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This study investigates the impact of the enactment of bail-in regimes in 2016 in Indonesia on bank owners' propping behavior. Based on Indonesian banking data for the period 2011–2020, we use the difference-in-differences method to examine whether related party transactions substantially increase or decrease after the introduction of bail-in as an indicator of propping. We find that while the requirement for sufficient capital allocated to shock absorbance increases, bank owners may provide capital via related deposits. These deposits are typically beneficial to bank stability, increase liquidity, and can act as a propping channel. However, the deposits are also more exposed to risks, and consequently decrease.

Environmental degradation occurs during the initial phase of development. However, after a turning point, the benefits of economic growth supported by the accelerated development of information and communication technology (ICT) can be used for environmental conservation. This research examines the relationship between financial inclusion, ICT, and environmental quality, including the development of ICT in influencing the relationship between financial inclusion and environmental quality. To obtain the research objectives, we used secondary data for the period 2010 to 2021 from 34 provinces in Indonesia using the panel data regression method. This finding is robust for different measures of the financial inclusion index constructed by a modified estimation model. The insights to financial inclusion and emission can be a reference for regulations that financial inclusion and ICT can be used as mitigation measures for environmental quality. Therefore, policymakers should consider the synergistic effect of financial inclusion and ICT in designing development and climate change policies.

Digital-based financial innovation has grown rapidly in recent times along with internet and smartphone penetration. The emergence of fintech and the existence of digital-based innovations carried out by incumbents in the financial services sector, in this case banking, are expected to increase financial inclusion. Furthermore, financial inclusion will encourage the growth of the real sector through increasing new entrepreneurs and also increasing the scale of existing micro and small businesses so that it will ultimately drive economic output growth. However, to achieve this goal, joint efforts are needed to increase the digital financial literacy of the community, especially the younger generation so that digital financial presence can be used for productive activities. This article discusses community service programs within the framework of developing digital financial literacy to encourage the growth of new entrepreneurs and increase the scale of existing micro and small businesses, especially by utilizing technology..

The purpose of this study was to determine the relationship between financial distress, value of firm and investment decision in the world's largest mining companies. Investment decision in a company is very important in developing the company, it can be by doing business expansion or other things. This research uses quantitative methods. The independent variables in this study are financial distress, firm value and trilemma index. the financial distress coefficient is negative -0.04 significant with a p-value of 0.021 for investment decisions. Financial distress has a negative influence on investment decisions in large mining companies around the world in 2010-2019, which means that in the world's large mining companies, companies that have a financial downturn in their companies tend to make investment decisions with the aim of restoring the company's financial condition. The point is, financial distress here can also occur not because after the company makes an investment decision, the company will experience a financial downturn, this can happen one of them because by making an investment decision it can make the company's finances seem to be reduced but financial conditions can be reduced. by the company in making investments.

PurposeThis paper examines the effect of lockdown on a firm's financial performance. The authors aim to fill in the debate over the corporate world's repercussions from governments' COVID-19 response. Therefore, it is imperative to understand what effect the lockdown policy has on firm financial performance.Design/methodology/approachThe study data are cross-sectional, covering a sample of 246 listed firms in Indonesia. The lockdown policy and period data were retrieved from the Indonesian Ministry of Health COVID-19 special task force website. The authors’ empirical model for performance specification is based on annual data, following a common performance function in economics and finance literature. In addition to controlling for the standard error and province effect, the authors also controlled the COVID-19 cases and the province effect.FindingsThe lockdown deteriorates the firm's profitability, but it is not up to making the firms at financial distress level. Simply put, lockdown erodes the profitability significantly, leading to declining performance; however, it does not mean the firms generate default.Research limitations/implicationsSeveral shortcomings in the authors’ empirical setup need to be tackled for future research. For example, the study findings may limit the short-run effect but not the long-run effect (5–10 years after the pandemic). The findings also do not give room to justify that lockdown should not be imposed due to its deteriorating effect on the corporate world. Therefore, the authors leave this as a scope for future research.Originality/valueThis research is among the pioneer papers evaluating the effect of the government policy for mitigating the repercussions of COVID-19, and it reveals how this policy affects corporations.

This research's main objective is to select profitable investment strategies with the presence of sentiment investors in emerging markets, with behavior bias-based portfolio methods. The sample of 114 companies traded daily on IDX was conducted over three years with weekly data. This study uses pairwise comparison and OLS. The research results show that contrarian strategies are more profitable than momentum. Investors benefit when mild conditions are optimistic and more significant when the conditions are pessimistic. This research proves that investor sentiment in the market can distort investor investment decisions, even using the behavior-bias method. Therefore, forming a portfolio will be more appropriate based on biased behavior because it facilitates investment decision-making.How to Cite:Koesoemasari, D.S.P., Haryono, T., Trinugroho, I., Setiawan, D. (2022). Investment Strategy Based on Bias and Investor Sentiment in Ememerging Market. Etikonomi, 21(1), 1-10. https://doi.org/10.15408/etk.v21i1.22290.

This paper investigates the relationship between fund reallocation on economic growth and poverty by using 1860 rural banks. Our quarterly data allow us to merge bank-level data and province level-data from 2010-2016. We find that loan-to-deposit ratio as our proxy of intermediation function could boost economic development. Our non-linear regression shows that too much finance reduces regional GDP growth but, in the long term, could help to reduce poverty. Our results provide some important policy implications that rural banks could contribute to economic development in a good way but should be highly supervised in terms of risk and competition.

This paper examined the impact of related deposit transactions on banks' risk-taking and financial stability by considering the ratio of related deposits over total deposits to capture banks' dependency on deposits from their related parties. Our sample consisted of 90 Indonesian banks and covered the period 2009–2019. Our finding showed that related bank deposits significantly increased the z-score. Our deeper investigation showed that the effect of related deposits when we split the sample based on size. We find that related deposits increase the z-score only for small banks. Our results provide insights and noteworthy policy implications for regulators to take into account related party transactions in deposits to have greater control over the behavior of bank's risk-taking and to maintain the soundness of the banks, and mitigate financial instability.

PurposeThis study aims to cover an important yet largely under-explored topic: the dynamic process of bank liquidity management in a vast developing economy by considering pool of funds hypothesis, signaling hypothesis and risk management hypothesis.Design/methodology/approachThe authors apply the dynamic common correlated effect (DCCE) method with an error correction model format to a long panel datasets of 84 Indonesian banks from January 2003 to August 2019, resulting in 16,800 observations.FindingsThe authors obtain convincing evidence of dynamic liquidity management with an error correction mechanism. The time needed to adjust to a liquidity shock ranges from 2.5 to 3.5 months. The empirical results strongly support the pool of funds and signaling hypotheses, whereas risk management motive appears to have secondary importance.Practical implicationsThe regulator should also encourage banks to diversify liquidity management to include interbank money market and off-balance-sheet instruments. The current condition shows that bank liquidity management is strongly correlated with intermediation dynamics and thus is contracyclical. Banks could end up with tight liquidity in a booming economy, which would pose a severe risk to their financial standing.Originality/valueTo authors’ knowledge, this study is the first to analyze bank liquidity management behavior empirically using a panel error correction mechanism. Here, the authors also try to combine a practitioner perspective with a scientific one.

This research examines how the board of commissioners' structure and ownership retention affect IPO underpricing in Indonesia. In this study, we have examined the following three aspects: the number of board of commissioners, percentage of independent commissioners, and percentage of female commissioners. In total, 186 Indonesian companies that have conducted IPO from 2001 to 2016 were included in this study. This study uses multiple regressions to test the hypothesis. Our findings show that ownership retention has a negative implication on underpricing. Furthermore, the number of board of commissioners and independent commissioners has also been determined to reduce the level of underpricing. However, female commissioners were found to have no significant effect on IPO underpricing; furthermore, it demonstrated no significant effect in reducing the level of underpricing. These results show that higher ownership retention, a smaller number of board members, and a higher percentage of independent commissioners can reduce IPO underpricing.JEL Classification: G30, G32How to Cite:Setiawan, D., Prabowo, M. A., Trinugroho, I., & Noordin, B. A. A. (2021). Board of Commissioners’ Structure, Ownership Retention, and IPO Underpricing: Evidence from Indonesia. Etikonomi, 20(1), 185 – 200. https://doi.org/10.15408/etk.v20i1.19156.

We assess the effect of loan growth and capitalization on credit risk in Islamic banking. Using a sample of Islamic banks from 29 countries, our empirical results reveal that higher loan growth exacerbates credit risk one year ahead, particularly for Islamic banks with higher capitalization. However, a deeper investigation highlights that such evidence is more pronounced after the 2008 global financial crisis (GFC). Hence, strengthening prudential tools and supervision for Islamic banks with higher capitalization is necessary to mitiate moral hazard and ensure prudent lending behavior in the aftermath of the GFC. Likewise, strengthening capital requirements is not enough to ensure prudent lending behavior in Islamic banking.

Changes in the oil price directly affect production costs, and subsequently, the general price level of products. With Indonesia observing an inflation targeting policy, this study applies the nonlinear autoregressive distributed lag (NARDL) technique to investigate the effect of oil price fluctuations in Indonesia. The relationship is important for the central bank to gauge the effectiveness of the inflation targeting policy in immunizing the country from oil price fluctuations. Our findings have revealed that there was an asymmetric behavior between oil price and the inflation rate (producer price index), thus questioning the effectiveness of the inflation targeting policy. More specifically, in the long run, an increase in the oil price will tend to lead to an increase in the rate of inflation with a greater deviation, while an oil price reduction will lead to a decrease in the inflation rate with a lower deviation. This suggests that the benefits of an oil price reduction are not passed down to the consumer.

PurposeUsing the Indonesian setting where the government formally limits the presence of busy commissioners, the authors investigate whether a board containing busy commissioners could be beneficial or detrimental for firm performance.Design/methodology/approachThe authors propose an econometric model focusing on the impact of busy commissioners on the firm's profitability. The authors are also interested in investigating whether the effect is different between small and large firms and between mature and non-mature firms. A sample of 392 Indonesian listed firms from 2014 to 2020 is used in this study.FindingsThe authors find a negative association between busyness and performance and this result is robust across different estimations and econometrics strategies. The authors also document that the negative impact of busy directors diminishes particularly in young and small firms. The authors also find that the impact is more pronounced in state-owned firms.Practical implicationsFrom a firm point of view, the result suggests that the companies should be aware that appointing busy commissioners in the board structure can detriment market-based performance. The listed firms should also understand that busy commissioners are inefficient, especially if these firms are large, mature and state-owned.Originality/valueTo the best of the authors’ knowledge, this is the first study investigating the relation between busy commissioners and performance by considering age, firm size and state-owned firms as a moderator in a sample of Indonesian listed firms.

Using a large-scale dataset from three leading online peer-to-peer (P2P) lending platforms in Indonesia from 2014 to 2018, we investigate the determinants of platform interest rate and borrowers’ d...

We use a monthly dataset to analyze whether Islamic banks have greater market power compared with their conventional counterparts. Using a sample of Indonesian banks, we find that Islamic banks possess greater market power than conventional banks. This condition does not hold, however, when we compare state-owned Islamic and conventional banks. We also find some specific determinants of Islamic banks’ market power: the Ramadan holy month (positive impact), the proportion of profit-and-loss sharing in their financing (negative impact), and the presence of a Sharia board (positive impact). Interestingly, Ramadan benefits not only Islamic banks but also conventional banks. Our findings support prior literature emphasizing the role of religiosity in Islamic banks’ behavior.

This study investigates the effect of the growth of financial technology payment on bank fee-based income by studying conventional banks in Indonesia from 2012 to 2019. We employ Random Effect (RE) to estimate our empirical model. Fintech payment is measured by using the log of volume transactions made by fintech payment firms. Our result shows a negative and significant relationship between fintech payment and bank fee-based income. This result indicating that, in general, fintech payment disrupts banks’ fee based-income. In particular, we find that fintech is a complement for small commercial banks.How to Cite:Kando, S., & Trinugroho, I. (2022). The Impact of Fintech Payment on Bank Fee-Based Income. Signifikan: Jurnal Ilmu Ekonomi, 11(2), 425-436. https://doi.org/10.15408/sjie.v11i2.26809.JEL Classification: G18, G21, G28

Financial technology has been growing significantly over the last few years all around the world. In this chapter, we study the impact of financial technology on the risk and performance of commercial banks as the incumbent in the industry. The authors combine a cross-country dataset resulting in 336 country-year observations. The authors find that financial technology, more particular the growing of adoption in mobile money, has been considered to increase the risk of banks. However, the authors do not find any evidence that the performance of commercial banks has significantly eroded by the presence of financial technology.

This activity will be carried at Mlese Cawas Klaten, Central Java. This area has potential that has been passed down from generation to generation to produce traditional striated fabrics and processed products. The people living around the area are mostly weavers and weaving workers. The village has the potential to develop lurik weaving skills. The main problems that exist for the craftsmen include management problems, especially marketing problems, production processes that are not optimal and have not carried out efficiency. This service activity will be carried out using several approaches, including conducting training in management and skills, training on web-based marketing methods for craftsmen and applying skir technology for efficiency of the production process.

This article investigates the effects of market competition and Islamic banks’ fundamental conditions on Islamic banks’ equity (profit and loss sharing [PLS]) financing. We use a monthly data set o...

A substantial proportion of Indonesian households in Indonesia depend on micro and small enterprises for their income. Mobile phone and internet penetration is expected to substantially drive micro and small enterprises to use technological-based innovation which eventually will improve the productivity and efficiency of those firms. In this paper, using a survey of 2,222 micro and small enterprises in Indonesia, we estimate an empirical model on the determinants of the use of technological-based innovation including digital finance technologies and online sales for micro and small enterprises. By doing so, we are able to improve understanding of the barriers to micro and small business use of digital technologies in Indonesia. Our results reveal that some business factors as well as firm and owner characteristics play significant role in explaining the barriers of adopting digital innovation. We also find that firms with higher income and selling during Covid-19 pandemic mostly adopt digital technologies in their business activity.

This paper examines the determinants of bank margins in Indonesian Islamic rural banks. We find that bank margins are affected mainly by competition and diversification. In this less competitive market, Islamic rural banks are able to set high margins. Islamic rural banks are also tend set high margins when they do not diversify their revenue, referring to the cross-subsidization strategy. We also find that the impact of competition and diversification on bank margins are more pronounced in the banks with lower banks’ loan contract diversification and also banks with a higher proportion of profit-and-loss sharing (PLS) lending. However, those impacts diminish when Islamic banks are located in provinces with above-average numbers of Muslims and located outside Java. Our empirical results therefore also suggest that regional differences matter for bank margins. Keywords: Bank margins, Competition, Diversification, Islamic rural banks, Indonesia, JEL classifications: G21, D40, L25, O18

We examine the impact of foreign presence on domestic banks’ performance by studying conventional commercial banks in Indonesia. We use monthly financial information of 97 commercial banks from 2003 through 2013 resulting in 8,600 observations. We use a panel data regression (Panel Least Square method) to test our hypotheses. Our results show that overall, foreign presence decreases the performance of domestic banks. Going deeper, we find that foreign presence reduces state-owned banks’ profitability as well as private domestic banks’ profitability. However, there is no significant effect of foreign presence on the performance of regional development banks. Little evidence found on the effect of foreign presence on overhead cost.DOI:10.15408/etk.v17i2.7769

We investigate the disclosure practices of screening and compliance information of Islamic equity funds around the world. Disclosures on Sharia advisors and screening information are quite high, but they are lower for compliance information such as Sharia advisory report (SAR) and holdings data. The results show that younger funds with better Sharia advisory board (SAB) governance which are domiciled in countries belonging to an Islamic international standard-setter body have the highest disclosure levels. However, funds domiciled in countries with a central SAB and following common law disclose less Sharia-related information. These findings are important for the effectiveness of disclosure framework.