blowing;
as well as high effort to do external whistle blowing if internal whistle blowing is
unavailable. Measurement instrument of attitude on whistle blowing follows questioner
model of Park and Blenkinsopp (2009), and Winardi (2013). Those assessments
measured by 5 point likert scale.
Organizational commitment measured by likert scale that shows respondent
agreement level on each question. Point 1 shows “very disagree”, while point 5 shows
“very agree”. By following OCQ (The Organizational Commitment Questionnaire)
questioner model of Mowday, Steers and Porter (1979); this research measures three
factors of organizational commitment; which are strong belief and acceptance of
organization objective and values, ready to give adequate effort in behalf of
organization name, strong desire to be part of organization (loyalty). OCQ uses 15 items
of questions; six of them are negative statement with reverse scored.
Professional commitment measured by questioner developed by Dwyer et
al(2000) with some addition. Professional commitment scale analyzed by questioner
developed by Aranya et al (1981) and Dwyer et al (2000) that consist of 7 item s of
questions. It is measured by 5 point likert scale.
In order to measures moral intensity of staff/employee, staff/employee perception
on seriousness of ethical behavior and responsibility for unethical behavior reporting by
adopting questioner of Lord and DeZort (2001) that have been modified for this
research five questions stated in a row after case scenario by liker scale of 1 to 5.
Personal cost measured by adopting instrument developed by Septianti (2013:
1093), which is by using three cases of accounting related to measures personal cost in
intention of whistle blowing. It is measured by 5 point likert scale. Every scenario
assesses personal cost level of respondent with effect of delaying of position promotion.
Scale 1 represents “very low” and scale 5 represents “very high”.
Ethic environment measured by adopting instrument used by Dalton and Radtke
(2012: 169), which is questioner 5 point likert scales.
Data Analysis
SPSS 20 software was used to analyze the collected data. Based on statistical test,
it is known that theoretical range is range of answer weight, theoretically, designed in
questioner; while actual range is minimum and maximum value of actual respondent’s
answer.
Instrument that used in this research consists of 6 variable measurements.
Organizational commitment uses 15 items of questions. Professional commitment uses
7 items of questions. Moral intensity uses 5 items of questions. Personal cost uses 3
cases where there is 1 question in each case. Ethic environment uses 7 items of
questions. Intensity for internal whistle blowing uses 16 items of questions.
49
Table 1:Descriptive Statistics of Variables studied
N Minimum Maximum Mean Std.
Deviation
Organizational Commitment 125 39.00 75.00 51.2320 7.15174
Professional Commitment 125 14.00 33.00 26.4640 3.45371
Moral Intensity 125 10.00 25.00 18.7600 2.71614
Personal Cost 125 6.00 15.00 11.3120 1.99360
Ethic Environment 125 20.00 35.00 27.1680 3.81790
Intensity for Internal Whistle blowing 125 48.00 80.00 62.5360 6.69442
Valid N (listwise) 125

Descriptive Statistics of Variables
Description of research variables is in table of descriptive statistics that shows
minimum, maximum, mean, and standard deviation value.
Variable of organizational commitment shows by using 125 number of sample,
minimum value is 39.00, maximum value is 75.00, and mean value is 51.2320 with
standard deviation 7.15174.
Variable of professional commitment shows by using 125 number of sample,
minimum value is 14.00, maximum value is 33.00, and mean value is 26.4640 with
standard deviation 3.45371.
Variable of moral intensity shows by using 125 number of sample, minimum
value is 10.00, maximum value is 25.00, and mean value is 18.7600 with standard
deviation 2.71614.
Variable of personal cost shows by using 125 number of sample, minimum
deviation 1.99360.
Variable of ethic environment shows by using 125 number of sample, minimum
deviation 3.81790.
Variable of intensity for internal whistle blowing shows by using 125 number of
sample, minimum value is 48.00, maximum value is 80.00, and mean value is 62.5360
with standard deviation 6.69442
Table 2. Hypothesis Testing Result

Hypothesis tvalue ttable Sig Remarks
H1 5.415 1.979 0,000 Ha1Supported
H2 2.355 1.979 0,020 Ha2Supported
H3 6.967 1.979 0,000 Ha3Supported
H4 3.376 1.979 0,001 Ha4Supported
H5 2.209 1.979 0,029 Ha5Supported
50
At hypothesis 1 test, it is seen that tvalue > ttable, which is 5.415 > 1.979; and
significance of t-statistic (0.000) < 0.05; H01 rejected and Ha1Supported. Based on the
result, organizational commitment has effect on intensity for internal whistle blowing.
At hypothesis 2 test, it is seen that tvalue>ttable, which is 2.355 > 1.979; and
result, professional commitment has effect on intensity for internal whistle blowing.
result, moral intensity has effect on intensity for internal whistle blowing.
result, personal cost has effect on intensity for internal whistle blowing.
result, ethic environment have effect on intensity for internal whistle blowing.
5. CONCLUSIONS
Result of this research can be discussion for future research and practitioner. This
research gives understanding in increasing of intensity for whistle blowing.
Organizational commitment, professional commitment, moral intensity, personal cost,
ethics environment have effect on intensity for internal whistle blowing, so leader of
organization have to creates condition that make individual have attitude to prevent all
kind of fraudulent in a institution and protects staff or employee that report the fraud
action.
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Universitas Diponegoro Semarang). Jurnal. Universitas Diponegoro.
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Park, Heungsik dan Blenkinsopp, John. 2009. Whistleblowing as Planned Behaviour –
A Survey of South Korean Police Officer. Journal of Business Ethics. Vol. 85;
545-556.
Putri, PA & Laksito, H. 2013. ‘Pengaruh lingkungan etika, Pengalaman auditor dan
tekanan ketaatan terhadap kualitas audit judgment’, Diponegoro Journal Of
Accounting, Vol.2, 1-13.
Robbins dan Judge. 2008. Perilaku Organisasi, Edisi Duabelas, Penerbit Salemba
Empat: Jakarta.
Robbins, S. 2007. Perilaku Organisasi. Edisi I Bahasa Indonesia. PT. Indeks. Jakarta.
Sagara, Yusar. 2013. Profesionalisme Internal Auditor dan Intensi Melakukan
Whistleblowing. Jurnal Liquidity. Januari-Juni 2013. Vol. 2, No. J: 33-44.
Septianti, Windy. 2013. Pengaruh Faktor Organisasional, Individual, Situasional dan
Demografis terhadap Niat Melakukan Whistleblowing Internal. Jurnal
Simposium Nasional Akuntansi XVI September 2013. Manado.
Winardi, Rijadh Djatu. 2013. The Influence of Individual and Situational Factors on
Lower-Level Civil Servants’ Whistle-Blowing Intention in Indonesia. Journal of
Indonesian Economy and Business. Vol. 28 (3); 361-376.
53
Professional Skepticism and Tax Officers’ Fraud Risk Judgment: The Moderating
Effect of Gender
Nurliyana Haji Khalid, and Zuraidah Mohd Sanusi

Accounting Research Institute (ARI), Universiti Teknologi MARA,
Shah Alam Campus, 40450, Selangor, Malaysia
ABSTRACT
This paper aims to examine the relationship between professional skepticism and fraud
risk judgment, and the moderating role of gender on this relationship among tax
officers. The survey study was conducted on 146 Inland Revenue Board of Malaysia
(IRBM) tax officers. Applying multiple regression analysis, the result reveals that there
is a significant and positive relationship between tax officers’ professional skepticism
and their fraud risk judgment. However, there are no moderating effects of gender on
this relationship. The results provide a basis for IRBM and other tax administration to
evaluate the performance of their tax officers during tax audit and investigation
engagement. Moreover, this study may provide a suggestion on how fraud risk
assessment can be improved to facilitate the efficiency and effectiveness of tax audit
and investigation activities. This study is original, as it focuses on the IRBM tax
officers’ fraud risk judgment, particularly involved in conducting corporate tax audit
and investigation, which is rare in fraud judgment literature.
Keywords: Professional Skepticism, Fraud Risk Judgment, Gender, Tax Officer
54
Implementation Evaluation: A Future Direction in Money Laundering Investigation
Salwa Zolkaflil*a, Normah Omara, and Sharifah Nazatul Faiza Syed

Mustapha Nazri
a
Accounting Research Institute, UiTM Shah Alam, Malaysia
b
Faculty of Accountancy, UiTM PuncakAlam, Malaysia
ABSTRACT
Malaysia has taken the initiatives in combating money laundering activities; however
the number of prosecution and sanction of money laundering cases remains low as
compared to other crime. In successfully combating money laundering, the problem of
implementation failure is an important component which should tackle for future
improvement. Yet, the issue of project implementation has been neglected by the
organizational researchers and evaluation specialist as well as policy makers in helping
to improve the current condition. Therefore, this study distributed surveys to the law
enforcement agencies with the aim to understand the challenges faced the law
enforcement agencies in investigating money laundering activities, also to identify
future improvement action in enhancing their effectiveness in combating money
laundering in the future. The result shows that difficulties in gathering sufficient
information have been the main challenge to the law enforcement agencies in
conducting their investigation before the case proceeds to the prosecution. The money
laundering investigation is also influenced by the investigation timeframe stipulated in
the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful
Activities Act (AMLATFPUAA) 2001. This study concludes that although the law
enforcement agencies have the power to investigate money laundering and terrorism
financing under the act, it is also important to have a good investigative support system
to assist the law enforcement agencies during the investigation process. The
investigative support system allows relevant agencies to provide sufficient information
to the law enforcement to ease their investigation process. Enhancing the current
investigative support system will be helpful for the law enforcement agencies in
gathering sufficient evidence to support their money laundering charges. Unlimited
power in gathering evidence is prominent in order to charge the money launderers,
since it helps to gather information required for the prosecution in a timely manner.
Keywords: Law Enforcement Agencies, Money Laundering Investigation,

Investigative Support System.
55
Related Party Transactions and Subsidiaries in Tax Heaven Toward the
Occurrence of Fraudulent Financial Reporting
Zulaikha Amirah Johari1*, Normah Omar 2, and Suhaily Hasnan3

1
Accounting Research Institute and Faculty of Accountancy UTiM, Malaysia
2,3
Faculty of Accountancy Universiti Teknologi MARA, Malaysia
ABSTRACT
The threat posed by fraudulent financial reporting is still remarkable as we are still
working to recover from the financial collapse caused b y misconduct in the financial
markets. While important strides have been made in recent years, fraudulent financial
reporting continues to pose a grave threat to financial interests in the world. And while
anti - fraud controls can effectively reduce the probability and potential impact of fraud,
the truth is that no entity is immune to this threat. Fraudulent financial reporting can
surface in many different forms, although once deceptive accounting practices are
initiated, various systems of manipulation will be utilized to maintain the appearance of
sustainability. Using data (annual report) from the Bursa Malaysia, this research
examines two of the risk factors as in International Auditing Standard 240 (ISA 240);
related party transaction (RPT) and subsidiaries in tax heaven as the red flag of the
occurrence of fraudulent financial reporting. First, this research identifies the transaction
between company and subsidiary which the directors have the interest. Then, this
research identifies the location of the subsidiary whether it is either in tax heaven or not.
Results indicate the occurrence fraudulent financial reporting positively correlated to
one of the following factors: higher RPTs, higher complex transactions of a firm, more
questionable of the business transaction. On the other hand, subsidiaries in tax heaven
did not show any correlation towards the occurrence of fraudulent financial reporting. A
simple logistic model based on these fraud risk factors of ISA 240 gauges the likelihood
of fraudulent financial reporting and can benefit practitioners.
Keywords: Occurrence, Fraud, Financial
*
Corresponding author: zulaikhamirah@gmail.com
56
Fraud Detection Ability: The Effect of Red Flags, Professional
Skepticism and Fraud Triangle
Rita Anugerah, Raisya Zenita, Muhammad Rasuli, Lollyta lovalia, and

Annisya Pratiwi
Department of Accounting FEB Univeritas Riau, Pekanbaru, Indonesia.
ABSTRACT
Internal auditors should have sufficient knowledge and ability to evaluate frauds such as
corruption in audit of organization included in government organization. Understanding
the factors that cause someone committing fraud, knowing symptoms of fraud and the
fraud triangle model is important in detecting an area where fraud is suspected of. The
primary objective of this study is to investigate the effect of red flags, professional
scepticism and fraud triangle model on auditor fraud detection ability. The population
in this study is internal auditors from local government of Riau province Indonesia. A
total of 45 respondents from 85 internal auditors were participated in this study. To test
the hypothesis the data was analyzed by using Warp PLS 5.0. The result suggested that
Red flags and Professional scepticism influence fraud detection ability of government
internal auditor. Unfortunately the data failed to support influence of fraud triangle on
fraud detection ability.
Keywords: Fraud detection ability; Corruption; internal auditor; red flags; professional
skepticism; fraud triangle
57
Fraud Triangle: The Effect of Financial Statement Fraud
Yesi Mutia Basri , Zirman , and Al Azhar A

Department of Accounting, Faculty of Economics and Business, Universitas Riau,
Indonesia
ABSTRACT
The aim of this research was to analyze the fraud risk factors of the fraud triangle
(pressure, opportunity, and rationalization) in detecting the likelihood of financial
statement fraud. The variables of the fraud triangle used is pressure consisting of
negative cash flow from operation (NCFO), financial stability (ACHANGE) and
external pressure (LEV), the factor opportunity is nature of industry (RECEIVABLE),
audit committee size (ACSIZE) and rationalization are proxy by auditor change
(AUDCHENGE). Indication financial statement fraud in this research uses a proxy
Beneish M-Score as the dependent variable. The population of this research is the
mining company listed in Indonesian Stock Exchange. Total sample was 27 companies
the period of 2013 to 2015. Testing the hypothesis used the logistic regression method.
The result of this study indicate that only two a factor of pressure consisting of a
negative cash flow (NCFO) and financial stability (ACHANGE) effect the financial
statements fraud. While other factors are opportunities proxy by the nature of industry
(RECEIVABLE), audit committee size (ACSIZE), external pressure (LEV), and
rationalization proxy by auditor change (AUDCHANGE) does not affect the financial
statement fraud.
Keywords: Financial Statement Fraud, Pressure, Opportunity, Rationalization.
58
Analysis on Competencies and Situational Support on Performance Effectiveness
of Forensic Accountants in Malaysia
Dr Norazida Mohamed1, Associate Professor Dr.Zuraidah Mohd Sanusi1, Nur

Hamizah Binti Hasnan1,and Lee Teck Heang2,
1
Accounting Research Institute, UniversitiTeknologi MARA
2
Help University, Kuala Lumpur
ABSTRACT
The financial scandals found in recent years affect the confidence of the public with
regard to the reliability of the financial information provided by companies. As a result,
this is likely to bring about a negative impact to the financial market of the country. To
improve the situation, there is a need of forensic accountants who are competent enough
in identifying and detecting irregularities and frauds in companies. Forensic accountants
must equip themselves with all the essential skills and techniques in order to play such
an important role. A questionnaire survey was conducted among personnel who are
involved with investigation of fraud, auditing, accounting, or legal matters throughout
Malaysia. 92 respondents responded to the survey. The study examines whether
competencies and situational support factors enhance performance effectiveness among
forensic accountants. The results show that both competencies and situational supports
have a positive relationship with performance effectiveness of forensic accountants. The
study also provides evidence that management and non-management frauds do occur in
the organizations. This study contributes to the understanding on the needs of
competencies and situational supports from organizations such as team members,
technology and integrated facilities to assist forensic accountants to perform their task in
a more efficient and effective manner.
Key words: Forensic accountants, financial criminology, Competencies, Situational

support, Performance effectiveness
59
Examining the Roles of Religiosity, Ethical Behaviour and Leadership To Whistle
Blowing Intention: Empirical Finding From Malaysian Royal Custome
Jamaliah Said1*, Mohd Naim Shaffie2, Ruhaya Atan3, and Marhamah Rafidi4
1
Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, Malaysia
2
Kolej Polytec MARA Cheras
3
Faculty of Accountancy & Accounting Research Institute, Universiti Teknologi MARA
4
Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, Malaysia
ABSTRACT
The commitment to combat employee fraud is continued to erupt and thus give pressure
to organization specifically Malaysia enforcement agencies to introduce new
mechanism to promote whistle blowing. In Malaysia Whistle blowing Protection Act
has been newly introduced in 2010 to promote whistle blowing and subsequently
become one of the mechanisms in preventing employee fraud. Past studies found that
fear of retaliation stunted the whistle blowing intent ion and whistle blowing protection
still does not effectively encourage whistle blower. However past studies tend to omit
the important role of religiosity and ethical values in to blow whistle. T his study aims
to examine whether the religiosity, individual ethical values and leadership contribute to
the whistle blowing intention among enforcement officers. This study collected 110
questionnaires survey Royal Malaysia Custom officers. The findings revealed that
religiosity and leadership increase whistle blowing intention whereas ethical values does
not significantly increase whistle blowing intention.
Keywords: Enforcement Bodies; Religiosity; Ethical Value; Organizational ethical
leadership; Whistle blowing intention
*
Corresponding author: jamaliah533@salam.uitm.edu.my
60
The Machiavellian Character, Ethical Environment and Personal
Cost in Their Impact to Whistle Blowing Intention (Empirical Study
on Samsat of Pekanbaru City and Rokan Hulu Regency)
Raja Adri Satriawan Surya , Arumega Zarefar , and Nanda Fito Mela
1
Department of Accounting, Faculty of Economics and Business, Universitas Riau, Indonesia
ABSTRACT
The objective of this study is to examine the effect of Machiavellian Nature, Ethical
Environment and Personal Cost to Whistle blowing Intention. This research was
directed to all employees who work on SAMSAT Pekanbaru City and Rokan Hulu
District. The sampling method that used in this study is purposive sampling. Collecting
data of this study using a questionnaire submitted to 130 working in the office of One
Stop Roof Administration Unit (SAMSAT) Pekanbaru City and Rokan Hulu District.
From questionnaires distributed, 82 questionnaires can be completed and can be
processed. Data collected were analyzed with Partial Least Square (PLS). The results of
hypothesis testing conclude that: first, Machiavellian nature has influence toward
Whistle blowing intention with value tcount 3,551 > ttable 1,99. Second, Ethical
Environment has effect toward whistle blowing intention with value tcount 2,829>
ttable1,99. Third, Personal Cost has impact toward Whistle blowing intention with value
tcount 4,200> ttable 1,99. The result of the coefficient of determination (R2) is 0,556 which
means that the independent variable used in this research affects Whistle blowing
Intention of 55,6% while the remaining 44,4% is influenced by other variables not
included in this regression model.
Keywords: Machiavellian Character, Ethical Environment, Personal Cost and Whistle

blowing intention.
61
Influence of Retaliation, Negative Guilty Emotion, Negative Shamefulness Emotion
And Organizational Commitment toward Intention to Do Whistle blowing
Yunita Anisma, Rheny Afriana Hanif, Fajar Odiatma, and Arumega Zarefar
ABSTRACT
The aim of this study is to examine the influence of Retaliation, Organizational

Commitment, Negative Guilty Emotions and Negative Shamefulness Emotions toward
intention to do whistle blowing. This study was conducted at all branches of PT.
Telkomsel in Riau Province. The sampling method used in this study was purposive
sampling. Collecting data of this study was by using a questionnaire submitted to 150
employees who work in all branches of PT. Telkomsel in Riau province. From
distributed questionnaires, 69 questionnaires can be completed and can be processed.
Data collected were analyzed with Partial Least Square (PLS). The results of hypothesis
testing conclude that: first, retaliation has an influence toward whistle blowing intention
with value 3.115 > 1.99 Second, organizational commitment has an
influence toward whistle blowing intention with value 15.069 > 1.99. Third,
Negative emotions Feel guilty has an influence toward whistle blowing intention with
value 2.495 > 1.99. Fourth, Negative Emotions Shamefulness has an
influence toward whistle blowing intention with value 3.267 > 1.99. The
2
result of the coefficient of determination (R ) was 0.835 which means that the
independent variable used in this research affects whistle blowing Intention of 83.5%
while the remaining, 16.5% is influenced by other variables not included in this
regression model.
Keywords: Retaliation, Organizational Commitment, Negative emotions Feel guilty

and Negative Emotions Shyness and Whistle blowing intention
62
Ar- Rahnu Usage in Economic Development of Ummah in Selangor
Azlan Alia, ZainalAzhar b ZainalAzimb, JulizabtMohamedb, AmirulSyafiq bin

Ghazalib and HafezaliIqbalHussainc
a
University Colleage of Technology Sarawak, Malaysia
b
Faculty of Business, Universiti Selangor, Malaysia
c
Universiti Kuala Lumpur Business School, Malaysia
ABSTRACT
This research seeks to measure the relationship between the usage of ArRahnu with its
operation, shariah views, personal consumption and investment that may assist in
economic development of ummah in Selangor. This study is used primary data by
questionnaire and the sample consist ArRahnu users in population selected. Study
conducted in scope of acceptance (on operation and shariah view perspective) and
intention (on personal consumption and investment perspective) determinants towards
ArRahnu. Four independent variable to be measured such as ArRahnu operation system,
shariah view on ArRahnu, personal consumption and investment purpose whereby the
dependent variable is the usage of ArRahnu. The result revealed that the key driven on
the usage of ArRahnu among ArRahnu users in Selangor significantly based on
independent variable selected. As the end, the limitation and recommendation are
included to help further researchers to have a better finding of the result.
Keywords: ArRahnu usage, investment, Islamic micro-financing, operation, personal

consumption, Shariah.
63
Non Halal Income Phenomenology Study as Source and Use of
Qardhul Hasan in Islamic Perspective
Harkaneri,Hana Reflisa, and HenniIndrayani

Faculty of Economic and Social Science, Uin Suska Riau, Jl.H.R. Subrantas, 28293,
Pekanbaru, Indonesia
ABSTRACT
Qardhulhasan is a form of social function of sharia banking in addition to running its

commercial business activities. The existence of non-halal income as one source in
qardhulhasan fund becomes a dilemma. The purpose of this study is to know and
understand the Islamic review of non-halal income as the source and use of
qardhulhasan funds in sharia banking. The research method used qualitative method
with phenomenology approach. This study conducted in-depth interviews with selected
informants based on purposive sampling technique. The selection of informants for this
phenomenological research is categorized from scholars, sharia banking practitioners
and academics. The results of this study revealed that the element of usury on interest
which is a source of non-kosher income. The use of non-halal revenue in qardhulhasan
funds should not be distributed in the form of revolving loans (qardhulhasan) because of
the illegitimate law attached to interest. So that its use is specifically distributed to the
public interest that is no consume which serves to clean up illicit funds in Islamic
banking. The disclosure of non-halal income transparently to the source report and the
use of a benevolent fund also need to be done as a comprehensive account (kaffah) in
providing information to stakeholders.
Keywords: Non-halal income, qardhulhasan, phenomenology, Islamic perspective
1. INTRODUCTION
The growth of the national sharia banking industry has continued to grow for
more than two decades of development since 1992. Sharia banking is a bank that not
only aims at profit (profit oriented) alone but also on social interests. Islamic banking
products in accordance with the principles of ta'awun (please help) one of them is
qardhul hasan. In the classical Jurisprudence literature, the concept of qardhul hasan is
categorized in a contract of help and not a commercial transaction (Purwadi, 2011).
Research conducted Badaruddin (2011) argue that the contribution of qardhul hasan
financing for customers has a very large mashlahat.
Figure 1.1 Non Halal Income

NO BANK SYARIAH 2012 2013 2014
1 Bank Muamalat - 1048 1637
2 Bank Syariah Mandiri 454 191 442
3 BNI Syariah 254 121 1
4 BRI Syariah 47 337 161
5 Bank Syariah Bukopin 75 58 130
6 BCA Syariah 1 1 1
7 BJB Syariah 4 98 220
8 Bank Mega Syariah 53 128 166
9 Bank Maybank Syariah Indonesia 11 28 27
Source: Financial Services Authority (OJK). Processed Researchers
64
Purwadi (2011) argues that such a large role of qardhul hasan financing
products attracts researchers to further investigate the source of qardhul hasan funds
sourced from non-halal income that will be reviewed in the Islamic perspective. In this
case non-halal income moves volatile but tends to increase. The following can be seen
in Figure 1.1 above
The difference of current research with previous research is the current study
using qualitative method with phenomenology approach. Researchers will see the
Shariah perspective on non-halal income as a source and use of qardhul hasan funds
according to scholars, academics who are experts in sharia accounting and syariah
economics as well as sharia banking practitioners. Thus, this study will provide more in-
depth information on non-halal income status on the source and use of qardhul hasan.
After knowing the problems that arise from the explanation of the background
submitted by the researcher can then formulated the problems that become the focus of
this research, as follows:
1. How is the informant's view of the phenomenon of non-halal income empowerment
as one source of the benevolent funds (qardhul hasan) on sharia banking in Islamic
perspective?
2. How is the informant's view of the utilization of non-halal incomes allocated to
revolving loans (qardhul hasan) in an Islamic perspective?
3. How does the disclosure of sources and the use of funds of virtue (qardhul hasan) on
Islamic banking?
LITERATURE REVIEW
Qardhul hasan comes from the qard, according to Ali and Muhdlar (1996) in
Burhanudin (2012) that etymologically the word qard comes from qa-ra-da which
means to cut. The qardh issuing according to the National Sharia Council as stated in
the Shariah Council's fatwa number 19 / DSN-MUI / IX / 2001 on al-qardh states that
al-qardh is a loan contract to certain customers provided that the customer is obliged to
return the funds received to the financial institution sharia (LKS) at the time agreed by
LKS and customers. There is a kind of qardh called qardh ul-hassan or qardh hassan,
namely the qardh treatments that are specific to social purposes (Khir, Giupta and
Shanmugam, 2008; 186 in Sjahdeini, 2014: 342).
The argument that reinforces the clerical decision permits the qardh transactions
described by Antonio (2013: 131) that qardh transactions are permissible by scholars
based on the hadiths of Ibn Majjah and the ijma ulama.
1. The Qur'an
"Who will lend to God a good loan, God will multiply (loan) it for him and he will
get a lot of reward." (Qs.al-Hadid: 11)
The meaning of the word of Allah (SWT) explains that as a servant of Allah,
Allah calls to spend the treasure in His path. So man must be convinced that lending to
fellow human beings because God is the same meaning by spending the treasure in his
path. Because the sustenance of every human being is a deposit from Allah SWT and
partly is the right of others who must be given in a good way. In the other word of God,
sura al-Baqarah verse 245 also explains the same meaning as the above suras.
2. Hadith
Antonio (2013: 132) explains the hadith relating to qardh, which is as follows:
Ibn Mas'ud narrates that the Holy Prophet, Saying, "is not a Muslim who lends
Muslims two more unless the other is (worth) alms." (Ibn Majah 2421, Kitab al-Ahkam
ibnu Hibban and Baihaqi)
65
Anas bin Malik said that the Messenger of Allah (saw) said, "I see at night
israised, at the door of heaven is written: alms replied tenfold and qardh eighteen times.
I asked: 'O Gabriel, why is qardh more than alms? He replied, "because he begs for
something and he has, while the borrower will not borrow except for necessity."
(Narrated by Ibn Majah no. 2422, al-ahkam and Baihaqi).
From these hadiths explain that its very prime mutual help each other. Similarly,
the qardhul hasan contract is a loan agreement that can help others from distress,
because with the loan other people will feel lighter to face financial problems and
undoubtedly the lender will get a reply that is God's promise that will give ease even
explicitly alan release his distress on the Day of Resurrection (Solehudin, Auliyah and
Zuhdi, 2014).
3. Ijma
According to Antonio (2013: 132-133) even the scholars have agreed al-qardh
may be done. It is explained that this fatwa is based on human beings as social creatures
that require others to survive. No one has all the things he needs. Therefore borrowing
has become a part of life in this world.
The source of qardhul hasan's fund is mentioned in the Exploration Draft of
Financial Accounting Standard Statement 101 (2014): Presentation of Sharia Financial
Statements, especially regarding the source report and the use of the virtue fund in para-
123a. In this case the source of qardhul hasan comes from the acceptance of infaq, alms,
the results of wakaf management in accordance with applicable legislation, refunds of
productive virtues, fines and receipts of non-halal funds. The qardhul hasan reporting is
presented separately in the source and fund use reports because the asset is not a bank
asset in question.
According to Nurhayati and Wasilah (2015: 263) that the source of qardhul hasan
funds from external and internal. External sources derive from qardh funds received by
sharia banks from other parties (eg from donations, infaq, alms and so on). For example,
the source of qardh funds provided by business entity owners, non-halal income and
other fines. Meanwhile, according to Antonio (2013: 133) qardhul hasan sourced from
the fund of the people such as zakat, infak and alms. In addition there are other sources
of funding such as nostro services in conventional correspondent banks, interest on L /
C guarantees in foreign banks.
Non-halal income is the acceptance or entry fee of an Islamic bank from non-
halal transactions. One example is interest income. Non-halal income one of them
comes from bank interest. There are opinions of scholars who claim that bank
interest is usury, then it is forbidden. Thus non-halal income derived from bank
interest is usury, it is clearly forbidden in the Qur'anic and Hadist texts. According
to Antonio (2013: 48-54) that there is a word of God that explains about usury as the
greetings of Ar-Ruum verse 3, an-Nisa verses 160-161, Ali-Imran verse 130 and al-
Baqarah verses 278-279.
In principle, sharia banking is prohibited from obtaining non-halal acceptance.
Non-halal acceptance generally occurs in unavoidable conditions. In ED PSAK 101
(revised 2014): Presentation of Sharia Financial Statements, especially regarding the
source report and the use of the virtue fund in paragraph 126, explains that non-halal
income is all receipts from activities that are not in accordance with sharia principles
such as receipt of demand deposit or interest earned from conventional banks.
66
3. METHODS
This research uses qualitative method with phenomenology approach. According
to Martono (2015: 206) research phenomenology (phenomenology research) is a type of
research that describes the meaning of some individuals about pengalamn his life, their
meaning about a particular concept or phenomenon.
The types and sources of data used in this study are primary data and secondary
data. Primary data is a collection of information obtained by researchers directly from
the research location through the first source (such as informants through interviews) or
through the results of observations conducted by the researchers themselves (Martono,
2015: 65). To answer the research question of the research conducted, the researcher
obtained the data by interview to the informant. Secondary data in this study for
example the financial statements of Islamic banking, especially reporting sources and
use of funds in the Islamic banking benevolent.
The object of research in this research is sharia banking in Indonesia. Then in this
research, syariah banking is chosen based on the following criteria: (1) is a Sharia
Public Bank; (2) The BUS must disclose the Source and Use Report of the Virtue Fund
in the last 3 years from 2012-2014; (3) and BUS must have non-halal income in one
source of virtue fund within the last 3 years. So based on the above criteria, there are 9
BUS which is used as research object, that is PT. Bank Muamalat, PT. Bank Syariah
Mandiri, PT. BNI Syariah, PT. BRI Syariah, PT. Bank Syariah Bukopin, PT. Bank
Jabar Banten Syariah, PT. Bank BCA Syariah, PT. Bank Mega Syariah and PT. Bank
Maybank Syariah Indonesia.
Data collection techniques used in this study are, interviews, documentation and
literature study. All of these methods are used in research to obtain relevant and quality
data.
The informant is the person who provides explanation or detailed information in
the research process (Martono, 2015: 120). In this study, the selection of informants
using purposive sampling technique. Researchers deliberately select informants that
have been divided and adjusted based on the field and expertise, namely as follows:
a. The selected sharia banking practitioners are the head of one of the main branches in
one of the regions in Indonesia.
b. Ulama, informants who have jobs or expertise as scholars who understand tafseer,
hadith and fiqh.
c. Academics, criteria of academic informants who have a degree or expertise in the
field of shariah muamalat and sharia accounting.
According Sugiyono (2013: 369) states that triangulation is interpreted as checking
data from various sources in various ways and various times, following explanation.
a. Triangulation of sources is a validity check of data that can be done by checking data
that has been obtained through several sources (Sugiyono, 2013: 370).
b. Triangulation of data collection techniques is to test the credibility of data performed by
checking the data to the same sources with different techniques (Sugiyono, 2013: 353).
c. Triangulation time is to test the credibility of data performed by checking with
interviews or other techniques in different times or situations (Sugiyono, 2013: 371).
Data analysis techniques for phenomenology research in this study refers to the
delivered Amadeo Giori (Raco & Tanod, 2011: 119-123 in Nuradilla, Rusmana and
Warsidi, 2014), namely:
a) The researcher reads the entire phrase conveyed by the informant with the aim of
obtaining the general meaning of the information, when reading the whole phrase
67
conveyed by the informant, the researcher also adheres to the research context that
the researcher can capture the expression intended by the informant.
b) The researcher will read the entire text back with a specific purpose, namely to select
or distinguish (discriminating) the unit of meaning (meaning unit) and with full
attention to the phenomenon being studied by researchers.
c) Researchers see and read the whole unit of meaning while looking at whether the
unit of meaning really has relevance to the topic discussed and researched by the
researcher.
d) The researcher makes the synthesis of all units of meaning transformed in one
statement according to the experience of the informant.

4.1 Reality of Non-Halal Income Use in Qardhul Hasan's Funds
The existence of non-halal income in sharia banking is due to the transaction
between syariah banking and conventional banking that raises bank interest. According
Solehudin, Auliyah and Zuhdi (2014) that sharia banking still requires cooperation with
conventional banking because the position of sharia banking in Indonesia is less precise.
Consistent with the submitted Mr. Imdibkri as Chief Branch in one of sharia
banking that under certain conditions sharia banks to deposit funds in conventional
banks. This raises interest received by sharia banks, so this interest is categorized as
non-halal income. The informant also submitted non-halal income received by the banks
which he led only from bank interest.
".... the source was. Just the one we receive now. It's from the flowers, our funds
that we use in conventional, one or two days. In love of flowers. That we are
categorized as non-halal. "
Non-halalincomes in the source report and the use of a benevolent fund in sharia
banking tend to increase. This can be seen in the diagram of the last three years below.
Pendapatan Non halal (dalam jutaan
rupiah)
2012 2013 2014

BM 0 1048 1637
BSM 454 191 442
BNIS 254 121 1
BRIS 47 337 161
BSB 75 58 130
BCAS 1 1 1
BJBS 4 98 220
BMS 53 128 166
Sumber:OtoriasJ aKeuang (OJK).DiolahPenlit
BMSI 11 28 27
Figure 4.1 Non-Halal Income in the Report on the Source and Use of the Virtue Fund
on Sharia Banking for 3 Years
Source: Financial Services Authority (OJK). Processed Researchers
68
From the picture above shows non-halal income in sharia banking is fluctuating
every year but tends to increase. This allows the emergence of non-halal income in
sharia banking is increasing every year.
4.2. Scholars, Academics and Practitioners View: Non-Halal Income as the Source
and Use of Qardhul Hasan's Fund in Islamic Perspective
1. Utilization of non-halal income: ahsan used as a source of funds qardhul hasan
a) Returns the people's funds to the people
In this case the researcher will expose the point of view of the scholars. Is Ustaz H.
Abdul Shomad, LC., D.E.S.A, an informant profession as a scholar and lecturer in
one of the State University in Indonesia. According to Majma 'al Fiqh al-Islamy's
decision, the fatwa of Mufti al-Azhar (Sheikh Abdulathif Hamzah), the mufti of
Saudi Arabia's great cleric, Sheikh Hisam' Afanah, was quoted by Ustaz H. Abdul
Shomad, LC., DESA, non-halal income may be used but not classified as alms.
From the decisions of the fatwa ulama-scholars revealed that all the property
derived from the interest of the bank then haram according to the Islamic Shari'a,
both for the recipient of interest and for other parties such as family but there are
exceptions from the statement. That bank interest may be utilized but for the poor,
and the public interest. As stated by Antonio (2013: 133) the use of this interest is
based on the principle of akhaffu dhararain (taking a smaller mudharat) when
compared with the funds used by conventional banking in the main business which
only berpcententase on interest and eventually interest will cause other flowers.
Ustaz H. Abdul Shomad, LC., D.E.S.A stated the same thing in the interview results
that have been done. Based on the assumption of informants that the use of non-halal
income is feasible to be used for the public interest and the poor. Here's the statement.
"..... then handed over to the poor and not as a sadaqah. Because God does not
receive the dirty. Allah is Most Holy, God receives except the sacred. Then what
is the function of the money? Returns the people's money to the people. These
people are regarded as one people. Initially this money belongs to the 'A', 'B', 'C'
and others. Then given to 'F', 'G', 'H', 'I', 'J', 'K'. Given the money 'this' to the
'This'. This is still considered a people. That should not be, the money I was
eating for me. So let him give to the people and for the common good. The
crowd enjoyed. Not enjoyed person (perorang). Because he can not eat,
unlawful! So the function of money at that time not as a sadaqah, return the
money of the ummah to the people. Because it belongs together. There lies the
intersection, as it seems. Loh eaten can not be, wherever possible? Not alms.
Hence there should not be with the intention of alms. Can not with alms
intention. Because it should not be alms, then if thrown away? Thrown away. It
is used for public purposes, for the people. Poor, orphan, build amaphaphaphy,
build schools, MDA, musytafaya (hospital). Not regarded as alms. Purify oneself
from the haram, returned to the people. "
According to Ustaz H. Abdul Shomad, LC., D.E.S.A, it can be concluded that he
agrees with the fatwa of scholars who agree (pro) on the use of non-halal income as a
source of qardhul hasan funds. According to informants implicitly stated that non-halal
income is not recognized as income by Islamic banks even for distribution.
Furthermore, with the acceleration of funds in conventional banking raises interest that
can not be avoided. In this case interest (interest) is not recognized as income in sharia
banking, but is used for people like the general public (weak economy). So called was
69
returning the ummah to the ummah. Because the source originally came from the
ummah and returned to the people. The informant stated that the people here mean the
one umma. To see the flow of non-halal income distribution in the meaning of returning
the people's fund to the people can be seen in Figure 4.2.
The purpose of returning the ummah to the Ummah is explained by the informant
that it is not classified as a sadaqah but to purify Islamic banking from this illicit
income. Because God does not regard a reward for the source of alms except the thoyib
(holy). This is based on an informant statement explaining that "Allah is Most Holy,
God receives except the sacred."
4.3 Consumptive use is not productive (revolving loan)

In ED PSAK 101 (revised): The presentation of Sharia Financial Statements
specifically regarding the source report and the use of the virtue fund explains that the
use of qardhul hasan funds in sharia banking is used for loans, alms, and others. The use
of qardhul hasan funds is channeled to the public interest, and alms as the empowerment
of the weak economic community can be called consumptive. In this case, consumptive
means the channeling of funds for the empowerment of the weak economic community
in meeting the needs of its life-wearing. In contrast to productive use in the form of
loans or qardh. There is also, Ustaz H. Abdul Shomad, LC., D.E.S.A in this case tends
to qardhul hasan funds utilized for public interest, and for consumptive rather than
70
productive. Because based on the income of the fatwa-fatwa or mufti ulama-scholars
clearly states the use of bank interest may be used even some say must be allocated for
the public interest and poor economic community.
"I would agree, if in this semester can non-halal funds can be for example a
hundred million, do not play again. I am more of a majority opinion. Purely
consumptive. For the cost of school children, for MDA development, do not play
with the loan and then returned. .... I am more amenable that for consumptive
funds, run out. "
The mixing of income of halal and non-halal income (haram) on the source of
qardhul hasan fund becomes dilematik. The illegitimate law inherent in interest is
recognized as a compulsory obligation to be issued by the entity for social purposes. In
the study of Solehudin, Auliyah and Zuhdi (2014) disclose that non-halal income should
record and report non-halal income separately from source and usage and virtue reports.
Because the caution and thoroughness in the management of non-halal income must be
maintained by the sharia. Not only does it preserve and avoid mismanagement or
materialist error in a financial report, but as a responsibility to a wise and virtuous
management given that interest is a source of economic disaster.
There is also a consumptive fund allocation scheme for the empowerment of the poor
and public use, and in the form of soft loans (qardhul hasan) will be seen in Figure 4.3.
Sumber Dana Qardhul Hasan
Pendapatan
Diberikan Penggunaan
Non Halal
Fakir Miskin & Memenuhi Kebutuhan
Kepentingan & Membangun Fasilitas
Umum Umum
Denda
Pengalokasian
Dana
Infak
Pengembalian pinjaman saat jatuh
tempo sesuai akad di awal
Sumbangan Dipinjamankan Pengelolaan
Peminjaman Mengelola
(Pinjaman Bergulir) Usaha Mikro
Lainnya
Source: Analysis of interview result of researcher with Ustaz Abdul Shomad

(Informant)
Figure 4.3 Qardhul Hasan Funds Allocation (Benevolent Fund)
It can be seen in Figure 4.3 that the consumptive use of funds for public use is
voluntary. Thus, in this case in accordance with the return of the ummah to the ummah.
Different conditions if qardhul hasan funds are disbursed in the form of productive
loans. There is an obligation to receive funds to refund the funds at maturity. So that the
purpose of Islamic banking to rid itself of non-halal acceptance has not been as
71
expected. Because non-halal income has not been completely clean from sharia
banking.
4.4. Utilization of non-halal income: not ahsan used as a source of funds qardhul
hasan
Haram Taken Haram Given
In a rule it says that "What is forbidden to take it then is forbidden to eat it and
given to others." This rule is quoted by Prof. Dr. Akhmad Mujahidin, M. Ag. as the
basis of the informant's argument stating that it is not a wise practice to use the non-
halal income to one of the qardhul hasan sources.
"It is wrong if this should be spin off. There can be non-halal income anymore.
This is continuity. It is so. .... So here is a rule. "Whatever is forbidden to take it
then is also forbidden to eat it and give it to others."
There is also, the intention of this rule are two activities of causality (cause-effect)
are tied to each other, then the law is parallelized. If a result of activity activity is
considered haram, then the previous activity which is the cause of the emergence of
prohibition, it is also forbidden. This as a logical consequence to realize the more
comprehensive benefit of a ban (Ramadhansyah, 2013).
The informant's statement confirms that the legal haram of non-halal income is
utilized to empower the weak economic community, as it is forbidden to recognize
interest as the operational income of sharia banking. Because not a justification for the
use of usury for the empowerment of the weak economic community.
As with the illegitimate law inherent in interest, efforts to stop receiving non-halal
funds should be a priority. As in the informant statement that the spin off on interest
receipt should be done as a form of self-esteem Islamic banks to keep the principles of
sharia free of usury.
"Yes non-halal income really accepted, yes can not. If you want the truth. Ga no
harm to us if we do not accept. There is no. This we can be dug the same
conventionally. 'Ente .... want also our flowers'. There we ga can be stupid.
Qardhul hasan is from zakat, infak, alms. Why should it be mixed with non
halal.
Furthermore, Prof. Dr. Akhmad Mujahidin, M.Ag corroborated the argument with
the above statement. The mixing of halal and non-halal funds in qardhul hasan funding
sources by sharia banking should be avoided. If sharia banking prioritizes its principles
comprehensively (kaffah), although gradually.
The same thing conveyed by Dr. Aji Dedi Mulawarman, the informant totally
refused the use of interest in qardhul hasan funds used for the weak economic
community. To that end, sharia banking should avoid interest income in its operations.
Because explicitly, informants stated that to avoid usury in sharia banking then what is
done is not taking something size based on interest (interest), in this case interest is an
interest. Sehinggga avoid transactions that generate interest in Islamic banks is a
manifestation of the implementation of sharia principles in a comprehensive (kaffah).
"If everything is taken the size is based on interest / interest. Wong riba is
interest. Interest is interest. So if the bank is the way of thinking usury, it is
resigned. That if you look at non-halal income, well it's okay wear aja. Kan's
interests. Even if he said to fund the virtue. However, his name is rash, this is his
name trapping people in bad. "
72
4.5. Use of non-halal Income for Public Interest
The use of non-halal income in qardhul hasan funds as a social from cannot be
said to be wise, and virtuous. For on Allah’s side this use is not regarded as alms
because Allah is All Giving except the sacred.
"If for general interest like a highway, the bridge may deh. Instead of redundant.
But if for consumption, do not. Meat that grows from illicit goods hell place. The
qardhul hasan context for the poor is not it. .... But if for consumption, investing like a
scholarship, that's an investment. Do not! Haram it. .... So too, for venture capital. The
effort is the result to be eaten (consumption). Do not!. Must be careful. "
Prof. Statement Dr. Akhmad Mujahidin, M.Ag. respond positively to the use of non-halal
funds for non-consumption public purposes. In his statement, the public interest is meant to
build bridges, road reconstruction and other similar. This idea is based on the premise
(assumption) that this is done as a form of caution if its use for consumption. The informant
reinforces the premise (assumption) of a hadith, that is "the meat that grows from the illicit
goods of the place hell." There is also, informant also explains if the use of this non-halal
income for business capital loan, the same law, that is haram. Because in the short or long
term will receive the results are clear results for consumption.
Consistent with the views of previous informants, Mr. Imdibkri as a practitioner in
one of sharia banking revealed such a thing. The use of non-halal income should be
allocated in a non-consumption form but distributed to public facilities such as building
roads, bridges and the like.
In Table 4.1 above describes the source and use of funds of virtues in sharia
banking period of December 2013. In table 4.2 describes the source and use and virtue
based on Reports of the Source and Use of Virtue Funds in sharia banking period 2014.
In 2014 Bank Mualamat reveals the source of its virtues derived of penalty of
2,337,000,000.00 and non-halal income of 1,637,000,000.00. While the use of funds is
not disclosed by Bank Muamalat. In Bank Syariah Mandiri the source of virtue fund is
almost equal to the previous period which comes from fines, non-halal income and
others, and its use is used for other categories that is Rp 2.252.000.000,00. Similarly,
BNI Syariah Bank obtained the same sources and usage in the previous period.
However, there is a decrease in the income of the fund although not so significant.
While the use of these funds has increased ± 5 times from the previous use of funds that
amounted to Rp 899,000,000.00. The increase in income from the previous period also
reached 57.7%, Bank Jabar Banten increased 72.9%, Bank Mega Syariah increased
135.1%, and Bank Maybank Syariah Indonesia increased by 183.1%. However, the
increase in the funds of virtue is not proportional to the increase in the use of such
funds, there is a decline in the allocation of funds of virtue.
Furthermore, BRI Syariah Bank discloses its financing sources from fines,
donations / grants, and non-halal incomes, in this case decrease in the source of funds,
although not significant, down about 18.5%. Meanwhile, Bank BCA Syariah
accumulated statutory (fixed) funds at Rp 418,000,000.00 from the previous year for its
use for other categories of Rp 211,000,000.00.
4.6 Expectation on the transparency of non-halal income

There is also non-halal income should disclose information about how the
transaction can occur and how to anticipate it. So stakeholders receive information in a
transparent manner. Based on the explanation from Haniffa & Hudaib (2004) in Iqbal
73
(2012) one of the foundations for sharia entities to show a genuine commitment to
social responsibility is by disclosure.
In this case, awareness of the importance of disclosure for all transactions relating
to qardhul hasan funds is required. Consistent with the results of Iqbal's (2012) study
that charitable funding aims at social, an act done for a good cause will receive a divine
blessing (blessing). Thanks to this the possibility of customers has given their trust to
fund managers (syariah banking), and when they believe, customers will be motivated
to repeat their charitable actions. The results of Schoorman et al. (2007) in Iqbal (2014)
have shown that charitable actions will lead to the emergence of a trust effect that
motivates individuals to repeat the same actions.
The mixing of halal and non-halal funds in the source of qardhul hasan funds is
not a wise and virtuous decision because of the illegitimate law inherent in interest. It
must be used carefully. In Solehudin's research, Auliya and Zuhdi (2014) attempted to
provide a solution to non-halal income, namely the separation of non-halal income from
source reports and the rolling of the fund of virtue. In the study also made samples of
non-halal income statements separate from the benevolent funds report. In fact, it is not
just the separation of reports but non-halal income funds are restricted to a thing that
requires non-halal income. So that non-halal income must go in and out of the door of
non-halal income. In this case, the solution is non-halal income used for donations or
grants to the State of Indonesia to be paid to interest due to state borrowing efforts to
cover the budget for the nation's needs. Then the interest is left to the flower.
However Ustaz H. Abdul Shomad, LC., D.E.S.A responds differently if this non-
halal income is allocated to the State. This is because a country already has the state
budget, which specifically tackles poverty. So that more effective and efficient non-
halal funds are allocated directly by sharia-based labor or submitted to social institutions
that can manage the fund for the public interest.
"I in this case follow the opinion of many scholars more. Because more
congratulations. So the funds are not to the State. The country already has
ABPN, APBD. It should, in our law, the poor man be borne by the State. Now
even the funds are in given to the State. Moreover, the State is not trust. It will
be difficult to identify the fund. So good, who get the non-halal funds earlier,
immediately wrote submitted. "
However, the necessity of disclosure of non-halal income in sharia banking is
urgent. The disclosure of the report of the virtue fund transparently on the grounds of
the occurrence and use of non-halal incomes in the notes to the financial statements
should be a priority in the implementation of sharia principles in a kaffah manner.
Prudent is effort in managing non-halal income in sharia banking
comprehensively (kaffah). According to Prof. Dr. Akhmad Mujahidin, M. Ag,
itAvoiding non-halal is with a spin off, stopping interest income in sharia banking. To
achieve the principles of Islamic Shari'ah in operational must avoid haram (interest).
Consistent with what Dr. Aji Dedi Mulawarman that differentiates sharia banking with
non sharia banking is from the paradigm, if the paradigm takes a measure based on
interest (interest) then to avoid interest in sharia banking become difficult to be realized.
So the wisest and virtuous decision is to decide all transactions that generate interest
whose purpose is to follow the principles of Islamic law in kaffah.
But in addition to these expectations, reality conditions show different things.
The acceptance of non-halal income in Islamic banking is continuous. There should be
no tolerance to recognize income since the status of income is haram, although in
74
certain cases it is admittedly possible. There should be an explanation of how the
transaction (interest) can occur and how to anticipate it.
With the transparent disclosure of qardhul hasan funds especially non-halal
funds will be oriented to public trust. In this case, according to the analysis of research
efforts disclosure that needs to be done is to separate the use of non-halal income on the
allocation of funds that are consumptive and especially productive loans. Although non-
halal income accumulates with other sources on qardhul hasan funds. However, this is
anticipated by disclosing it to the financial statements or notes to the financial
statements. Hence, the non-halal income specifically only allocated for the public
interest, such as road construction, bridge construction and others.
This is done to avoid mixing of halal and non-halal funds in their use; because,
the allocation with the loan in the use of the funds of virtue, should be avoided from
non-halal funding sources. Because considering the non-productive use of non-
productive income (loans) is not a wise and virtuous decision to make. So the separation
of the use of halal and non-halal funds on the source of qardhul hasan funds needs to be
done. In this case, the qardhul hasan source of non-halal income is used exclusively for
the public interest. Meanwhile, the source of halal funds can be used for productive
loans, donations and other consumptive.
5. CONCLUSIONS
The analysis of the informant's view of the phenomenon of non-halal income
utilization in the qardhul hasan fund has different perspectives. The results show there
are two different views related to the phenomenon, namely the first view, ahsan used as
a source of funds qardhul hasan. In this case, its use is allocated to the public interest or
the poor. The second view refers to the use of non-halal income on the source of
qardhul hasan funds. It is based on the assumption that if a consequence of activity,
activity is considered haram, then the previous activity which is the emergence of
prohibition. Hence, something that comes from the haram is not feasible even functional
given. However, an exception if non-halal income is used for public purposes, this is
classified as permissible rather than redundant.
The result of the analysis shows that although there are differences of opinion
from the informant statement, there is a relation or understanding of understanding, in
this case that is as follows:
1. Non-halal income may be used in qardhul hasan funds. This is based on the
assumption that the return of the ummah to the Ummah is aimed at cleansing of the
haram. However, the separation of use should be prioritized by separating the use of
non-pecuniary income specifically allocated for public purposes (public facilities) such
as road construction, bridges and others. While sources of qardhul hasan derived from
halal funds are allocated for consumptive donations or revolving loans (qardhul hasan).
2. Prudent efforts in managing non-halal income in sharia banking in kaffah
(comprehensive) according to Prof. Dr. Akhmad Mujahidin, M. Ag is with a spin off,
stopping interest income in sharia banking. Because to reach the principle, Shari'ah of
Islam in operational must avoid the haram (interest). Consistent with those delivered by
Dr. Aji Dedi Mulawarman that differentiates sharia banking with non sharia banking is
from the paradigm, if the paradigm take a measure based on interest (interest) then to
avoid interest in syariah banking only become an expectation without any realization.
75
So the wisest and wholesome decision is to decide all transactions that generate interest,
whose goal is to run the principles of Islamic law comprehensively (kaffah).
3. Transparent disclosure becomes an increasing orientation of public trust. According
to the analysis of research efforts disclosure needs to be done is to separate the use of
non-halal income on the allocation of funds that are consumptive and especially
productive loans (qardul hasan). Although non-halal income accumulates with other
sources on qardhul hasan funds. However, this can be anticipated by disclosing it to the
source report and the use of a benevolent fund or a note on a financial statement. Hence,
the non-halal income specifically only allocated for the public interest, such as road
construction, bridge construction and others.
5.1. Limitations of Research

This research is compiled and written by researchers who cannot be separated
from the shortcomings and limitations. In this study, the clerical information
interviewed was only one informant. However, the presence of more than one clerical
infamy can strengthen the results of the research. Then the practitioner's informants
from the select ones are not from their direct stakeholders such as the Sharia
Supervisory Board, which in this case is better informed about the principles of sharia
banking transaction better and accurate.
5.2. Suggestion
After doing research and based on the understanding of researchers in analyzing
this phenomenon the researchers provide suggestions as follows. First, for sharia
banking, to disclose non-halal income more transparently, reveals the source of how
transactions and allocated uses are made; as well as efforts to minimize the incidence of
non-halal income to realize sharia banking with the principles of Islamic law in a
comprehensive (kaffah). Secondly, for the stakeholders, the effort to realize sharia
banking in accordance with the principles of Islamic law comprehensively (kaffah) in
the decision to accumulate non-halal income with the source of halal funds in its use in
qardhul hasan funds may still need to be considered. Separation of the use of qardhul
hasan resources between halal funds and non-halal funds can be a consideration because
as a precautionary form in the use of "forbidden" income. The use of non-halal sources
of funds should be allocated exclusively to the public interest while sources derived
from halal funds are used for productive loan capital and in the form of consumptive
such as alms to the economically weak community.
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Wiroso. 201 Produk Perbankan Syariah. Jarkarta: LPEE Usaksi
www.syariahmandiri.co.id. Diakses pada 30 Januari 2015
www.bnisyariah.co.id. Diakses pada 30 Januari 2015
77
The Influence of Good Corporate Governance on Company Value in Jakarta
Islamic Index Companies in Indonesia Stock Exchange 2012-2016
Vera Oktari, and Nanda Fito Mela

ABSTRACT
The goal of this study is to assess the effect of the Board of Commissioner, Independent
Commissioner, and Audit Committee to firm value. The population in this study was all
companies in Jakarta Islamic Index as many as 30 companies. This study is using
purposive sampling method, and there are 15 companies that listed in Jakarta Islamic
Index on 2012-2016 that meets the criteria of the sample. Analysis of data used multiple
regression models. The study states that the Board of Commissioner does not have a
significant influence on firm value. Independent Commissioner has a significant impact
on the corporate value. Audit committee has a significant effect on firm value.
Keywords: Board of Commissioner, Independent Commissioner, Audit Committee,

Firm Value
78
Study Analysis of Factors Affecting Financial Performance of Islamic
Microfinance Institutions in Pekanbaru
Ahmad Fauzan Fathoni, and Haryetti,

Department of Management, Faculty of Economics and Business Riau University
ABSTRACT
The success of an organization is determined by several important internal factors. An

organization will always strive to improve financial performance in order to maintain
institutional sustainability. This study analyzes the affectshuman resource, shariah
supervisory board, shariah commitment, innovation ability, fund management, facilities
and infrastructure, and routine evaluation toward financial performace of Islamic
microfinance. Regarding to data collection, a self-constructed questionnaire was
administered and distributed to 22 Islamic microfinance institutions in Pekanbaru
using census and snowball approaches. The multiple linear regressions and
instrument validity and the reliability test are used to analyze the data. Theresult
shows that all of construct variable have strong correlation with financial
performance; but only fund management has significant to financial performance.
Keywords: Islamic microfinance, financial performance, internal factors
79
Analysis of the Receipt of The Income Tax Article 4 Paragraph (2) before and
after the Implementation of The Goverment Regulation Number 46 Year 2013
Muhammad Habib Gunawan, Yefni*, and Suci Nurulita

Accounting Department, Politeknik Caltex Riau, 21265, Pekanbaru, Indonesia
ABSTRACT
The government in their effort to increase tax revenue from the MSMEs sector on July
1, 2013 issued the Government Regulation (GR) Number 46 Year 2013. This provision
regulates the final tax imposition of 1% for a Taxpayer with gross income of not
exceeding 4.8 billion in a (one) tax year. After this GR was applied, the taxes paid by
MSMEs will contribute to the receipt of Income Tax Article 4 Paragraph (2). This
regulation has a diverse impact for business actors. Of course, it seems simple and easy,
but there is also injustice potential for business actors, onto whom this matter will affect
the receipt of Income Tax Article 4 Paragraph (2).The purpose of this study is to
determine whether there are differences in the receipt of the income tax Article 4
Paragraph (2) before and after the implementation of the Government Regulation (GR)
Number 46 Year 2013. The type of this research is a quantitative descriptive research
which is in the form of a comparative research. The data used in this study are
secondary data obtained from KPP Pratama Pekanbaru Senapelan and collected by
using the documentation method. The data used include data from 30 months before
and after the application of the GR 46/2013. For the group before the GR 46/2013 was
applied, the data used are the installments of the Income Tax Article 25 MSMEs each
month, while for the group after the GRwas applied, the data used are the Receipt of the
GR 46/2013 every month. This research uses the parametric analysis technique using
the Paired Sample T-Test. Based on the tests conducted, it can be concluded that there
is a significant difference in the receipt of the Income Tax Article 4 Paragraph (2)
before and after the application of the GR 46/2013. The difference that occurs is an
increase in the receipt of the income tax Article 4 Paragraph (2) after the GR 46/2013
was applied.
Keywords: The Government Regulation Number 46 Year 2013; Income Tax Article
25 MSMEs; Receiptof Income Tax Article 4 paragraph (2); Income Tax
Article 25
*)
Corresponding author: yefni@pcr.ac.id
80
Independence of Supervision to The State-Owned Banks towards
Good Corporate Governance
Andrew Shandy Utama

The Student of Doctoral Program of Law, Andalas University, INDONESIA
e-Mail: andrew.fh.unilak@gmail.com
ABSTRACT
Bank is a financial institution whose business activities collect funds from the
community and channel the funds back to the community, and provide financial
services. Based on its ownership, the bank is divided into private owned banks and
state-owned banks, or better known as State-Owned Enterprises (SOEs). The law has
mandated that every bank is required to conduct business activities in accordance with
the principles of prudence. Therefore, it is very important to optimize the supervision of
state-owned banks because in addition to collecting funds from the public in the form of
savings, deposits, and demand deposits on the basis of trust, state-owned banks
established using the state money is not small in number. The problem in this research is
how to supervise state-owned banks in national banking system? What is the
government and the House of Representatives’ intervention on state-owned banks? How
is the independence of supervision of state-owned banks to good corporate governance
after the enactment of Law Number 21 of 2011? The method used in this research is
normative law research. Sources of data used in this research are secondary data,
namely data obtained from legislation, scientific journals, and legal literature. Data
collection techniques used in this research is literature study. Data analysis technique
used in this research is qualitative analysis. The result of this research is that supervision
of state-owned banks in the national banking system is implemented by Bank Indonesia
as central bank, but under government intervention as shareholder and House of
Representatives as supervisor of government policy. Following the enactment of Law
Number 21 of 2011, the supervision of state-owned banks was handed over to the
Financial Services Authority as an independent state institution.
Keywords: Good corporate governance, State-owned banks, Independence of
supervision
1. INTRODUCTION
In Indonesia, as mandated by the Pancasila and the 1945 Constitution of the State
of the Republic of Indonesia, the goal of national development is the creation of a just
and prosperous society based on economic democracy by developing a just economic
system. In order to ensure the ongoing economic democracy, all potentials, initiatives
and creativity of the people must be mobilized and developed fully within the
boundaries that do not harm the public interest, so that all potential economic forces can
be mobilized into a real economic power for the benefit of increasing prosperity people.
In order to achieve these objectives, the implementation of economic development
should pay more attention to harmony and balance of elements of equity development,
economic growth, and national stability. One institution that has a strategic role in
harmonizing and balancing each element of the development trilogy is banking.
81
Banking is anything about the bank, including institutions, business activities, and
ways and processes in carrying out its business activities. Banking institutions existed in
Indonesia long before the country became independent. Banking activities began to be
introduced since the days of the VOC (Vereenigde Oost-Indische Compagnie) colonize
Indonesia. The VOC uses its own financial system and payment mechanism in its
trading activities. Therefore, in 1746, the VOC established De Bank van Leening, later
changed to De Bank Courant en Bank van Leening in 1752. This bank was the first
bank born in Indonesia. (Muhamad Djumhana, 2012: 1) After that, Nederlandsche
Handel Maatschappij stood in 1824, De Javasche Bank in 1828, NV Escompto Bank in
1857, Post Spaarbank in 1898, and De Algemeene Volkscredit Bank in 1934. (Djoni S.
Gazali and Rachmadi Usman, 2012: 146)
In simplest terms, banks are defined as financial institutions whose business
activities are collecting funds from the community and channeling the funds back to the
community, as well as providing financial services. (Kasmir, 2012: 3) Based on its
ownership, the bank is divided into private owned banks and state-owned banks, or
better known as State-Owned Enterprises (SOEs).
Based on Law Number 7 of 1992, the main function of Indonesian banking is to
collect and channel public funds. First, the bank serves to raise funds from the
community. Banks raise funds from the public in the form of savings. The community
trusts banks as a safe place to invest and save money. People with excess funds are in
dire need of a bank to keep funds safely. The security of the money it keeps in the bank
by the community is a very important factor for the community. In addition to sense of
security, the other purpose is as a place to make an investment. People will feel more
secure if their money is invested in the bank. By saving the money in the bank,
customers will also benefit from a return on their savings which amount depends on the
policy of each bank. (Ismail, 2011: 4-5)
Second, the bank works to channel funds to the community. Channeling funds is a
very important activity for banks because banks will earn revenue on funds discharged.
Revenues generated from fund channeling activities to customers represent the largest
revenue in each bank, so the distribution of funds to the public becomes very important
for the bank. The distribution of funds to the community, in addition to activities that
can generate profits take advantage of idle funds because the bank has paid a certain
amount of funds that have been collected. Thus, banks should not allow the public funds
to settle, and must immediately channel it to the community in need in order to obtain
income on funds that channeled. Loans given to the public occupy the largest portion of
assets in each bank. (Ismail, 2011: 5-6)
Considering the role of banking institutions that are so strategic in achieving the
national development objectives, it is necessary for the banking institution to always
have effective guidance and supervision, based on the solid foundation of the movement
so that banking institutions in Indonesia are able to function efficiently, healthy,
competition is increasingly global, able to protect well the funds deposited by the
community to him, and able to channel public funds into areas that are productive for
the achievement of development goals.
In providing credit and conducting other business activities, each bank are
required to take measures that do not harm the bank and the interests of customers who
entrust their funds to the bank. Given that banks primarily work with funds from
communities held on the banks on a trust basis, every bank needs to continue to
maintain its health and maintain public trust in it.
82
Indonesian society once lost confidence in the banking world at the time of the
economic crisis of 1998. The economic crisis became devastation for the national
banking system because many banks did not apply the prudent principles in managing
their business activities. The real evidences that resulted were among others the freezing
up of 38 private banks, including Bank Ciputra, Bank Ganesha, Pesona Bank, Bank
Alfa, Bank Aspac, and so on. Furthermore, there are 7 private banks that are taken over
by the government, namely Bank RSI, Bank Putera Sukapura, Bank POS, Bank Artha
Pratama, Bank Nusa Nasional, Bank Jaya, and Bank IFI. In addition, there are also 4
state-owned banks, namely Bank Dagang, Bank Exim, Bank Bumi Daya, and Bapindo
collapse and merged into Bank Mandiri.
In order for this incident not to happen again, it is very important to optimize the
supervision of banks, especially the supervision of state-owned banks. This is because
in addition to collecting funds from the public in the form of savings, deposits, and
demand deposits on the basis of trust; state-owned banks established using state money
that is not a few in number.
From the description described above, then the formulation of the issues to be
discussed in this study is as follows:
1. How to supervise the state-owned banks in the national banking system?
2. How are the government and the House of Representatives’ intervention on state-
owned banks?
3. How is the independence of supervision of state-owned banks towards good
corporate governance after the enactment of Law Number 21 of 2011?
2. METHODS OF RESEARCH
The method used in this research is normative law research. Sources of data used
in this research are secondary data, namely data obtained from legislation, scientific
journals, and legal literature. Data collection techniques used in this research is
literature study. Data analysis technique used in this research is qualitative analysis.
3. RESULTS OF RESEARCH AND DISCUSSIONS

3.1. Supervision of the State-Owned Banks in National Banking System
Based on Law Number 10 of 1998, bank guidance and supervision is conducted
by Bank Indonesia. This provision explicitly states that supervision of banks, including
state-owned banks, in the national banking system is conducted by Bank Indonesia.
Bank Indonesia is the central bank of the Republic of Indonesia.
The objective of Bank Indonesia is to achieve and maintain rupiah stability. To
achieve these objectives, Bank Indonesia has a duty which one of them is to regulate
and supervise banks, including state-owned banks. In line with that, Bank Indonesia is
given full authority, responsibility, and obligation to conduct guidance and supervision
on state-owned banks by pursuing efforts, both preventive and repressive. On the other
hand, state-owned banks must own and implement internal control system in order to
ensure the implementation of decision-making process in the management of state-
owned banks in accordance with the principles of prudence.
The state-owned banks must submit to Bank Indonesia all information and
explanation of its business according to the procedure stipulated by Bank Indonesia.
The state-owned banks at the request of Bank Indonesia shall provide an opportunity for
examination of books and files thereof, and shall provide necessary assistance in order
to obtain the truth of all information, documents and explanations reported by the
83
relevant state-owned banks. The obligation to convey information and explanations
relating to the business activities of state-owned banks to Bank Indonesia is required in
view of the information required to monitor the circumstances of a bank. Monitoring the
state of the bank needs to be done in order to protect public funds and maintain the
existence of banking institutions. Public confidence in banking institutions can only be
grown if the banking institutions in their business activities are always in good health.
Therefore, in order to obtain the truth of the report submitted by state-owned bank,
Bank Indonesia is authorized to examine the books and files available to state-owned
banks. Information on state-owned banks obtained by Bank Indonesia is not disclosed
and is confidential.
Bank Indonesia conducts checks on state-owned banks, either on a regular basis or
at any time as necessary. Basically, the inspection conducted by Bank Indonesia is
conducted periodically at least once a year for each state-owned bank. In addition,
inspections may be conducted at any time if deemed necessary to assure indirect
supervision results and where there are indications of deviations from sound banking
practices. Against the state finances administered by a state-owned bank, the Supreme
Audit Board may conduct checks on the relevant state-owned banks.
Bank Indonesia may assign a public accountant for and on behalf of Bank
Indonesia to conduct an audit of state-owned banks. Examination of state-owned banks
conducted by public accountants is a local examination, which is a form of delegation of
authority of Bank Indonesia as the supervisory authority and supervisor of banking.
In the event that state-owned banks are experiencing difficulties that endanger its
business continuity, Bank Indonesia may take action in order:
a. Shareholders add capital.
b. Shareholders replace the board of commissioners and / or directors of state-owned
banks.
c. The state-owned banks write off bad debts and take into account losses with their
capital.
d. The state-owned banks merge or consolidate with other banks.
e. The state-owned banks are sold to buyers willing to take over all liabilities.
f. The state-owned banks deliver the management of all or part of its activities to
other parties.
g. The state-owned banks sell part or all of its assets and / or obligations to the bank or
other parties.
3.2. The Government and the House of Representatives’ Intervention on State-

Owned Banks
Based on Law Number 19 of 2003, State-Owned Enterprises is a business entity
which is wholly or partly owned by the state through direct participation derived from
separated state assets. In line with that, Law Number 19 of 2003 implicitly states that
the Ministry of SOEs as state institutions that represent the government in overseeing
the SOEs. As the owner of a state-owned bank, the government is entitled to appoint the
Board of Directors, Commissioners and Supervisory Board through the General
Meeting of Shareholders. This is one form of government intervention against state-
owned banks.
In addition, government intervention in state-owned banks occurs in the form of
corruption, collusion and nepotism. Activities that are often intervened by the
government include the determination of commissioners and directors, employee
84
recruitment, procurement of goods and services, as well as lending. The government
often intervenes against the state-owned bank officials to approve the provision of credit
to their partner entrepreneurs, so that directors are not only dealing with entrepreneurs
but also dealing with the 'people' behind them.
In addition to the intervention of the government through the Ministry of SOEs, as
a business entity established using state assets, the state-owned banks are also
supervised its performance by the House of Representatives which has the function of
controlling the government. Supervision of state-owned banks is implemented by the
House of Representatives through Commission XI in charge of finance and banking.
Commission XI is entitled to visit directly to the state-owned banks and invite state-
owned banks in hearings held in the House of Representatives in order to assess the
performance of state-owned banks.
3.3. Independence of Supervision of BUMN Banks towards Good Corporate

Governance after the enactment of Law Number 21 of 2011
The onset of globalization in the financial system and the rapid advancement in
information technology and financial innovation has created a highly complex,
dynamic, and interconnected financial system between the financial sector, both in
terms of products and institutions. In addition, the existence of financial services
institutions that have ownership relationships in various financial sub-sectors
(conglomerates) has added to the complexity of transactions and interactions among
financial services institutions within the financial system.
The multitude of cross-sectoral issues in the financial services sector, which
include moral hazard actions, lack of financial services consumer protection, and the
disruption of financial system stability further encourage the establishment of an
integrated oversight body in the financial services sector. In relation to the above, it is
necessary to reorganize the organizing structure of the institutions that carry out
regulatory and supervisory tasks in the financial services sector, covering the banking
sector, capital markets, insurance, pension funds, financing institutions and other
financial services institutions.
Therefore, on November 22, 2011 Law Number 21 of 2011 on the Financial
Services Authority was enacted. The Financial Services Authority is an independent
institution free of interference by other parties, which has the functions, duties and
authority of the regulation, supervision, inspection and investigation of financial service
institutions such as banking, capital markets, insurance, pension funds, financing
institutions, other financial services institutions. Institutionally, the Financial Services
Authority is outside the government, which means that the Financial Services Authority
is not a part of government power. However, it does not rule out the existence of
elements of government representation because in essence the Financial Services
Authority is an authority in the financial services sector that has strong relations and
links with other authorities, in this case fiscal and monetary authorities.
The Financial Services Authority is established with the aim that all activities
within the financial services sector are organized on a regular, fair, transparent and
accountable basis; able to realize a sustainable and stable financial system; and able to
protect the interests of consumers and society.
The Financial Services Authority functions to provide an integrated regulatory
and supervisory system for all activities within the financial services sector, including
banking.
85
To carry out regulatory and supervisory tasks in the banking sector, the Financial
Services Authority has the authority:
a. Arrangement and supervision on bank institution:
1) Licensing for establishment of bank, opening of bank office, articles of
association, work plan, ownership, management and human resources, merger,
consolidation and acquisition of bank, and revocation of business license of
bank.
2) Bank business activities, including sources of funds, provision of funds,
hybridation products, and activities in the field of services.
b. Regulation and supervision on bank health:
1) Liquidity, profitability, solvency, asset quality, minimum capital adequacy
ratio, maximum credit extension, loan to deposit ratio, and bank reserve.
2) Bank statements related to the health and performance of banks.
3) Debtor information system.
4) Credit testing.
5) Standard of bank accounting.
c. Regulation and supervision on bank prudential aspects:
1) Risk management.
2) Bank governance.
3) The principle of knowing customers and anti money laundering.
4) Prevention of terrorism financing and banking crime.
d. Bank check.
Law Number 21 of 2011 clearly states that the Financial Services Authority is an
independent state institution, so it is expected to guarantee the implementation of good
corporate governance principles by state-owned banks.
Implementation of good corporate governance is needed to build public trust and
the international world as a necessary condition for the banking world to grow well and
healthy. Therefore, the Bank for International Sattlement, as an institution that reviews
continuously the prudential principles that must be embraced by banks, has issued
guidelines for the implementation of good corporate governance for the world of
banking internationally.
As an intermediary institution and trust agency, in conducting its business
activities, state-owned banks must adhere to the principle of transparency, having
performance measures of all levels of banks based on measures consistent with
corporate values, business targets, and bank strategies as a reflection of bank
accountability accountability), adheres to the prudential banking practices and
guarantees the implementation of the prevailing provisions as a form of bank
responsibility, objective and free from pressure from any party in decision-making
(independency), and always concerns the interests of all stakeholders based on the
principle of equality and fairness fairness).
4. CONCLUSION
1. According to Law Number 7 of 1992 which has been amended by Law Number 10
of 1998, supervision of banks, including state-owned banks, in the national banking
system is conducted by Bank Indonesia.
2. Government Intervention to state-owned banks is the owner of state-owned banks,
the government is entitled to appoint Directors, Commissioners and Supervisory
Board through General Meeting of Shareholders. Meanwhile, the House of
86
Representatives’ intervention on state-owned banks is through the implementation
of the government's control function.
3. After the enactment of Law Number 21 of 2011, the supervision of state-owned
banks becomes the authority of the Financial Services Authority as an independent
state institution in realizing good corporate governance.
REFERENCE
Abdul Ghofur Anshori. 2009. Perbankan Syariah di Indonesia. Yogyakarta: Gadjah
Mada University Press.
Djoni S. Gazali dan Rachmadi Usman. 2012. Hukum Perbankan. Jakarta: Sinar Grafika.
Ismail. 2011. Manajemen Perbankan; Dari Teori Menuju Aplikasi. Jakarta: Kencana.
Kasmir. 2012. Dasar-dasar Perbankan. Jakarta: Rajawali Pers.
Muhamad Djumhana. 2003. Hukum Perbankan di Indonesia. Bandung: Citra Aditya
Bakti.
Totok Budisantoso dan Sigit Triandaru. 2006. Bank dan Lembaga Keuangan Lain.
Jakarta: Salemba Empat.
Zainal Asikin. 2015. Pengantar Hukum Perbankan Indonesia. Jakarta: Rajawali Pers.
Undang-Undang Nomor 7 Tahun 1992 tentang Perbankan.
Undang-Undang Nomor 10 Tahun 1998 tentang Perubahan Atas Undang-Undang
Nomor 7 Tahun 1992 tentang Perbankan.
Undang-Undang Nomor 23 Tahun 1999 tentang Bank Indonesia.
Undang-Undang Nomor 19 Tahun 2003 tentang Badan Usaha Milik Negara.
Undang-Undang Nomor 3 Tahun 2004 tentang Perubahan Atas Undang-Undang Nomor
23 Tahun 1999 tentang Bank Indonesia.
87
The Analysis on the Influence of Service Quality and the Effectiveness
of Account Representative Supervision on Corporate Taxpayers
Compliancewith Account Representative Competence as Moderating
Variable at the Pratama Tax Office Lubuk Pakam
Suhaila Husna Samosir, and Horia Siregar

Fakultas Ekonomi UMN Al Washliyah, Jl. Garu II No. 93 Medan 20147
ABSTRACT
This study aimed to find out, analyze and prove empirically about the influence of
service quality and the effectiveness of account representative on the compliance
corporate taxpayers and account representative competence as moderating variable at
the Pratama Tax Office, Lubuk Pakam. The population of this study was 8,235
corporate taxpayers registered at the Pratama Tax Office,Lubuk Pakam. They were
scattered in 22 sub districts of Deli Serdang District, and 99 of them were used as the
samples since they returned the questionnaires, taken by using proportional random
sampling technique. The data were analyzed by using multiple linear regression analysis
and residual test for moderating variable. The result of the study showed that, partially
and simultaneously, there was the influence of service quality and the effectiveness of
account representative supervision on corporate taxpayers’ compliance at the Pratama
Tax Office, Lubuk Pakam. Account representative competence as moderating variable
could strengthen the correlation of service quality and the effectiveness of account
representative supervision with corporate taxpayers’ compliance at the Pratama Tax
Office, LubukPakam.
Keywords: Service Quality, Effectiveness of Supervision, Account Representative

Supervision, Account Representative Competence, Corporate Taxpayers
Compliance.
1. INTRODUCTION
Indonesia is a developing country that constantly conducts development in all
fields. National development is one of the government's ongoing activities. Of course,
the government requires a lot of funds to run the government tasks and implementation
of such development. The greater the government expenditure used to carry out
government duties and the implementation of development then the state revenue is also
required to be improved.
The source of state revenue comes from tax revenue and non-tax revenues.
Revenue from the tax sector is the largest source of state revenue. During the last five
years tax revenues contribute more than 70% of total domestic revenues. Even in 2013,
tax revenue is almost 80% of total state revenues (Ministry of Finance, 2013). Tax
revenues continue to increase from year to year, as our nation's efforts to escape
dependence on external assistance. This is as expected in the Principles of Mind and
Principles of Amendment of Law No. 16 of 2000 on General Provisions and Tax
Procedures that the main policy in the field of tax is aimed at increasing tax revenues
towards national independence in state financing and development financing.
The Directorate General of Taxes needs to adjust and refine its organizational
structure. So far the organizational structure of the Directorate General of Taxation is
88
based on the type of tax. Organizational structure like this in the implementation of
tasks in the field often lead to inefficiencies that result in service and supervision is not
running optimally. Therefore, the Directorate General of Tax (DGT) needs to reform the
taxation which became known as the modernization of taxation.
The background of the modernization of taxation is to achieve high levels of tax
compliance (tax compliance), high trust (trust) and high level of productivity of tax
apparatus (Pandiangan, 2008: 8).
The modernization of taxation undertaken by the DGT includes organizational
structure reform, business process reform and human resource management reform. The
manifestation of organizational structure reform and human resource management is
expressed through the existence of a new function in the modern office of DGT.
The creation of Tax Office Modern makes DGT always strive to provide
excellent service to taxpayers and the realization of excellent service by establishing
Account Representative in every Office of Modern Tax Services.
The concept of know your taxpayers (Knowing Your Taxpayers) to be a
reference Appointment Account Representative. In accordance with the Regulation of
the Minister of Finance No. 68/2008 on Amendment to Decree of the Minister of
Finance No. 98/KMK.01/2006, Account Representative is a tax officer responsible for
the implementation of services, consultation and supervision directly for certain
taxpayers assigned to him.
Tax compliance is not a foreign issue in taxation. Tax compliance is an issue that
has been commonplace since taxation. Tax compliance means taxpayer's willingness to
fulfill his tax obligations (Simon James et al, 2003 in Gunadi, 2005: 4). The issue of
compliance is important because non-compliance will simultaneously lead to tax
avoidance, such as tax evasion and tax avoidance resulting in reduced deposits of funds
to the state treasury.
If in a country the level of taxpayer compliance in paying taxes is very high by
itself would increase the tax revenue. Tax compliance becomes one of the determinants
for the success of tax revenue. Thus, the key question is how to improve taxpayer
compliance? Of course, by maximizing the budget allocation derived from the tax to the
maximum for taxpayer prosperity. In addition, as a form of appreciation to the taxpayers
who have financed the development of the country then it is appropriate taxpayers are
given the best possible service in fulfilling its tax obligations.
In essence taxpayer compliance is influenced by the conditions of tax
administration system which includes tax service (tax service) and tax enforcement (tax
enforcement). Improvement of tax administration itself is expected to encourage
taxpayer compliance. The more accurate measurement of the effectiveness of tax
administration is by measuring the amount of gap (tax gap), ie the difference between
actual receipt and potential tax with the level of compliance of each tax sector
(Nasucha, 2004: 9). Tax compliance can be identified from the compliance of the
Taxpayer in registering, compliance to remit Notice compliance in the calculation and
payment of tax payable, and compliance in payment of arrears.
Therefore the researchers interested in conducting research under the title “The
Analysis on the Influence of Service Quality and the Effectiveness of Account
Representative Supervision on Corporate Taxpayers Compliancewith Account
Representative Competence as Moderating Variable at the Pratama Tax Office Lubuk
Pakam”.
89
Based on description of the background above then the formulation of the problem
from this research is as follows:
1. Is the Service Quality and Effectiveness of Account Representative Supervision
partially influence on the Corporate Taxpayer Compliance at Pratama Tax Office
LubukPakam?
2. Is the Service Quality and Effectiveness of Account Representative Supervision
simultaneously influence on the Corporate Taxpayer Compliance at Pratama Tax
Office LubukPakam?
3. Does Account Representative Competence can moderate the relationship between
Service Quality and Effectiveness of Account Representative Supervision with
Corporate Taxpayer Compliance at Pratama Tax Office LubukPakam?
4. How much Service Quality and Effectiveness of Account Representative
Supervision influence on the Corporate Taxpayer Compliance at PratamaTax
Office LubukPakam?
Based on the formulation of the problem, the hypotheses of this study are:
1. Ha: There is the Influence between Service Quality and the Effectiveness of
Account Representative Supervision simultaneously effect to the Corporate
Taxpayer Compliance at Pratama Tax Office Lubuk Pakam.
2. Ho : There is no the Influence between Service Quality and the Effectiveness of
Account Representative Supervision simultaneously effect to the Corporate
Taxpayer Compliance at Pratama Tax Office Lubuk Pakam.
2.1. Service Quality
Tax collection system based on Self-Assessment which provides an opportunity
for taxpayers to calculate, pay and report their own tax obligations. This means that the
consciousness and compliance of the taxpayer in fulfilling his tax obligations lies with
the taxpayers themselves. One form of efforts to improve taxpayer compliance can be
done through improving the quality of service.
Service is the giving of a performance or invisible action from one party to
another party. Generally services are produced and consumed simultaneously, where
interactions between service providers and service recipients affect the results of these
services (Rangkuti, 2006:26).
The Quality of service is a measure of how well the level of service provided is
able to adjust to customer expectations, so the quality of service is realized through the
fulfillment of customer needs and desires as well as the accuracy of the delivery of the
customer to divide the customer expectations (Elitan and Anatan, 2007:47).
The taxpayer's perception of the quality of the tax service can be measured by
indicators of interaction quality, physical environment quality and service quality
outcomes (Caro & Garcia, 2007 in Aryobimo and Nur, 2012:2). Some studies reveal
that the quality of interaction is an important factor which has a significant influence in
the taxpayer's perception of overall service quality (Caro & Garcia, 2007). The quality
of interaction is how fiscal in communicating the tax service to the taxpayer so that the
taxpayer is satisfied with his service. The quality of the physical environment is how the
environmental quality role of the tax office itself in serving the taxpayer. The result of
service quality is if the service of the tax authorities can give satisfaction to the taxpayer
then the taxpayer's perception of the taxpayers will be good so as to improve taxpayer
compliance.
90
2.2.The Effectiveness of Supervision
In general, what are meant by supervision are all activities and actions to ensure
the operation of an activity that does not deviate from the objectives and plans outline.
Oversight is a process of observation rather than the exercise of all organizational
activities to ensure that all work underway is carried out in accordance with pre-
determined plans (Siagian 1990, 107) and also means improving and straightening it to
achieve the objectives in accordance with what is planned (Winardi, 2000:585).
Effectiveness is the state and ability of a successful work done by humans to
provide the expected. Effectiveness should be assessed by using goal-achievement
approaches rather than the way (Robbins, 1994:54). Effectiveness is a very important
thing because it is able to provide an idea of the success of an organization in achieving
its goals.
Supervision function plays a very important role in the self-assessment tax system
because without supervision in the condition of compliance level taxpayers are still low
which can cause the system that will not run properly, so the taxpayer will carry out tax
obligations incorrectly and ultimately the acceptance of the tax sector is not will be
achieved.
Account Representative has the duty to do law enforcement softly (soft law
enforcement). How it works is to create and update data and supervise taxpayer
compliance both formal and material and calculate the potential tax. This process is
done not through contact with the taxpayer but through a letter of appeal sent to the
taxpayer with the help Approweb application and Tax Information System to obtain
information and taxpayer data.
2.3.Account Representative Competency

Expertise is defined as the skill of an expert. The expert is defined as someone
who has a certain level of skill or knowledge in a particular subject gained from training
or experience (Webster's Ninth New Collegiate Dictionary in Murtanto, 1999). The skill
component based on the model developed by Abdolmohammadi (1992, in Murtanto
1999:40) can be divided into:
1. Knowledge component which includes components such as knowledge of facts,
procedures, and experience;
2. Psychological traits (pshycological traits) aimed at communication, trust, creativity,
and the ability to work with others;
3. The ability to think to accumulate and process information;
4. Formal and informal decision-making strategies; and Analysis of tasks that are
influenced by audit experience that has an influence on decision making.
According to Michael Armstrong cited Wardiah (2007) that competence is the
knowledge, skills and quality of individuals to achieve the success of their work, ability
and willingness to perform an effective performance task.
The level of competence is as follows: Skill, Knowledge, SelfImage,
TraitandMotive (Spencer in Nurmianto, 2006). Skill is the ability to perform a task well
and knowledge is the information that someone has for a particular field (certain). Self-
image is a person's view of self, brand identity; trait is as the eternal characteristic of a
characteristic that makes people to behave, for example: self-confidence and motive is
something one person impulse consistently behaves, because behaviors like that as
source of comfort.
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Based on the above definitions, competence can be described as the ability to
perform a task, role or task, the ability to integrate knowledge, skills, attitudes and
personality values, and the ability to build knowledge and skills based on experience
and lessons learned.
Knowledge that must be mastered by each Account Representative includes the
knowledge of:
1. The provisions of taxation as a whole
2. Insight and control over all types of taxes
3. Utilization of the latest information technology
Account Representative Skills and abilities include the ability to:
1. Supervise the taxpayer's tax obligations
2. Understand the corporate characteristics and taxpayer industry
3. Conduct the data analysis and potential taxation obtained from various sources
4. Providing excellent service
5. Communicate well
With regard to attitude skills or attitude, Account Representative must be
proactive, creative, communicative and responsive.
2.4. Taxpayer Compliance

Tax compliance is defined as a condition in which the taxpayer meets all tax
obligations and exercises his taxation rights. There are two kinds of compliance: formal
compliance and material compliance. Formal compliance is a condition in which the
taxpayer meets the tax obligations formally in accordance with the provisions of the tax
law (Nurmantu, 2005: 53).
Taxpayer compliance concerns the extent to which taxpayers fulfill their tax
obligations in accordance with applicable tax rules (James and Alley, 1999). Thus the
level of taxpayer compliance can be measured by the Tax Gap is the difference between
what is written in the tax law with what is implemented by the taxpayer.
Self-Assessment tax collection system is applicable in Indonesia, giving trust to
the taxpayer in carrying out the obligations and taxation rights, such as in calculating,
paying, calculating and reporting its tax liability through the Notice (SPT). This causes
the correctness of tax payments depending on the veracity and compliance of the
taxpayer itself in reporting its tax obligations. The expected compliance with the Self-
Assessment system is voluntary compliance rather than compulsory compliance. To
improve the voluntary compliance of the Taxpayer, it takes justice and openness in
applying the taxation regulation, the simplicity of rules and procedures of taxation as
well as the prompt and fast service of the Taxpayer.
Tax Compliance is not an unfamiliar issue but it is a familiar issue that has always
been in taxation. Domestically the taxpayer compliance ratio in fulfilling its taxation
obligations from year to year still shows a percentage that did not increase significantly.
Increasing taxpayer compliance is a major goal to be achieved by various tax authorities
in the world.
2.5 The Understanding of Account Representative

Account Representative becomes something that we often hear along with the
application of modernization system by Directorate General of Taxes. The major change
of vertical organization of the Directorate General of Taxes was started in 2002 with the
establishment of Regional Offices and Modern Tax Office through the Tax
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Administration Modernization Program. Some of the main characteristics of the Modern
Tax Office are:
1. The joining of the Tax Office and Tax Investigation Office and the Land and
Building Tax Office into the Tax Office;
2. The existence of administrative segmentation of Taxpayers, namely large Taxpayer
(KPP Large Taxpayer), middle taxpayer (KPP Madya) and small taxpayer (KPP
Pratama).
3. The organization of the functional tax office, and;
4. Service-oriented paradigm facilitates the taxpayers to carry out their tax
obligations, among others by developing a number of facilities.
The soul of this modernization program is the implementation of good governance
(good governance), namely the implementation of a transparent and accountable tax
administration system, by utilizing a reliable and up-to-date technology information
system. The strategy pursued is the provision of excellent service as well as intensive
supervision to the taxpayers.
Tax reforms were undertaken by the Directorate General of Taxation which aims
to improve high tax compliance, increasing public trust and increasing productivity of
the tax apparatus (HadiPurnomo, 2004).
Account Representative is a liaison partner between the Directorate General of
Taxes and the taxpayer to carry out the supervision of taxation obligations, carry out the
guidance and appeal to taxpayers and potential excavations. Account Representative is
an employee of the Directorate General of Taxes who is given the trust, authority and
responsibility to provide services, consultation and supervision directly to the
mandatory certain taxes.
Based on Regulation of the Minister of Finance number 68 in 2008 the duty of
AccountRepresentative as follows:
1. monitoring tax compliance of taxpayers;
2. Guidance/appeal and consultation of taxation techniques to taxpayers;
3. Preparation of taxpayer profile;
4. Taxpayer performance analysis, Taxpayer data reconciliation in the framework of
intensification;
5. Evaluate the results of the appeal under applicable terms.
The Requirements for employees who may be appointed as
AccountRepresentative in accordance with the Decree of the Minister of Finance of the
Republic of Indonesia number: 98// KMK/.01/2006 dated February 20, 2006 includes:
1. Graduated the lowest Formal Education Diploma III; and
2. The lowest rank at the time of the proposed is Level I Regulator (Group II/d)
The Directorate General of Taxes has an important role in guaranteeing
that the Tax Payer understands the obligation of taxation. This role is submitted directly
to the competent officers in supporting the success of the independence system which
was provided to the Indonesian Taxpayers. Account Representative (AR) is the main
characteristic of Modern Tax Office which is required to know and master all taxes well
including the ins and outs of each Taxpayer from status, income, type of business up to
modus operandi used in tax evasion. More specifically, AR focuses more on the work of
analyzing and monitoring taxpayer compliance of each taxpayer under his supervision
by using the Tax Payer Profile / Company Profile through Approweb application.
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2.6.Conceptual Framework
Based on the research background, the foundation of theory and problem
research, the researchers developed a conceptual framework that is tested in a manner
simultaneous and partial as shown in Figure 2.1
Service Quality (X1)
Taxpayer Compliance (Y)
The Effectiveness of
Supervision(X2)
3. RESEARCH METHOD
3.1 Location and Time of Study
The location of this research is conducted in Pratama Tax Office LubukPakam.
The reason for choosing the location of this research is because the Tax Office of
Pratama Lubuk Pakam is the only tax office in Deli Serdang Regency and its working
area covers 22 sub districts. The study period starts from May 2017 to August 2017.
3.2 Population and Sample Research

3.2.1 Population
Population is a generalization region consisting of objects or subjects that have
certain qualities and characteristics set by researchers to be studied and then drawn
conclusions (Sugiyono, 2008:72).
The population in this research is corporate taxpayer registered at Pratama Tax
Office Lubuk Pakam until March 2017 amount 8,235 taxpayers.
3.2.2 Sample
The sample is part of the population (partial or representative population) to be
used in research (Arikunto, 2002:117). The sampling process is done by proportional
random sampling. Then the sampling technique of the sub-population using incidental
sampling method is anyone who by chance met with the researchers can be used as a
sample, (Sugiyono, 2010:156).
The determination of the number of samples in this study using the formula Slovin
(Yustina, 2009:302) as follows:
N = Total Population
n = Number of Samples
Based on the formula then the numbers of samples of this study are as follows:
n = 98,87 rounded 99 sample
94
Based on the above calculation the numbers of samples used in this study are 99
taxpayers registered in the Pratama Tax Office Lubuk Pakam.
3.3 Research methods

This research method used quantitative research design, because this research
measure influence, hence approach statistical analysis used by product moment formula.
Research design serves to help the implementation of research in order to run well and
smoothly. The data analysis method that used by the researcher in this research are
descriptive and quantitative analysis method that is used to study the research object.
3.4 Data collection technique

Technique used for data collection in this research is questioner that is by giving
written question to customer to be answered. For the preparation of the questionnaire,
the Likert scale is used, which gives a suspension around 1 to 5 for each customer's
answer. Assessment scores on customer answers are:
Strongly agree = 5
Agree = 4
Neutral = 3
Less agree = 2
Disagree = 1
Furthermore, the questionnaire that has been collected will be tested for validity
and reliability to test whether the data should be aborted or not.
3.5 The Technique of Data Analysis

The Data analysis method used in this research is multiple regression analysis
(Multiple Regression Analysis) and residual test for moderating variable. This research
data is processed by using Statistical Package for Social Science (SPSS) program.
Multiple regression analysis is used to predict how the state of the dependent variable
when associated with two or more independent variables. To test the moderating
variable was chosen by using residual test (Ghozali, 2006:209). With multiple
regression,the equation on model I and residual test on model II.
Model I : Y = b0 + b1 X1 + b2 X2 + e
Model II : Z = b0 + b1 X1 + b2 X2 + e (1)
| e | = b0 + b1 Y (2)
Information:
Y = Taxpayer Compliance X1 = Quality of Service
b0 = Constanta X2 = Monitoring
Effectiveness
b1 = Regression Coefficient of Service Quality
b2 = Regression Coefficient of Monitoring Effectiveness
e = error
95
3.5.1 The Test of Quality Instrument
The quality of data was generated from the use of the research instruments which
can be done with validity and reliability tests. The tests are each to know the
consistency and accuracy of the data collected from the use of the instrument.
There are two tests which conducted in in this study to measure the quality of the
instrument, namely:
1. The Test of Instrument Validity

Validity is a measure that shows the validity of an instrument, which in an
instrument is said to be valid if it is able to measure what you want to measure
(Sugiono, 2008:172). Validity test is used to measure whether or not a questionnaire is
valid (Ghozali, 2006:49). Validity is an accuracy of research findings that reflect the
truth even if the respondents are tested differently.
Based on the test of instrument validity, the correcteditem-totalcorrelation> rtable,
then the item of question is declared valid. The rtable value can be seen from the r
ProductMoment with two-sided rtables (Ghozali, 2006: 49)
The test of validity instrument Variable results for Service Quality (X1),
AccountRepresentativeControl Supervisory Affectivity (X2), Taxpayer Compliance
Agency (Y) has correcteditem-totalcorrelation> r table, so that all research instruments
are valid. The result of validity test of research instrument can be seen in appendix 5.
Furthermore, the instrument which has been declared valid used to collect data, and the
data obtained will be tested its quality.
2. The Test of Reliability Instrument

The research instrument is said to be reliable if one's answer to the question is
consistent or stable over time. Reliability test is performed to measure the level of
consistency between observation results with instruments or measuring instruments
used at different times. Ghozali (2006: 46) states that the technique used to measure the
reliability of observations is by statistical tests Cornbrash Alpha.
3.5.2 The Test of ClassicalAssumption

Classic assumption test is needed to perform multiple regression analysis as a
requirement in analysis so that data can be meaningful and useful. The classical
assumption test used in this research includes normality test, multicollinearity test and
autocorrelation test (Erlina, 2008:102)
1. Normality Test
Normality test aims to test whether in the regression model, residual variables have
a normal distribution. In the study used statistical tests to detect whether the
residual is normally distributed or not. Statistical tests can be done by looking at the
value of Kurtosis and the residual skewness value (Ghozali, 2006:150). The
normality test can also be seen with the histogram graph and the Normal P-P plot
chart
2. Heteroscedasticity Test
The heteroscedasticity test aims to test whether in the regression model there is an
inequality of the residual one observation to the other. A good regression model is
homoskesdatisity or does not occurheteroskedastisitas (Ghozali, 2006: 125). In this
study used Glejser test to detect the presence or absence of heteroscedasticity.
96
3. MulticollinearityTest
The multicollinearity test aims to test the correlation between independent
variables. A good regression model should not be correlated between independent
variables (Ghozali, 2006: 96). Multicollinearity testing is done by using
varianceinflationfactor (VIF) and tolerance. Common values used to indicate the
presence of multicoleniarity are tolerance values ≤ 0.10 or equal to VIF value ≥ 10.
3.5.3. The Hypothesis Testing Research

The hypothesis test in this study is including:
1. The data analysis method used in this research is simple linear regression analysis.
2. Statistic Test t which basically indicates how far one independent variable
individually or partially can explain the variation of bound variables.
3. Coefficient of Determination (R2) to determine whether the regression model is
good enough to be used, it is determined through the coefficient of determination.
The adjusted value of R2 can rise or fall if one independent variable is added to the
regression model (Ghozali, 2006:87).
4. RESULT AND DISCUSSION

4.1. The Research result
This study examined the influence of service quality variables and the
effectiveness of Account Representative Supervision on corporate taxpayer compliance
and whether the Account Representative Competence variable is able to moderate the
influence of service quality variables and the effectiveness of Account Representative
Supervision of corporate taxpayer compliance. The total populations of this study are
corporate taxpayers registered in the Tax Office as of March 31, 2017 amount 8,235
taxpayers. The numbers of samples of this study are 99 corporate taxpayers.
4.1.1. The Description of Statistics

Statistical descriptions provide the descriptions of data such as mean, standard
deviation, and variance of the data (Ghozali, 2006: 19). Description of statistics in this
study can be seen in table 5.1.
Table 5.1 Statistical Description of Research Variables

Std.
N Minimum Maximum Mean Deviation
Service_Quality 99 35.00 75.00 60.2424 7.02051
Effectiveness_Supervision 99 33.00 54.00 42.8081 4.18129
Competence_AR 99 22.00 40.00 32.5960 3.76861
Compliance_WP 99 9.00 15.00 12.1414 1.52536

Source: Data processing 2017
From the statistical description table the research variables showed that the
number of respondents (N) is 99 people. Each variable has a minimum value, a
maximum value, a mean value and a varying standard deviation value.
97
4.1.2. The Testing of Quality Data
The data collection was done with questionnaire instrument and answers obtained
from 99 respondents. The data quality test is done by validity test and reliability test at
5% significance level.
1. The Test of Data Validity
Based on the data validity test, corrected item-total correlation> rtable is valid. TTable
value can be seen from df: 99-2 = 97, then rtable= 0,197. The results of validity test data
are as follows:
Table 5.2 TheTest Validity Variable Service Quality (X1)
Correcteditem-
No. Question Totalcorrelation r-table Test Results
1 Question Item 1 0,600 0,197 Valid
Table 5.3 Test Validity of Monitoring Effectiveness Variables (X2)

Corrected item- Total
Question correlation r-table Test Results
Source: data processing 2017
98
Table 5.4 theTest of Competency Validity Variable Account Representative (Z)
No. Question correlation r-table Test Results
Table 5.5 Test Validity Variable Taxpayer Compliance Agency (Y)

No. Question r-table Test Results
correlation
2. The Data Reliability Test

Based on the data reliability test, all the questions are variables this study is above
0.5 so it can be declared reliable. The results of reliability test data can be seen in the
table below:
Table 5.6 Test of Reliability Quality Service Variable (X1)
Cronbach’s Alpha N of Item Test Results
0,916 15 Reliable
Table 5.7 Test of Reliability Variable Effectiveness Supervision (X 2)

0,838 11 Reliable
Table 5.8 Test of Reliability Variable Competency Account Representative (Z)

0,877 8 Reliable
Table 5.9 Test of Reliability Variable Compliance Taxpayer Agency (Y)

0,720 3 Reliable
99
4.1.3. The Classic Assumption of Test Results
1. The Normality Test Result
In this study the normality test can be done by looking at the value of Kurtosis
and the Skewnessvalue of the residual. The value of Kurtosis and Skewness should be
between -2 and +2 for data to be said to be normally distributed. Normality test results
can be seen in the following table:
Table 5.10 Normality Test Results
Descriptive Statistics
N Skewness Kurtosis
Statistic Statistic Std. Error Statistic Std. Error
Unstandardized Residual 99 -,129 ,243 ,463 ,481
2. The Heteroscedasticity Test Results

In this study used Glejser test to detect the presence or absence of heteroscedasticity.
Significant value for all independent variables should be greater than 0.05 for data not
to experience heteroscedasticity. The results of heteroscedasticity test can be seen in the
following table:
Table 5.11 Heteroscedasticity Test Results
Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta T Sig.
1 (Constant) .217 .749 .290 .772
Service_Quality (X1) .001 .011 .007 .063 .950
Efektiveness_Supervision (X2) .012 .018 .074 .654 .515
a. Dependent Variable: abresid
3. The Multicollinearity Test

The multicolinearitytest is done by using variance inflation factor (VIF). The data is
said not to experience multicollinearity when the value of VIF <10.Multicollinearity test
results can be seen in the following table:
Table 5.12 Multicollinearity Test Results
Collinearity Statistics
Model Tolerance VIF
1 (Constant)
Quality_Services (X1) .811 1.233
Efektiveness_Supervision (X2) .811 1.233
a. Dependent Variable: Compliance_TP
100
4.1.4. The Hypothesis of Test Results
Hypothesis testing in this study used Coefficient of Determination (R 2), F test, t test
and residual test (Moderating)
1. Coefficient Determination Test Results (R2)
The coefficient of determination (R2) is used to find out how much independent
variable can explain the dependent variable. Coefficient test results determination (R 2)
can be seen in the following table:
Table 5.13 Results of Coefficient of Determination Test (R2) Model Summary
R R Square Adjusted R Square Std. Error of the Estimate
.756a .571 .562 1.00906

a. Predictors: (Constant), effectiveness of supervision, quality of service Source: Data
processing 2017
2. Test Result F
Statistical Test F basically showed whether all the independent variables included in
the model which have simultaneous effects on the dependent variable. F test results can
be seen in the following table:
Table 5.14 Test Results F

ANOVAb
Model Sum of Squares Df Mean Square F Sig.
1 Regression 130.273 2 65.136 63.972 .000a
Residual 97.747 96 1.018
Total 228.020 98
a. Predictors: (Constant), effectiveness_control, quality_services
b. Dependent Variable: compliance_Tax_payer
3. T Test Result
The t-statistical test basically shows how far one independent variable is
individually in explaining the variation of independent variables. T test results can be
seen in the following table:
Table 5.15 T Test Results
Coefficientsa
1 Unstandardized Standardized
Model B Std. Error Beta t Sig.
1 (Constant) .439 1.148 .382 .703
Quality_Services (X1) .138 .016 .637 8.584 .000
Efectiveness_Righting (X2) .079 .027 .216 2.907 .005
a. Dependent Variable: taxpayer compliance
From the values of these coefficients, then the regression equation can be
composed as follows:
Y = 0.439 + 0.138 X1 + 0.079 X2
Based on the regression equation can be explained as follows:
101
a. Constant is positive and coefficient on service quality variable and effectiveness
Account Representative Supervision is positive. This indicates that the multiple
regression equation has a direct relationship. This means that Corporate Taxpayer
Compliance will increase in line with the increasing Service Quality and the
Effectiveness of Account Representative Supervision in determining the
achievement of Corporate Taxpayer Compliance.
b. Constant of 0.439 means that corporate taxpayer compliance remains obedient for
the constant although the service quality variables and the effectiveness of
AccountRepresentativeSupervision is zero.
c. Service Quality Account Representative (X1)
d. Based on significant value with alpha 0,05, Service Quality variable has significant
value 0.000 less than alpha 0,05 so that partially Service Quality variable Account
Representative influence to Corporate Taxpayer Compliance.
e. Effectiveness of AccountRepresentative Supervision (X2)
f. Based on the significant value with alpha 0,05, the variable of Effectiveness
Account Representative Supervision has significant value 0,005 less than alpha
0,05 so that partially variable of Effectiveness of Account Representative
Supervision have a significant and positive influence to Corporate Taxpayer
Compliance.
4. Residual Test (Moderating)

Residual test is conducted to see if moderating variable can strengthen or weaken
the Influence of independent variable to dependent variable. Residual test results can be
seen in the following table:
Table 5.16 Residual Test Results (Moderating)
Model B Std. Error Beta T Sig.
1 (Constant) 15.986 3.963 4.033 .000
Service_Quality .147 .056 .273 2.638 .010
Effectivenesss_Supervision .181 .093 .201 1.942 .055
a. Dependent Variable: Competency_AR
Data processing 2017
Table 5.17 Residual Test Results (Moderating)

Coefficients2
Model B Std. Error Beta t Sig.
1 (Constant) 6.330 1.630 3.884 .000
Obedient_Taxpayer -.294 .133 -.219 -2.209 .030
a. Dependent Variable: ABRES
Data processing 2017
102
5. CONCLUSIONS AND SUGGESTIONS
Conclusions
From the results of research conducted, can be taken as a conclusion following:
1. Service quality and effectiveness of Account Representative supervision partially
proved to have a positive and significant influence on corporate taxpayer
compliance.
2. Service quality and effectiveness of Account Representative supervision
simultaneously proved to have a positive and significant influence on corporate
taxpayer compliance.
3. Account Representative Competence proven to moderate (strengthen) relationship
service quality and effectiveness of Account Representative with corporate
taxpayer compliance.
Suggestion
Based on the conclusions that have been found, the researcher gives suggestions
as follows:
1. Further research to be done to all Tax Office in the Regional Office of North
Sumatra I so that the results can be generalized.
2. Further research to be conducted on all taxpayers both individuals and entities so
that the results can be generalized.
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Erlina. 2008. Metodologi Penelitian Bisnis : untuk akuntansi dan manajemen edisi
kedua,cetakan pertama.USU Press. Medan
Ghozali, Imam. 2006. Aplikasi Analisis Multivariate Dengan Program Spss. UNDIP.
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Gunadi. 2005. Akuntansi Pajak. Gramedia. Jakarta
Kartajaya, Hermawan dan Syakir Sula, Muhammad. 2006.Syariah Marketing. PT.
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Pandiangan, Liberti. 2008. Modernisasi Dan Reformasi Pelayanan Perpajakan
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103
Ownership Structure and Firm Performance: Tax Avoidance as a Moderating Variable
Vince Ratnawati, Azhari. S , Nita Wahyuni, and Desmond Freddy

ABSTRACT
The aims of this study is to obtain empirical evidence of how ownership structure ie
institutional and managerial ownership affect firm performance. The study also
examined the moderating role of tax avoidance on the effect of both institutional and
managerial ownerships on firm performance. A model was developed and tested using
sample of 58 manufactured companies from 2012 to 2014, which is listed on Indonesian
Stock Exchange. Data were collected and analyzed using least square regression and
moderated regression analysis. The result showed that institutional ownership and
managerial ownership affect firm performance. The result also showed that tax
avoidance moderates the effect of both institutional and managerial ownership on firm
performance.
Keywords: Institutional Ownership, managerial ownership, tax avoidance, firm

performance
104
Preliminary Evidence: The Decoupling Effect of Manufacturing Industries’
Carbon Emissions on Firm Competitiveness in Riau Province, Indonesia
Andewi Rokhmawati* and Haryetti

The Faculty of Economics and Business, Universitas Riau, KampusBinawidyaUnriJl
HR Subrantas Km 12.5 28293, Pekanbaru. Riau, Indonesia
ABSTRACT
The increase in fossil fuels and electricity consumption is generally to support economic
growth of a nation, in which the consumption eventually will increase carbon emissions.
Decoupling phenomenon has drawn the attention from the researchers as decoupling
phenomenon highlights how to reduce carbon emissions without causing a negative
impact on economic growth in the region. In this research, by using decoupling
approach, we explored the relationship between carbon emissions and the competitive
advantage of manufacturing firms in Riau Province from 2011 to 2014. This research
used Tapio decoupling model to know the sensitivity of carbon emissions toward the
firms' competitive advantage. This study also adapted the Logarithmic Mean Divisia
Index (LMDI) decomposition model to calculate the factors that determine firm carbon
emissions. The study found that firstly, in general, there is a significant difference
between the growth of carbon emissions and the growth of competitiveness. The result
showed that the growth of carbon emissions is higher than the growth of
competitiveness, where the competitiveness has a negative growth and lower than
carbon emission growth. This indicates that reductions in carbon emissions decrease
firms’ competitiveness. Second, for effective firms, the growth of firms’
competitiveness is higher than the growth of carbon emissions. This implies that this
study confirms the theory of porter 'competitive advantage' that firms have been able to
work efficiently will be able to gain a competitive advantage.
Keywords: Carbon Emissions, Competitive Advantage, Decoupling, Indonesian

Manufacturing Firms
*
Corresponding author: andewi.rokhmawati@lecturer.unri.ac.id
105
Comparative Study on Finance-Growth Nexus in Malaysia and Indonesia: Role of
Institutional Quality
Kazi Sohag, Jamaliah Said, and Normah Omar

Accounting Research Institute, Universiti Teknologi MARA, 40450 Shah Alam,
Selangor, MALAYSIA.
ABSTRACT
This study explores the role of institutional quality in the nexus of financial market
development (FMD) on economic growth in the context of Malaysia and Indonesia.
Applying Autoregressive Distributed Lags (ARDL) and Threshold Regression
Approach, we analyze time series data over the year of 1980 to 2016. We found that
FMD promotes economic growth in the both economies. Non-linear analysis shows that
FMD and economic growth follows inverted U-shape relation in the case of Malaysia
while it follows U-Shape relation in the case of Indonesia. We further explore that not
all measures of FMD promotes economic growth. Market capitalization is profound for
Malaysian economy while credit to private sector and money supply is conducive for
Indonesian economy. Institutional quality has far greater impact on augmenting
economic growth rather than playing a mediating role in the linkage of FMD and
growth in Malaysia. In the context of Indonesia, Institutional quality impedes economic
growth but it plays positive and significant mediating role in the nexus of FMD and
economic growth. Spill-over analysis reveals that Malaysian FMD is positively
associated with Indonesian economic growth while Indonesian FMD is negatively
associated with Malaysian economy. This study provides all the economic and
anecdotal explanation in supporting the result.
Keywords: Financial Market Development; Economic Growth; Institutional Quality;

ARDL; Spill-over.
106
The Effect of Human Resources, Commitment, Communication and Bureaucratic
Structure on The Successful Implementation of Transparent and Accountable
Village Fund Allocation
Kamaliah, Elfi Ilham, and Ahmad Rifqi

Department of Accounting, Faculty of Economics, Universitas Riau
Kampus Bina Widya Km. 12,5 SP Panam, Pekanbaru 28293, Riau Indonesia
ABSTRACT
The purpose of this study is to examine the effect of human resources, commitment,
communication and bureaucratic structure on the successful implementation of
transparent and accountable Village Fund Allocation (ADD) in 6 villages in Siak Sub
district, Siak Regency. The population in this study is all government employee who is
involved and know about Village Fund Allocation in Siak Sub district, that is consist of
50 people. The sampling method used is the census method. This study used primary
data obtained from questionnaires and secondary data obtained from the Community
Empowerment and Sub district Department of Siak Regency, Siak Sub district Offices
and Village Office Agency in Siak Sub district. The hypotheses were tested by using
multiple regression method with SPSS 22.0. The result proved that communication and
bureaucratic structure affect the successful implementation of transparent and
accountable Village Fund Allocation.
Keywords: Human Resources; Commitment; Communication; Bureaucratic Structure;

The Successful Implementation of Transparent and Accountable Village
Fund Allocation
107
Community Economic Development Planning Model Dumai
Machasin, Taufiqurrahman, and Dewita Suryatiningsih

Management Department Economic Faculty Universitas Riau,Indonesia
ABSTRACT
In the business world there is life-the business, micro business, small business, medium-
sized and large businesses. The small and medium enterprises (SMEs), is the most great
businesses. It is recorded in America is almost 70% the industry that there is a group of
SMES. In Indonesia there are about BPS data based on 44 million small and medium
enterprises (SMEs). Of that number turns out there are about 98% or 43 million effort is
the micro enterprises. However the role of SMES is very strategic because it is able to
absorb 90% of the work force and can contribute to GDP amounted to 57%. Meanwhile
contributed to a 15% of exports. From these data illustrate that small and medium
enterprises (SPEM) are contributing to absorb labor is large enough so that the
occurrence of even distribution of opinion. The outline of the research problems are (1)
How the description of the characteristics of the community economy Dumai. (2) how
to program and the community economic development strategic Dumai? (3) How
strategic or economic community development planning model Dumai?. The purpose of
this research is the availability of Community Economic Development strategy
document (SPEM) Dumai containing analysis, evaluation and Strategy Planning
programs economic development Community in Dumai. Research activities carried out
in the overall coverage in Dumai on 5 (five) of the subdistrict include: Limestone Hill
Sub-district, sub-district of Medang Kampai, district Nine Rivers, district.
Keywords: Small Micro Enterprises, Community Economic Development,

Empowerment.
108
The Effect of Audit Committee through Value Company Mediated By
Management Profit Of The Banking Company Listed In Indonesia Stock
Exchange In 2011-2015
Yuniarti* Amir Hasan, and Andewi Rokhmawati

The Faculty of Economics Faculty of Riau University, Pekanbaru, Indonesia
ABSTRACT
The long-term goal of the company is to optimize the value of the company. The high
value of the company can describe the welfare of the company owner. The purpose of
this study is to find out how the influence of Audit Committee on Corporate Values
Mediated by Earnings Management in Banking Companies Listed in Indonesia Stock
Exchange Period Year 2011-2015. The population used for this research is all banking
companies in Indonesia Stock Exchange with research period 2011-2015. Based on the
consideration of the criteria specified, the sample is obtained as much as the annual
report data. This study uses secondary data in the form of financial statements. The
method of analysis used in this research is path analysis and Sobel test. Based on the
results of the research, the following conclusions are obtained: 1) Audit Committee
Size, Audit Committee Amount, Independence of Audit Committee and Financial
expertise has no significant effect on Corporate Value, while Earnings Management has
a significant effect on Corporate Value; 2) Audit Committee Size and Audit Committee
Sum Meetings have no significant effect on Earnings Management at the 5%
significance level. At a 10% significance level, the Audit Committee Size and Audit
Committee Sum Meetings have a significant effect on Earnings Management. In
addition, the independence of the Audit and Financial expertise Committee has no
significant effect on Earnings Management; 3) Earnings Management cannot mediate
the influence of Audit Committee Size, Audit Committee Amount, Independence of
Audit Committee and Financial expertise on company value.
Keywords: Size, Number of Meetings, Independence of Audit Committee, Financial

expertise, Earnings Management, Audit Committee, and Corporate Values
1. INTRODUCTION
The long-term goal of the company is to optimize the value of it. The highest
value of the company can describe the welfare of the company owner. The company's
value will be seen from the market price of its shares (Wahyudi and Pawestri, 2006).
According to Jensen (2001) in Wahyudi and Pawestri (2006) explains that to maximize
the value of the company is not only the value of equity should be considered, but also
all financial claims such as debt, warrants and preferred stock are also important.
Optimizing the value of the company which is the company's goals can be achieved
through the implementation of the financial management function, where the financial
decisions taken will affect other financial decisions and the impact will affect the value
of the company (Wahyudi and Pawestri, 2006).
*
Corresponding author: artiyuni138@ymail.com
109
In this globalization era, many scandals and fraud are related accounting
manipulations in the business of Go - Public. One of the accounting fraud that often
happens is that earnings management. The actions which put their own interests
(opportunistic), it is done by selecting certain accounting policies, so that profits can be
arranged, raised or lowered as he wishes. Behavior management adjusts to suit his
profit, which is known as profit management.
Things that indicate the occurrence of earnings management, such as an increase or
decrease in gross profit, the deficit is significant in operating cash flow relative to net
income, changes in accounting principles and estimates as well as the substantial
differences between growth in sales and revenues may affect the value of the company
in a certain period will also affect the perception of the interested parties in making
decisions. To minimize the occurrence of earnings management actions, the company
needs to implement Good Corporate Governance mechanism in the control system and
the management of the company.
With the implementation of the principles of Good Corporate Governance in
Indonesia so that it is required of Good Governance also in a company. In this
connection, the Jakarta Stock Exchange issued a regulation No .: Kep-315 / BEJ / 06-
2000 which is then refined with regulations No .: Kep-339 / BEJ / 07-2001 on July 1,
2001 regarding the establishment of an independent commission, committee audit, and
secretary to the board for publicly listed companies. The regulations require companies
listed on the stock exchange have an audit committee (Suaryana, 2005).
According to the Indonesian Institute of Audit Committee (IKAI), the
establishment of the audit committee has a central role, as this is one way to achieve
Good Corporate Governance in corporate management, especially in the public
company listing. IKAI (2010) confirmed the existence of an audit committee is
expected to improve the quality of the company's internal control, and be able to
optimize the mechanism of checks and balances, which is ultimately intended to provide
optimum protection for shareholders and other stakeholders. Nevertheless, within the
last ten years in the corporate audit committee effectiveness in overseeing the financial
reporting process is often dubious. With so many scandals in financial reporting that
come to the surface, a topic regards to Audit Committee in accordance to Good
Corporate Governance had been debatable among Policy Decision-Maker, Managers,
Investors, and Academic Activists (Vafeas, 2005).
Several studies have linked the influence of the characteristics of the audit
committee to the earnings management practices have been carried out. One aspect is to
measure the size, number of meetings, independent and Financial Expertise:
One of the elements of the audit committee, according to Lin, et al (2006) which
supports the function of oversight of management (agents) that do not harm the owner
of the company (the principal) is the size of the audit committee. The greater the
number of audit committee members will improve the function of the monitoring on the
part of management. A growing number of audit committee members will deter
management intends to conduct an earnings management, so that the quality of
reporting by management will be ensured. Thus, it can be said that the size of the audit
committee of a negative effect on profit management.
In addition to the size of the audit committee, Lin et al (2006) also use a number of
meetings conducted by the audit committee as a predictor of earnings management. Lin,
et al (2006) found that the higher the frequency of meetings held will increase the
110
effectiveness of audit committees in controlling the management (agent) not to attempt
to optimize their own interests.
Sharma, et al (2009), in her research used the independence of the audit
committee in examining the effect on profit management. The audit committee has a
role in overseeing the management (agent) to refrain from actions that could benefit
himself, which can cause to harm the owner of the company (the principal). One of the
audit committee to increase the independence of the oversight function is Independent
Audit. An independent audit committee members will ensure a higher quality of
financial reporting, thereby it will be reduced earnings management action. This
expectation is supported by empirical evidence by Sharma, et al (2009) and Prastitiand
Meiranto (2013) which stated that there is a relationship between the occurrence of
earnings management with an audit committee comprised of independent members.
Because of the increasingly independent members, then the quality of financial
reporting by companies i is more trustworthy. So that the independence which is owned
by the audit committee will be able to minimize the presence of profit management.
The proportion of members of the audit committee who is an expert in finance
(Financial expertise) may also increase the supervisory function of the owner of the
company (the principal) to the management (agent). With the greater the proportion of
members with expertise in finance then financial reporting by management to be more
qualified. This is because the members who have expertise in finance will be easier in
detecting earnings manipulation that can benefit management only. Wardhani and
Joseph (2010) stated that there is a relationship between financial expertise with their
earnings management. The study found evidence that an audit committee comprised of
at least one financial expertise will reduce the occurrence of earnings management.
Based on the background of the problem above is How to Influence the Audit
Committee Against Mediated by A Company Value Profit Management the Banking
Companies Listed in Indonesia Stock Exchange Period 2011-2015? While the purpose
of this study is to analyze empirically Effect Against Audit Committee the Corporate
Value Mediated by Profit Management The Banking Companies Listed in Indonesia
Stock Exchange Period 2011-2015.
Agency Theory
Agency theory regards the contractual relationship between the members of the
company. Jensen and Meckling in Hery (2009) explained that the agency relationship
occurs when one or more persons (the principal) employ another person (the agent) to
provide a service and then delegate decision-making authority. Principal is a
shareholder or investor, while the management agent is the managing company or
manager. The core of the agency relationship is the separation of functions between
ownership and control investor in management.
The separation between business owners and management by agency management
tends to lead to conflict between the principal and the agent. Conflicts of interest
between principal and agent occur because of possible agents do not always act in
accordance with the wishes principals, thus incurring the cost of the agency (agency
cost). According to Jensen and Meckling (1976) in Hery (2009) agency cost that
includes three things, they are monitoring costs, bonding costs and residual loss.
Monitoring costs are expenses paid by the principal to measure, observe and control the
111
behavior of agents in order not to deviate. These costs arise because of the imbalance of
information between principal and agent.
Company Value
Brigham and Erdhadt (2005: 518) defined the value of a company is the present
value (present value) of free cash flow in the future at the appropriate discount rate
average cost of capital. Free cash flow is the cash flow available to investors (creditors
and owners) after taking into account all expenses for the company's operations and
expenditures for investment and net current assets. While the value of the firm,
according to Gitman (2006: 352) is the actual value per share to be accepted if the
company's assets are sold according to the price of shares.
The conclusion of some of the definitions that the company's value can be
determined from comparison of the results of the company's performance as seen from
the financial statements, where the value of the company is the present value (present
value) of free cash flow in the future at a discount rate of weighted average cost of
capital. Maximizing the value of the company means to maximize the shareholder
wealth through the maximum price of the company's common stock.
The Profit Management

According Belkaoui (2006: 74) of earnings management that is an ability to
"manipulate" the options available and the right choice to achieve the expected level of
profit. According Kieso (2010: 161) defines "Earnings management as planning time
income, expenses, gains and losses to reduce earnings volatility." According Sulistyanto
(2008: 47), "Based on the understanding above, it can be concluded that earnings
management is an intervention in the external financial reporting process with a view to
personal gain.
Based on some of the above understanding, it can be concluded that the profit is
information generated from the difference between revenues and expenses that are used
to measure the performance of the company during a certain period.
The Audit Committee

Definition of the audit committee, according to National Committee on
Governance (2006) in the Code of Good Corporate Governance Indonesia is a group
chosen from a larger group to do a particular job or to perform specific tasks or some
members of the board of directors of client companies are responsible for helping the
auditor to maintain its independence from management. "The audit committee is one of
the institutional elements in the concept of good corporate governance are expected to
contribute to high levels of application. Its presence is expected to improve the quality
of the company's internal control, and be able to optimize the mechanism of checks and
balances.
3. METHODS
The population in this study is banking companies listed in Indonesia Stock
Exchange during the period of 2011-2015, published in 2011-2015 IDX totaling 43
companies. Sampling of this research is done by using purposive sampling method with
the following criteria: 1) The sample is banking companies listed in Indonesia Stock
Exchange; 2) The Company shall publish the financial report and annual report for the
period December 31 2011 to 2015; 3) The company has the relevant data regarding the
112
study. Based on these criteria, there were 180 financial statement data of 42 banking
companies in Indonesia Stock Exchange that will be used as a sample in this study.
Data used in this research is secondary data. Data collection method used in this
research is to study literature and study documentation. The data analysis method used
is the method of Path Analysis and Sobel Test. Path analysis is a technique for
analyzing the causal relationships that occur in multiple regressions if the independent
variables affect the dependent variable not only directly but also indirectly. As for the
definition and measurement of the variables are summarized in the following table
Table 1. Operational Definition of Variables

Variables Definition Formula
The value of The present value (present value) of free cash Price Earning Ratio
the company flow in the future at the appropriate discount rate arke ri e er hare
(Y1) the weighted average cost of capital. Free cash ar i g er Share
flow is the cash flow available to investors
(creditors and owners) after taking into account
all expenses for the company's operations and
expenditures for investment and net current
assets
Profit A process of taking deliberate steps within the DACCit =
Management limits of generally acceptable accounting TACCit-NDACCit
(Y2) principles both within and beyond the limits of
GAAP
The size of The number of audit committee members where Number of Audit
the Audit at least three (3) members, including the Committee Member
Committee chairman of the audit committee
(X1)
Number of Meeting of the members of the audit committee Number of meetings of
Meetings in order to discuss the financial reporting by an the Audit Committee
(X2) external auditor Members In 1 Year
Audit The circumstances in which the members of the The percentage of
Committee audit committee should be recognized as an members who are
Independence independent party independent of the total
(X3) number of audit
committee members.
Financial Audit Committee members with expertise in The percentage of the
expertise Accounting / Finance number of audit
(X4) committee members
who are financial
expertise to the number
of audit committee
members
The equation model of this research as follows:

Substructure 1:
Y1 = ρX1.Y1 + ρX2.Y1 + ρX3.Y1 + ρX4.Y1 + ε1
Substructure 2:
Y2 = ρX1.Y2 + ρX2.Y2 + ρX3.Y2 + ρX4.Y2 + ρY1.Y2 + ε2
113
Hypothesis testing can be done with the mediation Sobel test procedures (Sobel
Test) developed by Sobel (Andanawari, 2013). Sobel test is done by testing the strength
of the indirect influence of independent variables (X) to the dependent variable (Y)
through the mediator variable (M) (Andanawari, 2013). The Sobel test can be calculated
with the help of an online calculator that can be accessed
athttp://quantpsy.org/sobel/sobel.html by inputting figures regression results.
4. FINDINGS AND DISCUSSION

Descriptive Statistics
Descriptive statistical analysis is used to describe the state of the data in general.
Here are the results of the descriptive statistics of each variable used in the study:
Table 2 Results Descriptive Statistics

N Minimum Maximum Mean
The size of the Audit Committee 180 2,000 8,000 3,883
Number of Meetings 180 1,000 43,000 12 222
Audit Committee Independence 180 2,000 6,000 3633
Financial Expertise 180 2,000 7,000 3572
Profit management 180 -1472 0200 -0095
The value of the company 180 -219 372 2185.406 36 626
Source: Processed Data, 2017
Test Results of Classical Assumption
Before the test path analysis, first performed classical assumption to avoid biased
results. Classical assumption test results can be seen in the following table:
Table 3 Classical Assumption Test Results

Name of Test Result Information
Normality test Asymp Sig. = .722 Asymp Sig. (2-tailed) value is
(Kolmogorov-Smirnov greater than α = 0.05, then the
test) data in this study had a normal
distribution.
Test Multicolinearity Variables ToleranceVIF There is no independent
(Test Tolerance and The size of the Audit 4,219 variable that has a value of
VIF) Committee Tolerance is less than 0:10 and
no one independent variable
Number of meetings 1,033 which has VIF more than 10. So
we can conclude there is no
The independence 3,232 multicollinearity between the
independent variables in the
Financial expertise 3,194 regression model.
Autocorrelation test dw = 2,067 Du <dw<4-du = 1.7866 <2.067
(Test Durbin Watson) du = 1.7866 <2.2134, so it can be concluded
that there is no positive and
negative autocorrelation.
Test Heteroskidastity Variables Sig The significant value of all the
(Test Glejser) The size of the Audit Committee 0,226 variables more than the
Number of meetings 0,886 confidence level of 0.05. Thus,
The independence 0,825 it can be concluded that the
Financial expertise 0,616 regression model in this study
there is no heteroscedasticity.
114
Substructure Path Analysis Results 1
Multiple linear regression analysis was used in this study with the aim to prove
the hypothesis of the influence of the independent variables partially on the value of the
Company. The results of data processing using SPSS described in the following table:
Table 4 Result Path analysis Substructure 1

Substructure Model Feasibility Test 1
Test F Coefficient of Determination
Sig. 0.045 Adjusted R Square 0,035
The regression model is feasible and correct. 3.5% Corporate Values can be explained by the
The size of the Audit Committee Number of variable Independence of the Audit Committee, the
meetings of the Audit Committee, the Audit Audit Committee Number of meetings, size of the
Committee Independence, Financial expertise Audit Committee, the Financial expertise and Earnings
and Earnings Management in aggregate has a Management.
significant influence on the value of the
Company.
Path Analysis Results Substructure 1
Variables Coefficient Sig. Information Decision
Line
The size of the Audit 5724 .471 Positive effect, but not H1 is rejected
Committee significant
Number of Meetings -.887 .119 Negative effect, but not H2 is rejected
significant
The Independence 6677 .429 Positive effect, but not H3 is rejected
significant
Financial Expertise -5626 .414 Negative effect, but not H4 is rejected
significant
Profit management -68 104 .027 Significant negative effect H9 is rejected
Substructure Path Analysis Results 2
Multiple linear regression analysis was used in this study with the aim to prove
the hypothesis of the influence of the independent variables partially on Earning.
Earning Management data processing using SPSS program is described in the following
table:
Table 5 Result Substructure Path Analysis 2
Substructure Model Feasibility Test 2
Test F Coefficient of Determination
Sig. 0,027 Adjusted R Square 0,048
The regression model is feasible and correct. 4.8% Profit Management can be explained by the
The size of the Audit Committee Number of Audit Committee Independence, Number of Audit
meetings of the Audit Committee, the Audit Committee meetings, the Audit Committee and the
Committee Independence and Financial Financial Size expertise.
expertise jointly has a significant influence on
Earnings Management.
Path Analysis Results Substructure 2
Variables Coefficient Sig. Information Decision
Line
The size of the Audit .040 .064 Positive and significant effect H5 accepted
Committee
Number of Meetings .003 .096 Positive and significant effect H6 accepted
The Independence -.005 .841 Negative effect, but not significant H7 is rejected
Financial Expertise -.013 .479 Negative effect, but not significant H8 rejected
115
Variable Testing Mediation with Sobel Test
A variable can be called as a variable if these variables influence the relationship
between independent variables and the dependent variable. For ease of calculation used
Sobel Test Calculator provided by Daniel Soper
(http://www.danielsoper.com/statcalc/calculator.aspx?id=31). The results of the Sobel
test calculation are as follows:
Table 6 Sobel Test Results

Variables A SEA B SEB Test Two-tailed Information Decision
Statistic probability
The size of the .040 .022 -1.4117 0158 Cannot H10 is
Audit Committee mediate rejected
Number of .003 .002 -1.2464 0213 Cannot H11 is
Meetings mediate rejected
The Independence - .023 0.2163 0829 Cannot H12 is
.005 mediate rejected
Financial - .019 0.6543 0513 Cannot H13 is
Expertise .013 mediate rejected
Profit -68 30
Management 104 402
From the analysis of the substructure lines 1 and 2, can have created a pathway for
the study diagram as shown below:
-0.887
0.119
5.724
The size of the .471
Audit Committee 0,040
0,064
0.952
0,003
Number of 0.965
0.096
Meetings -68.104
Profit 0,027 The value of
-0.005 management the company
The Independence
0.841
The Audit
Committee
-0.013
.479
Financial
Expertise -5.626
0,414
6.677
.429
Figure 1: Results Path Analysis

116
Discussion
1. Direct Impact of the Measurement of the Audit Committee through the
Company Value
The test results of path analysis showed that the size of the audit committee
coefficient influence on corporate value is equal to 5.724. This means the audit
committee size has a positive effect on firm value. The results of hypothesis testing
significance value for the variable size of the Audit Committee (X1) show the
significance value of 0.471> 0.05, H1 rejected, which means that the size of the Audit
Committee (X1) does not significantly influence the value of the Company.
Dharmapala and Khanna (2008) stated that the size of the audit committee as one
of the mechanisms of corporate governance at the company's positive effect on firm
value. With the audit committees who supervise the company to increase appreciation
of market participants thus improves the market response to the company's shares and
increase the price of the stock market and also increase the value of the company. Choi
et al. (2007) and Black et al. (2008) has consistently stated previously that corporate
governance mechanisms applied to good effect on the value of the company through an
increase in the value of the return on investment for investors.
2. Direct Effect of Number of Meetings of the Audit Committee of the Company

Value
The test results of path analysis showed that the coefficient of the influence of the
number of audit committee meetings on the value of the company amounted to -0.887.
This means that the number of audit committee meetings has a negative effect on firm
value. The results of hypothesis testing significance value for the variable Number of
Audit Committee meetings (X2) indicate the significant value of 0.119> 0.05, H2 is
rejected, which means that the amount of the Audit Committee Meeting (X2) did not
significantly influence the value of the Company.
Several times a year, all members of the audit committee held a meeting related to the
company's financial reporting. The number of audit committee meetings has been tested on
several previous studies because the number of audit committee meetings that little will
reduce the oversight of management so that the lower value of the company. Gradiyanto
(2012) showed that companies that have an audit committee with a small level meeting
frequency will tend to result in financial statements that are less qualified. So, it can be said
that the larger the size of the audit committee to enhance shareholder value.
3. Direct Effect of Independence of the Audit Committee of the Company Value

The test results of path analysis showed that the coefficient of influence of the
Independence of the audit committee of the company's value is equal to 6.677. That is
independence of the audit committee have a positive effect on firm value. The results of
hypothesis testing significance value for the variable Audit Committee Independence
(X3) indicates the significance value of 0.429> 0.05, H3 is rejected, which means that
the independence of the Audit Committee (X3) did not significantly influence the value
of the Company.
Bapepam in the Code of Audit Committee recommends to the board of directors
to designate or appoint an audit committee member who does not have a particular
interest in the company and a member of the audit committee should be free of the
circumstances that caused him not independent. Because of the independence of audit
committee members had an influence on decisions to be made.
117
McMullen and Raghunandan (1996) connect the quality of financial reports with
the independence of the audit committee. The independence of the audit committee
expressed by the proportion of members of the audit committee be independent of any
external company owners and management companies. More and more members of an
independent audit committee, then the goal is reached audit committee oversight in the
process of preparation of financial statements that affect the quality of the financial
statements (Bryan et al., 2004).
4. Direct Effect of Financial Expertise Audit Committee of the Company Value

The test results of path analysis showed that the coefficient of influence of audit
committee financial expertise to the company's value is equal to -5.626. This means that an
audit committee financial expertise have a negative effect on the value of the company. The
results of hypothesis testing significance value for the variable Financial Expertise (X4)
shows the significance value of 0.414> 0.05, H4 is rejected, which means that the Financial
Expertise (X4) did not significantly influence the value of the Company.
Audit committee members are advised to have an educational background / job in
finance. The financial expertise has an impact on the performance of the audit
committee in carrying out its oversight of management (agents). If more members who
have expertise in finance, the financial reporting by management to be more secure. It
can be concluded that the more members with financial expertise, will enhance
shareholder value. Abbot et al. (2004) in Lin et al. (2006) states that there is a positive
relationship between financial expertise to the company's value.
5. Size Direct Impact on Earnings Management Committee

The test results of path analysis showed that the size of the influence coefficient of
the Audit Committee Against Profit Management is equal to 0,040. This means that the
size of the audit committee have a positive effect on earnings management. The results
of hypothesis testing significance value for the variable size of the Audit Committee
(X1) shows the significance value of 0.064> 0.05, H5 is rejected, which means that the
size of the Audit Committee (X1) does not significantly influence Profit Management at
a significance level of alpha 0.05 (= 5%). However, if used the significance level of
alpha 0.10 ( = 10%), size of the Audit Committee (X1) shows the significance value of
0.064 <0.10, then the H5 received, which means that the size of the Audit Committee
(X1) significantly affects Earnings Management.
The size of the audit committee supports the function of oversight of management
(agents) that do not harm the owner of the company (the principal). Due to the
increasing size of the audit committee will improve the functioning of the monitoring of
the management of earnings management action. Thus, the owner of the company felt
that the quality of the reporting by the management assured. It can be concluded that the
greater the size of the audit committee, it will reduce / prevent the intention of
management to earnings management.
6. Direct Effect of Number of Meetings of the Audit Committee on Earnings

Management
The test results of path analysis showed that the coefficient of influence Number
of meetings of the Audit Committee Against Profit
Management is equal to 0,003. This means that the number of audit committee
meetings has a positive effect on earnings management. The results of hypothesis
118
testing significance value for the variable Number of Audit Committee meetings (X2)
indicate the significance value of 0.096> 0.05, H6 rejected, which means that the
amount of the Audit Committee Meeting (X2) no significant effect on Earnings
Management. However, if used the significance level of alpha 0.10 ( = 10%) Number
of Audit Committee meetings (X2) indicates the significance value of 0.096 <0.10, then
H6 received, which means that the amount of the Audit Committee Meeting (X2)
significantly affects Earnings Management.
The number of audit committee meetings has been tested on several previous
studies because the number of audit committee meetings that little will reduce the
oversight of management so that the lower value of the company. Gradiyanto (2012)
showed that companies that have an audit committee with a small level meeting
frequency will tend to result in financial statements that are less qualified. So, it can be
said that the larger the size of the audit committee can minimize the occurrence of
earnings management.
7. Influence Audit Committee Independence straight to Earnings Management

Audit Committee Independence against Profit Management amounted to -0.005. That is
independence of the audit committee have a negative effect on earnings management.
The results of hypothesis testing significance value for the variable Audit Committee
Independence (X3) indicate the significance value of 0.841> 0.05, H7 is rejected, which
means that the independence of the Audit Committee (X3) no significant effect on
Earnings Management.
The independence of audit committees has a role in overseeing the management
(agent) to refrain from actions that could benefit him so as to harm the owner of the
company (the principal). One of the audit committee to increase the independence of the
oversight function. Independent audit committee members will ensure a higher quality
of financial reporting. This expectation is supported by empirical evidence by Sharma,
et al (2009) which states that there is a negative relationship between the occurrences of
earnings management with an audit committee comprised of independent members. As
more independent members, then the quality of financial reporting by companies is
more trustworthy. So that the independence which is owned by the audit committee to
minimize the presence of earnings management.
8. Direct Impact Expertise Financial Audit Committee on Earnings Management

Audit Committee Financial Expertise against Profit Management amounted to -0.013.
This means that an audit committee financial expertise has a negative effect on earnings
management. The results of hypothesis testing significance value for the variable
Financial Expertise (X4) shows the significance value of 0.479> 0.05, H8 rejected,
which means that the Financial Expertise (X4) no significant effect on Earnings
Management.
Financial Expertise is the expertise possessed by members of the audit committee
on matters related to finance, such as accounting, stock and taxes. Members of the audit
committee financial experts can improve the function of supervision of the owners of
the company (the principal) to the management (agent). With a growing number of
members who have expertise in finance then financial reporting by management to be
more qualified. This is because the members who have expertise in finance will be
119
easier to detect the presence of earnings management that can benefit and harm the
owner of the company management.
9. Influence Against Profit Management Company Value

The test results of path analysis showed that the influence coefficient Against
Profit Management Company Value amounted to -68.104. This means that earnings
management has a negative effect on firm value. The results of hypothesis testing
significance value for the variable Profit Management (Y1) indicate the significance
value of 0.027 <0.05, H9 received, which means that the Profit Management (Y1) has a
significant influence on the Company Value
Managers as a manager of the company have more information about the
company than the shareholders. Basically, the manager is obliged to provide a signal
about the real condition of the company to shareholders. The signal given reflects the
company's value through the disclosure of accounting information such as financial
reports. However, the condition asymmetric information between the agent and the
principal may provide the opportunity an agent to perform earnings management
(earnings management) in order to increase the value of the company at a given time so
as to mislead shareholders about the company's real value. It can be concluded that the
higher the chances of managers for earnings management then it will decrease the value
of the actual company.
10. Indirect Influence size of the Audit Committee Against Corporate Value
Through Profit Management
From the calculation of Sobel test indicated the z value of -1.4117, because the
value of z obtained at -1.4117 <1.98 significance level of 5%, we conclude that the H10
is rejected, it means that earnings management cannot mediate the effect of the size of
the audit committee of the company's value
According to Krishnamurthy et al. (2003), the number of audit committee
members can demonstrate the effectiveness of the audit committee in carrying out the
task of oversight of management. In carrying out the task of supervision of the financial
reporting process, all members of the audit committee have the formal authority to the
management (Kalbers and Fogarty, 1993). With the authority of the audit committee,
the expected function and role of the audit committee is able to work effectively so as to
identify the possible presence of earnings management practices in the financial
statements (Effendi, 2005).
In this study showed that the Profit Management was unable to mediate the effect
size of the Audit Committee of the Company's value. This can be due to many factors
that affect the value of the company, including macroeconomic factors, market risk
factor and also the amount of return generated.
11. Indirect Influence Number of Meetings Audit Committee Against Corporate

Value Through Profit Management
From the calculation of Sobel test indicated the z value of -1.246, due to the value
of z obtained at -1.246 <1.98 significance level of 5%, we conclude that the H11 is
rejected, it means that earnings management cannot mediate the effect of Number of
Meetings of the audit committee of the company's value.
Sharma et al. (2009) states that the frequency of meetings of the audit committee
members of the meeting showed a response to the problems of the company's audit
120
committee in the process of preparing the financial statements. The response to the audit
committee meeting frequency of audit committee members that had enabled every
problem in the enterprise more quickly resolved so as to enable the company to have a
quality of financial statements and earnings in the financial statements also qualified.
of the Audit Committee Number of meetings of the Company's value. This can be due
to many factors that affect the value of the company, including macroeconomic factors,
market risk factor and also the amount of return generated.
12. Indirect Influence Audit Committee Independence Against Value Through the
Company's Profit Management
From the calculation of Sobel test indicated the z value of 0.2163, because the
value of z obtained at 0.2163 <1.98 significance level of 5%, we conclude that the H12
is rejected, it means that earnings management cannot mediate the effect of the
independence of the audit committee of the company's value.
Research Xie, et al. (2003) examined the effectiveness of audit committees in
reducing earnings management performed by the management. Research results
mention that the audit committee of external origin is able to protect the interests of
shareholders of earnings management actions undertaken by management. Siallagan and
Machfoedz (2006) stated that the existence of the audit committee has a positive impact
on the quality of earnings and enterprise value which is calculated by Tobin's Q. This
gives evidence that the existence of an audit committee can improve the effectiveness of
the company's performance.
of Independence against the value of the Company. This can be due to many factors that
affect the value of the company, including macroeconomic factors, market risk factor
and also the amount of return generated.
13. Influence Indirect Financial Expertise Audit Committee Against Corporate

Value Through Profit Management
From the calculation of Sobel test indicated the z value of 0.6543, because the
value of z obtained at 0.6543 <1.98 significance level of 5%, we conclude that the H13
is rejected, it means that earnings management cannot mediate the effect of financial
expertise on the value of the company's audit committee.
Qin (2006) examined the effect of audit committee financial expertise to the
quality of earnings with empirical evidence that companies with audit committees that
have accounting skills are more likely to have high earnings quality. Krishnamurthy et
al. (2003) states that the percentage of audit committee members has expertise in
accounting or financial management is positively related to the quality of financial
reporting and related to the value of the company. In addition, Baxter and Cotter (2009)
also found empirical evidence that there is a relationship between accounting expertise
of audit committee members and the quality of earnings.
of Financial Expertise to Company Value. This can be due to many factors that affect
the value of the company, including macroeconomic factors, market risk factor and also
the amount of return generated.
121
5. CONCLUSIONS
Based on the research results, it can be obtained, some conclusions as follows:
The size of the Audit Committee Number of meetings of the Audit Committee, the
Audit Committee Independence and Financial Expertise do not have a significant effect
on the value of the Company. While a significant impact Profit Management is on Firm
Value. From the test results also concluded that the size of the Audit Committee
Number of meetings of the Audit Committee significant effect on Earnings
Management. While Audit and Financial Expertise Committee Independence does not
have a significant impact on Earnings Management. From the test results of mediation,
it was found that the Profit Management was unable to mediate the effect size of the
Audit Committee, the Audit Committee Number of meetings, Auditdan Committee
Independence Financial Expertise to Company Value.
Based on the results of the study as well as matters related to the limitations of
this study, it can be given suggestions as follows:
1. For further Researcher
a. We recommend for further research is expected to increase the sample size larger
so that the results of his research have a stronger generalization power.
b. Researchers further should expand the scope of the research object. Research may
be conducted on the entire company going public, so that the sample could be
more numerous and varied.
c. Researchers further should add the variables that would have an influence on the
value of companies such as risk, return (rate of return) and macroeconomic
factors.
2. For Practitioners
a. The company should pay attention to the regulations issued by Bapepam in
shaping both the audit committee of the minimum amount determined by
Bapepam, independence and audit committee expertise.
b. Companies should also consider the factors that can affect the value of the
company significantly as economic factors, risk factors and the rate of return
generated
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Quality: US Evidence. TheIcfai Journal of Audit Practice, Vol. 4, No. 3, pp. 7-28.
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123
The Effectiveness of Audit Committee Attributes towards Earnings Quality of
Malaysian Listed Firms
Aziatul Waznah Ghazali, Mohamed Nurullah, Salma Ibrahim, Zuraidah Mohd

Sanusi, and Norhayati Mohamed
Kingston University London & Accounting Research Institute and Faculty of
Accountancy, Universiti Teknologi MARA
ABSTRACT
Audit committee serves as a liaison between the external auditor and the board of
directors, and facilitates the monitoring process by reducing information asymmetry
between the external auditor and the board. Therefore, a properly functioning audit
committee is critical in ensuring the independence of auditors and high quality financial
reporting. Contrary to prior studies, current study examines the effectiveness of audit
committee in relation to earnings quality, proxies by both measurements of accrual
earnings management and real earnings management. The sample for this study was
drawn from 651 companies listed on Bursa Malaysia expanding from year 2010 until
2014. The findings suggest that several audit committee attributes have significant
impact on the type of earnings management. A higher level of audit committee’s
independence and higher frequency of meetings are associated with significantly lower
levels of earnings management which implies a higher earnings quality. Meanwhile,
audit committee’s size and audit expertise are insignificant towards both accrual
earnings management and real earnings management. Findings of the study provide
useful insights for regulators and company boards to evaluate the efficacy of board audit
committees and implement additional governance measures to help preserve the
integrity of financial statements.
Keywords: Audit Committee, Earnings Quality, Accrual Earnings Management, Real

Earnings Management
124
The Relevance of Earnings Management, Free Cash Flow and Industry on Market
Performance: Evidence from Malaysia
Mohd Taufik Mohd Suffian1*, Amir Hakim Osman2, Zuraidah Mohd Sanusi3, and
Zulkifli Mohd Ghazali4
1,3
Accounting Research Institute (ARI) & Faculty of Accountancy, Universiti Teknologi
MARA, Malaysia
2
Faculty of Accountancy, Universiti Teknologi MARA, Malaysia
4
Faculty of Computer and Mathematical Science, Universiti Teknologi MARA, Malaysia
ABSTRACT
This study examines the relationship between market performance of Shariah

compliant companies with earnings management, free cash flow and industry. Data
from year 2009 to 2011 was used in this study to determine the post financial crisis
effect before the introduction of the Malaysia Code on Corporate Governance 2012.
This study applied the method by Roy Chowdhury in determining the suspected firms
engaged in abnormal cost of goods sold and abnormal discretionary expenditures, which
are the proxies for earnings management. Free cash flow was measured using operating
cash flow minus capital expenditures. Linear regression was used in determining the
effect of earnings management, free cash flow and industry on performance of Shariah-
compliant companies in Malaysia. The results showed that the Shariah-compliant
companies were able to enhance its performance through free cash flow as well as
through practicing earnings management. It was found that where free cash flow is high,
market performance will increase. This contradicts Zhou et al. which indicated that firm
performance will decline if companies have more free cash flow. The industry where a
company operates in also plays a significant role in influencing performance. However,
this study was not able to identify the industry that outperforms other industries as the
mean comparison shows very little difference. These findings show no support of the
concept that Shariah-compliant companies should fully meet the terms of Shariah
principles mainly to keep away from ‘gharar’ (uncertainties) in business practices.
Keywords: Shariah-Compliant Companies, Earnings Management, Abnormal Cost of

Goods Sold, Abnormal Discretionary Expenditures, Free Cash Flow,
Industries
*
Corresponding author: taufiksuffian@gmail.com
125
Earnings Management Effect with The Appearance of Audit Industry
Specialisation, Market Share and Size
Hanis Athirah Zulkefeli1, Nor Balkish Zakaria, Jamaliah Said2, and Leny Nofianti3
1
Faculty of Accountancy, Universiti Teknologi MARA, Malaysia
2
Accounting Research Institute, Universiti Teknologi MARA, Malaysia
3
Department of Accounting, Faculty of Economics and Social Science, Universitas
Islam Negeri Sultan Syarif Kasim Riau, Indonesia
ABSTRACT
This paper aims at investigating the relationship of audit industry specialization, market
and size to earnings management based on Malaysia setting during 2011-2014. The
multivariate results indicate that there is no significant difference between audit industry
specialization and market share auditors in constraining earnings management practices.
However, the findings support the hypothesis that audit size is significant to earnings
management. The results provide empirical evidence which consistent with the
hypothesis that auditor with big size improves audit quality.
Keywords: Earnings Management Effect, Audit Industry Specialization, Market

Share, Size
126
Effectiveness of Local Financial Management
Hardi, Vince Ratnawati, and Arridho Abduh

Economic Faculty Universitas Riau, Pekanbaru,Indonesia
ABSTRACT
The objective of this study is to investigate the factors that affect the effectiveness of
local government’s financial management in Dumai City. Independent variables in this
research are internal control system and compliance of local government apparatus. The
study also wanted to see the moderation role of human resources competence on the
influence of the government's internal control system and the compliance on the
effectiveness of local government financial management. The analysis of 100 data
obtained was done by using moderated regression analysis. The test results show that
the government's internal control system and compliance affect the effectiveness of
local government financial management. The results also show that the interaction
between government’s internal control system and competence affects effectiveness, but
the interaction between government’s internal control and compliance does not affect
the effectiveness of local financial management.
Keyword: Government’s Internal Control System, Compliance, Effectiveness Local

Government’s Financial Management, Human Resources Competence.
127
The Effect of Profitability, Dividend Policy, Debt Policy, and Firm Age on Firm
Value in the Non Bank Financial Industry Period 2014-2016
Vidiyanna Rizal Putri, and Arinie Rachmawati

STIE Indonesia Banking School, Jl. Kemang Raya No. 35, 12730, Jakarta Selatan, Indonesia
ABSTRACT
The purpose of this research is to determine the effect of profitability, dividend policy,
debt policy, and company age on company value with company size as control variable.
Population of this research is all financial company except bank listed in Indonesia
Stock Exchange (IDX) year 2014-2016. Sampling method that used is purposive
sampling method and obtained 38 companies. The independent variables are Return on
Equity (ROE) as a measure of profitability, Dividend Payout Ratio (DPR) as a measure
of dividend policy, Debt to equity ratio (DER) as a measure of debt policy, and firm
age. The dependent variable is Tobins Q as a measure of company value. Control
variable is total asset as a measure of firm size. This study uses secondary data that
obtained from financial statement that available on Indonesia Stock Exchange. The
results showed that Profitability (ROE) and Debt Policy (DER) have no significant
effect; dividend policy has a positive significant effect, and Company age have a
negative significant effect on firm value. Meanwhile the control variables (firm size)
have no significant effect on firm value.
Keywords: Profitability, Dividend Policy, Debt Policy, Firm Age, Firm Size, Firm
Value
1. INTRODUCTION
In the last few years, non-bank financial industry believed to experience
continuous growth. According to data released from the official website of the Financial
Services Authority up to the year of 2016, although international economic turmoil has
occurred, which makes the national economy faint, non-bank financial industry
continues to experience good growth from total asset or from the level of public
services. The growth can also be seen from the increase in the price of shares in several
companies and the increased amount of go-public company which has joined the non-
bank financial industry.
The growth indicates the development of non-bank financial industry that would
have accompanied with more intense competition between companies in the field. The
entrepreneurs are required to think harder about business strategy and innovation that
will be applied by the company in order to keep sustainability of the company so the
goal can be reached.
The purpose of the company in general is to get the best profit. However there is
another purpose of the company, which is to maximize the prosperity of shareholders
through maximizing corporate value (Sartono, 2010). The higher the value of the company
and the welfare of shareholders will also be increased. Increasing the value of the company
will also make interests towards the company by some prospective investors.
The value of the company is the selling point of companies that are considered
worthy by potential investors so that the investors will expense the funds. For go-public
companies, the company value indicator is the share price distributed on the stock
128
exchange. This is based on the belief that the increase in the price of shares are in
relation with increasing the prosperity of the shareholders, and the increase in the price
of shares in relation to the increase of the value of the company.
Profitability considered can affect the value of the company. Profitability is a
measurement of the performance of the company which can be seen from the profit
produced. If the company is able to increase profitability from one period to the next
period then it could become the image that the company has a good performance so that
investors could become interested to invest and it will also increase the share price and
in relation with the increasing corporate value.
Dividend policy according to Senata (2016) is a policy that must be taken by
management to decide whether the profit obtained by the company during a period will
be shared to all, or divided partly for the dividend and partly not shared in the form of
suspended profit. Dividend policy can be seen from the values of dividend payout ratio
(DPR). This ratio shows the percentage of company income to be paid to shareholders
in the form of dividend (Meidiawati and Meldawati 2016). The ability of the company
in paying dividends can affect the value of the company. The higher the DPR then the
share price will be higher which means the value of the company is also be higher.
Debt policy is a policy of the company to fund operations using financial debts or
commonly called financial leverage (Brigham and Houston, 2011). The use of debt
must be well-managed because it is a sensitive matter for the company. The higher the
proportion of debt that set the company on a certain level, the higher the value of the
company. But at a certain point, increased debt will reduce the value of the company
which caused if the benefits from the debt are smaller than the cost of it (Brigham and
Houston, 2011).
Firm age is the span since the foundation of the company has been able to run the
operational activities, up to when it can maintain ongoing concern or the existence of
the company or in the world of business (Ashari and Putra, 2016). Firm age is one of the
things that are considered by the prospective investors where they must gather the
funds, and firm age shows the company’s ability to exist and able to compete in the
world of business (Suryamis and Oetomo 2014). The firms which have long lifespan
generally have more stable profitability compared to the new firms.
2. THEORITICAL BASIS AND HYPOTHESES DEVELOPMENT

2.1 Signaling Theory
According to Brigham and Houston (2011), gesture or signal is an action taken by
the company to provide guidance for investors about how the management oversees the
prospect of the company. The theory of signaling was introduced by Michael Spence on
1973. Signal Theory explains why the company has the urge to provide financial report
information on external parties. The management has more information, the prospects
for the company, rather than the external parties on the latter days. (Saerang and Pontoh
2011). The lack of information for external parties regarding the company matters
causing them to give low prices towards the company. Things that can be done by the
company to increase its value is to reduce the asymmetry of information. One of the
ways to reduce the asymmetry of information is to provide a signal in the form of
information about the company (Arifin, 2005)
Signaling theory relation with this research shows that the high profitability will
illustrate the prospect of a good company. The better company prospects are, and then
the investors will be more interested in investing funds. Higher demand from investors
129
on shares and will affect the share price and the value of the company will also increase
(Herawati 2011). When a company can manage the debt well, debts will increase firms’
value. If the managers are sure with the prospect of a good company, managers can use
more debt as a more credible signal. The lifespan of an older company will illustrate the
experience of a company and shows that the company can still compete in the
competition in the business today, besides the company that is experienced is
considered to have a more stable profit from the new companies. Of course these will be
a good signal for prospective investors and become a great consideration for investors to
put the funds in the company.
2.2 Bird in the Hand Theory

The Bird in the Hand theory is one of the dividend policy theories. This theory
developed by Myron Gordon in 1956 and John Lintner in 1962. Gordon and Lintner
stated that there is a relationship between the values of the company with its dividend
policy. In this theory, investors believe that the dividend has more value than the capital
gain, because the dividend has the level of certainty which is higher than the capital
gain (Syafiq, 2009). The benefits when applying the Bird in the Hand theory is it can
provide a high dividend, then the company share price will also be higher that will have
an impact on the value of the company.
2.3 Company Value

According to Sujoko and Soebiantoro (2007), value of the company is the
investor’s perceptions in the success level of the company which are closely related
with its stock price. The higher the share price the higher the value of the company. The
prosperity of the shareholders of the company will be increased if the share price of the
company is also increased. The value of the company is the price that is willingly be
paid by a potential buyer when the company is sold. (Husnan, 2008).
2.4 Profitability
According to the Financial Accounting Standards (2016), a company performance
indicator is mainly its profitability. According to Sartono (2001) profitability is the ability of
a company to obtain profit in its relationship with sales, total assets and funds. Profitability
is required to assess the potential changes of economic resources which may be controlled
in the future. A good prospect will attract investors to invest in the company.
2.5 Dividend Policy

Martono and Hardjito (2002) stated that dividend policy is a part that cannot be
separated by the financing decision of a corporate. Dividend policy according to Senata
(2016) is a policy that must be taken by the management to decide whether the income
obtained by the company during a period will be shared to all, or divided partly for the
dividend and partly not shared in the form of suspended profit. Mardiyati et al (2012) stated
that dividend policy is often considered as a signal for investors in assessing the good or bad
of company, because the dividend policy can influence the company share price.
2.6 Debt Policy

Debt Policy, according to Sukrini (2012) is the policy that determines how big the
needs of company which is funded by using debt. According to Harmono (2011)
funding decisions by management will have an effect on the prospects for the company
130
that flexed in the share price. Therefore, one of financial management task is to
determine the funding policy which can maximize the share price and will create a
reflection of a corporate value.
2.7 Hypotheses Development

2.7.1 Profitability Influence towards the Firm Value
Profitability of the company is a management performance indicator in managing
the wealth of the company which is indicated by the profit that produced by the
company (Sudarmadji and Sularto 2007). According to the Signaling Theory,
companies which have high profitability will show that the company have a good future
prospect and it will become a positive signal for the investors. The more potential
investors are willing to save the funds in the company, the more it will increase the
company share price. The increase in the price of the shares of course will be increase
the corporate value H1: Profitability has a positive effect on firm value.
2.7.2 Dividend Policy Influence towards the Firm Value

Share price was influenced by the growth rate of the dividend. Thus, the amount
of dividend paid will increase the value of the company or its share price (Herawati
2011). Bird in the Hand theory states that investors prefers dividend because it has more
certainty, and is more secure than capital gain. Thus, the higher the dividend has been
paid by a company, the higher the amount of investor interest towards the shares. This
will cause the rising share price in relation with the increasing corporate value.
H2: Dividend policy has a positive effect on firm value
2.7.3 Debt Policy Influence towards the Firm Value

Debt Policy is considered as a very sensitive matter to the value of the company.
The more debt there is, will increase the company value. But at a certain point when the
debts are beyond the boundaries, it will decrease the value of the company. According
to the Signaling Theory, some companies that use more debt will send a positive signal
for the investors. This is because the companies that increase the debt can be viewed as
a company that is certain in the future prospect of the company.
H3: Debt policy has a positive effect on firm value
2.7.4 Firm age Influence towards the Company Value

A firm age is one of the things that are considered by prospective investors where
they must invest the funds. Firm age reflects the experience and capability in running
the business. Signaling theory explained about a signal from the management to
investors in the form of information that reflect the future prospect of the company. A
long lifespan of a company can indicate that the company can still survive and competes
in the developing competition in the business today. It is indeed a positive thing that can
make investors want to invest funds and can also increase the value of the company
H4: Firm age has a positive effect on firm value
3. Research Methodology
Objects in this research are a non-bank financial industry companies that are
registered in Indonesia Stock Exchange in the 2014-2016 period. The table 3.1 shows
the number of observations used in this research based on the criteria (purposive
sampling) is as much as 93 observations.
131
3.1 Variable Operationalization
In this research, company value dependent variable is measured using the Tobins
Q, for independent variables profitability measured using ROA, dividend policy using
the DPR, debt policy using DER, and firma age using current year subtracted from the
listing year. For the control variables company size measured with natural logarithm
from the total assets. The table 3.2 (see Appendix) shows operationalization variable for
this research.
3.2 Model Research

Tobinsqi,t = α0 + β1ROEi,t + β2DPRi,t + β3DPRi,t + β4DERi,t + β5AGEi.t +
β6SIZEi,t + ei,t
Description:
Tobinsq = Company Value
α0 = Constant
β1, β2, β3, β4, β5. Β6 = regression coefficient
ROEi,t = Profitability
DPRi,t = Dividend Policy
DERi,t = Debt Policy
AGEi,t = Company Lifespan
SIZEi,t = Company Size
4. Finding and Discussion

4.1 Descriptive Statistic
The descriptive statistics of the research can be seen in Table 4.1. For a company
value variable and ROE which have average value lower than the median value which
means that the average non-bank financial industry companies have low corporate value
and low ROE. While for the variables of the DPR DER, AGE and Size, each has a mean
that is higher than the median, means DPR, DER, AGE and Size is above average.
While when compared with its standard deviation, for variables ROE and DPR each
have standard deviation larger than the mean, which means that the data distribution is
too wide/uneven. While for the variables the company value, DER, Life Span and Size
have standard deviation above the mean, means the data is evenly distributed.
Table 4.1 Descriptive Statistic

VALUE ROE DPR DER AGE SIZE
Mean 0.973259 0.064608 0.278914 2.083421 15.03226 28.27634
Median 0.976338 0.0715 0.006 1.553466 13 28.2699
Maximum 2.297205 1.0322 4.775 7.231186 33 31.93502
Minimum 0.203452 -0.9829 -0.05 0.004604 0 24.67508
std. dev 0.35585 0.198608 0.724307 1.872551 9.409121 1.761549
Skwness 0.767826 -1.66596 4.533807 0.942695 0.160276 -0.073138
Kurtosis 5.239558 20.14444 24.6922 2.924493 1.897454 2.466833
Jarque-Bera 28.57365 1182.005 2141.996 13.79654 5.108653 1.184449
Probability 0.000001 0 0 0.00101 0.077745 0.553096
Sum 90.51309 6.0085 25.939 193.7581 1398 2629.7
Sum Sq Dev 11.64991 3.628935 48.26505 322.5931 8144.903 285.481
Observation 93 93 93 93 93 93
Source: writer processed data. 2017
132
4.2 Normality Test
Normality Tests are done to determine whether the data is normally distributed
(Ghozali, 2011). The condition of the normality test is that the probability must be
above 0.05.
12
Series: Standardized
Residuals
Sample 2014 2016
10
Observations 93
-6.54e-
8 Mean 16
-
Median 0.038892
Maximum 0.809014
6 -
Minimum 0.717583
Std. Dev. 0.334641

4 Skewness 0.375392
Kurtosis 3.170215
2 Jarque-
Bera 2.296517
Probabilit
y 0.317189
0
-0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8
In this research, it can be seen that the probability is obtained by 0.317189 which
means that the data is normally distributed.
4.3 Panel Data Test

4.3.1 Chow Test
Table 4.3.1 Chow Test
Effect test Statistic d.f Prob
Cross section f 3.117834 -37.71 0.0000
Cross-section Chi Square 110.009966 37 0.0000
Table 4.3.1 above, it is known that the value of the Chi - Square probability
results is 0.0000. The value is smaller than the level of significant 0.05 so that it can be
said that the results of the regression model using fixed effects. Fixes can be extended to
the Hausman Test.
4.3.2 Hausman Test

Table 4.3.2 Hausman Test
Test summary Chi-sq statistic Chi-sq Prob

cross section random 3.402358 5 0.6382
133
Based on the table above, it is known that random cross-section probability
regression results is 0,6382. The value is greater than the level of the significance of
0.05, so that it can be said that the results of the regression equation in this research
using the model of random effect.
4.4. Classic Assumption Test

4.4.1 Multicollinearity Test
Multicollinearity tests used to test whether there are linier correlations between
independent variables (Ghozali, 2011). The requirement to get freed from
multicollinearity is that no variable coefficient correlation is above the 0.85
Table 4.4.1 Multicollinearity Test

ROE DPR DER LIFESPAN SIZE
ROE
DPR 0.0578
DER 0.0206 0.1622
LIFESPAN 0.2934 -0.0448 -0.3278
SIZE 0.2695 0.1391 0.3645 0.2816
Source: writer processed data, 2017
4.4.2. Autocorrelation Test

Autocorrelation test is done to test whether a linier regression model have a
correlation between errors at period t and t-1 (previous period). To test the
autocorrelation on this research, the author uses Durbin-Watson test (DW test). The
terms specified in this test are when the value of the D-W located between 1.54 - 2.46,
there was no autocorrelation.
Table 4.4.2 Autocorrelation Test
R-squared 0.257582 Mean dependent var 0.479189
Adjusted R-squared 0.214914 S.D. dependent var 0.266164
S.E. of regression 0.235834 Sum squared resid 4.838752
F-statistic 6.036937 Durbin-Watson stat 1.672401
Prob(F-statistic) 0.000076
Based on data processing that is done, as shown served on the table 4.5 that DW
values on the research of 1,672401 model which means that the value of the D-W in
accordance with the criteria that has been established so that it can be concluded that the
model of research do not experience autocorrelation.
4.4.3 Heteroscedasticity Test

Heteroscendasticity test is done with regressing independent variables against
squared resid or against natural resid logarithm (LN resid). When the p-value > 0.05, it
134
can be said there is no heteroscendasticity on the data. On the contrary, if p-value < 0.05
then there is a heteroscendasticity on the research model.
Table 4.4.3 Heteroscedasticity Test

Variable Coefficient Std. Error t-Statistic Prob.
ROE 1.8998 1.0118 1.8776 0.0638
DPR 0.4278 0.2682 1.5948 0.1144
DER -0.1004 0.1596 -0.6286 0.5312
LIFESPAN 0.0155 0.0339 0.4567 0.6490
SIZE -0.3061 0.1916 -1.5981 0.1136
C 5.0880 5.0072 1.0161 0.3124
Based on data that has been processed using Eviews 9 software, as it has been
attached to it in the table that the lack of a coefficient value probability that has result
which is under 0.05. It can be concluded that there is a lack of heteroscedasticity in this
research.
4.5 Panel Data Analysis

This research is done using data panel regression analysis method. Consists of 38
companies with research data for 3 (three) years, with each year using the annual data.
So there are 114 data, but after doing outlier on the research data, the data that is used is
as much as 93 data. The equation used in this research is as follows:
Tobinsq = 2.307848 + 0.068034ROE + 0.115264DPR – 0.009418DER –0.018008AGE – 0.038223SIZE
4.6 Hypothesis Test

4.6.1 R-Square Test
Table 4.6.1 R-Square Test
R-squared 0.257582 Mean dependent var 0.479189
Adjusted R-squared 0.214914 S.D. dependent var 0.266164
S.E. of regression 0.235834 Sum squared resid 4.838752
F-statistic 6.036937 Durbin-Watson stat 1.672401
Prob(F-statistic) 0.000076
Coefficient determination test are test which is performed to measure how much
research model describe the variation of the independent variables to the dependent
variable (Ghozali, 2011). On multiple regressions analysis can be seen on the value of
the determination coefficient (Adjusted R-square).The results of the test in table 4.6.1
shows that the Rsquare value is equal 0,214914. Which means free variables in this
research are able to explain the value of the tobinsq variable (Company) of 21.49%
where the rest is 79.51% explained by other factors outside of the variables examined?
135
4.6.2 Partial Test
Table 4.6.2 Partial Test
Variable Coefficient Std. Error t-Statistic Prob
ROE 0.068034 0.13775 0.493894 0.6226
DPR 0.115264 0.036557 3.153016 0.0022
DER -0.009418 0.02255 -0.41765 0.6772
LIFESPAN -0.018008 0.004856 -3.708556 0.0004
SIZE -0.038223 0.027646 -1.382564 0.1703

The hypothesis 1 (H1) in this research namely: Return on Equity has a positive
effect on firm value (Tobinsq). Based on the results of the regression equation on the
table, probability of the Return on Equity is greater than 0.05 and it shows that the
Return on Equity does not affect firm value. So this H1 research rejected.
The hypothesis 2 (H2) in this research namely: the dividend payout ratio has a
positive effect on firm value (Tobinsq). Based on the results of the equation regression
on the table found probability of DPR smaller than 0.05, with positive coefficient. This
shows that the dividend payout ratio has a positive effect firm value so the H2 research
is accepted. The hypothesis 3 (H3) in this research namely: Debt to Equity Ratio is a
positive effect on firm value (Tobinsq). Based on the results of the equation regression
on the table found probability of DER greater than 0.05. This indicates that the debt
policy does not affect the value of the company. So this H3 research rejected.
The hypothesis 4 (H4) in this research namely: the age of the company having a
positive effect on the value of the Company (Tobinsq). Based on the results of the
equation regression on the table, found probability of Age smaller than 0.05 with
negative coefficient it shows that the age of the company have a negative effect on the
value of the Company. So the H4 research is rejected.
In this research having the control variable which is the company size assumed a
positive effect on the value of the Company (Tobinsq). Based on the results of the
regression equation on the table, found probability of size is greater than 0.05. This
shows that the size of the Company does not have the influence on the value of the
company.
4.7 Research Result Analysis

The result of the research shows that during the period of 2014 - 2016 profitability
proved to have no impact on the value of the company. This results in line with the
research done Warouw, et al (2016), and Alamsyah (2017). This is supported by an
average of the value of the Return on Equity is still low. In addition, according to an
open letter OJK 2016 people in Indonesia still opted and use the bank as the only
funding and financing provider that make IKNB less known and less chosen.
Result of research shows that during the period of 2014 - 2016 dividend policy
proved to have a positive impact on the company value. These results are in relation
with the research done by Senata (2016) and Anton (2016). In accordance with the
theory of bird in the hand, which states that there is a relationship between dividend
policy with the value of the company. Investors are more interested to dividends
because dividends are considered to be more secure and more certain compared with
capital gain. There more investors that have that perception, the amount of investor
136
which will invest the funds in companies that distribute dividends will also be
increased. This will affect the share price and increase the value of the company.
The result of research shows that during the period of 2014 - 2016 debt policy
proved to have no impact on the value of the company. This result is in relation with the
research done Pertiwi, et al (2016), and Herawati (2011). This results is in accordance
with the theory that stated by Modigliani and Miller in 1958, stating that the debt policy
does not affect the value of the company. This is because when investing, an investor
will pay attention to the things other than the big and the small debt and funding, as
cash flow from operating activities and investment, especially operating activities
because according to Mulyani (2013) cash flow from operating activities can describe
management performance and the ability of the company to pay dividends, debts and
interest rates.
The result of research shows that during the period of 2014 - 2016 the age of the
Company proved to have a significant negative impact on the value of the company.
This results in line with the research done by Onasis and Robin (2016) and Hariyanto
and Juniarti (2014). In the theory of signaling, the lifespan of the company can be a
positive influence by conducting a negative impact on the value of the company. The
research done Hariyanto and Juniarti (2014) stated that the older companies considered
rigid, does not follow the development of the era, lack of knowledge and bring the
decline in profitability of the organization. Similar results expressed by Loderer and
Waelchli (2009) which stated that the company that more older have a lower margin,
having higher costs, outdated assets, and slow growth so that investors are not interested
in investing and make the value of the company continuously declining.
The results of research shows that during the period of 2014 - 2016 variable
company size control proved to have no impact on the value of the company. This
results is in relation with the research done Rahmawati, et al (2015), Hardian and Asyik
(2016) this result is different from the hypothesis researchers due to the size of the
company does not become a consideration for investors in investing (Rahmawati, et al
2015). In investing, investors will pay more attention to the level of return in the form
of dividend and capital gain.
5. Summary and Suggestions

5.1 Summary
Profitability does not have the influence on the value of the company. Dividend
policy has a significant positive effect on the value of the corporate debt policy yet has
no effect on the value of the company, the lifespan of the Company proved to have a
significant negative impact on the value of the company.
5.2 Limitations and Suggestions
1. This research only take samples from the companies who joined in the non-bank
financial industry 2014-2016 period, the value of the company only proxied with
tobins q, there are various of alternatives in calculating the company, and the period
used in this research were only three years.
2. For the next researcher, is expected to expand the research to add or change the
research object, such as banking to view and compare the variables influence of 2
different financial sectors. Using other proxy variable for calculating the value of
the company as it has several options such as PBV and PER. In addition, add a
period of time to strengthen the results of research.
137
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139
Determinants from Timeliness of Financial Statements on Listing
Companies in Indonesia Stock Exchange Period 2010-2015
Rosita Wulandari, and Holiawati

Pamulang University, South Tangerang, Indonesia
ABSTRACT
Timeliness is one important factor in presenting relevant information. Timely

information will affect the ability of the manager in response to any incident or
problem. If the information was not delivered on time, the cause of such information
loses its value in influencing the quality of decisions. This study aimed to test multiple
variables that predicted affect the timeliness of financial reports consisting of
profitability, liquidity, gearing ratio, firm size, firm age, the complexity of the company,
ownership structure, the reputation of KAP, audit opinion, the Audit Committee and
Independent Commissioner company listing on the Indonesia Stock Exchange period
2010-2015.The research sample consist of 450 companies listed in the Indonesia Stock
Exchange (BEI) and the submit financial reports to OJK in the period 2010-2015. The
data used in this research is secondary data and sample selection using purposive
sampling method. The analytical tool used is the logistic regression analysis at a
significance level of 5%.Hypothesis testing results show that the variable profitability,
liquidity, gearing ratios, firm size, firm age, the complexity of the company, ownership
structure, the reputation of KAP, audit opinion, the Audit Committee and Independent
Commissioner does not affect the accuracy of financial reporting.
Keywords: Profitability, liquidity, gearing ratios, timely submission of financial

statements
1. INTRODUCTION
The financial statements can be valuable information to businesses in the capital
market. The financial statements are prepared to provide useful information in making
economic decisions (Kieso, 2007). Decision-making can be made if the financial
statements have quality information. Growing information needs of the stakeholders
results in their efforts to presentation of financial statements accurate and trustworthy
(Iyoha, 2012; Budiadnyani and Radnadi, 2015).
Any company that go public are required to submit and publish the financial
statements must be prepared in accordance with Financial Accounting Standards and
audited by a public accountant. These obligations are of course related to the need by
some users of financial statements to determine the information contained in the report
for decision-making (Kuswanto and Manaf, 2014).
The development of capital markets in Indonesia led to the demand for
transparency of the company's financial condition. The financial statements are prepared
and presented at least once a year to meet the needs of users, for example before
deciding to invest in Indonesia Stock Exchange, investors need information about the
company's financial statements published Tbk (Marathani, 2013).
One factor that lately issuers should be of concern is about the development of a
new accounting standard. This should be of particular concern that the business person
140
is able to adjust the new accounting rules that do not affect the delivery of the
company's financial reporting provisions of Accounting Standard namely (IAS) that
have been adapted by the International Accounting Standards / International Financial
Reporting Standards (IAS / IFRS). Financial Services Authority (FSA) also adjust the
regulations in accordance with international standards, it is that the issuer may submit
financial statements in a timely manner in accordance with the rules of the FSA and also
adapted to the accounting standards inernasional (Marathani, 2013).
Timeliness of financial reporting (timeliness) is an important characteristic to the
financial statements. In addition, the financial statements are reported in a timely
manner will reduce the risk of mismatches interpretation of the information presented.
Timeliness of presentation of financial statements to the public is as a signal of the
company indicating information useful in decision-making imtuk needs of investors.
Regulations imposed BAPEPAM regarding the timeliness of the company in the
financial reports of companies will become important in the present financial reporting
in a timely manner. Information required by the parties concerned can be useful when
presented accurately and precisely when it is needed by users of financial statements,
This shows that the timeliness of financial statement presentation to the public is
needed, therefore tiap- each company is expected not to delay in the presentation of
financial statements. The demand for adherence to timeliness in the delivery of financial
statements of public company in Indonesia has been regulated in Law No. 8 of 1995 on
capital markets. In 1996, Bapepam issued a Decree of Chairman of Bapepam Number:
KEP80 / PM / 1996 on the obligation for listed companies and public companies to
submit annual financial statements of companies and audit reports independent to
Bapepam no later than the end of the fourth month (120 days) after the date of The
company's annual financial report. Then tightened with the issuance Kep17 / PM / 2002
and has been refurbished with Bapepam Regulation No. XK2, Bapepam chairman of the
annex to decision number: Kep-36 / PM / 2003, which states that the annual financial
statements must be accompanied by an auditor's report with unqualified opinion and
submitted to Bapepam no later than the end of the third month (90 days) after the date
of the annual financial statements. Then renewed regarding the accuracy of financial
reporting through the Decision of the Chairman of Capital Market Supervisory Agency
and Financial Institution Number: Kep-134 / BL / 2006 dated December 7, 2006 on the
Obligation to Submit Annual Report for Issuers and Public Company no later than 4
(four) months after the financial year and is set in 2007 with the publication of the
Decree of the Chairman of the Capital Market Supervisory Agency and Financial
Institution Number: Kep-40 / BL / 2007 dated March 30, 2007 on Term Submit Periodic
Financial Statements and Annual Report for Issuers or Public Company whose
Securities Listed in Indonesia Stock Exchange and the Stock Exchange in Other
Countries. And in 2012 it was revised rules in the regulation of Bapepam No: XK6
August 1, 2012 and the Decision of the Chairman of the Capital Market Supervisory
Agency and Financial Institution No. KEP-431 / BL / 2012 Annual Report of the Public
Company. Under this rule states that the issuer or public company registration statement
has become effective shall submit an annual report to Bapepam maximum of 4 (four)
months after the fiscal year ends. And began to apply to the deadline for submission of
financial statements in 2012 was April 30, 2013.
Based on these descriptions, the authors are interested to develop research titled
"Determinants Timeliness of submission of Financial Statements in the Company Listed
in Indonesia Stock Exchange Period 2010-2015".
141
Punctuality shows the time span of the desired information presentation and reporting
frequency information. Timely information will affect the ability of managers to respond to
any incident or problem. If the information was not submitted in a timely manner will cause
it to lose value information in influencing the quality of decisions. Timely information will
also support managers face the uncertainties that occur in their working environment.
Information can not be said to be irrelevant if it is not timely, the information must be
available for decision-making before the information is missing an opportunity to influence
decision-making (Chariri and Ghozali, 2001 in Hasniar 2012). Information about the
condition and position of the company must quickly and on time to the users of financial
statements. Timeliness implies that financial statements should have been presented at an
interval of time, to explain the changes in the company that will affect users of information
to make predictions and decisions. (Srimindarti 2008 in Hasniar 2012).
Based Framework for the Preparation and Presentation of Financial Statements of
Financial Accounting Standards, the financial statements must meet four qualitative
characteristics are the traits that make financial reporting information useful for the users.
The fourth characteristic is understandable, relevant, reliable and comparable. To obtain
relevant information, there are several obstacles, one of which is a constraint timeliness.
2.1 Theory Compliance (Compliance Theory)

Compliance is derived from the adherent, which according to the Indonesian
General Dictionary, abiding by the command means love, obey orders or rules and
discipline. Compliance mean to be obedient, obedience, submissive, obedient to the
teachings or regulations. The demand for adherence to timeliness in the delivery of the
annual financial statements of public company in Indonesia has been regulated in Law
No. 8 of 1995 on Capital Market, and furthermore stipulated in Bapepam Regulation
No. XK2, Attachment Decision of the Chairman of Bapepam Number: Kep-36 / PM /
2003 concerning Obligation to Submit Periodic Financial Statements. The Chairman of
the Capital Market Supervisory Agency and Financial Institution Number: Kep-134 /
BL / 2006 dated December 7, 2006 on the Obligation to Submit Annual Report for
Issuers and Public Companies, and amended in 2007 with the publication of the Decree
of the Chairman of Capital Market Supervisory Agency and Financial Institution
Number: Kep-40 / BL / 2007 dated March 30, 2007 on Term Submit Periodic Financial
Statements and Annual Report for Issuers or Public Company whose Securities Listed
on the Stock Exchange in Indonesia and at the Stock Exchange in Other Countries. And
in 2012 in the regulation of Bapepam No: XK6 August 1, 2012 and the Decision of the
Chairman of the Capital Market Supervisory Agency and Financial Institution No. KEP-
431 / BL / 2012 Annual Report of the Public Company. Under this rule states that the
issuer or public company registration statement has become effective shall submit an
annual report to Bapepam maximum of 4 (four) months after the fiscal year ends. Such
regulations are legally signaled their compliance with any individual behaviors or
organization (public company) involved in the Indonesian capital market for the
company's annual financial reports in a timely manner to Bapepam. This is consistent
with the theory of compliance (compliance theory).
2.2 Agency Theory

Agency theory is one way to better understand the economics of information by
expanding one individual to two individuals, namely the agent and the principal. As
142
stated by Meckling, (1976) in Sulistyo, (2010), this theory explains the relationship
between agents (business management) and the principal (business owners). In the
agency relationship there is a contract in which one or more persons (the principal)
govern another person (the agent) to perform a service on behalf of the principal and
authorized the agent to make the best decisions for the principal.
One of the key elements of agency theory is that the principal and the agent has a
different preference or purpose because all individuals acting on their own individual
interests. Shareholders as principal assumed to be only interested in the financial returns
obtained from their investment in the company, while the agents are assumed to not
only receive gratification in the form of financial compensation but also from additional
engage in an agency, such as the lot of free time, working conditions attractive, club
memberships, and flexible working hours.
2.3 Signaling Theory

Signaling Theory and asymmetric informations first initiated by Ackerlof, Spence
and Stigliz that make them gain Nobel prize for economics in 2001. Signaling theory
developed in economics and finance which uses asymmetric information between
companies with outsiders because management knew more about the company's
prospects and opportunities future than outsiders (investors). The asymmetry of
information would occur if the management does not fully convey all of the information
that may affect the value of the company to the capital market. To avoid asymmetric
information, the company should provide information as a signal to investors.
Asymmetric information needs to be minimized, so the company went public can
inform the state of enterprise transparent to investors. Investors always need information
that is symmetrical as monitoring the funds invested in statu company. So it is very
important for the company to provide any account information (account) on the
financial statements which is a signal to inform the investors or prospective investors
(Rini, 2010).
Signaling theory looked constantly enlarged with the recommendation to uncover
massive. According to Wolk and Tearney (1997), states that the positive things in the
signaling theory whereby companies that provide good information that will differentiate
them with companies that do not have "good news" to inform the market about their
situation. Good signal about future performance is given by the company that its past
financial performance is not good, it will not be trusted by the market (Rini, 2010).
2.4 Legal Basis Timeliness of Financial Reporting

In Act (Act) No. 8 of 1995 on Capital Markets stated clearly that public
companies are required to submit periodic reports and other incidental report to
Bapepam. More specific provisions on the reporting of public companies regulated in
Bapepam Regulation No. VIII.G.2, Attachment Decision of the Chairman of Bapepam
Number: Kep-38 / PM / 2003 Annual Report which came into force on 17 January
1996. Then on December 7, 2006, to improve the quality of information disclosure to
the public, diberlakukanlah Bapepam and Financial Institutions (LK) XK6 Attachment
of Bapepam Chairman Decree No. KEP-134 / BL / 2006 concerning Obligation to
Submit Annual Report for Issuers or public Companies.
In 1996, Bapepam issued Attachment Decision of the Chairman of Bapepam
Number: Kep-80 / PM / 1996, which requires that for each issuer and public companies
to submit annual financial statements of the company and report the independent auditor
143
to Bapepam no later than the end of the fourth month (120 day ) after the company's
annual financial statement date. But since September 30, 2003, Bapepam tighten
regulation by the issuance of Bapepam Regulation Number XK2, Attachment Decision
of the Chairman of Bapepam Number: Kep-36 / PM / 2003 concerning Obligation to
Submit Periodic Financial Statements.
In 2007 with the publication of the Decree of the Chairman of Capital Market
Supervisory Agency and Financial Institution Number: Kep-40 / BL / 2007 dated March
30, 2007 on Term Submit Periodic Financial Statements and Annual Report for Issuers
or Public Company whose Securities Listed on the Stock Exchange in Indonesia and on
the Stock Exchange in Other Countries. And in 2012 in the regulation of Bapepam No:
XK6 August 1, 2012 and the Decision of the Chairman of the Capital Market
Supervisory Agency and Financial Institution No. KEP-431 / BL / 2012 Annual Report
of the Public Company. Under this rule states that the issuer or public company
registration statement has become effective shall submit an annual report to Bapepam
maximum of 4 (four) months after the fiscal year ends. n as the late submission of
annual financial statements.
2.5 Conseptual Framework

Profittability (X1)
H1 (+)
Likuidity (X2)
H2 (+)
Gearing Ratio (X3)
H3 (+)
Size (X4)
H4(+)
Age (X5) Timeliness
H5 (+)
H12 (Y)
H6(+)
Complexity (X6)
H7 (+)
Ownership Structure (X7) H8 (+)
Audit Reputation (X8) H9 (+)
Audit Opinion (X9) H10(+)
Audit Committee (X10 H11 (+)
Commissioner Independent
(X11)
Gambar 1
Conseptual Framework
3. RESEARCH METHODOLOGY
The population used in this study is a company that has gone public with the
natural resources sector, the manufacturing sector and the service sector with the
classification of company property and real estate listed on the Indonesia Stock
Exchange for the periods 2010, 2011, 2012, 2013, 2014 and 2015 . the population in
this research is the natural resources sector by 43, by 144 Manufacturing sector, the
service sector with the classification of property and real eastate by 49 with a total
population of 236 companies during six periods.
144
The use of six this period, with consideration namely:
 To see the consistency of the effect of each independent variable on the
dependent variable;
 Data for the year included new data; and
 As a continuation of the previous research period referenced this study.
The sampling method is taken from a population of mining companies using
purposive sampling. This method is a sampling using certain criteria so that this sample
using the following criteria:
 Companies listed on the Indonesian Stock Exchange (BEI) respectively for
2010, 2011, 2012, 2013, 2014 and 2015;
 The company has issued annual financial statements for 2010, 2011, 2012, 2013,
2014 and 2015;
 The financial statements are denominated in the rupiah, as research conducted in
Indonesia;
 The Company did not experience a loss in the financial statements during the
years 2010-2015;
 Have a date data submission to Bapepam annual financial statements for 2010,
2011, 2012, 2013.2014 and 2015;
 Displaying the data and information used to analyze the factors that affect the
timeliness of financial reports for 2010, 2011, 2012, 2013, 2014 and 2015.
Tabel 1 Operasional Research variable
Variabel Indikator
Skala ukur
EAT
X1 = Profitability ROA : Rasio
TA
Current Asset
X2 = Likuidity Current Asset  Rasio
Current Liability
Liability
X3 = Gearing Ratio DER  Rasio
Ekuitas
X4 = Size SIZE = Ln (Assets)
Rasio
X5 = Age AGE = IPO - terminal years
Nominal
X6 = Complexity Operation KOP : variabel dummy
Nominal
(subsidiary ownership)
X7 = Structure Public Ownership SK : Structure Public Ownership
Rasio
X8 = Audit Reputation Reputation : Varibael dummy (Unqualified )
Nominal
Committe
Audit
X9 = Audit Committee Proporsi Audit
Komite Rasio
Board
of Commission
er
independen t commisione r
X10 = Independent Commissioner Proporsi KI  Rasio
Board of Commission er
Variabel Dummy : 0 : On Time
Y =Timeliness Nominal
1 : Not on time
145
4. FINDING AND ARGUMENT
Variables used in this research is profitability, liquidity, gearing ratio, firm size,
firm age, the complexity of the company's operations, ownership structure, reputable
public accounting firm (KAP), the auditor's opinion, the audit committee and
independent directors.Variabel-these variables are variables that can affect the
timeliness of the company's financial statements. With these variables can result what
are the factors that affect the timeliness of the financial statements of public companies
in Indonesia, especially if the variables of this effect applied to the companies listed in
Indonesia Stock Exchange (BEI).
4.1 Overview Research Object
Table 2
Sample Selection Process Research
Meet the Does not meet

No. Information
criteria the criteria
Natural Resource Sector Enterprise, Manufacturing Sector

and Service Sector with Classification of Real Property and
1 236 0
Real Estate for the period 2010, 2011, 2012, 2013, 2014
and 2015 listed on BEI.
The Company has issued audited financial statements
2 consistently for the period 2010, 2011, 2012, 2013, 2014 200 36
and 2015
The financial statements are stated in rupiah currency, as
3 the research is conducted in Indonesia 169 31
The Company did not suffer any losses in its financial

4 110 59
statements during 2010-2015
Having date data for submission of annual financial
5 statements to Bapepam for 2010, 2011, 2012, 2013,2014 110 0
and 2015 periods
Displaying data and information used to analyze factors

affecting timeliness of financial statement submission for
6 2010, 2011, 2012, 2013, 2014 and 2015 periods 75 35
Number of Company Sample 75

Total Number of Observation data during the study
450
period (6 Years)
source: www.idx.co.id
Based on the sample selection process that has been carried out, acquired 75
company listings that will be used as a sample. Due to the period of 6 years of research
conducted semala the sample in this study were 450 samples. Here are the names of
companies sampled in this study:
146
Table 3
List sample
No. Code Company name
1. NATURAL RESOURCES
Agricultural sector
1 BISI BISI International Tbk.
2 AALI Astra Agro Lestari Tbk.
3 LSIP PP London Sumatra Indonesia Tb
4 SGRO Sampoerna Agro Tbk.
5 TBLA Tunas Baru Lampung Tbk.
6 DSFI Dharma Samudera Fishing Indust
Mining sector
7 PTBA Bukit Asam Coal Mine
8 MEANING Ratu Prabu Energi Tbk
9 Ruis Interinsco Radiant Utama Tbk.
10 TINS Timah (Persero) Tbk.
11 CTTH Citatah Tbk.
2. MANUFACTURING
Basic and Chemical Industry Sector
12 INTP Indocement Tunggal Prakasa Tbk
13 SMCB Holcim Indonesia Tbk
14 SMGR Semen Gresik Tbk
15 AMFG Asahimas Flat Glasa Tbk
16 ARNA Arwana Citra Mulia Tbk
17 TOTO Surya Toto Indonesia Tbk
18 BTON Concrete Jaya Manunggal Tbk
19 HENNA Indal Aluminum Industry Tbk
20 KDSI Kedawung Setia Industrial Tbk
21 LION Lion Metal Works Tbk
22 LMSH Lionmesh Prima Tbk
23 PICO Pelangi Indah Tbk Canindo
24 EKAD Ekadharma International Tbk
25 SRSN Indo Acitama Tbk
26 APLI Asiaplast Industries Tbk
27 IGAR Champion Pacific Indonesia Tbk
Miscellaneous Industry Sector
28 TRST Trias Sentosa Tbk
29 CPIN Charoen Pokphand Indonesia Tbk
30 JPFA Japfa Comfeed Indonesia Tbk
31 ASII Astra International Tbk
32 AUTO Astra Auto Part Tbk
33 INDS Indospring Tbk
34 NIPS Nippres Tbk
35 SMSM Congratulations Perfect Tbk
36 RICY Ricky Putra Globlindo Tbk
147
No. Code Company name
Miscellaneous Industry Sector
37 UNIT Nusantara Inti Corpora Tbk
38 BRICK Shoes Bata Tbk
39 KBLI KMI Wire and Cable Tbk
40 KBLM Kabelindo Murni Tbk
41 SCCO Supreme Cable Manufacturing & Commerce Tbk
42 CEKA Cahaya Kalbar Tbk
43 DLTA Delta Djakarta Tbk
Sector Consumer Goods Industry
44 ICBP Indofood CBP Sukses Makmur Tbk
45 INDF Indofood Sukses Makmur Tbk
46 MYOR Mayora Indah Tbk
47 BREAD Nippon Indosari Corporindo
48 SKLT Sekar Laut Tbk
49 STTP Siantar Top Tbk
50 ULTJ Ultrajaya Milk Industry and Trading Company Tbk
51 GGRM Gudang Garam
52 HMSP Hanjaya Mandala Sampoerna Tbk
53 DVLA Darya Varia Laboratoria Tbk
54 KAEF Kimia Farma Tbk
55 KLBF Kalbe Farma Tbk
56 BRANDS Merck Indonesia Tbk
57 PYFA Pyridam Farma Tbk
58 TSPC Tempo Scan Pacific Tbk
59 TCID Mandom Indonesia Tbk
3. PROPERTY AND REAL ESTATE SECTOR
60 APLN Agung Podomoro Land Tbk.
61 ASRI Alam Sutera Realty Tbk.
62 FATHER Bekasi Asri Starter Tbk.
63 BKSL Sentul City Tbk.
64 DILD Intiland.
65 CTRA Ciputra Development Tbk.
66 CTRP Ciputra Property Tbk.
67 JRPT Jaya Real Property Tbk.
68 LAMI Lamicitra Nusantara Tbk.
69 PWON Pakuwon Jati Tbk.
70 GPRA Prime Gapuraprima Tbk.
71 KIJA Kawasan Industri Jababeka Tbk.
72 PUDP Pudjiadi Prestige Tbk
73 DART Ambassador Anggada Realty Tbk.
74 LPKR Lippo Karawaci Tbk.
75 MDLN Modernland Realty Ltd. Tbk
Source: Data are processed, 2016
Whereas in Table 4 below shows the total number of companies that timely and
punctual in submitting annual financial statements for 2010, 2011, 2012, 2013, 2014 and
148
2015. It is known that from year to year during the study period, the number of samples
submit financial statements on time tend to be too many changes in the year 2010 as many
as 12 (70.59%) of the company, in 2011 as many as 16 (94.12%), in 2012 a total of 14
(82.35%) of the company and in 2013 as many as 17 (100%) of the company. Thus during
the study period there are number of companies who do not timely submit financial
statements to Bapepam, the year 2010 as many as five (29.41%) of the company, in 2011 as
many as 1 (5.88%) of the company, in 2012 as many as 3 (17.
Tabel 4
Timely distribution company and not on Time in
Submission of Financial Statements for Periods Research
Periode 2010-2015
Research Periode
Company Category 2010 2011 2012 2013 2014 2015
Jml % Jml % Jml % Jml % Jml % Jml %
Timely 69 92% 70 93% 70 93% 75 100% 75 100% 67 89%
Not On Time 6 8% 5 7% 5 7% 0 0% 0 0% 8 11%
Total 75 100% 75 100% 75 100% 75 100% 75 100% 75 100%
4.2 Description of Research Results

Table 5
Descriptive statistics
N Minimum maximum mean Std. deviation

ROA 450 .00 1.81 .1066 .14010
CR 450 .28 11.74 2.4695 1.75292
DER 450 .07 5.78 .8956 .80243
SIZE 450 11:27 19:32 14.6684 1.64824
AGE 450 50.00 12579.00 6341.1667 2513.32741
COMPLEXITY 450 .00 1:00 .9867 .11483
STRUCTURE 450 .00 .94 .2997 .18133
REPUTASI_KAP 450 .00 1:00 .4778 .50006
KOMITE_AUDIT 450 .00 2:00 .8189 .34020
OPINI_AUDIT 450 .00 1:00 .9978 .04714
COMMISSIONE 450 .14 1:00 .3963 .12291
R
DELIVERY 450 .00 1:00 .9467 .22495
Source: Secondary data were processed (2016)
149
Based on table 5 above can be seen that from the sample of 450 companies
obtained the lowest value (minimum) in the variable accuracy at 0 and the highest
(maximum) equal to 1. The value of the average (mean) in the variable accuracy of
0.9467. Standard deviation of 0.22495 smaller than the average value of 0.9467
indicates that the deviation of the data occurring is low, thus can be explained that the
normal distribution of data accuracy.
Profitability is proxied by the ROA. The lowest value (minimum) ROA at 0:00
there are several companies with a code Ruis, CTTH, SRSN, INDS, DART and the
highest value (maximum) of 1.81 ysitu company Inti Nusantara Corporation., Tbk. The
average value (mean) on ROA amounted0.1066, Standard deviation of0.14010smaller
than the average value of 0.1731 indicates that the deviation of the data occurring is
low, thus can be explained that the profitability of variable data normal distribution.
With an average company earned a profit of 17:31 percent.
The lowest value (minimum) in the variable liquidity proxied by the current ratio
was 0.28 that the company Duta Anggada Realty Tbk (DART) and the highest
(maximum) at 11.74 which is the company Mandom Indonesia Tbk (TCID). With the
average value (the mean) on the current ratio of2.4695, Standard deviation of1.75292
smaller than the average value of 2.4695 Data shows that irregularities occurring is low,
thus can be explained that the current ratio variable data normal distribution. This shows
that the average company's ability to meet its short jangk liabilities amounted 2:47
means: every USD 1 USD 2:47 obligations secured by current assets.
The lowest value (minimum) in the variable gearing ratio is proxied by debt to
equiy ratio is equal to 0.074 by the company Ciputra Development (CTRA) and highest
value (maximum) of 5.78 by the company Dharma Samudera Fishing Industries (DSFI).
The average value (mean) in the ratio of debt to equiy0.8956, Standard deviation
of0.80243 smaller than the average value of 0.8956 Data shows that irregularities
occurring is low, thus can be explained that the variable data equiy ratio of debt to a
normal distribution.
The lowest value (minimum) in the variable firm size (SIZE) is at 11:27 and the
highest value (maximum) of 19:32. The average value (mean) on the size of the
company that is proxied by total assets is the natural log of14.6684, Standard deviation
value of 1.64824 smaller than the average value of 14.6684 indicates that the deviation
of the data occurring is low, thus can be explained that the data variables normal
distribution company size.
The lowest value (minimum) in the variable Age companies (Age) is 50, a
company Agung Podomoro Land (APLN) due in November 2010 just IPO and the
highest value (maximum) of 12579 that Merck Indonesia Tbk (MERCK). The average
value (mean) the age of the company amounted to6341.1167, Standard deviation value
of 2513.32741 smaller than the average value of 6341.1167 indicates that the data
irregularities occurring is low, thus can be explained that the age variable data normal
distribution company.
4.3 Hypothesis testing

Hypothesis testing using logistic regression models with enter method at a
significance level (α) of 5%. Logistic regression was used to examine the effect of
profitability proxied by return on assets (ROA), Liquidity, proxied by the Current Ratio,
Ratio Gearing with a debt to equity ratio (DER), the size of the company with Ln total
assets (LnTA), firm age (AGE) , complexity of business, ownership structure, reputable
150
public accounting firm (KAP), the Audit Committee, and the Audit Opinion
Independent Commissioner to timeliness of the company's financial statements.
4.3.1. Assessing Feasibility Regression Model (Goodness of Fit)

The first step taken is to assess the feasibility of the regression model. From the
look of Hosmer and Lemeshow Test table in table 5 indicated that the magnitude of the
statistical value Hosmer and Lemeshow Goodness of Fit amounted to 10 765 with
significance probability 0.215 where 0.215> 0.05, the null hypothesis can not be
rejected (H0). This means that the regression model used in this study completely unfit
for further analysis, because there is no real difference between the predicted
classification by classification were observed.
Table 6
Goodness of Fit
Hosmer and Lemeshow Test
Step Chi-square df Sig.
1 10 765 8 .215
(Source: Output SPSS 22.0)

4.3.2. Assessing Overall Model (Overall Model Fit)
The next step evaluate the feasibility of the model (overall model fit). -2 log
likelihood value indicates a match rate reduction based on the model of iterations
performed. Value -2 log likelihood come down quite a big show getting fit models. In
Table 4.6 shown due diligence with regard to the initial figure -2 Log Likelihood (LL)
block Number = 0, amounting to 225 152 and the number in -2 Log Likelihood (LL)
block Number = 1, amounting to 219 539. This shows a decline in the value of -2 Log
Likelihood block 0 and block 1 of 225152-219539 = 5613. Decrease Likelihood
regression model showed better or in other words the hypothesized model fits the data.
Table 7
Overall Model Fit
iteration - 2 Log likelihood
Step 0 225 152
Step 1 219 539

4.3.3. Model Summary
Model summary together with R2 testing on egresi linear equations. With the aim
of knowing how big a combination of independent variables able to explain the
variation of the dependent variable.
151
Table 8
Model Summary
-2 log Cox & Snell R Nagelkerke R
Step likelihood Square Square
1 166.148a .046 .135
a. Estimation terminated at iteration number 6

Because the parameter estimates changed by less than
.001.
Based on Table 8 it can be seen that the R2 value of 0.135 or 13.5%, which means
the variable X (profitability, liquidity, gearing ratio, firm size, firm age, complexity of
business, ownership structure, the reputation of the audit, the audit committee, the audit
opinion and an independent commissioner ) affects variable Y (timely submission of
financial statements) amounted to 13.5%. The rest is influenced by other factors beyond
the variables studied.
4.3.4. Simultaneous testing (Omnibus Test of Model Coefficient)

This test is used to test simultaneously or simultaneously. In this study, the
analysis using logistic regression techniques. Based on test results using SPSS 22.0
produces the following output:
Table 9
Omnibus Tests of Model Coefficients
Chi-square df Sig.
Step 1 Step 21 246 10 .019
Block 21 246 10 .019
Model 21 246 10 .019
Based on Table 9 shows that simultaneous profitability, liquidity, gearing ratio,

firm size, firm age, complexity of business, ownership structure, the reputation of the
audit, the audit committee, the audit opinion and an independent commissioner affect
the timeliness of financial reports. It is seen from the results of the chi-square 21 246
with significant value 0.019 <0.05.
4.3.5. Testing the Regression Coefficients

The final stage is the regression coefficient test where the result can be seen in
Table 9. The table shows the results of logistic regression test with significant level of 5
percent.
152
Of testing logistic regression equation is then obtained by a logistic regression
model as follows:
Ln (TL / 1-TL) = 0.372 + 4.470ROA + 0.478CR + 0.380DER + 0.202SIZE +
0.000AGE + 19.079KOP + -0.385KP-0.886KAP +
17.724OP-0.249KA-2.499KI + e
Table 10
Table Test Regression Coefficients
B Sig. Information
Step 1a ROA 4,470 .263 Not significant
CR .478 .056 Not significant
DER .380 .281 Not significant
SIZE .202 .301 Not significant
AGE .000 .789 Not significant
COMPLEXITY (1) 19 079 .999 Not significant
STRUCTURE -.385 .775 Not significant
REPUTASI_KAP -.886 .140 Not significant
(1)
OPINI_AUDIT (1) 17 724 1,000 Not significant
KOMITE_AUDIT -.249 .715 Not significant
COMMISSIONER -2499 .091 Not significant
Constant .372 .907 Not significant
H1: profitability influential positively to the timeliness of financial reports.
Variable profitability shows the value of regression coefficient of 4.470 with a
variable probability of 0.263 above 0.05 (5 percent). This implies that H1 is rejected,
thus not proven that the profitability affect the timeliness of financial reports.
H2: Likuiditas positive effect on the timeliness of financial reports.

Variable liquidity proxied by the current ratio shows the value of regression
coefficient of 0478 with a probability of 0.056 above variables of significance 0.05 (5
percent). This implies that H2 is rejected, thus not proven that the liquidity effect on the
timeliness of financial reports.
H3: Gearing ratio affect the timeliness of financial reports.

Variable gearing ratio is proxied by debt to equity ratio shows the value of
regression coefficient of 0380 with a probability of 0.281 above variables of
significance 0.05 (5 percent). This implies that the H3 is rejected, thus not proven that
the gearing ratio affect the timeliness of financial reports.
153
H4: Size companies positive effect on the timeliness of financial reports.
Variable sized companies shows the value of regression coefficient of 0.202
with a variable probability of 0.301 above 0.05 (5 percent). This implies that the H4 is
rejected, thus not proven that company size affects the timeliness of financial reports.
H5: Age Company's positive effect on the timeliness of financial reports.

Variable life of the company showed a regression coefficient of 0.000 with a
probability variable of 0.789 above 0.05 (5 percent). This implies that H5 is rejected,
thus not proven that the Age of companies affect the timeliness of financial reports.
H6: KCorporate Operations ompleksitas positive effect on the timeliness of

financial reports.
Variable complexity of the company's operations demonstrate the value of
regression coefficient of 19 079 with a variable probability of 0.999 at 0.05 ata (5
percent). This implies that H6 is rejected, thus not proven that the complexity of the
company's operations affect the timeliness of financial reports.
H7: The structure of public ownership (KP) positive effect on the timeliness of
financial reports.
Public ownership variables indicate the value of regression coefficient of -0385
with variable probability of 0.775 above 0.05 (5 percent). This implies that H7 is
rejected, thus not proven that public ownership affect the timeliness of financial reports.
H8: Reputation public accounting firm (KAP) has a positive effect on the
Variable reputable public accounting firms showed regression coefficient of -0886
with variable probability of 0.140 above 0.05 (5 percent). This implies that the H8
rejected, thus not proven that the reputation of the public accounting firm (KAP) affect
the timeliness of financial reports.
H9: The auditor's opinion has a positive effect on the timeliness of financial
reports.
Variable auditor's opinion indicates regression coefficient value of 17 724 with a
variable probability of 1,000 above 0.05 (5 percent). This implies that the H9 rejected,
thus not proven that the auditor's opinion affect the timeliness of financial reports.
H10: The Audit Committee has a positive effect on the timeliness of financial
reports.
Variable audit committee showed regression coefficient of -0249 with variable
probability of 0.715 above 0.05 (5 percent). This implies that H10 is rejected, thus not
proven that audit committees affect the timeliness of financial reports.
H11: Independent Commissioners positive effect on the timeliness of financial

reports.
Variable independent commissioner showed regression coefficient of -2499 with
variable probability of 0.091di above 0.05 (5 percent). This implies that H11 is rejected,
thus not proven that independent commissioners affect the timeliness of financial
reports.
154
H12: Profitability, liquidity, gearing ratios, Perusahaann size, complexity of the
Company, Ownership Structure, Firm Reputation, Opinion Audit, Audit
Committee and Independent Commissioner believed to affect the
From the test results simultaneously obtained siginfikansi value of 0.019. Due
to the significance value less than 0.05 (α = 5 percent), it can be concluded that the H12
is accepted. This means that together there is the influence of the variable profitability,
liquidity, gearing ratios, company size, complexity of the Company, Ownership
Structure, Firm Reputation, Opinion Audit, Audit Committee and Independent
Commissioner affect the timeliness of financial reports.
5. CONCLUSION
1. Profitability does not affect the timeliness of financial reports. So if the company
suffered a loss or gain does not affect the accuracy of delivery of a timely report
whether or not on time, so that H1 is rejected. The accuracy of report submission
is based more on the severity of the sanction imposed by OJK from the start of
written sanction to the revocation of business, so the company is more likely to be
timely in delivering the financial statements. This study is consistent with research
conducted by Sulistyo (2010), Sudaryanti (2008).
2. Liquidity does not affect the timeliness of financial reports. The level of liquidity
of a company does not affect the company to submit its financial statements in a
timely or untimely, so that H2 is rejected. The accuracy of report submission is
based more on the severity of the sanction imposed by OJK from the start of
written sanction to the revocation of business, so the company is more likely to be
timely in delivering the financial statementsThis study supports the research
conducted by Kuswanto and Manaf (2015), Sulistyo (2010).
3. gearing ratio proxied by the Debt Equity Ratio (DER)a company does not affect
the timeliness of financial reports. High and low levels of DER ratio of a company
does not affect the company to submit its financial statements in a timely or
untimely, so H3 is rejected. The accuracy of report submission is based more on
the severity of the sanction imposed by OJK from the start of written sanction to
the revocation of business, so the company is more likely to be timely in
delivering the financial statements. This study is consistent with research
conducted by Kuswanto and Manaf (2015), Abdul Kadir (2011).
4. Company size does not affect the timeliness of financial reports. So the size of a
large company or not, tend to want to be faster in delivering audited financial
statements due to various demands of multiple stakeholders, so H4 is rejected.
The accuracy of report submission is based more on the severity of the sanction
imposed by OJK from the start of written sanction to the revocation of business,
so the company is more likely to be timely in delivering the financial statements.
The results of this study are consistent with research conducted by Kuswanto and
Manaf (2015), Regina Susanto (2013).
5. Company Age (Age) does not affect the timeliness of financial reports. Where the
company has long been listed on the Indonesia Stock Exchange and recently listed
together tend to want to go faster in delivering audited financial statements due to
various demands of multiple stakeholders, so H5 is rejected. The accuracy of
report submission is based more on the severity of the sanction imposed by OJK
from the start of written sanction to the revocation of business, so the company is
155
more likely to be timely in delivering the financial statements. This study supports
the results of research conducted by Murtini et al (2014), Regina Susanto (2013).
6. The complexity of the company's operations did not affect the timeliness of
financial reports. Where companies tend to quickly resolve the financial
statements because of demands from outside investors and shareholders of
internal, regardless of how big the complexity of a wholly owned subsidiary, so
that H6 rejected. The accuracy of report submission is based more on the severity
of the sanction imposed by OJK from the start of written sanction to the
revocation of business, so the company is more likely to be timely in delivering
the financial statements. The results of this study are not consistent research
conducted by Sulistyo (2010).
7. Public ownership does not affect the timeliness of financial reports. This condition
can be due to that submission of financial statements by companies not based on
the level of public ownership structure in the process of preparing the financial
statements. Because the management company expects the financial statements
prepared to meet the needs of the information required by outsiders, so H7 is
rejected. The accuracy of report submission is based more on the severity of the
sanction imposed by OJK from the start of written sanction to the revocation of
business, so the company is more likely to be timely in delivering the financial
statements. This study supports the results of research conducted by Murtini et al
(2013), Prahesty (2010).
8. Reputation public accounting firm (KAP) does not affect the timeliness of
financial reports. So companies that use the services of a public accounting firm
(KAP), large and small tend not affect the timeliness in submitting their financial
statements, so H8 rejected. The accuracy of report submission is based more on
delivering the financial statements. The results of this study are consistent with
research conducted by Marathani (2013) and Murtini et al (2013).
9. The auditor's opinion does not affect the timeliness of financial reports.
Acquisition or unqualified opinion other than unqualified opinion by the company
do not affect the timeliness of the company's financial statements, so H9 rejected.
The accuracy of report submission is based more on the severity of the sanction
The results of this study are consistent with research conducted by Regina Susanto
(2013) and Sulistyo (2010).
10. The audit committee has no effect on the timeliness of financial reports. Their
audit committee here does not affect the delivery of financial statements due to the
audit committee only role is to ensure the financial statements are in accordance
with accounting standards, as well as the audit committee did not participate
directly in the audit and the greater the number or size of the Audit Committee
will result in hard form a network of communication and coordination were both
among the members of the Audit Committee, so that H10 is rejected. The
accuracy of report submission is based more on the severity of the sanction
156
The results of this study are consistent with research conducted by Riyan Sartika
(2014),
11. Independent Commissioner does not affect the timeliness of financial reports. The
existence of an independent commissioner here does not affect the delivery of
financial statements due to the independent directors only serves to oversee the
company's operational policies are in accordance with accounting standards, as
well as independent directors do not participate directly in the conduct of the
audit, so that H11 is rejected. The accuracy of report submission is based more on
delivering the financial statements. This study supports the results of research
conducted by Sprott Anggiani (2011) and Purwati (2006).
12. Variable profitability, liquidity, gearing ratios, company size, complexity of the
Company, Ownership Structure, Firm Reputation, Opinion Audit, Audit
Committee and Independent Commissioner significant effect on the accuracy of
the annual financial reporting with significant value 0.019> α 0:05 So H12
Accepted.
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160
Influence of Economic Value Added and Market Value Added to Stock Price on
Banking Companies Listed in The Indonesian Stock Exchange on 2012-2015
Dika Putra Gumay, and I KomangArthana*

1
Program of Accounting Studies, Faculty of Economics and Business, Nusa Cendana
University of Kupang
ABSTRACT
The company’s stock price reflects the value of the company so it is necessary to
measure the performance to know the extent to which the company’s performance that
will affect the movement of company’s stock price. In addition to performance
measurement using ratio analysis, another performance measurement method is
Economic Value Added and Market Value Added. This research aim to analyze
influence of Economic Value Added and Market Value Added to the Stock Price on
banking companies listed on the Indonesian Stock Exchange on 2012-2015. This
research used quantitative approach. Sample of the research was taken by using
purposive sampling method. Based on defined criteria, it got 8 banking companies that
become sample research. This research used multiple regression method. The result of
the significance of individual parameter (t test) showed that Economic Value Added
and Market Value Added variable has significant positive effect on Stock Price. The
result of the simultaneous significance (F test) showed that the two independent
variables simultaneously affect to stock price on banking companies listed on the
Indonesian Stock Exchange on 2012-2015.
Keywords: Economic Value Added, Market Value Added, Stock Price.
1. INTRODUCTION
The Bank as one of the important pillars in the economy of the society, serves as
a financial intermediary between the parties who have the funds and the parties who
need the funds. According to the Banking Act number 10 of 1998, the bank is a business
entity that collects funds from the public in the form of savings and distributes it in the
form of credit and or other forms in order to improve the standard of living of many
people. Because of the bank's function, the characteristic of the bank's business different
from that of manufacturing company or other service companies (Demu, 2014). In the
modern era, the banking industry has evolved not only as a financial intermediary
society but rather a profit-oriented company. This is needed to be done so that banking
companies can grow bigger that can attract customers so the banking company can
survive in the competition.
Nowdays, many banking companies have become public companies or have go
public. This makes the main capital source of the company can be obtained from
internal and external companies. Internal company is own capital owned by the banking
company is gaining from banking activities, and external company is an investment by
shareholders. The conventional orientation of banking companies as financial
intermediaries becomes irrelevant today because banking companies are required to
*
Corresponding author: komang.arthana@staf.undana.ac.id
161
maximize profits in order to attract investors. Therefore, the company is required to
consider all the taken strategies by considering the impact on stakeholders (Kartini,
2011). According Husnan and Pudjiastuti (2012), the purpose of financial decisions for
companies that have go public is to increase the stock price or increase the value of the
company in general. In other words, stock prices also reflect the value of a company,
where financial performance is reflected in it. Stock prices will increase if more
investors are buying stocks of the company and so do the other way. Here is the
movement of banking stock price of the period 2012-2015.
Stock Price Movements
2500
2000
RUPIAH
1500 Saham
1000
Linear (Saham)
500
0
2011 2012 2013 2014 2015
YEARS
Figure 1. Stock Price Movements in Banking Companies in 2011-2015
In general, stock prices in banking companies fluctuated in the period of 2011-

2015, and the occurred trend showed that stock prices increase during the period. The
most significant decrease occurred in 2013 of 16.01% from a year earlier due to the
weakening of the US economy, which ultimately affected the Indonesian economy,
especially the bank sub-sector (Baihaqi, 2015). Significant increase occurred in the next
year, which amounted to 25.55%, this is due to the performance results of a number of
issuers of banks that suit the expectations of market participants impact on the
movement of banking stocks (www.bisnis.liputan6.com).
The company's stock price reflects the value of the company, so the company
must keep the stock price stable and even increase. Therefore, performance
measurement is needed to know as far as which the performance of banking companies
that will affect the movement of stock prices company. Performance measurement
usually can be done using an analysis tool in the form of financial ratios, but
considering the characteristics of banking companies that specifically make the financial
ratios do not absolutely reflect the performance of banking companies. In addition,
financial ratios have several disadvantages, among others: (1) Financial ratio is not
adjusted to changes in the price rate; (2) Financial ratio is difficult to used as a
comparison between similar companies, if there is the different in accounting methods;
162
(3) The financial ratio only describes temporary condition, that is on the date of
financial report and financial reporting period (Munawir, 2002).
The method of Economic Value Added (EVA) and Market Value Added (MVA)
is a new approach method in appraising performance that introduced to resolve some
lack on financial ratios. EVA is the difference between NOPAT (Net Operating Profit
after Tax) with capital charge (Capital Charge) which means that EVA measures
additional on shareholder value in a certain period. This added value is created if the
company produces profit above the company's capital cost. While MVA is a cumulative
measure of corporate performance that display capital market valuation at any given
time of EVA value in the future or absolute between stock market value and invested
capital (Kartini, 2011).
EVA and MVA are performance measures that focus on company value; thereby
creating value added companies is important in this approach. EVA and MVA are
positive value which means the company has been able to create value-added companies
those implications with increasing stock prices of these companies. This can be
explained because the stock price is formed from demand and supply shares strength
itself, which means the increase in stock prices, is a form of positive response of
investors from the creation of value-added companies.
From several research results that have been done, it is known that the obtained
results are still various with different companies sample. For that research is intended to
see how much influence Economic Value Added and Market Value Added to stock
prices if applied to a banking company. The banking company was chosen because of
its special characteristics different from manufacturing companies and other service
companies. Besides that, banking companies have strict regulations so that financial
decisions that related in efforts to increase stock prices are limited.
Based on the description above, this study aims to analyze the influence of
Economic Value Added (EVA) and Market Value Added (MVA) either partially or
simultaneously to the stock prices in banking companies that listed on Indonesia Stock
Exchange 2012-2015.
2.1 Banking
According Ardiyana (2011), banking is everything that concerns about banks,
including institutions, business activities, and ways and processes in carrying out
activities. According to Law no. 10 of 1998, "Bank is a business entity that collects
funds from the society in savings form and distributes to the society in credit form
and/or other forms in order to improve the standard live of many people"
2.2 Stock Price

According Sutrisno (2003), stock price is the shares value that occurs due to the
sale of shares in the secondary market. While shares price according to Hartono (1998)
in Rahman (2016) is the price that occurs in the stock market at a certain time that
determined by market participants namely demand and supply market.
According to Arifin (2011) the factors that influence the increase and decrease
of stock prices are as follows: (a) Fundamental condition of the issuer; (b) Demand and
supply law; (c) Interest rate; (d) Foreign currency; (e) Foreign funds in the exchange; (f)
Stock price index; (g) News and rumours.
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2.3 Economic Value Added
According to Tunggal (2001) in Iramani and Febrian (2005), EVA / NITAMI is
financial management method to measure the economic profit in a company that states
that welfare can only be created when the company is able to fill all operating costs and
capital cost (cost of capital) ". Meanwhile, according to Mowen and Hansen (2009)
translated by Fitriasari and Arnos, the definition of Economic Value Added (EVA) is
the operating profit after tax less the total annual capital cost. If EVA is positive, the
company has created wealth. If negative then the company has wasted capital. In the
long run only companies that produce capital or wealth can survive.
According to Utama (1997) in Trihastuti (2009), the assessment of Economic
Value Added (EVA) as follows:
1. If Economic Value Added (EVA)> 0, it means EVA positive value indicate that
process of value added at the company has happened.
2. If Economic Value Added (EVA) = 0 indicates the breakeven position or Break
Event Point.
3. If Economic Value Added (EVA) <0, which means EVA negatives show no value
added process.
EVA which is a performance measurement tool can be calculated such as

indicated by Young and O'Byrne (2001) as follows:
EVA = NOPAT – Capital Charge
Where:
EVA = Economic Value Added
NOPAT = Net Operating Profit after Tax
Capital Charge = Investment Capital x Capital Cost
EVA forming components are:
a) Net Operating Profit after Tax (NOPAT) is net operating profit after tax that is free
from the debt influence and non-cash expense. NOPAT calculation can be done with
two approaches are financial approach and operational approach
b) Capital, as well as NOPAT calculation, capital calculation also can be done with
two approaches: financial approach and operational approach.
c) The Cost of Debt is the interest rate that requested by the creditor over a number of
funds that lent to the company.
d) Cost of Equity, Cost of Equity calculation is done by capital asset pricing model
(CAPM).
e) Weighted Average Cost of Capital (WACC), the weighted average capital cost
(rwacc) is the overall combined cost level of the financing system used by the firm,
which represents the expected rate of return on investment by creditors and
shareholders.
f) Capital Charge is the total cost of capital, which is the weighted average capital cost
(Rwacc) rate multiplied by the capital invested.
2.4 Market Value Added

According to Sartono (2011) "Market value added (MVA) is the increase in
market value of the company's capital above the paid-in capital of shareholders". MVA
can only be calculated or applied to a public company or listed in the capital market.
According to Winarto (2005) in Lutfiana et al (2013), Market value added (MVA) is the
difference between the capital invested in the company over time (for overall
164
investments in the form of capital, lending, retained earnings and so on) on profits that
can be taken now, which is the difference between the book value and the market value
of the overall capital demand.
Market Value Added (MVA) can be calculated using the following formula:
Where:
Outstanding Share = Number of Shares outstanding
Interpretation of MVA measurement results can be explained as follows:
1. MVA> 0, this indicates that the company can create a higher investment value than
the capital paid by investors.
2. MVA <0, this shows that the company has not been able to create shareholder
welfare because the investment value is lower than the capital paid by investors.
3. MVA = 0, this indicates a breakeven position.
2.5 Empirical Study

Previous studies on the influence of Economic Value Added and Market Value
Added on stock prices among others are:
Research conducted by Rahman (2016) which examines the influence of
Economic Value Added and Market Value Added to stock prices of financial companies
sector on 2011-2014 partially or simultaneously. The results showed that EVA and
MVA simultaneously or partially have a significant positive effect on stock prices.
Rahayu (2016) examined the influence of EVA, MVA and Liquidity on stock
prices at 13 Food and Beverages companies listed on Indonesia Stock Exchange on
2010-2014, and got the result that Economic Value Added has a negative and significant
influence on stock price. Market Value Added has a significant positive influence on
stock prices. Liquidity has a positive and significant influence on stock prices.
Pipit (2013) conducted research about the influence between EVA, Operating
Cash Flow, Residual Income, Earnings, Operating Leverage, and MVA to stock Return
at the listed manufacturing company in Indonesia Stock Exchange on 2008-2011. The
results showed that simultaneously EVA, Operating Cash Flow, Residual Income,
Earnings, Operating Leverage, and MVA influential to stock return, and partially
Operating Cash Flow and Earnings have a significant positive influence on stock return
while EVA, Residual Income, Operating Leverage, and MVA has no significant
influence on stock return.
The research by Kartini (2011) about influence of Economic Value Added (EVA),
Market Value Added (MVA), and Cash Flow to stock Return on listed public company
in Indonesia Stock Exchange. The results showed that partially the three independent
variables have no significant influence on stock returns.
The results of research conducted by Himawan (2009) on the influence of EVA,
MVA and Operating Income on stock returns in listed mining sector industries in
Indonesia Stock Exchange on 2003-2007 shows that partially or simultaneously EVA,
MVA and Operating Income have a significant influence on stock return.
2.6 Hypothesis
Based on the description of the empirical study about connection between
Economic Value Added (EVA) and Market Value Added (MVA) to stock price, it can
be arranged hypothesis as follows:
165
H1 : Economic Value Added (EVA) has a significant positive influential on Stock
Price.
H2 : Market Value Added (MVA) has a significant positive influential on Stock Price.
H3 : Economic Value Added (EVA) and Market Value Added (MVA) influence
simultaneously to Share Price.
3. METHODS
3.1 Research Variables and Operational Definition
The variables in this research include dependent variable and independent
variable. Dependent variable in this research is stock price. Stock price is the share
value that occurs due to the share sale in the secondary market. The stock price in this
study is proxied by the closing price of a share in a listed banking company on the
Indonesia Stock Exchange on 2012-2015. The independent variables in this research
are:
3.1.1 Economic Value Added (EVA)
Economic Value Added (EVA) is the difference between net profit after
tax/NOPAT (Net Operating Profit after Tax) and Capital Charge (Capital Charge). EVA
is measured by Rupiah per share. EVA can be formulated as follows:
EVA = NOPAT – Capital Charge
The variables used in EVA measurement are:

 Net Operating Profit after Tax (NOPAT) represents after-tax operating profit, which
is an adjustment of Earnings before Interest and Tax, where operating profit is
calculated before deducting by financing cost. In this research, NOPAT calculations
use a financing approach. The formula used is:
NOPAT = Net Profit + Increasein Deferred Tax + Increase in Allowance for
Earnings Assests + Minority Interest + AdjustedInterest Expense
 Invested Capital is the funds amount that invested by the company to finance
business, which is the sum of total equity and debt. In this research, Invested Capital
calculation uses a financing approach. The capital value that used in this research is
the average value of initial capital and final capital, assuming that management uses
the capital to be managed during the year so that invested capital is formulated as
follows:
Invested Capital (Average) = Equity Value + Total Debt Obligations + Minority Interest –
Deferred Tax – EliminationUncertain Credit
 Weight Average Cost of Capital is the equity cost and the each debt cost multiplied
with the equity percentage and debt in capital structure of the company. The
weighted average capital cost is searched by the equation as follows:
166
Information:
Wd = Weight of long-term debt in the capital structure
Kd = Debt cost after tax
We = Equity weight in the capital structure
Ke = Equity Cost
Where:
In calculating WACC a company need to know somecalculation component as
follows:
a. Tax Calculation
The tax calculation is formulated as follows:
b. Debt Cost Calculation (Kd)

Debt costs calculation is formulated as follows:
*Where:
c. Equity Cost Calculation (To)
The capital cost of equity is calculated using the Capital Assets Pricing Model
(CAPM) approach so first need to know the value of Risk Free Rate (Rf), Beta,
Market Risk Premium (MRP). The Risk Free Rate (Rf) used in cost of equity
calculation is using Bank Indonesia Certificates (SBI) rate one month by taking
the SBI average rate annually during the research period. The beta value (ß) is
derived from the regression coefficient of the investment return rate variable
(Ri) on the regression equation between market return rate (Rm) and investment
return rate (Ri). The Market Risk Premium value (MRP) is 1.71%; 4.10%;
3.76%; 2.91% taken from www.stern.nyu.edu/~adamodaran which states value
for Indonesia included in emerging market with risk category. Cost of Equity is
formulated as follows:
d. Long-term Debt Weight Calculation (Wd)

Long Term Debt Weight calculation can use the formula:
e. Weight Equity Calculation (We)

Weight Equity Calculation may use the formula:
 Capital Charges obtained by multiplying WACC with invested capital. Capital

charges show how much capital opportunity costs have been injected by creditors
and shareholders. Capital Charges can be calculated by the formula:
 Economic Value Added can be defined as operating profit after tax less the capital
cost. EVA used is EVA per share, so that can be comparable with stock prices, then
the results of EVA calculation divided by the outstanding shares number.
167
3.1.2 Market Value Added (MVA)
Market Value Added (MVA) represents the difference between equity market
value and equity book value. Market Value Added (MVA) can be calculated using the
following formula:
The dependent variable in research is the stock price so the MVA can be
calculated by using the formula:
Where:
Outstanding Share = Outstanding shares number
3.2 Population and Sample

In this research the population that will be used is listed banking companies on the
Indonesia Stock Exchange during the period 2012-2015 as many as 43 companies. The
interpretation sampling technique in this research is purposive sampling that is sample
determination technique with certain consideration (Sugiyono, 2013). Some of the
criteria that need to be fill in sample determining of this research are: (1) The listed
banking companies on the Indonesia Stock Exchange have audited financial statements
as of December 31, 2012 until 2015; (2) The Company has committed an Initial Public
Offering (IPO) before 2012 until 2012; (3) Listed banking company on the Indonesia
Stock Exchange which provides stock price information from 2012 until 2015; (4) The
research equity company is positive. This criteria is to avoid refraction in EVA
calculation if negative equity; (5) The Company has interest expense on the financial
statements as at 31 December 2012 until 2015; (6) Not doing corporate actions such as
stock split, rights issue, stock dividend, and other policy that can influence the
company's normal stock price during observation period. From the 43 listed banking
companies on the BEI, then the result is 8 banking companies who become the final
research that adjust with the sample selection criteria.
3.3 Types and Data Sources

The data type in this research is quantitative data. Data sources in this research are
secondary data in the form of financial statements and stock data of listed banking
companies on the Indonesia Stock Exchange (BEI) in 2012-2015. The obtained data
from the official website of BEI www.idx.com and stock information site that is
www.duniainvestasi.com.
3.4 Collecting Data Method

Collecting secondary data method in this research is documentation method.
Documentation method is done by studying the relevant documents such as banking
financial statements companies and stock data obtained either from libraries or search
through the internet to obtain necessary information and data.
3.5 Data Analysis Technique

Data analysis technique that used in this research is multiple linear regression
analysis method with classical assumption test step.
168
Hypothesis testing using multiple linear regression analysis, done with equation as
follows:
Stock Price = a + b1 EVA + b2 MVA + e
Information:
a = Constants
b = Regression Coefficient
EVA = Economic Value Added
MVA = Market Value Added
e = Error
4. RESULTS AND INVESTIGATION

4.1 Sample Research List
Here is the company names sampled list in this research:
Table 1. Research Sample List
No Company Code Company Name
1 BACA PT Bank Capital Indonesia Tbk.
2 BCIC PT Bank Mutiara Tbk
3 BEKS PT Bank Pundi Indonesia Tbk.
4 BNGA PT Bank CIMB Niaga Tbk.
5 BSIM PT Bank Sinarmas Tbk.
6 BTPN PT Bank Tabungan Pensiunan Nasional Tbk.
7 INPC PT Bank Artha Graha Internasioanal Tbk.
8 PNBN PT Bank Pan Indonesia Tbk.
4.2 Descriptive Statistics

Descriptive statistics provide descriptions or viewed data descriptions from
minimum values, maximum values, mean values, and standard deviations.
Table 2. Descriptive Statistics
Variable N Minimum Maximum Mean Std. Deviation
EVA 32 -21,59 511,00 111,6218 156,71859
MVA 32 -47,00 5.230,00 711,4513 1.341,63182
Stock Price 32 50,00 5.250,00 787,5313 1.320,54072
Based on table 2 it can be seen that the ranged value of the company's Economic
Value Added that become sample of this research between -21.59 until 511.00 with
average of 111.6218 at standard deviation of 156.71859. Based on table 2 it can be seen
that the value of Market Value Added companies that become the ranged sample of this
research between -47.00 until 5.230,00 with an average of 711,4513 at standard
deviation 1.341,63182. Based on table 4.2 it can be seen that the ranged value of the
company's stock price that became the sample of this research between 50.00 until
5.250.00 with an average of 787.5313 at the standard deviation 1.320.54072.
4.3 Classic Assumption Test

A classical assumption test is needed to find out is the regression model obtained
can produce a BLUE (Best Linear Unbiased Estimator) estimator.
169
Table 3. Summary of Classical Assumption Test Results
Variable Tolerance VIF Sig.
EVA 0,302 3,308 0,610
MVA 0,302 3,308 0,647
Asymph. Sig. (2-tailed) (Before Data Transformation) 0,042
Asymph. Sig. (2-tailed) (After Data Transformation) 0,434
Durbin Watson 1,498
Asymph. Sig. (2-tailed) ( Run test) 0,126
Based on Table 3 of normality test results using one sample kolmogorov-

smirnov test, the results of data processing showed that the data is not normally
distributed. This is shown by the results of one sample kolmogorov-smirnov test which
shows of Asymph. Sig. value (2-tailed) is below the significance level (0.05), which is
0.042. In order to, the researcher transforms the data or converts the data form into
natural logarithm. Normality test results after data transformation indicate that the data
has been normal distributed. This is shown by the results of one sample kolmogorov-
smirnov test which shows Asymph. Sig. value (2-tailed) above the specified level of
significance (0.05), which is 0.434.
The heterokedasticity result test using glesjer test can be seen that there is no
heterokedasticity in both of the independent variables. This is proven by the
significance level which is above the decided significance level (0,05) which is in the
mount of 0,610 and 0,647.
Multicollonearity test results showed that there is no independent variables that
have tolerance values less than 0.10 which means no correlation between independent
variables. The VIF value result shows the same thing that no independent variable has
VIF value more than 10 which means there is no correlation between independent
variables, thus in the regression model there is no multikolonierity between independent
variables.
The autocorrelation test result using Durbin-Watson test with the amount of
observation of 32 observation and the number of independent variables is 2 (k=2) shows
dL value is 1.309 and dU value is 1.574. It can be seen from the comparison that dL
value<d <dU or 1.309 <1.498 <1.574. Because dL <d <dU, then the decision taker
cannot be made or cannot be concluded (inconclusive). To resolve the autocorrelation
problem, the researcher does autocorrelation test using Run Test. Based on the
autocorrelation test result using Run test, the data processing shows that there is no
autocorrelation. This is indicated by the test run result that shows Asymph. Sig. value
(2-tailed) above the specified significance level (0.05), which is 0.126.
4.4 Research Results and Investigation

Table 4 is the analysis result summary that has been done
Table 4. Summary of Research Results
Variable B t Sig.
(Constant) 2,114 8,659 0,000
Economic Value Added 0,293 6,004 0,000
Market Value Added 0,500 7,947 0,000
t-table = 2,045 F-table = 3,32 Sig. F = 0,000
Fcount = 295,874 R2 = 0,966
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Based on the summary in table 4, the following analysis and discussion.
Hypothesis testing in this research using multiple linear regression statistic test.
Multiple linear regression analysis is used to determine the influence of Economic
Value Added and Market Value Added to Stock Price. This analysis was processed
using SPSS statistical program. Based on table 4, multiple linear regression equations
are obtained as follows:
LnStock Price = 2,114 + 0,293_LnEVA + 0,500_LnMVA
The statistical analysis result for Economic Value Added variable is known that
the regression coefficient is positive 0,293. The t test result for Economic Value Added
variable is obtained tcountis 6,004 and ttable is 2.045 so tcount > ttable is 6,004> 2,045 with
smaller significance level compare to significance level settled which have (0.000
<0,05), it can be concluded that Economic Value Added has a significant positive
influence on Stock Price to listed banking companies on Indonesia Stock Exchange
period 2012-2015 so the hypothesis H1is accepted.
Based on EVA variable regression coefficient multiple linear regression result is
0.293. This is indicating a positive influence between EVA and stock prices. It can be
said that when EVA has increased than will have an impact on increasing banking
company stock price. Positive Economic Value Added (EVA) indicates that the
company has been capable to create added value for investors or shareholders because
the company is capable to generate a rate of return more than the capital level. From the
individual parameter significance testing (t test statistic), the value of EVA variable
significance is 0,000 is much smaller than the settled level of significance that is 0,05
(5%). This indicates that the EVA variable has a significant influence on stock prices.
The result of the analysis shows that the performance measurement through EVA has an
influence on the movement of banking company stock, which means that investors pay
attention to the EVA value in making investment decisions, with expectation that the
company can create economic profit and provide added value that will improve the
welfare of shareholders.
The statistical analysis result for Market Value Added variable is known that the
regression coefficient is 0,500. The t test result for Market Value Added variables
obtained tcount of 7,947 and ttable of 2,045 so that tcount> ttable is 7,947> 2,045 with a
significance level smaller than the settled significance level (0,000 <0,05), it can be
concluded that Market Value Added has a positive and significant influence on Share
Price on listed banking companies on Indonesia Stock Exchange period 2012-2015 so
the hypothesis H2is accepted.
This shows that market value added is very relevant to be used as investor
reference in assessing company performance in creating market value, because Market
Value Added can measure company achievement based on market value added created
by company during certain period. According to Himawan (2009), positive MVA means
there is added value for the company, and usually will be responded by company stock
price will increase, which means that company succeed to create an added value
company for investors. If the MVA gets bigger, it shows a bigger added value for the
investors, so the stock price will increase too. On the other way, if the negative MVA
that means the company has a decrease in performance that usually will be responded
by a decrease in stock prices.
171
5. CONCLUSIONS
Economic Value Added has a positive and significant influence on the share
price at listed banking company on the Indonesia Stock Exchange. It is shown by the
obtained regression coefficient of 0.293 and t count of 6.004 with a significance level of
0,000 smaller than the level of significance is determined that is equal to 0,05. This is in
accordance with the research hypothesis explaining that Economic Value Added has a
positive and significant influence on Stock Price.
Market Value Added has a positive and significant influence on Stock Price at
listed banking company on the Indonesia Stock Exchange. It is shown by regression
coefficient obtained is 0,500 and tcount is 7,947 with significance level is 0,000 smaller
compare to the settled significance level is 0,05. This is in accordance with the research
hypothesis stating that Market Value Added has a positive and significant influence on
Stock Price.
Economic Value Added (EVA) and Market Value Added (MVA)
simultaneously have a positive and significant influence on Stock Price. This is
indicated by the result of simultaneous significance test obtained, that is F count value of
295,874 with significance level of 0,000. Based on the smaller significance value than
0,05, it can be said that jointly Economic Value Added and Market Value Added
influence to the Stock Price.
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Perusahaan Dengan Menggunakan Metode Economic Value Added (EVA) dan
Metode Market Value Added (MVA) Studi pada PT Japfa Comfeed Indonesia
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Tahun 201-2014.
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173
Liquidity, Growth and Profitability of Non-Financial Public Listed Malaysia: A
Malaysian Evidence
Nik Noor Ayu Nik Hussin1, Mazurina Mohd Ali 1, Erlane K Ghani2 and Halil
Paino2
1
Faculty of Accountancy, Universiti Teknologi MARA, 42300 Puncak Alam, Malaysia
2
Accounting Research Institute, Universiti Teknologi MARA, 40450 Shah Alam,
Malaysia
ABSTRACT
This study examines the relationship between liquidity, growth and profitability of non-
financial firms listed on the Bursa Malaysia. Specifically, this study examines the
relationship between liquidity and growth on profitability for 50 non-financial public
listed firms in Malaysia. Using panel data technique on 250 observations across a five
years period, this study shows that liquidity has a strong positive relationship with
profitability in terms of return on asset of the firms. However, liquidity in terms of
quick ratio has no impact on profitability. This study also shows that firm growth in
terms of sales growth has a negative relationship with profitability. However, this study
shows that liquidity and growth in general do not influence profitability in terms of
return on equity, although the result shows that sustainable growth rate has a positive
relationship on profitability. This study highlights the importance of these measures in
measuring performance. The finding in this study provides guidelines to the firms on the
measures that best to be used in evaluating performance so that appropriate strategies
can be adopted to increase performance.
Keywords: Liquidity, Growth, Profitability, Performance Evaluation, Public Listed

Companies.
174
The Influence of Company Policy and Profitability to Firm Value
Rofika , and Zulbahridar

Accounting Departement, Faculty Economic and Business, Universitas Riau, Indonesia
ABSTRACT
One of the goals of the company is founded is to maximize the firm value which is
reflected in the share price of the company. Some variables that affect the firm value
has been investigated by researchers before. This research aims to empirically examine
and analyze the influence of the company policy which consists of debt policy, dividend
policy and investment policy as well as the profitability to firm value. . The firm value
is measured by the ratio of Price to Book Value (PBV). Debt policy is measured by the
Debt to Equity Ratio (DER), the dividend policy is measured with a Divident Payout
Ratio (DPR), investment policy is measured by the Price Earnings Ratio (PER), and
profitability is measured by the ratio of Return on Equity (ROE). The research
population is all manufacturing companies listed in Indonesia Stock Exchange period
2013-2015. The sample of research is selected based on purposive sampling method
based on some criteria. Based on the criteria obtained 39 companies selected to be
sampled. While the number of observations of 117 observations. Data analysis for
hypothesis testing using multiple regression analysis with significance level (α) = 5%.
The results of the study found that debt policy (DER), investment policy (PER) and
profitability (ROE) statistically has a significant effect on firm value. While the
dividend policy (DPR) statistically has no significant effect on firm value.
Keywords: Firm value, debt policy, dividend policy, investment policy, profitability
175
Audit Report Lag Analysis at Mining Companies Listed in Indonesian Stock
Exchange 2012-2016
Sari Angriany Natonis, and Sarinah Joyce Margaret Rafael

Fakultas Ekonomi dan Bisnis, Universitas Nusa Cendana, Indonesia
ABSTRACT
BAPEPAM requires each of go public companies to publish its annual report no later
than three months after the fiscal year ends. Time period in completing the audit work
until the date of publishing audit report was called audit report lag. The aimed of this
study was to determine the effect of profitability, solvency, company size, audit opinion,
and size of accountant public firm to audit report lag at mining companies listed in
Indonesia Stock Exchange during the period of 2012-2016. There were twelve (12)
samples were obtained through purposive sampling technique. The data analysis
technique used the multiple regression analysis. The results showed that the profitability
and company size gave negative affected to the audit report lag, while the other
variables such as solvency, audit opinion, and size of accountant public firm had no
significant affected to the audit report. The result of simultaneous test showed that all
independent variables influenced audit report lag with 32,8% of determination
coefficient.
Keywords: Profitability, Solvency, Company Size, Audit Opinion, Size of Accountant

Public Firm, Audit Report Lag.
176
Analysis of Factors That Have Effect on Disclosure of Sustainability Report
(Empirical Study on Listed Companies in IDX 2013-2015)
Adhitya Agri, and Devi Safitri

Economics and Business Faculty of Riau University, Kampus Bina Widya KM 12,5
Simpang Baru, 28293, Pekanbaru, Indonesia
ABSTRACT
In Indonesia, disclosure of sustainability report is voluntary disclosure, but companies’

interest and priority to publish sustainability report have been increased. This research
is aimed to examine factors that have an effect on the disclosure of sustainability
reports. Population is listing companies on the Indonesian Stock Exchange (IDX) 2013-
2015. Sample selection uses the purposive sampling method and generates 19 samples
of companies. There are 57 samples for observation in three years. Analysis method for
hypothesis test is multiple regression analysis. The result shows leverage and
governance committee have effect significant on disclosure of sustainability report;
while liquidity, audit committee, listing age, and size have no effect on the disclosure of
sustainability reports.
Keywords: Sustainability Report; Liquidity; Leverage; Audit Committee; Governance

Committee
1. INTRODUCTION
In the last few years, corporate social responsibility (hereafter CSR) and
sustainability have been main issue for development of companies. This issue arises
from demands and hopes of companies’ role on society. Environment and humanity
tragedies around the world, such as Minamata (Japan), Bhopal (India), Chernobyl (Uni
Soviet), Shell (Nigeria), lead to demands of companies’ role on society. In Indonesia, it
happens as well, such as cases of flood of heat mud in Sidoarjo by PT. Lapindo,
pollution of Buyat Bay in South Minahasa by PT. Newmont Minahasa Raya, problems
of ethnic society empowerment in Papua mining area by PT. Freeport, and conflict
between local society of Aceh with Exxon Mobil which manages gas in Arun.
Objective of profit oriented by companies have been questioned. In order to get
profit, there are many damages of social and environment as the effect of business
activities by companies. As companies have been realized the important of CSR, they
make disclosure in corporate report. It is not only relied on single bottom line; which is
financial information; but also adds two other items as triple bottom line; which are
financial, social, and environment information (Amir, 2015). Nowadays, companies
have been demanded to be companies with sustainability development. This concept
leads to base of sustainability report.
Sustainability report can be seen as the proof of commitment between companies
and social environment that can be evaluated by stakeholders or information users.
Sustainability report is one of instruments that can be used by organization, such
government or companies, in dialogue process with citizens or stakeholders as an effort
of education implementation of sustainable development. Sustainability report is as
important as disclosures of financial statement (Luthfia, 2012).
177
The Global Reporting Initiative (hereafter GRI) which based in Netherland
develops framework of sustainability report. It becomes main reference for companies in
making disclosure of sustainability reporting (Sari& Marsono, 2013). Last updates of
GRI framework is G4 Guidelines. GRI G4 guidelines consist of three updated standards
of sustainability reporting, which are: organization profile, performance indicators, and
management approach to pushes company implements good corporate governance.
Sustainability reporting has rapid development globally. In Australia, 199 of 486
companies (24%) publish sustainability report (Australian Government, 2005, cited in
Dilling, 2010). In July 2007, about 20% of U.S. Fortune Companies publish corporate
sustainability report (UPHAM, 2007, cited in Dilling, 2010). KPMG (2008) shows that
80% of global big companies publish sustainability report (Dilling, 2010). Those data
shows that global companies realize the importance of sustainability report.
Indonesia shows the contrast data, which is only PT. Aneka Tambang Tbk.
publishes sustainability report in 2006, while only three companies publish
sustainability report in the next year. According to www.beritasatu.com (accessed in
February 2017), in 2016, 120 of thousand companies in Indonesia publish sustainability
report or disclosure level of sustainability report is below 10 percent.
In Indonesia, low disclosure level of sustainability report caused by some factors.
First, disclosure of sustainability report is voluntary disclosure and there is no regulation
of mandatory disclosure of sustainability report for companies. Second, companies are
indicated that they are not transparent in business activities, and have no commitment in
good corporate governance implementation. Third, companies think that it is costly to
make sustainability report that consists of not mandatory disclosures; in addition; it will
wastes time, resources, and expenses.
There is increasing of number of companies that disclose sustainability report
every year, although it is only voluntary disclosure. It is caused by awareness of
companies in good corporate governance implementation; as well as pressures by
society, community, and mass media in transparency and sustainability.
Contribution of this research is to extend previous researches by Dilling (2010),
and Sari and Marsono (2013). Differences of this research compares to previous
researches are measurement of dependent variable, research period, research object,
independent variables, and analysis method. In Indonesia, quantitative research about
sustainability report that uses sustainability report quality as operational definition is
rare. Previous researches measure sustainability report only by dummy variable
measurement, 1 if publishes sustainability report and 0 if does not publish sustainability
report, so, in such condition, analysis method will uses logistic regression. In the other
hand, this research disclosure of sustainability report seen by disclosure quality based on
GRI G4 guidelines, so this research will uses multiple linear regressions.
2.1 Stakeholders Theory and Legitimacy Theory
Implementation of disclosure of sustainability report is based on stakeholder
theory and legitimacy theory. Stakeholder theory explains that companies will disclose
mandatory and voluntary information, so stakeholders will trust on companies.
Mandatory information disclosure is financial statement. Voluntary information
disclosure, such as sustainability report, is needed by stakeholders that can have an
effect on economics activities of companies. By disclosing sustainability report (social
and environment disclosure), companies give more enough and complete information
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related to companies activities and its effect on society and environment condition
(Ghozali & Chariri, 2007).
Legitimacy theory explains, when “legitimacy gap” phenomenon happens,
companies need to evaluate their social value and adjust it to occurred social values or
perception on companies as legitimacy strategy. It is important to disclose information
related to social organization, community and environment. Companies can disclose
such information in sustainability report as picture of companies’ accountability to
public parties. It is aimed to get society legitimacy and explains how much social and
environment affected by companies (Chariri, 2008).
2.2 Sustainability Report

Based on GRI, sustainability report is measurement, disclosure and
accountability implementation of organization performance in order to achieve
sustainable development to internal and external stakeholders. Elkington (1997) defines
sustainability report as report that provides not only financial, but non-financial
performance information as well that consist of social and environment activities
information and leads to growth of sustainable performance.
Sustainability report is different from annual report. Sustainability report
supports annual report publication as well as shows commitment and a place for
company to inform participation as company that supports sustainable development to
society.GRI have developed framework based on above principles for sustainability
reporting, which is Sustainability Reporting Guidelines (hereafter SRG). Last updated
of SRG is GRI G4 Guidelines. GRI G4 effectively implements in 2013 until 2018.
GRI G4 Guidelines include economics, social and environment performance
indicators, consist of 91 items. GRI G4 provides relevant framework globally to
supports standardized approach in transparent and consistent reporting. It will be needed
to provide information that can be used and trusted by market and society.
2.3Effect of Liquidity on Disclosure of Sustainability Report
Companies that can pay all liabilities before its maturity, have good financial
performance and in liquid condition. It gives strong and positive image to companies.
Stakeholders will support companies with stronger and more positive image. In order to
strengthen the image, effort that can be taken by companies is makes additional reports.
One of them is makes sustainability report voluntarily, as companies’ act to get
stakeholders’ support (Widianto, 2011). Widianto (2011) and Amir (2015) prove that
liquidity has effect on disclosure of sustainability report. Based on above assumption,
first hypothesis is as followed:
H1 = liquidity has effect on disclosure of sustainability report
2.3 Effect of Leverage on Disclosure of Sustainability Report

High leverage shows bad financial condition. It is because most of all assets
generated from debt. Companies with high leverage are more likely to break debt
covenant. It is because of unavailable cash to pay debt on its maturity date. In order to
solve the problem, companies’ management will do efficiency and try to get investors as
much as possible by provides high current earnings. Management will reduces
expenses, includes expense of voluntary disclosure reporting. In order to get high
earnings, companies will reduce expenses (Nasir, 2014), include expense of
sustainability reporting. Disclosure of sustainability report needs time and high cost. It
179
is supported by Nasir (2014) shows that leverage has effect on disclosure of
sustainability report. Second hypothesis is as followed:
H2 = leverage has effect on disclosure of sustainability report
2.4 Effect of Audit Committee on Disclosure of Sustainability Report

Role of audit committee is to coordinate internal parties of company to do their
tasks effectively, monitors financial reporting, evaluates accounting policy, internal
control and supports implementation of good corporate governance. The more often
audit committee meets, the better audit committee coordination, so audit committee can
make monitoring role more effective and supports increasing of social and environment
information publication by company (Wulanda, 2017). Audit committee can push
company to disclose sustainability report in order to push company to give the best for
stakeholders. The more meetings by audit committee, the more effective audit
committee will be and pushes company to disclose sustainability report. It is supported
by Widianto (2011) that proves audit committee has effect on disclosure of
sustainability report. Based on the above assumption, third hypothesis is as followed:
H3 = liquidity has effect on the disclosure of sustainability report
2.5 Effect of Governance Committee on Disclosure of Sustainability Report

Governance committee is aimed to do monitoring on effective internal control of
financial statement (Widianto, 2011). Code of corporate governance, issued by Komite
Nasional Kebijakan Governance [National Committee of Governance Policy] (2006),
states that Komite Nasional Kebijakan Governance helps board of commissioner in
evaluation of good corporate governance policy that provided by board of directors as
well as assesses its consistent implementation, includes business ethic and corporate
social responsibility (Adhipradana,2013). Governance committee can recommends
management to publish disclosure of sustainability report. It will make company to have
good corporate governance and increases image in front of stakeholders. Adhipradana
(2013); Nasir, Ilham, and Utara (2014); and Luthfia (2012) prove that governance
committee has effect on disclosure of sustainability report. Based on above assumption,
fourth hypothesis is as followed:
H4 = governance committee has effect on disclosure of sustainability report
2.6 Effect of Listing Age on Disclosure of Sustainability Report

Companies that have been listed for long time will be able to give more
complete and comprehensive information than new listed companies. Companies that
have been listed for long time have put accounting information management to a test,
know well kind of any information that needed by stakeholders, and increases
companies’ value in front of stakeholders; such as publish disclosure of sustainability
report. The longer companies listed, the more companies publish disclosure of
sustainability report. It is supported by Putri (2013), and Kusuma (2014) that prove
listing age has effect on disclosure of sustainability report. Based on above assumption,
fifth hypothesis is as followed:
H5 = listing age has effect on disclosure of sustainability report
2.7 Effect of Companies’ Size on Disclosure of Sustainability Report

The bigger companies, the more companies will be get attention from
stakeholders. In such condition, companies need more effort to get legitimacy of
180
stakeholders to create harmonization between social values of companies’ activities
with behavior norms in society. The bigger companies, the bigger companies’ interest
are for disclosure of wider information (Widianto, 2011). One of ways to get
companies’ legitimacy is by disclosing sustainability report. By disclosing sustainability
report, companies will get legitimacy of business activities and avoid politic pressures.
Widianto (2011) and Fahriza (2014) prove that companies’ size has effect on disclosure
of sustainability report. Based on above assumption, sixth hypothesis is as followed:
H6 = companies’ size has effect on disclosure of sustainability report
3. METHODS
3.1 Data and Sample Selection
Data in this research is secondary data got from documents. Documents are
financial statement, annual report, and sustainability report. Data accessed from ICMD,
IDX website in (http://www.idx.co.id/), GRI database in
(http://database.globalreporting.org/), and companies’ website.
Research population is listed companies in Indonesian Stock Exchange (IDX)
Population will be research sample by purposive sampling method, which is classified
objects into certain considerations. Criteria of considerations are as followed:
 Publishes complete annual report in 2013-2015
 Have disclosure of sustainability report in 2013-2015
 Non financial companies; such as banks, finance companies and insurance.
 Data is available in companies’ report
3.2 Variables Measurement

Dependent variable is disclosure of sustainability report, measured by
indicators of GRI G4 guidelines. Dependent variable measured with content analysis
method, by giving checklist on disclosure of sustainability report that suited to
indicators of GRI (Sari and Marsono, 2013). In order to get disclosure level of
performance index, this research will give score for disclosed items in sustainability
report by followed calculation (Atmajaya, 2014) :
Advantage of this measurement, compares to previous research, is the use of

update guidelines, which is GRI G4 launched in 2013 and can be used effectively until
2018. Previous research still uses GRI G3 or only measures disclosure of sustainability
report by dummy variable.
Independent variables are liquidity, leverage, audit committee, governance
committee, listing age, and companies’ size. Liquidity measured by current ratio, which
calculated by current assets divided by current liabilities. Leverage measured by debt to
equity ratio, which calculated by total liabilities divided by total equities. Proxy of audit
committee is number of audit committee meetings in one year period. Governance
committee measured by dummy variable, score 1 if company has governance
committee, score 0 if company does not has governance committee. Listing age
measured by how long company have been listed in IDX (Kusuma, 2014), which
calculated by year of research period minus year of first listing in IDX. Companies’ size
measured by logarithm natural of total assets.
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3.3 Analysis Method
In this research, analysis method uses multiple linear regression. Model for
hypotheses test is as followed:
Y = α + β1X1 + β2X2 + β3X3 + β4X4 + β5X5 + β6X6 + e
where:
Y : Number of disclosed items divided by 91 indicators of GRI G4
a : Constant
β (1-6) : Coefficient
X1 : Liquidity, measured by current ratio.
X2 : Leverage, measured by debt to equity ratio.
X3 : Audit Committee, measured by number of member meetings
X4 : Governance Committee, measured by dummy variable
X5 : Companies’ size, measured by logarithm natural of total assets.
X6 : Listing age, measured by number of listing years in IDX.
e : Error

Research population is companies listed in Indonesian Stock Exchange three
years in a row from 2013-2015. By purposive sampling method, only 19 companies that
meet criteria and become research sample. Number of research objects in three years is
57 companies.

Table 1. Result of Descriptive Statistics
Variables N Minimum Maximum Mean Std. Deviation
Y 57 2.17 4.56 3.5914 0.54669
Liquidity 57 0.18 6.15 1.6286 1.08315
Leverage 57 0.16 4.04 1.2129 0.90289
audit_committee 57 3.00 6.00 3.7368 0.89695
listing_age 57 5.00 26.00 16.6842 7.03856
Companies_size 57 29.35 33.13 31.0304 0.92857
Source: Statistical result of SPSS 23.
Based on table above, data description for each variable is disclosure of

sustainability report has minimum value 2.17; maximum value 4.56; mean value
3.5914; and standard deviation 0.54669. Liquidity has minimum value 0.18; maximum
value 6.15; mean value 1.6286; standard deviation 1.08315. Leverage has minimum
value 0.16; maximum value 4.04; mean value 1.2129; and standard deviation 0.90289.
Audit committee has minimum value 3.00; maximum value 6.00; mean value 3.7368;
and standard deviation 0.89695. Listing age has minimum value 5.00; maximum value
26.00; mean value 16.6842; and standard deviation 7.03856. Companies’ size has
minimum value 29.35; maximum value 33.13; mean value 31.0304; and standard
deviation 0.92857. Based on data description, mean value is higher than standard
deviation that shows data is well distributed.
182
4.2 Normality
Table 2. Kolmogorov-smirnov Test
Indicators Unstandardized
Residual
N 57
Normal Parametersa,b Mean 0.0000000
Std. Deviation 0.49950648
Most Extreme Differences Absolute 0.084
Positive 0.084
Negative -0.060
Test Statistic 0.084
Asymp. Sig. (2-tailed) 0.200c,d
Source: Statistical result of SPSS 23.
Based on table above, Asymp. Sig. (2-tailed) of nonparametric test: Kolmogorov
Smirnov is0.200> 0.05. Regression model fulfill normality assumption.
4.3 Results of Classical Assumption Tests

4.3.1 Multicollinearity
Table 3. Result of Multicollinearity Test
Model Collinearity Statistics
Tolerance VIF
1 (Constant)
X1 0.703 1.423
X2 0.717 1.394
X3 0.837 1.195
X4 0.800 1.250
X5 0.745 1.343
X6 0.824 1.213
Source: Statistical result of SPSS 23
Based on table above, VIF value < 10 and tolerance > 0.10 for all variables.
Regression model is free of multicollinearity.
4.3.2 Heteroskedasticity
Figure 1. Result of Heteroskedasticity Test

183
Based on scatter plot, data distributed randomly below and above value 0 and
does not make any specific pattern. Regression model is free of heteroskedasticity and
feasible for research.
4.3.1 Autocorrelation
Table 4. Result of Autocorrelation Test
Model R R Square Adjusted R Std. Error of the Durbin-Watson
Square Estimate
1 0.526a 0.277 0.190 0.49211 1.760
a. Predictors: (Constant), X1, X2, X3_Ln, X4
b. Dependent Variable: Y_Ln
Based on table above, dvalue (Durbin-Watson) is 1.760. Based on table of Durbin-

Watson with significance value 0.05, dvalue of 1.760 is in between -2 until +2, so there is
no autocorrelation in regression model.
4.4 Result of t-Test and Discussion

Table 5. Result of t Test
Model Unstandardized Standardized t Sig.
B Std. Error Beta
1 (Constant) 6.521 2.377 2.744 0.008
Liquidity -0.027 0.072 -0.053 - 0.715
0.368
Leverage -0.206 0.086 -0.340 - 0.020
2.394
Audit_committee 0.024 0.080 0.040 0.305 0.762
governance_committe -0.393 0.153 -0.346 - 0.013
2.572
Listing_age 0.012 0.011 0.149 1.071 0.289
Companies_Size -0.090 0.078 -0.152 - 0.256
1.150
a. Dependent Variable: y
Based on table above, regression model is as followed:
Y = 6.521– 0.027X1– 0.206X2 + 0.024X3– 0.393X4 ++ 0.012X5- 0.090X6 +e
Test result of first hypothesis shows that significance value is 0.715; where it is
above 0.05. It shows that liquidity has no effect on disclosure of sustainability report.
This result supports Suryono and Prastiwi (2011), Luthfiah (2012), Adhipradana (2013)
that state creditors do not use additional information about social and environment that
provided in sustainability report as main source, but use financial statement in order to
give loans to companies. Creditors are more likely to see companies’ condition from
financial statement than sustainability report, so liquidity has no effect in disclosure of
sustainability report. This result is linear with Puspowardani (2013) as well, that stated
reason why liquidity has no effect on disclosure of sustainability report because
sustainability report is only additional information to make companies’ image, so
liquidity does not considered yet by manager and creditors.
Test result of second hypothesis shows that significance value is 0.020; where it
is below 0.05. It shows that leverage has significant effect on disclosure of sustainability
184
report. This result supports Suryono and Prastiwi (2011) that states leverage has
negative effect on disclosure of sustainability report. According to Jensen and Meckling
(1976), companies with high leverage cover high monitoring cost. High leverage has
effect on companies’ management to report high earnings by decreasing expenses,
include disclosure expense of corporate social and environment responsibility. In order
to publish sustainability report, companies need longer time and higher cost. Level of
voluntary disclosure, even more when it is separated from annual report, will be
decreased by companies.
Test result of third hypothesis shows that significance value is 0.762; where it is
above 0.05. It shows that audit committee has no effect on disclosure of sustainability
report. It supports Dilling (2010) and Ratnasari (2011). Audit committee has no effect
on disclosure of sustainability report because audit committee meetings are not done
effectively, where members of audit committee bring their own-interest or certain
group-interest. Lack of competences also can be reason why audit committee does not
do their task well (Ratnasari, 2011). Audit committee meetings have more concern for
financial reporting than disclosure of social and environment information, so audit
committee has no effect on on disclosure of sustainability report.
Test result of fourth hypothesis shows that significance value is 0.013; where it
is below 0.05. It shows that governance committee has a significant effect on disclosure
of sustainability report. It supports Adhipradana (2014) that states governance
committee helps companies to achieve good corporate governance, so companies can
make effective and efficient performance. Governance committee can push companies
to implement voluntary disclosure and create transparency. Voluntary disclosure that
will be implemented is sustainability report, so governance committee has an effect on
disclosure of sustainability report.
Test result of fifth hypothesis shows that significance value is 0.289; where it is
above 0.05. It shows that listing age has no effect on disclosure of sustainability report.
It supports Trencansky and Tsaparlidis (2014) that states companies’ age give only
minor effect and not significant on disclosure of sustainability report.
Test result of sixth hypothesis shows that significance value is 0.256; where it is
above 0.05. It shows that companies’ size has no effect on disclosure of sustainability
report. Putri (2013) states reasons why size has no effect on disclosure of sustainability
report. First, small companies can disclose corporate social responsibility as well, if it is
needed. Second, implementation and disclosure of social responsibility can give direct
and indirect advantages (according to companies’ ability in maintain sustainability of
companies’ activities) and companies get business legitimacy from stakeholders.
4.5 Result of Determination Coefficient Test (R2)

Table 6. Determination Coefficient (R2)
Model R R Square Adjusted R Square Std. Error of the
Estimate
1 0.406a 0.165 0.101 0.51836
a. Predictors: (Constant), X1, X2, X3_Ln, X4
b. Dependen Variable : Y_Ln
Based on table 6, R Square value is 0.165. It indicates that effect of independent
variables (liquidity, leverage, companies’ committee, age, and size) can explain
dependent variable (disclosure of sustainability report) is 16.5%, while 83.5% affected
by other variables outside this research.
185
5. CONCLUSIONS
This research is aimed to examine the effect of liquidity, leverage, audit
committee, governance committee, listing age, and companies’ size on disclosure of
sustainability report. Based on analysis results, leverage and governance committee
have effect significant on disclosure of sustainability report, while liquidity, audit
committee, listing age, and size have no effect on disclosure of sustainability report. It
indicates that ratio of financial performance and corporate governance does not seen yet
by management as consideration in disclosure of sustainability report.
This research has limitation. First, number of sample only 57 samples from 19
companies listed in IDX 2013-2015. It is because there are only a few of companies that
disclose sustainability report still. Second, this research does not use financial
companies because of consideration of variable measurement. Based on research
limitation, future research can consider other variables, so it will extend to other
industry sector as research sample.
ACKNOWLEDGEMENTS
Authors thank Accounting Program, Economics and Business Faculty of Riau
University for supporting the research fund.
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188
The Effect of Human Resources Competency and Implementation of Government
Accounting Standards on the Quality of Financial Accountability and the Quality
of Financial Statements as an Intervening Variable
Alfiati Silfi, Kamaliah, and Nurul Badriyah

Kampus BinaWidya Km. 12,5 SP Panam, Pekanbaru 28293, Riau Indonesia
ABSTRACT
The purpose of this study is to examine the effect of human resources competency and
implementation of government accounting standards on the quality of financial
statements and the effect of the quality of financial statements on the quality of financial
accountability. The population in this study is all government employers who are
involved in the process of preparing financial statements in regional device organization
in Siak Regency and purposive sampling is used as sampling method. The data
were collected by means of a questionnaire and then analyzed by using Partial Least
Square (PLS). The result proved that human resources competency and implementation
of government accounting standards affect the quality of financial statements. The result
also proved that the quality of financial statements act as an intervening variable among
that human resources competency and implementation of government accounting
standards on the quality of financial accountability.
Keywords: Human Resources Competency, Government Accounting Standards, the

Quality of Financial Statements, the Quality of Financial Accountability
189
The Effect of Company Characteristics to Disclosure in
Annual Report of The Company
Novita Indrawati, Edfan Darlis, and Al Azhar L

Accounting Department Economic Faculty Universitas Riau, Indonesia
ABSTRACT
This study examines the characteristics of firms that affect the company's disclosure in
the annual report. The company's characteristics are company size, ownership structure,
profitability, international activity, industry type, and growth opportunities. The
research sees disclosure in broader aspects, namely corporate governance disclosure,
enterprise risk management disclosures, and intellectual capital disclosure. Research
population is non-financial companies listed on the Indonesia Stock Exchange in 2016.
Sampling method is purposive sampling and obtained 125 companies. This study
consists of a model, which is tested with three multiple regression equations. The result
of the research shows that the characteristics of influential companies to disclosure are
firm size, ownership structure and industry type while profitability, international activity
and growth opportunities have no effect on the disclosure in the annual report.
Keywords: Company characteristic, disclosure, annual report
190
Analysis of Factors Affect the Quality of Bengkalis Regency Government Financial
Statements
Julita, and Susilatri

Accounting Department, Faculty Economic and Business, Universitas Riau
ABSTRACT
This study aims to determine the effect of Quality of Human Resources, Internal
Control, Technology Utilization and Application of SAP to the Quality of Financial
Statements at Bengkalis Regency Government. The dependent variable in this study is
the Quality of Financial Statements, while the independent variables are Quality of
Human Resource, Internal Control, Technology Utilization and Application of SAP.
The population in this research is 81 SKPD at Bengkalis Regency Government. The
sampling technique is determined by purposive sampling. Data collection technique is
by distributing questionnaires. Data analysis was done with multiple linear regression
models with SPSS version 20.00 software. The results of this study indicate that the
Quality of Human Resources, Internal Control, and Utilization Technology affects the
Quality of Bengkalis Regency Government Financial Statements, while the SAP
Application has no effect on the Quality of Bengkalis Regency Government Financial
Statements. The result of the determination coefficient (adjusted R2) test is 0.889. This
shows that the Quality of Financial Statement at SKPD of Bengkalis Regency
Government is influenced by the research factor is 88,9%. While 11.1% is influenced by
other factors not observed in this research.
Keywords: Quality of Financial Statements, Quality of Human Resources, Internal

Control, Technology Utilization and Application of SAP.
191
Achieving Business Sustainability through Comprehensive Value Creation: An
Empirical Findings from Malaysian Government Linked Companies
NikHerdaNik Abdullah1*, Jamaliah Said2, and Enni Savitri3

1
Faculty of Accountancy, UniversitiTeknologi MARA, PuncakAlam Campus, 43200
PuncakAlam, Malaysia
2
Accounting Research Institute, UniversitiTeknologi MARA, Shah Alam 40450, Malaysia
3
Department of Accounting, Universitas Riau, Pekanbaru 28293, Indonesia
ABSTRACT
Value creation plays a dynamic role not limited to expanding shareholder’s capital, but
also upgrade financial standing, create greater avenues for profit generation, business
sustainability and long-term performance of the organizations. Traditionally, value
creation emphasized on shareholder, customer and economy. However, a new paradigm
of value creation had shifted from this contemporary value creation to comprehensive
value creation which concentrating on financial, social and environmental sustainability
and survival of the business. Nonetheless, both traditional and comprehensive value
creation agreed on the importance of financial and non-financial as a dimension in
accessing value creation. The purpose of this paper is to explore the extent of top
management emphasis on the measures of value creation that deemed important for the
business sustainability in the context of Malaysian Government Linked Companies
(GLCs). Data collected based on the survey from 215 top managements in GLCs. The
findings discovered that the top three non-financial measures that highly emphasize are
enhancing business opportunities, brand recognition and reputation, and improved
operational performance. The findings also revealed that top three financial measures
are sales growth, return on investment and market value. This research extends to the
growing body of literature on value creation. This study paves a way towards assessing
the successfulness of value creation which create competitiveness in the industry,
sustainable competitive advantages, business survival and sustainability, secure long
term performance and economic prosperity.
Keywords: Business sustainability; Value creation; Government linked companies.
*
Corresponding author: nik_herda@yahoo.com
192
Hedging Local Product: Optimization of Products Processed Food Sago
Subtitution Competitively Global the Case of Kepulauan Meranti Provinsi Riau
Marhadi, Idjang Tsarsono, and Yusnarida Eka Nizmi

Universitas Riau
ABSTRACT
This study aimed to analyze the strategy of increasing food security and self-reliance
through the Riau province of processed products sago as a substitute for food
diversification. By leveraging the leading sectors in the region, will be a major driving
force in improving the regional economy, national and export competitiveness in the
global market. Sampling of gathering data structures questionnaire conducted on SMEs
and sago industry in the islands Meranti. By doing SWOT analysis and measurement of
product competitiveness through diamond porter to determine the potential of the
products processed sago. Moreover, to add sharpness analysis will be performed direct
observation in the form of unstructured interviews and gather relevant literature with the
studies reviewed. The authors find new strategies in providing solutions to improve
food security and self-reliance through the optimization of processed products sago.
Meeting the needs of the region in the consumption of basic materials requires another
alternative to avoid product shortages and increase the potential of the region in
developing the seed sector. Increased production of processed sago varied would be a
superior product that can compete in national and global markets.
Keywords: Hedging Local Product, Strategic, SWOT analysis.
193
Toward Whole of Government Applying Activity Based Management in One Stop
Licensing Service Office at Provincial Level of East Nusa Tenggara
Moni Wehelmina Muskanan, SE., MPA.1*, Drs. Markus Bunga, M.Agr.

Christien. C. Foenay, SE., M.Si., Herly M. Oematan, SE.,M.Si.
Faculty of Economics and Business, Nusa CendanaUniversity, East Nusa Tenggara-
Indonesia.
ABSTRACT
This research aims to analyse the implementation of the Whole of Government (WoG)
concept applied in One Stop Licensing Service (OSLS) at Provincial Level of East
Nusa Tenggara (Nusa Tenggara Timur/NTT), and to look for a better technical
approach of Whole of Government by applying the concept of Activity Based
Management (ABM) in issuing business licences. This qualitative research was
conducted by applying focus group discussion (FGD) and in depth-interview for data
collection, regarding the existing procedures. The research went through three steps
analysis. Firstly, comparing the whole of government concept that has to be applied for
public services with the content of all the relevant governmment and local government
rules that have been issued. Secondly, assessing the existing procedures based on the
concept of WoG and the rules issued. Thirdly, justifying a technical recommendation
for WoG managerial approach by applying a concept of Activity Based Management in
its operational management to respond the accountability and performance
measurement issues challenging in WoG application. The research found that NTT
OSLS office has not totally reformed its operational management according to the WoG
concept which has been required since 2006, when the government started to reform its
public services. This is stemming from inconsistency of applying the concept of WoG
which leads to inadequate capacity building and poor local government institutional
framework. The condition also brings a negative impact on OSLS performance relating
to the issue of business licenses which takes a longer time than it should be, because the
process of issuing the license is also depend on others technical institutions which out of
the control of OSLS office. To increase the performance of local government (OSLS
office) in public services, especially to support social and economic development in
local level, it needs to review all relevant local government rules that can strengthen
OSLS capacity, which in turn, it can effectively apply Activity Based Management
(ABM)approach as a better approach to measure accountability and performance, which
are challenging issues in WoG application.
Keywords: Whole of Government, Activity Based Management, One Stop Licensing

Service, Business License.
1. INTRODUCTION
In the past few years, many studies have been done on WoG application in
public service reform, especially to solve wicked problems that require a cross-cutting
approach (Christensen & Lægreid, 2007; Clarke & Stewart, 1997; Downe & Martin,
*
Corresponding author: moniwehelmina@gmail.com
194
2006; Farquhar & Graham, 2005; Pollitt, 2003). A portion of the studies review how
WoG can be successfully implemented in public administration management, and some
of them have reviewed management approach to measure accountability and
performance measurement (PM) in the WoG framework. The WoG approach has been
questioned by researchers, as it applies integrated processes while considering cross-
cutting sectors (Pollit, 2003; Ball, Broadbent, & Moore, 2002; Downe & Martin, 2006).
This study aims to specifically review the implementation of the WoG concept and
describe how accountability and PM issues can be resolved with the accounting-based
management approach.
Accountability and PM in the framework of WoG have been questioned by
researchers. WoG, which is known as a “cross cutting approach,” applies integrated
processes while considering cross-cutting sectors at vertical and horizontal levels, which
are difficult to manage (Pollit, 2003; Ball et al., 2002; Downe & Martin, 2006). In fact,
vertical coordination, involving activities that are unified, directed, and conducted by
top levels with several work units under their authority and responsibility, and the
horizontal approach, coordinating actions or activities that are unified and directed in
units at the same level in several organizations or apparatus (Pollit, 2003) are, to some
extent, not easily integrated. This is because the people at those levels still have the
working culture of a single-purpose organization—thinking based on function rather
than group-purposed organization or thinking based on integrated processes (Ball et al.,
2002; Downe & Martin, 2006).
The study argues that mutual accountability and PM are difficult to measure and
are not easily achieved in WoG implementation due to pressure to solve wicked
problems as shared organizational problems. However, a commitment to change from a
partial perspective to integrated thinking can have a positive impact on reliable
measurement of shared performance and accountability (Christensen & Lægreid, 2007;
Entwistle & Martin, 2005). This commitment is established in a set of regulations and
technical management approaches that emphasizes integrated service activities as the
main driver for measuring management processes and costs of accountability through
the ABM approach. This approach can be taken as an alternative integrated
management accounting technique for WoG application (Helden, 2005; Kaplan &
Cooper, 1998).
This research raises the issue of WoG implementation in licensing service
reform at the OSLS office known as Pelayanan Terpadu Satu Pintu (PTSP) at the
provincial level in East Nusa Tenggara (ENT)/Nusa Tenggara Timur (NTT). This
office has reformed its public service methods since 2009 because of a wicked problem
of poor licensing service, the result of multi-dimensional problems that require cross-
sectoral cooperation to solve. However, these problems cannot be solved effectively for
numerous reasons, such as poor accountability and PM, which have been challenged in
WoG application. Indeed, this office has poor service quality in relation to time and cost
(World Bank, 2012; Ombudsman, 2015; TAF, 2015). This research focuses on public
administration and management accounting aspects to answer the following research
questions:
 Why can WoG not be implemented effectively in PTSP NTT?
 How can ABM improve WoG implementation of accountability and PM in PTSP
NTT?
To answer these questions, the following scientific steps were taken: (1) review
of related literature regarding WoG and ABM, (2) review of how WoG was interpreted
195
in government and local government regulations and in PTSP operational management
issuance of licenses.
The remainder of this paper is organized as follows: Section 2 outlines the literature
review and develops the correlation between WoG and ABM in the public sector as well
as how accountability and PM can be reliably measured in ABM in a WoG context;
Section 3 explicates the research methods used, including data collection and analysis
techniques; Section 4 reports the findings and arguments showing how ABM is highly
likely to make positive contributions to the success of WoG implementation; and the
final section discusses the conclusion, which summarizes the findings, implications, and
limitations and provides suggestions for further research.
2.1 Reliance on WoG to solve wicked problems in public services
Wicked problems are defined as problems that are difficult to solve due to
various inherent circumstances such as unclear triggers or causes, multi-dimensional
reasons, and behavioral change. Therefore, they require interrelation and cooperation
among a wide range of organizations—ministries, agencies, non-departmental public
bodies, local authorities, professional associations, voluntary sector bodies, private
sector contractors, public utilities and so on (Christensen & Lægreid, 2007; Clarke &
Stewart, 1997; Downe & Martin, 2006; Farquhar & Graham, 2005; Pollitt, 2003).
Wicked problems cannot be overcome with single-purpose organizational
approaches, as proposed by the new public management (NPM) framework, because as
was mentioned, wicked problems are multidimensional problems that require inter-
sector coordination and collaboration (Christensen & Lægreid, 2007; OECD, 2005).
The literature shows that the WoG approach is more effective than NPM in dealing with
wicked problems, which has been confirmed in most Anglo-Saxon countries and the
United States under the heading of collaborative public management (Agranoff &
McGuire 2003; O'Leary, Gerard, & Bingham, 2006), as well as in Scandinavian
countries gradually acquiring WoG features (Christensen & Lægreid, 2007) and other
Asian countries that are successfully implementing this approach such as Singapore,
South Korea, Thailand, and Malaysia (UN Survey, 2012). Furthermore, it was
mentioned that Indonesia ranked 35 of 41 top performers of the WoG concept, in which
its adoption has been particularly helpful in solving poverty, low education level,
unemployment, environmental damage, poor healthcare service, and poor licensing
services (Budiati, 2017).
WoG itself is represented in many terminologies as “joined-up government” or
“integrated networking" and as a cross-cutting approach (Ling, 2002; Pollit, 2003). But
Pollit (2003:35) defines WoG as “a phrase to denote the aspiration to achieve
horizontally and vertically coordinated thinking and action. Through this co-ordination
it is hoped that a number of benefits can be achieved." Pollit also mentioned that, given
some measurement, WoG is considered to be successfully applied if some of these
situations are attained:
Conditions in which there is no different policy undermining each other, better
use can be made of scarce resources, synergies developed through different key
stakeholders in a particular policy field or network, and no fragmented access to
a set of related services offered to citizens (Pollit, 2003:35).
In addition, WoG is not a new approach, as it raises the old question of
coordination, and indeed, its elements have been observed in the United Kingdom and
196
Canada for some time (Ling, 2002; Christensen and Lægreid, 2007; Pollit, 2003). In fact
it seems that, notwithstanding, the WoG is one of the oldest preoccupations in the field
of politics and public administration—the coordination of policymaking and
administration, which is particularly associated with centrist administrations (Pollit,
2003). There are many previous examples showing that this approach is not new. One
example was mentioned by Pollit (2003), who stated that Heath’s 1970 publication of a
white paper entitled “The Reorganization of Central Government” was, in large part,
intended to produce a more coordinated approach to policymaking.
Indonesia adopted this concept in 2003 when the government launched the E-
Government program to facilitate community access to public information, integrating
multiple data sources from several ministries. In 2006, WoG was initially adopted in
one-stop licensing services as a response to poor licensing services stemming from poor
business licensing procedure. This is the main cause of low investment realization,
which has a negative impact on economic growth (Robert, 2015; Sugiyono, 2015;
World Bank, 2015; Dadang, 2015; Budiati, 2017).
The WoG concept as applied to licensing service reform began with the
alteration of integrated one-roof license service (IORLS), Perijinan Terpadu Satu Atap
(PTSA), into one-stop licensing service (OSLS) / one-stop service (OSS), Perijinan
Terpadu Satu Pintu (PTSP). Both are integrated services indeed, where people are able
to go to one place to apply for various necessary permits. However, in the PTSA
system, the processing of licensing documents was still carried out in each technical
agency, or regional working unit (RWU), Satuan Kerja Pemerintah Daerah (SKPD),
and it was fragmented (in accordance with each authority). Therefore, the impact on the
acceleration of service cycle time was less effective. On the other hand, PTSP is an
integrated plenary service, where the entire process of obtaining permits (registration,
processing, and issuance) is accomplished at the PTSP office.
2.2.Challenges on WoG application in public services

Christensen and Lægreid (2007) argue that WoG is a relatively better approach
than NPM for integrated public reforms because NPM tends to ignore them. Indeed,
under NPM, PM is mainly preoccupied with vertical coordination, emphasizing the
principle of "single-purpose organizations" with many specializations and non-
overlapping roles and functions, thereby hampering effectiveness and efficiency
(Boston & Eichbaum, 2005, p. 21; New Zealand, 2002).
However, apart from the benefits of WoG, Pollit (2003) points out that its
implementation is highly costly, requires high commitment at all levels (vertical and
horizontal lines) to deal with wicked problems, and is therefore vulnerable to being
unsuccessfully executed. This condition can stem from the complexity of the activities,
irreconcilable disagreements, obscure accountability arrangements, and other factors.
However, if all levels of management have a high commitment to abandonment of
sectoral ego and individual purpose, and have effective and efficient collaboration, it
will yield dramatic results in public service perfomance (Gillanders & Ahmad, 2007).
To achieve such results, there are admittedly many challenges in applying WoG. A
previous study showed that not only are structural and hierarchical changes necessary,
but cultural changes as well, because processes and attitudes must be changed from a
single-purpose to a group-purpose organization. This not only affects the high cost
required but also the time required for implementation, since cultural change cannot
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take place in months or even years (Pollit, 2003; Christensen & Lægreid, 2007; Ling,
2002).
The researchers also presented the issues of blurred lines of accountability for policy
and service delivery and even greater difficulty in measuring effectiveness and impact
due to sophisticated performance measurement, which need more focus as main
concerns in WoG application (Pollit, 2003; Hodges, 2012). This is because more stake-
holders are involved in cross-cutting policies that are naturally more difficult to monitor
and evaluate, which automatically creates a higher risk of failure.
To reduce that risk, Pollit (2003) identifies several key points that must be
implemented to create interagency collaboration, which are:
Fashioning a high quality operating system (promoting flexibility, mutual
intelligibility, mutual accountability and performance linked, financial
exchanges between the partners); acquiring resources; creating a steering
process (including an element of political steering); and developing a culture of
trust and joint problem-solving (Pollit, 2003).
He also argues that to effectively apply the strategies, there must be collaboration
between politicians, senior public servants, and professional public servants.
Based on those arguments, this study asserts that effective WoG application can
be achieved with a high commitment at all levels of vertical and horizontal lines. This
commitment should be embodied as a set of regulations and management techniques, in
which both aspects are strongly intertwined to set coordination and collaboration on
both lines. In addition, the preparation of the regulations and management techniques
must involve politicians, senior civil servants, and professional service providers, who
have the ability to employ WoG in technical procedures to solve wicked problems and
determine expected outcomes. These regulations and management techniques are
essential to develop organizational structures and culture, direct people in integrated
processes, and foster collaborative thinking (Christensen & Lægreid, 2007; Ling, 2002).
Furthermore, this study proposes integrated activity-based management as a suitable
management approach in line with the WoG philosophy, as this approach fits Pollit’s
description of fashioning high quality operating systems and promoting flexibility,
mutual intelligibility, mutual accountability, and PM in WoG application. The reason is
that ABM emphasizes coordination and collaboration of working teams to conduct
effective and efficient processes in the provision of goods and services. ABM can serve
as an approach for addressing blurred lines of accountability for policy and service
delivery in WoG implementation, as ABM is able to provide a high-quality integrated
operating system based on service activities to solve wicked problems as proposed by
Pollit.
2.3 ABM in WoG context

The concepts of activity-based costing (ABC) and ABM systems were first
introduced by Cooper and Kaplan (1988) as a means of improving accuracy in
determining product and service costs. The benefits of ABC have been acknowledged in
many studies (Norris, 1994; Anderson, 1995; Foster & Swenson, 1997; McGowan &
Klammer, 1997). A number of studies also examined the adoption of activity
management practices in the public sector. In fact, Jackson and Lapsley (2003) found
that 54% of local authorities, 17% of government agencies, and 55% of healthcare
organizations have used ABC techniques in the UK since 1997.
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This trend is likely to increase in coming years, especially in public service
reforms, which require public sector organizations to give an account of their services’
efficiency and effectiveness (Melese, Blandin, & O’Keefe, 2004). In fact, regarding
efficiency, ABM can help public sector organizations to improve by analyzing internal
business activities involved with the provision of goods and services (Melese et al.,
2004; Sherratt, 2006), while, regarding effectiveness, it enables them to more accurately
determine the cost of goods and services provided as it is derived from the activity
driven (Arnaboldi & Lapsley, 2003). It can be seen that integrated activities, which
involve many parties in the provision of goods and services, are more open and have a
more transparent process, which can help organizations to more accountably provide
their services with effectiveness and efficiency (Heald, 2003; Gillanders & Ahmad,
2007).
Activity management, which functions as an integrated and systematic approach to
improve customer value (Cooper and Kaplan, 1988) provides the best service for public
needs in integrated networking, so it is fit for implementation in WoG application.
Therefore, it is suggested that this approach should be adopted by public sector
organizations as it promotes transparency and efficiency in government activities
(Melese et al., 2004, p. 109). In line with this perspective, Sastry (World Bank Institute,
2000) notes that ABM evolved tremendously during the 20th century. Indeed,
traditional ABM, which is identical to standard costing, is focused on absorption and
has limited decision support, while contemporary ABM is more focused on activity-
based management and has wide coverage, legacy system integration, decision-making
orientation, integrated performance measurement, and recurrent management reporting
for management improvement. This transformational picture gives significant assurance
that the approach can be adopted in WoG application, as it proposes the integration
process and performance measurement that have been challenged by previous
researchers.
Sastry (2000) described ABM from two main perspectives: (1) managing
processes and cost assignments while focusing on integrated and activity-driven
management, and (2) increasing customer value. She explained by utilizing Turney’s
illustration (1992) in Fig. 1.
The first viewpoint is that contemporary activity management still maintains the
traditional activity management approach in its process. Indeed, the fragmented
activities in traditional management are reconciled in the process of product creation
and focused on integrated activities to provide better product service delivery to
enhance customer values (Sastry, 2000; Bradley et al., 2009).
The second perception is that activity management aims to provide continuous
improvement to enhance customer value by eliminating waste, defined as non-value-
added activities (NVA) causing inefficiency. By increasing customer value, the focus on
identifying value-added activities (VA) leads to efficient service costs (Sastry, 2000;
Baird 2007).
Thus, ABM has two important dimensions to its implementation: (1) process
value analysis (PVA), and (2) the cost required to generate the values, which is activity-
based costing (Cooper & Kaplan, 1988; Turney, 1992). Simply, it can be said that ABM
manages the process and the cost. These two dimensions are described in Fig. 1.
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Figure 1. Managing Process and Cost Assignment Under ABM
Resource: Turney (1992) cited by Sastry, 2000.
The figure shows that PVA begins with understanding activities performed by
organizations in producing products and services for customers. PVA comprises
assessment of cost drivers, analysis of activities (including managing the activities), and
performance measurement. The purpose of this process is to maximize the performance
of the integrated working system to perform the activities effectively and efficiently to
satisfy customers’ needs. The assessment of cost drivers includes analyzing these two
drivers: (1) the resource driver, which is associated with how resources are consumed
by an activity, and (2) the activity driver, which is related to how the cost object is
consumed by an activity. Obviously, this analysis is done to determine the factors
generating the cost of an activity, and if the determinant factors can be revealed, it is
easier to determine a course of action to make improvements to the activities.
The second analysis is activity analysis. This is the process of identifying,
drawing, and evaluating the activities undertaken by the organization, by
straightforwardly asking the question words (what, when, why, who, where, and how).
This analysis is very important to eliminate NVA activities and to maintain VA
activities to improve the processes that can enhance customer values.
Performance measurement is divided into financial and non-financial
measurements, particularly to assess how goods or services generate value for
customers in terms of efficiency, quality, and the time cycle given to provide goods and
services. Cost assignment is represented in the activity-based costing system, which
provides flexibility for ABM in meeting customer needs by continuously improving the
process used to produce products or services. ABC is primarily intended for long-term
improvement in terms of time, quality, and efficiency.
The basic principle of ABC is "Cost is caused, and the causes of cost can be
managed." According to this belief, simply linking cost to authority is not enough. In
order to control the cost, not only is authority needed, but accountants must also have
information about the cause of the cost of the activity to measure the amount of
resources that are used in such activity, and then traced to the cost object of the activity,
which is determined through PVA.
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In the context of ABC, performance measurement indicators present a standard
cost to measure cost efficiency. This standard cost is defined for each process, and is not
a standard for the organizational unit or on a functional basis. It is related to the
efficiency and productivity of producing the output, which is based on standard time,
quality, and cost efficiency.
The productivity and cost indicators are emphasized to maintain the level of
efficiency that should be rewarded. The process should be designed with greater
complexity than the PM and reward schemes under traditional responsibility accounting
systems. Individuals who are measured for their performance are required to be
responsible not only for their performance, but also for team performance. This is
because ABM highlights improvements in processes, which are based on team
coordination and collaboration. Indeed, group-based rewards are more appropriate than
individual rewards in the ABM scheme. Bonuses are awarded to teams that can
maintain all of these performance indicators such as cost, time, and quality.
Based on this review of the aforementioned literature, some critical points can
be derived to define the ABM in WoG concept:
1) ABM can be recommended as a suitable management technique and an important
part of WoG implementation concerning the issues of accountability and PM, for the
following reasons:
a. ABM uses an integrated operational management approach to increase customer
value.
b. ABM is able to respond to the challenges of measuring accountability in the WoG
concept as a result of the complexity of coordination and cross-sectoral
collaboration in service delivery for the solution of wicked problems. This is
because ABM provides an activity-based approach and not a functional or
organizational approach, which integrates activities in more than one sector and
increases working transparency in order to achieve effectiveness and efficiency.
c. ABM more effectively answers the measuring complexity challenges of
performance and reward measurement in the WoG context because it emphasizes
integrated processes. Performance is measured based on the processes and how
teamwork is involved in such processes. The reward is designed based on team
performance and not individual performance. This situation automatically
promotes teamwork and increases transparency in evaluating team performance
improvement goals, which will eventually lead to better working results and better
team rewards.
2) It is apparent that executing the WoG and ABM approach is not easy and takes time;
structure alone is not enough to change the culture, as processes and attitudes also
need to be addressed (Egeberg, 2003; Pollit, 2003; Lindquist, 2002). Therefore, a set
of regulations and management techniques should be formally established for
institutional framework and size of authority on vertical and horizontal lines
(Lindquist, 2002). Furthermore, informal approaches at both vertical and horizontal
levels must be driven to successfully implement WoG by using the ABM approach.
This argument is depicted in Fig. 2.
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WoG
Set of Regulations: collaborative work
Structure Culture
Process & Attitudes
ABM
Figure 2. ABM in WoG Context

Resource: Turney Concept is colaborated with our concept
3. METHODS
A qualitative approach was applied in this research, which was not intended to
measure the strength and direction of relationships among variables, but rather to
describe the situation, phenomenon, circumstances, and processes. This research can be
categorized as an investigative approach because researchers collected data face-to-face
while interacting with people at research sites rather than obtaining them through
statistical procedures or other forms of calculation, and it prioritizes the content of each
piece of information over generalization of the subject studied (Miles, 1984).
Primary and secondary data were utilized for the analysis. Secondary data was a
set of regulations and documentation of operational management of the research
object’s activities. The primary data included information on PTSP NTT province
obtained from in-depth interviews, FGD, and expert meetings.
The research analysis technique used to explain data from observations and
interviews was descriptive analysis. Situation analysis, literature review, and regulatory
review were employed to assess WoG implementation in existing regulations and
management techniques along vertical and horizontal lines. The analysis also included
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applying ABM in process and cost dimensions to respond to WoG challenges in the
issues of complexity of accountability and performance measurement.
The object of this study was the OSLS/PTSP NTT office, with the goal of
answering the various obstacles and challenges faced in the WoG implementation of
NTT licensing service in which the WoG concept has not been effectively implemented
regarding service time, service cost, and service quality.

4.1 Overview of public reform in one-stop licensing service
The Government of Indonesia initiated public sector reforms after the Asian
currency crisis in 1998. These reforms were aimed at developing the legal framework
which, prior to the currency crisis, was not yet effective in regulating the financial
administration system in the public sector. Two of the most important regulations were
Law of Local Governance No. 22/1999 and Law of Fiscal Balance No. 25/1999, which
have been transformed into Law of Local Governance No. 32/2004 to redefine the
meaning of local autonomy, change the legal framework of local authorities, provide
independence for local government in managing financial matters, and achieve a
balance in control over local resources in order to increase local economic growth.
A critical strategy to improve local economic growth is to reform the business

licensing service, which is believed to have a positive impact on entrepreneurship and to
automatically spur economic growth. This is the main reason for government
establishment of Law of Public Service No. 25/2009, Law of Capital Investment No.
25/2007, and Government Regulation No. 24/2006. All of these regulations were
enacted to reform business licensing services from PTSA to PTSP, since under PTSA
management the service was considered poor because of time consumption, high cost,
and low quality performance.
Table 1. The Differences between PTSA and PTSP

PTSP PTSA
Authority and At PTSP Authority Authority and signing are still in many
Endorsement RWU/SKPD agencies
Authority
Coordination Easier More difficult
Chief Operating Officer of PTSP Authority and signing are still on RWU,
acts as Coordinator of various and Chief Operating Officer of PTSP
SKPD in substantive and technical lacks the authority to control substantive
aspect analysis and technical aspect analysis done by
RWU
Procedural Easier to simplify the procedures Difficult to simplify procedures because
Simplification because coordination is PTSP authority is still in RWU and there is a
authority “silo mentality”
Monitoring Joint monitoring between PTSP and Single monitoring by RWU
RWU
Service Standard Quality of service is easy to conform Quality of service is difficult to conform
to a minimal standard to a minimal standard because
substantive and technical analysis, which
are the most important parts, are under
RWU authorities and policies
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PTSP PTSA
Institutional Office or Agency Institutional Unit institutional structure, acting as
Authority Structure front office to receive administrative
requirements and dispatch to RWU
Performance Levy receipts are managed under Levy receipts are managed under
Achievement of PTSP responsibility RWU/SKPD
Target Levy
Receipts
Employment Status PTSP Staff Majority of staff are RWU employees
Source: Minister of Home Affairs Circular Letter no. 500/1191 / V / BANGDA on the
improvement of National Guidelines of Manual Operation of PTSP
In essence, the one-stop roof license service (OSRLS), in Bahasa called PTSA,
and OSLS, in Bahasa called PTSP, are in the domain of integration. But in the PTSA
system, the processing of licensing documents was still performed in each technical
agency under the authority of the RWU or, in Bahasa, SKPD. Therefore, the service was
not improved. The process of obtaining business permits is still time-consuming. This
condition rendered investment and economic growth sluggish. Unlike PTSA, PTSP is a
fully plenary service, in which all licensing processes (registration, processing, and
issuance) are carried out at the PTSP office. Initially, under government rules, PTSP
was acting as a coordinator agency, managing all processes including reviewing
administrative, substantive, and technical requirements. The details of the differences
between PTSA and PTSP are described in Table 1.
The table above illustrates that although service locations were combined in one
location at PTSA, the authority and endorsement remained in the other relevant
technical RWU. On the other hand, PTSP has the necessary authority to grant licenses
(licenses, permits, approvals, and clearances). With the authority to handle all these
matters, PTSP acts as a single-access institution that can enforce various regulations
during the process and establish the principles of coordination and collaboration with
technical SKPD.
The government vision of centralizing license service under PTSP authority is to
shorten the processing time of permit issuance. In fact, all processes are carried out and
finished in one place. This is possible with information technology under a single
administrative basis, where data input is performed once and permit administration can
be done simultaneously. Thus, all licensing needs under the authority of the regional
leader are able to be served in one institution. The shorter the time, the easier for
investors to get business permits, leading to faster acceleration of economic growth
(East Nusa Tenggara Bureaucrachy Reform Platform, 2013-2017).
4.2 Alignment between PTSP Province NTT public reform and WoG
Table 1 demonstrates that licensing reform from PTSA to PTSP emphasizes the
coordination and collaboration that are the basic principles of WoG implementation.
The literature mentions that when the principles of coordination and collaboration are
adopted to overcome complicated issues, the government should already have organized
WoG principles. Therefore, it can be said that WoG is not a new approach, as it raises
the old questions of coordination and collaboration, and indeed, its elements have been
observable in the United Kingdom and Canada for some time (Ling, 2002; Christensen
204
& Lægreid 2007; Pollit, 2003). In fact, WoG is one of the oldest preoccupations in the
field of politics and public administration—the coordination of policy making and
administration, which is particularly associated with centrist administrations (Pollit,
2003). There are many previous examples showing that this approach is not new. One
example mentioned by Pollit (2003) is that in 1970, Heath published a white paper
entitled “The Reorganization of Central Government” which is largely intended to
produce a more coordinated and strategic approach to policymaking.
Pollit’s four indicators to analyze whether WoG principles have been effectively
adopted were used to determine WoG application in provincial OSLS in NTT. The
indicators are: (1) situations in which policies that undermine each other can be
eliminated, (2) better use of scarce resources, (3) synergy between key stakeholders in a
particular policy field or network, and (4) possibility of offering citizens seamless rather
than fragmented access to a set of related services.
The following analysis of these four aspects is divided into two sections: the first
relates to assessment of undermining regulations, and the second is associated with
efficient use of resources, integrated operational working, and integrated provided
services to the Community. The first section is the main criterion to determine whether
WoG has been successfully implemented or not as it provides institutional framework,
and the second section outlines the consequences of the first section. These four aspects
are interrelated and cannot be individually examined.
4.2.1 The elimination of undermining policies
The basic principle of licensing reform is to simplify the licensing procedure that
makes processing time shorter. This is intended to accelerate economic growth through
high investment by giving greater attention to small and medium enterprise investment
and to improve the quality of public services. For that reason, relevant regulations,
namely the Regulation of Ministry of Home Affairs (in Bahasa, Permendagri) No.
24/2004, Head of BKPM Regulation No.11/2009, Government Regulation No. 27/2009,
and Permendagri No. 20/2008 were issued to provide strong legalities and institutional
framework for public reform in PTSP in Indonesia. The aspects to be examined are
function, working principles, institutional structure, and authority and endorsement of
OSLS/PTSP.
The main function of PTSP service as stated in these regulations is that all
licensing and non-licensing services applications are carried out by PTSP, with standard
cycle time stipulated in local regulations, simplification of document requirements for
two or more permits, free charge for small and medium enterprises, and public
participation and transparency of public information regarding procedures and services.
In addition, the regulations also mention that the working principles of PTSP are
coordination, integration, synchronization, and file security. Furthermore, the
institutional structure of PTSP is formed as an agency or office, which is blended in the
Capital Investment and Integrated Licensing Service Agency. This agency is officially
responsible to the Regional Head through the Regional Secretary.
The institutional structure of PTSP was specifically regulated under
Permendagri No. 20/2008. It was formed into an agency or office, supported by a
secretariat and headed by a Chief whose position is Head of Office or Head of Agency.
However, as the aim of PTSP is to accelerate investment, under BKPM Regulation
No.11/2009 this structure is reformed; PTSP is made a part of the Capital Investment
and Integrated Licensing Service Agency. This agency is an assistant of the Regional
Head in the framework of capital investment policy implementation, which carries out
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the main functions of coordination and collaboration in the field of investment and
investment acceleration under licensing services. Therefore, the PTSP subagency and
the capital investment (CI) sub agency are under that agency, and their main goal is to
accelerate regional investment. In fact, CI’s chief responsibility is to promote regional
investment and PTSP ensures that the licensing process is easy in order to enhance the
realization of business investment.
Furthermore, under Permendagri No. 24/2006 and Permendagri No. 20/2008,
PTSP has the authority to approve all licensing delegated from the Regional Head to
PTSP. This means that all licensing under the authority of the Regional Head is
delegated to PTSP, including the issuance of permits, and the delegation is under the
authority of the Regional Head regarding the resources in PTSP to validate and ratify
the licenses. Both of these rules are required in order for the PTSP to work effectively
and efficiently to fulfil the substantive and technical requirements. Therefore, PTSP is
expected to have technical teams consisting of RWU technical employees that are
responsible for reporting any substantive and technical review as the basis for
consideration in issuing a permit ratified by PTSP. The whole process is under the
authority of the PTSP in coordination with RWU.
The explanation above briefly explains that the three rules are not undermining
each other. The position of PTSP under the WOG concept is clearly along both vertical
and horizontal lines. It has defined its institutional framework as a coordinator under CI
and the Integrated Licensing Service Agency. Along vertical lines, the Regional Head
should give all licensing authority to PTSP through the agency while at the same time
strengthening PTSP capacities and resources. Along horizontal lines, PTSP has the
authority to directly control the work of technical teams but still maintain collaborative
supervison of RWU. Overall, it is apparent that all the relevant central government rules
are consistent with the WoG concept.
A further evaluation explores how Local Regulation of NTT Province No.
5/2009 and No. 10/2010, and Governor Regulation No. 2/2017 are in line with central
government regulations and the concept of WoG. This evaluation examines the same
aspects of function, working principles, institutional structure, authority and
endorsement, affecting number of licensing authorities as the basis of review of the
previous three regulations.
After assessing these local rules, it was found that only working principles and
institutional structure are clearly consistent with all previous central government rules
reviewed, but function, authority and endorsement, and number of licensing authorities
are not in line with the central regulation, so they are conflicting with the WoG concept.
In Local Regulation of NTT Province No. 5/2009 and No. 10/2010, it is
noticeably stated that the working principles and institutional structure of PTSP are
incoherent with Permendagri 24/2006, BKPM Rule No. 11/2009, and Permendagri
20/2008. In fact, PTSP is a subagency under the CI and Licensing Service Agency,
which collaborates with another sub agency, CI, to increase regional investment. PTSP
working principles as stated in the rules of the Central Government are coordination,
integration, synchronization, and file security.
However, the aspects of function, authority and endorsement, and number of
licensing authorities are not as clearly expressed in the local regulations as stated in
central government regulations. Indeed, the local regulations do not specifically
describe the function of PTSP. There is no clause stating that all licensing services
applications are carried out by PTSP, with standard cycle time stipulated in local
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regulations, simplification of document requirements for two or more permits, free
charge for small and medium enterprises, and public participation and transparency of
public information regarding procedures and services. Therefore, the number of
licensing authorities delegated for PTSP is very limited. Of 146 permits, only 46
permits are under PTSP authority, and of the 46, few are still maintained in RWU (NTT
Governor Regulation, 2017; Ombudsman, 2015).
The aspect of authority and approval is also poorly defined. In fact, technical
teams, which are responsible to provide substantive and technical recommendations, are
not considered in the regulations as being under PTSP control. Rather, the PTSP is
compelled to write a letter to the RWU/SKPD to request that technical teams conduct a
survey to issue letters of technical recommendation that must be approved by the Head
of Agency of the RWU. It is apparent that PTSP has no authority to control the work of
technical teams in providing substantive and technical assessments, yet this activity is
deemed critically important to issue a license. Table 2 concisely explains those findings.
Table 2. Comparison of Central and Local Regulations Review of Undermining
Regulations
Central Government Regulation Local Governent Regulation
Function Clearly stated: a coordinator subagency to Not clearly defined as a coordinator and no
of PTSP process and release all licenses clearly defined PTSP function
Working Coordination, integration, synchronization, Coordination, integration, synchronization,

Principles and file security and file security
Institutio A subagency under the Capital Investment A subagency under the Capital Investment
nal and Licensing Service Agency and Licensing Service Agency
Structure
Authority All processes are under PTSP, including All processes are not clearly defined under
and reviewing administrative, substantive and PTSP. There is no clause stating PTSP is to
Endorse technical requirements. PTSP is expected to have technical teams for substantive and
ment have technical teams for substantive and technical assessment, which are contained in
technical assessments, which are contained the RWU element. Therefore, for substantive
in the RWU element and technical assessment PTSP must propose
to RWU, and the result must be ratified by
the Head of RWU
Number All licensing and nonlicensing activities not defined
of
Licensing
Authoriti
es
Source: Processed by Researchers
Table 2 confirms that there are still undermining regulations between central
government rules and local government rules. In fact, central government regulations
have obviously adopted the WoG concept, but this is not well-translated into local
regulations. Therefore, it can be derived that one reason the WoG concept does not
work in PTSP Province NTT is because of poor local regulation that is inconsistent with
the central rules and WoG concept.
4.2.2. Efficient use of resources, integrated operations, and service to the community
These three aspects are analyzed simultaneously since they are interconnected as
the consequences of poor local regulations.
As a result of poor local regulations, which are not transformed by WoG concepts
and the Permendagri requirements, the operational service performance of management of
PTSP is poor. In fact, due to a lack of strong institutional framework and authorities, PTSP
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cannot execute its working principles (integration, coordination, and synchronization)
effectively and efficiently. This lack of authority limits the power of PTSP to work
collaboratively along vertical and horizontal lines. For example, fewer licenses delegated to
the PTSP means there are still many licenses that have not been transferred to PTSP. If all
permissions are delegated to PTSP, it will be very easy to simplify permissions by avoiding
overlapping authority. Automatically, the resources used (financial and non-financial) will
be more efficient. This efficiency of simplication is seen not only in the simplified
requirements of the applicant, but in that the licensing process to issue multiple permits can
be done simultaneously, avoiding overlapping requirements.
There are still overlapping permissions in licensing service in NTT. The
overlapping requirements of the applicants prove that the process is not efficient, yet
applicants must still informally meet the technical teams in the RWU to provide
technical recommendations as rapidly as possible. Overall, according to the Head of
PTSP:
The cycle time to provide licensing service is still far ahead from its standard.
The business license, that has to be issued within 14 days, only can be finished
within 3 months at minimum time. This is still the main audit finding of internal
auditor of Ministry of Home Affairs.
The Head also added:
It is not easy for us to control the work of technical teams as we do not have the
authority. PTSA was changed into PTSP to have integrated working, but
actually it does not work. We, PTSP still have lack of authorities to improve our
service in weak institutional framework.
These facts demonstrate that PTSP Province NTT is not efficient in using
resources to conduct effective service and lacks integrated operational management,
which together cause failure to provide integrated service to the community. This stems
from poor institutional framework and operational management as stated in relevant
local regulations.
4.3 Confusion in public reform in PTSP Province NTT

The previous section presents that the licensing service reform, adopting the
principles of WoG in PTSP Province of NTT, begun in 2006 has not yet been fully
applied in PTSP working management. This is due to the fact that local government
regulations have not fully derived all the principles of integrated working philosophy
present in central government regulations to provide a strong institutional framework
and authority for PTSP to manage its integrated operations. Consequently, operational
management techniques have not been reformed and still employ the traditional
management approach applied in PTSA. This sub agency is only physically seen as
PTSP, but its nature, which should direct the process and people’s attitudes, is still
under a traditionally fragmented management approach. In such a condition, it cannot
solve the fundamental problem of substantive and technical affairs in the process of
licensing service. This finding is elaborated upon in the following assertions.
The literature states that one of the key factors in effectively adopting WoG is
having a set of strong regulations enabling placement of integrated institutional
framework into an organizational structure and authorities. It should visibly and
effectively mobilize cultural changes, processes, and attitudes to form a collaborative
operation along vertical and horizontal lines (Christensen & Lægreid, 2007; Clarke &
Stewart, 1997; Downe & Martin, 2006; Farquhar & Graham, 2005; Pollitt, 2003). Up to
208
now, under local government regulations, PTSP has had limited supporting institutional
framework which also means less power to act as an agent in promoting collaborative
operations to provide integrated service for the community. A clear coordinating
example of this situation is that there is a lack of power to direct the work of technical
teams in providing technical and substantive recommendations, as their work is under
the supervison of their Head of RWU.
The literature argues that a working operational management comprised of
complex mutual accountability indicators and complex performance measurement needs
to be established to increase interrelated organizations’ performance in solving
fundamental problems under the WoG scheme (Clarke & Stewart, 1997). Indeed, PTSP
still adopts a traditional fragmented management approach, although it has been stated
in local regulations that its working principles are coordination, integration, and
synchronization. These values have not yet been well-implemented in its operational
management. This is due to its very weak institutional framework as stated in the
regulations and there is no management model to be implemented by PTSP NTT to
manage its integrated activities.
4.4 ABM as A Recommendation for Improving Public Reform in PTSP Province

NTT
This research proposes ABM practices for PTSP NTT to manage its integrated
activities although, admittedly, the issue of poor institutional framework under local
regulations needs to be addressed first, before implementing ABM (Egeberg, 2003).
There is a strong correlation between integrated institutional framework and integrated
activity management (Sastry, 2000). This correlation is shown in Fig. 2.
This model is strongly recommended to PTSP for two reasons: First, it is able to
provide integrated measurement of the complexity of mutual accountability, and second,
it is specifically able to calculate performance measurement. In general, this model can
provide better measurements of accountability and performance of process/activity in
delivering goods for public service (Cokins, 2001).
This study makes the following arguments in favor of ensuring PTSP adopts this
model in its technical operation under the WoG scheme:
1. The basic principles of integrated operation in the licensing service reform adopted
in the Permendagri are coordination and collaboration. From an operational
management point of view, all intra- and inter-sector processes or activities must be
identified in detail because the principle’s emphasis is on integrated
processes/activities and not functions. It is argued that even if it is complex and
sophisticated, once the organization can identify all the VA, it will be much easier
to measure accountability and perfomance in a public service organization
(Mardiasmo, 2009; Arnaboldi & Lapsley, 2003). PTSP can utilize this approach by
identifying all the license services under its authority and all the VA performed to
issue related permits. These are called process value activities (PVA).
2. After ascertaining all the VA, the analysis goes through the resources consumed by
the activities. These resources are then measured by a cost-assignment process by
tracking the resources to their cost object. This cost-assignment process will
determine the overall cost needed to be spent in conducting VA to enhance
customer values. From this point of view, it is much easier to gauge complex
accountability.
209
3. Performance measurement is also easy to identify as the activities, resources
consumed by the activities, and their cost objects are traceable. Therefore, it can be
measured straightforwardly based on the group of individuals’ performance since,
under the integrated ABM scheme, performance is gauged and rewarded based on
group performance, or “teamwork,” rather than individual performance. The basic
principle of this approach is integrated activities-based and not fragmented
function-based.
5. CONCLUSIONS
This paper has provided an investigative analysis of the adoption of WoG in
licensing service reform in PTSP Province NTT, which was initiated by the Minister of
Home Affairs Regulation No. 24/2006, Minister of Home Affairs Regulation No.
20/2008, BKPM Regulation No. 11/2009, Local Government Regulation of NTT No.
5/2009 and No. 5/2010, and Gubernatorial Regulation of NTT No. 2/2017. By
extending the object of analysis into PTSP licensing services in Province NTT, the
study provides a deeper understanding of PTSP Province NTT service reforms and
practices. It includes Pollit’s four indicators to review whether or not the reforms and
practices have adopted the WoG concept that has been adopted in the Minister of Home
Affairs regulations. Finally, this study recommends two main points regarding
improving local regulations and adopting an integrated management approach.
Based on the study of regulations, literature review, and interview of PTSP
officials, this paper finds that PTSP has not totally reformed its operational management
according to the WoG concept which has been required since 2006. This stems from the
inconsistency of local regulations in interpreting Ministry of Home Affairs and BKP
regulations. The local regulations lack the clearly defined integrated operation that has
been adopted in Ministry of Home Affairs regulations. For example, the service reforms
of PTSP of NTT Province are not underpinned by the creation of integrated
management, which is the main idea of WoG as stated in Ministry of Home Affairs
regulations. Additionally, the local regulations are apparently not regulating the
collaborative position between PTSP and the RWU technical team, which should be
under PTSP supervision, as the team is responsible to provide substantive and technical
review to determine whether a license is approved or not. Another example is that the
license documents must be ratified by the Head of PTSP, however, the substantive and
technical letter of recommendation that is a critical point of licensing process must be
approved by the Head of RWU, who is responsible for the technical teams.
There are several inconsistencies stated in local regulations that are not in line
with Ministry of Home Affairs regulations. These inconsistencies lead to a poor
institutional framework in PTSP Province NTT, affecting various integrated
management issues and causing poor service performance, poor notification cycle time,
inefficient use of resources, and poor quality services.
This paper also suggests two main points of recommendation, which are: first,
improving local regulations to strengthen PTSP institutional framework under the WoG
scheme; second, adopting integrated activity management to improve accountability and
performance measurement based on process and not function.
This paper argues that ABM is a better approach to management in the WoG
scheme because it can reliably measure the complexity of accountability and
perfomance through PVA and ABC (Vazakidis, 2010). This argument is developed to
210
answer the literature’s questioning regarding the difficulty of measuring accountability
and PM under the WoG scheme, as it presents cross-cutting sector management.
This paper admits that it is a challenging task to follow the recommendations.
Applying WoG and incorporating it into integrated activity management are considered
politically attractive, costly, and time consuming in relation to cultural change, since
they address processes and attitudes that cannot be changed in days or months.
However, the benefits of employing WoG to solve fundamental issues hampering the
community are much higher than its drawbacks.
This research is limited to PTSP Province NTT, therefore the results cannot be
generalized to other PTSP in Indonesia. The results give suggestions for future research,
including a comparison study of several PTSP reforms and practices to find the best
practices. In the context of improving licensing service reform in Indonesia, an avenue
for future research that may be of concern is related to the paradox and tension of
applying WoG in the licensing service reforms in Indonesia, which is not explored in
this paper.
ACKNOWLEDGEMENTS
We would like to thank the Ministry of Research, Technology and Higher Education,
which has fully supported this work under the research grant Penelitian Terapan
Perguruan Tinggi in 2017.
We would also like to show our gratitude to PTSP Province of NTT for their
cooperation as a group of respondents to describe licensing service reforms and
practices.
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The Relationship among Management Control System, Strategy and Firm
Performance: Indonesian Evidence
Ria Nelly Sari, Dewi Junita, Rasuli, Yusralaini & Susilatri

Department of Accounting, Faculty of Economics and Business, Universitas Riau
ABSTRACT
This study aims to examine the relationship among management control system (MCS)
strategy and firm performance. This study applied diagnostic control system, interactive
control system and dynamic tension to represent MCS. Data for this study was collected
through questionnaires that mail to Chief Financial Officer (CFO) or subordinated
managers, internal auditor and controller of manufacturing company listed in Indonesia
Stock Exchange (BEI). A total of 94 respondents participated in the study and the data
obtained were analyzed by using Warp PLS. The results showed that diagnostic control
system and interactive control system have a positive association with differentiation
and cost leadership strategy. The stronger use of diagnostic control system was found in
cost leadership strategy while interactive control system was stronger used in
differentiation strategy. The data failed to support the influence of dynamic tension on
both low cost and differentiation strategy. Financial performance was greater in the low
cost strategy than differentiation strategy meanwhile nonfinancial performance was
found greater in differentiation study than in low cost strategy.
Keywords: Management Control System, Diagnostic Control System, Interactive
Control System, Business Strategy, Firm Performance.
214
Factors Affecting Going Concern Statement Opinion at LQ 45 Listed Companies
in Indonesia Stock Exchange
Valerio Rodrigues Bahan, and Sarinah Joyce Margaret Rafael
Fakultas Ekonomi dan Bisnis, Universitas Nusa Cendana, Indonesia
ABSTRACT
The going concern statement opinion is important for investors and other stakeholders
before taking an economic decision. The aimed of the study is to find empirical
evidence regarding factors affecting going concern statement opinion, such as company
growth, profitability, liquidity, and leverage. The study used purposive sampling
method to LQ45 companies listed in Indonesia Stock Exchange (IDX) period 2014 to
2016. The data were analyzed using logistic regression analysis at 5% significance
level. The results showed that profitability, liquidity and leverage partially affect the
going concern statement opinion meanwhile the company's growth did not affect the
going concern statement opinion. As well as company growth, profitability, liquidity
and leverage effected simultaneously about 38,2% to going concern statement opinion.
Keywords: going concern statement opinion, company growth, profitability, liquidity,
and leverage.
1. INTRODUCTION
The business continuity (going concern) of a company is important things for the
stakeholders especially the investors. The role of investors today has a very big role in
funding the company's operations through investment. In addition, every investor wants
to have profit from his investment. Therefore, one of the considerations of investors in
investing is the auditor's opinion on the company's financial statements.
The financial statements referred to the Statement of Financial Accounting
Standards have the primary objective to provide information on the financial position,
financial performance, and cash flows of entities beneficial to most users of the report in
economic decision making (PSAK No.1, 2015). A good financial report is capable of
providing quality information to all parties associated with the company. Thus, the
resulting information is expected to show the true condition of the company, so that
investors and other stakeholders can make investment decisions and other economic
decisions quickly and accurately.
Auditors have an important role in connecting between the interests of investors
as users of financial statements and corporate interests as providers of financial
statements. The task of a public accountant (independent auditor) is to provide services
to assess the financial statements made by the agency (management), with the final
result of an audit opinion. Thus, the company's financial statements can be trusted by
stakeholders of the company which will affect the continuity of the company's business.
Standard Audit (SA) 570 (IAIP, 2013) explained that auditors are responsible for
evaluating whether there is a material uncertainty about the entity's ability to maintain
its viability. The independent auditor's report issues an opinion on the fairness of the
financial statements presented by the management. If there is no material uncertainty
about the entity's ability to maintain its business continuity, the auditor will give a non-
going concern statement opinion. On the other hand, if the auditor finds material
215
uncertainty about the entity's ability to maintain its business continuity, the auditor will
give a going concern statement opinion.
The auditor's opinion statement concerning the going concern is a statement of
opinion which in the auditor's judgment there is a significant incapacity or uncertainty
over the survival of the company in carrying out its operations within a reasonable
period of time, not later than one year from the date of the audited financial statements
(SPAP, 2011). An audit report with going concern modification indicates that auditee is
at risk of not being able to survive for long. According to Venuti (2007), the auditor's
opinion about going concern will reduce the trust of shareholders and creditors to the
company.
Company growth is proxied with profit growth. High earnings generally signify
high cash flow (Houston and Bringham, 1993). Firms with high earnings tend to have
reasonable reports, so the potential for obtaining auditors' opinions of non-going
concerns will be greater.
The level of liquidity is considered as an important indicator of health in general,
because to see the health of a company, first seen is the level of liquidity first. This is
because the level of liquidity measures the ability of the firm's cash sources to meet its
short-term liabilities (Wild, et al., 2005). A less liquid company may result in the
company not being able to pay its creditors, so the auditor may give an auditor's opinion
statement on going concern.
Leverage is used to measure the level of debt use as a source of corporate
financing (Husnan and Pudjiastuti 2004). Companies that have high leverage rates can
cause the company cannot finance the debt with the assets owned by the company. So, it
can be said, the higher the leverage ratio of a company, it will increasingly cause
auditors doubt about the survival of the company, because most of the funds obtained
by the company will be used to finance the debt.
This study uses companies that are included in LQ 45 as research objects. This is
because the companies included in LQ 45 are considered to represent all industry
sectors listed in the Indonesia Stock Exchange. The LQ 45 Company is also a forum of
companies whose shares have value of transactions, liquidity levels, and high market
capitalization in the sense that the trading frequency of its shares is the highest among
other stocks, so that the auditor's report on the LQ45 Company is considered very
important for the need for retrieval decisions of investors.
From the research background it can be formulated the following problems: (1)
whether the company's growth, profitability, liquidity and leverage partially influence
the statement of going concern opinion and (2) whether the company growth,
profitability, liquidity and leverage influence simultaneously to the statement of opinion
going concern. The purpose of this research is to know the growth of company,
profitability, liquidity and leverage affected partially and simultaneously to the going
concern statement opinion.
2.1 Agency Theory
Jensen and Meckling (1976) defined agency relationships as a contract whereby
one or more persons (principal) require the other agent to carry out a number of work on
behalf of the principal involving the delegation of some decision-making authority to
the agent. Principal assesses the performance of agents (management) through financial
performance as reflected in the company's financial statements. In certain
216
circumstances, there can be manipulation of financial statements due to the fear of the
agent (management) in disclosing information that is expected to harm him.
Preparation of financial statements in such conditions indicated not made based on
actual conditions, but made in accordance with the expected by the principal. Things
like this trigger agency conflicts so that an independent third party is needed, that is, a
public accountant. The task of a public accountant (independent auditor) is to provide
services to assess the financial statements made by the agency (management), with the
final result of an audit opinion. The service of the auditor is used by the principal to
verify information from the financial statements presented by the agent. Whereas,
agents need it in order to provide legitimacy over its financial statements.
2.2 Audit
Audit is the collection and evaluation of evidence of information to determine and
report the degree of conformity between the information and the predefined criteria.
Audits should be conducted by a competent and independent person (Elder, 2011). The
criteria set out in the audit are the criteria that conform to generally accepted accounting
principles (GAAP), while audit evidence is any information that the auditor uses to
determine whether the information being audited is stated in accordance with
established criteria.
ASOBAC (a Statement of Basic Auditing Concepts) in Halim (2013) defined
auditing as a systematic process of collecting and evaluating objectively the
management assertions about the various actions and economic events to determine the
degree of conformity between the assertions and the criteria which has been determined
and delivered the results to the interested users. The auditor is an auditor.
2.3 Audit Opinion

Standard Audit (SA) 200 (IAPI, 2013) explains that the audit objectives of the
auditor's financial statements are generally about whether the financial statements are
presented fairly, in all material respects, in accordance with the applicable financial
reporting framework. The Audit Standards also state that the auditor is required to
obtain reasonable assurance about whether the financial statements as a whole are free
of material misstatement, whether caused by fraud or error. Prior to auditing, the auditor
should first acquire the knowledge of the entity's business that makes it possible for him
to plan and perform the audit based on the audit standards established by the Indonesian
Institute of Certified Public Accountants. The independent auditor expresses his opinion
in the audit opinion sheet. Whatever the type of audit opinion is, providing an audit
opinion by an independent auditor is expected to reduce the information asymmetry
between the management and the principals.
According to Halim (2013) there are five types of opinions: (1) Unqualified
opinion, (2) Unqualified Opinion with additional explanatory language, (3) Fairly
Qualified Opinion opinion), (4) Adverse opinion and (5) Disclaimer of opinion.
2.4 Going Concern Statement Opnion

Auditor opinion about going concern is audit report with modification about going
concern indicates that in auditor's evaluation there is risk of company can not survive in
business (Komalasari, 2007). The audit opinion statement of modification concerning
going concern is an audit opinion which in the auditor's judgment there is a significant
incapacity or uncertainty about the company's survival in running its operation for a
217
reasonable period of time, not later than one year from the date of the audited financial
statements (SPAP, 2011).
Auditor is responsible for evaluating whether there is a great doubt in the ability of
the entity to maintain its survival. The auditor may identify information about certain
conditions or events that indicate a great doubt about the entity's ability to maintain its
viability within a reasonable period of time, its abaout no later than one year from the
date the financial statements are being audited (IAI, 2011: section 341). Examples of
such conditions and events are (1) Negative trends, (2) other clues about possible
financial difficulties, and (3) Internal issues.
External issues that have occurred for example, court suits complaints, legal
disagreements or other matters that may jeopardize the ability of an entity to operate,
loss of franchise, license or patent are critical, loss of major customers or suppliers,
large disaster losses, such as earthquakes earth, floods, uninsured or insured droughts
but with inadequate coverage.
The opinion of a going concern audit is an unqualified, reasonable opinion with
exceptions, unfair opinions and discriminations issued because there are conditions and
/ or events that affect the survival of the company on the condition that there are auditor
doubts and there is sufficient disclosure.
2.5 Company Growth

According to Kashmir (2015) defines the ratio of growth (Ratio Growth) is a ratio
that describes the ability of the company to maintain its economic position in the middle
of economic growth and business sector. The growth ratio can be formulated as follows:
1. Sales Growth
Sales growth shows the extent to which the company can increase its sales
compared to the total sales as a whole.
Sales Growth(t)-Sales Growth(t-1)
Sales Growth = Sales Growth(t-1)
2. Net Profit Growth
Net profit growth shows which companies can increase their ability to earn net
profits with total overall profit.
Profit Growth(t)-Profit Growth(t-1)
Sales Growth = Profit Growth(t-1)
3. Revenue Growth Per Share.
The growth of earnings per share shows the extent to which the company can
improve its ability to earn revenue or earnings per share compared with the total
earnings per share as a whole.
Revenue Growth Per Share(t)- Revenue Growth Per Share(t-1)
Revenue Growth Per Share = Revenue Growth Per Share(t-1)
4. Dividend Growth per Share.
The growth of dividend per share shows the extent to which the company can
increase its ability to earn share dividend compared to the total dividend per share
as a whole.
Dividend Growth per Share(t)- Dividend Growth per Share(t-1)
Dividend Growth per Share = Dividend Growth per Share(t-1)
The growth of companies in this study using net profit growth, where the net profit
generated by a company is a tool used by stakeholders to see how much the company's
ability to maintain continuity of business forward.
218
2.6 Profitability
Profitability is a company's ability to generate profits. Profitability reflects the
advantages of financial investment.Profitability ratio is a ratio to measure the ability of
companies to earn profits in relation to sales, total assets and own capital (Sartono,
2008). This ratio is highly considered by prospective investors and shareholders as it
relates to stock prices and dividends to be received.
Profitability ratios can be measured from two approaches: sales approach and
investment approach. The widely used measures are return on assets (ROA) and return
on equity (ROE), profitability ratios measured by ROA and ROE reflect business
attractiveness (bussines attractive). Return on asset (ROA) is a measure of the
company's overall ability to generate profits with the total assets available within the
company. ROA is used to see the overall operating efficiency level of a company. The
higher ROA is, the better is a company.
The advantages and disadvantages of Return On Assets (Lisa, 1999) are as follows:
1. Excess ROA among others as follows:
a. ROA is easy to calculate and understand.
b. It is a performance measurement tool that is sensitive to any influence of the
company's financial condition.
c. Management focuses on maximizing profits.
d. As a benchmark of management achievement in utilizing assets owned by the
company to earn a profit.
e. Encourage the achievement of corporate goals.
f. As a tool to evaluate the implementation of management policies.
2. The weakness of ROA are as follows:
a. Less push management to increase assets if the expected value of ROA is too
high.
b. Management tends to focus on short-term goals rather than long-term goals, so
it tends to take short-term decisions that are more profitable but long-term
negative impacts.
Indirectly Return on Equity (ROA) shows the efficiency of the company in using its
capital. But ROE does not include debt to the calculation of such efficiency so that
companies with large debts will miss this indicator. Therefore, many investors do not
use ROE and use Return On Assets (ROA) as an indicator because ROA shows the
efficiency of the company in using all its assets and including its debts.
2.7 Liquidity
According to Harahap (2011) the liquidity ratio illustrates the company's ability to
settle its short-term liabilities. These ratios can be calculated through sources of
information about working capital ie items of current assets and current debt. From this
definition, the authors conclude that liquidity is the ability of a company to meet its
short-term obligations or that will mature through sources of information about working
capital. There are two results of the assessment of the measurement of the liquidity
ratio, ie if the company is able to meet its obligations, then the company is in a state of
liquidity. Conversely, if the company is unable to fulfill the obligation, then the
company is in a liquid state.
1. Current Ratio
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Harahap (2011) argues that the current ratio shows the extent to which current assets
cover current liabilities. The greater the ratio of current assets to current debt the
higher the company's ability to cover its short-term liabilities.
Current Asset
Current Ratio =Current Liabilities
2. Quick Ratio / Acid Test Ratio
Sugiri (2004) states that inventory items are not counted in this ratio because
inventory is the most illiquid item in current assets.
Current Asset-Inventory
Quick Ratio = Current Liabilities
2.8 Leverage
The smaller the leverage gain in the firm's capital structure, the less the risk, and
vice versa. So it can be said that the smaller the risk of the company, then the possibility
to grow and grow the greater the company's financial risk. The leverage ratio shows the
company's ability to meet its long-term liabilities. The leverage ratio measures the level
of debt use as a source of corporate financing (Husnan and Pudjiastuti 2004).
The various Leverages are as follows:
a. The ratio of total debt to total assets (Debt Ratio / DR)
Measures the percentage of funds provided by creditors to total assets owned by the
company.
Current Liabilities
Debt Ratio = Total Asset
b. The ratio of total debt to capital / equity (debt to equity ratio / DER)
Describe to what extent the owner's capital can cover the debt to outsiders.
Current Liabilities
Debt to Equity Ratio = Owner's Equity
2.9 Development of Hypotheses

1. The effect of company’s growth to going concern statement opinion
The growth of the company is indicated by how well the company maintains its
economic position in the industry as well as its overall economic activity (Setyarno et
al., 2006). Company growth is proxied with profit growth ratio. Profit growth shows the
company's ability to maintain its survival.
The profit growth ratio can describe the state of the company. The amount of
profit earned on a regular basis or an increase is an important factor for the company to
be able to maintain its survival. Meanwhile, companies with negative earnings growth
have the potential to go bankrupt, since profits should be the main source of funds for
the company to operate. Therefore if the growth of the company is positive, then the
auditor is less likely to issue a statement of going concern opinion (Santosa and Wedari,
2007).
From the description above, it can be assumed that the growth of the company has
a negative influence on the acceptance of going concern statement. The better the profit
growth of the company then the possibility to accept going concern audit opinion will
be smaller. This is supported by research conducted by Setiwan (2015) and Arma
(2016). Based on the description, the hypothesis in this study is as follows.
H1= The growth of the company affectspartially the statement of going concern opinion.
2. The effect of profitability to going concern statement opinion
Profitability is the ability of a company to earn profits in relation to sales, total
assets, and own capital (Sartono, 2001). Through calculations proxied with return on
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assets (ROA), that is by dividing net profit (loss) by total assets, we can know how far
the effectiveness of asset management company in order to generate profit. The higher
return on assets (ROA) shows the more effective the management of assets, so the
smaller the possibility of companies getting going-concern audit opinion. Some studies
including, Setiawan (2015) and Saifudin (2016) have found that profitability has a
negative effect. The higher the profitability ratio, the smaller the potential for going
concerns. Based on the description, the hypothesis in this study is as follows.
H2= Profitability affects partially on going concern statement opinion
3. The effect of liquidity to going concern statement opinion
Liquidity refers to a company's ability to pay its short-term liabilities in
accordance with the payment due date. Liquidity ratio can be measured by comparing
current assets with current liabilities, from this calculation the value of current ratio.
The smaller the current ratio value indicates the company is less liquid so it can be
assumed that the company will have difficulty fulfilling its obligations to its creditors,
in such position it is likely that the auditor will give a going concern audit opinion.
From the results of his research Setiawan (2015) and Saifudin (2016) stated that
liquidity negatively affect the going concern opinion. Based on the description, the
hypothesis in this study is as follows.
H3= Liquidty affects partially on going concern statement opinion
4. The effect of leverage to going concern statement opinion.
The leverage ratio measures the level of debt use as a source of corporate
financing (Husna and Pudjiastuti 2004). This ratio can be measured by the debt ratio
that is comparing the total liabilities with total assets. The Setiawan (2016) study
concluded that leverage positively affects the acceptance of going concern audit
opinion. This is because the higher the leverage ratio of a company, the more it will
cause auditor doubt will be the survival of the company, because most of the funds
obtained by the company will be used to finance the debt. Based on the description, the
hypothesis in this study is as follows.
H4= Leverage affects partially on going concern statement opinion
5. The effect of company growth, profitability, liquidity and laverage to going concern
statement opinion.
The profit growth ratio can describe the state of the company. The amount of
profit earned on a regular basis or an increase is an important factor for the company to
be able to maintain its survival. Meanwhile, companies with negative earnings growth
have the potential to go bankrupt, since profits should be the main source of funds for
the company to operate. Therefore if the company's growth is positive, then the auditor
is less likely to issue a going concern opinion (Santosa and Wedari, 2007).
Profitability is the ability of a company to earn profits in relation to sales, total
assets, and own capital (Sartono, 2001). Through calculations proxied with return on
assets (ROA), that is by dividing net profit (loss) by total assets, we can know how far
the effectiveness of asset management company in order to generate profit. The higher
return on assets (ROA) shows the more effective the management of assets, so the
smaller possibility of companies getting a statement going concern. The
higherprofitability ratio, the smaller potential for the issuance of going concern
statement.
Liquidity refers to a company's ability to pay its short-term liabilities in
accordance with the payment due date. Liquidity ratio can be measured by comparing
current assets with current liabilities, from this calculation the value of current ratio.
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The smaller the current ratio value indicates the company is less liquid so it can be
assumed that the company will have difficulty fulfilling its obligations to its creditors,
in such position it is likely that the auditor will give a going concern statement opinion.
The leverage ratio measures the level of debt use as a source of corporate
financing (Husna and Pudjiastuti 2004). This ratio can be measured by the debt ratio
that is comparing the total liabilities with total assets. This is because the higher the
leverage ratio of a company, the more it will cause auditor doubt will be the survival of
the company, because most of the funds obtained by the company will be used to
finance the debt.
Based on the description above, the hypothesis in this study is as follows.
H5= Company growth, profitability, liquidity and leverage simultaneously affect the
statement of going concern opinion.
3. METHODS
3.1 Research Approach
This research is in the form of quantitative research that is research which see the
correlation of variable to the object under study, more causal and consequence so that in
this research there are dependent variable and independent variable in the form of
numbers and analysis using statistic (Sugiyono, 2007). This research will be conducted
by using four main variable that is company growth, profitability, liquidity, and
leverage. Analysis of research results will be done by using logistic regression analysis
method.
3.2 The Scope of Research

The study used secondary data that is by accessing and downloading data on the
official site of Indonesia Stock Exchange (IDX) which provides data audit report
through website www.idx.co.id.
3.3 Operational Definition of Research Variables

The variables in this study consist of two groups of variables, namely the dependent
variable and the independent variable. Dependent variable is the variable that influenced
or resulted because of the independent variable. While the independent variable is the
variable that affects or be the cause of the change or the emergence of the dependent
variable. Dependent variable in this research is going concern audit opinion and which
become independent variable is company growth, profitability, liquidity and leverage.
3.4 Variable Definitions

3.4.1 Dependent Variables
The statement of going concern opinion shall be a modification audit statement which in
the auditor's consideration there is a significant incapacity or uncertainty about the
survival of a company in carrying out its operations, within a reasonable time of not
more than one year from the date of the audited financial statements (SPAP, 2011).
Included in this statement of going concern audit opinion is unqualified with
explanatory language / emphasis of matter paragraph, unqualified opinion, adverse
opinion and disclaimer opinion which include a paragraph or clarification sentence
about the company's ability to maintain its survival.
This variable is measured using the dummy variable. Companies that get a going
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concern statement opinion are coded 0, while companies that do not get a going concern
statement opinion are coded 1.
3.4.2 Independent Variables
a) Company Growth
Company growth can be interpreted that the company's ability to finance its
activities and indicate the company's ability to maintain its survival (Munawir, (1992) in
Dedi Kristianto, 2008). Company growth is proxied with profit growth ratio which is
mathematically formulated as follows:
Sales Growth(t)-Sales Growth(t-1)
Sales Growth = Sales Growth(t-1)
Information:
Net Profit (t) = Net income for the current year
Profit (t-1) = Net Profit last year
The company growth in this study was measured using dummy variables. Where a
company experiencing negative growth profit is coded 0, whereas companies
experiencing a positive profit growth are coded 1.
b) Profitability
Profitability ratios measure the ability of corporate executives to create profit
levels both in the form of corporate profits and economic value of sales, net assets of
companies and their own capital (Raharjaputra, 2009). In this research used return on
assets (ROA) which mathematically formulated as follows:
Net Profit
Return on Asset =Total Asset
c) Liquidity
Liquidity is a problem related to the problem of a company's ability to meet its
financial obligations that must immediately be met (Riyanto, 2008). The liquidity ratio
is used to measure the short-term ability of a company to pay its obligations due (Kieso,
2007). This research uses current ratio which is mathematically formulated as follows:
Current Asset
Current Ratio =Current Liabilities
d) Leverage
Leverage shows the proportion of debt usage to finance its investment (Sartono,
2008). The ratio of leverage, which in this study used the debt ratio is done with the aim
to measure how much corporate assets financed with debt. This ratio can be calculated
as follows:
Current Liabilities
Debt Ratio = Total Asset
3.5 Population and Sample

The population of this study is the company in LQ45 which amounted to 45
companies. This is because LQ45 Company can represent all companies listed on BEI
with high level of liquidity.
Sampling method used is purposive sampling method that is sampling technique
with consideration or certain criterion (Sugiyono, 2007). The criteria in this research are
determined as follows: (1) The Company is listed on BEI and entered into LQ45
Company. (2) The Company is consistently listed in the consolidated LQ45 list for the
period 2014 to 2016. (3) The Company issues its financial statements in rupiah currency
for the period ended 31 December. (4) The financial statements of the sample year have
been audited by the Independent Auditor.
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3.6 Data Collection Technique
Data collection techniques used in this study is documentation, namely by
collecting, recording, and reviewing secondary data required. Required data in the form
of financial report and annual report of company LQ45 listed on BEI year 2013 until
2015.
3.7 Data Analysis Technique

The data collected in this research will be analysed quantitatively by using the
following method:
3.7.1 Descriptive statistics
The data in this study were analysed with descriptive statistics. Descriptive statistics
provide an overview or description of data viewed from the mean, standard deviation,
variant, maximum, minimum, sum, range, kurtosis and skewness (Ghozali, 2006).
3.7.2 Logistic Regression
Hypothesis testing in this research is done by using logistic regression (logistic
regression). Logistic regression is a special form of regression analysis with the
dependent variable being category and the independent variable being a category,
continuous or a combination of both. This logistic regression is used to test whether the
probability of occurrence of dependent variables can be predicted with the independent
variables (Ghozali, 2006). This test is done by using logistic regression due to
dependent variable data in the form of variabel dummy category and independent
variable data in the form of dummy and ratio variable. Logistic regression analysis
techniques do not require the assumption of data normality in the independent variables
(Ghozali, 2006), and ignore heteroscedasticity (Gujarati, 2003). Calculation of logistic
regression analysis in this study using IBM Statistic SPSS 19.
The logistic regression model used in this study is shown in the following equation:
PGC
ln 1-PGC= α + β1 PG + β2 ROA + β3 CR + β4 DR + ε
Information:
PGC = Statement of Opinion Going Concern (Y = 1)
PGC
ln 1-PGC= probability of getting a going concern statement
α = Constants
βi = Regression Coefficient
PG = Company Growth (Profit Growth)
ROA = Profitability (Return On Asset)
CR = Liquidity (Current Ratio)
DR = Leverage (Debt Ratio)
ε = Standard error
Stages in testing using logistic regression can be explained as follows:
a. Assessing the Eligibility of the Regression Model
The feasibility test of the regression model is used to find out whether the
independent variables together can predict the dependent variable or not. The feasibility
of the regression model is assessed by the Hosmer and Lemeshow Goodness of Fit Test.
The hypothesis for assessing regression eligibility is:
H0: There is no significant difference between the predicted classification and the
observed classification.
H1: There is a marked difference between the predicted classification and the observed
classification.
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This model is to test H0 that empirical data match the model. If the Hosmer and
Lemeshow Goodness of Fit Test statistic is ≤ 0.05 then H0 is rejected. If the value> 0.05
then H0 cannot be rejected, it means the model is able to predict the observed value or
in accordance with the data.
b. Assessing Overall Model (Overall Model Fit)
This test is performed to assess the hypothesized model has been fit with the data.
The hypothesis for assessing the fit model is:
H0: The hypothesized fit model with the data.
H1: The hypothesized model is not fit with the data.
From the hypothesis H0 must be accepted to fit the model with the data. Statistics
used by Likelihood function.
Likelihood L of the model is the probability that the model is hypothesized based
on the input data. Gudono (2001) states that a model is perfectly fit if it has a degree of
accuracy (Likelihood) of 1, thus having -2LL = 0. Assessing the whole model (Overall
Model Fit) by comparing the -Log Likelihood (-2LL) (Block Number = 0) and the
Likelihood Log-2 number at the end (Block Number = 1). The reduction of the initial -
2LL value with the 2LL value in the next step shows the hypothesized fit model with
the data (Ghozali, 2006).
Then to find out whether H0 hypothesized in this test is accepted or rejected is to
compare the value of Log Likelihood Block = 0 or Block = 1 with table χ2 with df value
obtained from df = N-k-1. If value -2 Log Likelihood Block = 0 or Block = 1 <χ2 table
then H0 is acceptable or in other words fit model with data.
c. Assess the Coefficient of Determination
The value of the coefficient of determination on the logistic regression model is
shown by the value of Nagelkerke R Square (R2), which the test is used to measure how
far independent ability is able to explain and influence the dependent variable (Ghozali,
2006). R2 value ranges from 0 to 1, where if the value of R2 is small then the ability of
independent variables in explaining the dependent variable is limited. Whereas if R 2
approaches 1 means the independent variable is able to provide all the information
needed to predict the dependent variable.
d. Table Classification
The classification table shows the predictive power of the regression model to
predict the possibility of receiving a going concern audit opinion on the auditee. In the
logistic regression output, then this number will be seen in the classification table.
e. Multicollinearity Test
Multicollinearity test aims to test whether in the regression model found a
correlation between independent variables. A good regression model is shown in the
absence of strong correlation symptoms among the independent variables. This test uses
correlation matrix between independent variables to see the magnitude of the correlation
between independent variables. If the value of the correlation coefficient between the
independent variables is smaller than 0.8 means there is no serious multicollinearity
symptom among the independent variables (Kuncoro, 2004).
f. Hypothesis testing
1) Partial Test (Wald Test)
Testing with logistic regression model used in this research is to know the effect
of each independent variable to dependent variable. Partial test of parameter
significance can be done through Wald test. Criteria testing, namely:
 The confidence level used is 95% or 5% significance level (ά = 0.05).
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 Criteria for acceptance or rejection of the hypothesis are based on p-value
significance. If the significance level> 0.05 H0 is rejected, if the significance level
<0.05 H0 is accepted.
2) Simultaneous Test (Test G)
To determine the effect of the dependent variable on the independent variables
together in the model, can use Test G. This G test shows that the overall logistic model
can explain or predict the independent variable to the dependent variable. With a
significance level (ά) of 0.05, then the conclusions can be drawn:
 If p-value (in this case is sig-2 tailed)> 0.05 means that the independent variable
together does not affect the dependent variable.
 If p-value (in this case is sig-2 tailed) <0.05 means that the independent variables
simultaneously affect the dependent variable.

Descriptive statistics provide descriptions or descriptions of data viewed from the
minimum, maximum, average (mean) and standard deviation. Based on the output of
SPSS 19, the general description of the sample under study can be presented in the
Table 1 below.
Table 1. Descriptive Statistic
N Min Max Mean Std. Deviation
PGC 96 0 1 0,9300 0,2610
PG 96 0 1 0,6600 0,4770
ROA 96 0,0107 1,4130 0,0969 0,1529
CR 96 0,4500 9,7169 1,9916 1,5227
DR 96 0,1331 0,8781 0,5193 0,1999
Source: Processed Researcher, 2017
The average value of going concern (PGC) statement statements of 0.9300 or 93%
greater than 50% indicates that the statement of opinion with code 1, ie non-going
concern statement opinion more emerge. Of the 96 samples studied, in the period of the
study year ie 2014-2016, 7 samples received a going concern statement opinion and 89
samples received a non-going concern audit revelation.
The average value of firm growth proxied with profit growth (PG) shows a value
of 0.6600 or 66% greater than 50%. This shows that positive earnings growth with code
1 more emerge compared with negative earnings with code 0. Of 96 samples studied,
companies that experienced positive profit growth of 63 samples, while companies
experiencing negative profit growth of 33 samples.
For profitability variables, the average value of profitability proxied with ROA
has a value of 0.0969 and standard deviation of 0.1529. This shows that the average of
96 samples studied has the ability to generate profits of 9.68% of total assets owned.
Profitability value of profitability (ROA) is 0.0107 that is at Global Mediacom Tbk. The
maximum value of profitability (ROA) is 1.4130 in Astra Agro Lestari Tbk. The
liquidity variable proxied by the current ratio (CR) has an average value of 1.9916. This
shows that 96 samples studied have average level of good liquidity that is equal to
199,16% which is bigger than 100%. Value drink variable liquidity (CR) is 0.4500
which is at Astra Agro Lestari Tbk, and the maximum value of the variable liquidity
(CR) is 9.7169 ie in Media Nusantara Citra Tbk.
The average value of the variable leverage proxied by Debt Ratio (DR) is equal to
0.51930 or about 51.93% greater than 50%. This shows that 96 samples studied on
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average have the ability to pay off debt above 50%. The minimum value of the leverage
(DR) variable is 0.1331 that is in Indocement Tunggal Prakasa Tbk. While the
maximum value is 0.8781 at Bank Rakyat Indonesia.
Samples were categorized into two groups or categories based on the type of audit
opinion that the receipt of the statement, the group of companies that obtain a statement
of opinion going concern (PGC) and the companies that acquire a non-going concern
statement of opinion (NPGC). The distribution of the companies is presented in Table 2.
Tabel 2. Distribution of Company Based on Audit Opinion Statement
Firms Total %
2014 2015 2016
Total % Total % Total %
PGC 2 6,25 2 6,25 3 9,38 7 7,29
NPGC 30 93,75 30 93,75 29 90,62 89 92,71
Total 32 100 32 100 32 100 96 100
In 2014 as many as 2 companies had going concern statement of opinion by the
percentage rate of 6.25% and non-going concern statements opinion has 30 companies
with the percentage rate of 93.75%. Then in 2015, the number of companies and
corporate presentations that get the statement of going concern opinion are 2 companies
and 6.25% respectively. While companies that do not get a statement of going concern
opinion of 30 companies with a percentage of 93.75%. In 2016, companies earning a
going concern statement from independent auditors increased to 3 companies with a
portion of 9.38% of the 32 companies studied. While companies that do not get going
concern statement opinion from independent auditors amounted to 28 companies with
the percentage of 90.62%.
The number of samples that get the statement of going concern (PPGC) opinion
from 2014-2016 is 7 samples with percentage of 7.29% of the total sample studied ie 96
samples. While the number of samples that get non-expression of going concern
statement from year 2014-2015 is 89 sample with percentage equal to 92,71% from all
sample studied that is 96 sample.
4.2 Feasibility Test of Regression Model

The feasibility of the regression model was assessed using Hosmer and Lemeshow's
Goodness of Fit Test. Based on Hosmer and Lemeshow's Goodness of Fit Test table can
be seen the significance of 0.973 whose value is above the alpha value (α = 0.05). This
means that H0 says no real difference between the predicted classification and the
observed classification is acceptable. This regression model is feasible for use in further
analysis, since logistic regression models are able to predict the value of observation.
The strength of the regression model to predict the observed value of 97.3%. Thus, the
accuracy of the regression model in predicting the observed value is good because the
value is significantly close to 1 or 100%.
Table 3. Hosmer and Lemeshow Test

Step Sig.
1 0,973
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4.3 Assessing Model Fit (Overall Model Fit)
The overall model assessment is done by comparing the values between the Log-
Likelihood Logs at the start (Block Number = 0), which only include the constants with
the Log Likelihood -2 value at the end (Block Number = 1), where the model enters the
constants and independent variables. The initial Likelihood Log-2 value is 50,135 and
after it is inserted independent variable, then the final Likelihood Log -2 value decreases
to equal to 33,905. It can be said that the model hypothesized fit with the data.
To see more fit hypothesized models with the data, it can be proven as follows. In
Step 0 the value of Log-2 is 50,135 and df is 95, with error standard 5% then the value
of χ2 table is 118,752. The conclusion is the value of -2 Log L <χ2 table (50,135
<118,752). For Step 1, the value of -2 Log L is 33.905 and df is 91, with standard error
of 5% feeding χ2 table of 114.268. The conclusion is the value of -2 Log L <χ2 table
(33,905 <114,286). It can be concluded that H0 is received or in other words a
hypothesized fit model with data.
Table 4. Value of -2 Log L and df

Information Value df = N-k-1
Step 0 (Block 0) 50,135 95
Step 1 (Bolck 1) 33,905 91
4.3 Coefficient of Determination

The coefficient of determination is used to find out how much variability
dependent variable by looking at the value of Nagelkerke R Square. Based on the results
of tests performed, the value of Nagelkerke R Square is 0.382, which means variability
of the dependent variable that can be explained by independent variable is 38.2%, the
remaining 61.8% is explained by other variables outside the research model. It shows
that together variations of independent variables (company growth, profitability,
liquidity and leverage) can explain the variable statement of going concern audit
opinion by 38.2%.
Table 5. Model Summary
Step Nagelkerke R Square
1 0,382
4.4 Table Classification

From the results of classification table test can be concluded that the prediction
strength of the regression model in predicting the possibility of companies receiving
going concern audit opinion is 28.6%. While the possibility of the company receiving a
non-going concern audit opinion is 98.9%. Overall strength of prediction from
regression model is 93,8%.
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Table 6. Classification Table
Observed Predicted
PA Percentage
PPGC NPPGC Correct
Step 1 PA PGC 2 5 28,6
NPGC 1 88 98,9
Overall Percentage 93,8
4.5 Multicollinearity Test
A good regression model is in the absence of strong correlation symptoms among
the independent variables. Multicollinearity test in logistic regression using correlation
matrix (Correlation Matrix) between independent variables to see the magnitude of
correlation between independent variables.
Table 7. Correlation Matrix

Constant PG ROA CR DR
Step 1 Constant 1,000 0,246 -0,800 -0,102 -0,886
PG 0,246 1,000 -0,475 0,178 -0,448
ROA -0,800 -0,475 1,000 -0,292 0,739
CR -0,102 0,178 -0,293 1,000 -0,140
DR -0,886 -0,448 0,739 -0,140 1,000
The test results show that there is no correlation coefficient value between
variables greater than 0.8. The above correlation matrix indicates the absence of serious
multicollinearity symptoms among the independent variables.
4.6 Logistic Regression Model

Logistic regression models can be established by looking at the parameter
estimation values in Variables in The Equation. Regression model that is formed based
on parameter estimation value in Variables in The Equation is as follows:
Table 8. Variables in the Equation
B Sig.
Step 1 PG -0,992 0,348
ROA 34,575 0,034
CR -0,547 0,009
DR 9,855 0,025
Constant -2,222
Information:
PG = Profit Growth
RAO = Profitability (Return on Assets)
CR = Liquidity (Current Ratio)
DR = Leverage (Debt Ratio)
From Table 8, by looking at the value of B then we will get the logistic regression
equation as follows:
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PGC
ln 1-PGC = -2,222 + (-0,992) PG + 34,575ROA + (-0,547) CR + 9,855DR + ε
The result of the logistic regression equation shows the direction of the influence
of each independent variable to the dependent variable shown by the regression
coefficient value of each independent variable. The coefficient marked positive means
that it has a direct influence on the statement of going concern (PGC) opinion, while the
coefficient which has negative sign has opposite effect to going concern statement
opinion (PGC).
4.7 Hypothesis Testing and Discussion

4.7.1 Practical Testing (Wald Test)
Table 9. Wald Test
Variable Sig. Information
PG 0,348 H0 rejected
ROA 0,034 H0accepted
CR 0,009 H0accepted
DR 0,025 H0accepted
1. The effect Of Corporate Growth Partially to The Going Concern Opinion Statement
The result of hypothesis testing shows that the company's growth has no effect on
going concern statement. The growth of companies proxied by profit growth shows that
not all companies experiencing negative profit growth will go bankrupt or in other
words will receive a statement going concern opinion.
This condition is reinforced by the data in this study from 32 companies studied,
in the year 2014 there are 2 companies that get the statement going concern opinion, 2
companies has experience positive profit growth. In 2015 companies that get going
concern audit opinion number 2 with negative profit growth. In 2016, there are 3
companies that get a going concern audit opinion who experience positive profit
growth. It can be concluded that negative earnings not necessarily get a going concern
statement opinion and positive profit growth not necessarily get a statement of opinion
non-going concern.
2. The Effect of Profitability Partially Against the Statement of Opinion Going
Concern
The result of hypothesis testing shows that profitability has an effect on going
concern statement. High profitability can affect the business continuity of the company
is getting better because it can attract investors to invest. However, it is only seen from
the investment side of the company. If viewed from the side of corporate management,
ROA measuring tool used to analyze profitability has a lack of management encourages
management to increase assets if the expected value of ROA is too high and
management tend to focus on short-term goals rather than long-term goals, so tend to
make decisions short term that is more profitable but negative in the long run.
The disadvantages of the ROA may cause the company to have a chance of not
lasting long. In addition, the emergence of auditor doubts about management issues that
ignore long-term goals will result in auditors issuing a going concern audit opinion
statement.
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3. The Effect of Liquidity Partially Against the Statement of Opinion Going Concern
The result of hypothesis testing shows that liquidity has an effect on going
concern opinion statement. The higher the liquidity value, the better the company will
meet its current liabilities by using current assets. This may indicate that the company
has a healthy financial condition, so an audit opinion statement about the company's
survival can be avoided. Similarly, in contrast, where companies that have low liquidity
value may result in auditors issuing a statement of going concern opinion.
4. The Effect of Leverage Partially Against the Statement of Opinion Going Concern
The result of hypothesis testing shows that leverage has an effect on going
concern statement. In giving an opinion by the auditor about the survival of a business,
what the auditor needs to be accounted for is the financial health of how the company's
liabilities can be settled by the assets owned by the company. The greater the value of
debt comparisons with assets the lower the company's ability to cover its obligations so
as to cause auditors doubt about the continuity of a company's business. Vice versa, if
the lower the ratio of the value of the comparison between debt with assets, the higher
the company's ability to cover its obligations.
4.7.2 The Effects of Corporate Growth, Profitability, Liquidity and Leverage
Simultaneously Against Statement of Going Concern.
Test results in table Omnibus Tests of Model Coefficients obtained Sig.Model
value of 0.003. Because this value is smaller than α (5%) it can be concluded that
independent variables simultaneously affect the dependent variable or at least there is
one independent variable that influences. In other words, the company's growth
variable, profitability, liquidity and leverage influence simultaneously to going concern
statement.
Table 10. Obnumus of Coeficient Test
Step 1 Sig
Model 0,003
The results of the first hypothesis testing showed that the company's growth has
no effect on the revelation of going concern opinion. This conclusion shows that H 1 is
rejected. Nevertheless, there are three independent variables that significantly influence
the going concern statement. The three variables are profitability, liquidity and leverage.
Hypothesis test results showed that the four independent variable effect
simultaneously to the statement of going concern opinion. Because the value of
Sig.Model is 0.003 smaller than α (5%) it can be concluded that the independent
variables simultaneously affect the dependent variable or at least there is one
independent variable that influences. From the results of hypothesis testing can show
that company growth, profitability, liquidity and leverage simultaneously have a
significant effect on going concern statement. These results support the fifth hypothesis.
These findings indicate that all independent variables as a whole can explain or predict
the dependent variable.
5. CONCLUSIONS
Based on the formulation of the problem, objectives, theoretical basis, hypothesis,
and test results, it can be concluded as follows: (1) The growth of companies proxied
with profit growth (PG) does not partially affect the statement of going concern opinion.
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(2) Profitability proxy with Return on Asset (ROA) have an effect on going concern
statement of opinion. (3) Liquidity measured using Current Ratio (CR) partially effect
the going concern statement. (4) Laverage proxied by Debt Ratio (DR) has partial effect
on going concern statement. (5) Company growth (PG), profitability (ROA), liquidity
(CR) and laverage (DR) simultaneously affect the statement of going concern opinion.
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www.idx.co.id
233
Micro Business Development Strategies for Aero City Opportunities in Majalengka
Ellen Rusliati, Mulyaningrum, and Mujibah A. Sufyani
ABSTRACT
The purpose of this research is to study the development of micro business potential to
exploit aero city opportunities in Majalengka that will change the livelihoods and
culture of the community. Local potentials in Majalengka are agriculture and natural
resource-based tourism. Processing of local raw materials into products that fit the
needs of communities will be able to increase the income of population. The research
method used is descriptive qualitative. The result shows that the strategies fit to this
study are market penetration and new product development. Efforts to be taken to
support the strategies include (1) The improvement of human resources quality in
services and trade, (2) Innovation of local-based new products, (3) Promotion using
information technology, (4) The increase of tourism infrastructure involving micro
business, (5) Business assistance, market survey, and management training involving
higher education, (6) Facilitation of BUMDesa for machinery, storage, capital
development, product marketing, (8) Producing products according to agricultural
commodities.
Keywords: Micro Business, Innovation, Promotion.
234
The Impact of Knowledge Management, Entrepreneurship and Cultural Motifs of
the Community in Improving the Performance of Women's Micro Enterprises in
Pelalawan District, Riau Province
Susi Hendriani, Yulia Efni, and Ezky Tiyasiningsih

Management Department, Faculty Economic and Business, Universitas Riau
ABSTRACT
This research aims to know the impact of knowledge management, Entrepreneurship

and cultural motifs of the community in improving the performance of women's micro
enterprises in Pelalawan District, Riau Province. The research of using primary data i.e.
data obtained from the results of the interview questionnaire and the granting to all
perpetrators micro women in Pelalawan District. Secondary data obtained related to
Women micro enterprise objects in Pelalawan District. The sample in this research is
121 takers micro women in pelalawan. Methods of analysis in this study using Multiple
Regression analysis by SPSS. Simultaneous regression test (test F) showed that the free
variables examined (knowledge management, Entrepreneurship and cultural Motifs of
society) has a positive and significant effect against variables bound (Business
Performance). The magnitude of the influence that caused (R2) by both these variables
are jointly against the variable banded 50.1%, while the rest of 49.9% is affected by
other variables which are not examined in this study. The results of the testing that has
been done, partial regression test (test t) indicates that each of the free variables are
examined, namely, knowledge management, Entrepreneurship and cultural Motives of
influential Community significantly to Business performance.
Keywords: Knowledge Management, Entrepreneurship, Cultural Motif Community.
235
The Moderating Effect of the Understanding of Accounting Information Systems
on Audit Complexity, Time Budget Pressure and Audit Quality Relationship
Elfi Ilham, Kamaliah, and Aunurrafiq

Kampus Bina Widya Km. 12,5 SP Panam, Pekanbaru 28293, Riau Indonesia
ABSTRACT
The aim of this study is to examine the moderating effect of the understanding of
Accounting Information System on Audit Complexity, Time Budget Pressure and Audit
Quality relationship. The population of this study is independent auditors who worked
at public accounting firm in Pekanbaru, Batam and Padang. A survey was conducted to
100 independent auditors and then analyzed by using Moderated Regression Analysis
(MRA) with SPSS 22.0. The result prove that the understanding of Accounting
Information System moderate the relationship between Audit Complexity, Time Budget
Pressure and Audit Quality.
Keywords: Accounting Information System, Audit Complexity, Time Budget

Pressure, Audit Quality
236
The Effect of Clients Charismatic to Auditor's Client Acquiescence in KAP
Pekanbaru, Padang and Batam
Pipin Kurnia, and Sem Paulus Silalahi

Accounting Department, Faculty Economics and Business, Universitas Riau
ABSTRACT
The purpose of this research is to identify the influence of charismatic client to auditor's
client acquiescence: auditor tenure, client important, client image (antisedan variable) to
client identification while professional indentification, client identification, client size,
firm tenure and auditor experience (independent variable) to auditor’s client
acquiescence. This research uses purposive sampling method. The population in this
study are auditors who are working in KAP Pekanbaru, Padang and Batam. The sample
in this study consists of junior auditor, senior auditor, supervisor and partner who are
working in 21 KAP in Pekanbaru, Padang and Batam. In this study there are 65
respondents. Data analysis technique using SEM model (Structural Equation Modeling)
and warpPLS 6.0 program. The result of hypothesis in this study shows that (1) tenure
auditor has significant effect to client identification variable with the path coefficient
value of 0.265, (2) client important has significant effect to client identification variable
with the path coefficient value of 0.285, (3) client image has no effect to auditor’s
client identification variable with the path coefficient value of 0.144, (4) professional
identification has significant effect to auditor's client acquiescence variable with the
path coefficient value of 0.18, (5) client identification significant effect to auditor's
client acquiescence variable with the path coefficient value of 0.151, (6) the client size
has no effect to auditor's client acquiescence variable with the path coefficient value of
0.053, (7) firm tenure has no effect to auditor's client acquiescence variable with the
path coefficient value of 0.14, (8) auditor experiance has no effect to auditor's client
acquiescence variable with the path coefficient of 0.242.
Keywords: Auditor Tenure, Client Important, Client Image, Professional

Identification, Client Identification, Client Size, Firm Tenure and Auditor
Experience And Auditor’s Client Acquiescence.
237
Developing Enterprise Risk Management Index for Public Companies
Enny Nurdin Sutan Maruhun, Ruhaya Atan, Sharifah Norzehan Syed Yusuf, and
Jamaliah Said
Universiti Teknologi MARA, Perak
Accounting Research Institute, Universiti Teknologi MARA, Shah Alam
Institute of Professional Accountants, Universiti Teknologi MARA, Shah Alam
ABSTRACT
More firms are implementing enterprise risk management (ERM) due to its ability to
increase firm value. However, academic research examining the association between
ERM and firm value is still limited due to the lack of suitable and comprehensive
dimensions available for measuring ERM. This paper directly addresses this absence
and proposes a comprehensive dimension of ERM that effectively measures the
construct. Enterprise Risk Management Index (ERMi) is proposed as an effective
measurement for ERM implementation. ERMi was constructed based on data gathered
from a thorough review of literatures. The effectiveness of ERMi as a measurement of
ERM implementation was assessed through survey questionnaire among Malaysian
publicly listed companies and tested using the structural equation model technique of
partial least squares (PLS-SEM). Empirical findings confirmed that 42 items in ERMi
that measure the eight principal components of ERM are significant and effective
dimensions for ERM implementation. Empirical premise of ERMi such as its reliability
and validity assessed using PLS-SEM is another important contribution of this study
that shows PLS-SEM is an efficient data analysis technique that can be used in
accounting research.
Keywords: Enterprise risk management, Firm value, Partial least square, Structural
equation modelling
238
The Effect of Corporate Governance Mechanism, Third Party Funds and Credit
Risk on Sharia Banks’ Financial Performance by Firm Size and Leverage as
Controlling Variables
Faradilla, Yulia Efni, and Andewi Rokhmawati

The Faculty of Economics of Riau University, Pekanbaru, Indonesia
ABSTRACT
Since the last decade in Indonesia has introduced a banking system with Islamic sharia
approach that can be an alternative banking for the community, especially for Muslims.
The focus of this research is how to improve the financial performance of sharia
banking. The purpose of this research is to know the influence of corporate governance
mechanism, third party fund and financing risk to financial performance at sharia bank
with firm size and leverage as control variable. The population in this study is all sharia
commercial banks in Indonesia which amounts to 11 sharia commercial banks.
Sampling technique in this research is by purposive sampling with criteria of continuous
operation and publishes financial report during year 2011-2015. The data analysis
technique used is linear regression with the help of WarpPLS 5.0 software. Based on
data analysis and discussion of research result, it can be concluded that board of
commissioner, board of directors and sharia supervisory board have no significant effect
to financial performance. While third party funds and financing risks have a significant
effect on financial performance. In addition, it can be concluded that the model with the
control variable is better than the model without control variables (firm size and
leverage).
Keywords: Performance, Sharia Bank, Fund, Risk, Governance, Firm Size, Leverage
1. INTRODUCTION
Since the last decade in Indonesia has introduced a banking system with Islamic
sharia approach that can be an alternative banking for the community, especially for
Muslims. Description of a safe, trustworthy and trustworthy banking and free of usury is
longed for by the community. The characteristics of the sharia banking system operating
on the basis of profit sharing principles, provide an alternative to a mutually beneficial
banking system for communities and banks, as well as highlighting aspects of fairness
in transactions, ethical investments, promoting shared values and brotherhoods in
production and avoiding speculative activities in financial transactions.
The growth of sharia banking gives an indication that nowadays the people of
Indonesia are increasingly heading towards sharia transactions. These conditions
indicate that the community began to realize the existence of Islamic banks as a means
to manage their funds but still based on sharia principles that clearly more blessing by
Allah SWT.
The growth of these sharia banks includes the number of branches opened, Total
Assets, Third Party Funds and Funds disbursed to the public. This is also followed by an
increase in risks faced in line with increasing growth in asset value, third party funds
(DPK) and funds disbursed to the public.
Generally, the rapid development of sharia financial institutions must be balanced
with the development of other fields such as performance professionalism, governance
and maturity in implementing the principles of sharia indeed. Along with these
239
developments, one thing that needs to be observed is the aspect of corporate governance
because it is associated with various kinds of losses that if not paid attention will
damage the image of sharia in the future. The growing sharia bank, must be prevented
from various risks of loss, both financial loss and reputation risk.
Implementation of governance is a form of accountability of sharia banks that a
sharia bank is well managed, professional and cautious. The need for governance is
basically aimed at improving business success and corporate accountability in order to
realize shareholder value while maintaining the interest of other stakeholders. This
obviously will affect the financial performance of banks, so the better mechanism of
governance of a bank, the financial performance of banks will increase accordingly.
The financial performance of a company is a description of the financial condition
of a company that is analyzed by means of financial analysis, so it can be known about
the good financial condition of a company that reflects the performance of work in a
certain period (Dwiermayanti, 2009). In other words, the company's financial
performance is also called a determination that measures the goodness of the company
in performance can be seen from its financial condition at a certain period.
Past research on corporate governance and third party funds has been widely
implemented. Here are some studies that measure the effect of corporate governance
and third party funds on financial performance.
Gabriela (2013) found that there is no significant influence between corporate
governance on financial performance. While Like (2012) shows that good corporate
governance practices have a significant effect on financial performance. However, Ferly
et al (2014) found that GCG has a negative and significant impact on the profitability of
sharia banking.
In addition, research Maulida (2010) shows Third Party Fund (DPK) have a
significant positive effect on profitability. While Yuliani (2007) shows DPK has a
positive and insignificant effect on Return on Assets (ROA).
Based on previous research and differences in research results, and inconsistencies
between theory and facts, this becomes a research gap.
From the description above, it can be made problem formulation: whether
corporate governance mechanism, third party funds and financing risk significantly
influence the financial performance of sharia banks.
The purpose of this study is to determine the effect of corporate governance
mechanisms, third party funds and financing risks to the financial performance of sharia
banks.
Financial performance
Performance is a description of the level of achievement of the implementation of
a company's activities in realizing the goals, objectives, vision and mission of the
organization's that set out in the strategic planning of a company. While, the financial
performance is the achievement of work that has been achieved by the company in a
certain period and contained in the company's financial statements concerned. So the
financial performance based on the description above is the ability of financial
management work in achieving its performance.
According Darsono (2007), the meaning of financial performance, namely
"financial performance is the result of the company’s operations is presented in the form
of financial numbers. The results of the firm's current activity should be compared with
240
the financial performance of the period in the past, the balance sheet budget and profit
and loss and average financial performance of similar companies ".
The Influence of Corporate Governance Mechanism with Financial Performance

The implementation of corporate governance is a form of accountability of sharia
banks that a sharia bank is well managed, professional and cautious. The need for
governance is basically aimed at improving business success and corporate
accountability in order to realize shareholder value while maintaining the interest of
other stakeholders. This obviously will affect the financial performance of banks, so the
better the mechanism of governance of a bank, the financial performance of banks will
increase then.
 H1: The Board of Commissioners has a significant effect on financial performance.
 H2: The Board of Directors has a significant effect on financial performance.
 H3: The Sharia Supervisory Board has a significant effect on financial performance.
The influence of Third Party Funds on Financial Performance

Third Party Funds are one of the largest sources of funds obtained from the
community. Therefore, the bank must always be in the middle of society so that the
flow of money from the community that excess funds can be accommodated and
channeled back to the community. Third party funds (DPK) is one of the largest sources
of funds obtained from the community. Banks may utilize funds from these third parties
to be placed on income-generating items for banks, one of which is in the form
financing. The increase in third party funds will lead to substantial financing growth so
that bank profitability will increase.
Taswan (2008) also explained that with the increasing number of third party funds
as the main source of funds in banks, banks place the funds in the form of earning assets
such as credit. Placement in the form of credit will contribute to interest income for the
bank that will affect the profitability (profit) of the bank.
The influence of third party funds on profitability is supported by research
Maulida (2010). The results show that the amount of third party funds affects the
growth of profitability.
 H4: Third Party Funds significantly influence financial performance.
Effect of Financing Risk on Financial Performance

The risk of financing can occur due to the inability of customers to pay their
obligations within the period specified in the credit agreement by the bank to the
customer. A Bank undermined by problem financing (NPF) in large numbers tends to
decrease its profitability. ROA which is the benchmark of their profitability will
decrease (Sutojo, 2008). Arim (2009) states that the level of financing risk seen from the
ratio of NPF negatively affects the profitability (ROA) in Islamic banks.
The influence of Non Performing Financing (NPF) on Return On Assets (ROA) is
supported by Nusantara research (2009) which shows that NPF has a negative effect on
ROA,the number of NPFs will result in a decrease in ROA. Negative influence shown
by NPF indicates that the higher bad credit in bank credit management shown in NPF
will decrease the level of bank earnings reflected through ROA.
 H5: Financing risk significantly affects financial performance.
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3. METHODS
This research was conducted at Bank Sharia in Indonesia. This research was
conducted from October 2016. The design of this research is quantitative research with
multiple regression model. This quantitative research is a financial report and annual
report published annually by sharia commercial banks in Indonesia and data reports
from Indonesian Sharia Banking Statistics (SPSI). The type of data used in this study is
secondary data. The population in this study is all sharia commercial banks in Indonesia
which amounts to 11 sharia commercial banks. Sampling technique in this research is
by purposive sampling with criterion of continuous operation and publishes financial
report during year 2011-2015.
Table 1: Research Sample
No Nama Bank
1 Bank Muamalat Indonesia
2 Bank Victoria Syariah
3 Bank BRI Syariah
4 West Java Bank Banten Syariah
5 Bank BNI Syariah
6 Bank Syariah Mandiri
7 Bank Syariah Mega Indonesia
8 Bank Panin Syariah
9 Bank Syariah Bukopin
10 Bank BCA Syariah
11 Maybank Syariah Indonesia
This study uses four regression models, namely:

Y = b1 DK + b2 DD + b3 DPS + b4 DPK + b5 RP + e1 (1)
Y = b1 DK + b2 DD + b3 DPS + b4 DPK + b5 RP + b6 UP + e1 (2)
Y = b1 DK + b2 DD + b3 DPS + b4 DPK + b5 RP + b6 LEV + e1 (3)
Y = b1 DK + b2 DD + b3 DPS + b4 DPK + b5 RP + b6 UP + b7 LEV + e1 (4)
Information:
Y = ROA
DK = board of commissioners
DD = board of directors
DPS = Sharia Supervisory Board
DPK = third party funds
RP = financing risk
UP = company size
LEV = leverage
β1 - β7 = regression coefficient
ɛ = standard error
Data processing in this research is done by using Statistical Package for the Social
Science application program (IBM SPSS version 20.0) and Warp Partial Least Square
(Warp PLS) version 5.0.
242
Descriptive Analysis of Research Variables
The following table shows the average value of variables from all samples each year:
Table 2: Average Value of Variables
Year ROA Board of Board of Sharia Third Party Financing Company Leverage
Commis- Directors Supervisory Funds Risk Size
sioners Board
2011 1,95 3,64 4,00 2,36 105,69 1,25 29,08 5.54
2012 1,78 3,82 4,09 2,45 100,26 1,61 29,41 7.89
2013 1,26 3,82 4,27 2,36 99,31 1,62 29,65 8.01
2014 0,66 3,73 4,00 2,36 96,48 2,93 29,80 8.24
2015 -1,46 3,82 4,18 2,36 93,24 3,29 29,84 7.44
Results of Coefficient of Determination

Table 3: Results of Coefficient of Determination
No Variable Without Variable With Variable Control
Control Company Size Leverage Company Size
1 R square 0,509 0,512 0,536 0,542

2 Adjusted R square 0,459 0,451 0,478 0,474
From the test results of coefficient of determination, it can be concluded that the
model with the control variable has R square and Adjusted R square is higher than the
model without control variables. It can be seen in table that R 2 model with control
variable equal to 0,542 bigger than with R2 model without control variable equal to
0,509. In addition it can be seen Adjusted R square model with control variables of
0.474 larger than the Adjusted R square model without control variables of 0.459.
Comparison of Multiple Linear Regression Test Results without and With

Variable Control of Company Size and Leverage
From the results of the analysis, we can make a summary of the results of
hypothesis testing as follows:
Table 4: Comparison of Regression Coefficient
No Variable Without Variable With Variable Control
Control Company Size Leverage Company Size &
Leverage
1 Board of commissioners -0,181 -0,189 -0,223 -0,222
2 board of directors 0,098 0,075 0,059 0,063
3 sharia Supervisory Board 0,127 0,143 0,095 0,009
4 third party funds 0,309 0,296 0,361 0,366
5 financing risk -0,579 -0,571 -0,569 -0,571
6 company size 0,055 0,014
7 Leverage 0,192 0,198
From the table above shows that:

 Regression coefficient of influence of Board of Commissioner's Size to financial
performance without control variable equal to -0,181. If the Company's size control
variables are added, the regression coefficient of the Board of Commissioner's Size
243
decreases to -0.189. However, if the Leverage control variable is added, the
regression coefficient of Board size decreases to -0.23. Then, when added both
control variables Size Company and Leverage, then the impact on the decrease in
regression coefficient Size Board of Commissioners to -0.22..
 The regression coefficient of Sharia Supervisory Board influence to financial
performance without control variable equal to 0,127. If the Company Size control
variables are added, the regression coefficient of the Sharia (Islamic) Supervisory
Board decreases to 0.143. Likewise, when the Leverage control variable is added, the
regression coefficient of the Sharia Supervisory Board decreases to 0.095. Then,
when added both control variables Size of Company and Leverage, then impact on
the big decrease in regression coefficient Sharia Board of Supervisor to be 0,009.
 Regression coefficient of influence of Third Party Fund to financial performance
without control variable equal to 0,309. If the Enterprise Size control variables are
added, the Third Party Fund regression coefficient decreases to 0.296. Likewise,
when the Leverage control variable was added, the Third Party Fund regression
coefficient increased to 0.361. Then, when added the two control variables Company
size and Leverage, then impact on the increase in regression coefficient of Third
Party Funds to 0.366.
 Regression coefficient of influence financing risk to financial performance without
control variable equal to -0,579. If the Company's size control variables are added,
the regression coefficient The risk of financing increases to -0,571. Likewise when
added Leverage control variable, regression coefficient Financing risk increases to -
0.569. Then, when added both control variables Size of Company and Leverage, then
have an impact on the increase in regression coefficient Financing risk to -0,571.
Comparison of Hypothesis Test Results without and With Variable Control of

Company Size and Leverage
From the results of the analysis, we can make a summary of the results of hypothesis
testing as follows:
Table 5: Comparison of Hypothesis Test Results
No Variables Without Variable With Variable Control
Control Company Size Leverage Company Size &
Leverage
1 Board of no significant no significant significant effect significant effect
commissioners effect effect
2 Board of directors no significant no significant no significant no significant
effect effect effect effect
3 Sharia Supervisory no significant no significant no significant no significant
Board effect effect effect effect
4 Third party funds significant effect significant effect significant effect significant effect
5 Financing risk significant effect significant effect significant effect significant effect
From the table above shows that:
 The size of the Board of Commissioners has no significant effect on Financial
Performance without control variables or with the company's size control variables.
However, the size of the Board of Commissioners has a significant influence on
Financial Performance if added leverage control variables or with both control
variables of firm size and leverage.
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 The size of the Board of Directors has no significant effect on Financial Performance
either without control variables or with the existence of firm size control variables
and leverage.
 Sharia Supervisory Board has no significant effect on Financial Performance either
without control variables or by the existence of firm size and leverage control
variables.
 Third Party Funds have a significant influence on Financial Performance either
without control variables or by the existence of firm size and leverage control
variables.
 Third Party Funds have a significant influence on Financial Performance either
without control variables or in existencevariable control of firm size and leverage.
Discussion
In this research, there are five hypotheses about partial effect of fundamental
factors on Financial Performance. Below we will discuss the five hypotheses.
Influence of the Board of Commissioners on Financial Performance

The result of the hypothesis testing stated that the Board of Commissioners did
not significantly affect to the Financial Performance. The regression coefficient of the
Board of Commissioners on Financial Performance is negative valued , meaning the
direction of negative influence where the greater the Board of Commissioners, the
financial performance will decrease accordingly, and vice versa, the smaller the Board
of Commissioners, the financial performance will increase then. These results indicate
that the large number of Board commissioner is not necessarily able to encourage the
performance of sharia banks.
The results of this study are strengthened by the results of descriptive analysis that
showing the negative relationship between the Board of Commissioners and Financial
Performance as measured by ROA, where there is a tendency of the Board of
Commissioners amount increased and the financial performance decreased.
From the coefficient indicates that the size of the board of commissioners is
negative, meaning the greater the board of commissioners amount,the financial
performance will decrease then, and vice versa. According to theory of agency where
more and more parties have an interest in the company will lead to conflict which
resulted in decreased company performance. The findings of this negative value
coefficient indicate that if more and more members of the board of commissioners are
allowed, that will possible for members to have different opinions and will certainly
influence the policies given to the directors. In addition, salary expenditure for
commissioners is big expense for the company, the more members of the board of
commissioners will made greater the company's expenses and will minimize the
company's profit.
The results of this study are in line with the research conducted by Prahesti and
Abundanti (2015), Suryani (2010) and Hasanah (2013) stating that the Board of
Commissioners has no significant effect on financial performance. Prahesti and
Abundanti (2015) in his research stated that the cause of the board of commissioners is
not significant to financial performance can be caused by low or small influence of the
existence of the board of commissioners in providing benefits for companies which can
improve the company's financial performance (ROA). The position or number of the
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board of commissioners in the company does not have an effect on the decision making
in managing and improving the company's financial performance (ROA).
The size of the board of commissioners has no significant effect on the
performance of the company, this condition occurs because the size of the board of
commissioners can have an effect that is contrary to the effect on performance. This is
because the principal delegation to the agent makes the principal unable to supervise the
manager's performance, so the manager's decision is sometimes not in accordance with
the wishes of the owner (Suryani, 2010).
Therefore, it is necessary to establish a board of commissioners responsible for
carrying out supervision and ensuring that the company has implemented corporate
governance in accordance with applicable rules. The supervisory function of the board
of commissioners is by overseeing the policies of the board of directors in running the
company and advising the board of directors. With the large number of members of the
board of commissioners, the oversight of the board of directors becomes much better,
advice and input for the board of directors becomes more. So that the performance of
management becomes better and also impact on the improvement of company
performance (Hasanah, 2013).
Influence of the Board of Directors on Financial Performance

The results of hypothesis testing states that the Board of Directors has no
significant effect on Financial Performance. The regression coefficient of the Board of
Directors on Financial Performance is positive, meaning the direction of positive
influence where the greater the Board of Directors, the financial performance will
increase accordingly, and vice versa, the smaller the Board of Directors, the financial
performance will decrease then. This is in accordance with the theory that the Board of
Directors has a positive relationship to the performance of the company, because the
Board of Directors as management always have a desire to improve the performance of
the company. Board of Directors has a very vital role in a company. With the separation
of roles with the board of commissioners, the board of directors has great power in
managing all the resources that exist within the company. The Board of Directors has
the duty to determine thedirection of the company's policy and strategy resources, both
for short and long term, so that it will strive to improve the performance of the
company.
The absence of significant influence on the board of directors of the company's
financial performance shows that the size of a board of directors within the company
does not guarantee the effectiveness in carrying out its responsibilities in managing the
company, so the board of directors does not affect financial performance.
The results of this study are in line with those conducted by Sunarwan (2015) in
his research states that the Board of Directors has no significant effect on the
performance of the company. This is due to the existence of the Board of Directors
within the company only based on limited compliance only. The average number of
members of the Board of Directors is only 4 people. According to Bank Indonesia
Regulation no. 11/3 / PBI / 2009 concerning Sharia Commercial Bank, the Board of
Directors shall be fully responsible for the implementation of Bank management
including compliance with prudential principles and sharia principles. The number of
members of the Board of Directors shall be at least 3 (three) persons. This resulted in
the ineffective role of the Board of Directors in the management function.
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Effect of Sharia Supervisory Board on Financial Performance
Hypothesis testing results stated that Sharia Supervisory Board has no significant
effect on Financial Performance. The regression coefficient of the Sharia Supervisory
Board on Financial Performance is positive, meaning the direction of positive influence
where the greater the Sharia Supervisory Board, the financial performance will increase
accordingly, and vice versa, the smaller the Sharia Supervisory Board, the financial
performance will decrease then. This is in accordance with the theory that more and
more syariah supervisory board willthe more strict supervision made on the
management policy and can improve the performance of the company.No significant
influence of the Sharia Supervisory Board on Financial Performance indicates that a
large number of supervisory boards can not boost the performance of sharia banks. This
is probably because of the descriptive statistics, the average number of members of the
supervisory board of sharia is only 2 people.
The results of this study are in line with those carried out by Kholid and Bachtiar
(2015) and Prasetyoningrum (2009) stating that the Sharia Supervisory Board has no
significant effect on the financial performance of sharia banking. Kholid and Bachtiar
(2015) in his research stated that the result of regression analysis for syariah supervisory
board variable (DPS) shows that the number of syariah supervisory board has no effect
on the performance of sharia bank. These results indicate that a large number of
supervisory boards can not promote sharia bank performance. Prasetyoningrum (2009)
in his research found that the independence of DPS had a significant influence on the
professionalism of DPS with the direction of the negative relationship. According to
Bank Indonesia Regulation no. 11/3 / PBI / 2009 concerning Sharia Commercial Banks,
Number of DPS members of at least 2 (two) persons or at most 50% (fifty percent) of
the total members of the Board of Directors. The average number of sharia supervisory
boards in this study, although it meets the criteria but is still relatively small, so there is
a possibility that the role of Sharia supervisory board has not been maximal and has not
been able to encourage the performance of sharia banks.
According to Umam (2015: 345-346), in Indonesia there is a sharia supervisory
board which becomes the supervisory board of sharia in other financial institutions and
there is a sharia supervisory board which becomes the national sharia council. The
existence of several sharia supervisory boards concurrently sharia supervisory boards in
other financial institutions and served as a national sharia council, indicates that the
number of sharia supervisory boards in Indonesia is still small. In addition, double
positions can reduce the level of supervision by the supervisory board of sharia, so that
the existence of Sharia supervisory board has not been able to encourage the
improvement of the performance of sharia banks.
The Effect of Third Party Funds on Financial Performance

The results of hypothesis testing stated that Third Party Funds as measured by
Financing Deposit Ratio (FDR) proved to have a significant effect on Financial
Performance. The Third Party Fund regression coefficient on Financial Performance is
positive, meaning the direction of positive influence where the greater the Third Party
Fund, the financial performance will increase accordingly, and vice versa, the smaller
the Third Party Fund, the financial performance will decrease then. This is in line with
the theory that the more funds spent to finance sharia financing, the more profit the
results will be obtained by sharia banking. The results of this study are reinforced by the
results of descriptive analysis showing the positive relationship between Third Party
247
Fund and Financial Performance, where there is a tendency in average Third Party Fund
decreased and financial performance also decreased. From the research results of Third
Party Funds proved to have a significant effect on Financial Performance. The results of
this study in accordance with that conducted by the research results Karunia (2013)
states that the variables of Third Party Funds affect Financial Performance. The gift
(2013) in his research stated that DPK had a significant effect on financial performance.
According to the Gifts (2013), this reinforces the public's perception of keeping the
funds in the bank, and theoretically the community trusts the bank, because the people
hand over their money to be managed by the bank.
Sharia banking financing to deposit ratio (FDR) is considered to be effective to
support high returns if it is in the range of 95% -98%. This means that from 100% of
funds collected from the community, as much as 95% -98% of which is disbursed in the
form of financing. President Director of PT Bank Syariah Bukopin (BSB) said the range
of numbers is very effective to provide competitive returns. The margins generated from
financing to customers tend to be higher than if funds were placed on other instruments
such as Bank Indonesia saving facilities and sukuk. Until now, the Financial Services
Authority (OJK) and Bank Indonesia (BI) have not set FDR limits for sharia banks.
Meanwhile, the limit of FDR in conventional banking, known as LDR (loan to deposit
ratio) is set at 78% -92%. (Muqoddam, 2014).
Third Party Funds are one of the largest sources of funds obtained from the
community. Therefore, the bank must always be in the middle of the community so that
the money flow from the public that excess funds can be accommodated and distributed
again to the community. Third party funds (DPK) is one of the largest sources of funds
obtained from the community. The Bank may utilize funds from these third parties to be
placed on income-generating items for banks, one of which is in the form of financing.
The increase in third party funds will lead to substantial financing growth so that bank
profitability will increase. Taswan (2008: 12) also explained that with the increasing
amount of third party funds as the main source of funds in banks, banks place the funds
in the form of productive assets such as credit. Placement in the form of credit will
contribute to interest income for the bank that will affect the profitability (profit) of the
bank.
Influence of Financing Risk on Financial Performance.

The result of hypothesis testing stated that Financing Risk has significant effect to
Financial Performance. The Third Party Fund regression coefficient on Financial
Performance is negative, meaning the direction of negative influence where the greater
the Financing Risk the financial performance will decrease, and vice versa, the smaller
the Financing Risk the financial performance will increase. This is in accordance with
the theory of signaling and risk and return theory where the higher the risk of financing
indicates that the given shariah financing faces obstacles in billing or it can be said the
financing is substandard. It certainly will reduce revenue-sharing so that the profit
obtained by the banking decreased which resulted in the decline in company
performance. The results of this studyreinforced by the results of descriptive analysis
showing the negative relationship between financing risk and financial performance,
where there is an increasing trend of risks of financing increased and financial
performance has decreased.
The results of this study found that Financing Risks have a significant effect on
Financial Performance. The results of this study are in line with the results of research
248
Raharjo, et al (2014) and Nusantara (2009). Raharjo, et al (2014) found that NPLs have
a negative effect on ROA, meaning that any increase in the NPL amount will result in a
decrease in ROA. Nusantara (2009) found that NPF has a negative effect on ROA,
meaning that any increase in the number of NPF will result in decreased ROA.
Negative influence shown by NPF indicates that the higher bad credit in bank
credit management shown in NPF will decrease the level of bank earnings reflected
through ROA.NPL is a non-performing loan ratio with total credit. A good NPL is a
NPL that has a value below 5%. The smaller the NPL, the smaller the credit risk borne
by banks. Banks with high NPLs will increase the cost of both provisioning of earning
assets and other costs, potentially leading to bank losses. The risk of financing can occur
due to the inability of customers to pay their obligations within the period specified in
the credit agreement by the bank to the customer. A Bank undermined by problem
financing (NPF) in large numbers tends to decrease its profitability. ROA which is the
benchmark of their profitability will decrease (Sutojo, 2008: 14).According to Arim
(2009: 6) states that the level of financing risk seen from the ratio of NPF negatively
affects the profitability (ROA) in Islamic banks.
From the above explanation can be concluded that the problematic financing at
the bank is a financing risk that is very significant effect on the increase in profitability
projected by Return On Assets (ROA). Because of the higher Non Performing
Financing (NPF), the smaller the ROA, as opposed to the lower Non Performing
Financing (NPF), the Return On Assets (ROA) in the bank will increase.
The BI Regulation governing each outstanding loan increase must be covered by
the earning assets reserve by debiting the earning expense account of earning assets and
crediting the reserve account for the write-off of earning assets, so that any increase in
the loan will add to the cost of the earning assets reserves which will eventually affects
ROA. Thus, this process will help Commercial Bank to always keep NPL maximum 5%
from total outstanding loan provided by bank at the end of period of financial statement
after issuing reserve account deletion and crediting NPL account or problem loan
according to BI regulation. This result reinforces the research conducted by Sukma
(2009) research that the Financing Risk variable affects Financial Performance.
5. CONCLUSIONS
Based on data analysis and discussion of research results, of the five hypotheses
proposed there are only two accepted hypothesis, the fourth and fifth hypothesis. From
the previous discussion, it can be concluded that
 The Board of Commissioners, Board of Directors and Sharia Supervisory Board have
no significant effect on Financial Performance.
 While Third Party Fund and Financing Risk have significant influence to Financial
Performance.
 In addition it can be concluded that the model with the control variable has R square
and Adjusted R square is higher than the model without control variables.
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Profitability Growth of Rural Banks in Indonesia".
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on the Profitability of Banks (Comparison of Commercial Banks and Public Go
Public Non Go Public in Indonesia Period Year 2005-2007). Thesis Master of
Management Program Diponegoro University of Semarang.
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Loans, Ownership Structure and Independent Board of Commissioners on Financial
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Analysis of Factors Affecting Risk Management Disclosures
Hariadi and Rusli

ABSTRACT
This study aims to determine the effect of managerial ownership, independent
commissioner, commissioner size, auditor reputation, leverage and firm size to risk
management disclosure. Sample of this research is Real Estate company that listing in
Indonesia Stock Exchange (IDX) from year 2013-2015. Data were analyzed by using
multiple regression method using SPSS. The data used are primary data using
questionnaires. The results show that managerial ownership, commissioner size,
leverage and firm size have an influence on risk management disclosure. Independent
commissioners, and auditor reputation, have no effect on risk management disclosure.
Adjusted R Square shows the value of 66.3%. This shows that managerial ownership,
independent commissioner, commissioner size, auditor reputation, leverage and firm
size explain the changes in risk management disclosure of 66.3%, the remaining 33.7%
explained by other variables outside this research model.
Keywords: Managerial ownership, independent commissioner, commissioner size,
auditor reputation, leverage, firm size and risk management disclosure.
252
Investigation of the Disposition Effect and Herding Behaviour on Investors`
Portfolio Ferformace
Ahmad Fauzan Fathoni, Henni Noviasari, and Arwinence Pramadewi

Department of Management, Faculty of Economics and Business Riau University
ABSTRACT
Previous studies indicated that there are several finding inconsistency about behavioral
phenomena, included the impact of disposition effect and herding behavior on portfolio
performance. This study aims to investigate the impact of disposition effect and herding
behavior on investors` portfolio performance. For the data collection, a self-constructed
questionnaire was administered to investors in Indonesia Stock Exchanges. Data has
been analyzed through instrument validity and reliability tests, description, and
regression analysis. The result indicated disposition effect positively and significantly
affected investors` portfolio performance; herding behavior indicated that investors are
more confident to do more transactions because they believed with all-received
information that positively and significantly determined their portfolio performance.
Keywords: Disposition Effect; Herding Behaviour; Portfolio Performance
253
The Role of Higher Education in Producing Young Enterprises
Ahmad Mardalis, Fauzan, and Imron Rosyadi

Faculty of Economics, UMS, Jl. A. Yani Tromol Pos 1 Pabelan Kartasura, 57102,
Surakarta, Indonesia
E-mail: Ahmad.Mardalis@ums.ac.id, Fauzan@ums.ac.id and
Imron.Rosyadi@ums.ac.id
ABSTRACT
The purpose of this research was to formulate the strategic role of universities in the
development of micro and small enterprises managed by students. Respondents are
students from three major universities in Surakarta, that is, Sebelas Maret University
(UNS), Muhammadiyah University of Surakarta (UMS), and State Islamic Institute of
Surakarta (IAIN) Surakarta. This study uses primary data obtained through field
observation techniques, focus group discussions (FGD) and in-depth interviews with the
authorities in universities who are considered key figures in the field of student affairs.
To analyze the data used descriptive-analytic approach. The results of this study
indicated the importance of the active role of universities to develop micro and small
businesses owned by students through various approaches. Firstly, entrepreneurship
teaching and soft skill about business management with intensive, systematic and
integrated training based on science and technology. The higher education institution
provides adequate laboratories to hone student’s skills in developing business plan and
explaining future business prospects (prospectus); Secondly, universities work together
with banks and HIPMI for the purpose of business feasibility evaluation, business
assistance, and business consultant for students of business actors; and Thirdly,
providing easy access to obtain capital for student entrepreneurs whose business plan is
considered feasible by the assessment team. The capital given to the student is not grant,
but it is a loan and revolving fund with a mudharabah contract that is a business
cooperation agreement between two parties where the first party (shahibul maal)
provides all (100 percent) of capital, while the other party as a manager. These steps are
believed to form entrepreneurs’ students.
Keywords: Business strategy; micro and small enterprises; entrepreneurships
1. INTRODUCTION
Entrepreneurship is believed to be one of the solutions to overcome highly
educated unemployment. As expressed by Maric et al., (2010) that entrepreneurship is
one solution to solve the problem of unemployment. Empirically, there is a negative
correlation between unemployment and entrepreneurship. It means, the more
entrepreneurs in a country, the lower the country's unemployment rate. Even in other
research on the contribution of entrepreneurship to economic development it has been
found that entrepreneurship is one of the keys to economic development, because as a
source of job creation and growth of per capita growth (Richardson, 2002; Steven and
Russell, 2003; Tambunan, 2006; Maribel et al. 2009; Zoltan and Laszlo, 2010)
Therefore, to mobilize the national economy, specifically the real sector that is
more dynamic and prosperous Indonesian society, its ideal entrepreneur’s need two
percent of the total population of Indonesia or about 5 million entrepreneurs with the
assumption of Indonesia's population of 250 million people. While the reality, the
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number of entrepreneurs in Indonesia just about 0.8 percent of the total population of
about 450 thousand people. This shows that the business sector has not been able to
drive the economy wheel optimally.
The small population of entrepreneurs in Indonesia is caused by several main
factors among the factors of access to capital and skill entrepreneurship is not adequate.
For the capital factor, beginner entrepreneurs (not least business students) are plagued
by very high bank lending rates. Based on the report of Bank Indonesia (2011) that the
Bank Indonesia interest rate of 5.75 percent; lending rates above 100 billion of about 10
percent; lending rates below 100 billion of about 11 percent; lending rates for medium-
sized enterprises about 13 percent; while loan interest rates for micro businesses
amounted to 18 percent. This shows that there is a very wide gap between large
entrepreneurs and micro entrepreneurs and it is also understandable that the Bank enjoys
a very large Net Interest Margin (NIM) of about 13 percent of micro businesses, while
the lending rate is very burdensome for micro and small enterprises in Indonesia.
For the capital factor, beginner entrepreneurs (including entrepreneurial
students) are constrained by the high interest of the bank. Based on the report of Bank
Indonesia (2011) that the interest rate of Bank Indonesia is 5.75 percent; lending rates
above 100 billion of about 10 percent; lending rates below 100 billion of about 11
percent; loan interest rate for medium-sized enterprises is about 13 percent; while loan
interest rates for micro businesses amounted to 18 percent. This shows that there is a
very wide gap between big entrepreneurs and micro entrepreneurs as well as it can be
understood that the Bank enjoys a very large net interest margin (NIM) which is about
13 percent of micro business, while the loan interest rate is very burdensome for micro
and small enterprises in Indonesia.
Table 1: Number of Units, Labor, Production Value, and Investment Value Based on
Business Unit in Indonesia Year 2016
Information Small Medium Big Total
Amount (thousand units) 44.621 68 4 44.693
Labor (thousand people) 71.187 6.491 2,59 80.268
Production Value (Rp trillion) 1.036 444 1.249 2.729
Investment Value (trillion) 82 93 214 389
Source: Ministry of SME (2010)
As it is known that the SME sector became the most social safety net for being
able to absorb a very large workforce. Table 1 shows that the number of small-scale
business units in Indonesia is at most and able to absorb a relatively large workforce of
71,187,000 people, while the difference in investment value is not too large when
compared to medium-scale enterprises. This indicates that small businesses play a very
important role in moving the real sector in Indonesia.
Individual interest in the business world can be observed since the individual is
pioneering or running a business on the sidelines of his lecture activities or since his
status as an active student. In general, the business run by students is still in the form of
stub or micro scale and or small like food stall, depot, accessories smartphone or
computercounter, laundry service, fashion and so on. But it can be assumed that the
business has not been able to grow significantly due to constrained various main
obstacle factors such as the widespread factor of access to capital and entrepreneurial
skills that have not been adequate.
255
It is necessary for the role and / or strategic policy of universities to develop micro
and small business owned by students, so it is expected to grow a reliable young and
entrepreneurial entrepreneur population from universities and in turn can reduce
unemployment rate of high school graduate. This condition triggers the researchers to
formulate the problem: how to model the strategy of micro and small business development
of students based on the strategic policy of universities? The objectives that have been
achieved in the second year is to create a model of policy and or strategy of micro and small
business development of students based on strategic policy of higher education.
Based on the provisions of the Law of the Republic of Indonesia No. 9 Year
1995 concerning Small Business referred to small-scale business is a small-scale
economic activity that meets the criteria of annual net worth and ownership as follows:
a. Have a net worth of at most IDR 200,000,000, excluding land and building of
business premises or;
b. Has annual sales of at most IDR 1,000,000,000.
According to BPS (2000) the company or small industry and household
handicraft business is a processing industry or enterprise that has workers 1 - 19 people
including entrepreneurs, whether companies or businesses are incorporated or not. Table
2 shows the criteria of micro and small enterprises in Indonesia.
Table 2. Criteria for Micro and Small Enterprises

Law No.9 of 1995 on Small
Criteria Small Business Act No.20, 2008 on UMKM
Business Act
Micro Business Unregulated  Net worth ≤ IDR 50.000.000
 Annual sales ≤ IDR 300.000.000
Small Business  Net worth ≤  Net worth>IDR50.000.000 toIDR500.000.000
IDR200.000.000 or
 Annual sales ≤ IDR1 B  Annual sales>IDR300.000.000 to ≤ IDR2,5 B
Business Unregulated  Net worth>IDR500.000.000 to ≤ IDR10 Bor
 Annual sales>IDR2,5 Bto ≤ IDR50 B
Source: Bank Indonesia (2011)
The results of a survey conducted by Hamid and Sri Susilo (2010) mentioned that
there are several problems faced by SMEs in the province of Yogyakarta, among others
are (i) marketing; (ii) capital and funding; (iii) innovation and utilization of information
technology; (iv) the use of raw materials; (v) production equipment; (vi) employment
absorption and empowerment; (vii) business development plan; and (viii) preparedness
for external environmental challenges.
Furthermore, based on the results of the survey, Sri Susilo and Hamid (2010)
provide some policy and strategy recommendations, namely: (i) various training in
product development that is more varied and quality oriented and based on local
resources; (ii) government support for the development of production processes with the
revitalization of more modern machinery and equipment; (iii) development of highly
competitive products with local characteristic cargo; (iv) credit policy by banks with
cheaper interest and simpler process so as to support the acceleration of process
revitalization of production process; (V) improving the quality of physical and non-
physical infrastructure to reduce distribution costs so that UMKM products will have
higher competitiveness; And (vi) promotional development policy support to export and
domestic markets with more modern and varied media.
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3. METHODS
The location chosen as the research area which is the location of the micro and
small business operates are Surakarta City, Sukoharjo District, Klaten Regency and
Boyolali District.
Population needed in this research is university student in Surakarta recidency
area which academically administration recorded as active student counted from force
2010 until class of 2012. The method chosen for sampling in this research is non-
probability sampling with purposive sampling type, the sample that has the criteria of
active students until the academic year 2012/2013 force 2010-2012 as many as 100
students who are running and or pioneering micro and small business.
The type of data used is primary data and secondary data. Secondary data is
obtained from the rectorate (fields I and III) and the Academic Administration Board
(AAB) PTS in the Surakarta residency area associated with the data alumni, academic
and student affairs. While primary data is obtained through interview technique with
questionnaire, focus group discussion (FGD) and indepth interview to reveal about: (i)
the proportion of the number of students who have pioneered and or run the business
and the type and scale of business, (ii) identification of business constraints for students
Business actors (iii) factors that encourage students to pursue business
(entrepreneurship) and (iv) model of micro enterprise development strategy.
The results of a survey conducted by Hamid and Sri Susilo (2010) mentioned that
there are several problems faced by SMEs in the province of Yogyakarta, among others
are (i) marketing; (ii) capital and funding; (iii) innovation and utilization of information
technology; (iv) the use of raw materials; (v) production equipment; (vi) employment
absorption and empowerment; (vii) business development plan; and (viii) preparedness
for external environmental challenges.
Furthermore, based on the results of the survey, Sri Susilo and Hamid (2010)
provide some policy and strategy recommendations, namely: (i) various training in
product development that is more varied and quality oriented and based on local
resources; (ii) government support for the development of production processes with the
revitalization of more modern machinery and equipment; (iii) development of highly
competitive products with local characteristic cargo; (iv) credit policy by banks with
cheaper interest and simpler process so as to support the acceleration of process
revitalization of production process; (v) improving the quality of physical and non-
physical infrastructure to reduce distribution costs so that UMKM products will have
higher competitiveness; and (vi) promotional development policy support to export and
domestic markets with more modern and variedmedia.

4.1 Profile of Respondents
The respondents in this study are those who are academically administrative as
students who have done and or initiated micro business with a business capital below
IDR 5 million and IDR 5 million up to less than IDR 50 million domiciled in selected
residency of Surakarta, Sukoharjo, Klaten and Boyolali districts. Table 3 shows the
respondent data based on the type of micro business that has been done and or initiated
by the active student and the place where the micro enterprise operates.
The type of business is divided into 6 (six) categories, with the following details: (1)
Food and beverage as many as 39 business units; (2) Business services are 17 business
units; (3) Convection and fashion as many as 15 business units; (4) Stores, depots and the
257
like as many as 15 business units; (5) Suplier, Multi Level Marketing (MLM) as many as 8
business units and (6) Livestock and ornamental plants as many as 6 business units.
Table 3. Respondents Data by Business Type and Business Position
No Business Status Business Type Amount (Unit)
Micro Enterprises
1 Surakarta Food and Beverage 12
Business Services 4
Suplier, MLM 2
Livestock and Ornamental Plants 2
Convection and Fashion 2
Stores, Depots and the like 3
2 Sukoharjo Food and Beverage 8
Business Services 4
Suplier, MLM 1
3 Klaten Food and Beverage 10
Business Services 4
Suplier, MLM 3
4 Boyolali Food and Beverage 9
Business Services 5
Suplier, MLM 2
Total 100
Source: Primary data (processed)
4.2 Proportion of Type of Micro and Small Business Owned by Student
The amount of samples taken for the entire region (regency and city) of 100
respondents (micro business actors) with details, the city of Surakarta as many as 25
students; Sukoharjo regency as many as 25 students; Klaten Regency as many as 25
students and Boyolali District as many as 25 students.
Store, Depot
15%
Conv %
Fashion
15%
Food & Bev
Livestocks & 39%
Ornament
Plants
6%
Suplier & Bussiness
MLM Serv
8% 17%
Source: Primary data (processed)

Figure 1. Proportion of Respondents by Type of Business
258
Figure 1 shows the results of observation (survey and interview) which describes
the proportion of the type of micro business that is being run and or initiated by students
in the research area. Based on the picture can be explained that the biggest composition
(first order) type of micro business run by student is effort (product) food and beverage
that is equal to 39 business units or 39 percent.
The results of observation are in accordance with the findings of Hamid and Sri
Susilo (2010) which explains that SMEs in Yogyakarta mostly operate in the field of
business or small industries related to food products (agriculture). This happens because
it is influenced by several things, namely: (i) availability of raw materials, (ii) the
availability of adequate human resources and (iii) the scale of business in accordance
with local market conditions. This type of business includes, pastry products, cakes or
bread, catering, food stalls (Special Village Dish/HIK), mineral water refills, fried duck,
grilled chicken and fried chicken, green banana ice, organic soy milk, cow's milk,
meatball (sausage) grilled, vegetable rice cake, vegetable sellers and others.
The second order, the type of business services business as much as 17 business
units or has a proportion of 17 percent. This business includes private lessons, author,
salon and day spa, daycare, computer rental (typing), computer and laptop service,
smartphone service, household electronic service, photocopy and others. The largest
proportion of the following types of businesses is convection and fashion which is 15
business units (15 percent). This type of business includes door to door convection,
Moslem clothes (robes, veil and mokena), unique handicraft bag, laundry, boutique
accessories. The following is a type of business that has the same proportion (15
percent) with the type of convection and fashion business is a shop consisting of several
businesses namely: grocery store (daily necessities), pulse vouchers, smartphone
accessories, laptop accessories (notebooks) and others.
The fifth and sixth order proportion is the business of suppliers and farms and
ornamental plants, each having 8 percent and 6 percent share. Supplier businesses
include, vegetable traders, fruit suppliers, supplier of MLM products, foodstuff
suppliers and others. While the types of livestock and ornamental plants include, laying
chicken race, chicken, rental or buying and selling ornamental plants and others.
Figure 2 shows the average total sales value of micro business products owned by
students observed from 2010 until 2012. The picture explains that from year to year
there is an increase in the sales value of micro-businesses run by students. In 2010 the
average total sales value amounted to IDR 1.55 billion, then in 2011 increased by
IDR2.65 billion. While in 2012, the total value of micro business sales managed by
students reached IDR3, 85 billion.
3,852,000,000
2,655,000,000
1,552,000,000
2010 2011 2012
1 2 3
Figure 2. Average Total Sales Value of Products 2010–2012
259
4.3 The Problem of Micro and Small Business Owned by Students
The first step before preparing the students micro and small enterprise
development strategies is to identify the various problems and constraints faced by the
students in running their business. Based on observations and in-depth interviews in the
field found several problems, which can be grouped into two aspects: internal and
external aspects. This is also found in the research of Hamid and Sri Susilo (2010).
Table 4 shows some of the internal and external problems facing students in
managing their micro and small businesses.
Table 4. Some Problems of Small and Micro-Owned Small Business

Internal Aspects External Aspects
1. The physical, content and packaging of 1. Market share does not develop, due to lack of
products tend not to change or there has marketing strategy (promotion and advertising).
been no significant product innovation. 2. Vulnerable to artificial products and or threats of
2. Production capacity is very limited, so can’t similar products that are more modern and hygienic
serve large orders in certain seasons. (for the case of food and beverage business).
3. Very small business capital, due to lack of 3. Economic conditions influenced by the rise in fuel
access to banks (collateral constraints), prices or inflation, so raw material prices increased
resulting in difficulties in business sharply.
expansion. 4. Very high bank lending rates are far above the BI
4. Management of business is not based on rate and rigid collateral, so access to capital is low.
science and technology so that business 5. The case of a particular type of business, the place
development tends to stagnate. of vulnerable business is evicted by certain parties.
5. Business management that is historically 6. The contribution of universities is not optimal in
transmitted, thus hindering the development the development of micro business owned by
of the business (the case for a particular type students.
of business). 7. Lack of external party contributions such as,
6. Entrepreneurship skills are still relatively KADIN, HIPMI, and similar associations in
low, so the business does not develop supporting the development of MSMEs (Hamid
optimally. and Sri Susilo, 2010).
7. For certain types of business, raw materials 8. Lack of (even none) the establishment of a
are difficult to obtain, so that entrepreneurs partnership relationship between large and small
have difficulties in meeting the huge market enterprises (micro).
demand 9. Government policy in terms of taxation that
8. Product pricing tends to be expensive, as a burdensome entrepreneurs.
result of high production costs.
Source: Primary Data (processed)

The problems presented in the above table in accordance with the findings of
Hamid and Sri Susilo (2010), can generally be described as follows: the main problem
faced by micro and small business of student is internal problem especially in capital
aspect. Small business capital or working capital has an impact on the difficulties of
business expansion. Business expansion that can’t be done by business entrepreneurs
leads to business deference, product innovation, and low market panetration or low
product quality so that in turn it causes market share does not grow. The low market
share owned by micro and small businesses resulted in low sales rates. This has an
impact on the low level of net profit so that the level of business capital formation tends
to be low. The difficulties of business expansion are also influenced by business
management that is not based on knowledge and technology (Science and Technology).
260
Then the low market share is also affected by the threat of similar products from major
competitors.
4.4 Small and Micro Enterprise Student Development Strategy

The next step is college to analyze strength, weakness, opportunity and threat
(SWOT) toward micro and small business owned by students as the basis for
formulating grand strategy. Table 5 shows the results of SWOT analysis and grand
strategy formulation based on findings of internal problems and internal problems.
Table 5. SWOT Analysis and Grand Strategy Formulation
SWOT Analysis
Strength (S) Weakness (W)
 Have loyal customers  Design, content and packaging products are less
 Small and micro enterprise products are (uncomplicated) attractive, less likely to change or
unique (Hamid and Sri Susilo, 2010) there has been no significant product innovation
 Tend to resist the economic crisis  Low capital access due to less bankable
 A place of business close to the  Products tend to be less known, due to less advertising
customer and promotion
 Not much in need of manpower and jobs  In the case of food and herbal products, it is
tend to be simple considered to be inconsistent with hygienic rules
 Market share is small, profit is relatively small
Opportunity (O) Threat (T)

 Opportunities to open new markets  The threat of trade liberalization dominated by
(business branches) Chinese products (Hamid and Sri Susilo, 2010)
 Easy and wide access to raw materials  Higher bank loan interest
 Growing demand for products is getting  Increased production costs due to higher fuel prices
higher and high inflation.
 The creation and innovation of products
may increase sales
Grand Strategy Formulation
StrategyS-O StrategyW-O
 Business expansion by opening new  Innovation of products more attractive, to boost sales
branches and profits
 Differentiation and development of  Increase capital access through bank loans by creating
quality-oriented products (Hamid and Sri a prospectus and accurate business plan
Susilo, 2010)  Increase advertising and promotion
 Optimize raw material inventory to meet  Hygiene guarantees from health offices or related
increasing market demand agencies (food products)
StrategyS-T Strategy W-T
 Develop a highly competitive product  Following higher education programs related to
with local content. entrepreneurship development
 Find the cheapest source of funding (for  Improve entrepreneurship and business management
example, joint venture) skills
 The efficiency of production costs, by  Optimize working capital without having to add debt
reducing less important or non-business  Partnering with established mid-size businesses
related items
 Technological usage for efficiency and
effectiveness of production
Based on the SWOT analysis can be formulated micro and small business
development strategies owned by students as follows: (1) Expansion of business by
opening new branches; (2) Differentiation and development of quality-oriented products
(Hamid and Sri Susilo, 2010); (3) Optimizing raw material inventory to meet increasing
261
market demand; (4) More interesting product innovations, to boost sales and profits; (5)
Increasing capital access through bank loans by creating a prospectus and accurate
business plan; (6) Increase advertising, promotion and market panetration; (7) Hygienic
predicate from health department or related service (food product); (8) Development of
highly competitive products with local components; (9) Looking for the most cost-
effective source of funding of its cost (e.g. joint venture); (10) Efficiency of production
costs, by reducing items that are less important or unrelated to the business; (11) The
use of technology for efficiency and effectiveness of production; (12) Following higher
education programs related to entrepreneurship development and (13) Improving
entrepreneurship and business management skills; 14) Optimizing working capital
without having to increase debt and (15) Partnering with established medium-sized
businesses.
INPUT PROCESS OUTPUT OUTCOME
Survey,
Problem The
Identification Strategic Bank
and SWOT Role of
Analysis Universities HIPMI
Business
assistance
and business
consultant
Soft-
Monitoring
based
and evaluation
Micro and teaching
small
business
Review and
evaluation
Integrated
management
and entrepre-
neurship
Students of training Revolving
micro and based on
Business fund with Reliable
small science and develop- mudharabah The young
business technology ment contract business
entre-
actors plan is
preneurs
growing
signifi-
cantly
262
Figure 3 shows the strategic steps that must be applied by universities to develop
micro and small businesses owned by students so that it can produce young
entrepreneurs who are reliable college graduates. The first step that a university should
take is to survey several matters related to: (i) how many student have run and or started
a micro business; (ii) what kind of business is managed; and (iii) place of business
where. After the data obtained and managed serve as the basis for coordinate between
students of micro business actors with the college. The results of coordination can be
used as a medium to identify the problems and constraints faced by students in running
micro business. After the problems and obstacles have been identified the next step is to
conduct a SWOT analysis of the micro business. The steps are grouped in the INPUT
phase.
Based on the data already obtained and managed; Problems and SWOT analysis,
then colleges formulate micro and small business development strategies, namely: (i)
entrepreneurship teaching and soft skill based business management and (ii) organizing
intensive, systematic and integrated education and training on business management and
entrepreneurship Based on science and technology. After the students of micro business
follow intensive education and training, the next step is the students are asked to prepare
a business plan that describes the prospect of future business (prospectus). The business
plan is then reviewed and evaluated by a team consisting of parties in synergy with
universities, the Bank and a young entrepreneurs association named the Indonesian
Young Entrepreneurs Association (HIPMI). Banks are involved in the business plan
feasibility assessment because the bank has long experience and competence required in
terms of financing for customers. HIPMI is involved in the business plan feasibility
assessment because HIPMI consists of people who have established small and medium-
sized businesses. The next strategic step is that the universities provide easy access to
capital for students of business actors whose business plan is considered feasible by the
assessment team. The capital granted to the student is not grant, but is a revolving fund
with a mudharabah contract which is a business cooperation agreement between two
parties where the first party (shahibul maal) provides all (100 percent) of capital, while
the other party as a manager. Mudharabah business profits are divided according to the
agreements set forth in the contract, whereas if the loss is borne by the owner of the
capital during the loss is not due to negligence of the manager (Antonio, 2005). The
steps are grouped in the PROCESS phase.
The next strategic step is the university conducting monitoring and evaluation on
the development of micro business owned by students after the use of the capital. At the
same time, the university is in synergy with HIPMI to conduct business counseling and
act as business consultant for students of business actors. The steps are grouped in the
OUTPUT phase.
Based on these strategic steps, it is expected that in the future, it can be
generated by reliable young entrepreneurs who graduated from universities who are
strategic OUTCOME for higher education institutions.
5. CONCLUSIONS
Based on the results of the research presented in the chapter on Results and
Discussion can be summarized as follows: (1) The micro and small enterprises owned
by students face various problems, namely: (i) the physical form, content and packaging
of products tend not to change or there is no innovation meaningful products; (ii)
production capacity is very limited, so it can’t serve big order in certain season; (iii)
263
very small business capital, due to lack of access to banks (collateral constraints),
resulting in difficulties in expanding business; (iv) non IPTEK-based business
management so that business development tends to be stagnant; (v) business
management that is historically transmitted, thus impeding the development of the
business (the case for a particular type of business); (vi) the entrepreneurship skill is still
relatively low, so the business does not develop optimally; (vii) for certain types of
business, difficulties in purchasing raw materials, so as to satisfy large market demands
and (viii) product pricing tends to be expensive, as a result of high production costs; (2)
The identified issues are used as the basis for preparing SWOT analysis to formulate the
grand strategy and model of micro and small enterprise development based on the
strategic role of the university (Figure 4.3.);and (3) The strategic role of high level of
burgeoning in developing micro and small business owned by the students include: (a)
Surveying some matters related to: (i) how many student populations have run and or
initiated micro business; (ii) what kind of business is managed; and (iii) place of
business where; (b) Conduct a SWOT analysis of the micro business; (c) To formulate
micro and small enterprise development strategies, namely: (i) entrepreneurship and soft
skill-based business management and (ii) providing intensive, systematic, and integrated
education and training on business management and entrepreneurship based on science
and technology; (d) The universities are in synergy with the Bank and HIPMI for the
purpose of business feasibility evaluation, business assistance and business consultant
for students of business actors; (e) To provide easy access to capital for students of
business actors whose business plan is considered feasible by the assessment team.
REFERENCES
Baron R. A and Markman G.D. (2000), “Beyond Social Capital: How Social Skill Can
Enhance Entrepreneurs’ Success”. Academy of Management Executive. Vol.
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Baum J.R. and Locke E.A. (2004), “The Relationship of Entrepreneurial Traits, Skill,
and Motivation to Subsequent Venture Growth”, Journal of Applied Psychology.
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Bricklin D. (2001), “Natural-Born Entrepreneur”. Havard Business Review. Vol.
September; hal. 53-59
Calvin R.J. (2002), “Entrepreneurial Management”. McGrawhill. New York.
Florin J., Lubatkin M. and Schulze W. (2003). “A Social Capital Model of High-
Growth Ventures”. Academy of Management Journal. Vol. 46; hal. 374-384
Hamid E.S. dan Sri Susilo Y.(2010), “Strategi Pengembangan Usaha Mikro Kecil dan
Menengah (UMKM) di Propinsi Daerah Istimewa Yogyakarta”. Jurnal Ekonomi
Pembangunan. Vol. 12; hal.45-55
Kuratko D., Ireland R.D., and Hornsby (2001). “Improving Firm Performance Through
Entrepreneurial Actions; Acordia’s Corporate Entrepreneurship Strategy”,
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Lumpkin G.T. and Dess G.G. (1996), “Clarifying the entrepreneurial Orientation
Construct and Linking it to Performance. Academy of Management Review. Vol.
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Rosyadi, I (2010), “Survei Pendahuluan (Pre-Research) Dalam Rangka Persiapan
Penelitian Tentang Kewirausahaan”. Un-Published.
Rosyadi, I (2012), “Karakteristik Wirausaha dan Keinginan Menjadi Wirausahawan
Muda”. Prosiding Konferensi Nasional. Universitas Pelita Harapan
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R.W. Smilor (1997), “Reflections on a Subversive Activity”. Journal of Business
Venturing. Vol. 12; hal. 341-346
Suharyadi, Arissetyanto N., Purwanto SK., dan Maman Faturohman (2008)
“Kewirausahaan: Membangun Usaha Sukses Sejek Usia Muda”. Salemba Empat
Jakarta
Shane S. and Venkataraman S. (2000), “The Promise of The Entrepreneurship as a field
of Research”. Academy of Management Review. Vol. 25; hal. 217-226.
Thomas W. Zimmer dan Norman M. Scarborough (2008), “Kewirausahawan dan
Manajemen Usaha Kecil”. Salempa Empat. Jakarta.
Yohnson (2003), “Peranan Universitas Dalam Memotivasi Sajana Menjadi Young
Enterpreneurs”. Jurnal Manajemen dan Kewirausahaan Vol. 5. No.2.
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265
BUDGETARY PARTICIPATION AND ITS IMPACT ON INDIVIDUAL
PERFORMANCE
Yuliansyah Yuliansyah *, Intan Oktri Agtia, Biana Adha Inapty and Nafsiah Mohamed
Faculty of Economics and Business, University of Lampung, Indonesia, e-mail:
ABSTRACT
The aim of the study is to examine to the influence of budgeting

participation on the employee performance by pride in membership and job
satisfaction as mediating variable. In order to achieve the goal of the study,
we distribute a survey study to 200 employees working in hotel In Lombok
with gaining 108 respondents. According to its data, we analyze 88 usable
data using SmartPLS. We found that budgeting participation has a positive
influence to individual performance direct and indirectly through pride in
membership and job satisfaction. In other word, there is a positive influence
between budgeting participation and employee performance which is fully
mediated by pride in membership and job satisfaction. This study has
contributions to the enrichment of management accounting literature aspect,
especially employee’s involvement in budgeting participation in hotel
industry.
Keywords: Budgeting participation, Pride in membership, job satisfaction,

individual performance, hospitality industry
*
Corresponding author: yuliansyah@feb.unila.ac.id
266
AND THE EFFECT TOWARD CUSTOMER LOYALTY IN BANK RIAU
KEPRI SYARIAH PEKANBARU BRANCH.
Deny Danar Rahayu, Lilis Setyowati and Reza Pahlevi

Faculty of Economics and Business, Universitas Riau, Indonesia
ABSTRACT
This study aims to analyze the level of customer satosfaction on the quality of service
and customer relationship as well as its impact on customer loyalty at Bank Riau Kepri
Syariah Pekanbaru Branch. Respondents in this study that amounted to 1 customer
taken with purposive sampling method with a minimum of 1 years to become customers
of Bank Riau Kepri Syariah Branch Pekanbaru and perform Banking transaction at
least 3 times a year. The type of data used s primary data with data collection methods
using questionnares. Data analysis method used in this research is analysis of
importance Performance Analysis (IPA) and Analysis Path with the help of software
SPSS Version 22.0. The result of IPA analysis shos that customer satisfaction level
onservice quality and customer relationship given by Bank Riau Kepri Syariah
Pekanbaru Branch is good / satisfying and needs to be improved. The result of path
analysis shows that the total influence of Quality Service (X1) variable on Customer
Loyalty (Y2) is 30,8% with direct influence effects of 24,4% and indirect influence
6,4%. Total influence Of Customer Relatioship variable (X2) to Customer Loylty (Y2) is
34,9 % with details of direct influence of 29,7 % and indirect influence 5,2 %. And the
contribution of variable from Quality of Service and Customer Relationship to
Customer Satisfaction is 20,8 % and contribution of Quality of Service variables and
Customer Relationship to Customer Loyalty equal to 38,2 %.Thus it can be stated that
Quality of Service and Customer Relationship Affects Customer Loyalty through
Customer Satisfaction.
Keywords : Quality of Service, Customer Relationship, Customer Satisfaction, and

Customer Loyalty
267
The Conference Organizing Committee
Patron Joint Conference Chair

Dr. Hj. Sri Indarti, SE., M.Si Assoc. Prof. Dr. Jamaliah Said
Assoc. Prof. Dr. Zuraidah Mohd Sanusi
Steering Committee (Accounting Research Institute, UiTM Malaysia)
Dr. Hj. Kamaliah, SE., MM., Ak., CA Assisstant Professor J Kiranmay
H. Edyanus Herman Halim, SE., MS (International Public Enterprize, India)
Drs. Wahyu Hamidi, M.Si Prof. Dr. Farid A. Sobhani
Prof. Dr. H. H.B. Isyandi, SE., MS (Dean of Human Research Development
R. Adri Satriawan, SE., M.Ak., Ak., CA Institute Daffodil International UniversityDhaka,
Drs. Machasin, M.Si Bangladesh)
Dr. Hj. Yusni Maulida, SE., M.Si Lauren Tam Kam Peng
Dr. H. M. Rasuli, SE., M.Si., Ak., CA (Director of Malaysian Institute of Corporate
Prof. Dr. Zulfadil, SE., MBA GovernancePetaling Jaya, Selangor Darul Ehsan,
Malaysia)
Drs. Hardi, SH., MH., MM., Ak., CA., CPA
Chairman (Institute of Indonesia of Chartered Accountant,
Prof. Dr. Ria Nelly Sari, MBA., Ak., CA Riau Region)
Secretariat Committee
Hj. Henni Noviasari, SE., MM
Anggia Paramitha, SE., M.Sc
Vice Chairman Rika Promalessy, SE., M.Si
Ando Fahda Aulia, SE., ME., MBA., Ph.D Ezki Tiyasiningsih, SE., MM
Secretary
Dr. Andewi Rokhmawati, SE., M.Si., M.Ed
Parallel Session
Treasury Dr. Any Widayatsari, SE., MSE
Arumega Zarefar, SE., M.Ak., Ak., CA Dr. Jahrizal, SE., MT
Arika Fitriani, SE., M.Si
Treasury Staff
Meidefri Eka Sastra, SE
Hayat Harianto, SE
Erpan Rajab, SE
268
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i

Table of Contents ................................................................................................ ............ i

Greetings from the Rector of Universitas Riaug .................................................. ......... vii

Greetings from the Dean of Faculty of Economics and Business, Universitas

Greetings from the Conference Chair ................................................................... .......... ix

Greetings from Accounting Research Institute (ARI) Universiti Teknologi

Greetings from Institute of Public Enterprise (IPE) India .................................... .......... xi

Greetings from Institute of Indonesian Chartered Accountant (IAI) Riau

Greetings from University of Daffodil Human Research Development Institute

Keynote Speakers ................................................................................................. ..........xv

Message From Scientific Committee ................................................................... ........ xvi

Internal Governance, Accountability and Sustainable Performance of Social

Implementation of Corporate Social Responsibility (CSR) To Support Good

The Influence of Good Corporate Governance, Corporate Social Responsibility

Investment Awareness among Young Generation by Azlan Ali, Zainal Azhar b

The Antecedent Satisfaction with Price as a Moderating Variable in Consumer

Information System and Service Quality: An Empirical Study of Their Impact

Public Service Delivery on Basic Education in Banjarmasin by Maulana Rizky,

Duties of Directors: International Comparison Vs India by Kiranmai J, R K.

Public Finance and Corporate Governance by Kiranmai J, R K. Mishra .................. ......... 40

Whistleblowers’ Role in Mitigating Fraud of Malaysian Higher Education

Ethical Ideologies, Personality Traits and Whistle blowing Intention:

Effect of Audit Technology on Fraud-Risk Task Performance of Government

Evaluation on the Effectiveness of Whistle blowing System by Atika Zarefar,

Professional Skepticism and Tax Officers’ Fraud Risk Judgment: The

Implementation Evaluation: A Future Direction in Money Laundering

Related Party Transactions and Subsidiaries in Tax Heaven Toward the

Analysis on Competencies and Situational Support on Performance

Examining the Roles of Religiosity, Ethical Behaviour and Leadership To

The Machiavellian Character, Ethical Environment and Personal Cost in Their

Influence of Retaliation, Negative Guilty Emotion, Negative Shamefulness

Ar- Rahnu Usage in Economic Development of Ummah in Selangor by Azlan

The Influence of Good Corporate Governance on Company Value in Jakarta

Study Analysis of Factors Affecting Financial Performance of Islamic

Independence of Supervision to The State-Owned Banks towards Good

The Analysis on the Influence of Service Quality and the Effectiveness of

Ownership Structure and Firm Performance: Tax Avoidance as a Moderating

Preliminary Evidence: The Decoupling Effect of Manufacturing Industries’

Comparative Study on Finance-Growth Nexus in Malaysia and Indonesia: Role

The Effect of Human Resources, Commitment, Communication and

Community Economic Development Planning Model Dumai by Machasin,

The Effect Of Audit Committee Through Value Company Mediated By

The Effectiveness of Audit Committee Attributes towards Earnings Quality of

The Relevance of Earnings Management, Free Cash Flow and Industry on

Earnings Management Effect with The Appearance of Audit Industry

Effectiveness of Local Financial Management by Hardi, Vince Ratnawati, and

Determinants from Timeliness of Financial Statements on Listing Companies

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