Is BI Rate Effective?: An Investigation of Taylor Rule Application in Indonesia

Abstract.This research examines the effect BI rate towards the economic condition of Indonesia, measured by various variables using the Taylor Rule methods. This study has a purpose to measure the effect of BI rate to the Indonesian economics to see the effectiveness of BI rate towards Indonesian Economics. Considering the fluctuating Indonesian economics, the research seems necessary. The methodology used on the paper will be VAR (Vector Auto Regression). The type of  VAR used will be determined in the paper based on the type of the data through various tests. This paper concludes with a discussion of recommendation, and the limitations of the research. Some researcher and economic watchers have considered that BI rate ineffective because of various reasons. The results was BI rate is not significantly affect other variables in Taylor Rule and some variables like Inflation are the one significantly affect other variables.Keywords: BI rate, economics, inflation rate, Gross Domestic Product, Taylor Rul

DETERMINANTS OF DIVIDEND PAYOUT POLICY: EVIDENCE FROM LQ 45 COMPANIES

Dividend payout policy determines the decision of the dividend distribution to the shareholders is an important issue for both the investor and the firm. Income investors tend to buy shares of companies who regularly distribute dividend. On 2018, LQ 45 index as one of the most attractive indexes in Indonesia recorded that 75.5% of LQ 45 companies distributed dividend. Therefore, in order to provide useful investment consideration for income investor, this research will identify the determinants of dividend payout policy in LQ 45 companies. This research employed Dividend Payout Policy measured by Dividend per Share as the dependent variable. The independent variables consist of Leverage measured by Debt to Asset Ratio, Liquidity measured by Current Ratio, Profitability measured by Return on Equity, and Firm Size measured by Total Asset. The sample of this research is taken using purposive sampling. It consists of 19 companies listed in LQ 45 index February - July 2019 period with time horizon from 2009 to 2018. Panel data regression is applied to analyze the data. Estimation model test is held which resulted in Fixed-Effect Model. Cassical assumption test is held before running the regression. The data analysis is done by using Stata 14.2. T-test and F-test with confidence interval of 95% are conducted to test the hypothesis. T-test result shows the significant positive relationship between profitability and firm size towards dividend payout policy. This implies that LQ-45 firms with higher profitability and larger firm size tend to distribute more dividend. F-test result implies that all independent variables simultaneously affect dividend payout policy. The adjusted R2 value of the model is 0.8569 which indicates that 85.69% of the variability in the dependent variable can be explained by the independent variables while the remaining 14.31% is explained by other variables which are not included in this research. Keywords: 1 Dividend Payout Policy · 2 Leverage · 3 Liquidity · 4 Profitability · 5 Firm Siz

HOW A DOMESTIC MARKET OBLIGATION POLICY AFFECTING THE COMPANY FINANCIAL PERFORMANCE: CASE STUDY OF COAL MINING INDUSTRY IN INDONESIA

Indonesia has a great potential in natural resources in term of coal resources. The average ratio of the nation’s coal production being exported from 2000 to 2014 is 75.4%. With a high ratio of national coal production being exported rather than for domestic market, Indonesia is currently leading the global coal exporters with a total contribution to global coal exports of 28.59%. In March 2018 the government are issuing the DMO price policy written in Government Regulation No. 8/2018 and Ministry of Energy and Mineral Resources Regulation No. 19/2018 related to guidance of the determination of the coal price for electricity that is supplied in the public interest protect domestic market needs. This research aims to obtain empirical evidence about the differential in the financial performance of Indonesian Public Listed Coal Companies before and after the Domestic Market Obligation price policy issuance represented with Return on Assets ratio. This research will be using 17 Indonesian Public Listed Coal Companies and using difference-in-difference method with Return on Asset ratio using 2 period of event window which was 2 quarter before and after the regulation was issued. To validate the result from difference-in-difference analysis, this research will be analyzed with Wilcoxon Signed Rank Test. The analysis indicates that the short term effect of the Domestic Market Obligation price policy issued by the government did not give a significant impact towards the financial performance of Indonesian Public Listed Coal Companies represented with Return on Assets ratio.Keywords: Financial Performance; Coal Industry; Profitability Ratio; Difference-in-Difference

Seed Capital Financing Valuation of Data Analyst Startup: SMART Case

Abstract. A Start-up in seed stage only has prototype and lack of financial record because it has not generate any revenue yet. S-MART as a start-up founded in 2018 that tries to help warung managing the stocks, shorten the distribution channels and organizing the financial record and stocks ordered through digital platform for warung, so that they will have a competitive advantage. However they are still in the seed stage and need to find a suitable source of financing to support their business. This study aims to help S-MART estimate the enterprise value in order to be a bargaining power in the attempt to look for capital and the suitable source of financing for them. This study uses two valuation methods which are Berkus and Scorecard methods. The data collected was from the interview with the CEO of S-MART, SMART’s investors intended, and find the similar start-up financing deals as comparable data. The results show Berkus method generates USD1,526,500 and Scorecard method shows USD 1,333,240. For a seed stage start-up like S-MART, Berkus and Scorecard are more preferable due to the absence of financial records that makes it difficult to determine the right input factors such as growth rates, cost of capital, and other fundamental financial assumptions for estimating future financial projections.Keyword: Start-up Valuation; Seed Stage; Berkus Method; Scorecard Method

Account Receivable Management in PT Wijaya Karya (Persero) Tbk.

Abstract. PT Wijaya Karya (Persero) Tbk. is a state-owned company in the construction sector. WIKA business pillars consist of industry, infrastructure and building, energy and industrial plant, realty and property and investment. WIKA current condition is showing the decreasing in stock price and Return on Equity (ROE), while its Account Receivable (AR) and Average Collection Period (ACP) is continue to increase. This indicates that the Company does not manage its working capital optimally. The objective of this researches is to give the best alternative solution to reduce Company average collection period by doing working capital management especially account receivable management. Account receivable management that used in this research are cash discount period, change on credit period, customers selection, combination between cash discount period and change on credit period, and combination of all those 3 (three) method. The results of this study is by using several technique of account receivable management, WIKA can reduce its average collection period, thus, it will reduce the investment on working capital, so, the Company could invest their money on the more productive assets and also distribute the additional profit gained as dividends to shareholder, so WIKA can turn back its share price. The Company can reduce its Account Receivable and get the biggest additional profit outright by apply cash discount period 2.96/60 net 229,4.Keywords: Working Capital; Construction; Account Receivable Management; Average Collection Period; Cash Discount.

Determinants of Capital Structure Analysis: Empirical Study of Telecommunication Industry in Indonesia 2008-2015

Abstract.The capital structure is an essential element in the firm’s long-term financial strategic decision. Generally, the firm’s management tends to create leverage with the optimal capital structure as the target. The optimal capital structure reflects proportional number of debt and equity to maximize the return on investment and firm’s value alongside minimizes the cost of capital that directly protects the firm from any potential risks such as bankruptcy and financial distress.Many studies have been discovered the contemporary capital structure theory which helps the firms to understand financing behavior with the capital structure determinants. But, these theories also proposed different hypotheses/assumptions regarding the capital structure. The result of those studies does not lead to a concurrence for the specific factors that affect the capital structure so that the theories cannot perfectly explain the ideal financing decisions. Therefore, this research focuses on investigating the capital structure regarding the MoF (Minister of Finance) regulation No. 169/PMK.010/2015, the government limits the Debt to Equity Ratio (“DERâ€) maximum of 4:1 which effective for Fiscal Year 2016. One of the industries that will be restructured their capital is telecommunication. They had an important role as one of the key industries in Indonesia. This final project reviews the capital structure theories to formulate testable hypotheses regarding the determinants of capital structure. The panel data econometric techniques are used to investigate the most significant factors that affect the capital structure of telecommunication industry in Indonesia which represented by five listed telecom firms with the largest market capitalization in Indonesia Stock Exchange (IDX) during 2008-2015. The final project processes the data from secondary sources to be tested in a statistical software STATA.11. The result shows 68.5% variation of the dependent variables (leverage/TDR) of capital structure as a whole can be explained by the variables in the model such as profitability, size, tangibility, liquidity, risk, the effective tax rate, ownership, interest rate and GDP, while the remaining 31.5% is influenced by other variables outside the system. The final project suggests the most significant factors that affect the capital structure such as size, tangibility, liquidity, risk, interest rate, GDP and ownership which consistent with some capital structure theories. It is suggested for managers in the telecommunication industry in Indonesia to consider those factors when restructuring their capitals or others financial decision. However, the optimal capital structure variable evidently does not affect the firm’s value in industry level. The result indicates that firm value independent of the capital structure due to behavioral factors of the investors in Indonesia who tend to ignore the fundamental factor(s) of the firm.Keywords: Indonesia’s telecommunication industry, capital structure, leverage, value of the fir

The Analysis of Determinants of Developing Village Index in Indonesia

Abstract. Indonesia has been suffering from economic and social disparity. The most common gap occurs between rural and urban communities. This level of inequality also occurs within the villages themselves. Therefore, to support village development, The Ministry of Village, Development of Disadvantaged Regions, and Transmigration of Indonesia has developed Developing Village Index (Indeks Desa Membangun) to provide information and village progress status. This paper reviews the relation of the Developing Village Index with local factors. The author applies several local variables of 434 municipalities/districts in all over Indonesia using data of 2017. By using Multiple Linear Regression as the methodology, the author found a positive and significant relationship between the Human Development Index (X1) and Population Size (X3) toward the Developing Village Index (Y). Besides, the author also found a negative and significant relationship between Area Size (X2) and The Regional Level of Surplus and Deficit (X5) toward the Developing Village Index (Y). At the same time, some variables do not have a significant effect on Developing Village Index such as Local Government Capital Expenditure (X4) and Local Grant (X6).Keywords: Developing village index, human development index, local government capital expenditure, the regional level of surplus and deficit, local grant.

Are Foreign Banks More Efficient than Domestic Banks? Case Study: Indonesia

Abstract.The aim of this study is to analyze and compare the efficiency of foreign and domestic conventional banks in Indonesia in 2013-2015 based on the BUKU 3 category regulated by Bank Indonesia and further sees the growth of those efficiencies by each month during the period of the study. The objects of this study are 9 foreign and 11 domestic conventional banks that operated in Indonesia in2013-2015. Data are retrieved from monthly financial reports of the sample. This study uses input-oriented Variable Return to Scale (VRS) Data Envelopment Analysis (DEA) model with intermediation approach to measure the technical efficiencies of the banks and Malmquist Index to investigate the growth of the efficiencies and also the monthly growth of the sample in the analysis period. Mann-Whitney test is used for hypothesis testing to examine the significance level of the efficiencies and its growth. DEA results shows that in aggregate, foreign banks are more efficient than domestic banks. The malmquist index results presents that domestic banks have higher average growth compared foreign banks in the period of analysis. Moreover, the sample’s performances in terms of monthly changes from the malmquist index experience fluctuation. However, there are no significant differences of both efficiency and its growth of foreign or domestic conventional banks in Indonesia during the period, meaning that both bank groups whether foreign or domestic banks in this study are operating in almost the same level.Keywords: foreign banks, domestic banks, efficiency, Data Envelopment Analysis, Malmquist Inde