Overconfidence and Excessive Trading Behavior: An Experimental Study

The main objective of the research is to examine the excessive trading hypothesis, investors who have higher overconfidence shown by high miscalibration levels will tend to practice aggresive and excessive trading strategy. It is an experimental research which combines both between and within subject design. The participants are undergraduate students who have already taken financial management course but have not yet invest in real capital market. The result of the research shows that high overconfidence investors have higher trading activity than low overconfidence investor. The other result shows that among high overconfidence investors, there is no trading activity differences between pre and post bad news, whereas among low overconfidence investors, the existence of bad news cause trading activity to decrease in the post bad news period. Then, the investment returns of high overconfidence investors is significantly lower than that of the low overconfidence investors

DOES MISPRICING AFFECT INVESTMENT AND CAPITAL STRUCTURE OF INDONESIAN FIRMS?

Stock price movement is not entirely a reflection of its fundamental value because of there are non-fundamental factors such as market sentiment (Keynes, 1936), behavioral biases of investors (Lakonishok et al., 1994), systematic errors when assessing stock (Stein, 1996), asymmetric information (Tobin, 1969) causing the value of stock deviate from its fundamental value (misprice). This condition can affect corporate investment decisions because managers can take advantage of overvalued stock condition as a source of investment funding because the cost of capital becomes cheaper. Conversely, firms avoid selling stocks at undervalued due to high cost of capital. Therefore, the objectives of this research is to examine the effect of mispricing to firms investment behavior and to firms capital structure. We also test the role of the level of financial constraint in the relationship between mispricing and investment. Using panel data regression with data observation for five years, we find that mispricing have positif impact to firms investment level. However, this effect is not diverse whether on a group of firms which have a high level of financial constraint (financially constraint) or those which have a low level of financial constraint (less constraint). Moreover, this research also find that the mispricing can also influence firms in choosing sources of funding which can be seen on their debt to equity ratio (D/E). To check the accuracy of examination, we employ some robustness test and use several control variables. These results are consistent with and can be explained using market timing and catering hypotesis

Fintech Studies in Indonesia: A Systematic Literature Review

The advancement of information technology has brought digital transformation on many aspects of human life, including in financial activities. This leads to the emergence of financial technology (fintech) has proved to be one of the most significant phenomena for the last decade. Thus, scientific studies in this field are important for the literature development to provide evidence in the field as well as contribute to the development of fintech innovations, regulations, and practices. The study explores the available research publications in fintech topic in Indonesian literature using systematic literature review method. Based on our analysis, we conclude that the studies in the area of fintech have covered most of the available topics for all of the existing fintech products and potential issues. However, several topics still requires further research as they are considerably less explored. Further, the quality of studies also needs to be improved as there are a lot of studies with quality issues. Finally, the fintech studies in Indonesia can enrich the Indonesian fintech literature with good quality paper publications in reputable publishers.Keywords: financial technology, fintech, Indonesia, systematic literature review

FACEBOOK CONTENTS AND JOB RECRUITMENT: AN EXPERIMENTAL STUDY

Abstract. This paper presents an experimental study exploring the effect of Facebook applicants' content on the recruitment decisions made by job recruiters. Facebook content is divided into professional and non-professional contents. We employ 40 participants in this experimental design. Our results show that the applicants’ Facebook contents significantly affect the recruitment decisions which is indicated by the difference of choice from the first phase to third phase. Qualified applicants are associated with more professional contents on their Facebook accounts

Does Loan Restructuring Play a Role in Increasing Credit Risk of Rural Banks during Covid-19 Pandemic?

Comparing the impact of COVID-19 loan restructuring on credit risk at sharia and conventional rural banks, sharia banks operate under Islamic principles that prohibit charging interest, whereas conventional banks charge interest on loans. This study aims to examine the impact of loan restructuring on credit risk at a sharia and conventional rural bank in Surakarta during the COVID-19 pandemic. The study may investigate whether the differences in the banking systems affect the credit risk associated with loan restructuring. The study could have significant implications for rural banks and borrowers, particularly in countries with a large rural populations. Understanding the impact of loan restructuring on credit risk could help rural banks develop more effective strategies to manage risk and support borrowers during times of economic hardship. The research data uses panel data from quarter 1 to quarter 4 in 2020–2022. The test uses multiple linear regression analysis with random effect model selection. The study results show that restructuring negatively impacts the risk of problem financing in both sharia and conventional rural banks. Providing loan restructuring by financial authorities is appropriate to address the risk of default in rural banks. In summary, the study likely examines the impact of COVID-19 loan restructuring on credit risk at Sharia and conventional rural banks, focusing on understanding the differences between the two banking systems. Keywords: COVID-19, loan restructuring, financing risk, Sharia Rural Bank, Conventional Rural Bank

THE EFFICIENCY OF PUBLIC SERVICE OBLIGATION FOR FOOD SUBSIDY IN INDONESIA: REVIEW OF COST STRUCTURE ANALYSIS

Abstract: The paper reviews the efficiency of food subsidy in Indonesia based on cost structure analysis. Using the comparison between cost of good of government and cost of good of National Logistics Board appointed to manage and channel the subsidy. The level of efficiency has decreased in the recent years because of increase in costs of exploitation, management cost and interest expense. It is suggested that government has to determine the cut-off point as a feasibility assessment of cost of subsidy

Political Connections, Bank Deposits, and Formal Deposit Insurance: Evidence from an Emerging Economy

This paper investigates the impact of banks' political connections on their ability to collect deposits under two different deposit insurance regimes (blanket guarantee and limited guarantee). We estimate a simultaneous equations model of supply and demand for funds using quarterly data for Indonesian banks from 2002 to 2008. We find that, regardless of their type (state-owned or private entities), politically connected banks are able to attract deposits more easily than their non-connected counterparts. We also show that this effect is more pronounced after the implementation of formal deposit insurance with limited coverage. Our findings have various policy implications. Formal deposit insurance might have improved market discipline, as highlighted by earlier studies, but it has also exacerbated the issue of political connections in the banking sector

Human Development, Banking Development and the Quality of Local Government: The Case of Indonesia

We extend the study of Trinugroho et al. (2015) by focusing on the effect of human development on banking development and the moderating effect of the quality of local government on the link between human development and banking development. We use unique data set by disentangling the type of banks (commercial bank, rural bank, and the total of both) to measure financial development. This research uses panel data at the provincial level for the period of 2010-2014. Generally, it could be concluded that human development has positive effect on banking development. To some extent, the quality of local government is found to strengthen the impact of human development on banking development

Foreign Banks’ Presence and Domestic Bank Performance: Evidence from Indonesia

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</p

Human Development, Banking Development and the Quality of Local Government: The Case of Indonesia

We extend the study of Trinugroho et al. (2015) by focusing on the effect of human development on banking development and the moderating effect of the quality of local government on the link between human development and banking development. We use unique data set by disentangling the type of banks (commercial bank, rural bank, and the total of both) to measure financial development. This research uses panel data at the provincial level for the period of 2010-2014. Generally, it could be concluded that human development has positive effect on banking development. To some extent, the quality of local government is found to strengthen the impact of human development on banking development.