22 Jurnal Atestasi

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Editorial Team
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Darti Djuharni - Sekolah Tinggi Ilmu Ekonomi Malangkucecwara - Indonesia [Google Scholar, ID Scopus]
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Teodora Winda Mulia - Widya Mandala Catholic University Surabaya - Indonesia [Google Scholar, ID Scopus]
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Reviewer Team
Ari Kamayanti | Politeknik Negeri Malang | SCOPUS
Darwis Said | Universitas Hasanuddin, Indonesia | SCOPUS
Aji Dedi Mulawarman | Universitas Brawijaya, Indonesia | SCOPUS
Nurmala Ahmar | Universitas Pancasila, Indonesia | SCOPUS
Winston Pontoh | Universitas Sam Ratulangi | SCOPUS
Achdiar Redy Setiawan | Universitas Trunojoyo Madura, Indonesia | SCOPUS
Muhammad Su'un | Universitas Muslim Indonesia | SCOPUS
Sepky Mardian | Sekolah Tinggi Ekonomi Islam SEBI | SCOPUS
ii
Komang Adi Kurniawan | Universitas Warmadewa, Bali, Indonesia | SCOPUS
Novi Swandari Budiarso | Universitas Sam Ratulangi, Manado, Indonesia | SCOPUS
Andi Manggala Putra | Universitas Pembangunan Nasional Veteran Jakarta, Indonesia | SCOPUS
Yulius Kurnia Susanto | Trisakti School of Management, Indonesia | SCOPUS
Muhammad Faisal AR Pelu | Universitas Muslim Indonesia | SCOPUS
Andre Prasetya Willim | Universitas Widya Dharma Pontianak | SCOPUS | WOS | OrcID
Anthony Holly | Universitas Atma Jaya Makassar | SCOPUS | WOS | OrcID
Dwiyanjana Santyo Nugroho | MNC University | SCOPUS | WOS | OrcID
Eny Latifah | IAI Tarbiyatut Tholabah | SCOPUS | WOS | OrcID
Febrianty | Institut Teknologi dan Bisnis Palcomtech | SCOPUS | WOS | OrcID
Hengky Leon | Universitas Widya Dharma Pontianak | SCOPUS | WOS | OrcID
Lesi Hertati | Indo Global Mandiri University | SCOPUS | WOS | OrcID
Lilis Puspitawati | UNIKOM, Bandung | SCOPUS | WOS | OrcID
Maryam Mangantar | Universitas Sam Ratulangi | SCOPUS | WOS | OrcID
Meifida Ilyas | Universitas Satya Negara Indonesia | SCOPUS | WOS | OrcID
Mia Ika Rahmawati | STIESA Surabaya | SCOPUS | WOS | OrcID
Ni Luh Putu Anom Pancawati | IAHN Gde Pudja Mataram | SCOPUS | WOS | OrcID
Ni Wayan Rustiarini | Universitas Mahasaraswati Denpasar | SCOPUS | WOS | OrcID
Popi Fauziati | Universitas Bung Hatta | SCOPUS | WOS | OrcID
Stefani Lily Indarto | Universitas Katolik Soegijapranata | SCOPUS | WOS | OrcID
Supitriyani | Sekolah Tinggi Ilmu Ekonomi Sultan Agung | SCOPUS | WOS | OrcID
Supriyati | Universitas Komputer Indonesia | SCOPUS | WOS | OrcID
Zainuddin | Universitas Khairun Ternate, Indonesia | SCOPUS | WOS | OrcID
Muhammad Yamin Noch | Universitas Yapis Papua, Indonesia | SCOPUS
iii
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Theory of stewardship in the marriage of female migrant workers: Perspectives of

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Hasbiyadi Hasbiyadi
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Financial Literacy, Financial Behavior and Financial Attitudes Towards Investment

Decisions and Firm Bankruptcy
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Andi Arman, Mira Mira
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Impact of Cash Flow and Dividend Policy on Manufacturing Firm Value

Ansir Launtu
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Influence of Ownership Structure on Company Profitability and Value In

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Budi Andriani
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Mosque Transparency under Frame Qur'an Surah At Taubah Verse 18: Analysis at
the Mosque of Jogokariyan
Dessy Ekaviana, Iwan Triyuwono, Ali Djamhuri
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View Article
v
Febrina Nur Ramadhani, Lilik Purwanti & Aji Dedi Mulawarman / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 01-10
Print ISSN: 2621-1963 / Online ISSN 2621-1505

DOI : https://doi.org/10.33096/atestasi.v4i1.589
Theory of stewardship in the marriage of female migrant workers: Perspectives

of accounting and accountability
1* 2 3
Febrina Nur Ramadhani , Lilik Purwanti , Aji Dedi Mulawarman
Received: October 29, 2020 Revised: November 12, 2020 Accepted: January 03, 2021
Abstract
This research explores accounting and accountability practices in the families of female workers (TKW) in East Java, based on
the concept of stewardship theory. The study was carried out using a qualitative approach to ethnomethodology; we obtained
data on 10 TKW individuals from East Java through in-depth interviews with the FGD technique. The results show that, based
on the concept of stewardship theory, the implementation of accounting and accountability practices in TKW families has been
applied. In TKW families, accounting and accountability practices aim to control the financial management of the husband's
family so that it does not exceed the budget set by the wife and there is no deviation in the use of funds. This study shows that
the application of the concept of stewardship theory can avoid various disputes that may arise due to problems of accountability
for financial management. The application of the concept of stewardship theory, on the other hand, affects accounting practices
that pay attention only to material aspects to lead TKW families to the spirit of capitalism.
Keywords: Household Accounting; Accountability; Stewardship Theory; Female Migrant Workers
1. Introduction12
This research examines accounting and accountability practices based on the concept of stewardship in women's families
(TKW) in East Java. The family is the smallest organization in the state structure, but civilisation is formed. The quality of
relationships and the principles of family depends on the good and the bad of society (Wąsiński & Szyszka, 2013). Although
it looks simple, it is not easy to maintain family stability. Fair, orderly, and conceptual governance is necessary to preserve
its stability (Setiowati, 2016). The economy is one of the problems that often disrupt household stability. The high divorce
rate is usually due to economic reasons, not sex and in-laws (Eldar-avidan, Haj-Yahia, & Greenbaum, 2008; Burstein, 2007;
Llewellyn & Walker, 2000). This can happen because the inability of a person to manage finances can cause problems,
anxiety and even disease (Bogan, 2015; Gray, Brennan, & Malpas, 2013; Li, Whalley, & Zhao, 2013). Not only that, the
lack of "money" transparency and accountability can also cause conflicts between husband and wife (Koochel, 2018; Britt
& Huston, 2012; Papp, Cummings, & Goeke-Morey, 2009). Referring to these various arguments, it can be stated that the
economic problems common in households relate more specifically to accounting and accountability practices. In addition,
some observers on this research topic argue that accounting can be used by financial management to strengthen the
community institutions, which can form a living standard in the family (Hardees & Khalifa, 2018; Ramlugun, Ramdhony,
& Poornima, 2016; Walker, 2015).
To date, accounting has often been defined as 'business language' (Marriott, Edwards, & Mellett, 2002). However,
accounting is interdisciplinary because it can be used by corporations and a wider range of social institutions, including the
family (Roslender & Dillard, 2003). Moreover, Bourdieu (2005) argues that the house is not just a financial institution, but
a body which requires money, time, work and emotions. The family accounting discourse discusses domestic economics,
finance, management and other social life sciences (Feng & Tang, 2018; Kapoor, 2019; Walker & Llewellyn, 2000). Komori
1* First Author and Corresponding Author. Department of Accounting, Faculty of Economics and Business , Universitas Brawijaya Malang, Malang, East
Java, Indonesia, [ Email: febrina.nr94@gmail.com ]
2 Second Author. Department of Accounting, Faculty of Economics and Business, Universitas Brawijaya Malang, Malang, East Java, Indonesia, [ Email:
lilikpurwanti64@gmail.com ]
3 Third Author. Department of Accounting, Faculty of Economics and Business, Universitas Brawijaya Malang, Malang, East Java, Indonesia, [ Email:
ajidedim2@gmail.com ]
ⓒ Copyright: ATESTASI: Jurnal Ilmiah Akuntansi (2021)
This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License. Site Using OJS 3 PKP Optimized.
(2012) and Llewellyn & Walker (2000) are researching empirical findings related to household accounting and gender.
Family accounting is not a new theme in accounting science development, or more commonly known as "household
accounting." Several family accounting studies have been published since the end of the 20th century (Northcott & Doolin,
2000; Pahl, 2000; Piorkowsky, 2000; Walker, 1998). The implications of these studies are still relatively the same, namely
to explain accounting practices for the Anglo-Saxon family. Family accounting is generally embedded in the interactions
between husband and wife. The difference in roles between husband and wife must always be correctly achieved in order to
maintain the sustainability of accounting practices (Komori, 2007). The patriarchal culture of the Anglo-Saxon family
established relations between husband and wife as kings and servants (Walker, 1998). Men have great power in decision-
making because they are the source of family income. According to the will of the king, the wife is a servant who manages
the assets of the king. This relationship is in principle adopted by Christian theology, namely stewardship (Walker, 1998).
In Greek, management is oikonomos, which means a household manager, household affairs or a trust position (Reumann,
1992). The concept of stewardship has two main actors: the agent (asset owner) and the steward (asset manager). When you
look at this concept from the sharing of roles in the Anglo-Saxon family, you can say that the husband is the agent while the
wife is the steward. Walker (1998) also explains that as human beings must be accountable for the use of God's assets,
women have the same obligation to use the assets of their husbands. It is only important that accountability in this case is
not a husband's wife's accounting activity but an activity aimed at controlling expenses (Bernal, Pinzón, & Funnell, 2018;
Carnegie & Walker, 2007; Pahl, 2000). This statement corresponds to the aims of management accounting, namely to reveal
the competence of superiors in the management of resources, not to measure profits (McCuddy & Pirie, 2007). For the
Anglo-Saxon family, it is therefore essential to keep detailed evidence of cash disbursements to ensure cash is paid for
purposes consistent with budgetary items and that the total does not exceed incomes (Llewellyn & Walker, 2000; Northcott
& Doolin, 2000; Piorkowsky, 2000).
In addition to the Anglo-Saxon family, research topics were also conducted in Japanese society. Komori (2012) shows
Japanese women's critical role in family resource management. The concept of democracy is not recognized in Japanese
traditional culture (Komori, 2007). Women thus play a crucial role in maintaining financial stability for households,
especially after the Second World War (Komori & Humphrey, 2000). Family accounting research has also been carried out
on families with various professions in Indonesia several times (Manurung & Sinton, 2013; Musdalifa & Mulawarman,
2019; Raharjo & Kamayanti, 2015; Sidharta, 2016). From several existing studies, different accounting practices were found
in each family, both in method and purpose. However, compared with those for the Anglo-Saxon and Japanese families, the
study is common, namely the division of the roles of husbands as agents and wives as stewards.
Llewellyn & Walker (2000) recommend further research into household accounting practices and gender accountability.
There is not always the same division of roles between men and women at home. Not only can men play a role in creating
a livelihood, but family treasurers are not yet women as far as income management is concerned. Democratic systems in
households are standard, so that previous household accounting practices may no longer be relevant to the present reality.
In Indonesia there is an unusual role division in the families of female workers (TKW).
Women's workforce (TKW) is a term for women of Indonesian nationality who have been working abroad for a period
of time. Based on BNP2TKI (2019) data, 70% of Indonesian workers (TKI) are female domestic workers. In particular, most
of these women came from the province of East Java. It was recorded that there were at least 17,254 active Indonesian
migrant workers from East Java who were dispersed abroad in different countries by June 2019. This has been up to three
times higher than last year, with 5,372 people. Most TKW are married and come from rural areas with weak economic
families. The husbands of TKW work generally as workers in agriculture and industry (Buchori & Amalia, 2004). It's no
secret that labor is one of the jobs in Indonesia which promises no welfare (Sidik & Mashuda, 2017; Soleh, 2017). This
economic situation in households requires mobilizing all the members of the family, both male and female, young and old,
to allow the kitchen to boil, including the wife. This is why many rural women migrate to work abroad.
TKW families have different relationships with other professions in the context of social life. The wife has to leave her
family for a relatively long period of time during the contract period. During the day, his continuous participation in the
public sphere led to a large part of his domestic work delegated to other parties. As an accompaniment, the husband is
therefore no longer just a public figure but must also replace some of the duties of his wife at home (Lam & Yeoh, 2018;
Mahampang, 2018; Nainggolan, 2008). It is simply that the absence of the instinct of a mother in her husband means that
some domestic childcare duties have to be delegated to third parties. The hope is that a third-party presence can become a
mother figure for children (Yuniastuti, 2014). The woman's income, coupled with the husband's uncertainty about her income,
makes the woman the principal source of income for the family. The wife regularly checks the funds she has given to manage.
This explanation gives an overview of the new form of the management concept of marriage, formed by different
relationships between men and women in accounting and accountability practices.
2
2. Research Design and Method
In order to achieve research goals, researchers start with the interpretive paradigm and use ethnomethodological research
methods. Ethnomethodology is a study of the everyday practices of community members in their daily lives (Ritzer, 2015).
Ethnomethodological studies emphasize that organizational members seek rational and practical reasons to continue
producing certain activities in their daily life (Kamayanti, 2016). The reporting and accountability practices in this study are
daily activities which are constantly repeated in TKW families. Ethnomethodology has therefore been chosen as a way to
achieve the aims of this study.
Data were collected via a number of techniques, including Focus Group Discussion (FGD), interviews, observations, and
a literature review. A focus group discussion (FGD) on the role division of TKW families was held for the purpose of obtaining
general information. The role description then shows the accounting practices for the TKW families. FGDs were twice
conducted with 10 TKW people from East Java trained at Business Training Center in Malang Regency.
The informants chosen to join the FGD were those who had and will return to become TKW. Furthermore, as this research
focuses on accounting practices and family accountability, all informants are married. In addition, the researcher also
conducted direct interviews to deepen information obtained through the FGD. There have been interviews with several
informants living in Malang Regency so that their residence can be visited. In this case, the interview is done in an informal
way, namely through general and detailed questions and developed in the course of interviews or the work of the following
interview (Azungahv, 2018; Comi, Bischof, & Eppler, 2014; Moleong, 2018). To enhance the research results, we have made
observations on four Malang Regency informant families. Statements were made through the daily lives of TKW families,
especially in production and consumption activities, to help scientists understand the behavior of informants in income-
gaining and distribution activities.
We performed several techniques for validity checks, namely triangulation. Triangulation is a data validity check technique
that uses something other than the data to match or compare it to those data (Moleong, 2018). There are at least four types of
triangulation as an examination technique using sources, methods, researchers and theory (Moleong, 2018). In this study,
researchers employed two types of techniques of triangulation. First, it is possible to triangulate with sources by using various
informants to strengthen the validity of the data obtained. Second, the technique of triangulation is based on the method,
namely by observing information.
Table 1. List of Name of Informants and City of Origin
Name District/City Info

Informan 1 Banyuwangi district Has been a TKW since 2008
Informan 2 Jember district Has been a TKW since 2008
Informan 3 Mojokerto district Has been a TKW since 2016
Informan 4 Jember district Has been a TKW since 2016
Informan 6 Bojonegoro district Has been a TKW since 2010
Informan 8 Malang district Has been a TKW since 2008
Informan 10 Malang district Has been a TKW since 2004
In the study of daily activities agreed with group members, Garfinkel (1967) define three stages of analyzes. Firstly, the
analysis of indexicality, namely making indexes or topics with expressions and body language. The researchers then proceed
to the second stage of analysis, namely reflexivity analysis, after obtaining various indexes or articles. In this case,
ethnomethodologists must observe the routine activity of the group being observed in order to find out how individuals always
perform the activities that are observed even if they do not want to discuss this since it is their daily routine (Kamayanti, 2016).
Finally, contextual action analysis reveals practical, recognizable and reportable daily activities. Kamayanti (2016) says an
ethnomethodological crown explores the regularity and the relationship between expressions of indexicity, the rationality of
the expressions of indexicality and the end of indexicality action. The data analysis stages can be seen in Figure 1.
Common Sense
Indexality Reflexivity Contextual
Knowladge of
Analysis Analysis Action
Social Structure
Figure 1. Garfinkel Ethnometodology Data Analysis Phase

Source: Garfinkel (1967), suddenly
3
3. Results and Discussion

Result Analysis
The presence of migrant workers in their hometowns will be seen just before the Eid al-Fitr because most of them are
given leave by their employers. A few days after the holiday, they will again leave Indonesia. On a day-to-day basis, husbands
in their hometowns also continue to work like husbands in general. It's just that there are changes in the allocation of income
for both wives and husbands.
On the basis of the results of the field investigations, it was found that the income of the husband is used only to meet
the individual needs of the husband since the wife worked as a TKW. This happens because husbands who work as workers
generally do not receive regular income. The woman's income, on the other hand, is enough to meet different family needs.
Since they work abroad, TKW usually turns roles into the backbone of the family (the primary source of income). As the
informants explained during the FGD.
** “….. The husband said he did not need his wife's money because he was able to meet the need for
food on his own.” (Informan 8)
** “….. I was only given money to shop as little as possible before becoming a female laborer (TKW),
because my husband also took a motorbike on credit at that time. This causes the income of the husband
to be split for routine family shopping money and pay for installments of motorbikes. After I became a
TKW, though, I was able to meet my family's needs.” (Informan 3)
Notes : ** Have a revised language for more accurate readability
In order to understand the relationship between husband and wife in the TKW's family, two keywords must be examined
from the statements of the three informants. First of all the "eating" index, which means the different personal needs of the
husband. From this index, Informan 8 tries to explain the efforts of her husband not to depend on the work of her wife.
Second, the 'money spending' index, which means different family needs. Informan 3 phrase shows her crucial role in the
family economy. The family income was only derived from her income since Informan 3 became a TKW. The above two
statements show a change in the family's needs, which was first the husband's duty but rather moved to the wife.
Net income is the woman's income used to meet family needs. In this case, net income is the result of deducing various
liabilities, including the repayment by the Indonesian Manpower Responsible Agency of the allowance (PJTKI) and
government tax payments, as well as the personal expenditure of TKW abroad. The TKW usually has still the obligation to
repay loan funds provided by the PJTKI when they leave the country in the first few months since their departure. The funds
must be returned at the interest of the loan. Not only that, the Indonesian Government must still pay taxes. These expenses
were not considered family expenses because they were related only to their personal needs. Here begins accounting family
practice. Figure 2 shows in more detail the flow of accounting practices.
Shortly after the income is earned, the wife pays her various routine duties. The TKW will then distribute the money as
necessary. The statements of the two informants below demonstrate how they practice budgeting.
** “….. Savings for myself, my parents and my children.” (Informan 4)

** “….. I sent my husband and mother money. My mother brought my child up from a young age. I sent
my husband and mother a different amount of money nominally and tended to be more for my mother
because my mother needed a great deal.” (Informan 8)
TKW doesn't understand budgeting. It's only that the practice of distributing money reflects budgeting, as explained in
the quotation above. The distribution of funds depends on the number of family requirements. The amount of money sent
home is therefore not always the same. You realize that it is essential to spend money to ensure that all requirements are met
and to see how many funds can be saved.
Usually, after budgeting, the wife sends money according to the budget prepared. There are three groups of budgets on
which the funds are managed: routine expenditure, irregular expenditures and investments, and savings. This group will also
determine whether or not these funds must be recorded and reported. First, the group of routine expenditure. This group
includes a number of children's needs, including food and supplies, school and training fees, educational insurance, etc. This
money is used for the maintenance of survival and daily activities. These funds are usually managed by a third party as the
child caregiver. Interestingly, they also consider compensation as routine expenses for third parties. This is reflected in the
narrative of Informan 8 and Informan 3 when the investigator asked, "Is there a special fund for extended family parties? '.
** “….. The money I send covers family needs, such as family meals, the needs of my mother and the
needs of my children.” (Informan 8)
4
** “….. My younger sibling takes care of my child. I have two children, the first is in a pesantren school,
and my younger sibling cares for the other. So I sent money to support the family and education of my
child.” (Informan 3)
In the family of Informan 8, the role of the third party was the parents of the mother, whereas in the family of Ms. Aini
her younger sibling played the part. The accounts of Informan 8 and Informan 3 were highly representative of the practices
of the other eight informants. TKW feel that they have a social obligation to cover their children's living expenses. This may
reduce the thanksgiving for the care burdens they owe to them. All informants agreed uniquely that the routine spending
group was immaterial, therefore it did not have to be recorded and held accountable. The following interview quotations
from two informants show that not all expenses require registration and reporting.
“ ….. I don't have to send money every month, saving is an important investment for me, like the
purchase of land. For me it's not so important to send money for food.” (Informan 8)
In contrast to the regular expenditure group, husband as the decision-maker usually manages irregular expenditure and
investment groups. This group of expenditure comprises various needs, which require relatively large funds, such as the
construction or refurbishment of homes, vehicles, purchases of land, rice fields, livestock, etc. These funds are not always
sent every month by their nature. Normally, after several months of work and saving enough, the woman discusses what
she's going to do with the money. The final decision is given to the husband to purchase the investment or to repair the house
or to save more. That's what they see as decision-making. This is reflected in Informan 8 narrative.
** “ ….. My husband wants to invest like raising cows. But we both had to agree before I invested to
sell our cows when we needed something suddenly.” (Informan 8)
This story implies respect for their husbands by both informants. This is also reinforced by the researchers' findings in
the residence of the young family. During a visit to the family residence of Informan 8, the researcher saw a bamboo stop.
After it was confirmed, it turned out that the shop was built using Informan 8 work, although they live in a husband's house.
Almost all informants during the FGD also explained that the renovation site belongs to the husband. Interestingly, although
the investment is made with the money of the wife and is recognized as a joint property, the investment object is legally
purchased on behalf of the husband. In other words, such a system means the position of the husband as head of the family.
In contrast to the routine group of expenditure, the TKW agrees that this group of expenditure is important for recording
and reporting.
The wife regularly requests evidence of the expenditure. Thus, even without a careful and structured record, the husband
must report the use of the funds. Sometimes the wife requests proof of payment. The husband must therefore say that the
use of funds is made without a proper and structured record. As Informan 8 explained.
** “ ….. For me, communication is essential in order to report the problems of financial management
in detail. Investment-related things such as the purchase of raw materials such as building a house and
other things must be received or proven. I'll record all big purchases, such as house investments,
purchases of wood raw materials, roofing tiles, and so on, so I can make sure the money is used properly.”
(Informan 8)
This explanation demonstrates that TKW's contextual recording and reporting actions are not intended as a husband's
accountability to his wife but to control the use of money. In this case, the funds used for the agreed goals are used to reach
the goals they have set. The position of the wife and husband, who are very distant from each other, makes it feel necessary
for TKW to always be open to each other, in particular in terms of using the money they send, to prevent friction that can
lead to dispute.
Usually, the TKW saves the remaining income after both expenditure groups are met. These funds are considered savings.
Unlike investments, all savings are owned by the wife because they are managed by the migrant workers themselves as cash,
gold or deposits. The savings are normally used as an emergency fund and for different purposes when you go back to your
hometowns. This explanation has been reflected in the statements made during the FGD by three informants.
5
** “ ….. When we return home, our responsibility as a TKW is to collect salaries for three months and
then distribute them to meet our needs.” (Informan 9)
** “ ….. Do not enter savings because several nephews will be given it.” (Informan 8)
** “ ….. What is certain is that a small envelope filled with money to be distributed should be prepared.”
(Informan 3)
On the basis of the informants' explanations, they cleared up various needs, such as the purchase of souvenirs, preparation
of the angpao for their nephews, tahlilan costs (thanksgiving) as well as the purchase of deposits and gold and routine
expenses, for prepare at least the next three months. Periodic expenditure funds as a reserve fund are required for at least the
next three months if their departure from abroad takes longer than expected. All must be properly arranged so that none of
the needs are satisfied.
The entire practice will lead to accountability. Both husband and wife must be accountable, especially in financial terms,
in order to prevent conflicts. Unresponsibility can reduce family harmony by one party; even the worst effect is divorce.
This is what four informants experienced in this study. In a single interview, Informan 8 explained why she was divorced.
** “ ….. My husband said he wanted to renovate the kitchen at home, so I ended up sending him a lot
of money because I trusted him. But when I called my neighbor's house, my neighbor said there was no
renovation of the kitchen in my house, and my husband also sold the motorcycle I had without first
notifying me. Finally, I chose to divorce my husband in 2014 and report it to the police. I only had two
weeks of leave at that point, while the divorce process took five months.” (Informan 8)
The importance of transparency in financial management can be seen from Informan 8 narrative. The fact that husbands
often neglected the use of money could resulted in TKW becoming more alert. As Informan 3 and Informan 9.
** “….. More than my husband, I trust my family. The family will remain with me, irrespective of their
behavior. The reason is that the man (husband) has a lot of behavior if he has a lot of money. I believe
that men (husbands) with a high standing tend to lead to deviant actions and vice versa. The philosophy
of Javan states that money can be life and can be deadly, too.” (Informan 3)
** “….. For me, my husband's confidence percentage is only 50%. The reason is that the thinking of
individuals can change every minute. The Javanese theory states that cash can be transformed into
anything.” (Informan 9)
The story of the two informants reflects more confidence in their own (parents and siblings) families than their husbands.
Interestingly, when husbands are able to demonstrate their transparency through adequate evidence of funds, internal
harmony can be maintained.
Figure 2. Flow of TKW Families' accounting practices
6
Discussion
The empirical findings on accounting practices and accountability applied to TKW families imply the concept of
management, as already explained. However, research by Walker (1998) shows that the idea of stewardship is generally
used in families that adhere to a patriarchal culture. Research has shown more mixed results in recent years. At present, the
division of house roles between men and women is not always the same. In production as well as in income management,
not only men can play a role; family treasurers are still not women. In families, the democratic system is common.
The wife is the agent in the TKW family, while the husband is the steward. As an agent, the wife provides money for
different family needs. On the other hand, the husband is responsible for the management of the household. The husband
fulfills the role of steward to reduce his hardship in providing for the family (Lam & Yeoh, 2018). Husbands also don't use
money for personal gains from their wives' work, but family interests. Funding for the claims of their husband comes from
their work. This is done to maintain the position and self-esteem of the man in society, to avoid the evil stigma which sees
him in the work of his wives as a lazy man (Hoang & Yeoh, 2011; Lam & Yeoh, 2018). Therefore, while women have large
incomes while the work of the husband does not promise a steady revenue, husbands continue to work to meet their personal
needs. In previous research results, these findings have never been described. The results of earlier studies show that
husband's or husband's common income is a source of family income (Musdalifa & Mulawarman, 2019; Bernal et al., 2018;
Sidharta, 2016; Walker, 2015; Manurung & Sinton, 2013; Komori, 2012; Carnegie & Walker, 2007; Northcott & Doolin,
2000; Pahl, 2000).
TKW families' accounting practices are implemented in four ways: budgeting (distribution, decision-making, recording
and reporting. These four practices are performed to meet your needs. Home accounting actors are husbands, wives and
third parties. In this case, another woman in the extended family is a third party, for example a mother or a sister who can
be a mother for a child. The presence of third parties in this case also makes the described household accounting practices
unusual. Practice of accounting begins with budgeting. Budgeting is the activity to distribute money each month to the wife.
The objective of this activity is to determine the number of funds distributed to each group.
There are three groups of expenses: routine, irregular and savings expenses. This group of expenses is divided by the
manager. Daily expenses are family costs and are handled by a third party. This group usually requires a small distribution
of funds (Cita, Nurjihadi, & Liesmayanti, 2019; Primawati, 2011). Therefore, TKW considers the expenses of this group to
be immaterial, so that the manager does not require records or responsibilities. In contrast, irregular expenditure and
investment groups are expenditure groups with large funds to be recorded and held accountable. In general, the husband as
long-term decision maker is the manager of this expenditure group. If all expenses are met, the remaining funds are directed
by TKW in a savings post.
Interestingly, TKW has two things in terms of investment and savings. They consider investment to be an enormous
tangible asset for long-term safety, such as land, rice, homes, livestock, etc. Savings, on the other hand, are deposits in the
form of money, gold or promises which can be withdrawn when emergency funds are needed. In other words, rescues are
designed to ensure a short life. The difference between the two can be seen not only from their ownership. In general,
investment assets are purchased in administrative terms on behalf of the husband even if they recognize it as a joint property
while the savings are held on behalf of the wife. The property was taken from traditional Javanese families who adhere
generally to the bilinear system (mixing husband and wife's assets in households) (Stuers, 2017).
Recording and reporting are the next accounting practice. As previously explained, only expenditure groups managed by
the husband had to write about the use of funds. This practice is performed so that the husband is responsible for storing
transaction proof for the use of funds. In addition, the wife periodically checks the use of the funds by examining the evidence
of the transaction to ensure that the funds are distributed on budget items. This method is similar to that used by men who
use the concept of stewardship in the Anglo-Saxon families (Llewellyn & Walker, 2000; Northcott & Doolin, 2000;
Piorkowsky, 2000).
The husband's performance on the resources provided by the wife is monitored in a range of accounting practices, from
budgeting to reporting. This is consistent with the theory of economic stewardship (McCuddy & Pirie, 2007). When the
husband does not become a steward, as the wife as an agent expects, the potential for the fight is enormous. The worst
consequences are divorce. As Llewellyn & Walker (2000b) quotes Cornan (1975), which argues that household problems
are often caused not by sex or laws, but by poor financial planning. Instead, if husbands can demonstrate their transparency
through adequate proof of funds, internal harmony in the family can be maintained. This accountability is explained in terms
of household stewardship theory by Eddleston & Kellermanns (2007), Reumann (1992) and Walker (1998). Therefore, if
the husband performs his role by giving priority to the interests of the family, the potential for conflicts between husband
and wife is minimal.
Indirectly, the accounting and accountability practices applied to TKW families demonstrate the interaction of TKW in
the country in which they work with foreign cultures. Family accounting based on the concept of management they apply
to the Anglo-Saxon family can be 'similar but not the same.' The similarity can be seen through the use of accounting, namely
for controlling the household management expenses incurred by the spouse. In this case, however, the roles of the manager
(steward) and agent are no longer the same. Their difference and the newness of this research lie here. However, the
application of the concept of household management only makes family members focused on material things. This means
7
that they still have business logic inside the house, so that the house is indirectly considered a small business (Grimshawn,
1970; Llewellyn & Walker, 2000). In his work 'The Mythology of The House,' Bourdieu (2005) explains that the house is
an institution that demands more than just financial responsibility as people will invest their money, time, work, and emotions.
Finally, the idea of managing the family accounting system is the same as the idea that the spirit of capitalism is allowed to
enter TKW's household.
4. Conclusions
Accounting practices are applied in four ways to TKW families in East Java: budgeting (distribution of money), decision-
making, recording and reporting. Budgeting is done every month by the wife. The husband decides, records and reports. The
decision-making role of the husband is symbolic of his role as head of the household. On the other hand, recording and
reporting activities show the manager role of the husband. These four methods are based on the management concept. In
this case, the wife acts as an agent because the income of the family comes from the income of the wife. In the meantime,
the husband is a steward responsible for household finance. The husband tries to fulfill his duties according to the agent's
wishes. Recording and reporting of the use of funds are only conducted on husband-managed funds, namely spending
accounts requiring significant funds. Such accounting and accountability practices are designed to control the financial
management of the husband's families so that the budgets set by the wife are not exceeded and the funds are not misused.
The application of the stewardship concept can avoid various disputes due to financial management responsibilities. On the
other hand, the application of the stewardship concept has an impact on accounting practices which only address the
substantive aspects of bringing TKW families into the capitalist spirit.
This research was conducted only in East Java on the women's family. The limitations of household accounting literature,
particularly in Indonesia, certainly require a great deal of attention by accounting researchers. Moreover, research is needed
for families with more diverse backgrounds, both professionally and culturally. The household is the lowest and the most
influential institution in its development structure and this is a key plan for the development of accounting science and
society.
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10
Muryani Arsal / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 11-18
Impact of earnings per share and dividend per share on firm value
1*
Muryani Arsal
Received: November 08, 2020 Revised: December 18, 2020 Accepted: January 22, 2021
Abstract
The purpose of this study is to explore the impact of earnings per share (EPS) and dividends per share (DPS) on the value of
the company on the Indonesian stock exchange for the period 2014-2017. This study uses data from 6 food industry companies
listed on the Indonesian Stock Exchange to examine the impact of these variables. Multiple regression models are used to
determine the effect of earning per share and dividend per share. The results of the research show that earnings per share
separately have a significant and positive impact on company value. However, the dividend per share does not substantially
affect the value of the company. The findings of this research also found that firm value is affected simultaneously by EPS and
DPS. The study concludes that investors can use Earnings per Share as the basis for making investment decisions, particularly
on the Indonesian Stock Exchange for companies in the food industry. In practical terms, the implications of this research
indicate that the management of companies listed on the Stock Exchange must formulate a dividend policy and develop a
company strategy aimed at internal and external factors in order to increase the value of the company.
Keywords: Earnings per share; Dividend per share; Firm Value
1. Introduction12
All firms can compete fairly in the capital market to attract investors (Lin, Lee, Kao, & Chen, 2011; Rahman & Ahmad,
2018). A capital market is the right place to invest and earn profits for investors (Nagendra, Kumar & Venoor, 2018).
Investing in shares is one alternative investment that investors are interested in (Badruzaman, 2017). Investors therefore
need the data to evaluate and compare different stocks in order to determine the performance of the entity they want to invest
in (Ahmed, 2018). High risk-high return characteristics mean that inventories are a type of investment that, although
promising relatively large returns, is quite a high risk. This is because capital market stock investment is susceptible to
changes, both domestic and foreign changes, that occur. Changes in politics, economics, economics, laws or regulations,
and changes within the organization itself. Such adjustments can affect the share price positively or negatively. An accurate
share valuation can minimize risks while helping investors earn profits (Tangngisalu, 2020). Therefore, potential investors
need information about their share valuation and the situation before making investment decisions. This information can be
obtained from the company's periodic financial reports (Arsal, Intan, Abd & Bashir, 2016). For decision-making stakeholders,
financial statements are important for (Innocent, Ibanichuka, & Micah, 2020).
This is undoubtedly an issue for businesses to determine what factors or variables can be used in the capital market as
indicators affecting share prices. The objective is for the company to control and achieve the goal of increasing the value of
the company (Lamuda, Yusuf & Ibrahim, 2020). This results in prospective investors who wish to invest in the capital market
need careful and accurate considerations of information to determine how closely related are the variables that cause
fluctuations in the price of the shares of the company to be bought.
Hunjra, Ijaz, Chani, Irfan & Mustafa, (2014) states that shareholders are generally interested in large earnings per share
(EPS) because it is an indication of the success of the company. One of the variables determining investors' decision-making
to invest in EPS. EPS is a significant amount of information provided to shareholders about the amount of money received
from each share of their shares in the organization (Nagendra, Kumar & Venoor, 2018; Arkan, 2016). EPS reflects the share
1* First Author and Corresponding Author. Department of Accounting, Faculty of Economics and Business , Universitas Muhammadiyah Makassar,
Makassar City, South Sulawesi, Indonesia, [ Email: muryani@unismuh.ac.id ]
of preferred stock in corporate income, after-tax, and dividends allocated to each common share (Ahmed, 2018: Islam et al.,
2014; Nagendra, Kumar & Vendor, 2018; Shehzad & Ismail, 2014). Investors can assess the potential earnings per share by
understanding earnings per share, and company leaders can use that profit to determine the development of the company.
An increase in total income indicates an increase in income per share, so that share value reflects an increase in the value of
the company (Nawangwulan, Ilat, & Warongan, 2018).
An investor investing in a business will receive a return on the shares it holds (Mira, 2020). The greater the EPS of the
company will provide a reasonably good return (Fauza & Mustanda, 2016). This will encourage investors to make even
more substantial investments to raise the share price of the company (Innafisah, 2019). Brealy, Stewart & Alan, (2018) stated
that the terms income stock and growth stock are often used by investors (investors). This shows that investors tend to
purchase stocks that are increasing primarily in the hope of making a profit. For the coming year, they are more interested
in future revenue growth than in dividends. They bought stocks instead, in order to earn cash dividends. The aim of the EPS
calculation is to see the progress of the company's activities, determine the share price and determine the number of dividends
to be distributed (Almeida, 2019).
The profit per share is the Dividend per Share (DPS). DPS is a profit distributed to shareholders by a company in
proportion to, or in proportion to, the number of shares held, and may take the form of dividends in cash or dividends in
shares (Datu & Maredesa, 2017). The bird in the hand theory states that the value of the firm will be maximized by a high
cash dividend payout ratio. This occurs because investors consider that the cash dividend is a low risk issue in order to
increase the potential for capital gains. In this case, at the general meeting of shareholders, the company needs to consider
the distribution of dividends with regard to the composition of the number of dividends to be distributed with retained
earnings. Brigham & Houston (2006) explain that the distributed dividends can influence the stock price of the company in
the information signaling content hypothesis because the dividend distribution announcement contains essential information
about its prospects. It can be interpreted from this statement that a company's dividend policy, namely the distribution of
dividends to shareholders, affects share prices.
It is quite essential to study this research topic because investors have different goals when investing their capital. One
objective is to obtain, in the form of an increase in share prices or dividends, a return on investment in shares. EPS can
measure the maximization of shareholder wealth because it can affect investor trust in the company. EPS is an indicator of
the success of the company in generating its shareholders' profits (Islam et al., 2014). The dividend policy is one of the
policies in companies that can affect company value. For investors, the content of the information in dividend
announcements is a signal. Einde, (2008) states that, after distribution of dividends, the average share price increases. On
the basis of these views, it can be said that the company's dividend distribution policy may increase its share price.
Using EPS and DPS ratios, this study aims to measure firm value. This research refers to the different approaches,
including the EPS and DPS ratio, most frequently used to evaluate organizational performance (Ahmed, 2018; Nagendra,
Kumar & Venoor, 2018; Thonse Hawaldar, Ur Rahiman, M, & Kumar, 2017; Robbetze, De Villiers, & Harmse, 2017; Warrad,
2017; Sharafoddin & Emsia, 2016; Arslan & Zaman, 2014: Sharif, Purohit, & Pillai, 2015). We use the signaling theory in
this study to explain how businesses should provide financial reporting users with signals. A signal is a form of information
about the efforts of management to achieve the wishes of the owner (Bulbulia & Sosis, 2011). The signaling theory describes
the value of the company by providing investors with information on the increase in EPS; this data will be a positive signal
because it demonstrates that the company has adequate liquidity and can meet the needs of investors in the form of dividends
(Mustafa & Junaid, 2018). However, if the company announces a decrease in earnings per share, investment return, and
dividend distribution rate, this information will be received as a negative signal that the performance of the company has
decreased (Peso, Elgar & Barron, 2015). Therefore, this study asks whether EPS, DPS, and firm value have a significant
relationship and influence.
As an indicator of firm value level, EPS can be used (O'Sullivan & McCallig, 2012). EPS is one way to measure the
success of shareholder earnings (Annisa & Nasaruddin, 2019). The research findings by Solomon et al., (2016) found that
EPS has a positive impact on the value of the company. The findings of this study show that there is a significant relationship
between accounting data and the company's equity stake. It is known that EPS has a positive correlation with investments
in equity. Research results (Nuradawiyah & Susilawati, 2020), which show that EPS negatively affects firm value, show
different results.
H1: Earnings Per Share has a positive and significant effect on firm value
Lilianti, (2018), explained that to determine how much profit each stock market gets, information on dividends per share
is needed. Dividends are part of shareholder profits from stock investments (Adediran & Alade, 2013) and have an impact
on stock market price reactions (Nagendra, Kumar & Venoor, 2018; Adediran & Alade, 2013). DPS shows the actual amount
of dividends distributed per share (Nagendra, Kumar & Venoor, 2018), and shareholders are entitled to such dividends
because the share value corresponds to the present value of the dividend payment flow (Adediran & Alade, 2013). Additional
resources will also be invested by investors in the most effective capital market. The value of the company, in this case, the
stock price, is one of the main variables that every investor has in making decisions (Arkan, 2016). The theory of signaling
explains how businesses should provide users of financial reports with signals. A signal is a type of information about the
12
efforts of management to achieve the desires of the owner. Signaling theory will describe the value of the company by
providing investors with information on the increase in EPS; this data will be a positive signal because it demonstrates that
the company has sufficient liquidity and can meet the needs of investors in the form of dividends. However, if a reduction
in earnings per share, return on investment, and dividend payout rate is announced by the company, this information will be
received as a negative signal that its performance has decreased. Reducing the number of dividends paid can be incorrect
information for the company, according to Halim (2005), because dividends are a sign of the availability of company profits
and the number of dividends paid as information on the growth in current and future profit levels. The share price will
decrease with this assumption because many shareholders will again sell their shares.
H2: Dividen Per Share has a negative impact on firm value.
All food industry companies listed on the Indonesia Stock Exchange in the study period were in the population of this
study and had financial report data from 2014 to 2017. To determine samples that match the criteria met by the model used in
this study, purposeful sampling was used. These criteria are (1) food industry companies listed consecutively on the Indonesian
Stock Exchange during the 2014 to 2017 study period, (2) data on research variables is provided by the company, (3) dividends
are distributed by the company during the 2014 to 2017 study period. Based on the criteria of six companies, PT Delta Djakarta
Tbk, PT Indofood Sukses Makmur Tbk, PT Multi Bintang Indonesia Tbk, PT Mayora Indah Tbk, PT Nippon Sari Corporindo
Tbk and PT Sekar Laut Tbk, respectively. To examine the effect of EPS and DPS on firm value, data was analyzed using
multiple regression models. This study uses a core trend measurement of standard deviation and the lowest and highest values
for data characterization and clarification (Ghozali & Latan, 2015).

Result Analysis
This measurement has been used most frequently in previous research. For all study variables, Table 1 shows the results
of the central tendency measurement. The minimum EPS value is 1001.7892 with a standard deviation of 3552.23345, while
the minimum DPS value is 2781.5829 with a standard deviation of 9596.007735. Table 1 shows the minimum EPS value.
Similarly, as a proxy for firm value, the value (min) of the stock price is 22558.04, with a standard deviation of 78596.667.
As a prerequisite in the regression analysis, we test the classical assumption of data normality test, multicollinearity test,
and heterokedastisitas test (Chen & Popovich, 2011; Ainiyah, Deliar, & Virtriana, 2016). The normality test research results
can be seen in Table 2, which shows the variables EPS, DPS. In general, stock prices have not distributed data because the
significant value is <0.0. The data is transformed into a natural logarithmic model (Ln) for the data to be normally distributed,
and the information is tested again to achieve the normality assumption.
Table 1. Central Tendency Measurement
N Minimum Maximum Mean Std. Deviation
DPS 24 3,12 46076,00 2781,5829 9596,07735

EPS 24 25,10 17621,00 1001,7892 3552,23345
Harga Saham 24 300 390000 22558,04 78596,677
Valid N (listwise) 24
The results after data transformation with Ln are shown on the basis of table 2; the stock price variable (Ln Stock price)
is 0.200, the DPS variable (Ln DPS) is 0.05, and the EPS variable (Ln EPS) is 0.174; it can be concluded that all variables
distributed with a meaningful value > 0, 05. Similarly, the results of the multicollinearity test in table 4 show EPS and DPS
tolerance values >0.10 and VIF <10, so that it can be concluded that there is no multicollinearity in all the variables used in
the study.
The results of the heteroscedasticity test using a scatterplot graph show that in the form of dots, the data is spread
irregularly so that it can be stated that there is no heteroscedasticity in the study between variables. It can be concluded,
based on the results of the normality test, multicollinearity and heteroscedasticity, that the data used in the study meets the
requirements and can be analyzed using regression.
13
Table 2. Normality test after Ln transformation
Ln_Stock Price Ln_DPS Ln_EPS

N 24 24 24
Normal Parametersa,b Mean 8,319881118937792 4,579819289202178 5,201468061345799
Std. Deviation 1,616766478648019 2,578448003222162 1,566150773184216
Most Extreme Differences Absolute ,132 ,177 ,150
Positive ,103 ,177 ,145
Negative -,132 -,157 -,150
Test Statistic ,132 ,177 ,150
Asymp. Sig. (2-tailed) ,200c,d ,050c ,174c
Table 3. Multicollinearity Test
Collinearity Statistics
Model Tolerance VIF
1 (Constant)
Ln_EPS ,398 2,515

Ln_DPS ,398 2,515
Table 4. Research model test
Model R R Square Adjusted R Square Std. Error of the Estimate

1 ,969a ,939 ,933 ,41779
a. Predictors: (Constant), Ln_DPS, Ln_EPS
b. Dependent Variable: Ln_ Stock Price
Table 5. Partial t-test

Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta T Sig.
1 (Constant) 3,214 ,321 10,001 ,000
Ln_EPS ,943 ,088 ,913 10,687 ,000
Ln_DPS ,044 ,054 ,071 ,826 ,418
Table 6. Simultaneous F-Test

ANOVAa
Model Sum of Squares Df Mean Square F Sig.

1 Regression 56,455 2 28,227 161,718 ,000b
Residual 3,666 21 ,175
Total 60,120 23
a. Dependent Variable: Ln_ Stock Price
b. Predictors: (Constant), Ln_DPS, Ln_EPS
In table 4, the results of the research model test show that the variables EPS and DPS have an R-value of 0.969. This
states that there is a strong correlation between EPS (X1) and DPS (X2) stock prices (Y) with a level of significance of 0.05
<0.05933. The R2 value of 93.3 percent, on the other hand, states that stock price changes can be explained by the EPS and
14
DPS variables; the remaining 6.7 percent is explained by other variables not included in the research model.
The value of the EPS variable t-test is shown in Table 5 to be 10.001 with a significant value of 0.000 <0.05, indicating
that the EPS has, in part, a significant effect on stock prices. The DPS t-test value, meanwhile, was obtained at 0.826 with a
significant value of 0.418> 0.05, indicating that stock prices were not partially affected by the DPS.
The F-test is used to prove the effect of EPS and DPS on stock prices simultaneously, the results of which can be seen
in table 6. The F-test results show that, with a significant level of 0.000, the F-value is 161.178. This shows that the EPS
and DPS variables have a significant effect on the stock price variable of 0.000 <0.055 at the same time.
Discussion
This study shows that, for the period 2014-2017, the EPS had a significant impact on the stock prices of food industry
companies listed on the Indonesian Stock Exchange. This happens because when the company announces earnings, investors
will view the EPS value to measure what to expect. If the EPS value is not met, the share price will decline; if the EPS is
too high, on the other hand, the stock value will be higher. EPS can be used as a driving factor for capital market investment
(Tupe, 2014; Islam et al., 2014) and is the foundation of rational decision-making (Shehzad & Ismail, 2014). Theory of
signaling, which explains how businesses should provide financial report users with signals. A signal is a type of information
about the efforts of management to achieve the desires of the owner. Signaling theory will describe the value of the company
by providing investors with information on the increase in EPS; this data will be a positive signal because it demonstrates
that the company has sufficient liquidity and can meet the needs of investors in the form of dividends. However, if a reduction
in earnings per share, return on investment, and dividend payout rate is announced by the company, this information will be
received as a negative signal that its performance has decreased.
These results are consistent with (Ahmed, 2018; Idawati & Wahyudi, 2015; Innocent et al., 2020; Islam et al., 2014;
Majanga, 2015; Robbetze et al., 2017; Solomon et al., 2016; Wang, 2013) who discovered that EPS is a determinant affecting
stock prices in stock exchange-listed companies. However, it is distinct and inconsistent with those who found no effect of
EPS on stock prices (Khairani, 2016; Warrad, 2017). Because investors will see the EPS value as a measure of what is
expected when the company announces earnings, this inconsistency of research results can be caused. Speculation over its
performance caused the large volume of trading ahead of the earnings release, and EPS was one of the driving factors. If the
EPS value is not met, the share price will decline; if the EPS is too high, on the other hand, the stock value will be higher
(Tupe, 2014). EPS can be used as a driving factor for investing in the capital market with these considerations (Islam et al.,
2014) and a basis for rational decision-making (Shehzad & Ismail, 2014).
The DPS factor, meanwhile, does not affect the share prices of food industry companies listed on the Indonesian Stock
Exchange for the period 2014-2017. Investors seeing the announced dividends not in line with their expectations can cause
the absence of DPS' influence on share prices (Douglas & Frank, 2013) because DPS is required to assist potential investors
in making the right investment choices on the Stock Exchange (Farrukh et al., 2017). The theory of signaling explains how
businesses should provide users of financial reports with signals. A signal is a type of information about the efforts of
management to achieve the desires of the owner. Signaling theory will describe the value of the company by providing
investors with information on the increase in EPS; this data will be a positive signal because it demonstrates that the company
has sufficient liquidity and can meet the needs of investors in the form of dividends. However, if a decrease in earnings per
share, return on investment, and dividend payout rate is reported by the company, this information will be received as a
negative signal that the performance of the company has decreased. The findings of this research are consistent with the
results of Khairani, (2016), but not consistent with the results (Farrukh et al., 2017; Majanga, 2015; Sharif et al., 2015;
Warrad, 2017), which found that stock prices were affected by DPS. Differences in research results can occur because it is
possible to view dividend announcements from two perspectives. If the dividends declared are in line with shareholder
expectations, the stock market price will be affected positively, whereas if the dividends declared are not in line with investor
expectations, the stock market price will be affected negatively (Douglas & Frank, 2013). Companies must therefore
understand the impact of dividend distribution on the psychology of investors, which affects the stock price of the company
(Majanga, 2015), to ensure that it has a good and robust dividend policy to increase profitability so that it can attract investors
(Adediran & Alade, 2013) because dividends make a significant contribution to stock prices (Majanga, 2015).
This study found that the stock prices of food industry companies on the Indonesian Stock Exchange for 2014-2017 were
simultaneously influenced by EPS and DPS. These findings are consistent with the results of several studies such as (Ahmed,
2018; Arslan & Zaman, 2014; Farrukh et al., 2017) in Pakistan (Innocent, Uchechukwu, & Ikechukwu, 2015) and (Adediran
& Alade, 2013) in Nigeria, (Lin et al., 2011) in Shanghai, (Warrad, 2017) in Jordan, (Majanga, 2015) in Malawi, and
(Nagendra, Kumar & Venoor, 2018) in Bombay that found EPS and DPS concurrently. This shows that information about
EPS and DPS can help investors make wise choices about investing their funds in the capital market (Nagendra, Kumar &
Venoor, 2018; Sharif et al., 2015).
15
4. Conclusions
This study examines the effect of EPS and DPS on firm value through either partial or simultaneous proxying of stock
prices. In order to achieve the research objectives, previously abnormal data obtained on the Indonesian Stock Exchange
from 2014-2017 was transformed (Ln) so that data normality was accepted and multicollinearity and heteroscedasticity met
the requirements. This study shows that EPS, in part, has a significant impact on stock prices, whereas DPS does not. This
study also shows that EPS and DPS have an effect on the stock prices of the food industry on the stock exchange at the same
time. On the basis of these findings, investors are expected to view earnings and dividend data as something that can help
investors make wise and rational decisions (Nagendra, Kumar & Venoor, 2018; Sharif et al., 2015; Shehzad & Ismail, 2014).
Investment decisions rely on the expectations of the investment benefits achieved (Sharafoddin & Emsia, 2016; Solomon et
al., 2016). Based on these findings, this study recommends that dividend policies that can increase firm value as much as
possible can be formulated by the management of companies listed on the Stock Exchange. Also, development must a
business strategy focused on internal and external factors affecting EPS and features that, according to company information
effectively value shares.
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R. Rajindra / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 19-27

Intellectual Capital's influence on the Financial Performance of Manufacturing

Companies
1*
R. Rajindra
Received: January 21, 2020 Revised: February 18, 2020 Accepted: March 02, 2021
Abstract
This study aims to see the effect of intellectual capital on the financial performance of companies listed on the Indonesia Stock
Exchange (BEI) in 2014-2016. This research is a quantitative research. This research was conducted at the Indonesia Stock
Exchange through a representative of the Capital Market Information Center (PIPM), which is located at Jl. Dr. Sam Ratulangi
No. 124, Makassar. Our research was conducted in two months, from March to April 2018. The population of this study were
all manufacturing companies listed on the Indonesia Stock Exchange in the observation period from 2014 to 2016. While the
sample of this research is a company selected from the population with purposive sampling criteria, namely as many as 10
companies. Sources of data in this study are secondary data. The data collection method used is the documentation method. The
statistical method used to test the hypothesis is to use multiple regression with the help of SPSS for windows software. Our
research results show that Human Capital Efficiency (HCE) has a positive and significant effect on Return On Assets, Structural
Capital Efficiency (SCE) has a positive and insignificant effect on Return On Assets. And Capital Employed Efficiency (CEE)
has a positive and significant effect on Return On Assets.
Keywords: Intellectual Capital, Financial Performance
1. Introduction12
In this era of globalization, companies are increasingly motivated and motivated to improve their performance so that
they are able to compete and maintain the sustainability of the company's operations. The company must immediately change
its strategy from a labor-based business to a knowledge-based business, so that its main characteristic is becoming a science-
based company. (Sawarjuwono, 2003) believes that the prosperity of a company will depend on a transformation and
capitalization creation of knowledge itself. In facing competition and the development of today's business world, people
have realized that intellectual capital is a force that can drive economic growth. Therefore, intellectual capital plays an
important role in today's business world. Of course, based on the changes that have occurred, the identification, measurement
and disclosure of accountants for these changes in financial statements will certainly bring new challenges. However, this
also makes it difficult to estimate the firm's value. Because it is not only physical assets, but we also have to estimate the
Intellectual Capital (IC) value of a company (Ulum, 2008). The emergence of this difficulty is due to the nature of Intellectual
Capital (IC) which is intangible assets (intangible assets).
The importance of intellectual capital can be seen when an investor decides to invest in a company. For making
investment decisions, investors need information about the state of the company (Humaira & Sagoro, 2018). The condition
and success of a business can be seen from the company's financial performance which is displayed through its financial
statements. Companies should be able to display financial performance in which liquidity, solvency and profitability
areguaranteed from time to time. Alevel of profitability highin the company will increase the company's competitiveness
(Dewi, 2008). A high profit rate indicates future growth of the company. Company activity shows the level of effectiveness
that is in the company. The existence of a high level of effectiveness indicates a high growth opportunity for the company
in the future.
1* First Author and Corresponding Author. Department of Management, Faculty of Economics, Universitas Muhammadiyah, Palu City, Central Sulawesi,
Indonesia, [ Email: rajindra.fekonump@gmail.com ]

The company value is determined through the management performance and the company's financial performance
(Hasnawati, 2005). Management performance can be seen from the internal conditions of the company, how managers
manage the company effectively and efficiently in realizing the company's stated goals, while financial performance can be
seen from the financial condition in the company's financial statements. The success of the company is not only seen from
the performance that can be measured through the company's current financial ratios, but the existing resources in the
company should be able to produce financial performance that continues to increase from year to year, so that the company's
survival can be guaranteed (Arianie & Puspitasari, 2017). The survival of the company and the company's financial
performance are not only generated by tangible assets, but more importantly, intangible assets in the form of human resources
(HR) that manage and utilize existing company assets. Intellectual Capital is a way to gain a competitive advantage and is a
very important component for the prosperity, growth and development of companies in the new knowledge-based economy.
Increasing attention to intellectual capital in providing added value and excellence for the company, but the exact
measurement has not been determined. Some experts define Intellectual Capital in three categories, namely human capital,
structural (organizational) capital and relational (customer) capital (Firer & Mitchell Williams, 2003).
Developments and innovations force the company to improve its strategy and also require the company to present the
company's financial statements as well as possible. (Rafinda et al., 2013) Andi stated that the preparation of financial
statements by a company is a form of management responsibility to stakeholders. According to (Jafri & Mustikasari, 2018)
aset tak berwujud perlu dievaluasi agar laporan keuangan lebih informatif, sehingga perusahaan dengan aset berupa modal
intelektual dapat sepenuhnya melaporkan seluruh nilai perusahaan. Pengungkapan Intellectual Capital dalam laporan
keuangan ini menjadi suatu kebutuhan yang sangat penting untuk dilakukan. Dengan adanya pengungkapan dan pengelolaan
Intellectual Capital yang efektif dan efisien, dapat membantu meningkatkan kinerja keuangan perusahaan dan tentu saja
akan menumbuhkan kepercayaan dari stakeholder (Yulandari & Gunawan, 2019).
When stakeholders begin to trust the company's financial performance, going concern will also increase and can affect
the return company's stock. Therefore, disclosure of intellectual capital is able to provide a positive signal for investors and
attract investors to invest in a company (Septia, 2018).
In Indonesia, the phenomenon of Intellectual Capital (IC) began to emerge after the existence of PSAK No. 19 (revised
2011) regarding intangible assets. According to PSAK No. 19, intangible assets are non-monetary assets that can be
identified and have no physical form, and are owned for use in producing or delivering goods or services, leased to other
parties, or for administrative purposes (IAI, 2011). One of the information needed by investors to assess a company's
capability is information on Intellectual Capital (IC). This information is needed to create better future wealth. Its
development has attracted the attention of researchers over the past few years (Nurhayati et al., 2019). Based on accounting
research, Intellectual Capital (IC) is associated with intangible assets, knowledge, and innovation which are described as
valuable assets that are increasingly developing in a knowledge-based economy. The accounting profession today must be
able to make it happen in an account (Firer & Mitchell Williams, 2003). Based on the Resource-Based Theory, it is concluded
that Intellectual Capital (IC) meets the criteria as a unique resource capable of creating a company's competitive advantage
so that it can create value for the company, and can be used to formulate and implement strategies so as to improve company
performance for the better.
Until now, research on intellectual capital which is related to company performance has been carried out a lot, both
domestically and abroad and has also produced various research results. The relationship between the Value Added
Intellectual Coefficient (VAIC ™) which consists of three components, namely Human Capital Efficiency (HCE), Capital
Employed Efficiency (CEE), and Structural Capital Efficiency (SCE). Human Capital Efficiency (HCE) indicates the ability
of the workforce to generate value for the firm from the funds spent on that labor. Structural Capital (SC) is the infrastructure
owned by a company in meeting market needs. Structural capital is the supporting infrastructure for humans capital as a
means and infrastructure to support employee performance. Therefore, even if employees have high knowledge, but the
supporting facilities and infrastructure are not sufficient, the employees' capabilities will not generate intellectual capital.
Capital Employed Efficiency (CEE) is an indicator of the efficiency of the added value of capital used. CEE is the ratio of
VA to CE. CEE describes how much added value a company generates from the capital it uses. CEE is a calculation of the
company's ability to manage capital (Nurhayati et al., 2019). There have been many studies similar to this research,
including research conducted by (Dwi, 2012) in banking companies at Bank Indonesia in 2006-2009 about the influence of
Intellectual Capital on the Return on Assets (ROA) of banks shows that there is a positive influence between the two
variables.
In this study, the objects to be tested are consumer goods sector manufacturing companies listed on the IDX with a three-
year period, namely 2014 to 2016. Manufacturing companies in the consumer goods sector were selected as objects in this
study because manufacturing companies in the consumer goods sector are urgently needed. human resources who have
special expertise and skills in carrying out company operational activities. The motivation for this study was due to the
inequality of research results between previous studies. Another motivation is that there are suggestions for future research
to use other performance measures in order to produce a better R square. Based on research conducted by (Yulandari &
Gunawan, 2019), shows that the R square value obtained is relatively small, which is less than 10%. According to Ghozali
(2011), a small R square value means that the ability of the independent variables to explain the variation of the dependent
variables is very limited, so it is necessary to measure other performance variables which are expected to increase the R
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Square.
This study aims to analyze the effect of intellectual capital (IC) on the financial performance of public companies in
Indonesia, based on this research (Ulum, 2008) who examined the effect of Intellectual Capital (IC) on the financial
performance (ROA and EPS) of public companies in Indonesia. This study adds the ROE variable which refers to the
research (Nurhayati et al., 2019), because Intellectual Capital (IC) is an intangible asset that plays an important role in
increasing company competitiveness, and is also used effectively to increase company profits, and ROE is the ratio used to
determine the company's capital ability to generate profits.
The contribution of this research is that companies can understand the characteristics of Intellectual Capital (IC) that
require attention in order to improve performance and vice versa, companies can get information about the components of
Intellectual Capital (IC) which are the main drivers or creators of company value. Furthermore, this can be applied to the
company's resource management strategy in order to gain a competitive advantage.
This study uses three types of theory as the foundation, namely: Signaling Theory, Resources Based Theory / Resources
Based View, and Stakeholder Theory. Signaling theory explains that existing information will provide an attractive signal to
generate a positive response. Financial statement information will provide a signal for investors and other parties to make
decisions. Financial statement information becomes important information in the correct decision-making process.
Resource-based view (RBV) considers company resources as the main driver of company competitiveness and performance.
These resources include tangible assets and intangible assets that are used effectively and efficiently to implement certain
competitive and profit strategies. According to (Fontaine, 2006) Stakeholders are any groups or individuals who influence
or are influenced by the achievement of organizational goals, but in 2004 Freeman defined stakeholders as a group that is
very important for the continuity and success of the company.
Intellectual Capital (IC) is an invisible asset and it is a combination of human, process and customer factors that give a
company a competitive advantage. Intellectual Capital (IC) is recognized as one of the most important intangible assets in
the information and knowledge era. Intellectual Capital (IC) by (Nurhayati et al., 2019), refers to the knowledge and abilities
possessed by a social collectivity such as an organization, intellectual community, or professional practice. Intellectual
Capital (IC) represents a valuable resource and the ability to act based on knowledge. (Oktari et al., 2016) defines intellectual
capital as material that has been formalized, acquired, and utilized to produce higher value assets. (Yuniasih et al., 2018)
states intellectual capital as intellectual material, which includes knowledge, information, intellectual property and
experience that can be used collectively to create wealth. Meanwhile (Sunarsih & Mendra, 2017) argue that intellectual
capital is information and knowledge that is applied in work to create value.
Fontaine, (2006) gives the view that company performance is the result of many individual decisions made continuously
by management. From this point of view, it can be seen that performance is an indicator of good or bad management
decisions in decision making. Company performance is a description of the company's financial status, which can be
analyzed through financial analysis, so that it can be seen whether the company's financial status is good or bad, which
reflects the performance of a certain period of work. Measurement of company performance is indispensable in relation to
customer satisfaction, internal processes, and activities related to improvements and innovations in organizations that lead
to future financial returns (Sulastri, 2013).
One way to assess a company's financial performance is to use financial ratio analysis. Types of financial ratio analysis
are used to analyze the company's financial performance according to (Ismanu & Kusmintarti, 2018) are as follows: (1)
Liquidity ratio is a ratio that aims to determine the company's ability to pay short-term obligations. (2) The solvency ratio is
the ratio to determine the company's ability to pay its obligations if the company is liquidated. (3) Profitability ratio is the
ratio to determine the company's ability to generate profits at a certain level of sales, assets and share capital. (4) The activity
ratio is the ratio to measure the effectiveness of the company in utilizing existing resources under its control. (Asna & Graha,
2006) states that ratio analysis shows the relationship among selected items of financial statement data. To perform financial
ratio analysis, it is necessary to calculate financial ratios that reflect certain aspects. Ratio analysis according to (Khikmawati
& Agustina, 2015) is a relationship or balance (mathematical relationship) between a certain amount and another. By using
ratio analysis, it can be seen whether the good or bad condition or financial position of the company, especially if the ratio
is compared with the ratio used as the standard.
In order to obtain good financial ratios and financial information, companies need to manage their assets so that they can
be used effectively and efficiently. Asset management is not only carried out on tangible assets, but intangible assets such
as Intellectual Capital need to be managed in such a way as to become the Company's competitive advantage. Intellectual
Capital is the main key to the Company's success. Without the existence of intellectual capital, the company will not be able
to run its business even with abundant wealth, because it is human capital that empowers all company assets to achieve the
company's goals.
According (Fontaine, 2006), the benefits of company performance appraisal include: to measure organizational
achievement within a certain period of time, performance evaluation can also be used to evaluate the company's contribution
to the achievement of overall company goals, can be used as a basis for determining future corporate strategy, providing
guidance in decision making and activities organization, and the final benefits become the basis for determining investment
policies to increase the efficiency and productivity of the company.
Margaretta et al., (2019) revealed that there are several objectives of evaluating company performance, including:
21
determining the level of liquidity, determining the level of solvency, determining the level of profitability or profitability,
and determining business stability. To measure company performance, measuring tools are used to evaluate the company's
financial statements. The financial report is a summary of the recording process and a summary of financial transactions that
occurred during the year. Complete financial statements typically include balance sheets, income statements, changes in the
statement of financial position (which can be disclosed in various ways, such as a cash flow statement or a statement of
funds flows), notes and other reports, and explanations. material that is part of the financial statements. Financial reports are
used to evaluate the company's financial performance. Financial reports are also the basis for investors to make decisions to
buy, hold or sell investments, because we can assess the health of the company based on the company's financial statements.
According (Margaretta et al., 2019) evaluation of a company's financial performance is usually measured by financial ratios.
Company performance can be measured by financial and non-financial elements, the financial elements used in this study
are return on assets (ROA), asset turnover (ATO), growth in revenue (GR), and market to book value (MB) while measuring
elements non-financial using a balance scorecard developed by Kaplan and Norton (Hartono, 2001).
Profitability is the ability of a company to generate profits within a certain period of time. Good profitability will
encourage investors to invest in the company. Return on Asset (ROA) describes the ratio of annual profit after tax to total
assets. Return On Assets is the ability of a business unit to earn a return on a number of assets owned by the business unit,
(Karlina et al., 2019). This ratio measures the rate of return on investment that the company has made using all its assets.
Profitability ratio according to (Masyitah & Harahap, 2018) is measuring the company's ability to generate profits
(profitability) at the level of sales, assets, and certain share capital. While (Anita & Dewi, 2019) states that the profitability
ratio profitability ratio is a ratio that measures the efficiency of the use of company assets. The financial performance used
in this study is part of the profitability ratio, namely Return on Assets. Return on Asset according to (Dwi, 2012) is a ratio
that measures the company's ability to generate net income based on a certain level of assets. A high ratio indicates the
efficiency of asset management, which means management efficiency.
Intellectual Capital is an intangible asset or intangible asset that is gross to the eye. According to (Purnomosidhi; Setiono
& Rudiawarni, 2017), Intellectual Capital is information and knowledge that can create value opportunities for any company.
At the same time (Sawarjuwono, 2003) points out Intellectual Capital is a material knowledge (knowledge, information,
intellectual property, experience) that can be used to create wealth. According to the stakeholder theory concept, Pulic
divides the classification of intellectual capital in terms of value added obtained from the difference between the company's
income (input) and all costs (output). Furthermore, the added value of Intellectual Capital is divided into capital employment
(VACA), human capital (VAHU), and structural capital (STVA). High human capital will be able to encourage increased
financial performance. Human capital is a combination of knowledge, skills, innovation and a person's ability to carry out
their duties so that they can create value. Human capital reflects the collective ability of a company to produce the best
solutions based on the knowledge possessed by the people in the company.
Structural capital is an organizational capability covering infrastructure, information systems, routines, procedures and
organizational culture that supports employee efforts to produce optimal intellectuals. In an organization that has good
procedures, intellectual capital will achieve optimal performance (Septia, 2018). Relational capital is a harmonious
relationship between a company and its partners. Relational capital is knowledge that is formed in marketing channels to
develop a company's potential through business operations. High relational capital will be able to encourage improvements
in financial performance.
In this study, the Intellectual Capital measurement technique used was the Pulic model measurement technique. The
combination of the three value added from Human Capital Efficiency (HCE), Structural Capital Efficiency (SCE), Capital
Employed Efficiency (CEE) is symbolized by the name VAIC ™ developed by Pulic. (1998). VAIC ™ starts with calculating
the value added (VA). According to Pulic (1998), VA is calculated as the difference between Output (total sales and other
income) and Input (selling expenses and other expenses, except employee expenses). This method consists of calculations
of human capital efficiency (HCE), structural capital efficiency (SCE), and capital employed efficiency (CEE)(Nurhayati et
al., 2019).
Human Capital Efficiency (HCE) indicates the ability of the workforce to generate value for the company from the funds
spent on that labor. HCE shows how much Value Added (VA) can be generated with funds spent on labor (Ulum, 2008).
Structural Capital (SC) is the infrastructure owned by a company in meeting market needs. Structural capital is the supporting
infrastructure for human capital as a means and infrastructure to support employee performance. CEE is an indicator for VA
created by one unit of physical capital. This ratio shows the contribution made by each CE unit to the company's VA
(Nurhayati et al., 2019).
This research is a quantitative research. This research was conducted in less than 2 (two) months, namely from March to
April 2018. The population of this study were all manufacturing companies listed on the Indonesia Stock Exchange in the
observation period from 2014 to 2016. While the sample of this study was Companies selected from the population with
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purposive sampling criteria, namely as many as 10 companies. Sources of data in this study are secondary data, namely data
that we obtain indirectly or through intermediary media. The data in question is financial statements. The data collection
method used is the documentation method. The statistical method used to test the hypothesis is to use multiple regression with
the help of SPSS for windows software. The several test stages in this research are: descriptive statistical analysis, and classical
assumption test.

Result Analysis
Based on the results of descriptive statistics, there were 30 observational data obtained from the results of the
multiplication between the study period, namely for 3 years from 2014 - 2016 with the number of sample companies, namely
as many as 10 companies.
Table 1. Statistik Deskriptif

HCE 30 1.19 6.31 3.2073 1.44806
SCE 30 .16 .84 .6148 .18867
CEE 30 .19 2.32 .5513 .47915
ROA 30 3.63 43.17 12.4030 9.60719
The table shows the minimum value of Human Capital Efficiency (HCE) of 1.19 and the maximum value of 6.31. The
average value of 3.2073 indicates that the Human Capital Efficiency (HCE) has a high enough effect. The standard deviation
of Human Capital Efficiency (HCE) is 1.44806. The minimum value for Structural Capital Efficiency (SCE) is 0.16 and the
maximum value is 0.84. The average value of 0.6148 indicates that Structural Capital Efficiency (SCE) has a high enough
effect. The standard deviation of Structural Capital Efficiency (SCE) is 0.57141. The minimum value for Capital Employed
Efficiency (CEE) is 0.19 and the maximum value is 2.32. The average value of 0.5513 indicates that Capital Employed
Efficiency (CEE) has a high enough effect. The standard deviation of Capital Employed Efficiency (CEE) is 0.47915. The
minimum value of Return of Assets (ROA) is 3.63 and the maximum value is 43.17. The average value of 12.403 indicates
that the Return of Assets (ROA) has a high enough effect. The standard deviation of Return of Assets (ROA) is 9.60719.
The normality test is used to determine whether in a regression model, the resulting error has a normal distribution or
not. In this study, to test the normality of the data, the Normal P-P Plot of Regression Standardized Residual graph is used.
Based on Figure 1, it can be seen that the dots spread around the diagonal line, and the direction of the spread follows the
direction of the diagonal line. This shows that the regression model is feasible because it meets the assumption of normality.
Figure 1. Normality Test Results
The multicollinearity test aims to see whether or not there is a high correlation between the independent variables in a
multiple linear regression model. Based on table 2, it can be seen that the Human Capital Efficiency (HCE), Structural
Capital Efficiency (SCE) and Capital Employed Efficiency (CEE) variables have a tolerance value above 0.1 and VIF is less
23
than 10. This means that the regression equation model does not exist multicolonearity symptoms so that the data can be
used in this study.
Table 2. Multicollinearity Test Results
Model Tolerance VIF
1 (Constant)
HCE .107 9.330
SCE .131 7.644
CEE .508 1.968
a. Dependent Variable: ROA
The autocorrelation test aims to test whether in a linear regression model there is a correlation between confounding
error in period t and confounding error in period t-1 (previous). From table 3, the Durbin-Watson coefficient is 0.944 and
the F table value is 73.497. Where the value of DW <F table (0.944 <73.497) thus, it can be concluded that in the regression
between the independent variables Human Capital Efficiency (X1), Structural Capital Efficiency (X2) and Capital Employed
Efficiency (X3) on Return On Assets (Y) there is no autocorrelation.
Table 3. Autocorrelation Test
Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson

1 .946a .895 .882 3.29529 .944
a. Predictors: (Constant), CEE, SCE, HCE
b. Dependent Variable: ROA
The heteroscedasticity test aims to see whether there is an inequality of variance in the residuals from one observation
to another. Based on Figure 4, the scatterplot graph shows that the data is spread out on the Y axis and does not form a clear
pattern in the distribution of the data. This shows that heteroscedacticity does not occur in the regression model, so the
regression model is appropriate to be used to predict Return On Assets with influencing variables, namely Human Capital
Efficiency (X1), Structural Capital Efficiency (X2) and Capital Employed Efficiency (X3).
Figure 2. Heteroscedasticity Test Results
After the classical assumption test results are carried out and the overall results show that the regression model meets
the classical assumptions, the next step is to evaluate and interpret the multiple regression model.
Table 4. Regression Test Results
Model Unstandardized Coefficients Standardized t Sig.

Coefficients
B Std. Error Beta
(Constant) -6.684 2.703 -2.472 .020
HCE 3.797 1.291 .572 2.941 .007
1
SCE 2.127 8.967 .042 .237 .814
CEE 10.162 1.792 .507 5.672 .000
24
Based on the table above, the regression equation formed in this regression test is:
Y = -6,684 + 3,797 X1 + 2,127 X2 + 10,162 X3 + e
This model can be interpreted as follows: 1). The constant value of -6.684 is this indicates that, if the independent variable
(Human Capital Efficiency, Structural Capital Efficiency and Capital Employed Efficiency) is zero (0), then the value of the
dependent variable (Return On Asset) is -6.684 units. 2). The regression coefficient for Human Capital Efficiency (b1) is
3,797 and is positive. This means that the value of the Y variable will increase by 3,797 if the value of the X1 variable has
increased by one unit and the other independent variables have a fixed value. The coefficient which is positive indicates that
there is a direct relationship between the Human Capital Efficiency (X1) variable and the Return On Asset (Y) variable. The
higher is owned by the company, the Return On Assets will increase. 3). The regression coefficient for Structural Capital
Efficiency (b2) is 2.127 and is negative. This means that the value of the Y variable will increase by 2.127 if the value of
the X2 variable has increased by one unit and the other independent variables have a fixed value. The positive coefficient
indicates that there is a direct relationship between the Structural Capital Efficiency (X2) variable and the variable Return
On Asset (Y) value. The higher the Structural Capital Efficiency ratio owned by the company, the higher the Return On
Assets. and 4). The regression coefficient for Capital Employed Efficiency (b3) is 10.162 and it is positive. This means that
the value of the Y variable will increase by 10,162 if the value of the X2 variable has increased by one unit and the other
independent variables have a fixed value. The coefficient which is positive indicates that there is a direct relationship
between the Capital Employed Efficiency (X3) variable and the Return On Asset (Y) variable. The higher the company's
Capital Employed Efficiency, the higher the company's Return On Assets.
The coefficient of determination test aims to determine how much the ability of the dependent variable can be explained
by the independent variable. Table 5 shows the R number of 0.946 which indicates that the relationship between return on
assets and the three independent variables is very strong, because it is in a very strong definition where the number is above
0.8. While the R square value of 0.895 or 89.5% indicates that the variable Return on Assets can be explained by the Human
Capital Efficiency, Structural Capital Efficiency and Capital Employed Efficiency variables of 89.5% while the remaining
10.5% can be explained by other variables not found in this study.
Table 5. R2 Test Results

1 .946a .895 .882 3.29529 .944
a. Predictors: (Constant), CEE, SCE, HCE
b. Dependent Variable: ROA
Table 4 shows that Human Capital Efficiency has a significant level of 0.007, which is less than 0.05. This means that
H1 (Human Capital Efficiency) is accepted and Ho is rejected, so it can be said that Human Capital Efficiency has a
significant effect on Return On Assets. The t value of +2.941 indicates that the effect is positive on the dependent variable.
Structural Capital Efficiency has a significant level of 0.814 which is greater than 0.05. This means that H2 (Structural
Capital Efficiency) is rejected and Ho is accepted, so it can be said that Structural Capital Efficiency has no significant effect
on Return On Assets. The t value of 0.237 shows that the effect is positive on the dependent variable. Capital Employed
Efficiency has a significant level of 0.000, which is less than 0.05. This means that H3 (Capital Employed Efficiency) is
accepted and Ho is rejected, so it can be said that Capital Employed Efficiency has a significant effect on firm value. The t
value of +5.672 shows that the effect given is positive on the dependent variable.
Discussion
Hypothesis test results show that Human Capital Efficiency (HCE) has a positive and significant effect on Return On
Assets. The greater the Human Capital Efficiency (HCE), the higher the Return On Assets. Human capital will increase if
the company is able to use the knowledge possessed by its employees. Companies that have good human capital will create
sources of innovation and company progress. The higher the HCE, the higher the ROA of the company. Therefore, Human
Capital Efficiency (HCE) has a positive effect on ROA. When the company's Human Capital Efficiency (HCE) is high, it
will provide good news for investors so that changes in stock trading volume are positive. Hypothesis test results show that
Structural Capital Efficiency (SCE) has a positive and insignificant effect on Return On Assets. This means that partially
SCE has a positive effect on the Return On Asset variable, although the increase or decrease in SCE does not have a
significant effect on Return On Assets. Structural capital gives the company the ability to fulfill the company's routine
processes and structures that support employees' efforts to produce optimal intellectual performance. Hypothesis test results
show that Capital Employed Efficiency (CEE) has a positive and significant effect on Return On Assets. The positive effect
shows that the effect of Capital Employed Efficiency (CEE) is in the same direction as Return On Asset, or in other words,
a good / high Capital Employed Efficiency (CEE) will affect Return On Asset.
25
4. Conclusions
The conclusion of our research is: Human Capital Efficiency (HCE) has a positive and significant effect on Return On
Assets in manufacturing companies listed on the Indonesia Stock Exchange for the observation period 2014-2016. Structural
Capital Efficiency (SCE) has a positive and insignificant effect on Return On Asset in manufacturing companies listed on
the Indonesia Stock Exchange for the 2014-2016 observation period. Capital Employed Efficiency (CEE) has a positive and
significant impact on Return On Assets in manufacturing companies listed on the Indonesia Stock Exchange for the 2014-
2016 observation period.
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M. Muttiarni / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 28-36

The Study of Individual Morality and Internal Control and the Relationship on
Accounting Fraud
1*
M. Muttiarni
Received: November 08, 2020 Revised: February 27, 2021 Accepted: March 01, 2021
Abstract
Good governance is required by society to create a government free of corruption, collusion, and nepotism. According to this
study, individual morality and internal control impact accounting trends in Makassar City Regional Work Units. This study's
data was obtained directly from the source without the use of intermediaries, namely by taking the data to the Makassar City
Regional Revenue agency office and processing it using a Direct Questionnaire with 43 respondents as research objects.
Hypothesis testing using the data analysis technique used, multiple linear regression with the Statistical Package for Social
Science, was used for the analysis method (SPSS). According to hypothesis testing results, individual Morality and Internal
Control have a negative and significant effect on the Tendency of Fraud Accounting. The study's findings are expected to lead
to a greater focus on individual morality and internal control systems to reduce accounting fraud.
Keywords: Internal Control; Accounting Fraud; Individual Morality
1. Introduction12
All Indonesians want a government free of corruption, collusion, and nepotism, so they demand good governance
(Heriningsih & Rusherlistyani, 2013). As part of the public's expectation of government accountability, the public expects a
transparent financial report with adequate disclosure (Yuliant & Gamayuni, 2017). The importance of disclosing all
information in local government reports is to avoid misunderstandings during the reading process. As a result, the
government's financial statement disclosure should meet the requirements of existing regulations and include disclosure
elements that will make financial statement users' lives easier (Setyowati, 2016). The public's demand for corruption-free,
collusion-free, and nepotism-free governance in Indonesia. As part of the public's expectation of government accountability,
the public expects a transparent financial report with adequate disclosure (Rahim, Ahmad, Muslim & Nursadirah, 2020).
The importance of disclosing all information in local government reports is to avoid misunderstandings during the reading
process. Government financial reports produced as a result must adhere to the principles on time and be prepared by
Government Accounting Standards, as defined by Government Regulation Number 71 of 2010. In fact, the Supreme Audit
Agency discovered irregularities in government financial report audits. As a result, the government's financial statement
disclosure should meet the requirements of existing regulations and include disclosure elements that will make financial
statement users' lives easier (Setyowati, 2016).
Accounting data in the form of financial reports is essential in the government sector. The presentation of financial
statements is a form of local government accountability that demonstrates that the government has exercised good
governance to meet the community's aspirations and the state's goals (Mardiasmo, 2009; Muna & Harris, 2018; Muslim,
Ahmad & Rahim, 2019). The risk of fraud is inextricably linked to financial management in public and private sectors
(Sholehah, Rahim & Muslim, 2018). To avoid recording errors or acts of accounting fraud, government financial reports
must be prepared by parties with expertise and competence in the area of regional financial accounting (Randiza & Anisma,
2016; Apriliana & Budiarto, 2018; Rahim et al., 2020).
The purpose of this study is to show that fraud detection requires serious consideration. A type of fraud or dishonest
1* First Author and Corresponding Author. Department of Accounting, Faculty of Economics and Business , Universitas Muhammadiyah Makassar,
Makassar City, South Sulawesi, Indonesia, [ Email: muttiarni@unismuh.ac.id ]
behavior is what the term fraud means (Tuanakotta, 2007; Sudarmo, 2015). Wahyuni, (2019) defines fraud as all kinds of
thoughts and efforts by a person to gain advantage from others by coercing the truth, and covering all unexpected, scheming
or hidden ways, as well as every way that isn't good. The difference between fraud and error is the underlying action, whether
it was done intentionally or not. It's called fraud if the action is done on purpose, and it's called an error if it's done by
accident (Prasetyo, Kamaliah, & Hanif, 2015). In financial statements, fraud is an intentional misstatement or loss of amount
or disclosure (Ferdian & Naim, 2006). Fraud is an intentional act committed for personal gain that has resulted in a financial
loss to one or more parties or institutions (Fahmi, 2008).
According to the Indonesian Corruption Watch (ICW), 2018 was a year marked by a significant increase in corruption
cases. Transparency International (TI) releases the Corruption Perception Index (CPI) every year, a global index that
measures corruption. Indonesia received a 40 in 2018 and placed it 85th out of 180 countries in terms of corruption. This
information demonstrates that the Indonesian government must prioritize the prevention and elimination of corruption.
Indonesia has a score of 40, indicating that it is still unable to overcome its corruption problems (Corruption Perception
Index, 2019). Asset protection and compliance with laws and regulations are top priorities in government circles.
Safeguarding state assets is a critical issue that needs to be addressed by the government; if state assets are not properly
protected, embezzlement, theft, and other forms of manipulation will be easy to perpetrate (Sholehah, Rahim, & Muslim,
2018). According to data from the Corruption Eradication Commission (KPK), as of December 31, 2019, bribery corruption
is the most common type of corruption in Indonesia. This study focuses on cases of fraud in local government agencies.
Table 1. Corruption in Different Case Types
Cases 2011 2012 2013 2014 2015 2016 2017 2018 2019
Purchasing goods and services 10 8 9 15 14 14 15 17 18

Getting a License 0 0 3 5 1 1 2 1 0
Bribery 25 34 50 20 38 79 93 168 119
Accusations 0 0 1 6 1 1 0 4 1
Abuse of the Budget 4 3 0 4 2 1 1 0 2
TPPU 0 2 7 5 1 3 8 6 5
Hindering the KPK Process 0 2 0 3 0 0 2 3 0
Total 39 48 70 58 57 99 121 199 120
In 2019, state losses were more likely to occur due to weaknesses in the Internal Control System (SPI) and non-
compliance with legislation. It is necessary to have an auditor's role as part of an organization's internal control system to
reduce accounting fraud. The internal control system is critical to an organization's ability to protect itself from unwanted
events, including those perpetrated by its own employees (Sholehah et al., 2018). Based on the description of this research
phenomenon, it is clear that auditors' ability to detect fraud is a critical skill to prevent and detect fraud as soon as possible.
An auditor's skill or expertise in detecting fraud in financial statements is known as their ability to detect fraud (Hartan &
Waluyo, 2016; Rahim et al., 2019; Muslim et al., 2020).
Accounting fraud can be caused by external factors in the company and internal factors within the individual. According
to (Ramamoorti, 2008; Zimmerman, 1977), behavioral factors are at the root of the fraud problem. According to Setyowati,
(2016), agency problems also exist in government organizations because the People are principles that mandate the
government as an agent to carry out government tasks to improve the welfare of the people. Politicians can also be referred
to as principles because they take on the role of the people. Still, they can also be referred to as agents because they carry
out supervisory duties entrusted to them by the people. This theory implies that the principles of both the people and the
government must directly supervise agents such as politicians. Politicians, as principles, require information to assess the
government's performance. According to Fadzil & Nyoto (2011), the central government and local governments have a
principal-agent relationship. The principal is the federal government, and the local government is the agent. As a unitary
state, the local government is accountable to both the voters and the central government. According to (Fadzil & Nyoto,
2011), agency relationships cause information asymmetry, which causes opportunism, moral hazard, and advertisement
selection. When viewed from the perspective of the legislative agency's relationship with the people, the legislature acts as
an agent to protect the people's interests (principal). Still, there is no clear mechanism, regulation, or control in delegating
people's authority to the legislature. This frequently results in budget distortion prepared by the legislature. The budget does
not reflect resource fulfillment allocation to the community but instead prioritizes the legislative parties' self-interests. If this
occurs, the approved budget is likely to be used to launch acts of theft of people's rights, also known as corruption (Mauro,
1998; Keefer & Khemani, 2003).
The fraud triangle concept was first introduced by (Cressey 1953). Cressey concluded that a trusted person is a breach
of trust when he sees himself as someone who has financial problems that he can't tell others about, realizing that this
problem can be solved secretly by abusing his authority as a trustee in the financial sector and his daily behavior allows him
29
to do so. According to Tuanakotta (2007), fraud has three distinct characteristics. The fraud triangle comprises three elements
present in most cases of fraud: pressure, opportunity, and rationalization (Kurniawati, 2012).
Individual morality refers to a person's ability to solve ethical problems. Personal morality has a negative and
insignificant effect on accounting fraud (Sholehah et al., 2018; Eliza, 2015; Novikasari, Desmiyawati & Silfi, 2017).
Individual morality will influence a person's ethical behavior, according to the findings of several studies presented.
Individuals with low personal morality will act differently than those with high individual morality. Individuals with low
individual morality are more likely to fraud, whereas those with high individual morality are less likely to fraud. Moral
reasoning is when individuals determine what is right or wrong, good or bad, and how this affects ethical decisions (Alkam,
2013; Syarhayuti, 2016). Hanif & Naibaho (2014) discovered that moral reasoning influences the auditor's quality of the
audit. Auditor maintains his professional values to provide a reliable audit opinion if he has moral reasoning. However,
another study (Indira Januarti, 2010) claims that moral reasoning hurts audit quality; this study shows that even when
respondents have poor moral reasoning, the audit quality remains high. This is demonstrated in a negative and significant
manner.
H1: In the Regional Apparatus Organization of South Sulawesi Province, individual morality has a
significant negative impact on accounting fraud
Accounting control is a part of the internal control system that includes organizational structure, methods, and measures
coordinated to maintain organizational wealth and ensure the accuracy and reliability of accounting data (Bastian, 2006).
An internal control system is implemented comprehensively within the central government and regional governments to
achieve organizational goals through effective and efficient activities, financial reporting reliability, asset safeguarding, and
adherence to laws and regulations, according to Government Regulation Number 60 of 2008. The government's internal
control system is based on PP SPIP Number 60 of 2008. It includes the control environment, risk assessment, control
activities, information and communication, and monitoring. Internal control is essential for maintaining the integrity of
management personnel. According to Puspasari & Suwardi (2012), internal control is a policy or procedure designed to
reduce data loss due to security threats. Internal controls can help a company reduce accounting fraud (Sholehah, Rahim &
Muslim, 2018; Eliza, 2015; Novikasari, Desmiyawati & Silfi, 2017; Hamdani, 2017).
H2: In the Regional Apparatus Organization of South Sulawesi Province, internal control has a significant
negative effect on accounting fraud.
Using information data in the form of numeric symbols and analyzed using statistics, this study uses a quantitative
approach to reveal the effect of individual morality and internal control on the tendency of accounting fraud. Researchers
distributed the questionnaire to all employees in the finance and accounting section of the SKPD office (Makassar City
Regional Revenue Agency). The questionnaire is given and is accompanied by a permit application letter and an explanation
of the research's purpose. It is in the form of experimental research case questions related to the object under study. Also, clear
instructions for filling out the questionnaire were included in distributing the questionnaire to make it easier to provide
complete answers. An independent variable, also known as a free variable, is a variable that influences or occurs due to the
dependent variable (bound). Individual The research instrument is a questionnaire with five alternative answers on a Likert
scale, each with a score, namely strongly agree (5 Point), agree (4 Point), disagree (3 Point), disagree (2 Point), and strongly
disagree (1 Point). The classic assumption tests (normality test, multicollinearity test, and heteroscedasticity test) and
hypothesis testing (coefficient of determination R2 and t-test) were used in the analysis.

Result Analysis
Gender, age, education level, and length of employment are among the questions asked about respondent characteristics
OPD officials from South Sulawesi Province were used as respondents in this study. Female respondents accounted for 28
people (65.11 percent), while male respondents accounted for 15 people (34.88 percent ). There were 19 people aged 31-40
years (44.18 percent), 13 people aged 21-30 years (30.23 percent), and 9 people aged 41-50 years (20.93 percent) and above
among the respondents. Over the last 50 years, as many as two people have died (4.65 percent ) The percentage was S1 as
many as 30 people (59.76%), S2 as many as 8 people (18.60%), and S3 as many as 5 people (62%) based on educational
level. According to the length of time spent working, 13 taxpayers (30.23%), 16 taxpayers (37.20%), and 14 taxpayers (>
30
10 years) were among the respondents (32.55 percent ).

The validity test is used to determine whether the measuring instrument that has been prepared accurately measures the
target. A measuring instrument with high validity will have a small error variant, or in other words, the test will run its course
by producing results that are consistent with the test's intent. If the calculated r value, which is the item value of the Corrected
Item-Total Correlation> from the r table at a significance of 0.05, the data is declared valid (5 percent ). The Pearson
Correlation approach was used to test the data's validity.
Table 2. Validity Test Results
Questions Corrected Item-Total Correlation (count) r-table Info

X1.1 0,483 0,301 Valid
X1.2 0,648 0,301 Valid
X1.3 0,377 0,301 Valid
X1.4 0,451 0,301 Valid
X1.5 0,459 0,301 Valid
X1.6 0,568 0,301 Valid
X1.7 0,521 0,301 Valid
X2.1 0,530 0,301 Valid
X2.2 0,567 0,301 Valid
X2.3 0,537 0,301 Valid
X2.4 0,757 0,301 Valid
X2.5 0,817 0,301 Valid
X2.6 0,757 0,301 Valid
X2.7 0,447 0,301 Valid
Y1 0,621 0,301 Valid
Y2 0,466 0,301 Valid
Y3 0,464 0,301 Valid
Y4 0,660 0,301 Valid
Y5 0,791 0,301 Valid
Y6 0,531 0,301 Valid
Y7 0,630 0,301 Valid
Table 3. Reliability Test Results
Variable Cronbach’s Alpha Reability Limits Info

Individual Morality 0,694 0,60 Reliable
Internal control 0,762 0,60 Reliable
Accounting Fraud 0,691 0,60 Reliable
Table 4. Normality Test Results (One Sample Kolmogorov-Smirnor)
Unstandardized Residual
N 43
Normal Parametersa,b Mean .0000000
Std. Deviation 2.55592159
Most Extreme Differences Absolute .088
Positive .076
Negative -.088
Test Statistic .088
Asymp. Sig. (2-tailed) .200c,d
a. Test distribution is Normal.
b. Calculated from data.
c. Lilliefors Significance Correction.
d. This is a lower bound of the true significance
31
Because the r table value obtained from the product-moment statistical table at degrees of freedom with an alpha of 5%
is greater than 0.301, the corrected item-total correlation of each question item on the variable of accounting fraud tendency
is declared valid based on table 2. This means the individual morality questionnaire can measure what needs to be measured,
ensuring that employee responses to the published questionnaire are consistent and stable over time. The reliability test was
used to see if the data collection tools were accurate, stable, and consistent. A reliability test is a tool for determining a
questionnaire's reliability that serves as an indicator of a variable. If a respondent's answer remains consistent over time, the
questionnaire is said to be reliable. If the Cronbach Alpha statistical test yields a reliability coefficient of > 0.60, the research
instrument's criteria are realistic. According to table 3, the Individual Morality variable (X1) has a Cronbach Alpha of 0.694,
the Internal Control variable (X2) has a Cronbach Alpha of 0.762, and the Accounting Fraud Tendency variable (Y) has a
Cronbach Alpha of 0.691 (Y). This means that all questionnaires used for further measurements are very good or reliable.
To determine whether the residual value is normally distributed, the normal test is used. In this study, graph analysis and
statistical tests are used to determine whether the data is normal or not.
The value of 0.200 > 0.05 in the Normal Test, as shown in Table 4, indicates that the residual value is normally distributed.
Figure 1 shows that there are points (data) scattered around the diagonal line, with the distribution of these points following
the diagonal line's direction. This means that, based on the Probability Plot normality chart analysis, the regression models
in this study meet the requirements of asymsu normal. The multicollinearity test is used to determine whether the two
variables deviate from the traditional multicollinearity assumption. If the value of the inflation factor (VIF) in the regression
model is less than 10, the variable does not have multicollinearity problems with other independent variables, according to
the multicollinearity test.
Figure 1. Normal Test Results - Normal Probability Plot
Figure 1 shows that there are points (data) scattered around the diagonal line, with the distribution of these points
following the diagonal line's direction. This means that, based on the Probability Plot normality chart analysis, the regression
models in this study meet the requirements of the normalized assumptions. The multicollinearity test is used to determine
whether the two variables deviate from the traditional multicollinearity assumption. If the value of the inflation factor (VIF)
in the regression model is less than 10, the variable does not have multicollinearity problems with other independent
variables.
Variable Tolerance VIF

Individual Morality .985 1.015
Internal control .961 1.015
Table 5 shows that all variables have a VIF value of 10 and a tolerance value of > 0.10, indicating no multicollinearity
signs. This study's Scatterplot graph appears to be spread randomly, both above and below the number 0 on the Y axis,
indicating that the regression model is no heteroskedasticity. The scatterplot method detects heteroscedasticity by examining
the distribution of the resulting points, which should be random and not form a pattern and the direction of the distribution
above or below the number 0 on the Y-axis.
32
Figure 2. Heteoscedasticity Test Results – Scatterplot
Figure 2 shows a scatterplot graph that shows the data is spread out on the Y-axis and does not form a clear pattern in
the data distribution. This demonstrates that the regression model has no heteroscedasticity, indicating that it can be used to
predict the likelihood of accounting fraud using influencing variables such as individual morality and internal control. The
next step is to evaluate and interpret the multiple regression model after the classical assumption test results have been
completed. The overall results show that the regression model meets the classical assumptions. The effect of the independent
variable on the dependent variable is determined using multiple linear regression analysis, as shown in table 6, which shows
the results of multiple linear regression as follows:
Table 6. Results of the Regression Equation
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) 6.634 3.218 3.168 .000
Individual Morality -.208 .186 -.172 -1.989 .004
Internal control -215 .192 -.181 -2.117 .002
a. Dependent Variable: Accounting Fraud
The regression coefficient values formed in this test, according to the results of the multiple linear regression test shown
in Table 6, are:
Accounting Fraud = 6.634 - 0,208X1 - 0,215X2 +e
If the independent variables, namely individual morality and internal control, are both zero, the value of the tendency for
accounting fraud is 6.634. The negative direction coefficient value of the individual morality variable is -0.208, which means
that as individual morality rises, the likelihood of accounting fraud decreases by -0.208. Meanwhile, the negative coefficient
of the internal control variable is -0.215, which means that as internal control improves, the likelihood of accounting fraud
decreases by -0.215. The determination test coefficient is used to see how much the independent variable can explain the
dependent variable's ability.
Table 7. Determination Coefficient Test
Model R R Square Adjusted R Square Std. Error of the Estimate

1 .338a .514 .593 2.657
a. Predictors: (Constant), Accounting Fraud
The results of the determination coefficient test are displayed in table 7, with an adjusted R square number of 0.514 or
51.40 percent, indicating that 51.40 percent of the variance in accounting fraud can be explained by individual morality and
internal control variables, with the remaining 48.60 percent not included in the variables examined by this study.
33
The t-test is used to determine whether the hypothesis proposed in this study is accepted or not by determining whether
the independent variable affects the dependent variable individually. Individual morality has a negative and significant effect
on the tendency of accounting fraud. The individual morality variable has a significance value of 0.004 or at a significance
level of 0.05. The findings of this study show that the higher the organization's apparatus's morale, the lower the likelihood
of cheating. Meanwhile, a significance value of 0.002 or a significance level of 0.05 for the internal control system variable
indicates that the internal control system has a negative and significant effect on the likelihood of accounting fraud. This
study's findings show that the higher an organization's internal control, the lower its risk of fraud.
Discussion
Hypothesis 1 states that individual morality has a negative and significant impact on accounting fraud. The hypothesis
testing results support this claim. This means that the hypothesis being considered has been accepted. In other words,
accounting fraud decreased as individual morality increased. Many people break the law daily, both individuals and groups,
motivated by their desire to benefit themselves at others' expense. This study's findings support the goal of agency theory,
which is to resolve issues that arise in agency relationships. One of them is the problem that occurs when the principal's and
agent's wishes or goals conflict, making it difficult for the principal to track what the agent actually does. The agent does
not always act in the principal's best interests when the agent and the principal attempt to maximize their own utility and
have opposing goals and motivations. Differences in desire, motivation, and utility between superiors and subordinates can
lead to accounting fraud. A significant factor that influences accounting fraud is an individual's morale (apparatus). The
morality of the apparatus has an impact on the likelihood of accounting fraud in a business. This study's findings also support
attribution theory, which explains how people interpret events and how that influences their thinking and behavior.
According to attribution theory, people try to figure out why people do what they do. People will try to figure out why others
act the way they do and explain their actions. The morality of individuals will have an impact on the likelihood of fraud
(fraud). According to the findings of (Sholehah, Rahim, & Muslim, 2018), individual morality has no significant negative
effect on accounting fraud. Individuals with a low sense of individual morality will behave differently than those with a high
sense of personal morality (Luthfi, Puspita, & Sulistiya, 2019). Individuals with low morality are more likely to cheat, while
those with high morality are less likely to cheat. According to (Gunayasa & Erlinawati, 2020), the lower a person's morality,
the more likely they are to cheat. Individuals with ambiguous morals are more likely to engage in unethical behavior and
commit accounting fraud.
Hypothesis 2 is supported by the hypothesis testing results, implying that the internal control system a negative and
significant impact on accounting fraud. This means that the hypothesis being considered has been accepted. This means that
the easier it is to detect fraud, the better the SPI is at meeting its goals. This means that if the agency's internal control system
is in good working order, fraud is less likely to occur. Internal control and monitoring systems in place by superiors can have
an impact on unethical and fraudulent behavior. An internal control system is one way to supervise or monitor financial
management (SPI). Because a good SPI allows a business to run smoothly (Anggara & Suprasto, 2020). According to
government regulation Number 60 of 2008, SPI is an integral process for actions and activities carried out continuously by
leadership and all employees to provide adequate confidence in achieving organizational goals through effective and
efficient activities, financial reporting reliability, safeguarding state assets, and compliance. With an effective control system
in place, operational activities can run more effectively and efficiently, reducing the agency's operational processes' risk of
irregularities. As a result, the more effective a company's internal control system is, the lower the fraud risk. This study's
findings support the goal of agency theory, which is to resolve issues that arise in agency relationships. One of them is the
problem that occurs when the principal's and agent's wishes or goals conflict, making it difficult for the principal to track
what the agent actually does. The agent does not always act in the principal's best interests when the agent and the principal
attempt to maximize their own utility and have opposing goals and motivations. Differences in desire, motivation, and utility
between superiors and subordinates can lead to accounting fraud. To achieve good monitoring results, effective internal
company control is required. This study's findings also support the attribution theory, according to which a causal attribute
causes a person's actions. The attributes of the cause influence a leader's and an authorized person's actions. Internal control
and monitoring systems in place by superiors can have an impact on unethical and fraudulent behavior. According to the
findings of (Putri & Irwandi, 2016; Sholehah, Rahim, & Muslim, 2018), internal control has a negative and significant effect
on accounting fraud (Rodiah, Ardianni, & Herlina, 2019). The better the internal control, the lower the level of fraud in a
company. An internal control system can help an organization reduce accounting fraud (Pratiwi & Budiasih, 2020).
4. Conclusions
The following conclusions can be drawn based on the data analysis findings and discussion in research: Individual
morality has a negative and significant impact on the Accounting Fraud Tendency Level in SKPD (Makassar City Regional
Revenue Agency). This is a negative influence, meaning that the higher a person's morality, the lower the accounting fraud
level. Internal control has a measurable impact. This means that the greater the level of internal control, the greater the risk
of accounting fraud. Based on the findings of a study on the influence of individual morality and internal control on the
34
tendency of accounting fraud, the following suggestions and considerations can be made: To improve internal control,
employees at the City Makassar's SKPD (Regional Income Agency) should adhere to applicable regulations more closely to
prevent and reduce accounting fraud. Individual morality, internal control, and other variables that can affect a person's
tendency to commit accounting fraud are expected to be included in future research to expand the research.
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Muhammad Su’un / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 37-44

Several factors affect the audit quality in South Sulawesi Inspectorate

1* 2
Muhammad Su’un Usman Usman
Received: January 18, 2021 Revised: March 01, 2021 Accepted: March 01, 2021
Abstract
This study aims to assess the quality of audit results at the South Sulawesi Province Inspectorate Office. The competence,
independence, objectivity, and integrity of auditors are the independent variables in this study, while the quality of audit results
is the dependent variable. Purposive sampling was used as the method of sampling. Multiple Regression Analysis was used to
analyze the data, which was then processed using SPSS 24. A questionnaire was distributed directly to the South Sulawesi
Provincial Government Internal Supervisory Apparatus to collect data. The study found that auditor competence, independence,
objectivity, and integrity have a significant positive effect on the quality of audit results, both simultaneously and partially. To
improve audit quality, auditors must constantly monitor and improve the quality of their experience and knowledge at all levels
of the Public Accounting Firm's organizational structure, including junior, senior, and higher levels, by attending training on
relevant topics. Auditors are also expected to maintain an independent mental attitude, objectivity and integrity at all times.
Keywords: Auditor Competence; Independence; Objectivity; Integrity; Audit Quality
1. Introduction12
In practice, public sector organizations have the duty and responsibility to promote good governance. The public's right
to know and be informed about government financial management is the foundation for the need for government
management transparency (Dewi, 2018). Three main aspects that support the development of good governance are
supervision, control, and inspection. The regional government is implemented in stages, starting at the district/city level and
working its way up to the provincial and departmental levels. The inspectorate conducts inspections (audits) and special
supervision at Regional Work Units (SKPD) in each Regency / City and Province. The Government Internal Supervisory
Apparatus (APIP), which includes audits, reviews, evaluations, monitoring, and other supervisory activities, is part of the
Government Internal Control System (SPIP) (Sulistiyanti, 2018). APIP's responsibilities and functions, according to
(Iswanto & Rufaedah, 2019), including making recommendations and reporting work results in the form of inspection
reports based on auditing standards for government internal control apparatus. The quality of audit results (inspection) is
defined by State Financial Audit Standards (SPKN) as an audit report containing weaknesses in internal control, fraud,
deviations from statutory provisions, non-compliance, and other issues. A quality audit can be followed up on by the auditee.
This quality level must be maintained throughout the audit, from the beginning to the end of reporting and making
recommendations (Nugraha et al., 2018).
However, there are several flaws in Indonesian government audits, including a lack of appropriate performance indicators
as a basis for measuring the performance of both the central and local governments, which is a common occurrence among
public organizations due to the difficulty of measuring the output produced in the form of public services. The number of
findings that have not been completed from 2017 to 2019 is increasing every year, according to the Eradication Commission's
follow-up evaluation of the Inspectorate's and BPK's findings in South Sulawesi Province. This fact has brought the audit
quality conducted by the auditors of the South Sulawesi Provincial Government Inspectorate into the spotlight. Because
many partners have not paid, regional company cash holders have not deposited, treasurers have not collected local taxes,
partner returns are not smooth, civil servants have not returned, civil servants' trips are suspected to be fictitious,
responsibility for eating and drinking is not appropriately, and so on, the follow-up evaluation of Inspekrorat and BPK's
findings continues to rise. This demonstrates that there are still flaws in Indonesian government audits, such as the lack of
1* First Author and Corresponding Author. Department of Accounting, Faculty of Economics and Business, Universitas Muslim Indonesia, Makassar City,
90231, South Sulawesi, Indonesia, [ Email: muhammad.su’un@umi.ac.id ]
appropriate performance indicators as a basis for measuring the performance of both the central and local governments, and
this is a common problem faced by public organizations because the output produced in the form of public services is
difficult to measure. As a result, an auditor's personal characteristics must be considered because they influence whether
they perform well or poorly. These personal characteristics include traits, motives, value systems, attitudes, knowledge, and
skills, with competence directing behavior and behavior influencing audit quality (Rahim et al., 2019). Audit quality is
important because it is used as a basis for auditors' decision-making when evaluating financial reports, and it has the potential
to restore public confidence in auditors' work, which is still a topic of debate (Nugrahadi & Sukiswo, 2019).
Figure 1. Evaluation of the Follow-Up Findings of the Inspectorate and BPK

Source : SuaraSulsel.id (2020)
Not finished
Recommendation
Findings with Follow Up
One of the factors that influence audit quality is competence. The auditor's competence will result in a learning process
and improved behavior. According to the Financial Accounting Standards Board, a competent auditor will be able to hone
sensitivity in understanding fraud and errors in the presentation of financial statements (Muslim et al., 2018). Advanced
degreed auditors will have a broader perspective on a wide range of issues. Auditors will gain a better understanding of their
fields, allowing them to learn more about a variety of issues, according to (Hajering et al., 2020). Furthermore, auditors with
sufficient knowledge will find it easier to keep up with increasingly complex developments.
Independence is another factor that influences audit quality. The audit profession's main key to producing a sound and
quality assessment of financial statements' fairness is auditor independence. According to the Supreme Audit Agency of the
Republic of Indonesia's Regulation No. 01 of 2007 concerning State Financial Audit Standards, all matters relating to the
work of auditing, inspection, and examination organizations must be free from personal, external, and organizational
interference in mental attitude and appearance. It can have an impact on independence. According to (Hamdi & Sari, 2019),
independence in supervision means no partiality or other influence in the supervision process or practice due to relationships
with relatives, friends, relatives, position status, or others. According to (Jesika et al., 2015), if the auditor has certain
relationships (for example, family relationships, financial relationships) with his clients, suspicions that the auditor will side
with his client or is not independent will arise. As a result, auditors must act freely according to the facts and avoid situations
that cause others to question their independence. According to (Ningtyas & Aris, 2016; Kurniawati et al., 2019), auditors
must gather all information necessary for making audit decisions, which must be accompanied by an independent attitude,
ensuring that the auditor's independence is maintained at all times.
One of the assumptions that influence audit quality is the objectivity of the auditor. According to the APIP Audit
Standards, the principle of objectivity requires auditors to conduct audits honestly and without compromising quality
(Cahyono et al., 2015). Individually, an auditor emerges from his neutral, fair attitude, does not want to be caught up in
conflicts of interest, is honest, diligent, and accountable to his profession. Susilo & Widyastuti, (2015) suggest that
objectivity is a mental attitude that internal auditors must maintain when performing audit tasks. The better the quality of
the examination results, the higher the level of objectivity of the auditor. Integrity is another factor that influences audit
quality. Integrity is a quality that underpins public trust. When conducting an audit, an auditor must be honest, transparent,
brave, wise, and responsible (Pitaloka & Widanaputra, 2016). Integrity can accept unintentional mistakes and honest
differences of opinion (Muslim et al., 2019).
This research is based on competency, independence, and objectivity variables. Meanwhile, the integrity variable has
been added as a new variable in this study because the researcher believes that public trust in auditors' work has begun to
erode due to the widespread reporting of auditor fraud. This study will be conducted at the South Sulawesi Province
Inspectorate to understand that many of the inspectorate's findings have not been completed in the last three years.
According to behavioral decision theory, a person has limited knowledge and acts solely on his perception of the situation.
In practice, decision-making is inextricably linked to a variety of social contexts. The social context in question in this study
is the presence of a social relationship with the auditee, pressure from the auditee, superior intervention, etc. When a person's
decisions are closely related to their personal interests, they may lose their ability to think rationally. As a result, the auditor
38
must have the competence, knowledge, and experience to produce a quality audit. Competence isn't enough if you don't
have an independent auditor's independent attitude as foundational expertise for the audit results. The causes of an event or
the outcomes obtained based on individual perceptions are referred to as attribution theory. The nature, character, attitude,
pressure of the situation, and so on all influence the cause of other people's or one's own behavior. According to attribution
theory, the auditor's integrity and objectivity will determine the audit's quality (Ferdiansyah, 2016).
Competence is defined as a worker's personal characteristics that enable him to achieve superior performance (Amanda
& Ahalik, 2018). These personal characteristics include traits, motives, value systems, attitudes, knowledge, and skills, with
competence directing behavior and performance resulting from behavior. Auditors with advanced degrees will have a
broader perspective on a variety of issues. Auditors will gain a greater understanding of the field they are working in,
allowing them to investigate various issues in greater depth. Furthermore, auditors will find it easier to follow increasingly
complex developments if they have sufficient knowledge (Asdianti et al., 2015).
H1 : Competence has a positive and significant effect on audit quality.
When providing opinions or conclusions, independence refers to the auditor's impartiality, lack of personal interest, and
refusal to be influenced by interested parties (Jesika et al., 2015). Auditor independence is a critical factor in producing high-
quality audits (Muslim et al., 2020) because auditors can lose their independence if the audit reports produced are not based
on facts and cannot be used as a decision-making tool (Hardiningsih, 2008). Audit quality is linked to independence (Asysyfa
& Rahmaita, 2018; Sunandar, 2019). In the case of auditors, independence is critical because it is the foundation for public
trust. As a result, auditors must have an independent mindset to produce high-quality audits.
H2 : Independence has a positive and significant effect on audit quality.
To be objective, internal auditors must have an independent mental attitude. To avoid situations where they cannot
provide a professional and objective evaluation, auditors should not judge everything based on the results of other people's
assessments when examining (Sihombing & Triyanto, 2019). The findings show that objectivity has a positive and
significant impact on audit quality (Nugrahadi & Sukiswo, 2019; Laksita & Sukirno, 2019). If auditors can act reasonably
and without pressure or requests influenced by certain interested parties in the audit, detachment can help institutions
maintain positive feelings about the quality of the resulting audit.
H3 : Objectivity has a positive and significant effect on audit quality
Audit quality is influenced by integrity in a significant and positive way. Auditors with a high level of integrity will
produce high-quality audits due to the public's trust in the government (Ilham et al., 2019). Furthermore, auditors must have
a personality that includes honesty, courage, wisdom, and responsibility (Amanda & Ahalik, 2018). To build trust and
provide a foundation for reliable decision-making (Gita & Dwirandra, 2018; Fitriani & Hidayat, 2013). Auditors must be
truthful and transparent and courageous, wise, and accountable (Tawakkal, 2019).
H4 : Integrity has a positive and significant effect on audit quality
This study uses a quantitative approach combined with descriptive analysis to examine the South Sulawesi Province
inspectorate's audit quality. Competence, independence, objectivity, and integrity are the independent variables, while audit
quality is the dependent variable. The participants in this study were 40 auditors from the South Sulawesi Province
Inspectorate Office. The sample is chosen based on certain or predetermined criteria (Sugiyono, 2015). Multiple linear
regression analysis is used in this study to see if the independent variable has an effect on the dependent variable. It can be
seen in the table coefficients for research using the SPSS 21 output.
Equation of regression:
Y = α + β1X1 + β2X2 + β3X3 + β4X4 + e
Description:
Y = Audit Quality
a = Constant
X1 = Competence
39
X2 = Independence
X3 = Objectivity
X4 = Integrity
β1- β4 = Regression Coefficient
e = Standard Error
Table 1. Research Sample Criteria
No Description Number of Auditors

1 JFA 1
2 Skilled Auditor 4
3 Expert Auditor 3
4 Young Auditor 5
5 Team Leader Auditor 5
6 Team Member Auditor 5
7 Technical Controlling Auditor (Dalnis) 4
8 Establishment Auditor 2
9 Public Administration Auditor 2
10 Auditor of Highways 2
11 Spatial Auditor 1
12 PSDA 1
13 P2UPD 1
14 PNPM Mandiri auditors 1
15 Goods and Services Auditor (Barjas) 1
16 Auditor Review Financial Statements 1
17 Audit Engineering Auditor 1
Total 40
The regression method was used to test the hypothesis with the help of the SPSS for Windows software, which includes:
Statistical Descriptive Test: The mean, standard deviation, variance, maximum, minimum, sum, range, kurtosis, and skewness
are all descriptive statistics that provide an overview or description of data (Ghozali, 2016). The regression analysis method
tests the influence relationship between one variable and another to test this hypothesis.

Result Analysis
An instrument is valid if it can accurately measure the desired variables and reveal data from them. The instrument's
validity level indicates how closely the collected data matches the variables in the study description in question. The R-x.y
product-moment table was used to determine whether a question item from the questionnaire instrument was valid or not,
with a significant level of 5%. When measuring a different symptom, a measuring instrument is reliable if it always measures
the extent to which the measuring device is reliable and dependable. To measure instrument reliability, use Cronbach's Alpha
based on the average correlation of the measurement instrument data items. If the Cronbach Alpha value is greater than or
equal to 0.6, an instrument is reliable. The validity and reliability tests performed on the instrument items used in the study,
which revealed that all of the research instrument items were valid because they met the criteria for testing the instrument's
validity items.
Figure 2. Heteroscedasticity Test Result
40
On the normality probability plot, the data distribution is centered around the diagonal line indicating that the data is
normally distributed. Figure 2 shows a scatterplot diagram in which the data are randomly distributed and do not form a
pattern, indicating that heteroscedasticity is not present. To see if the regression model's independent variables are linked.
The summary of the multicollinearity test results in table 2 shows that all variables have a VIF value of 10, so there is no
multicollinearity between the five independent variables.
No. Variable Tolerance VIF Decision

1 X1 0,924 1,088 Multicollinearity does not occur
Table 3. Regression test results
Variable Koefisien Regresi T-Count P-Value Info

Competence 0,445 2,363 0,000 Significant
Independence 0,202 2,819 0,005 Significant
Objectivity 0,188 2,833 0,005 Significant
Integrity 0,218 2,574 0,010 Significant
Constant = 21,680
F-Count = 6,403, P = 0,001
F-Table = 2,352, t-Table = 2,131
R= 0,667, R2 = 0,653
The regression equation is shown in table 3 as a result of the regression analysis:
Y = 21.680 + 0,445X1 + 0,202X2 + 0,188X3 + 0,218X4
According to the appearance of table 3, b0 (constant) = 21,680 means that the quality of the inspection results at the
Inspectorate of South Sulawesi Province is 21,680 units if the variables of competence, independence, objectivity, and
auditor integrity are constant. With the assumption that other variables such as independence, objectivity, and auditor
integrity are constant, b1 = 0.445 is a regression coefficient indicating that the auditor competence variable can improve the
quality of audit results by 0.445 units. With the assumption that other variables such as competence, objectivity, and auditor
integrity are constant, b2 = 0.202 is a regression coefficient that shows that the auditor independence variable can improve
the quality of the examination results by 0.202 units. b3 = 0.188 is a regression coefficient that shows that increasing the
auditor's objectivity improves the quality of the examination results by 0.188 units, assuming that other variables like
competence, independence, and auditor integrity remain constant.
Table 4. Hypothesis Testing Results
Code Hypothesis Info

H1 Competence has a positive and significant effect on audit quality Accepted
H2 Independence has a positive and significant effect on audit quality Accepted
H3 Objectivity has a positive and significant effect on audit quality Accepted
H4 Integrity has a positive and significant effect on audit quality Accepted
Discussion
Testing the first hypothesis (H1) shows that audit quality is significantly influenced by competence. This result indicates
that the (H1) submission has been accepted. These findings suggest that to improve the quality of examination results, the
South Sulawesi Provincial Government's Internal Supervisory Apparatus requires competencies that include sufficient
knowledge and skills and the appropriate attitudes and behaviors. To carry out their work/profession. If the auditors have
good competence, they will easily complete their audit tasks; on the other hand, if the auditors do not have sufficient or low
41
competence, they will have difficulty carrying out their duties, resulting in poor audit quality. The findings of this research
back up the Behavioral decision theory, which states that auditors have limited knowledge and act solely on their perceptions
of the situation. In practice, decision-making is inextricably linked to a variety of social contexts. When a person's decisions
are closely related to their personal interests, they may lose their ability to think rationally. As a result, the auditor must have
the competence, knowledge, and experience to produce a quality audit. This study's findings also back up previous research
(Siahaan & Simanjuntak, 2019; Melinawati & Prima, 2018), which found that competence has a positive and significant
impact on audit quality. Auditor knowledge gained through formal education, experience, and technical training is expected
to improve their ability or competence in the auditing field, resulting in higher audit quality (Angelina, 2017).
Testing the second hypothesis (H2) shows that audit quality is significantly affected by independence. This result
indicates that the (H2) submission was accepted. These findings suggest that to improve the quality of examination results,
the South Sulawesi Provincial Government's Internal Supervisory Apparatus must act independently in carrying out their
duties. This independence must be backed up by mental attitude and appearance freedom from personal, external, and
organizational disturbances that could jeopardize independence. As a result of this finding, an independent attitude must be
attached to the South Sulawesi Provincial Government's Internal Supervisory Apparatus and made an absolute requirement.
This is because it is difficult to maintain independence due to the various factors that can influence it, such as a long-term
relationship with the client, leading to independence vulnerability and the availability of various facilities for auditors during
the audit assignment. Because the auditor is in a bind, the client can be "easy to control" the auditor. The findings of this
research back up the Behavioral decision theory, which states that auditors have limited knowledge and act solely on their
perceptions of the situation. In practice, decision-making is inextricably linked to a variety of social contexts. When a
person's decisions are closely related to their personal interests, they may lose their ability to think rationally. As a result,
the auditor must have the competence, knowledge, and experience to produce a quality audit. Competence isn't enough if
you don't have an independent auditor's independent attitude as foundational expertise for the audit results. This study's
findings corroborate those of research (Asysyfa & Rahmaita, 2018; Sunandar, 2019), which found that audit quality is
improved by independence. The more independent an auditor is, the harder it is for them to be swayed, and they will not
take sides with anyone. In auditors' case, independence is critical because it is the primary basis for the public's trust in them.
As a result, it stands to reason that an auditor's independent attitude is required to produce a quality audit.
The third hypothesis (H3) test results show that objectivity has a significant impact on audit quality empirically. This
result indicates that the (H3) submission has been accepted. These findings suggest that to improve the quality of
examination results, the South Sulawesi Provincial Government Internal Supervisory Apparatus needs to maintain
professional impartiality when collecting, evaluating, and processing audit data/information. APIP auditors must make an
objective assessment of all relevant circumstances and are not swayed by their own or others' interests when making
decisions. APIP auditors must also maintain a neutral and fair attitude, avoid conflicts of interest, and be accountable to their
profession. This study's findings back up the attribution theory, which states that the causes of an event or the outcomes
based on individual perceptions are attributed. The nature, character, attitude, pressure of the situation, and so on all influence
the cause of other people's or one's own behavior. According to attribution theory, the auditor's objectivity will determine
the quality of the audit produced in this study (Ferdiansyah, 2016). Objectivity has a positive and significant effect on audit
quality, according to this study's findings (Nugrahadi & Sukiswo, 2019; Laksita & Sukirno, 2019). Because the auditors act
fairly and without pressure or requests influenced by certain interested parties in the audit, objectivity can help the agency
maintain things that are positive about the quality of the resulting audit.
The third hypothesis (H3) test results show that objectivity has a significant impact on audit quality empirically. This
result indicates that the (H3) submission has been accepted. These findings suggest that to improve the quality of
examination results, the South Sulawesi Provincial Government Internal Supervisory Apparatus needs to maintain
professional impartiality when collecting, evaluating, and processing audit data/information. APIP auditors must make an
objective assessment of all relevant circumstances and are not swayed by their own or others' interests when making
decisions. APIP auditors must also maintain a neutral and fair attitude, avoid conflicts of interest, and be accountable to their
profession. This study's findings back up the attribution theory, which states that the causes of an event or the outcomes
based on individual perceptions are attributed. The nature, character, attitude, pressure of the situation, and so on all influence
the cause of other people's or one's own behavior. According to attribution theory, the auditor's objectivity will determine
the quality of the audit produced in this study (Ferdiansyah, 2016). Objectivity has a positive and significant effect on audit
quality (Nugrahadi & Sukiswo, 2019; Laksita & Sukirno, 2019). An auditor who can act rationally and objectively while
ignoring the pressures or demands of certain parties can help the institution maintain positive perceptions of the audit quality.
4. Conclusions
Based on the findings of the analysis and discussion, this study discovered that the variables of competence,
independence, objectivity, and integrity impact audit quality. Competence is the most important variable in this study, it is
hoped that policies relating to auditor competence will improve, particularly in the indicators that shape it, such as sufficient
mastery of knowledge and skills, and having attitudes and the appropriate attitude to carry out the job/profession, but the
42
relatively low indicators will be maximized. The results of this study suggest to the auditors of the Inspectorate of South
Sulawesi Province, it is necessary to continue maintaining and maintaining and improving the competence, independence,
objectivity, and integrity of the auditors because these variables affect the quality of the audit results. To analyze audit quality,
this study only looks at four independent variables: competence, independence, objectivity, and integrity. As a result of this
research, it is suggested that future researchers add more variables and experiment in different areas. Also, auditors must
always pay attention to and improve the quality of experience and knowledge for each individual, both junior, senior, and
higher levels in the Public Accounting Firm's organizational structure, by participating in training on this subject about the
thing that helps do them. Similarly, the auditors are expected to maintain an independent mental attitude at all times.
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Yana Fajriah, Edy Jumady & Syamsul Alam / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 45-52

Abnormal Returns Before and After the January Effect

1 2* 3
Yana Fajriah Edy Jumady Syamsul Alam
Abstract
This research aims to see if there is a difference in LQ45 share abnormal returns before and after the January effect. The non-
probability sampling method was used in this study, and data from 45 companies were obtained using this method. In this study,
secondary data from financial reports obtained from yahoo.finance.com was used as the source of data. The Event Study
technique was used in this study, with the Event Window consisting of seven days before and seven days after the January
Effect event. The research data was put to the test using a normality test and a paired sample test to test the hypothesis. The
results revealed that the Abnormal Return on LQ45 companies listed on the Indonesia Stock Exchange did not differ
significantly before and after the January Effect. One of the references used by the entity's stakeholders in making decisions is
managerial interest in window dressing.
Keywords: Abnormal Return; January Effect; Dividend
1. Introduction12
Because the Indonesian capital market is not very sensitive to the efficient market hypothesis, the Indonesian capital
market is currently inefficient. An efficient market can provide timely and relevant information. Fama, (1970) was the first
to propose and promote an efficient market concept, and he divided it into three types of efficient market hypothesis. To
begin with, a weak form of efficient market or security prices accurately reflects previous information markets. Investors
cannot profit from past information in a weak and efficient market, as evidenced by the current share price. Second, it is a
market in which the security price or the semi-strong efficiency market fully reflects all publicly available information. No
investor can use published information to obtain long-term abnormal returns in a semi-robust efficient market form. Third,
for all information, a powerful form of an efficient market or securities price fully reflects the market (including personal
information) if no one can make excessive profits after adjusting risk and using existing trading strategies, whether an
individual investor or an institutional investor, the market is influential (Pradnyaparamita & Rahyuda, 2017).
A deviation known as abnormality exists in an efficient market, but the abnormal return rate cannot be obtained. Because
it can generate abnormal returns, the market anomaly is evidence that rejects or at least does not support the existence of an
efficient market theory. The return obtained from the difference between the expected and actual returns is known as an
abnormal return. The abnormal income can be in the form of profit if the difference in income earned is more significant
than the expected income; it can also be negative if the income earned is less than the expected income (Bodie & Brière,
2011; Saofiah et al., 2019). Dividend announcements, production company announcements, interest rate increases, lawsuits,
and other events are common causes of abnormal returns.
The debate over an efficient market is still going on right now. One sign of seasonal pattern deviation is what is known
as the January effect, which occurs at the start of the year. The first week of January's impact is the upward trend in stock
prices as investors restructure their portfolios after the year-end holidays. Due to positive investor expectations, rising
investor demand for financial instruments can lead to price increases (Werastuti, 2012). Most fund managers advise investors
to sell losing stocks at the end of the year and repurchase them at the beginning of the following year. This is due to the
investment manager's desire to improve the stock portfolio report's performance. This will provide tax benefits to investors,
causing prices to fall at the end of the year and rise at the start of the year due to supply and demand for stocks seeking a
2 * Second Author and Corresponding Author. Department of Management, STIEM Bongaya, Makassar City, South Sulawesi 90131, Indonesia.
[ Email : edy.jumady@stiem-bongaya.ac.id ]
45
high return in January. Because it is dependent on investors' behavior in interpreting each event to obtain a higher return,
the January effect is not always observed in every observation period.
According to research conducted by Indrayani, (2019) there is a significant difference between the 5-day average
abnormal return at the end of December and five days in early January, indicating that the mining sector stocks listed on the
Indonesia Stock Exchange experienced a January effect phenomenon between 2011 and 2015. According to the findings of
Pradnyaparamita & Rahyuda (2017), January has the highest overall abnormal stock returns, while other months have the
lowest. Pradnyaparamita & Rahyuda, (2017) found, on the other hand, that there was no difference in abnormal stock returns
in January compared to other months.
Signal theory is a type of information signal that investors should consider when deciding whether to invest in related
companies (Spence, 1973; Khairudin & Wandita., 2017). Following the information's announcement, market participants
will first interpret and analyze it to determine whether it is a good signal (good news) or a wrong signal (bad news). The
trading volume of shares will change if this information is released as a positive signal to investors. Around 1942, a banker
named Sidney B. Wachtel noticed the January effect for the first time. In January, he said, the performance of idle stocks
tended to rise sharply. Some theorists believe that this phenomenon is that American retail investors who own these inactive
stocks sell their shares at the end of the year for tax reasons and reinvest the funds at the beginning of the following year.
Another theory is that bonuses are usually distributed in January in the United States, allowing investors to purchase shares
as an investment in January, causing the share price to rise.
Tax-loss selling, a requirement for investors to sell shares that have depreciated, is one of the many factors that can cause
abnormal stock behavior in January. Its goal is to generate a tax loss or lower the amount of tax owed before the end of the
year. Stocks that are being sold will see price changes in December before rising again in January. Window-dressing refers
to the practice of selling underperforming stocks at the end of the year. This is similar to Tax Loss Selling, except that
financial managers do it to make the stock portfolio performance report at the end of the year look promising. In January,
shares with a lower market cap are riskier than in other months. If this is the case, small-cap stocks will have a higher average
return in January than in other months. Return is one of the factors that encourages investors to invest, and it also serves as
a reward for the investor's courage in taking the risk of his investment (Tandelilin, 2010; Wulandari, 2014)
Abnormal return is the advantage of return that occurs on expected returns (Sharpe, 1995; Pratomo, 2007). The average
return is the return expected by investors in normal circumstances. For some events, the average return will increase if it
contains good news. If the event contains terrible news, then the average return will decrease. Thus, abnormal return is the
difference between the actual results and the expected results (H. Jogiyanto, 2010). The January effect explains that every
month is different, and in January, there is a higher return than other months. This research is a study that observes the
movement of stocks in January with other months. Several researchers have previously studied the January effect. The study
results (Faiq & Mahardika, 2019) show differences in annual abnormal returns. This does not prove that companies listed
on the LQ45 index during the 2015-2017 period experienced an abnormal January effect because they did not show abnormal
returns. The abnormal return is always positive in January and not consistently higher than the other months.
Pradnyaparamita & Rahyuda, (2017) and Saofiah et al., (2019) prove this, proving that the January effect does not occur in
abnormal returns. The results of the study (Pradnyaparamita & Rahyuda, 2017; Indrayani, 2019) show that Indonesia had a
January impact on LQ45 companies on the IDX from February 2009 to January 2014, so that it had an impact on the IDX
in January, especially companies that had entered the LQ45 index.
The difference in the results of this study is one reason for the need for further research. This research was conducted to
consider whether or not the January effect occurred on the LQ45 Index company. The object of this research is companies
that are on the index 45 stocks that have the highest level of liquidity on the Indonesia Stock Exchange or the LQ 45 index
and are one of the stock index indicators on the IDX that can be used as a reference as a material for assessing stock trading
performance. Of the many stocks listed on the IDX, the shares in the LQ 45 index are the stocks most attractive to investors.
Based on this description, the researcher is interested in examining whether there are differences in abnormal returns before
and after the effect of LQ45 shares on companies included in the LQ 45 index listed on the Indonesia Stock Exchange in
January.
Abnormal return is the difference between the actual rate of profit and the expected rate of return. In utilizing the January
effect phenomenon's momentum to achieve abnormal returns, investors try to sell their shares at the end of the year and
buyback at the beginning of the year. The act of selling and buying back causes the stock price at the end of the year to fall
and again increase at the beginning of the year to get a higher rate of return or return at the beginning of the year. Research
conducted by Indrayani, (2019) shows that there is a significant difference between the 5-day average abnormal return at
the end of December and five days in early January, which indicates that there is a January effect phenomenon on mining
sector stocks listed on the Indonesia Stock Exchange during 2011-2015 period. The same result was also obtained by
Pradnyaparamita & Rahyuda, (2017) that the highest overall abnormal stock returns occurred in January and the lowest
occurred in other months. However, the results obtained from research conducted by Pradnyaparamita & Rahyuda, (2017)
found no difference between January's stock abnormal returns and other months, so it can be concluded that the January
effect phenomenon does not occur in the Indonesian capital market.
46
This research is quantitative. Sampling in this study is a census sampling method because the population is limited.
Objectively, we observed 45 companies with observation times in August 2017- January 2018. The data analysis method used
was statistical analysis consisting of descriptive statistical analysis and inferential statistical analysis. There are two kinds of
statistical analysis used in the research, namely descriptive statistical analysis and inferential statistical analysis to the
Difference-Test. Hypothesis testing in this study is determined based on the results of the data normality test. If the data is
normally distributed, the Paired Sample T-Test parametric test is used. Meanwhile, if the data is not normally distributed, a
non-parametric test is used, namely the Wilcoxon Signed Rank Test. This statistical test is used to determine whether the
difference is significant between the average abnormal returns before and after the stock split (Jogiyanto, 2008). The January
publication date of the securities in question is the date of listing on the IDX when it enters 1 January. This is done to make it
easier to determine day 0 as the stock split event. Determining the event period is observing the period around the event time
(when the event occurs). The event period chosen in this study was for 14 days, namely seven days before and seven days
after the January effect. To see whether there is a significant difference, comparing the average stock liquidity and stock
returns is performed using the abnormal return with day 0 or (event date). Paired Sample T-Test was used to test the differences
between two paired samples. Paired samples are defined as a sample with the same subject but experiencing two different
treatments in the situation before and after the process (Ghozali, 2010).
3. Results & Discussion

Result Analysis
This study's data processing results indicate that the actual return before (January the highest securities) was at the
company PT PP London Sumatra Tbk with an average value of 0.016512107 and the actual return before (January The
lowest securities) was at the company PT. Matahari Department Store Tbk with an average value of -0.00832413. As for the
Actual Return after (the highest January Securities) is at PT. Adaro Energy Tbk with an average value of 0.021552003, and
for Actual Return after (the lowest January Securities) is at PT. PP London Sumatera Tbk with an average value of -
0.067220534.
The calculation result (attachment) shows that the Expected Return highest before January is in the company PT. PP
London Sumatera Tbk with an average value of 0.0165121, and the lowest is at the company PT. Matahari Department Store
Tbk with an average value of -0.008324. The Expected Return calculation results after the January Securities; the highest
Expected Return is at the company PT. Adaro Energy Tbk with an average value of 0.024631, and the lowest is PT. BPD
West Java and Banten Tbk with an average value of -0.0105.
Calculation of Abnormal Return for each issuer's shares for seven days before and seven days after the stock split. The
Abnormal Return analysis results show that the Abnormal Return before January the highest securities are in the company
PT. PP London Sumatera Tbk with an average value of 0.087861249 and the lowest at PT. Matahari Department Store Tbk
with an average value of -0.085992408. As for the Abnormal Return after January, the highest securities are in the company
PT. Adaro Energy Tbk with an average value of 0.142339128 and the lowest at PT. Bumi Serpong Damai Tbk with an
average value of -0.050880029. So it can be concluded that there is no significant difference in the sample of 45 companies
before and after the January effect.
Table 1. Descriptive Statistics

7 Hari Sebelum 45 -86,00 88,00 -,3333 35,93175
7 Hari Setelah 45 -133,00 142,00 -,7111 61,54770
The descriptive statistical analysis results in table 1 show the observation period's results before and after the January
Effect 2017-2018 event. The minimum values for all samples' abnormal returns in each observation period before and after
the January effect event are -86.00 and -133.00. The highest maximum value for abnormal returns occurs before the January
effect, 88.00, and the maximum value after the January effect is 142.00. Before the January effect event, the average value
of abnormal returns was -3333 with a standard deviation of 35.93175, then decreased after the January effect event to -7111
with a standard deviation of 61.54770.
47
Table 2. Normality Test Results
Return Before January Return After January
N 45 45
Normal Parameters,b Mean -.3333 -.7111
Std. Deviation 35.93175 61.54770
Most Extreme Differences Absolute .096 .063
Positive .096 .063
Negative -.072 -.053
Test Statistic .096 .063
Asymp. Sig. (2-tailed) .200c,d .200c,d
The results of the normality test were obtained using the One-Sample Kolmogorov-Smirnov Test for the Asymp value.
Sig. (2-tailed)> 0.05 on the abnormal return before the January effect (0.200) and the abnormal return after the January effect
(0.200), then the data is usually distributed. Based on the normality test results, the test tool used to test the hypothesis is the
Paired Sample T-Test.
Table 3. Paired Samples T-Test
Paired Differences
Mean Std. Deviation Std. Error Mean T Df Sig. (2-tailed)
Pair 1 7 Hari Sebelum .37778 80.67902 12.02692 .031 44 .975
7 Hari Setelah
Table 3 shows that the paired sample t-test hypothesis testing obtained an average value (mean) before and after the
January effect of 37778 with a standard deviation of 80.67902 and a standard error of 12.02692. then obtained the value of
t count before and after January of the effect of 0.031. Based on the test results, the significance value is more significant
than α = 0.05, so Ha is rejected. It can be seen that the results of the study do not support the hypothesis, which states that
there are differences in abnormal returns before and after January in effect on LQ45 company shares in the Indonesia Stock
Exchange.
Discussion
According to this research, there is no difference in abnormal returns before and after the January events. This research
demonstrates that the hypothesis is correct. These findings support Pradnyaparamita & Rahyuda, (2017) that the January
effect does not exist in LQ45 companies listed on the Indonesia Stock Exchange because there is no difference in abnormal
stock returns in January to other months. There are differences in stock returns and abnormal returns each month, according
to Faiq & Mahardika, (2019), but this does not prove that the January effect anomaly occurs in returns that are always
positive in January and are not always higher when compared to other months. In terms of overall abnormal returns, Saofiah
et al. (2019) explained no January effect on the LQ45 stock group on the Indonesia Stock Exchange. Because portfolio
managers and investment managers are always interested in beautifying the year's performance so that a positive return is
felt at the end of the year, the January effect does not occur. Investment managers and portfolio managers have lost interest
at the beginning of the year after the window dressing action. The January effect's potential will not be felt in January.
Furthermore, because the January effect is dependent on investors' actions in interpreting each event, it is not always
observed in every observation period. The January effect does not occur if investors wait and see before buying shares.
Investors or users of financial data's ability to make decisions is heavily influenced by the company's management parties'
behavior, which sends strong signals at the end of the period to improve their year-end reports to generate positive returns
(Wulandari, 2014). As a result, the January effect is no longer a common occurrence. Each decision is colored by the
increasing increase in each entity's economic activity (Esana & Darmawan, 2017; Purnamasari et al., 2020).
The January effect does not occur for several reasons, one of which is that portfolio managers and investment managers
are always interested in enhancing the year's performance so that positive returns are felt at the end of the year (Eduwinsah
& Sitorus, 2018; Dewi & Sasmikadewi, 2017; Primajati & Ahmad, 2018). Investment managers and portfolio managers
have lost interest at the beginning of the year after the window dressing action. The January effect's potential will not be felt
in January. Furthermore, because the January effect is dependent on investors' actions in interpreting each event, it is not
always observed in every observation period. The January effect does not occur if investors wait and see before buying
shares.
Other instances of the January effect are due to a company's desire to appear better, reflected in the annual financial
statements. Company managers sell shares that are considered to have little value at the end of the year and repurchase them
48
at the start of the year. Incidents similar to those seen in the January effect could occur for various reasons, including
companies' desire to appear flawless in their annual financial report presentation, causing middle managers to sell shares
that are expected to have a low value at the end of the year. Also, they will buy back the stock (Indrayani, 2019).
4. Conclusions
Based on the results of the research and discussion previously described regarding the analysis of abnormal returns
before and after the January effect on LQ45 company shares on the Indonesia Stock Exchange, researchers can conclude
that there is no difference in abnormal returns before and after the January effect. This is evidenced by the paired sample t-
test on Abnormal Returns 7 days before and seven days after January. It can be seen from the count of 0.031, which is smaller
than the t table of 1.680 with a significant t (0.975) greater than α = 0.05 in LQ45 company on the Indonesia Stock Exchange.
The January Securities phenomenon does not always occur. There is no significant difference in abnormal returns before
and after January Securities, so companies are advised not to believe in the January Securities phenomenon entirely. This
research can help investors find out anomalies on a trading day, namely January Securities, consider deciding the right time
to invest, and understand stocks' situation in the future. However, investors should pay more attention to stock prices because
of the information. The stock price investors can predict their future investment to predict that they will get a positive
abnormal return.
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50
Appendix 1. Calculation Results of Expected Return Before January Securities
No Emiten -7 -6 -5 -4 -3 -2 -1 Total
1 AALI -0,00769 0 0 0 0,021013 -0,0095 0,00381 0,0010905
2 ADHI 0,010526 -0,00525 0 0 -0,02937 0,002706 0,018742 -0,000378
3 ADRO 0,029853 0,010638 0 0 0,002642 -0,00264 -0,016 0,0034987
4 AKRA 0,020285 0,019881 0 0 0,015625 -0,00388 -0,01174 0,005738
5 ANTM -0,00797 0,007968 0 0 0,007905 -0,02391 0,008032 -0,001138
6 ASII 0,006192 0,01227 0 0 -0,00612 -0,01235 0,030583 0,0043691
7 BBCA 0,007134 0,01878 0 0 0,001162 0,018412 -0,00114 0,0063354
8 BBNI 0,020514 0 0 0 0,005063 0,002522 -0,00252 0,0036538
9 BBRI -0,00583 0,011628 0 0 0,025679 0,022285 0,002751 0,0080732
10 BBTN 0,005714 -0,00285 0 0 -0,00286 0,008559 0,014105 0,0032377
11 BJBR 0,017778 -0,00885 0 0 0 0,004435 0,060104 0,0104953
12 BMRI 0,009885 0,006536 0 0 0,041473 -0,00627 0,00627 0,0082706
13 BMTR 0,033902 -0,02532 0 0 -0,02598 0,017392 0,017094 0,0024421
14 BRPT 0,0177 -0,0044 0 0 0,017468 -0,02188 0 0,0012698
15 BSDE 0,014948 0,002963 0 0 0 0 0,0059 0,0034015
16 BUMI -0,01429 -0,01449 0 0 0,021661 0 -0,03637 -0,006212
17 EXCL 0,013986 0 0 0 0,003466 0,027305 -0,00337 0,0059122
18 GGRM 0,012735 -0,00062 0 0 0,005544 0,004291 0,024767 0,0066741
19 HMSP 0,033152 0,010811 0 0 0,008565 0,004255 0,004237 0,0087173
20 ICBP 0,01387 -0,0083 0 0 0 -0,01117 0 -0,0008
21 INCO -0,01051 -0,01418 0 0 0,010657 0 0,02098 0,0009921
22 INDF 0,009917 0,003284 0 0 0 0,009788 -0,00979 0,0018859
23 INTP 0,020001 0 0 0 0,017178 0,047515 0,018391 0,0147265
24 JSMR 0,032261 0 0 0 0,00396 -0,00396 0,015748 0,0068585
25 KLBF -0,02403 0,003035 0 0 0,02099 0 0,002963 0,0004233
26 LPKR -0,00416 0 0 0 0,004157 0,012419 0,004114 0,0023619
27 LPPF 0,025613 0 0 0 0,015964 -0,00454 -0,09531 -0,008324
28 LSIP -0,01193 -0,00401 0 0 0,035507 0 0,096015 0,0165121
29 MNCN 0,007937 -0,01193 0 0 0 0,011929 0,015687 0,0033747
30 MYRX 0,026412 -0,03547 0 0 0,017935 0 -0,02689 -0,002572
31 PGAS -0,02874 0,014472 0 0 0,008584 -0,01435 0,011494 -0,001219
32 PPRO 0,010638 -0,016 0 0 0,005362 0,010638 0 0,0015198
33 PTBA 0,044095 -0,01183 0 0 -0,00398 -0,00399 -0,01613 0,0011662
34 PTPP -0,00387 0,003868 0 0 -0,02344 0,015687 0,026873 0,0027316
35 PWON 0,015625 0,045462 0 0 -0,00743 0,014815 0,007326 0,0108277
36 SCMA -0,01227 0,020367 0 0 0,019961 -0,02806 0,008097 0,0011567
37 SMGR 0,020619 0,002548 0 0 0,017655 0,019803 -0,02985 0,004396
38 SMRA 0,04012 0,049325 0 0 0 0 0,010638 0,0142976
39 SRIL -0,01644 -0,00554 0 0 0,00554 0 0,048527 0,004584
40 SSMS -0,00344 -0,00692 0 0 0,037483 0,003339 0 0,0043513
41 TLKM 0,014218 0,011696 0 0 0 0,020714 0,011325 0,0082791
42 UNTR 0,02249 0,015447 0 0 0,009444 0,000723 0,022858 0,0101374
43 UNVR 0,010324 0,01068 0 0 0 0,005068 0,0272 0,0076104
44 WIKA -0,00316 -0,01274 0 0 -0,00966 -0,00649 0,009972 -0,003155
45 WSKT 0,004535 -0,02288 0 0 0 0,018349 0,004535 0,0006479
expected Sebelum 0,0039605
51
Appendix 2. Calculation Results of Expected Return After January Securities
No Emiten 0 1 2 3 4 5 6 7 Total
1 AALI 0 0,009461 -0,02866 0,001936 0,001932 0,026668 0,016776 0,007367 0,005069
2 ADHI 0 -0,01067 -0,02718 0,035186 0,007947 0,033726 0,02519 0,004963 0,009881
3 ADRO 0 0,010695 -0,02696 0,045402 0,038417 0,081974 0,009217 0,013668 0,024631
4 AKRA 0 -0,02391 -0,00404 0,00404 0 0,039531 -0,02353 -0,01198 -0,00284
5 ANTM 0 0,015873 -0,00791 0,015748 0,023167 -0,00766 0,007663 -0,00766 0,005603
6 ASII 0 -0,01212 -0,01846 0,021506 0,009077 0 -0,01517 0,012158 -0,00043
7 BBCA 0 0 0 0,014731 0,001124 0,004484 0,007799 -0,00334 0,003543
8 BBNI 0 -0,01271 -0,03646 -0,00266 -0,0107 0 0 -0,00269 -0,00932
9 BBRI 0 -0,00275 -0,00552 -0,01676 0,011205 0 -0,00559 -0,01127 -0,00438
10 BBTN 0 0,005587 0 -0,03688 -0,0058 -0,00583 0,023122 0,030945 0,001592
11 BJBR 0 -0,01681 -0,01709 0,004301 -0,01732 -0,00438 -0,00881 -0,01336 -0,0105
12 BMRI 0 -0,01893 -0,01929 0,016103 0 0,012699 -0,00316 0 -0,0018
13 BMTR 0 0,033336 0 0,008163 -0,02469 0,072321 0,02299 -0,01527 0,013836
14 BRPT 0 -0,00443 -0,05012 -0,04297 0,024098 -0,00477 0,018958 0,004684 -0,00779
15 BSDE 0 0 0 0,005865 -0,00881 0,005882 -0,00294 -0,0208 -0,00297
16 BUMI 0 -0,00743 0,022141 0,007273 0,063179 0,00678 -0,00678 -0,0137 0,010208
17 EXCL 0 -0,0274 0,013793 0 0,030356 0,064331 0,042689 -0,03648 0,01247
18 GGRM 0 -0,02783 -0,00184 0,032056 0,009184 0,000295 -0,03847 0,017011 -0,00137
19 HMSP 0 0,004219 -0,03863 0,028049 0,031416 0,00206 0,01227 -0,01227 0,003873
20 ICBP 0 0,022223 0 0,002743 0,016305 -0,0301 -0,01399 -0,01705 -0,00284
21 INCO 0 0,047306 0,006579 0,019481 0,019109 0 0,00315 0,00627 0,014556
22 INDF 0 -0,00988 0,013158 0,009756 -0,00649 0,022545 -0,00319 0 0,003699
23 INTP 0 0,046727 0 0 0,009735 0,001076 -0,01081 0,006501 0,007604
24 JSMR 0 -0,01972 0,011881 -0,00394 0,027292 0,011472 -0,02698 -0,01575 -0,00225
25 KLBF 0 0,023393 -0,02044 0,029072 0,008559 0,014105 -0,00281 -0,02273 0,004165
26 LPKR 0 -0,00822 -0,00415 0,016465 0 0,016198 0,00399 -0,00399 0,002899
27 LPPF 0 0,065319 0,025435 0,011351 0,037657 -0,02198 -0,0202 0 0,01394
28 LSIP 0 -0,06548 -0,00755 0,033523 -0,00735 0,032671 0 0,014185 0
29 MNCN 0 0 0,003884 0,041752 0,011091 -0,01109 0,003711 0,00738 0,008104
30 MYRX 0 0,018004 -0,00905 0,017935 0 0,034758 -0,04364 0,008882 0,003841
31 PGAS 0 0,008535 -0,00568 0,002845 0,016902 0,02755 -0,0192 0,011019 0,005995
32 PPRO 0 0 0 0,005277 0,015666 0,035627 0,00995 -0,00995 0,008081
33 PTBA 0 0,016129 -0,02429 0,016261 0,051092 0,022728 0,022223 -0,00367 0,014353
34 PTPP 0 -0,0076 -0,02708 0,038466 0,011257 0,071974 0,054067 -0,01325 0,018262
35 PWON 0 0 0,007273 0,00722 0,021353 0,007018 -0,0212 -0,02899 -0,00105
36 SCMA 0 -0,01217 0,00813 0,008065 0,004008 -0,00803 -0,00404 -0,02045 -0,0035
37 SMGR 0 0,037179 -0,00733 0,075508 -0,00913 0,009132 0,018019 -0,03406 0,012761
38 SMRA 0 -0,00531 -0,02696 0,026956 0,031416 0,020409 0,01005 0,024693 0,011609
39 SRIL 0 -0,02128 -0,01626 0,00545 0,00542 0,031918 -0,01583 0,015831 0,00075
40 SSMS 0 -0,00669 -0,02377 -0,00344 -0,00345 -0,01394 0,010471 -0,01047 -0,00733
41 TLKM 0 -0,00678 -0,04167 -0,00237 0,014118 -0,00468 -0,01418 -0,00238 -0,00828
42 UNTR 0 -0,03595 -0,03198 0,027583 0,041057 0,007733 0,005587 0,027474 0,005929
43 UNVR 0 -0,00045 -0,03413 -0,01117 0,011173 0,00738 -0,01668 0,012999 -0,00441
44 WIKA 0 0,009631 -0,02589 0,016261 0,01917 0,073203 0,054377 -0,01403 0,018961
45 WSKT 0 -0,00909 -0,01379 0,058444 0,004357 0,04256 0,044814 0 0,018184
52
Muhammad Rusydi / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 53-60

The Impact of CEO Narcissism Behavior on Firm Performance through

Earnings Management
1*
Muhammad Rusydi
Received: November 08, 2020 Revised: March 10, 2021 Accepted: March 18, 2021
Abstract
The purpose of this study is to see if Narcissistic CEO behavior patterns lead to earnings management. This study looks at the
signs of Narcissistic CEO management practices and how they relate to company performance in 19 Manufacturing Companies
listed on the IDX from 2017 to 2019. There are 57 people in the sample. The method of research used in this study was
quantitative research with a causal approach. The SPSS test tool for Windows 24.0 is used to test hypotheses by using Path
analysis. The findings, CEO narcissism, impact earnings management behavior, but it also impacts company performance
through earnings management practices or actions. The CEO is the custodian of data and has the power to make decisions,
including policies. The accounting will make every effort to portray good performance through a positive image and profit
achievement as expected by investors as an indicator of performance measurement; as a result, CEOs with high self-confidence
will use accounting policies to practice earnings management by adding profit figures as needed and the investors' wishes or
lowering the profit rate as necessary to achieve the desired results.
Keywords: CEO Narcissism; Firm Performance; Earnings Management
1. Introduction12
Profit is one of the benchmarks used by financial statement users to evaluate company performance. The primary concern
for assessing performance or management accountability is earnings information material. The hard work of top
management in managing the company to achieve its primary goals can show whether the company is performing well or
poorly. If the CEO (Chief Executive Officer) has exemplary achievements every year and can achieve common goals with
the principal and agent, he is said to have a good performance. However, it does not rule out a CEO change if the current
CEO is unable to meet the company's primary objectives, in which case a new CEO will be hired. To instill confidence,
narcissistic CEOs frequently employ creative accounting strategies. If shareholders maneuver to record more optimal and
healthier profits than the company's actual financial condition, this changes shareholders' decision patterns. On the other
hand, Narcissistic CEOs believe that the financial statements' benefits will describe a good performance or achievement.
The CEO will believe he has the power to maximize the company's profits and, as a result, bring good to the company's
shareholders, giving him a social identity, praise, and recognition.
As the company's manager, the CEO tries to make policies that benefit him personally as much as possible. Still, every
policy or decision he makes has an impact on the company and its partners. In terms of decision-making, every decision
made by the CEO has far-reaching implications not only for the people who interact with them directly but also for a larger
group of stakeholders (Chatterjee, & Hambrick, 2007). This explains why behavioral factors such as the CEO's personality
can significantly impact the organization. It is also stated that CEOs with Narcissism are more aggressive and confident
when making risky decisions (Li & Tang, 2010), such as acquisitions (Chatterjee & Hambrick, 2007), innovations (Gerstner,
Konig, Enders, & Hambrick, 2013), or projections by maximizing the value of Resources and Development. This
explanation demonstrates that Narcissism's CEO will strive to improve their performance and be publicly recognized to add
value to companies such as Earning Per Share. As a result, even though some CEOs with Narcissism manipulate accrual-
based financial reports, it is not uncommon for them to use operational data (Olsen, Dworkis & Young, 2014).
1* First Author and Corresponding Author. Department of Accounting, Faculty of Economics and Business, Universitas Muhammadiyah Makassar,
Makassar City, 90221, South Sulawesi, Indonesia, [ Email: rusydi@unismuh.ac.id ]
According to Reina, Zhang & Peterson (2014), CEOs who are always more aggressive are more likely to engage in
earnings management practices. As the party to whom the principal has delegated authority and trust to manage its affairs,
management is frequently pressed to meet performance goals such as revenue or profit growth (Hery, 2015). This has an
impact on the way earnings are managed. A CEO's likelihood of being laid off in the coming year can be increased by
aggressive earnings management (Guan, Wright, & Leikam, 2005). The CEO personality trait of Narcissism can be rated
positively or negatively. When a narcissistic CEO's operational activities and activities can provide a fire that can burn
enthusiasm and innovation, it can be rated positively.
On the other hand, CEOs can be judged negatively if their personalities lead them to compete unfairly (hostilely), be
selfish, and file lawsuits (Zhang et al., 2017). The CEO of Narcissism tries his hardest to convince himself and others that
he can run the company well and that every decision he makes will benefit the company, even if it is risky (Doho & Santoso,
2020). The CEO of Nracissm uses creative accounting to demonstrate the ability to manage earnings according to individual
needs with strong self-confidence through power and flexibility as the highest policymaker (Arif, Aulia, & Herawati, 2014).
The relationship or contract between the principal and the agent is explained by agency theory. Principals hire agents to
perform tasks in the principal's best interests, such as delegating decision-making authority to the agent. Shareholders act as
principals in companies with a share capital, and the CEO (Chief Executive Officer) acts as their agent. The shareholders
hire the CEO to act in the best interests of the company. In this study, the term "agency theory" describes the contractual
relationship between the agent and the principal. The agent is obligated to carry out tasks in the principal's best interests.
Each party in an agency relationship is motivated by different motivations based on their respective interests. Assume that
each party in this relationship tries to achieve or maintain the desired level of prosperity. There could be a conflict of interest
between management as an agent and the company owner as to principal in that case. The principal's and agent's differing
interests can lead to agency issues, in which each party prioritizes its interests. As rational humans, agents prioritize their
interests (while disregarding the principal's interests), such as manipulating the income statement.
This study's theory signaling explains why companies provide information to the capital market. Theoretically,
companies should provide signals to users of financial statements, according to signal theory. This theory states that when a
company's financial situation is terrible, management uses earnings management to signal bad news to the market,
demonstrating that they have integrity, act honestly, and are confident in their ability to solve the problems at hand. Earnings
management is a false signal in signal theory because it causes investors to take on more risk. Management intervention in
external financial reports that prioritizes personal interests is referred to as earnings management. Of course, management
will benefit from this effort. Other parties who use the information in the financial statements, on the other hand, will be
harmed because what is contained therein does not reflect the actual conditions.
Several previous studies have looked at CEO narcissism as a factor affecting CEO involvement in corporate decision-
making from Upper Echelons Theory's perspective. According to Li et al., (2018), the CEO is one of the primary decision-
makers who directly control the company's operations. The effect of CEO narcissism on the disclosure of upbeat corporate
earnings was investigated by Marquez, Zebedee, A., and Zhou (2019). The impact of CEO narcissism on internationalization
decisions was investigated (Oesterle, Elosge, & Elosge, 2016). CEO narcissism has a positive impact on Environmental,
Social, and Governance (ESG) disclosure, according to (Falah & Mita, 2020). According to the studies' findings (Kim, Lee,
& Kang, 2018) and (Falah & Mita, 2020), CEO narcissism has a positive and significant impact on earnings management.
Because they see the company's reputation as their own, CEOs who are more narcissistic tend to release more positive
company information to boost their self-image and reputation. As a result, a CEO with a narcissistic personality tries to
make the best decisions for the company's long-term sustainability by increasing ESG disclosure.
H1: CEO narcissism has a positive and significant effect on earning management
Narcissism is characterized by a strong sense of self-assurance and excessive admiration for oneself (Kusuma, Setyanto,
& Khasan, 2019). Narcissism is a positive attitude characterized by a strong belief in one's abilities and business results, as
well as a desire for others to acknowledge one's superiority (Sakina, Wahyuni, & Mas'ud, 2014). Narcism prefers to flaunt
its superior abilities for its actions to garner attention and praise from others (Sakinah, Zatrahadi, & Darmawati, 2019). CEO
narcissism has its own set of values and consequences, though it is sometimes thought to be harmful in that it can harm a
company if it is involved in a legal case due to its confidence in making risky decisions. On the other hand, CEO narcissism
can be viewed as part of an individual's dynamism, which can motivate management to improve performance by channeling
the CEO's passion and energy derived from his strong sense of self-confidence. The ultimate goal of implementing good
corporate governance is that shareholders can know and obtain complete and reliable information so that the information
obtained is equal to or comparable to the information owned by the manager (Njatrijani, Rahmanda, & Saputra, 2019). As
top management, which is given the authority to take the highest policy, the CEO sometimes tries to practice earnings
management because of the flexibility to apply creative accounting to increase or decrease its profits. The CEO's character,
which is Narcissism, is a factor that can influence the amount of earnings management through the company's strategy to
carry out earnings management to maximize individual profits, feel great, and want to get recognition, praise, and praise
from others. Profitability is the ability of a company to generate profits (Amin, 2015). Performance measurement based on
earnings motivates managers to give their best performance through creative accounting measures to show good
54
performance.
CEO Narcissism will demonstrate good performance by increasing or decreasing company profits to project a positive
image and maximize company profits. Their earnings management practices and creative accounting make their
performance look good. This means that he will reduce his spending, including the large bath he took his first year in office.
According to Natonis (2019), poor performance can be blamed on the previous CEO. A decrease in profit this year will
increase the chances of a higher profit the following year. As the company's top executive, the CEO must demonstrate to
stakeholders that he can lead a company to success. On the other hand, CEOs who receive positive performance reviews are
more likely to be offered a better job when their current position expires. If the CEO's performance is poor and he cannot
guide the company's development in a positive direction or is even harmful to the company, he may be replaced before his
term is up (Putri & Ramantha, 2019).
The relationship or contract between the principal and the agent is explained by agency theory. Principals hire agents to
perform tasks in the principal's best interests, such as delegating decision-making authority to the agent. Shareholders act as
principals in companies with a share capital, and the CEO (Chief Executive Officer) acts as their agent. The shareholders
hire the CEO to act in the best interests of the company. In this study, the term "agency theory" describes the contractual
relationship between the agent and the principal. The agent is obligated to carry out tasks in the principal's best interests.
Each party in an agency relationship is motivated by different motivations based on their respective interests. Assume that
each party in this relationship tries to achieve or maintain the desired level of prosperity. There could be a conflict of interest
between management as an agent and the company owner as to principal in that case. The principal's and agent's differing
interests can lead to agency issues, in which each party prioritizes its interests. As rational humans, agents prioritize their
interests (while disregarding the principal's interests), such as manipulating the income statement.
The concept of signaling explains why companies provide information to the capital market. Theoretically, companies
should provide signals to users of financial statements. This theory states that when a company's financial situation is terrible,
management uses earnings management to signal bad news to the market, demonstrating that they have integrity, act honestly,
and are confident in their ability to solve the problems at hand. Earnings management is a false signal in signal theory
because it causes investors to take on more risk. In general, the CEO of Narcissism has the authority to take and manage
any available resources, including decisions to make acquisitions that may jeopardize the company's ability to achieve other
objectives (Campbell, Bush, Brunell, & Shelton, 2005). Because they believe their decisions will be successful, narcissistic
CEOs will often try to gain control of available resources, causing them to invest more aggressively in the company to
achieve their goals (Nugraheni & Wahyuni, 2016). the study results (Sadia & Sukartha, 2014) discovered that the CEO's
earnings management behavior appears when the period is replaced or when the new CEO replaces the old CEO in a
company is interesting to study. According to (Phandeirot 2017), CEO duality has a significant impact on financial
performance. CEO duality hurts financial performance. CEO duality causes a company's financial performance to decline
when it occurs, and it causes a company's financial performance to increase when it does not. Earning management hurts
financial performance, which means that its financial performance suffers when a company practices earnings management.
When a company does not practice earnings management, the financial performance of the company suffers.
H2: Narciss CEO will improve good company performance through earnings management practices
This study was conducted at manufacturing companies in Indonesia, understanding that Indonesia is a developing
country with a low level of transparency, resulting in poor governance and shaky investor protection. The Upper Echelon
theory (Hambrick & Mason, 1984) emphasizes how top management has power and is the leading strategic decision-maker
in companies and organizations. As a result, it emphasizes that top management has corporate governance and organization
responsibilities and that their overall activities will influence its decisions. It is also explained that this theory is based on
the idea that an aspect of personality behavior, in this case, the CEO's, influences how each policy is interpreted in light of
the situations and conditions encountered in the decisions made.
Earning Management (Y)
CEO narcissism (X1) Firm Performance (Z)
Figure 1. Conceptual Framework
55
This research is qualitative research to examine CEO Narcissism's relationship or influence on Firm Performance through
earning management. The population in this study were 150 manufacturing companies listed on the Stock Exchange in 2017-
2019. The sample selection method used a purposive sampling method of 57 from 19 companies for three years.
Table 1. Variable Definition and Measurement
Variable Definition Measurement

Earning management Intervention or manipulation of company a. TA (total accruals) = Net income –
financial information (Dechow et al., Cash flow from
1995) operation................. (1)
b. TAt/At-1 = α1 (1/At-1) +
α2(ΔREVt/At-1) + α3 (PPEt/At-1)
+ ε..................(2)
c. NDA = α1 (1/At-1) + α2 (ΔREVt-
ΔRECt)/At-1) + α3 (PPEt/At-
1)................. (3)
d. DA t = TAt /At-1-NDA..........(4)
Firm Performance The success of the company ROA = Operating profit
Total Asset
CEO Narcissism Overconfidence behavior, as seen from the a. one point if there is no photo of the
size of the photos on the financial report CEO;
b. two points if the CEO is photographed
with one or more fellow executives;
c. three points if the photo is from the
CEO only and is less than half a page
d. four points if the CEO's photo is a
photo of himself that occupies more
than half of the page
e. e. five points if the CEO's photo is a
photo of himself that occupies the
entire page
Chatterjee & Hambrick (2007), Olsen et
al., (2013

Result Analysis
This test is used to see if the data is normally distributed if there is no multicollinearity and no heteroscedasticity. The
standardized residual histogram and the standardized residual PP plot were used to check for data normality. As shown by
the standardized residual PP plot image, the data is usually distributed, which shows the points spread out in the diagonal
line's direction.
56
The regression model needs to be tested to see an intercorrelation or collinearity between the independent variables. The
multicollinearity test was tested by looking at the VIF value of each independent variable <10 and a tolerance value> 0.05.
The test results show that the VIF value of each independent variable is <10 and a tolerance value> 0.01; So it can be
concluded that there is no multicollinearity problem in the regression model. According to the processed data, each
independent variable's VIF value is more significant than ten, as shown in Table 2.
Table 2. Multicollinearity test results
Model
Tolerance VIF
(Contants)
Narcisme CEO 0,990 1,010
Firm Size 0,990 1,010
This test is used to see if the regression model's residual variance is unequal, as shown by the scatterplot graph (Ghozali,
2011). The Scatterplot graph shows the points spread randomly and scattered both above and below zero on the Y axis,
indicating that the regression model has no heteroscedasticity and can be used to determine the study results.
Figure 3. Heteroscedasticity test results
Table 3. Hypothesis Testing Results (Model Test 1)
Unstandardized Coefficients Standardized Coefficients

Model T Sig.
B Std. Error Beta
Constant -0,014 0,02 -0,728 0,47
Narcissism 0,005 0,005 0,148 1,044 0,301
Because the CEO Narcissism variable has a t-count value of 1.044 and a significant level> 0.05, it can be concluded that
CEO Narcissism has no significant effect on earnings management, and H1 is accepted as a hypothesis. In the form of
Equation 1, the following is written:
Y= -0,014 + 0,005
Table 4. Hypothesis Testing Results (Model Test 2)
Unstandardized Coefficients Standardized Coefficients

Model t Sig.
B Std. Error Beta
Constant -0,022 0,039 -0,577 0,567
Narcissism 0,025 0,01 0,331 2,478 0,017
Earning Management 0,391 0,277 0,188 1,41O 0,165
57
The CEO Narcissism variable has a value of 2.478 and a significant level of 0.05, indicating that CEO Narcissism
impacts firm performance via earnings management practices. As a result, H2 has been accepted. The following is written
in the form of Equation 2:
Y= 0,022 + 0,025 + 0,391
Discussion
The CEO of Narcissism has an impact on earning management practices. This is because Narcissism's aggressive
behavior will make it believe it is superior, allowing it to enact policies that influence decision-making and project a positive
image. Positive numbers can be derived from financial statement accounting figures. Narcissism is a personality trait that
causes a person to assume a power position (power) and exert control over others. Narcissism, which is closely linked to
self-esteem, also helps a person advance in their career. As a result, when someone has Narcissism, they try to project a
positive image, which leads to optimism and strong confidence in the outcome. The CEO will choose an accounting method
that will boost profits while also boosting compensation. It is used to evaluate the CEO's performance when the company
profits increase. Agency theory explains the relationship or contract between the principal and the agent. Principals hire
agents to perform tasks in their best interests, such as delegating decision-making authority to the agent. In companies with
a share capital, shareholders act as principals, and the CEO (Chief Executive Officer) acts as their agent. The shareholders
hire the CEO to act in the company's best interests. The term agency theory is used in this study to describe a contractual
relationship between an agent and a principal. The agent is obligated to carry out tasks in the best interests of the principal.
There may be a conflict of interest between management as the agent and the company owner as of the principal when each
party in an agency relationship is motivated by different interests and tries to achieve or maintain the desired level of
prosperity. Differentiated interests between the principal and the agent can lead to agency issues, in which each party
prioritizes its interests. As rational humans, agents prioritize their interests (while ignoring the principal's interests), as
evidenced by income statement manipulation. Theory signaling is used to explain why companies provide information to
the capital market in this study.
According to signal theory, companies should provide signals to users of financial statements. According to this theory,
when a company's financial situation is dire, management uses earnings management to signal bad news to the market,
demonstrating that they are trustworthy, act honestly, and are confident in their ability to solve the problems at hand. In
signal theory, earnings management is a false signal because it increases the risks that investors face. CEO narcissism,
according to research, has a positive and significant impact on earnings management (Kim, Lee, & Kang, 2018). (Falah &
Mita, 2020). CEOs who are more narcissistic tend to release more positive company information to boost their self-image
and reputation because they see its reputation as their own. As a result, a narcissistic CEO seeks to make the best decisions
possible for the company's long-term viability by increasing ESG disclosure.
The findings show that CEO Narcissism has an impact on firm performance through the practice of earnings management,
where CEO Narcissism will influence financial decisions through earnings management practices to assist investors in
making business decisions (Lin, Sui, Ma, Wang, & Zeng, 2018; Sanjaya & Rizky, 2018). As the company's top executive,
the CEO must demonstrate to stakeholders that his leadership performance is exceptional. Positive performance reviews at
the end of a CEO's tenure are more likely to be offered a better job. If the CEO's performance is poor and unable to show
the company a better direction, he may be replaced before his term is up. If a company performs well, its value will increase
in the eyes of its stakeholders. One of the company values that can be evaluated is the profitability of the company. This is
expected to persuade stakeholders that correctly carried out and managed company activities can lead to financial report
self-confidence, allowing managers to be considered successful in their duties (Sintyana & Artini, 2019).
Agency theory explains the principal-agent relationship. Principals hire agents to carry out tasks in their best interests,
such as delegating decision-making authority to the agent. Shareholders act as principals, and the CEO (Chief Executive
Officer) acts as their agent in companies with a share capital. The shareholders hire the CEO to serve the company's best
interests. The term agency theory is used in this study to describe the contractual relationship between an agent and a
principal. The agent is required to carry out tasks in the best interests of the principal. There may be a conflict of interest
between management as the agent and the company owner as of the principal when each party in an agency relationship is
motivated by different interests and attempts to achieve or maintain the desired level of prosperity. Differentiated interests
between the principal and the agent can result in agency issues, in which each party prioritizes its interests. Agents prioritize
their interests (while ignoring the principal's), as evidenced by income statement manipulation. Idea Signaling is a concept
that explains why companies provide information to the capital market. According to signal theory, companies should
theoretically provide signals to financial statement users. According to this theory, when a company's financial situation is
dire, management uses earnings management to signal bad news to the market, demonstrating that they have integrity, act
honestly, and are confident in their ability to solve the problems at hand.
In signal theory, earnings management is a false signal because it raises investor risks. The CEO's earnings management
behavior appears when the period is replaced or when the new CEO replaces the old CEO in a company interesting (Sadia
58
& Sukartha, 2014). CEO duality has a significant impact on financial performance (Phandeirot, 2017). CEO duality hurts
financial performance, which means that its financial performance suffers when it happens. When CEO duality does not
exist, the company's financial performance suffers. Earning management hurts financial performance, which means that its
financial performance suffers when a company uses it. In contrast, when it does not use it, its financial performance improves.
4. Conclusions
Based on the analysis and discussion findings, this study concludes that CEO narcissism impacts earnings management.
This is because narcissistic CEOs will use creative accounts to increase or decrease profits to achieve their goals. CEO
Narcissism affects firm performance through earning management. As a policyholder and decision-maker, he will project a
positive image and sound performance through earning management, which is carried out by reporting optimal earnings to
measure performance appraisal investors. According to this study, this CEO's personality should be investigated further
because it significantly impacts company employees' actions, including work pressure and work environment. This will help
you figure out if any other psychological factors point to the CEO's personality. Aside from that, the research object should
be expanded to include different companies because pressure and the work environment can cause personality differences
in the CEO.
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Abd Rauf Wajo / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 61-69

Effect of Cash Turnover, Receivable Turnover, Inventory Turnover and Growth

Opportunity on Profitability
1*
Abd. Rauf Wajo
Abstract
The purpose of this study is to analyze cash flow, accounts receivable turnover, inventory turnover, and growth opportunity for
the profitability of manufacturing companies listed on the Indonesia Stock Exchange. This research was conducted at
manufacturing companies listed on the Indonesia Stock Exchange. This study's population were manufacturing companies listed
on the Indonesia Stock Exchange in 2013-2016, totaling 137 companies. The number of samples used in this study was 16
companies using the purposive sampling method. The data was collected using the documentation method. The type of data
used is quantitative, while the data source used is secondary data. This study indicates that cash turnover has a positive and
significant effect on profitability, accounts receivable turnover has a positive and significant impact on profitability, has a
positive and significant impact on profitability, and growth opportunity has a positive and insignificant effect on profitability.
Keywords: Profitability, Cash Turnover, Receivable Turnover, Inventory Turnover, Growth Opportunity.
1. Introduction12
Every business strives to achieve its primary objective of profit maximization (Wiranata & Nugrahanti, 2013; Ahmad et
al., 2018; Hala, 2020; Mira, 2020; Anwar & Gunawan, 2020; Amran et al., 2021). Working capital is critical for businesses,
and its management must be highly valued and closely monitored. This is because working capital is typically used to cover
operational costs associated with a business. Excessive working capital indicates that funds are being wasted and will
ultimately harm the business by squandering the opportunity to earn profits. Working capital's effectiveness is a metric that
indicates the most efficient use of a business's working capital to maximize profitability (Abesty & Puspitasari, 2014). Given
the critical nature of working capital in a business, financial managers must budget for it appropriately. If capital is either
excessive or insufficient, it will hurt its profitability (Supriyadi & Fazriani, 2011).
Competition in all industrial sectors is getting tighter, so that the number of manufacturing companies is increasing every
year. Manufacturing companies carry out the production process from purchasing raw materials and processing raw materials
to finished products to get the maximum profit. On the Indonesia Stock Exchange, there are 137 companies from the
manufacturing industry that are engaged in the chemical industry, consumer goods, and various other industries. In industrial
companies, problems often arise in managing working capital, a driving force for poor management, such as slow inventory
turnover. Even though many factors cause it, an inventory turnover that is too slow or a small value can indicate that product
management and other related components are not in the best condition.
Working capital is divided into three components: cash, accounts receivable, and inventory. These three components of
working capital can be managed in various ways to increase profitability or foster business growth (Lazaridis & Tryfonidis,
2006). Growth opportunities exist for the future expansion of a business (Humaira & Sagoro, 2018). Profitability and growth
of previous assets will indicate future profitability and growth (Hermuningsih & Wardani, 2009). Businesses with significant
growth potential have a high investment value, particularly in fixed assets with a longer economic life than one year.
1 * First Author and Corresponding Author. Institut Agama Islam Negeri Ternate, Ternate City, 97727, Maluku Utara, Indonesia, [ Email:
raufwajo@gmail.com ]

This research refers to the pecking order and trade-off theories. The pecking order theory advanced by (Frank & Goyal,
2003) explains why businesses prefer to finance activities with internal sources of funding (retained income), specifically
retained earnings and depreciation, rather than external sources of funding (debt, shares). Meanwhile, the pecking order
theory explains a relationship between the use of debt, taxes, and bankruptcy costs due to the business's capital structure
(Surjadi & Sinambela, 2017).
Theoretically, there is a strong correlation between working capital effectiveness and firm profitability. Effective working
capital management demonstrates that the available working capital is sufficient to meet the business's operations' needs
without being excessive. Effective working capital management enables a business to operate economically and profitably.
The research will focus on manufacturing companies listed on the Indonesian Stock Exchange between 2013 and 2016.
Manufacturing companies manage the entire production process, from the acquisition of raw materials to the processing of
raw materials and the final form of finished goods, to maximize profit.
Effectiveness is defined as the quantity, quality, and duration of accomplishments (Putra & Badjra, 2015). Working
capital is a long-term financing source primarily used to fund a business's daily operations (Nuriyani & Zannati, 2017).
Working capital is defined by Ayunitha (2020) as the difference between current assets and current liabilities. Working
capital effectiveness is a metric that indicates how effectively a business uses its working capital to accomplish its objectives
(high return on assets) (Ridwan & Sandy, 2019). Risyaldi et al., (2017) proposed several concepts for working capital,
including 1) Liquidity is a quantitative concept that refers to the total amount of liquid assets. 2) According to this concept,
working capital is included in current assets and can be used to fund business operations without jeopardizing the company's
liquidity. 3) This is a functional concept; it is based on funds' role in generating income.
The working capital can be classified according to its requirements (Risyaldi et al., 2017). Thus, working capital can be
classified into two types: (fixed working capital and variable working capital). Working capital continues to be the amount
of money that a business must have to operate normally during an accounting period. Meanwhile, variable working capital
refers to the working capital required over a specified time period, which varies according to changes in the external
environment over that time period. The term "working capital" is frequently used to refer to the difference between current
assets and liabilities. This means that by comprehending current assets and liabilities' contents, ascertaining which
components of working capital are (Oktavia & Nugraha, 2020).
Current assets include cash and other assets that can be readily converted to cash, sold, or used within a year. Cash,
securities, accounts receivable, inventories, and prepaid expenses comprise it. Current liabilities are expected to be paid off
within a short period of time, typically one year. Trade payables, notes payable, short-term bank loans, tax payable, accrued
expenses, and the current portion of long-term debt are included. Saraswati, (2012) categorizes working capital's role in
businesses as protecting them from working capital crises caused by the decline in the value of current assets, enabling them
to meet their obligations on time, and enhancing their credit standing. They enabled it to maintain sufficient inventory to
meet consumer demand and to operate more efficiently.
Saraswati, (2012) also provides the view three kinds of ratios can be used to measure the effectiveness of working capital,
namely cash turnover, accounts receivable turnover, and inventory turnover. Cash turnover is used to determine how
effective the company is in managing its cash funds to generate income or sales. Receivable Turn Over is used to measure
a company's ability to manage funds embedded in rotating receivables in a certain period (Nuriyani & Zannati, 2017).
Furthermore, inventory turnover is used to show how many times the inventory can rotate in a year (Demeter & Matyusz,
2011).
A growth opportunity is a growth ratio that indicates a business's ability to maintain its economic position in the face of
economic growth and changes in its industry (Permana, 2017). Businesses with high growth rates should finance themselves
through equity to avoid agency costs between shareholders and management. On the other hand, businesses with slow
growth rates should consider debt as a financing source, as debt requires the business to pay interest regularly (Rahman et
al., 2015). Changes in total assets are used to determine a company's growth. Asset growth can be defined as the change in
or annual growth rate of a company's total assets from one year to the next.
Profitability is defined as the relationship between revenue and expenses generated by the efficient use of company assets
that remain in productive activities (Permana, 2017). The profitability ratio measures a company's ability to earn profits
from all of its existing capabilities and sources, including sales activities, cash, capital, employee count, and branch count
(Permana, 2017). According to (Permana, 2017), profit ratios come in a variety of forms. One such ratio is the gross profit
ratio, which indicates the percentage of net profit earned on each sale. Profit margin, which is expressed as a percentage of
revenue before taxes and interest. The net profit margin is the percentage of sales remaining after interest and taxes are
deducted. Earnings per share, or EPS, is a ratio that indicates the profitability or profit of a single share unit. Return on assets
(ROA), which is used to calculate the return on equity or return on investment of common stockholders, and return on equity
(ROE) are used to determine management's effectiveness in managing the company's assets.
ROA can be used to determine the efficiency with which available assets generate profits or the capacity to generate
returns on invested capital (Horne & Wachowicz, 1998). The higher the ROA, the better the performance, as the return on
equity is more important in attracting investors seeking a return rate on their investment in the business. The ROA indicator
is a financial metric that is frequently used to evaluate a company's performance.
ROA can be used to determine the efficiency with which available assets generate profits or the capacity to generate
62
returns on invested capital (Horne & Wachowicz, 1998). The higher the ROA, the better the performance, as the return on
equity is more important in attracting investors seeking a return rate on their investment in the business. The ROA indicator
is a financial metric that is frequently used to evaluate a company's performance.
H1: Cash Turnover has a positive and significant effect on profitability.
Accounts receivable are created when a business sells on credit to increase its business volume. With a high turnover of
accounts receivable, the capital in accounts receivable will dwindle. The capital can then be invested in profitable activities
to maximize the company's profitability. This is backed up by research (Zahroh & Nuzula, 2014), demonstrating that
accounts receivable turnover affects profitability.
H2: Accounts Receivable Turnover has a positive and significant effect on profitability
The primary component inventory is working capital assets that are constantly rotating and changing (Supriyadi &
Fazriani, 2011). The higher the inventory turnover rate, the lower the maintenance costs. The lower the company's fees, the
more profitable it is (Supriyadi & Fazriani, 2011). Yanthi & Sudiartha's (2017) research demonstrates that inventory turnover
affects profitability.
H3: Inventory Turnover has a positive and significant effect on profitability
Growth potential is a measure of a company's ability to maintain its economic position in the face of competition (Chen
& Zhao, 2006). Increased sales, followed by improved operating results, will bolster outsiders' confidence in the company.
With the increase in external trust (creditors), the proportion of debt has surpassed equity. This is based on creditors'
confidence that the company's funds are secure due to the size of its assets; healthy growth indicates the company's continued
growth and profitability. This study's findings are corroborated by research conducted by (Lestari & Hermanto 2015), which
demonstrates that growth opportunity affects profitability.
H4: Growth Opportunity has a positive and significant effect on profitability
This research was conducted at manufacturing companies listed on the Indonesia Stock Exchange. This study's population
were manufacturing companies listed on the Indonesia Stock Exchange in 2013-2016, totaling 137 companies. At the same
time, the sample used in this study amounted to 16 manufacturing companies. The data was collected using the documentation
method. The type of data used in this research is quantitative data. While the data used in this study are secondary, namely
data in the form of writing or company documents. The analysis method used to test the hypothesis is the classical assumption
test analysis method, multiple regression analysis tests, and hypothesis testing.

Result Analysis
From the observation of table 1, it can be seen that the lowest cash turnover value in manufacturing companies listing
on the Indonesia Stock Exchange in the 2013 period is PT. Indocement Tunggal Prakarsa, Tbk with the company code INTP
of 3.11. In the 2014 and 2015 periods, the company PT. Indo-Rama Synthetics, Tbk with company codes INDR of 2.56 and
4.18. And in the 2016 period, PT. Indocement Tunggal Prakarsa, Tbk with the company code INTP of 2.76. Meanwhile, the
highest cash turnover value in manufacturing companies listing on the Indonesia Stock Exchange in the 2013 period is PT.
Indo Kordsa, Tbk with the company code BRAM of 18.34. In the 2014 period, PT. Selamat Sempurna, Tbk with the company
code SMSM of 16.95. In the 2015 period, PT. Goodyear Indonesia, Tbk with the company code GDYR of 16.86. And in the
2016 period, PT. Indo Kordsa, Tbk with the company code BRAM of 19.34. This shows that the higher the company's cash
turnover, the less possible risk of the company's inability to pay its obligations, which means that cash is more efficient and
increases the possibility of the company obtaining high profitability. The lowest receivable turnover value for manufacturing
companies listing on the Indonesia Stock Exchange for the 2013 and 2014 periods is PT. Indo Kordsa, Tbk with the company
code BRAM of 2.41 and 2.01. In the 2015 period, PT. Goodyear Indonesia, Tbk with the company code GDYR of 1.44. And
in the 2016 period, PT. Nipress, Tbk with the company code NIPS of 2.21. Meanwhile, the highest receivable turnover value
in manufacturing companies listed on the Indonesia Stock Exchange for the 2013-2015 period is PT. Indomobil Sukses
63
Internasional, Tbk with the company code IMAS. In the 2013 period amounted to 20.54. In the period 2014 amounted to
22.55. In the 2015 period, it was 25.32, and in the 2016 period, PT. Gajah Tunggal, Tbk with the company code GJTL, which
is 20.87. This shows that the higher the turnover rate of accounts receivable, the more likely the company will obtain high
profitability. The lowest inventory turnover value for manufacturing companies listing on the Indonesia Stock Exchange in
the 2013 period is PT. Gajah Tunggal, Tbk with the company code GJTL of 1.49. In the 2014 period, PT. Indospring, Tbk
with the company code INDS of 2.17. In the 2015 and 2016 periods, PT. Holcim Indonesia, Tbk with the Company codes
SMCB of 1.49 and 1.47. Meanwhile, the highest inventory turnover value for manufacturing companies listing on the
Indonesia Stock Exchange for the 2013 and 2014 periods is PT. Astra Otoparts Tbk, with the company code AUTO, namely
8.51 and 8.82. In the 2015 period, PT. Indo Kordsa, Tbk with the company code BRAM of 8.76. And in the 2016 period,
PT. Multistrada Arah Sarana, Tbk with the company code MASA of 6.59. This shows that the higher the inventory turnover,
the costs incurred for maintenance and maintenance of small inventory to save cost.
Table. 1. Manufacturing Company Cash Turnover 2013-2016
Code Cash Turnover Receivable Turnover Inventory Turnover

No.
Company 2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016
1 ARGO 13,98 13,35 14,46 12,72 6,8 3,45 2,46 2,25 6,8 3,45 2,46 2,25
2 BRAM 18,34 14,23 16,62 19,34 2,41 2,01 3,48 6,84 2,41 2,01 3,48 6,84
3 GDYR 17,12 10,7 16,86 10,04 6,33 2,97 1,44 5,67 6,33 2,97 1,44 5,67
4 SMSM 12,34 16,95 5,98 11,01 4,35 4,69 4,73 4,01 4,35 4,69 4,73 4,01
5 SMCB 16,14 3,75 6,19 8,04 10,13 10,17 8,39 9,24 10,13 10,17 8,39 9,24
6 GJTL 14,67 13,88 4,4 3,56 6,64 18,93 16,76 20,87 6,64 18,93 16,76 20,87
7 IMAS 14,33 11,37 6,98 6,61 20,54 22,55 25,32 18,11 20,54 22,55 25,32 18,11
8 INDR 6,9 2,56 4,18 5,87 6,23 4,22 8,41 6,55 6,23 4,22 8,41 6,55
9 INDS 12,27 11,81 12,14 13,23 6,98 6,78 5,91 5,85 6,98 6,78 5,91 5,85
10 INTP 3,11 3,35 4,46 2,76 11,8 8,45 6,46 4,58 11,8 8,45 6,46 4,58
11 MASA 4,81 8,08 6,62 9,34 8,43 6,19 8,24 8,86 8,43 6,19 8,24 8,86
12 MYTX 7,14 10,17 11,43 10,54 12,64 11,87 13,09 12,51 12,64 11,87 13,09 12,51
13 NIPS 10,69 11,25 12,98 11,81 2,45 2,89 2,93 2,21 2,45 2,89 2,93 2,21
14 ADMG 6,14 3,85 6,29 8,61 8,19 10,35 8,55 9,67 8,19 10,35 8,55 9,67
15 ASII 14,89 12,48 14,4 13,56 8,45 6,59 6,89 7,83 8,45 6,59 6,89 7,83
16 AUTO 12,83 11,97 16,18 16,61 10,42 10,87 11,19 10,45 10,42 10,87 11,19 10,45
Table 2 illustrates the calculation of growth opportunities from 2013-2016 in manufacturing companies listed on the
Indonesia Stock Exchange.
Table 2. Growth Opportunity and Profitability of Manufacturing Companies 2013-2016
Code Growth Opportunity ROA

No
Company 2013 2014 2015 2016 2013 2014 2015 2016
1 ARGO 6,63 6,34 5,47 4,9 21 13 6 6,56
2 BRAM 4,48 3,82 9,1 9,84 6,91 5,13 13,8 11,4
3 GDYR 10,34 10,78 11,64 14,6 11 8,5 5 6,3
4 SMSM 5,12 4,27 4,59 5,09 9 10 4 17,74
5 SMCB 9,05 9,61 35,46 25,24 15,05 12,83 9,8 8,63
6 GJTL 42,54 48,53 51,76 73,49 9,27 37,8 39,47 35,87
7 IMAS 10,23 8,93 9,3 4,65 57,3 56,4 53,4 31,78
8 INDR 6,61 6,42 6,55 6,34 6,89 2,58 8,78 3,68
9 INDS 6,77 6,23 6,73 7,34 14,9 12,41 13,96 14,62
10 INTP 6,68 6,38 5,37 4,15 15,4 13,21 16,11 16,56
11 MASA 4,28 4,32 4,21 4,45 6,51 4,33 3,82 8,4
12 MYTX 10,84 13,88 11,74 14,62 11,13 10,5 8,23 9,3
13 NIPS 2,12 4,57 2,51 4,49 12,12 10,1 12,4 12,78
14 ADMG 6,15 7,61 8,87 9,24 13,05 12,73 16,85 18,43
15 ASII 6,54 8,53 6,76 7,49 35,29 34,89 36,87 35,34
16 AUTO 8,83 8,63 6,13 6,35 52,34 51,42 53,44 52,26
64
From the observation of table 2, it can be seen that the lowest growth opportunity value in manufacturing companies
listing on the Indonesia Stock Exchange in the 2013 period is PT. Nipress, Tbk with the Company code NIPS of 2.12. In the
2014 period, PT. Indo Kordsa, Tbk with the company code BRAM of 3.82. In the 2015 period, PT. Nipress, Tbk with the
Company code NIPS of 2.51. In the 2016 period, PT. Indocement Tunggal Prakarsa, Tbk with the company code INTP of
4.15. Meanwhile, the highest Growth Opportunity value in manufacturing companies listing on the Indonesia Stock
Exchange for the 2013-2016 period is PT. Gajah Tunggal, Tbk with the company code GJTL. In the 2013 period amounted
to 42.54. The 2014 period amounted to 48.53. In the 2015 period, it was 51.76, and in the 2016 period, it was 73.49. This
shows that companies with high growth opportunities have a large amount of investment value, especially in fixed assets
whose economic age is more than one year. The lowest return on assets (ROA) value for manufacturing companies listing
on the Indonesia Stock Exchange in the 2013 period is PT. Multistrada Arah Sarana, Tbk with the Company code MASA of
6.51. In 2014, PT. Indo-Rama Synthetics, Tbk with the company code INDR of 2.58. In 2015, PT. Multistrada Arah Sarana,
Tbk with the Company code MASA of 3.82. And in 2016 is PT. Indo-Rama Synthetics, Tbk with the company code INDR
of 3.68. Meanwhile, the highest return on assets (ROA) value for manufacturing companies listing on the Indonesia Stock
Exchange for the 2013-2016 period is PT. Astra Otoparts, Tbk with the company code AUTO. In the 2013 period amounted
to 52.34. In the 2014 period, it was 51.42. In the 2015 period, it was 53.44. And in the 2016 period of 52.26. This shows that
companies with high profitability can attract creditors to provide credit and issuers to issue securities to the company.
The normality test in this study aims to test whether there are confounding variables (error) or residuals that have a
normal distribution in the regression model. This study will conduct a One-Sample Kolmogorov-Smirnov Test (KS)
statistical test to detect the data's normality. If the value is Asymp.Sig. (2-tailed) ≥ 5% significance value, then the data is
considered to be normally distributed. Meanwhile, if the value of Asymp.Sig. (2-tailed) ≤ 5%, then the information is
considered to be not normally distributed. The results of the One-Sample Kolmogorov-Smirnov Test (KS) statistical test can
be seen in table 3:
Table 3. Normality Test Results
N 64
Mean ,0000000
Normal Parametersa,b
Std. Deviation 11,13550027
Absolute ,084
Most Extreme Differences Positive ,084
Negative -,071
Kolmogorov-Smirnov Z ,672
Asymp. Sig. (2-tailed) ,757
a. Test distribution is Normal.
b. Calculated from data.
Based on the results of normality testing in table 3, it can be seen that the research data is normally distributed. This can
be seen from Asymp. Sig (2-tailed) of 0.757> a significance value of 0.05 (5%). Multicollinearity test this test aims to test
whether there is a correlation between independent variables. The multicollinearity test results can be seen in table 4:
Model Collinearity Statistics

Tolerance VIF
Cash Turnover ,628 1,592
Receivable Turnover ,865 1,157
Inventory Turnover ,741 1,349
Growth Opportunity ,623 1,605
Based on table 4, it is known that there is no multicollinearity in testing cash turnover on return on assets (ROA). This
can be seen from the VIF value of cash turnover, which is 1.592, which means no more than 10. This can also be seen from
the cash turnover tolerance value of 0.628, which means not less than 0.1. There is no multicollinearity in testing receivables
turnover on return on assets (ROA). This can be seen from the VIF value of the accounts receivable turnover amounting to
1.157, which means no more than 10. This can also be seen from the value of the receivables turnover tolerance value of
65
0.865, which means not less than 0.1. There is no multicollinearity in testing inventory turnover on return on assets (ROA).
This can be seen from the VIF value of the inventory turnover amounting to 1.349, which means no more than 10. This can
also be seen from the inventory turnover tolerance value of 0.741, which means less than 0.1. Testing growth opportunity
on return on assets (ROA) does not show multicollinearity. This can be seen from the VIF value of the growth opportunity,
which is 1.605, which means no more than 10. This can also be seen from the tolerance growth opportunity value of 0.623,
which means less than 0.1.
A heteroscedasticity test is carried out to test whether the regression model has inequality of variants from the residuals
of one observation to another. Heteroscedasticity testing can be seen with a scatterplot graph which can be seen in Figure 1:
Figure 1. Heteroscedasticity Test Results
The heteroscedasticity test results in Figure 1 show that the data used does not experience heteroscedasticity. The dots
spread above and below the 0 on the Y-axis and do not form a specific, straightforward pattern. The determination coefficient
test was conducted to determine how much influence the independent variables used in the study were cash turnover,
accounts receivable turnover, inventory turnover, and growth opportunity.
Table 5. Results of Testing the Coefficient of Determination (R2)
Model R R Square Adjusted R Square Std. Error of the Durbin-Watson

Estimate
1 ,698a ,488 ,453 11,50679 ,658
Table 5 shows the coefficient of determination of 0.453. This indicates that the contribution of cash turnover accounts
receivable turnover, inventory turnover, and growth opportunity to profitability proxied by return on assets (ROA) is 45.3%.
The remaining 54.7% is influenced by other variables, not in this study. Furthermore, a simultaneous test is carried out to
test whether there is an effect of the independent variable as a whole on the dependent variable. This test uses α 5%. With
provisions, if the significance of the F-count <0.05, the proposed hypothesis can be accepted.
Table 6. Simultaneous Test Results
Model Sum of Squares df Mean Square F Sig.

Regression 7435,861 4 1858,965 14,040 ,000b
1 Residual 7811,960 59 132,406
Total 15247,821 63
Table 7. Multiple Linear Regression Test Results
Model Unstandardize Standardized T Sig. Collinearity Statistics

d Coefficients Coefficients
BStd. Error Beta Tolerance IF
(Constant) 9,817 5,965 3,322 002
Cash Turnover ,629 ,350 ,547 4,656 000 ,628 1,592
1 Receivable Turnover ,064 ,346 ,308 3,077 003 ,865 1,157
Inventory Turnover ,422 ,930 ,282 2,605 012 ,741 1,349
Growth Opportunity 129 ,146 ,105 ,886 379 ,623 1,605
66
Table 6 shows that the significance level is smaller than 0.05; So it can be said that cash turnover, accounts receivable
turnover, inventory turnover, and growth opportunity simultaneously (together) influence profitability, with a probability of
0.000. Since the chance is much smaller than the significant value of 0.05, a regression model can be used to predict
profitability. Multiple Linear Regression Test was conducted to determine the effect of cash turnover, accounts receivable
turnover, inventory turnover, and growth opportunity on return on assets.
The relationship between the independent variable and the dependent variable can be formulated into the following
equation:
Y = -9,817+ 1,629X1 + 1,064X2 + 2,422X3 + 0,129X4
The regression coefficient value of the effect of cash turnover on profitability as proxied by return on assets (ROA)
shows a value of 1.629 with a significance value of 0.000 less than 0.05 so that the cash turnover variable has a significant
effect on profitability which is proxied by return on assets (ROA). The results of testing the first hypothesis are that cash
turnover significantly affects profitability, which is proxied by return on assets (ROA) and is declared accepted.
The regression coefficient value of the effect of receivables turnover on profitability as proxied by return on assets (ROA)
shows a value of 1.064 with a significance value of 0.003 less than 0.05. The receivables turnover variable has a significant
effect on profitability which is proxied by return on assets (ROA). The result of testing the second hypothesis is that accounts
receivable turnover has a significant effect on profitability, which is proxied by return on assets (ROA) and is declared
accepted.
The regression coefficient value of the effect of inventory turnover on profitability as proxied by return on assets (ROA)
shows a value of 2.422 with a significance value of 0.012 less than 0.05. The inventory turnover variable has a significant
effect on profitability which is proxied by return on assets (ROA). The result of testing the third hypothesis is that inventory
turnover has a significant effect on profitability, which is proxied by return on assets (ROA) and is declared accepted.
The regression coefficient value of the effect of growth opportunity on profitability as proxied by return on assets (ROA)
shows a value of 0.129 with a significance value of 0.379 greater than 0.05 so that the growth opportunity variable does not
have a significant effect on profitability which is proxied by return on assets (ROA). The results of testing the fourth
hypothesis, namely that growth opportunity, do not significantly affect profitability, which is proxied by return on assets
(ROA) and is declared rejected.
Discussion
Testing the first hypothesis indicates that the higher the cash turnover, the company's cash is productive, so the company's
return on assets will increase. Pecking order theory suggests that companies use internal funding sources because they still
have adequate internal sources of funds, such as retained earnings. This is in line with the research results (Utami & Dewi,
2015; Yanthi & Sudiartha, 2017), which show that cash turnover affects profitability. The results of testing the second
hypothesis show that the higher the turnover of accounts receivable, the faster and more efficient the company is turning its
assets. It also means that the company's chances of making a profit are increasing. This is in line with the pecking order
theory, which tends to use internal sources of funds because companies still have adequate internal sources of funds such as
retained earnings. This is supported by research results (Prakoso, Zahroh & Nuzula, 2014; Hoiriya, 2015; Utami & Dewi,
2015); receivables turnover affects profitability.
The results of testing the third hypothesis indicate that the higher the inventory turnover rate, the higher the turnover rate
of funds embedded in the inventory. This means that the amount of inventory in a small company, thus affecting the increase
in profit. This is in line with the pecking order theory, which tends to use internal sources of funds because companies still
have adequate internal sources of funds such as retained earnings. This is in line with the research results (Santhi & Dewi,
2014; Utami & Dewi, 2015; Lestari & Farida, 2017), which show that inventory turnover affects profitability. The results of
testing the fourth hypothesis indicate that the increasing growth opportunity in a company does not significantly affect the
rate of return on assets for the company's operating activities or the return on assets (ROA) obtained by the company. This
is in line with the trade-off theory, which states that a company will not reach the optimal value if all funding is financed by
debt or does not use debt to finance company activities. This study's results do not support research conducted by (Lestari
& Hermanto, 2015; Damayanti & Budiyanto, 2015; Kopong & Nurzanah, 2016), proving that growth opportunity affects
profitability.
4. Conclusions
Based on the research and discussion, it can be concluded that the higher the cash turnover, the higher the profitability,
as measured by the company's return on assets (ROA). The higher the percentage of rotating accounts receivables, the faster
and more efficiently the company turn its assets, implying a greater profit or profitability chance. The higher the inventory
turnover rate, the lower the maintenance costs. The lower the company's costs, the higher its profitability. Meanwhile, growth
opportunity, which is calculated based on changes in the company's total assets, has decreased from the previous period,
67
indicating that the company has not grown significantly, resulting in decreased profitability.
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Hasbiyadi Hasbiyadi / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 70 - 78

Is it possible that intellectual Capital Affects Performance?

1*
Hasbiyadi Hasbiyadi
Abstract
The impact of capital structure, good corporate governance, and intellectual capital on financial performance and firm value is
examined in this study. The impact of financial performance on the value of a company. Examine the impact of capital structure,
corporate governance, and intellectual capital on a company's financial performance. There were 193 financial reports in this
study, with a sample size of 62 financial reports. Purposive sampling was used as a sampling technique. SEM-PLS is the analysis
method used. The findings show that capital structure, good corporate governance, and intellectual capital have a positive and
significant impact on financial performance and firm value. Firm value is influenced by financial performance in a positive and
significant way. Good corporate governance and intellectual capital have a small but significant impact on firm value through
financial performance. Through financial performance, capital structure has a negative and insignificant effect on firm value.
Keywords: Capital Structure; Good Corporate Governance; Intellectual Capital; Financial Performance; Firm Value
1. Introduction12
Management's ability to improve shareholder welfare is an indicator of the company's management success (Ahmad et
al., 2018). Investors believe that a company's value reflects its success in general (Sujoko & Soebiantoro, 2007). A company's
value is reflected in the share price, which is determined by the capital market's demand and supply. It reflects how the
general public views financial performance (Naufal, 2014). Stock performance, as measured by stock price, is highly
correlated with firm value. According to (Munawir, 2010), financial performance in a company is a description of the
company's financial condition to provide accurate information for stakeholders in making financial decisions (Putri &
Lutfillah, 2020). Financial performance can be measured on two levels: on the inside, by looking at the ratios in the financial
statements, and on the outside, by evaluating the company's value as expressed in share prices (Sarafina & Saifi, 2017). As
measured by stock prices, companies with strong financial performance can increase their value and avoid financial
difficulties (Rumini et al., 2019).
Good financial performance will send a positive message to investors and shareholders about a company's long-term
viability and survival (Siro, 2013). The capital structure of a company has a direct impact on its financial performance
(quote). The capital structure combines the company's sources of long-term funds used for operations to maximize its value
(Husnan & Pudjiastuti, 2004). A company's capital structure refers to how it finances its operations with a combination of
debt and equity capital (Martis, 2013). When the capital structure is above the target of its optimal capital structure,
increasing debt lowers the company's value (Brigham & Houston, 2006). Previous research findings have not yielded
consistent results when it comes to determining the optimal capital structure. It's due to differences in industry types and
characteristics, which lead to differences in business risk and, in turn, affect the optimal capital structure's composition.
Meanwhile, the findings of Wheeler et al., (2000) show that if a company is not profitable, it is necessary to reduce debt. It
is due to the fixed costs of debt repayment and interest payments. According to the trade-off theory (Myers, 1984), debt can
be used if the benefits of tax savings outweigh the company's obligation to pay interest and nominal installments. However,
if debt usage exceeds the optimal capital structure's limit or the cost of capital is too high, the company's value will suffer.
Empirical research on capital structure's impact on financial performance and firm value continues to yield mixed results.
1* First Author and Corresponding Author. Department of Management, STIEM Bongaya, Makassar City, South Sulawesi 90131, Indonesia [ Email:
hasbiyadi@stiem-bongaya.ac.id ]

The findings (Pratiwi, 2016; Adnyani et al., 2020; Jessica, 2018; Rahman, 2015) shows that the capital structure has a partial
impact on a firm's financial performance. However, Rahman's (2015)'s findings show that not all capital structure ratios have
a significant impact on firm value.
If the company has good corporate governance (GCG), it can achieve its long-term goals for its shareholders' benefit.
However, a strong commitment from stakeholders is required to ensure the effective implementation of GCG (Hamdani,
2016). GCG is defined by the Organization for Economic Cooperation and Development (OECD) as a system for controlling
and directing a company's business activities, including regulating the separation of duties, rights, and obligations of those
with a stake in the company's long-term viability, such as shareholders, board of directors, managers, and all members, as
well as other stakeholders (Widhianningrum & Amah, 2012). The ineffectiveness of the GCG mechanism, which consists
of the board of commissioners, board of directors, and audit committee, which serves as a supervisor on the development of
company performance, can lead to stakeholder distrust, which leads to distrust of financial performance disclosed through
financial statements. The effective functioning of the GCG mechanism, on the other hand, can increase trust and provide
value to stakeholders, ultimately affecting company value (Widhianningrum & Amah, 2012). The effects of the GCG
mechanism on financial performance and company value are still being studied, with mixed results. GCG has a positive and
significant effect on firm value, according to (Putra & Wirawati, 2020; Nurhidayah, 2020). However, results from (Sulastri
& Nurdiansyah, 2017; Adnyani et al., 2020) show that not all GCG mechanism elements have a significant impact on
financial performance and firm value.
One of his employees, Malinda Dee, embezzled funds from Citibank's private banking customers, as an example of
Indonesia's case. It occurred as a result of Citibank's ineffective monitoring system, which resulted in the loss of
approximately 500 customers (source: detik.com, 06/04/2011). The implementation of GCG, on the other hand, has an
impact on the company's performance and reputation. For example, in 2015, PT. CIMB Niaga Tbk in Indonesia won the
ASEAN Corporate Governance Award in two categories: top 50 ASEAN Public Listed Companies and top 3 Public Listed
Companies from Indonesia based on the ASEAN CG Scorecard (source: tempo.co, 19/11/2015). Conflicts of interest are
preventing the GCG mechanism from working properly in a number of companies. According to agency theory, GCG is a
concept (Myers, 1984). The existence of a contractual relationship between managers and owners is explained by this theory.
It is due to the fact that human nature is inherently selfish (Dalton et al., 2007). The contractual relationship frequently does
not meet the expectations of the principal (Chen et al., 2012). It has the potential to increase agency costs and cause financial
distress, affecting financial performance and firm value.
The dominant factor also impacts the company's financial performance, which is linked to its intellectual capital (IC).
IC has been identified as an intangible asset (resources, capabilities, and competencies). Knowledge, information, human
experience, resources, and company organizations are examples of intangible corporate assets (Pulic, 2008). The resource-
based theory (Penrose, 1959) emphasizes how stakeholders can improve financial performance through its IC influences
firm value. Superior IC can only be achieved if the company can effectively improve and manage the IC components (human
capital, structural capital, and relational capital/capital employed) effectively (Sydler et al., 2014).
Because it is a source of strategic renewal, creativity, innovation, and competitive advantage, human capital is the
company's most valuable asset (O'Sullivan & Schulte Jr, 2007). Meanwhile, even though employees have stopped working
and left the company, structural capital remains (St-Pierre & Audet, 2011). Finally, relational capital refers to a company's
ability to derive value from complex relationships with outside stakeholders (Meles et al., 2016). Effective IC component
management can have a big impact on financial performance and firm value. Findings on the impact of IC on financial
performance and firm value are still mixed. According to the findings of (Wijayani, 2017; Brigita & Farida, 2017),
intellectual capital has a positive and significant impact on financial performance and firm value. However, research by
(Nanik, 2016; Susanti, 2016) shows that IC does not affect firm value.
This research aims to look into the impact of financial performance variables on the relationship between capital structure,
GCG, and intellectual capital, and firm value. In previous studies, financial performance was only used as an antecedent
variable that influenced firm value. Several previous research findings continue to yield conflicting results. As a result, more
research is needed to explain the causal relationship between capital structure, GCG, intellectual capital, and firm value in
manufacturing companies listed on the Indonesia Stock Exchange through financial performance.
Fixed short-term debt, long-term debt, preferred stock, and common stock are balanced in the capital structure (Naufal,
2014). The capital structure is a component of a company's financial structure, reflecting how its assets are financed. It is
displayed on the liabilities side of the balance sheet. Meanwhile, the capital structure refers to the company's long-term debt,
preferred/priority shares, and ordinary share capital financing. Capital structure management aims to integrate the company's
sources of permanent funds for operations to maximize its value. Factors such as company size, asset structure, leverage,
company growth rate, profitability, taxes, lender attitudes, market conditions, internal company conditions, and financial
flexibility influence capital structure selection (Brigham & Houston, 2006).
Corporate governance refers to a set of rules that govern the rights and obligations of shareholders, company executives,
government creditors, employees, and other internal and external stakeholders, or a system that governs and controls a
company's strategy and performance (Munawir, 2010). There are two types of mechanisms for monitoring GCG: internal
and external mechanisms. Internal mechanisms such as the General Meeting of Shareholders, the composition of the board
of commissioners, the board of directors' composition, and meetings with the board of directors are used to control the bank.
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In the meantime, external mechanisms, such as company control and the market, influence the company and internal
mechanisms.
Intellectual capital is an intangible asset that can be used to increase a company's value and competitiveness (Chen et al.,
2004; Stephani & Yuyetta, 2011). The VAIC method measures the efficiency of three types of company inputs: human capital,
structural capital, and physical and financial capital. The financial performance is a description of the company's financial
condition over time, both in terms of raising funds and channeling funds, and is typically measured by capital adequacy,
liquidity, and profitability indicators (Naufal, 2014). Knowing the level of liquidity, knowing the level of solvency, knowing
the profitability level, and knowing the level of stability are the goals of measuring a company's financial performance.
Dewa's (2016)'s findings show that financial performance has a significant impact on firm value. Reni (2016), on the other
hand, found that not all financial performance indicators have a significant impact on firm value. A public appreciation of a
company's performance and achievements in serving the community or stakeholders are called company value (Brigham &
Houston, 2006). Avoiding the high risk, paying dividends, and maintaining its height are all aspects of company guidelines
for maximizing company value.
This study includes causality research when viewed from variable relationships, based on the objectives to be achieved.
Documentation, which is research that takes or accesses data to be sampled from a population already available through the
Indonesian Capital Market Directory through the IDX website, is the data collection approach.
Variable Definition Construct References

Capital Structure (X1) The company's funding • Long term debt to equity ratio (Sartono, 2014)
structure consists of a (LtDER)
combination of debt and • Long term debt to assets ratio
equity, which can affect (LtDAR)
firm value through the cost • Debt to equity ratio (DER)
of capital • Debt to Asset Ratio (DAR)
Good Corporate governance a series of systems used to • Board of commissioners size Faizal (2005)
(X2) control the company • Board of directors size
through supervisory • Audit committee size
mechanisms that are
following the rules to
create value added for all
stakeholders
Intellectual Capital (X3) It is an intangible asset that • Value Added Capital Pulic, (2008)
can be used to increase the Employed (VACA)
value and competitiveness • Value Added Human Capital
of the company (VAHU)
• Structural Capital Value Added
(STVA)
Financial Performance (Y) One of the factors that • Return on assets (ROA) Atmaja, (2008)
show the effectiveness and • Return on equity (ROE)
efficiency of an • Gross profit margin (GPM)
organization in achieving • Operating profit margin (OPM)
its goals • Net profit margin (NPM)
Firm Value (Z) Is the price that investors • Price Earning Ratio (PER) Irham, (2013)
are willing to pay based on • Price Book Value (PBV)
the market price the • Return Saham (RS)
company is going to sell • Earning Per Share (EPS)
The population is a complete element that is usually a person, a transactional object, or an event that we want to study or
become a research object (Suliyanto, 2018). This study's population is financial statements from 193 manufacturing
companies listed on the Indonesia Stock Exchange from 2016 to 2020. (primary and chemical industry sectors, various
industrial sectors, consumer goods industry sectors). The sample is a subset of the population unit or a portion of the population
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(Suliyanto, 2018). The minimum sample size is 62 companies, which were chosen using purposeful sampling. The following
criteria were used to sample: (a) Manufacturing companies listed on the Indonesia Stock Exchange for 2016-2020. (b)
Businesses that present and publish comprehensive financial reports for the years 2016 to 2020.
SEM-PLS was used as the analytical method in this study to answer the hypothesis. The SEM-PLS testing model is divided
into two parts: measurement model testing and structural model testing. All the variables in the hypothesis as written are
referred to as operational research variables. Here we illustrate this research model, which is arranged in Figure 1.
X1
X2 Y Z
X3
Figure 1. Research Model

Result Analysis
The measurement model is a component of a structural equation model that describes the relationship between latent
variables and their indicators. There are three criteria for evaluating the outer model using data analysis techniques and
Smart PLS software: The goal of convergent validity is to determine whether any relationship between indicators and
constructs or latent variables is valid. Average Variance Extracted is used to assess Convergent Validity, a construct with
reflective indicators (AVE). If the AVE value is less than 0.5, the construct can explain more than half of the items. Similarly,
if the AVE value is less than 0.5 and the loading factor is less than 0.5, the instrument is considered valid (Sarstedt et al.,
2017).
Table 1. Convergent Validity
Description Loading Factor (λ) AVE Info

X1.1 -------------- Capital Structure 0,887 0,647 Valid
X1.2 -------------- Capital Structure 0845
X1.3 -------------- Capital Structure 0,894
X2.1 -------------- GCG 0,835 0,810 Valid
X2.2 -------------- GCG 0,827
X2.3 -------------- GCG 0,881
X3.1 -------------- Intellectual Capital 0,753 0,690 Valid
X3.2 -------------- Intellectual Capital 0,743
X3.3 -------------- Intellectual Capital 0,717
Y1.1 -------------- Financial Performance 0,897 0,683 Valid
Y1.2 -------------- Financial Performance 0,721
Z1.1 -------------- Firm Value 0,729 0,702 Valid
Z1.2 -------------- Firm Value 0,742
Z1.3 -------------- Firm Value 0,832
Z1.4 -------------- Firm Value 0,791
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Table 2. Composite Reliability and Cronbach Alpha
Variable Composite Info Cronbach Alpha Info

Reliability
Capital Structure 0,809 Reliability is excellent 0,822 High Reliability
Good Corporate Governance 0,881 Reliability is excellent 0,787 High Reliability
Intellectual Capital 0,813 Reliability is excellent 0,753 High Reliability
Financial Performance 0,873 Reliability is excellent 0,851 High Reliability
Firm Value 0,821 Reliability is excellent 0,770 High Reliability
Table 3. Latent Variable Correlations
Variable Capital Structure Good Corporate Intellectual Financial Firm Value

Governance Capital Performance
Capital Structure 1,000 0 0 0 0
Good Corporate Governance 0,736 1 0 0 0
Intellectual Capital 0,718 0,6203 1 0 0
Financial Performance 0,740 0,723 0,549 1 0
Firm Value 0,749 0,739 0,755 0,621 1
Table 4. AVE Roots and Discriminant Validity
Variable AVE Roots Discriminant Validity

Capital Structure 0,8643 Fulfill
Good Corporate Governance 0,8426 Fulfill
Intellectual Capital 0,7681 Fulfill
Financial Performance 0,7635 Fulfill
Firm Value 0,7758 Fulfill
Variable Direct Indirect Total

HIP P-Value Info
Eksogen Intervening Endogen Effect Effect Effect
Financial Negative and
1 CapitalStructure - 0.000 -0.403 0.000 -0.403
Performance Significant
Good Corporate Financial Positive and
2 - 0.000 0.349 0.000 0.349
Governance Performance Significant
Intellectual Financial Positive and
3 - 0.003 0.273 0.000 0.273
Capital Performance Significant
4 Capital Structure 0,002 -0,248 0,000 -0,248
Performance Significant
Good Corporate Financial Positive and
5 0,000 0,483 0,000 0,483
Governance Performance Significant
Intellectual Financial Positive and
6 0,029 0,244 0,000 0,244
Capital Performance Significant
Financial Financial Positive and
7 - 0.000 0.424 0.000 0.424
Performance Performance Significant
Financial Financial Negative and
8 Capital Structure 0.062 -0,248 -0,171 -0,077
Performance Performance Significant
Good Corporate Financial Financial Positive and
9 0.058 0,483. 0.148 0.631
Governance Performance Performance Significant
Intellectual Financial Financial Positive and
10 0.061 0,244 0.116 0.260
Capital Performance Performance Significant
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Internal consistency reliability aims to determine whether any indicators can detect the latent construct (Sarstedt et al.,
2017). Based on the principle that each indicator must be highly correlated with its construct, discriminant validity aims to
determine whether a reflective indicator is a good measure of its construct. The correlation between constructs and the AVE
root can be used to determine discriminant validity. If the AVE root value for each construct is greater than the correlation
value between constructs and other constructs in the model, discriminant validity is good. Structural Model Testing (Inner
Model). Inner model testing is to see the relationship between endogenous variables and exogenous variables by looking at
the path coefficient results and the level of significance (Ghozali & Latan, 2015).
Discussion
The Influence of Capital Structure on Financial Performance and Firm Value
The hypothesis testing findings show that capital structure has a negative and significant impact on financial performance
and firm value. To improve financial performance, static trade off theory explains the balance between debt benefit and the
cost of financial distress (Myers, 1984; Atmaja, 2003). Nonprofitable organizations, on the whole, rely on a significant
amount of debt. Because the company has a small profit reserve, this is the case. The company uses long-term debt as an
alternative source of funding. Companies with large debts pay a lot of interest and save a lot of money in taxes. Profitability
is affected by companies that save a lot of money on taxes. Investors consider profitability when evaluating financial
performance. The traditional theory explains why companies that use debt and companies that do not use debt have different
values (Chowdhury & Chowdhury, 2010). Companies that can increase firm value through increased leverage are prudent,
according to this theory. Increasing the proportion of debt in the capital structure will boost the company's value. However,
increasing leverage beyond this point will raise the company's overall capital cost and reduce its total market value.
Companies with strong financial performance will see their value rise.
According to the findings, financial leverage is an alternative that can be used to increase profits, according to the
findings (Brigham & Houston, 2006). Financial difficulties will cause the performance to decline if the interest expense is
significant and the operating profit is insufficient. On the other hand, debt interest expense is a tax deduction that can help
you improve your financial situation. Debt can, in this case, be said to improve financial performance. According to signaling
theory, managers must provide positive information to increase stakeholders' trust (Myres, 1984; Atmaja, 2003). This data
is used to calculate the company's financial performance. A company's share price and value will rise as its financial
performance improves. This study's findings back up (Pratiwi, 2016; Adnyani et al., 2020; Jessica, 2018; Rahman, 2015),
demonstrating that capital structure has a significant impact on firm value. However, Rahman's (2015)'s findings show that
not all capital structure ratios have a significant impact on firm value.
The Effect of Corporate Governance on Financial Performance and Company Value.

The hypothesis testing results prove that GCG has a positive and significant effect on financial performance and firm
value. Stewardship theory explains that the board of directors can be trusted to act in the best possible way for shareholders'
interests (quote). However, this will be different if the board of directors has behavior that tends to be self-interested because
it can be detrimental to the company's interests in the long run. For example, a board of directors that prioritizes better
performance is more likely to report better company profitability. Fraud committed by the board of directors to obtain
personal benefits can influence shareholders' decisions. Therefore, the board of commissioners and the audit committee can
help mediate between the board of directors and shareholders' interests.
According to agency theory, shareholders who are unable to manage their own company can delegate operational
responsibilities to managers. However, if the manager has a conflict of interest, it may be difficult to improve shareholder
welfare. As a result, a supervisory mechanism is required to manage the company effectively. GCG will promote a
transparent, clean, and professional management/board of directors' work pattern. Members of the board of commissioners,
the board of directors, and the audit committee will all be part of the GCG mechanism, which will help to minimize conflicts
of interest between shareholders and managers. The board of directors carries out the company's operational activities.
Meanwhile, the board of commissioners and the audit committee monitor the company's operations to ensure that it is well-
run. Profitability, which is a measure of financial performance, is expected to rise due to good company management via
the GCG mechanism. Stock prices can rise as a result of good financial performance, which impacts the company's value.
GCG has a positive and significant effect on financial performance and firm value, according to (Putra & Wirawati, 2020;
Nurhidayah, 2020; Sulastri & Nurdiansyah, 2017; Adnyani et al., 2020).
The Influence of Intellectual Capital on Financial Performance and Firm Value.

The hypothesis testing results show that intellectual capital has a positive and significant impact on financial performance
and firm value. According to the Knowledge Based Theory, companies with good intellectual capital will improve their
performance (Sveiby, 2001). When intellectual capital, which includes human capital, physical capital, and structural capital,
is managed effectively, financial performance can be improved. Financial performance, as seen in financial reports, is an
important source of information for company stakeholders. Stakeholders expect company management to provide
information about company activities, which can be accomplished by developing good relationships, according to
stakeholder theory (Gray, 1988). The presence of positive stakeholder relationships fosters trust and makes it easier for
businesses to obtain funds to improve their performance. According to the Theory of the Firm, the goal of a company is to
75
maximize shareholder welfare (Jensen & Meckling, 1976). Financial performance, which provides an overview of a
company's financial condition, reflects firm value. This study's findings corroborate those of Diaming (2017), demonstrating
that intellectual capital has a positive and significant impact on financial performance. According to research, the value
added intellectual coefficient does not affect firm value (Nanik, 2016; Susanti, 2016).
The Influence of Capital Structure, Good Corporate Governance, and Intellectual Capital on Firm Value through
Financial Performance
According to the hypothesis test results, the capital structure has a negative and insignificant effect on firm value through
financial performance. The rising use of debt raises the risk that the cost of financial distress will lower the company's
profitability. Because a company's profitability reflects its financial performance, poor financial performance will impact its
value. According to this study, financial performance is a variable that has no bearing on the capital structure of a firm's
value. Through financial performance, GCG has a positive and insignificant effect on company value. The GCG mechanism
is not well-implemented, and it has the potential to raise agency costs. It occurs because the manager's supervisory function
as a board of directors is not carried out to its full potential. The company's profitability may be harmed as a result of agency
costs. Profitability reflects a company's financial performance, and poor financial performance negatively impacts the
company's value. As a result, financial performance is a variable that has no bearing on GCG's impact on firm value. The
hypothesis test results show that intellectual capital has a positive but insignificant impact on firm value via financial
performance. Profitability can be harmed by ineffective intellectual capital management. If not properly optimized,
expenditures for human capital development create inefficiencies and have a negative impact on financial performance. Poor
financial performance impacts relational capital, which in turn has an impact on firm value. Can have a negative impact on
the company's profitability. As a result, financial performance is a factor that has no bearing on the capital structure of a
company's value.
4. Conclusions
Financial performance has no bearing on the value of a company's capital structure, corporate governance, or intellectual
capital. The presence of agency costs and financial costs of distress results in poor financial performance and has no firm
value. The right capital structure can boost financial performance and increase the value of a company. Tax savings and
profitability can be achieved by using debt that does not exceed the optimal capital structure. Profitability is a measure of a
company's financial success. As a result, determining the best capital structure has a big impact on financial performance
and its value. The GCG mechanism can help a company's financial performance and value. The board of commissioners,
board of directors, and audit committee's effective implementation of GCG mechanisms has a significant impact on financial
performance and firm value. Financial performance and company value can both benefit from intellectual capital. Financial
performance and firm value are significantly influenced by companies with strong human capital, structural capital, and
relational capital. Financial performance can be improved by effectively and efficiently managing human capital to reduce
training and development costs. Similarly, good relational capital management can improve the relationship between
businesses and their customers.
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Rustan DM / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 79-87

Financial Literacy, Financial Behavior and Financial Attitudes Towards

Investment Decisions and Firm Bankruptcy
1*
Rustan DM
Received: January 08, 2021 Revised: February 05, 2021 Accepted: March 24, 2021
Abstract
The research objective was to analyze financial literacy, financial attitudes, and financial behavior on investment decisions and
MSME bankruptcy. The partial influence of financial literacy, financial attitudes, and financial behavior on MSMEs' bankruptcy
through investment decisions. The sampling method used was purposive sampling. The population was 149 MSMEs and a sample
of 108 MSMEs. The analysis method used SEM-PLS. The results prove that financial literacy, financial attitudes, and financial
behavior partially positively and significantly affect investment decisions and MSME bankruptcy in Makassar City. Financial
decisions cannot partially intervene in the influence of financial literacy, financial attitudes, and financial behavior on the potential
for bankruptcy of MSMEs in Makassar City.
Keywords: Financial Literacy; Financial Attitudes; Financial Behavior; Investment Decisions; Bankruptcy
1. Introduction12
The Covid-19 outbreak has hit the economy and business sector in Indonesia hard (Pelu et al., 2020). Many micro, small
and medium enterprises (MSMEs) are overwhelmed by having their businesses hampered and may not even survive.
Globally, the impact of Covid-19 has damaged supply chains, dropped commodity prices, and increased the risk of global
economic collapse. Domestically, the impact of Covid -19 on MSMEs is very significant, where as many as 84.7 percent of
MSMEs in Indonesia have the potential to go bankrupt because the income of MSMEs has dropped by an average of 53
percent. Meanwhile, 13 percent are neutral, and only 2.3 percent are still positive. Various efforts that MSMEs must make
in order to survive are focus on consumer needs, continue to innovate and be creative, both at the product and service level
according to changes in consumer preferences and behavior, developing research and development to increase resilience
when a crisis hits, not being complacent self because competition will get more challenging, preparing the next generation
to become more resilient future MSME leaders, maintaining good reciprocal relationships with vendors, suppliers and
distributors, assembling in MSME organizations as a means of developing networks and business, and collaborating with
banks as strategic partners for sources of financing, information, and business development assistance.
The Covid-19 pandemic makes investors and creditors worry that MSMEs experience financial distress, leading to
bankruptcy. So that bankruptcy becomes a fundamental problem that policymakers need to be aware of and anticipate.
Bankruptcy is very synonymous and closely related to failure. The failures that resulted in the bankruptcy of MSMEs were
related to mismanagement in financial management (Schaeck & Cihák, 2014). Financial literacy is an alternative that
MSMEs can take in financial management to minimize the potential for bankruptcy (Astuti & Trinugroho, 2016). However,
in reality, the percentage of Indonesia's financial literacy is reasonably low compared to several other ASEAN countries,
which is 29%. Meanwhile, financial literacy in Malaysia is 66%, in Thailand, it is 73%, and in Singapore, it is 98% (OJK
2016). MSMEs with good financial literacy will be more appropriate in making investment decisions than MSMEs with low
financial literacy. Investment decisions are a matter of how MSMEs must allocate funds into investment forms that will
benefit the future (Sutrisno, 2009). Financial literacy will help MSMEs to be wiser in making investment decisions (Putri,
Rasuma & Rahyuda, 2017)
1* First Author and Corresponding Author. STIE Nobel Indonesia, Sultan Alauddin Street, Makassar City, 90231, South Sulawesi, Indonesia, [ Email:
rustan.dm@gmail.com ]
H1 : Financial literacy has a positive and significant effect on micro, small, and medium investment decisions.
Financial literacy that only relies on a knowledge approach alone cannot change a person's behavior if they do not have
the appropriate attitude and motivation (World Bank, 2016). Research by (Huston, 2010; Putri et al., 2017; Dewi &
Purbawangsa 2018; Arianti, 2018; Kumala, 2019; Samuel et al., 2019) prove financial literacy has a positive and significant
effect on investment decisions. However, these findings do not support the findings (Fitriarianti, 2018), proving that financial
literacy is positive and insignificant towards investment decisions. Financial attitudes are a concept of information and
emotions about the learning process and the results of the tendency to act positively (Yuningsih et al., 2017). MSME players
who have an excellent financial attitude can apply financial principles to create and maintain value through making
investment decisions (Rajna et al., 2011). MSME actors in investing not only use estimates on the prospects for investment
instruments but psychological factors have also determined the investment.
Attribution theory explains that the financial behavior of MSME actors is influenced by the nature, character, attitude as
internal factors and situation pressure as external factors. MSMEs who have good character and attitude can face financial
problems that can potentially lead to bankruptcy. Research from Aminatuzzahra, (2014) proves a significant favorable
influence between financial attitudes and investment decision making. The psychological factors of MSME actors are related
to financial behavior and become the basis for investment analysis (Fitriarianti, 2018). MSME actors who have financial
behavior tend to be effective in using their money, such as investing (Susanti et al., 2018). The Theory of Planned Behavior
explains that its intention towards this particular behavior influences behavior. The intention to behave is influenced by
attitudes, subjective norms, and perceptions of behavioral control. MSME actors who have good financial behavior can think
about the implications of their actions before deciding whether or not to make an investment decision. Research from
(Fitriarianti, 2018; Arianti, 2018) proved that financial behavior has a positive and significant effect on investment decisions.
H2 : Financial attitudes positively and significantly affect investment decisions in micro, small and medium
enterprises.
H3 : Financial behavior has a positive and significant effect on micro, small, and medium investment decisions.
The Organization for Economic Co-operation and Development or OECD (2016) defines financial literacy as knowledge
and understanding of financial concepts and risks, skills, motivation, and confidence. To apply the knowledge and
understanding, they have to make effective financial decisions, improve the financial welfare (financial wellbeing) of
individuals and society, and participate in the economic field. Financial literacy is the basic knowledge that people need to
survive in modern society (Sabri, 2011). This basic knowledge involves knowing and understanding the complex principles
of spending, saving, and investing. Furthermore, Bhushan & Medury, (2013) stated that financial literacy could make
informed judgments and make effective decisions about using and managing money. Some of the factors that cause financial
literacy to develop are low savings interest rates, increased bankruptcy, debt levels, and increased individual responsibility
to make decisions that will affect their future economy (Servon & Kaestner, 2008). Financial literacy includes aspects such
as a) General Personal Finance Knowledge (knowledge of personal finance in general) which includes understanding several
things related to basic knowledge of personal finance. b) Savings and Borrowing. It includes knowledge related to savings
and loans such as bank interest, types of savings, and credit. c) Insurance. Insurance is a willingness to determine small
losses that are certain to compensate for significant losses that are not certain. d) Investment. Covers an understanding of
market interest rates, mutual funds, and investment risk.
Financial behavior is a discipline in which the interaction of various disciplines is attached and continuously integrates
so that the discussion is not carried out in isolation (Arianti, 2018). Financial behavior is a pattern of habits and behavior
when managing his finances (Sugyanto et al., 2017). The psychological aspect greatly influences the investment decision to
what extent that person can maximize his investment return (Prawirasasra & Maulani, 2020). Financial attitudes can be
interpreted as psychological tendencies expressed when evaluating, agreeing, or disagreeing with financial management
practices (Taneja, 2012). Financial attitude is applying financial principles to create and maintain value through appropriate
decision making and resource management (Rajna et al., 2011). The factors that influence the formation of attitudes are 1)
Direct Experience, 2) Family influence, 3) Peers, 4) Direct marketing, 5) Mass media impressions (Suryani & Ramadhan,
2017).
H4 : Financial literacy has a positive and significant effect on the potential for bankruptcy of micro, small and
medium enterprises.
H5 : Financial attitudes have a positive and significant effect on the potential for bankruptcy of micro, small
and medium enterprises.
Investment is the activity of placing capital into a particular business to obtain additional income and profits (Wulandari
& Iramani, 2014). Investment decisions are related to how individuals allocate funds into investment instruments (Virlics,
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2013). Investment is a commitment to several funds or other resources that are carried out at this time to obtain a return in
the future. The investment decision process can run well if an individual has financial goals and plans and financial
management skills (Perwito et al., 2020). Law No.4 of 1998 defines bankruptcy as a condition of an entity that is stated by
a court decision that the entity concerned has two or more creditors and cannot pay off its obligations at least one debt that
is due and can be collected. A company can be said to fail economically when the company's income cannot cover all costs
that must be incurred, including the cost of capital. A company can be said to experience a business failure when the company
closes or stops its operations. Failure to meet these obligations or conditions of technical insolvency are the most common
causes of corporate bankruptcy. Failure to pay off obligations in total or a condition of total insolvency can occur if the book
value of the company's total liabilities is greater than the market value of the company's total assets. The company has failed
legally when there is a formal claim or lawsuit against the company to court by applicable regulations. Three main factors
can generally result in bankruptcy in a company 1) Management error, 2) Economic Conditions, 3) The life cycle of the
company.
Financial literacy is related to MSME actors' ability to assess financial information that correlates with financial decisions.
Management knowledge theory explains that MSME actors with good financial literacy adapt to various financial problems
that have the potential for bankruptcy. This theory confirms the success of MSMEs achieved through financial literacy. Good
financial literacy can be used to help solve problems related to investment decisions.
H6 : Financial behavior has a positive and significant effect on the potential for bankruptcy of micro, small and
medium enterprises.
H7 : The investment decision has a positive and significant effect on the potential bankruptcy of micro, small
and medium enterprises.
MSME actors who have good financial literacy have the responsibility for investment decisions. However, the lower the
financial literacy, the more investment decision can cause losses and eventually lead to bankruptcy. Research by (Putri,
Rasuma & Rahyuda, 2017; Dewi & Purbawangsa 2018; Arianti, 2018; Kumala, 2019; Samuel et al., 2019) prove that
financial literacy has a positive and significant effect on investment decisions. However, these findings do not support
Fitriarianti (2018), which prove that financial literacy is positive and insignificant for investment decisions. MSME actors
with good financial attitudes will commit to making effective financial decisions to obtain returns in the future. Attribution
theory explains that the financial behavior of MSME actors is influenced by nature, character, attitude (internal factors), and
situation pressure (external factors). MSME actors who have good character and attitude can face financial problems that
can potentially lead to bankruptcy (quote). An excellent financial attitude can help MSME players be able to manage finances.
Good financial management can optimize investment decisions and minimize the potential for bankruptcy. An excellent
financial attitude can help MSME players apply financial principles for investment decisions. Research from Aminatuzzahra,
(2014) proves a significant favorable influence between financial attitudes and investment decision making.
H8 : Financial literacy has a positive and significant effect on the potential for bankruptcy through investment
decisions in micro, small and medium enterprises.
H9 : Financial attitudes positively and significantly affect the potential for bankruptcy through investment
decisions in micro, small and medium enterprises.
H10 : Financial behavior has a positive and significant effect on the potential for bankruptcy through
investment decisions in micro, small and medium enterprises.
Financial behavior is related to the way MSME actors manage finances as a tool as an investment decision. Planned
Behavior Theory explains that behavior is influenced by the individual's intention towards this particular behavior. The
intention to behave is influenced by attitudes, subjective norms, and perceptions of behavioral control. MSME actors who
have good financial behavior can think about the implications of their actions before deciding whether or not to make an
investment decision. Research from (Fitriarianti, 2018; Arianti, 2018) proved that financial behavior has a positive and
significant effect on investment decisions.
The research approach used is quantitative. A quantitative approach is a form of scientific research that examines a problem
from a phenomenon and looks at the link or relationship between the variables in the specified problem. The quantitative
approach uses a combination of social science and statistical science in its data analysis. The goal of using a quantitative
approach is to manage the amount of meaning in the hypothesized model as an answer to the problem that has been formulated.
The research location is in Makassar and the research site for Micro, Small, and Medium Enterprises (UMKM). The data
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collection methods used in this study were questionnaires and documentation. The questionnaire material was derived from
the operationalization of the variables. The statement given is a closed and open statement. The questionnaire was arranged
based on items related to the variables to be studied, using the Likert's Summated Rating (LSR) method. The measurement
scale used is ordinal (variable financial literacy, financial behavior, financial attitudes), where the numbers are given to
indicate the level of very satisfied = 5, satisfied = 4, neutral / quite satisfied = 3, dissatisfied = 2, very dissatisfied. = 1.
Documentation material related to EMKM's financial statements and ratio measurement scale. The population is 149 MSMEs
(Source: Makassar City Cooperatives and SME Service, 2019). The sample is part of the population or a subset of the
population unit. The minimum sample size is 108 MSMEs. The sample collection method uses purpose sampling. The criteria
used as the basis for sampling are: MSME actors who have micro, small, and medium equity reports (EMKM).
This study is using SEM-PLS as an analytical method to answer the hypothesis. The test model using SEM-PLS is divided
into testing the measurement model and testing the structural model. They were testing the Measurement Model (Outer Model).
The measurement model is part of a structural equation model that describes latent variables' relationship with their indicators.
There are three criteria in using data analysis techniques using Smart PLS software to assess the outer model. Convergent
Validity aims to determine the validity of each relationship between indicators and their latent constructs or variables.
Convergent Validity, a construct with a reflective indicator, is evaluated based on Average Variance Extracted (AVE). AVE
value ≥ 0.5 means that the construct can explain more than 50% of the items. Likewise, with the AVE value ≥ 0.5 and the
loading factor value ≥ 0.5, the instrument is declared valid (Sarstedt et al, 2017). Internal Consistency Reliability aims to
measure how well an indicator can measure its latent constructs. Assessment of Internal Consistency Reliability based on the
value of Composite Reliability (0.6-0.7 = good reliability) and Cronbach Alpha (> 0.90 = perfect reliability; 0.7 - 0.9 = high
reliability; 0.50 - 0.70 = moderate reliability; <0.50 = low reliability) (Sarstedt et al., 2017). Discriminant Validity aims to
determine whether a reflective indicator is a good measure of its construct based on the principle that each indicator must be
highly correlated with its construct. Discriminant validity can be determined by comparing the correlation between constructs
and the AVE root. Discriminant Validity is good if the AVE root value for each construct is greater than the correlation value
between constructs and other constructs in the model. Testing the Structure Model (Inner Model). Inner model testing is to
see the relationship between endogenous variables and exogenous variables by looking at the path parameter coefficients'
results and their level of significance.
The conceptual framework can be described as follows:
X1
X2 Y Z
X3
Figure 1. Research Model

Result Analysis
The average types of investment decisions made by MSME players were 72.4% for real investments (land, houses,
jewelry, cars and others) and 28.6% for financial investments (stocks, bonds, deposits, warrants, BI certificates. and others).
On average, MSMEs experiencing potential financial difficulties that lead to business bankruptcy in the future were 64.2%
(cut-off value> 0) and 36.8% did not experience financial difficulties (cut off value ≤ 0). In general, respondents' perceptions
agree on the importance of financial literacy, financial attitudes, financial behavior, and investment decisions. Financial
literacy (knowledge of financial concepts: µ = 3.87, ability to communicate financial concepts: µ = 4.02, ability to manage
finances: µ = 4.07, ability to make financial decisions: µ = 3.96, confidence in financial planning: µ = 4.17). Financial
attitude (obsession: µ = 4.12, power, µ = 4.03, effort: µ = 4.06, inadequacy: µ = 4.01). Financial behavior (financial planning:
µ = 4,11 ,, financial budgeting: µ = 3,91, (X3.2), financial management µ = 4,14, (X3.3), financial control µ = 4.07, financial
search µ = 4.19, financial storage: µ = 4.22). Investment decision (return: µ = 4,13, risk: µ = 4,14, the time factor: µ = 4.02).
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Table 1. Convergent Validity
Information Loading Factor (λ) AVE Info

X1.1 -------------- Financial Literacy 0,769 0,659 Valid
X1.2 -------------- Financial Literacy 0841
X1.3 -------------- Financial Literacy 0,799
X2.1 -------------- Financial Attitude 0,811 0,809 Valid
X2.2 -------------- Financial Attitude 0,819
X3.1 -------------- Financial Behavior 0,758 0,691 Valid
X3.2 -------------- Financial Behavior 0,733
Y1.1 -------------- Investation decision 0,797 0,683 Valid
Y1.2 -------------- Investation decision 0,724
Y1.3 -------------- Investation decision 0,754
Table 2. Composite Reliability dan Cronbach Alpha
Variables CR Info Alpha Info

Financial Literacy 0,819 High Reliability 0,814 High Reliability
Financial Attitude 0,811 High Reliability 0,817 High Reliability
Financial Behavior 0,791 High Reliability 0,823 High Reliability
Investation Decision 0,814 High Reliability 0,819 High Reliability
Table 3. Latent Variable Correlations, AVE Root dan Discriminant Validity
Variables Capital Good Corporate Intellectual Capital Performance Firm AVE R Discriminant
Structure Governance Finance Value oot Validity
Financial Literacy 1,000 0 0 0 0 0,8543 Fulfill
Financial Attitude 0,836 1 0 0 0 0,8726 Fulfill
Financial Behavior 0,818 0,720 1 0 0 0,7981 Fulfill
Investation decision 0,840 0,823 0,649 1 0 0,7335 Fulfill
Testing the Measurement Model (Outer Model). The measurement model is part of a structural equation model that
describes latent variables' relationship with their indicators. There are three criteria in using data analysis techniques using
Smart PLS software to assess the outer model, namely: (a) Convergent Validity aims to determine the validity of any
relationship between indicators and constructs or latent variables. Convergent Validity, a construct with a reflective indicator,
is evaluated based on Average Variance Extracted (AVE). AVE value ≥ 0.5 means that the construct can explain more than
50% of the items. Likewise, with the AVE value ≥ 0.5 and the loading factor value ≥ 0.5, the instrument is declared valid.
(b) Internal Consistency Reliability aims to measure how well the indicators can measure their latent constructs. Assessment
of Internal Consistency Reliability based on the value of Composite Reliability (0.6-0.7 = good reliability) and Cronbach
Alpha (> 0.90 = perfect reliability; 0.7 - 0.9 = high reliability; 0.50 - 0.70 = moderate reliability; <0.50 = low reliability). (c)
Discriminant Validity aims to determine whether a reflective indicator is a good measure of its construct based on the
principle that each indicator must be highly correlated to its construct. Discriminant validity can be determined by comparing
the correlation between constructs and the AVE root. Discriminant validity is good if the AVE root value for each construct
is greater than the correlation value between constructs and other constructs in the model.
Inner model testing is to see the relationship between endogenous variables and exogenous variables by looking at the
results of the path parameter coefficients and their level of significance (Ghozali & Latan, 2015).
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Table 4. Inner Model
Variable P-Value Direct Indirect Total

HIP Info
Eksogen Intervening Endogen Effect Effect Effect
Investation Positive and
1 Financial Literacy - 0.001 0.201 0.000 0,201
decision Significant
Investation Positive and
2 Financial Attitude - 0.000 0.245 0.000 0.245
Financial Investation Positive and
3 - 0.000 0.103 0.000 0.103
Behavior decision Significant
Negative and
4 Financial Literacy Bankruptcy 0,000 -0,142 0,000 -0,142
Significant
5 Bankruptcy 0,007 -0,133 0,000 -0,133
Behavior Significant
6 Bankruptcy 0,009 -0,222 0,000 -0,222
Behavior Significant
Investation Negative and
7 - Bankruptcy 0.000 -0.124 0.000 -0.124
8 Financial Literacy decision Bankruptcy 0.067 -0,142 -0,025 -0,167
Insignificant
9 Financial Literacy decision Bankruptcy 0.062 -0,133 -0.030 -0.163
Insignificant
Financial Investation Negative and
10 decision Bankruptcy 0.059 -0,222 0.013 -0.235
Behavior Insignificant
Discussion
The results of hypothesis testing prove that financial literacy has a positive and significant effect on investment decisions.
Knowledge of financial management that will be allocated for investment decisions will provide a significant contribution
to MSMEs. Good financial literacy can increase the return of investment decisions. MSME actors who have good financial
literacy are more likely to behave financially in ways responsible for the investment decisions made. According to Hilgert
and Hogarth (2003), the higher the knowledge of MSME actors, the wiser and better they will be in managing and solving
investment decisions. The results of this study support the findings of (Putri, Rasuma & Rahyuda, 2017; Dewi &
Purbawangsa 2018; Arianti, 2018; Kumala, 2019; Samuel et al., 2019) that proves financial literacy has a positive and
significant effect on investment decisions. However, these findings do not support Arianti, (2018) proves that financial
literacy is positive and insignificant for investment decisions.
The results of hypothesis testing prove that financial attitudes have a positive and significant effect on investment
decisions. MSME actors with good financial attitudes have a good state of mind, opinion, and judgment in financial decisions.
An excellent financial attitude helps MSME players allocate funds into the proper forms of investment instruments. MSME
players with good financial attitudes are committed to making effective financial decisions to obtain future returns.
Aminatuzzahra, (2014) can be concluded that there is a significant positive influence between financial attitudes and
investment decision making.
The results of hypothesis testing prove that financial behavior has a positive and significant effect on investment
decisions. MSME actors who have good financial behavior will be responsible and tend to be effective in investment
decisions. Good financial behavior tends to be wiser and more intelligent in managing finances, such as investing. The
psychology of MSME actors influences financial behavior in making investment decisions. According to Prawirasasra &
Maulani, 2020) who found the role of financial behavior when a person makes investment decisions is significant. In his
research, the psychological aspects of a person greatly influence the investment decision to what extent that person can
maximize the return on his investment. Also, it is stated that it is tough for a person to behave consistently. It is because they
will make different assumptions based on the financial information and investment obtained. The results of this study support
the findings of (Fitriarianti, 2018; Aminatuzzahra, 2014; Sumtoro & Anastasia, 2015; Arianti, 2018), who found that there
was a positive and significant influence on financial behavior on investment decisions.
The results of hypothesis testing prove that financial literacy has a negative and significant effect on bankruptcy.
Understanding financial literacy minimizes the potential for MSME bankruptcy. Financial literacy helps MSME actors to
manage finances more wisely. The skills, motivation, and confidence to apply the knowledge and understanding possessed
by MSME actors can support effective and efficient financial management, minimizing the future's potential for bankruptcy.
84
MSME actors who have good financial literacy can minimize identical and closely related bankruptcies to the failure. The
failures that arise are in the form of economic failures, business failures, failure to fulfill technical obligations, failure to pay
off obligations in total, and failure legally. Research from (Setiawan et al., 2016; Lusardi & Mitchell, 2007; Damayanti &
Fauzi, 2020) prove that knowledge encourages someone to do financial planning and minimize errors in decision making
that have the potential to cause business failure.
The results of hypothesis testing prove that financial attitudes have a negative and significant effect on bankruptcy. An
excellent financial attitude can minimize financial difficulties and have a financial surplus in the future. An excellent
financial attitude is an essential contributor to MSMEs' financial success or failure (Klontz et al., 2011). The results of this
study support the opinion of Chinnen & Endo, (2012) which states that MSME actors who have the ability and attitude to
make correct financial decisions will not have financial problems in the future.
The results of hypothesis testing prove that financial behavior has a negative and significant effect on investment
decisions. Errors in policymaking in financial management significantly affect bankruptcy. Good financial management is
related to financial behavior. Financial behavior is a pattern of habits and behavior owned by MSME actors when managing
finances. Mistakes in managing finances cause financial difficulties and, ultimately, the potential for bankruptcy. Good
financial behavior can minimize investment risk because MSME actors are smarter and more careful in assessing an
investment. Investment risk is closely related to the potential for bankruptcy. Financial behavior has the potential to assess
the benefits derived from investment returns and risks. The return is lower than the risk of investment resulting in failure or
bankruptcy.
The results of hypothesis testing prove that investment decisions have a negative and significant effect on bankruptcy.
Investments in MSMEs are closely related to the risk of uncertainty in the future. Among the risks that can occur is that the
funds that have been reinvested do not return as expected. Identification of the conditions of financial difficulties for MSMEs
is essential to do in order to anticipate bankruptcies that can harm the parties concerned. Analysis of potential bankruptcies
caused by investment decisions does not only need to be carried out by MSMEs but also includes other interested parties
such as creditors, investors, and regulatory authorities. The impact caused by bankruptcy can harm not only MSMEs but
also all parties concerned with the company. Bankruptcy itself is the final stage of distress or problematic financial condition
due to the MSMEs' failed efforts in following up on financial problems that occur.
The results of hypothesis testing prove that investment decisions have a negative and significant effect on bankruptcy.
Investments in MSMEs are closely related to the risk of uncertainty in the future. Among the risks that can occur is that the
funds that have been reinvested do not return as expected. Identification of the conditions of financial difficulties for MSMEs
is essential to anticipate bankruptcies that can harm the parties concerned. Analysis of potential bankruptcies caused by
investment decisions does not only need to be carried out by MSMEs but also includes other interested parties such as
creditors, investors, and regulatory authorities. The impact caused by bankruptcy can harm not only MSMEs but also all
parties concerned with the company. Bankruptcy itself is the final stage of distress or problematic financial condition due to
the MSMEs' failed efforts to follow up on financial problems.
The hypothesis testing results prove that financial literacy, financial attitudes, and financial behavior have a negative and
insignificant effect on bankruptcy through investment decisions. It means that investment decisions do not significantly
affect financial literacy, financial attitudes, and financial behavior on MSME bankruptcy.
4. Conclusions
Financial literacy, financial attitudes, and financial behavior partially positively and significantly affect MSMEs'
investment decisions in Makassar City. Financial literacy, financial attitudes, and financial behavior partially positively and
significantly affect MSMEs' bankruptcy in Makassar City. Financial decisions cannot partially intervene in the influence of
financial literacy, financial attitudes, and financial behavior on the potential for bankruptcy of MSMEs in Makassar City.
Financial literacy needs to be improved because it can improve financial decisions and minimize the potential for bankruptcy.
The financial attitude needs to be improved because it can improve financial decisions and minimize bankruptcy potential.
Financial behavior needs to be improved because it can improve financial decisions and minimize the potential for
bankruptcy. Management errors, economic conditions, and MSMEs' life cycle require further study because they are
essential factors for potential bankruptcy.
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Andi Arman & M. Mira / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 88-95

Does Tax Avoidance Make Do Earning Opacity?

1* 2
Andi Arman Mira Mira
Abstract
This study examines and analyzes the effect of earning opacity on tax avoidance with leverage and company size as control
variables in manufacturing companies listed on the Indonesia Stock Exchange. This research is quantitative research with an
approach explanatory research involving 42 companies from 187 companies engaged in the manufacturing sector listed on the
Indonesia Stock Exchange in 2017-2019. Determination of the sample using a purposive sampling technique. The data in this
study were collected using literature study and documentation study methods. Furthermore, the data were analyzed using
descriptive statistical methods, classical assumption tests (normality test, multicollinearity test, heteroscedasticity test, and
autocorrelation test), multiple linear regression, determination test, and hypothesis test (t-test). The results showed that earning
opacity hurts tax avoidance and is proven to be significant. This is because the company is less likely to minimize the tax burden.
After all, the company no longer needs to carry out or take advantage of existing tax regulatory loopholes to minimize tax
burden because its profit information has been obscured by management. Furthermore, the earning opacity carried out by
company management is behavior opportunistic to maximize individual profits so that it is believed that there is less tax
avoidance. This is because tax avoidance is done for the benefit of the company.
Keywords: Earning Opacity; Leverage; Tax Avoidance; Firm Size
1. Introduction12
One of the sources of state income with the most significant contribution of all Indonesian state income is taxes.
According to the 2016 State Budget published by the Ministry of Finance of the Republic of Indonesia, the percentage of
state revenue in 2016, which came from taxes, was 74.6% of the total 2016 State Budget revenue of 1,822.5 trillion Rupiah
(www.kemenkeu.go.id). Lestari & Ningrum, (2018) stated that tax is one of the sources of state revenue that comes from
citizens' active role to finance various state needs in the form of national development whose implementation is regulated
in-laws and other regulations for state welfare. The Indonesian government wants taxpayers to comply with tax laws and
regulations through a tax reporting system that uses a self-assessment system. However, not all taxpayers carry out their
obligations according to the rules because some unscrupulous entrepreneurs always try to do tax avoidance. As the definition,
tax avoidance is an effort made by a company to save on its tax payments that can be done legally, namely tax avoidance.
Tax avoidance is a legal act by exploiting loopholes in the Taxation Law to minimize the income tax burden that should be
paid (Siregar & Widyawati, 2016). The goal is clear, to take advantage unilaterally so that the incoming revenue is not much
tax deducted from the government even though tax avoidance itself can be categorized as a violation of the Taxation Law.
Tax avoidance and tax planning are often synonymous, as both use legal means to reduce or even eliminate tax
obligations (Hamzah & Muslim, 2018). Tax planning, on the other hand, is widely accepted as legitimate, whereas tax
evasion is widely condemned. The line between tax avoidance and tax planning is frequently blurred (Sudirman & Muslim,
2018). The extent to which the limits are allowed to distinguish acceptable tax planning practices from unacceptable tax
evasion is a contentious issue that is frequently resolved through high court proceedings. Some of these tax avoidance
phenomena are based on real-life examples from large corporations. Tax avoidance has become a hot topic in the media, as
evidenced by the large number of findings tax avoidance from 2012 to the present, and in almost every part of the country.
1* First Author and Corresponding Author. Department of Accounting, Faculty of Economics and Business, Universitas Muhammadiyah, Makassar City,
90231, South Sulawesi, Indonesia, [ Email: andi.arman@unismuh.ac.id ]
According to (Annuar et al., 2014), tax avoidance is the most difficult current generation issue, with severe income
reductions due to government taxes. This is demonstrated by the recent spate of tax-related news, which has sparked outrage
in almost every country because it was revealed that many large corporations had engaged in tax evasion or violations.
Earnings management is one of the factors that can influence companies to avoid paying taxes. Companies frequently carry
out earnings management by reducing income in an effort to avoid paying taxes; the greater the income reduction, the more
likely the company is to engage in tax avoidance behavior. Profit becomes a benchmark for measuring the corporate tax
burden because of the effect of earnings management in income decreasing on tax avoidance. As a result, management will
report earnings that have been adjusted to reflect accounting choices that result in lower profits or lower income as a form
of tax avoidance. Furthermore, earnings management is defined as the obfuscation of corporate financial information,
particularly in the income statement, which ultimately leads to biased information. The more information the management
company owns and controls, the more information the reported profit is opac or blurred. Earning opacity is another name
for this concept. Earning opacity is defined as changing a company's earnings information in such a way that the earnings
information becomes obfuscated.
Company management's tax evasion practices are frequently accompanied by earning opacity to increase the company's
value. According to Amalia, (2015) ear opacity and tax avoidance are necessary because management believes that this will
increase firm value and attract more investors. Various earnings opacity instances have prompted investors and potential
investors to think twice about absorbing a company's earnings information. In other words, when profits appear to be
promising, investors and potential investors must ensure that the profits are accurate and free of any opacity-generating
practices (Athana, 2016). Furthermore, Balakrishnan et al., (2011) argue that tax avoidance increases a company's
organization's complexity. Companies' tax avoidance has a lower impact on financial reporting quality and transparency
(opacity).
This research aims to investigate and analyze the impact of earning opacity on tax evasion in manufacturing companies
listed on the Indonesia Stock Exchange. Companies' tax avoidance practices are inextricably linked to the existence of the
Theory of Planned Behavior (TPB). TPB can assist in deciphering anticipated corporate tax avoidance trends (Ajzen, 1991).
Individuals who do not follow tax laws are influenced by intention (Hidayat & Nugroho, 2010). The postulate theory states
that behavior is a function of information or prominent beliefs and beliefs, and this theory is based on that. People can hold
various beliefs about behavior, but only a few of these beliefs come into play when confronted with a specific situation. This
minor belief is notable for its ability to influence individual behavior (Ajzen, 1991; Hidayat & Nugroho, 2010). According
to Mustikasari, (2007), the Theory of Planned Behavior can be used to explain how taxpayers fulfill their tax obligations.
Before doing something, the person will be confident in the behavior's outcome, and then he will decide to do it. This has to
do with taxpayers' awareness. Taxpayers who are aware of their obligations will believe that paying taxes is critical to their
development (behavioral beliefs).
Besides the theory of planned behavior, this research also refers to agency theory. Lestari & Ningrum, (2018) stated that
agency theory focuses on the relationship between two actors with different interests, namely between agents and principals.
Agency theory is a consequence of the separation of control (management) functions that directly access company
information with ownership or shareholder functions (Jensen & Meckling, 1976). Furthermore, Lestari & Ningrum, (2018)
defines agency theory as a contract between one or more principals who delegate authority to others (agents) to run the
company. Hanum & Zulaikha, (2013) explain that the agency theory's main objective is to explain how the parties in a
contractual relationship can design contracts to minimize costs as a result of asymmetric information uncertain conditions.
Agency theory also tries to answer agency problems caused by the fact that the parties working together in a company have
different goals, including carrying out their responsibilities to manage a company.
Tax authorities are viewed as principals (stakeholders) who want to collect as much revenue as possible. In contrast,
businesses are viewed as agents who want to pay the least tax possible (Dewinta & Setiawan, 2016). The company's efforts
to avoid taxes will be hampered by the conflicts of interest that arise (tax avoidance). Tax avoidance is a transaction scheme
to reduce the tax burden by exploiting loopholes in a country's taxation provisions (Ningtias, 2015). Experts say they're legal
because they don't break any tax laws (Wardani & Juliani, 2018). According to Budiarto & Madya (2018), a transaction is
considered tax avoidance if the taxpayer attempts to pay less tax than is owed by relying on the fairness of tax law
interpretation. Tax avoidance is difficult to measure, and data for tax payments in tax returns is difficult to obtain (Desai &
Dharmapala, 2006). As a result, a method for estimating how much tax companies pay to the government is required. As a
result, previous studies used an indirect approach to measure tax avoidance's dependent variable, starting with the difference
between accounting profit and taxable income (GAP with financial and taxable income). GAAP / SAK is used to report
differences to shareholders or investors. The Book Tax Gap refers to the difference between the tax service office and the
tax regulations.
Even though tax avoidance has a positive side, it can minimize the tax burden; it also negatively impacts. Managers do
tax avoidance, not for opportunistic purposes (increasing firm value). However, if managers carry out tax avoidance
activities to cover manager opportunism by manipulating reported earnings and managers lack transparency in running
company operations (Ningtias, 2015; Wardani & Juliani, 2018). This behavior will undoubtedly reduce the content of the
information presented and ultimately influence investors' decisions to provide value to the company. So, the higher the level
of tax avoidance carried out by the manager, the less information content of a financial report will be; with the reduced
89
information content presented, it will impact the lower company value.

According to Nugraha & Setiawan (2019), increasing company value is a company goal that can be achieved by
implementing the management function, in which one decision affects other decisions. It will have an impact on the
company's value in the future. The increase in the company's stock price reflects the increase in its value. A high company
value will positively signal investors, encouraging them to invest in the company. According to Amalia, (2015), tax
avoidance combined with earning opacity is a very reasonable way to increase firm value and attract investors. According
to Athana, (2016) Earning Opacity is the act of modifying earnings to obscure earnings information. As defined by
Bhattacharya et al., (2003), ear opacity is the failure of the distribution of reported earnings to provide accurate and
unobservable information. The more opaque the profit, the more imprecise the signals of economic value changes occurring
over time. Because of the complex interactions between at least three factors: managerial motivation, accounting standards,
and accounting standards, reported earnings in countries could be opaque (audit quality). Earnings may be opaque because
managers are motivated to manipulate earnings, and they can do so either because accounting standards allow for a lot of
flexibility or because accounting standards don't exist for determining accounting principles related to certain types of
business activity, or because accounting standards are strict but poorly enforced. Furthermore Nasih, (2014) claims that low
earning opacity results in high-quality financial reports that are precise and honest, reducing opportunistic management
behavior. Earnings opacity occurs due to managers' and controlling shareholders' actions to carry out earnings management
to cover up their deviations and rent-seeking actions from management and outsiders.
Bhattacharya et al., (2003) and Altamuro et al., (2005), in particular, use several measures of profit figures that lead to
earning opacity; first, earning aggressiveness, which is defined as a management action that leads to a tendency to delay the
recognition of losses and accelerate the recognition of earnings, resulting in a decrease in earnings quality. Second, loss
avoidance is a form of earnings management that involves avoiding negative earnings reports. Loss avoidance is defined as
income statement behavior that focuses on avoiding negative profit (loss), decreased earnings, analysts' failure to predict
earnings and the cost of default on debt contracts such as debt covenants. The way you act Loss avoidance is also a link
between profit and economic performance that impacts increasing earning opacity (Athana, 2016). Third, earnings
smoothing is an act of earnings management that involves consistently reporting earnings over time. When accounting
earnings are artificially smoothed, profit figures fail to accurately reflect economic performance, reducing earnings report
information accuracy and resulting in earning opacity (Bhattacharya et al., 2003).
Earnings smoothing is determined by the correlation between accruals and changes in cash flows divided by lagged total
assets (Bhattacharya et al., 2003). The correlation is expected to be negative due to the nature of some accrual accounting
processes. The higher the correlation number, the more earnings smoothing is occurring, and thus the earnings opacity is
becoming more significant. Bhattacharya et al., (2003) also pointed out that if total (aggregate) accruals result in earnings
opacity, profit figures fail to accurately describe economic performance, reduce earnings statement information, and result
in earnings opacity. According to Francis et al., (2004), opacity is measured using the NIBE generated while conducting
daily operations. As a result, management can smooth out the earnings fluctuations by using their personal information. The
smaller the ratio, the smoother the profit, and thus the more sustainable it appears. To put it another way, smoother equates
to higher profit quality. In contrast, if the ratio is higher, it indicates that the profit is more volatile. As a result, the quality
of earnings will be lower, resulting in earnings opacity.
According to Balakrishnan et al., (2011), increasing the complexity of a company's organization has an impact on tax
aggressiveness, resulting in lower financial reporting quality and transparency as a result of tax avoidance by companies
(Opacity). According to Kerr's research (2013), companies reporting earnings opacity were the primary perpetrators of tax
evasion. Based on the description that has been explained, the hypothesis of this study is that Earning Opacity has a
significant negative effect on Tax Avoidance.
There are control variables in this study that are used to control and prevent other variables from affecting the study's
dependent variable (Athana, 2016). Control variables include the company's size and leverage. According to Reinaldo et al.,
(2017) the size of a company is a scale that can categorize a company as large or small based on a variety of factors, including
total assets or total assets of the company, stock market value, average level of sales, and total sales. According to Ridho,
(2016), company size and growth play a role in tax management, with smaller companies with high growth having higher
tax rates. According to the agency theory, large companies have higher agency costs than small businesses (Jensen &
Meckling, 1976). According to Siregar & Utama, (2005), the larger the company, the more information is typically available
to investors when making decisions about stock investments. As a result, the quality of financial reports must be free of
earnings management because it can obscure the available information, particularly when minimizing profits to reduce
taxable income and thus reduce tax payments.
Leverage is the study's second control variable. Leverage is a financial ratio that describes how a company's debt is
related to its capital and assets. The source of operating funds used by the company is referred to as ratio leverage. The
leverage ratio also reveals the company's risks (Putri & Putra, 2017). According to Fahmi, (2012), the leverage ratio measures
how much a company is financed with debt. This ratio compares the company's capabilities as described by capital to the
extent to which the company is financed by debt or external parties. According to Kurniasih & Sari, (2013) the ratio leverage
shows a company's financing from debt, reflecting the higher company value. Leverage is defined as an increase in debt that
results in additional expenses in the form of interest that must be paid by the company, as well as a reduction in corporate
90
taxpayers' income tax expense.

This is a quantitative study using an explanatory approach to determine the causal relationship between the independent
and dependent variables. This study involved 42 companies from 187 companies engaged in the Indonesia Stock Exchange's
manufacturing sector in 2017-2019. Determination of the sample using purposive sampling technique with sample criteria,
namely all manufacturing companies that have been listed on the Indonesia Stock Exchange, IDX, have published financial
reports from 2017-2019, experienced no losses during the observation period, and are presented in the rupiah currency. The
data in this study were collected using library research methods and field studies in the form of documentation. Furthermore,
the data were analyzed using descriptive statistical methods, classical assumption tests (normality test, multicollinearity test,
heteroscedasticity test, and autocorrelation test), multiple linear regression, determination test, and hypothesis test (t-test).
Variable Definition Measurement
Earning ∆𝐶𝐴𝑖𝑡 − ∆𝐶𝐿𝑖𝑡 − ∆𝐶𝐴𝑆𝐻𝑖𝑡 + ∆𝑆𝑇𝐷𝑖𝑡 − 𝐷𝐸𝑃𝑖𝑡 + ∆𝑇𝑃𝑖𝑡

Opacity 𝐴𝐶𝐶𝑖𝑡 = (
Earning Opacity can be defin 𝑇𝐴𝑖𝑡−1
ACC : Accrual
ed as the extent to which the
CA : Current Aset (Aset Lancar)
reported profit distribution fai
ls to provide accurate but un CL : Current Liability (Hutang Lancar)
CASH : Kas
observable information about
STD : Bagian hutang jangka panjang yang akan dibayarkan kurang dari
earnings distribution.
1 tahun
(Bhattacharya et al., 2003)
DEP : Depresiasi
TP : Tax Payable (Hutang Pajak)
TA : Total Aset
Tax Avoidance Tax Avoidance is an effort 𝑇𝑎𝑥 𝑒𝑥𝑝𝑒𝑛𝑠𝑒
𝐶𝐴𝑆𝐻 𝐸𝑇𝑅 =
to reduce or even eliminate 𝑃𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥
the tax debt that must be
paid by not violating existing
tax laws.
(Anggoro & Septiani, 2015).
Ukuran Perusa Company size is a scale that 𝑆𝐼𝑍𝐸 = ln(𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑒𝑡)
haan can be used as a guide in
classifying a company into la ln : Logaritma natural
rge or small company sizes
(Anshori & Iswati, 2009; Ath
ana, 2016).
Leverage Leverage is a ratio that meas 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
ures the company's good-term 𝐷𝑒𝑏𝑡 𝑅𝑎𝑡𝑖𝑜 =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
debt capability
long or term
short used
company to finance company
assets.

Result Analysis
Based on table 3, the variable earning opacity (EO) has the lowest value of -0.43 and the highest value of 0.51. The
company with the lowest score is owned by the company Merck Tbk. (MERK) that occurred in 2018, while the highest
value of earning opacity was obtained by the company Kirana Megatara Tbk. (KMTR) in 2017. The average value is earning
opacity 0.1567 with a standard deviation of 0.16619. The firm size variable (UP) has the lowest value of 21.02 and the
highest value of 32.20. The lowest value of company size is owned by the company Delta Djakarta Tbk. (DLTA) in 2017,
the highest value of company size was owned by PT Indocement Tunggal Prakarsa Tbk. in 2018. The average company size
of all sample companies was 28.9180 with a standard deviation of 1.69571. The variable Leverage (LV)has the lowest value
of 0.001 and the highest value of 6.49. The lowest value of leverage is owned by the Sido Jamu and Pharmaceutical Industry
company (SIDO) in 2017, while Fajar Surya Wisesa Tbk owns the highest value of leverage. (FASW) in 2017. The average
leverage of all sample companies was 0.4400 with a standard deviation of 0.57333. The variable tax avoidance (TA)has the
91
lowest value of -2.77, and the highest value is 0.23. the lowest value of tax avoidance Fajar Surya Wisesa Tbk has the.
(FASW) in 2017, while the highest value of tax avoidance was owned by the company Delta Djakarta Tbk. (DLTA) in 2019.
The average tax avoidance owned by all sample companies was -0.2706 with a standard deviation of 0.25200.
Tabel 2. Uji One-Sample Kolmogrov-Smirnov Test
N 126
Normal Parametersa,b Mean 0E-7
Std. Deviation 122.87398189
Most Extreme Differences Absolute .116
Positive .063
Negative -.116
Kolmogorov-Smirnov Z 1.306
Asymp. Sig. (2-tailed) .066
The results of the One Kolmogorov-Smirnov test in table 2 show a significant result of 0.066. The value is far above the
significant value, so it can be said that the data is usually distributed, and the regression model is feasible to use.
The normality test results with the plot graph analysis shown in Figure 1 show that there is an even distribution of data,
and the distribution follows the direction of the diagonal line so that it can be concluded that the regression model is normally
distributed.
Table 3. Multicolonierity Test Results

Tolerance VIF
1 EO ,955 1,047
UP ,972 1,029
LV ,977 1,024
The multicollinearity test calculation results in table 3 show that earning opacity, company size, and leverage have a
value tolerance above 0.10. Thus, it shows that there is no correlation between the independent variables. The variance
inflation factor (VIF) calculation shows that the dependent variable and control variable has a VIF value less than 10. Thus,
it can be concluded that there is no multicollinearity between the independent variables in the regression model. The control
variable is company size, and leverage is more than 0.05; it can be concluded that the regression model does not have
heteroscedasticity symptoms.
92
Table 4. Autocorrelation Test Results

1 ,873a ,762 ,756 ,12438 1,516
Table 4 shows the autocorrelation test results on the Durbin-Watson number in the data regression model of 1.516. This
data ranges from -4 to 4. This value is compared with a significant table of 5% with a sample size of N = 126 and the number
of dependent variables K = 3; then the du value is 1.7582. The DW value = 1.516 is greater than the upper limit (du), which
is 1.7582 and subtracted from (4-du) 4-1.7582 = 2.2418. This shows that there is no autocorrelation problem, so this
regression equation is feasible to use.
Table 5. Multiple Regression Analysis Test Results
Model Unstandardized Coefficients Standardized Coefficients T Sig.

B Std. Error Beta
1 (Constant) -,012 ,195 -,064 ,949
EO -,221 ,068 -,146 -3,222 ,002
UP -,002 ,007 -,012 -,276 ,783
LV -,388 ,020 -,882 -19,746 ,000
Based on table 5, the regression equation formulation is described as follows:
TA= -0,012 - 0,221 – 0,002 – 0,388
The regression equation in this study can be analyzed the effect of independent variables on tax avoidance, namely the
EO regression coefficient value is -0.221. The negative sign shows the same relationship between the EO variable and tax
avoidance. This shows that every one percent increase in tax avoidance will cause a decrease in tax avoidance received equal
to the coefficient value. This equation can be studied for the influence of independent variables, and the coefficient is 0.221.
The inverse relationship between tax avoidance and the EO variable is displayed in the negative sign. When tax avoidance
increases by one percent, the amount of money received is reduced by the same amount. The value of the LV regression
coefficient is -0.388. The negative sign shows the same relationship between the LV variable and tax avoidance. This shows
that every one percent increase in tax avoidance will cause a decrease in tax avoidance received equal to the coefficient
value.
Table 6. Determinant Coefficient Test
Std. Error of the

Model R R Square Adjusted R Square Durbin-Watson
Estimate
1 ,873a ,762 ,756 ,12438 1,516
Based on table 6, the coefficient of determination is 0.756, which means 75.6%. This shows that 75.6% of changes in
the dependent variable tax avoidance (TA) can be influenced by variations in the independent variable earning opacity (EO)
and the control variable firm size (UP) and leverage (LV). While the remaining 24.4% is influenced by variables not
explained in this study. Table 5 shows that the significant number in the variable is earning opacity 0.002. The resulting
value is less than 0.05, so it can be concluded that earning opacity has a significant positive effect on tax avoidance; based
on hypothesis testing, it is concluded that hypothesis is accepted.
Discussion
This test of the hypothesis concludes that tax avoidance shows a significant effect on the variable earning—the greater
the degree of earnings opacity, the lower the company tax burden. The credibility of the corporation is increased because it
minimizes taxes. While the company no longer needs to exploit existing tax loopholes because profits have been made
illegible by management, its taxation should be considered zero, especially since it is located in another country with a
different tax regime. Finally, it is assumed that managements carry out this behavior to their own advantage to ensure the
highest possible personal profits. It is believed that they are trying to avoid paying taxes. Tax avoidance is beneficial to
corporations.
Profit obfuscation is a form of tax evasion in which management conceals regulated profits by obfuscating income
decreasing or income smoothing. The greater the company's growth, income reduction, or income smoothing, the lower its
tax. As a result, businesses that become more aggressive in blurring corporate profits through income reduction and income
93
smoothing will increase their tax aggressiveness. However, if a business is less aggressive in concealing its profit information,
tax aggressiveness is assumed to decrease. This study's findings corroborate those of Septiadi et al. (2017), who discovered
a significant negative relationship between corporate tax avoidance practices or actions and earnings through concealing
income.
4. Conclusions
Earning opacity has been shown to have a significant negative effect on tax avoidance in this study. This demonstrates
that as companies become more aggressive in blurring corporate profits through income reduction and income smoothing,
their tax aggressiveness will increase. On the other hand, if a business is sufficiently aggressive to conceal its profit
information, its tax aggressiveness will decrease. The subsequent researcher can investigate several additional factors
believed to influence tax avoidance, such as the effect of earnings management and company characteristics.
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Rustan Rustan / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 96-104

Several Factors Affecting Audit Judgment with Moral Reasoning Moderation

1*
Rustan Rustan
Received: February 05, 2021 Revised: March 05, 2021 Accepted: March 30, 2021
Abstract
The purpose of this study is to analyze and examine the effect on audit judgment of self-efficacy, obedience pressure, and moral
reasoning. The purpose of this study is to analyze and examine the relationship between self-efficacy and obedience pressure
using audit judgment as a moderator. The study population consisted of auditors employed by BPK RI Representatives in South
Sulawesi Province who had audited local government financial reports for a period of more than five years. The total population
is 52 auditors, and because the population is less than 100, the sample is determined using the census method. We gathered data
for this study by sending questionnaires to all respondents. The Partial Least Squares (PLS) method was used to analyze the
data. The findings indicated that self-efficacy, obedience, and moral reasoning all influenced audit judgment positively and
significantly. Additionally, moral reasoning is incapable of moderating the relationship between self-efficacy and audit
judgment; similarly, the moral sense is incapable of moderating the relationship between compliance pressure and audit
judgment.
Keywords: Self-Eficacy, Obedience Pressure, Moral Reasoning, Audit Judgement
1. Introduction12
Auditors' accountability and professionalism are a requirement that must be met for public confidence in the profession
to grow (Muslim et al., 2020). The audited financial statements must be accurate and effective for auditors to make decisions.
The Supreme Audit Agency (BPK) is one of the government's highest state institutions, and it plays a key role in evaluating
local governments' financial performance (Rahim et al., 2020). Examining regional government accountability reports in
regional government financial reports is part of the assessment process (LKPD).
Several BPK auditors have been linked to several cases of fraud reported in the media in recent years. Among the many
issues that exist, audit judgments are revealed to be one factor that will affect auditors' performance (Muslim et al., 2018).
The auditor should be given sufficient leeway when gathering audit evidence to form an opinion. For opinions, conclusions,
considerations, or recommendations based on examination results to provide justice for all society levels, independence
must be maintained when making financial statement judgments. It is critical because the results of the BPK auditors'
investigation will impact the quality of government financial management and the welfare of Indonesians.
According to Putra & Rani (2016), public accountants are more focused on audit judgments because they have a high
level of trust. When conducting the audit process, the auditor must consider receiving client trust, formulating the audit plan,
and audit considerations when expressing an audit opinion (Yowanda, et al., 2019). When faced with uncertainty and limited
data and information, auditors must make decisions and make assumptions that can be used to make decisions (Muslim et
al., 2018). Auditors' personal decisions when evaluating and interpreting information and evidence discovered during an
audit are referred to as audit judgment (Irwanto, Karamoy, & Datu, 2017). When deciding audit results, the auditor's policy
is to form ideas, opinions, or estimates of objects, events, circumstances, or other types of events (Yendrawati & Mukti,
2015). Auditor responses to audit-related information and the risks that the auditor will face as a result of the judgment he
makes (Maryani & Ilyas, 2017).
A person's self-efficacy is their belief in their ability to achieve specific goals. People with a high level of self-efficacy
find it difficult to give up and work hard to overcome all of the obstacles they face (Satiman, 2018). Furthermore, Shanti
1* First Author and Corresponding Author. Faculty of Economics and Business, Universitas Muhammadiyah Makassar, Makassar City, 90231, South
Sulawesi, Indonesia, [ Email: rustanperpajakan@gmail.com ]
(2019) claims that a higher education level, mature experience, and good skills are all factors that contribute to self-efficacy.
The self-assurance of a person grows over time. Because there are more skilled technicians around or around, and their trust
continues to grow, this characteristic is also pervasive, but it cannot be used as a measure of job success.
When assessing and evaluating the reasonableness of the audited financial statements, the auditor's professional
judgment is required to avoid inaccuracy in the audit opinion. According to Parwatha, Sujana & Purnamawanti, (2017) there
will be obedience pressure if a particular issue an order that violates a predetermined standard, so the client will try to
pressure the auditor and ask him to do what he wants. Even if their actions deviate from the auditors' professional standards,
the auditors' judgment will be influenced by the pressure to comply with superiors' orders (Wijayantini, Yuniarta, & Atmadja,
2014). On the other hand, because an auditor's professional judgment is based on personal values, beliefs, and moral
awareness, client pressure is a risk for this profession (Surya & Dewi, 2019).
Characteristics of auditors, such as moral reasoning, will influence their decision-making. Of course, government
auditors frequently face moral dilemmas, such as when they are in a difficult situation and must choose between their own
interests and the interests of the public (Sholehah, Rahim, & Muslim, 2018). This moral quandary also arises from the need
to choose options beneficial to one party but not to the other (Kisnawati & Kartini, 2014). Moral reasoning has a significant
impact on professionals' moral awareness when performing their duties. A person's effectiveness in establishing and
improving the implementation of a code of ethics, including accountability values, is influenced by their moral reasoning
(Anwar, 2017). The study of how a person should act to prove or criticize behavior is known as moral reasoning. Moral
reasoning explains why a particular action is considered wrong or why a particular decision is deemed correct. As a result,
moral reasoning tries to prove whether moral beliefs are true or false by providing reasons for following or opposing them
(Gaffikin & Lindawati, 2012).
Table 1. BPK Auditor Bribery Case
Year Auditor's Name Cases

BPK
2017 Ali Sadli and Ro Ali's buying and selling of opinions was revealed by the Corruption Eradication Commissio
chmadi Saptogiri n. BPK auditors, Sadli and Rochmadi Saptogiri, during an arrest operation, both were appr
ehended. They all took bribes in exchange for an unqualified opinion. (WTP) on the Minist
ry of Health's 2016 financial statements audit report (LHP)
(WTP) on the Ministry of Health's 2016 financial statements audit report (LHP).
2017 Sigit Yugoharto Sigit Yugoharto accepts bribes of Rp. 115 million for Harley-Davidson motorcycles and nig
htly entertainment facilities. Sigit was asked to change his invention for the Special Purpos
e Test (PDTT) to PT Jasa Marga in exchange for this reward. He revised the financial sur
vey results from around Rp. 13 billion to Rp. 842.9 million, and detailed the results of the
2015 financial survey, which totaled Rp. 526.4 million, and the financial summary, which
totaled Rp. 316.4 million in 2016.
2018 Ex auditor BPK In connection with his position as Head of Sub-Auditor III of the State Finance Auditorate
Ali Sadli of the State Audit Board, he received bribes and gratuities and committed money launderin
g(TPPU). Ali received IDR 9,896,180,000 in gratuities (previously indictment of IDR 10.5
billion, USD 80 thousand). Although the defendant Ali's legal income from 2015 to March
2017 was only Rp 1,728,656,000, the court found him guilty..
2019 Rizal Djalil In the People's Settlement Administration of the People's Democratic Republic and the mini
stry, Auditor Rizal Djalil is in charge of drinking water and waste sanitation infrastructure
inJakarta, East Java, Central Java, West Kalimantan, and Jambi. Incorrect financial reports
totaling Rp. 180 billion were discovered. The amount was reduced to Rp. 4.2 billion, howe
ver. It was suspected that someone had asked the BPK for funds totaling Rp. 2.3 billion b
efore the changes were made. Rizal is also suspected of requesting Rp. 79.27 billion for a
total electricity distribution network project in Hungary. After that, the project was given to
PT Minarta Dutahutama (MD).
This study is based on (Suardika & Budiartha, 2017) research that looked into the ability of gender to moderate the effect
of self-efficacy and task complexity on audit judgment. The self-efficacy variable is used in this study, along with obedience
pressure as an independent variable and audit judgment as a dependent variable. The moral reasoning variable is also used
as a moderating variable in this study because the auditor's moral reasoning will cause him or her to behave professionally
according to the code of ethics that governs the auditor's work professionalism.
The Cognitive Social Theory provides a framework for analyzing, predicting, and taking responsibility for human
behavior. According to this theory, human behavior is defined as the interaction of individual, behavioral, and environmental
factors. Individual and group behavior are recognized and predicted by cognitive social theory, which identifies appropriate
methods for that behavior. This theory is associated with a person's learning to become a better person. The auditor's self-
efficacy is explained in this study using cognitive social theory to give them the confidence to take the necessary actions to
achieve a specific task level. Because of his confidence in producing quality judgments, an auditor with high self-efficacy
can alleviate the emotional state during work and affect the resulting audit judgment.
97
Self-efficacy is a person's perception of his or her ability and confidence in carrying out a task and its likelihood of
success. It demonstrates that auditors who have a high level of self-efficacy will be able to do a good job (Tumurung, Ilat,
& Kalalo, 2019). Due to an auditor's extensive experience, self-efficacy or high confidence will impact the auditor's ability
to complete the job as efficiently as possible under any circumstances. Positive self-efficacy on audit judgment was found
by (Muttiwijaya & Ariyanto, 2019; Tumurung, Ilat & Kalalo, 2019). Before deciding, a person with self-efficacy will
consider, evaluate, and combine their abilities. It boosts people's confidence in their decision-making abilities. Following
that, a hypothesis is proposed:
H1 : positive and significant self-efficacy on audit judgment.
The expected gap between the audited entity and the auditor creates a separate conflict, putting pressure on compliance.
In a general audit, the auditor must express an opinion on the entity's financial statements' fairness. Giving an unqualified
opinion without sufficient audit evidence can transform a routine audit issue, particularly a routine reporting issue, into
ethical independence and a conflict of interest (Elvira, Putra, & Susfayetti, 2019). Direct orders from superiors or clients
cause pressure obedience, which is a social problem. The auditor usually receives pressure from the entity being audited to
take actions that are contrary to ethical and professional standards. Because the auditor must express his independent opinion
on the financial statements' fairness, compliance pressure will be increased when the auditor is faced with a conflict. On the
other hand, the auditor must meet the requirements of the audited entity's financial statements to be satisfied with its work
(Sofiani, 2014).
Attribution theory states that a thing can influence a person's behavior in performing tasks. This influence is an influence
that comes from internal factors and external factors (Rahim, Muslim, & Amin, 2019). A judgment made by the auditor must
pay attention to several things and not just come from the existing findings. In this study, attribution theory explains that the
external factor that affects the auditors is obedience pressure. Obedience pressure in the form of pressure from the agency
and pressure from superiors can also affect the auditor's judgment. The research results by (Tampubolon, 2018; Putri, 2018)
found that compliance pressure has a positive and significant effect on audit judgment. Pertiwi & Budiartha (2017) found
that the higher the auditor's compliance pressure, the less precise the audit assessment will be. Pressure from other sources
can make the auditor make mistakes in making judgments to make an incorrect audit judgment. Then the hypothesis is
proposed:
H2 : Obedience pressure has a positive and significant effect on audit judgment
Moral reasoning is moral awareness (moral considerations and moral thinking). Moral reasoning is a factor that
determines moral behavior in moral decision making (Cohen & Leventis, 2013). One of the ways that auditors can maintain
values professionals an ethical standard or code of ethics is by relying on an understanding of moral reasoning (Gaffikin &
Lindawati, 2012). Landarica & Arizqi, (2020) state that moral reasoning describes how a person goes through when making
moral decisions or a description of forming behavior based on personal moral judgments.
The theory of planned behavior as a control behavior regulator from individuals who are limited to behavior deficiencies.
In behaving, auditors will influence judgment. One of the perceived controls in producing behavior is moral reasoning.
Moral reasoning is considered a perceived control with control beliefs that can facilitate or hinder the performance of
behavior and the perceived strength of the factors that support or inhibit a person's behavior.
The results of research by Naibaho, Hardi & Hanif, (2014) found that moral reasoning has a significant positive effect
on audit quality. If the auditor has good moral reasoning, the auditor can maintain his professional value to provide a reliable
audit opinion. Syamsuriana et al., (2019) found that moral reasoning has a significant positive effect on audit quality.
Suppose the auditor is experienced in conducting audits. It will increase his moral reasoning in making decisions because
he will judge based on audit experience and professional knowledge. Then a hypothesis is proposed :
H3 : Moral reasoning has a positive and significant effect on audit judgment
Moral reasoning is defined as the reason that underlies someone in taking action, justifying, or criticizing an action. The
existence of moral reasoning that is owned will help the auditors in solving the problems they face. The efforts that exist in
individuals to achieve the level of performance they believe in, especially self-efficacy, whether they can take the necessary
actions to achieve the level of performance on a particular task. Self-efficacy is focused on goal setting as the principal way
to regulate one's behavior but allows other factors to influence.
The results of research by Wedhasari & Astika, (2018) found that moral reasoning moderates the positive effect of ethical
sensitivity on the quality of internal audits at PT. BRI Bank Branch Offices in Bali Province. Auditors with strong moral
reasoning skills will make audit assessments more accurate, so that the final audit quality will be higher. Then a hypothesis
is proposed :
H4 : Moral reasoning moderates the effect of self-efficacy on audit judgment.
98
An auditor who is constantly faced with ethical dilemmas will be involved in a choice between conflicting values, the
pressure of compliance from the superior or the entity being audited can affect the audit process carried out by the auditor.
The existence of a moral dilemma, namely obedience pressure can affect judgment. Thus, the auditors' moral reasoning will
be able to maintain their consistency in conducting audits and providing judgments.
TPB theory is a perceived control in producing behavior, one of which is moral reasoning. Moral reasoning embedded
in auditors will protect them from behaving defiantly, while the external factor that affects auditors is obedience pressure.
Because there is a control that is understood by the auditor, when working, the auditor will not violate his professional ethics
as an auditor.
Habibollah, Ismail & Na, (2015) found that the level of auditors' ethical considerations is influenced by moral reasoning.
Wedhasari & Astika, (2018) found that the moral reasoning behavior that an internal auditor must have in carrying out an
audit as far as possible has a consequent nature by taking a task-oriented approach (autocracy, supervision, and transactional).
Then the hypothesis is proposed :
H5 : Moral reasoning moderates the effect of obedience pressure on audit judgment
The quantitative approach is used in this study to answer, analyze data, and test the proposed hypothesis. The descriptive
quantitative data type will answer data from respondents who are then given a value or score. The data source used is primary
data. The questionnaire was directly distributed to the research location, namely the BPK RI Representative Office of South
Sulawesi Province. The study population was the auditors who worked at the BPK RI Representative of South Sulawesi
Province and had audited the local government's financial statements for over 5 years with a total of 52 auditors. The sampling
technique uses the census method so that the questionnaire is distributed to all populations.
The objects of this research are experience, independence, implementation ethic, workload, and fraud detection. The data
source is primary data through a questionnaire that has been distributed to auditors BPK RI. In this research five variables
were measured by using a Likert Scale, from 1 to 5 where : 1 = Strongly Disagree, 2 = Disagree, 3 = Neutral, 4 = Agree and
5 = Strongly Agree.
Data analysis using the Smart PLS structural equation model. Optimize the relationship between the dependent variable
and the independent variable. PLS consists of external relationships (outer model or measurement model) and internal
relationships (inner model or structural model). (1) the measurement model (outer model) specifies the relationship between
the indicator block and its latent variables; and (2) a structural model (inner model) which specifies the relationship between
latent variables.

Result Analysis
Of the 52 respondents in this study, respondents' profiles will be described and presented based on demographics, gender,
latest education, and service years. From the results of the study, based on gender, it can be seen that the auditors who work
at the BPK RI Representative Office of South Sulawesi are dominated by male auditors as many as 39 auditors (75 percent),
while the female gender is 13 auditors (25 percent). Meanwhile, from the perspective of their education, it is known that the
majority have S1 education as many as 36 auditors (69.23 percent), followed by S2 education with 16 auditors (30.76
percent). Judging from the tenure of service, the work period is dominated by> 5-10 years as many as 45 auditors (86.53
percent), working period> 10 years as many as 7 auditors (13.46 percent).
The outer model test results in table 2 show that all instruments used in this study have met the outer model test
requirements because of the three Partial Least Square (PLS) criteria. It can be seen that all loading indicators are above
0.65 and the average variance extracted exceeds 0.5. The reliability of the research instrument used in this study was tested
using Cronbach's Alpha and the composite reliability coefficient. The construct basis used is reliable if the composite
reliability and Cronbach alpha values are above 0.70. Table 3 shows the results of composite reliability and Cronbach alpha
showing the value of each variable above the value of 0.70, which means that all instrument variables are reliable.
The inner model (inner relations, structural and substantive theory) describes the R-square for the latent dependent
variable. The test results of the coefficient of determination from table 3 show that the R-Square value for the moral
reasoning variable is 0.918, which means that it is included in the moderate and strong category. The R-square moral
reasoning value of 0.918 or 91.80% indicates that the moral reasoning variable can be explained by the self-efficacy variable
and the obedience pressure of 91.80% while the remaining 8.20% can be explained by other variables not found in this study.
The R-square value of audit judgment is 0.926 or 92.60%. It indicates that the audit judgment variable can be explained by
the self-efficacy variable, the obedience pressure and moral reasoning of 92.60% while the remaining 7.40% can be
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explained by other variables that are not contained in this research.

Table 2. External model test results
Construct Indicator Outer Loading Average Variance Extracted (AVE)

Self-efficacy (Se) Se 1 0,790
Se 2 0,883
0,740
Se 3 0,878
Se 4 0,887
Obedience Pressure (OP) MI 1 0,868
MI 2 0,813
MI 3 0,905
MI 4 0,916 0,752
MI 5 0,934
MI 6 0,865
TK 7 0,865
TK 8 0,761
Moral Reasoning (MR) MR 1 0,834
MR 2 0,885
MR 3 0,860 0,672
MR 4 0,785
MR 5 0,726
Audit Judgement (AJ) KA 1 0,927
KA 2 0,904
KA 3 0,925
0,815
KA 4 0,852
KA 5 0,903
KA 6 0,905
Table 3. Cronbach’s Alpha and composite reliability
Construct Composite Reliable Cronbach

Self-efficacy 0,919 0,882
Obedience Pressure 0,960 0.952
Moral Reasoning 0,911 0,878
Audit Judgement 0,964 0,954
Table 4. Coefficient Determination (R-Square)
Construct R Square
Audit Judgement 0.926
Moral Reasoning 0.918
The data analysis in this study was carried out by using the Structural Equation Model (SEM). Testing was carried out
with the help of the Smart PLS program. Figure 1 below presents the results of testing the Full Model SEM using PLS as
follows :
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Figure 1. Full SEM Model Test Using smart PLS

Source: PLS Output, 2020
Testing the proposed hypothesis is done by testing the structural model (inner model) by looking at the path coefficients
which indicate the parameter coefficient and the significance value of t statistical can be seen in the table as follows :
Table 5. Hypothesis Testing
Correlation between variables Β t- Statistics p-Values Information

Self-efficacy on audit judgment 0.531 3.420 0.001 Accepted
Pressure obedience to audit judgment 0.353 2.394 0.017 Accepted
Moral reasoning on audit judgment 0.195 3.033 0.003 Accepted
Moral reasoning moderates self-efficacy on audit -0.244 1.722 0.086 Rejected
judgment
Moral reasoning moderates the pressure of 0,192 1.437 0.151 Rejected
obedience on audit judgment
Source: PLS Output, 2020
From the results of the path coefficient analysis in table 5, it can be seen that the self-efficacy variable has a significant
level of 0.001, which is less than 0.05. It means that H1 is accepted, so it can be said that self-efficacy has a positive and
significant effect on audit judgment. Obedience pressure has a significant level of 0.017, which is less than 0.05. It means
that H2 is accepted, so it can be said that compliance pressure has a positive and significant effect on audit judgment. Moral
reasoning has a significant level of 0.003, which is less than 0.05. It means that H3 is accepted so that it can be said that
moral reasoning has a positive and significant effect on audit judgment. The role of moderation in moral reasoning on the
relationship between self-efficacy and audit judgment has a significant level of 0.086, which is greater than 0.05. It means
that H4 is rejected, so it can be said that moral reasoning is unable to moderate the effect of self-efficacy on audit judgment.
The role of moderation in moral reasoning on the relationship between obedience pressure and audit judgment variables has
a significant level of 0.151, which is greater than 0.05. It means that H5 is rejected, so it can be said that moral reasoning is
unable to moderate the effect of obedience pressure on audit judgment.
Discussion
The results of testing hypothesis 1 are accepted, it finds that self-efficacy has a positive and significant effect on audit
judgment. Self-efficacy affects the audit judgment of BPK South Sulawesi Province auditors. It means that the higher the
101
self-efficacy possessed by an auditor in carrying out an audit assignment will have a good impact on the judgment they
make. Auditors who have confidence in carrying out audit assignments can influence the quality of their work and the
decision making that is carried out. Maryani & Ilyas, (2017) state that there is self-efficacy or high self-confidence due to a
large amount of auditing work experience. Therefore, whatever work is assigned, he can complete the job as much as possible.
This theory identifies human behavior as the interaction of individual, behavioral and environmental factors. In this study,
Cognitive social theory explains self-efficacy to give the auditor confidence to take the necessary actions to achieve a
particular task level. When the auditor has high self-efficacy, he can relieve the emotional state during work and affect the
resulting audit judgment because he believes in producing quality judgments. This study's results also support the results
(Muttiwijaya & Ariyanto, 2019; Tumurung, Ilat & Kalalo, 2019), which found positive self-efficacy towards audit judgment.
A person with self-efficacy will consider, evaluate, and combine their abilities before making a choice. It makes people
confident in their ability to make decisions.
The results of testing hypothesis 2 are accepted, it finds that obedience pressure has a positive and significant effect on
audit judgment. The higher the auditor's pressure, the auditor's judgment will affect and will tend to be less precise. The
pressure of obedience both given by superiors and auditees from the audit task carried out is an external encouragement
received by the auditors in influencing their behavior or actions to affect the audit judgment achieved. Obedience pressure
is a kind of social influence pressure generated when someone commands another person's direct behavior. Influential
individuals generate obedience pressure. In this case, this pressure is interpreted as pressure received by auditors from the
inspected entity to take actions that deviate from ethical and professional standards (Sofiani, 2014).This study supports the
attribution theory, which states that a person's behavior in carrying out a task or something can be influenced by one thing.
This influence is an influence that comes from internal factors and external factors (Rahim, Muslim & Amin, 2019). When
an auditor takes a judgment, he will pay attention to several things, not just the findings. In this study, attribution theory
explains that the external factor that affects the auditors is obedience pressure. Obedience pressure in the form of pressure
from the agency and pressure from superiors can also affect the auditor's judgment. The difference in expectations between
the supervisor or the auditee and the auditor will cause obedience pressure. When the difference in expectations occurs, the
auditor will pressure the auditor to equalize expectations to arise between the auditor and the entity. This study's results
support the results (Tampubolon, 2018; Putri, 2018), finding that compliance pressure has a positive and significant effect
on audit judgment. Pertiwi & Budiartha (2017) the higher the auditor's compliance pressure, the less precise the audit
assessment will be. Pressure from other sources can make the auditor make mistakes in making judgments so that an
incorrect audit judgment occurs.
The results of testing hypothesis 3 are accepted, it finds that moral reasoning has a positive and significant effect on audit
judgment. BPK auditors who have good moral reasoning will act professionally to carry out their duties as government
auditors. Landarica & Arizqi, (2020) state that moral reasoning describes how a person goes through when making moral
decisions or a description of forming behavior based on personal moral judgments. The results of this study support the
theory of planned behavior as a control behavior regulator of individuals who are limited to behavioral deficiencies. In
behaving, the auditor behave will influence judgment. One of the perceptions of control in producing behavior is moral
reasoning. Moral reasoning is considered a perceived control with control beliefs that can facilitate or hinder the performance
of behavior and the perceived strength of the factors that support or inhibit a person's behavior. This study also supports
(Naibaho, Hardi & Hanif, 2014) finding that moral reasoning has a significant positive effect on audit quality. If the auditor
has good moral reasoning, the auditor can maintain his professional value to provide a reliable audit opinion. This study's
results are also the same as those (Syamsuriana et al., 2019), which found that moral reasoning has a significant positive
effect on audit quality. Suppose the auditor is experienced in conducting audits. In that case, it will increase his moral
reasoning in making decisions, because he will make judgments based on audit experience and his professional knowledge.
The results of testing hypothesis 4 are accepted, finding that moral reasoning is unable to moderate the relationship of
self-efficacy to audit judgment. Although supported by moral reasoning, the auditors' self-efficacy has not provided a
meaningful relationship to the judgments made by the BPK RI auditors for the Representative of South Sulawesi Province.
The auditors can produce quality judgments by understanding their duties and having self-confidence without any moral
reasoning. In acting, auditors can still produce judgments with considerations in audit implementation. Auditors must have
self-confidence in themselves and understand the tasks they are doing. On the other hand. A person's moral reasons for acting
are considered to be included in one of the indicators of self-efficacy, namely self-confidence. The results of this study
support the social cognitive theory. The efforts that exist in individuals to achieve the level of performance they believe in,
especially self-efficacy, whether they can take the necessary actions to achieve the level of performance on a particular task.
Self-efficacy is focused on goal setting as the primary way to regulate one's behavior but allows other factors to influence.
The results of this study support the results (Wedhasari & Astika, 2018) moral reasoning moderates the positive effect of
ethical sensitivity on the quality of internal audits at PT. BRI Bank Branch Offices in Bali Province. Auditors with strong
moral reasoning skills will make audit assessments more accurate so that the final audit quality will be higher.
The results of testing hypothesis 5 are accepted, finding that moral reasoning cannot moderate the relationship of
obedience pressure to audit judgment. These findings also indicate that moral reasoning weakens the relationship of
compliance pressure with the BPK RI auditor's audit judgment for the Representatives of South Sulawesi Province. Moral
reasoning as a controlling matter in carrying out the tasks performed by the auditors is good. This study supports the TPB
theory as a perceived control in producing behavior, one of which is moral reasoning. Moral reasoning embedded in an
102
auditor will protect them from behaving defiantly, while the external factor that affects auditors is obedience pressure.
Because there is a control that is understood by the auditor, when working, the auditor will not violate his professional ethics
as an auditor. Wedhasari & Astika, (2018) found that the moral reasoning behavior that an internal auditor must have in
carrying out an audit as far as possible has a consequent nature by taking a task-oriented approach such as autocracy,
supervision, and transactional.
4. Conclusions
This study aims to analyze and test the effect of self-efficacy, obedience pressure, and moral reasoning on audit judgment.
This study also wants to analyze and test whether moral reasoning can moderate the relationship of self-efficacy and
obedience pressure with audit judgment. Based on the tests and analyses carried out, it was found that self-efficacy,
obedience pressure, and moral reasoning had a positive and significant effect on audit judgment. Furthermore, moral
reasoning cannot moderate the relationship between self-efficacy and audit judgment. Likewise, moral reasoning is unable
to moderate the relationship between compliance pressure and audit judgment. This study's sample is still relatively small
and is only limited to auditors who work at the BPK RI Representative Office of South Sulawesi. The study then suggests
further research to add and expand the area, the number of samples, and use new variables to understand the audit judgment
factors better. The results of this study also hope that they can be taken into consideration for the related auditors of the BPK
RI Representatives of South Sulawesi to improve their audit judgment and professionalism further.
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Ansir Launtu / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 105-111

Impact of Cash Flow and Dividend Policy on Manufacturing Firm Value

1*
Ansir Launtu
Abstract
A cash flow statement is a report showing how running, spending, and funding activities impact cash over an accounting period.
In addition to cash flow, the dividend policy determines whether the company's earnings will be paid as dividends to investors
or retained for reserve funds to support future investments. Firm value is the price a prospective buyer willing to pay if the
business is sold. The research objective was to evaluate the impact of cash flow and dividend policies on firm value in
Indonesian-listed manufacturing companies (BEI). The research tool used is multiple regression analysis techniques to evaluate
the linear relationship between two or more independent variables and the dependent variable. The results showed a small effect
of cash flow and dividend policies on firm valuation. Meanwhile, cash flow and dividend strategies have a strong and important
effect on firm valuation
Keywords: Cash Flow; Dividend Policy; Firm Value
1. Introduction12
Financial reports are an important source of information for financial report users (Muslim et al., 2021). Financial reports
are intended to provide details on the financial status, results, and improvements in the financial condition that is useful to
a large number of users in making economic decisions (IAI, 2007). Financial reports are an important method for investors
and stakeholders to monitor business developments regularly. Investors and creditors are interested in learning information
about decisions. Long-term, the company's key goal is to maximize value (Wahyudi & Pawestri, 2006). The company's
worth is expressed in its share price (Fama & French, 1998). The stock price on the capital market is established based on
an agreement between the demand and the supply of investors so that the stock price is a reasonable price that can be used
as company value output (Hasnawati, 2005). Optimization of firm value can be accomplished by introducing the financial
management function, where a financial decision can affect other financial decisions and firm value (Fama & French, 1998).
In a company, cash is important since all business operations often require cash flow. Money is used to purchase products
and services as well as fixed assets for inventory production. According to (Cahyo, 2013), cash flow summarizes cash flows
over a span. This report is often referred to as a source report, and the use of corporate activities, acquisitions, and cash
flows and shows changes in cash and securities over that period. Money allows both parties to rely more on cash flow
according to their respective interests. Internally, management uses cash flow as the basis for different strategies or decisions
on the company's operations. Meanwhile, external parties, especially investors and creditors, use cash flow as a basis to
decide whether to invest in a business. One of the main policies relating to cash flow is the payment of dividends to business
owners or shareholders for the money they spend in the company to share income paid to shareholders or investors
(Badruzaman, 2017). Operating cash flow is the most dominant factor in firm valuation, as operating cash flow displays the
company's key revenue-producing operations. Increased cash flow from operating activities would give investors an
optimistic indication of the potential financial success of the business. It will result in investors interested in enterprise
investment. The more investors invest in the company, the greater the company's value. The dividend payout ratio dictated
the volume of profit split between cash dividends and retained earnings as the funding source (Badruzaman, 2017). Payment
policies require relatively high cash outflows. The strategy must be developed in the process, taking into account the
company's ability to produce cash and the company's requirements for cash funds.
1* First Author and Corresponding Author. Department of Management, STIEM Bongaya, Makassar City, South Sulawesi 90131, Indonesia, South
Sulawesi, Indonesia, [ Email: ansir.launtu@stiem-bongaya.ac.id ]
Investors have the main goal of raising health by expecting dividends and capital gains. By comparison, the company
expects sustained growth to ensure its existence while providing interest to its shareholders. On the other hand, dividend
policy does not hamper the company's growth. Dividends paid at this moment would have a higher valuation than capital
gains received in the future so that investors unable to speculate will favor dividend capital gains (Rakhimsyah & Gunawan,
2013). The phenomenon on the Indonesia stock exchange shows that the company's valuation based on the stock market
value has increased, although there is no financial policy enforced by the company (Hasnawati, 2005). Very competitive
market rivalry and high valuation in Indonesian companies will also affect the better state of the Indonesian economy.
Indonesia's economic growth has seen an improvement over the past few years. From 2007 to 2012, the industry's
contribution to the Indonesian economy was around 30% per year. This figure shows the fundamental factor in
manufacturing's contribution to Indonesia's annual economic development. From 2011, the manufacturing industry's growth
rate reached 7.36 percent, and 2012 reached 7.78 percent, higher than non-oil and gas growth of 6.82 percent in 2011 and
6.91 percent in 2012 (http://www.kemenperin.go.id).
The researcher's justification for selecting a manufacturing company as the focus of research is that a manufacturing
company is a company that sells its goods beginning with an uninterrupted production process from buying raw materials,
processing materials, and being ready-to-sell products. The corporation needs a source of funds to be used on fixed assets.
Manufacturing firms need more long-term financing sources to finance their activities, one of which is investing in equity
investors. Financial accounting is an accounting component that prepares financial reports for outside parties, including
shareholders, creditors, vendors, and the government. The key principle used is the accounting equation (assets = liabilities
+ equity). Financial accounting deals with tracking transactions for a business or entity and preparing different periodic
reports from these records results. This report is written for the public interest and is commonly used by business owners to
determine the performance of management or is used by managers as shareholder financial transparency.
Esthirahayu, (2014) argues that financial reports are as historical and comprehensive as progress reports. Also, it is said
that financial statements consist of data that result from a combination of recorded facts, principles, and practices in
accounting and personal opinions. (Masyitah & Harahap, 2018) financial statements describe the financial condition and
results of a company's operations at a particular time or for a certain period. In general, the financial statements consist of
balance sheets, profit and loss statements, and reports of changes in capital. Still, other groups that help obtain explanations
are often included in daily practice, such as reports of sources and use of cash or cash flows, pieces of production costs, etc.
The balance sheet informs the financial position at a particular time, reflected in the number of assets owned, the number of
liabilities, and the company's capital. The income statement informs about the income and expenses of a company during a
specific period. The cash flow statement discloses the changes in financial position due to business activities, expenditures,
and investments during the period.
The concept of a cash flow statement put forward by (Purnomo, 2014) is a report showing how operating, spending, and
funding activities of banks affect cash over an accounting period. The cash flow statement outlines net cash increases or
decreases over the accounting period. Cash flow statements can provide information that enables consumers to assess
changes in net assets, financial structure (including liquidity and solvency), and influence the volume and timing of cash
flows to respond to changing conditions and opportunities. Cash flow information helps measure the capacity of a company
to produce cash and cash equivalents. It enables users to create models to determine and compare the 10 present values of
different companies' potential cash flows. Cash flow details also improve the comparability of operating performance results
from different organizations. Historical cash flow information is also used to show the number, timing, and certainty of
potential cash flows. Cash flow information helps analyze the accuracy of past forecasts of potential cash flows. One of two
methods of determining and presenting cash flows from operational operations is the Direct Method and the Indirect Method
(Khikmawati & Agustina, 2015). The direct approach is a cash or cash-based income statement showing cash receipts and
cash disbursements briefly. Meanwhile, the indirect method does not specify the key category of cash flows as in the direct
method.
The cash flow statement classifies cash receipts based on operating, investment, and funding activities. Transaction
characteristics and other events for each operation category are (PSAK No. 2): operational activities, investment activities,
and financing activities. Operating operations are the company's primary revenue-producing activities and other non-
investment and funding activities. Investing practices are acquiring and disposing of long-term assets and other non-cash
equivalent investments. Financing operations lead to improvements in the volume and structure of the company's capital
and loans. Khikmawati & Agustina, (2015) states that knowledge helps to understand accounts explaining why cash and
cash equivalents changed over time.
A dividend policy is a decision as to whether the company's generated income will be distributed to investors in the form
of dividends or held for reserve funds to support potential investment. The dividend payout ratio dictated the volume of
profit split between cash dividends and retained earnings as a funding source (Latuheru, 2016). Dividend policy concerns
the use of profit, which is the right of shareholders and can be divided into dividends or retained earnings to be reinvested
(Harjito & Nurfauziah, 2006). Based on this opinion, dividend policy can be described as the distribution of corporate
income to investors whose value depends on the company's policy, resulting in the company's reduced retained earnings.
(Dewi, 2008) Shareholders' dividends can be paid in cash dividends, property dividends, scrip dividends, liquidation
dividends, and stock dividends.
One of the essential components in dividend policy is the dividend payout ratio, which shows the dividend per share/DPS
106
relative to earnings per share/EPS. Mulyanti & Supriyani, (2018) have various dividend policies carried out by companies,
including a stable dividend policy, a dividend policy with a minimum dividend amount plus a certain extra amount, a
dividend policy with a constant dividend payout ratio, and a flexible dividend policy. Many companies adopt a stable
dividend policy because investors prefer regular dividends. According to Asna and Graha (2006), dividend policy is
influenced by law, liquidity position, the need to pay off debts, prohibitions on debt agreements, asset expansion rates, profit
levels, profit stability, opportunities to capital markets, control, shareholders' position as taxpayers, and taxes on incorrectly
accumulated profits.
Asna & Graha, (2006) states that the company's dividend policy does not affect both firm value and the cost of capital.
Firm value is determined by the earning power of the company's assets. Therefore, firm value is determined by investment
decisions. In contrast, whether the profits earned will be distributed in dividends or will be retained does not affect firm
value. The dividend irrelevance theory is a theory which states that the company's dividend policy does not affect the firm
value or the cost of capital (Asna & Graha, 2006). Latuheru, (2016) stated that if there is an increase in dividends, the rise
in share prices is often followed. Nurhayati, (2013) argues that a dividend increase above is usually a "signal" to investors
that company management predicts a good income in the future.
Esthirahayu, (2014) the company value is the price a prospective buyer is willing to pay if the company is sold. The
higher the company's value, the greater the prosperity the company owner will receive. Maximizing company value or share
price is not identical with maximizing earnings per share, EPS. Academics and analysts in the financial sector have
developed various concepts of value to understand the behavior of stock prices. Here are some of them, namely: economic
value, intrinsic value, and market value.
H1: Cash flow has a positive and significant effect on firm value
H2: Dividend policy has a positive effect on firm value
This research was carried out in companies listed on the Indonesian stock exchange (BEI). In this report, 125
manufacturing firms were listed on the Indonesia Stock Exchange during 2009-2013. This study's sampling technique used
purposive sampling.
No Criteria Total
1 Companies listed on the Indonesia Stock Exchange 2009-2013 503
2 Manufacturing company from 2009-2013 125
3 Companies selected as samples 10
4 Research period 2009-2013 5
5 Sample 50
The type of data used is quantitative data. Although the data source used is secondary data, which is already available to
researchers seeking and collecting data. Secondary data can be accessed easier and faster since it's readily available. The
author uses documentation as a tool for obtaining the relevant details. Data analysis was conducted using multiple linear
regression equation:
Y = b0 + b1X1 + b2X2 + e
The analysis methods used in this research are the regression analysis assumption method. It consists of normality test,
multicollinearity, heteroscedasticity, and autocorrelation. Hypothesis testing consists of the simultaneous test (F statistical
test), partial hypothesis testing (Hypothesis t-test), and the determination coefficient test (R2).

Result Analysis
Based on the criteria and the samples in this study during the 2009-2013 period, they are presented in table 2:
107
Table 2. Research Sample
No Company Code Company name Lifting date

1 AMFG Asahimas Flat Glass Tbk 08 Nov 1995
2 ASII Astra Internasional Tbk 04 Apr 1990
3 CPIN CharoenPokphandIndonesia Tbk 18 Mar 1991
4 DLTA Delta Djakarta Tbk 27 Feb 1984
5 GDYR Goodyear Indonesia Tbk 22 Dec 1980
6 GGRM Gudang Garam Tbk 27 Aug 1990
7 HMSP HM Sampoerna Tbk
8 INDF Indofood Sukses Makmur Tbk 14 Jul 1994
9 LION Lion Metal Works Tbk 20 Aug 1993
10 UNVR Unilever Indonesia Tbk 11 Jan 1982
Figure 1. Normality Histogram Diagram
The normality test is used to test whether the regression model between the dependent variable (related) and the
independent variable (free) has a normal distribution or not, which can be seen using the normal p_plot and the histogram
diagram, which is neither leftward nor right-leaning. The data is in a normal state if the distribution of the data is neither
leftward nor rightward.
Figure 2 shows that the data is usually distributed, where the data appears to be spread out following a diagonal and a
histogram diagram that is not leaning left and right so that it can be said that the data is usually distributed. Multicollinearity
is a condition in which other (independent) variables are correlated with one another. The VIF value is not more than 10,
and the Tolerance value is not less than 0.1.
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Table 3. Multicollinearity Test

Tolerance VIF
1 (Constant)
Cash Flow .891 1.122
Dividend Policy .891 1.122
Based on the results of table 3, it can be seen that the two variables independent with a VIF value are not more than
10 tolerance, not less than 0.1, so it can be concluded that this regression model does not have a multicollinearity problem.
Heteroscedasticity describes the value of the relationship between the predicted value and the Studentized Delete
Residual value. Here is a picture to see the presence or absence of heteroscedasticity.
Figure 3. Scatterplot graph
The scatterplot graph in Figure 3 shows no apparent pattern. It indicates no heteroscedasticity for the research variables,
so the basic assumption that the residual variation is the same for observations is fulfilled. Autocorrelation tests whether in
a linear regression model there is a correlation between confounding error in period t and confounding error in period t-1
(previous). If there is a correlation, then there is a problem with an autocorrelation that arises because sequential observations
over time are related.
Table 4. Autocorrelation Test Results
Std. Error of the

Model R R Square Adjusted R Square Estimate Durbin-Watson
1 .384a .148 .111 9.15033 1.825
The Lagrange multiplier (LM) value shows that the residual leg 2 (res_2) parameter coefficient provides a significant
probability of 0.148 above 0.05. It indicates that the LM test does not have autocorrelation. Hypothesis Testing with the F
Test is used to pay attention to the significant value of F in the calculation output with an alpha level of 5%. If the significant
value of the F test is less than 5%, then there is an influence between all independent variables on the dependent variable.
Table 6 shows that the calculated F test value is 3,985 > F table 3,200 with a significance value of 0.025 < 0.05, then H0 is
rejected, and Ha is accepted. Where required, a significance value of F is less than 5%. Thus, it can be concluded that all the
independent variables in this study simultaneously affect Firm Value (Y). It means that the Cash Flow and Dividend Policy
have increased together, which will have an impact on the increase in Firm Value.
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Table 5. Simultaneous Test Results
Model Sum of Squares Df Mean Square F Sig.

1 Regression 667.310 2 333.655 3.985 .025a
Residual 3851.510 46 83.728
Total 4518.820 48
In this study, the t-test is used to test whether the hypothesis proposed in this study is accepted or not by knowing whether
the independent variable individually affects the dependent variable.
Table 6. Partial Test Results
Unstandardized Standardized
Coefficients Coefficients Collinearity Statistics
Model B Std. Error Beta t Sig. Tolerance VIF
(Constant)
1 -23.126 11.435 -2.022 .049
Cash Flow 1.839 .732 .362 2.513 .016 .891 1.122
Dividend Policy .120 .059 .295 2.044 .047 .891 1.122
a. Dependent Variable: Firm Value
Discussion
The results showed that there was a positive and significant influence between cash flow on firm value. The positive
effect shows that operating cash flow is in line with firm value. Alternatively, high operating cash flow will affect firm value
and vice versa if operating cash flow is low, it could be a low company value. The relationship between operating cash flow
and firm value is generally explained using the signaling theory that increasing operating cash flow will increase firm value.
Investors will be very interested in increasing operating cash flow because it shows that the company can increase revenue
in the future. The results of this study are also in line with the research conducted (Baridwan, 1997), which examined cash
flow on firm value and the results showed a positive and significant effect between cash flow and firm value. In theory, the
greater the amount of cash the company has, the smaller the risk of fulfilling its obligations. However, that does not mean
that the company must maintain an ample cash supply because the greater the amount of cash, the greater the idle cash. Thus,
cash flow has an influence internally for management and externally for investors and creditors.
The research results indicate that the effect of dividend policy on firm value is positive and significant. The positive
effect shows that the effect of dividend policy is in line with firm value. In other words, a good/high dividend policy will
affect firm value and vice versa. If the dividend policy is low, it could be a low company value. The significant effect shows
that the dividend policy has an essential role in increasing firm value. This research is in line with (Sujoko & Soebiantoro,
2018), proving that dividend policy positively and significantly affects company value. An increase in stock prices will
increase company value because company value compares stock prices to the book value of shares (Sujoko & Soebiantoro,
2018). However, the results of this study are not in line with the results of research conducted (Sujoko & Soebiantoro, 2018)
which found evidence that dividend policy has a positive effect on firm value.
4. Conclusions
Based on the results of research and discussion, it can be concluded that the results of operating cash flow have a positive
and significant effect on firm value, and the results of dividend policy have a positive and significant effect on firm value.
The suggestion for further research is that it is expected to use a sample from all companies and use a more extended
observation year so that the results of the study can realize the capital market conditions of all companies. In further research,
it is recommended to use external factors of the company so that the independent variable affects firm value with the research
model adequate.
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Budi Andriani / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 112-119

Influence of Ownership Structure on Company Profitability and Value In

Companies
1*
Budi Andriani
Abstract
The purpose of this study was to provide empirical evidence that managerial, institutional, and public ownership affect company
profitability; provide empirical evidence that managerial, institutional, and public ownership affect firm value; provide empirical
evidence that managerial, institutional, and public ownership have an indirect effect on firm value; and provide empirical
evidence that managerial, institutional, and public ownership have an indirect effect on firm value. This study uses secondary
data from companies listed on the Indonesia Stock Exchange obtained from the Indonesian Capital Market Directory (ICMD)
2013. Samples were collected using the purposive sampling method and then analyzed using Path Analysis. The results showed
that managerial ownership has a positive effect on profitability; institutional ownership has a positive effect on profitability;
public ownership has a positive effect on profitability; managerial ownership has a positive direct or indirect effect on firm
value; institutional ownership has a positive direct or indirect effect on firm value; public ownership has a positive direct or
indirect effect on company value; profitability has a positive effect on firm value.
Keywords: Managerial Ownership; Institutional Ownership; Public Ownership; Profitability; Company Value
1. Introduction12
Financial reports are an important source of information for financial report users (Muslim et al., 2021). Financial reports
are intended to provide details on the financial status, results, and improvements in the financial condition that is useful to
a large number of users in making economic decisions (IAI, 2007). Financial reports are an important method for investors
and stakeholders to monitor business developments regularly. Investors and creditors are interested in learning information
about decisions. Long-term, the company's key goal is to maximize value (Wahyudi & Pawestri, 2006). The company's
worth is expressed in its share price (Fama & French, 1998). The stock price on the capital market is established based on
an agreement between the demand and the supply of investors so that the stock price is a reasonable price that can be used
as company value output (Hasnawati, 2005). Optimization of firm value can be accomplished by introducing the financial
management function, where a financial decision can affect other financial decisions and firm value (Fama & French, 1998).
The main objective of the company being established is to increase the value of the company through increasing the
prosperity of the owner or shareholders (Ahmad et al., 2018). When the stock price increases, it means that the company
value increase and the owner's welfare increase. Bathala et al., (1994) stated that the company's main objective is to increase
firm value by increasing the prosperity of owners and shareholders. Firm value is significant because it reflects the
company's performance, which can affect investors' perceptions of the company (Mira, 2020). One of the benchmarks for
determining firm value is company profitability. The profitability of the company is the result of the company's operational
activities. The achievement of net income shows operational activities in the financial statements (Arsyad et al., 2021). Profit
is the difference between revenue and expenses. So, managers managing the company will try to maximize revenue and
reduce operating expenses. The activity of maximizing income is also known as increasing profitability. (Christiawan &
Tarigan, 2007).
A potential agency problem can be influenced by the ownership structure (Wahyudi & Pawestri, 2006). Some researchers
believe the ownership structure influences the running of the company, which will affect the company's profitability in
1* First Author and Corresponding Author. Department of Management, Universitas Muslim Indonesia, Makassar City, South Sulawesi 90231, Indonesia,
South Sulawesi, Indonesia, [ Email: budi.andriani@umi.ac.id ]
achieving the company's goals, namely maximizing firm value. It is due to the control they have.
A conflict of interest occurs when a manager's decision will only maximize his interests and are not in line with the
interests of shareholders. The decisions and activities of managers who own company shares will certainly be different from
those of pure managers. A manager who owns company shares means that the manager is also a shareholder. Managers who
own company shares will of course align their interests with their interests as shareholders. Meanwhile, managers who do
not own company shares may only be concerned with their own interests. Ownership of company shares by managers is
called managerial ownership. The same thing can also happen in companies where large block shareholders (a large number
of shareholders) usually consist of institutional shareholders who have a high ability to control managers. The existence of
a significant block shareholder indicates that the level of dispersion of shareholders by outsiders is smaller.
Public ownership reflects the number of shares outstanding in society (Herni & Susanto, 2008). The greater the share
ownership by the public, the more information the public knows about the company. Compared to managers who
simultaneously act as shareholders and institutional shareholders, public shareholders have the least influence on the
profitability and value of the company. The relationship between ownership structure and firm value has been studied both
theoretically and empirically. This means that many studies examine the influence of managerial and institutional ownership
on firm value. This study re-examines the relationship between ownership structure and firm value and presents the
profitability variable as a mediating variable. Ownership structure will increasingly play its role if the company's condition
can achieve good profits. Thus, this will affect the value of a company. Wahyudin, (2012) explains that the main purpose of
establishing a company is to increase company value which is marked by the level of prosperity of the company's
shareholders. Company value is also a benchmark for investors to judge the success of a company. The company value can
be seen from the amount of the share price owned by the company. The higher the stock price of a company, the higher the
value of the company. Various attempts were made to increase the company's share price. One of the efforts made is the
involvement of management in share ownership. Based on agency theory (Jensen & Meckling, 1976) this effort is to reduce
the tendency of management to take opportunistic actions that can harm shareholders. Wahyudin, (2012) states that
managerial ownership policies will be able to encourage management to be more careful in making decisions about using
sources of financing from debt. Wiranata & Nugrahanti, (2013) state that a high level of institutional ownership will lead to
greater supervision efforts by institutional investors so that it can hinder the opportunistic behavior of managers.
This study attempts to reexamine the effect of managerial ownership and institutional ownership on firm value by
presenting the profitability variable. Hsu et al., (2011) show that managerial ownership is proven to have an effect on firm
value. (Lestari et al., 2014; Sienatra et al., 2015; and Julianti, 2015) also found the same thing. Meanwhile, research
conducted by (Bona-Sánchez et al., 2018; Ambarwati & Stephanus, 2014; Astriani, 2014; and Hidayah, 2015) shows that
managerial ownership has no effect on firm value. The effect of institutional ownership on firm value is also different.
Studies that have found a positive effect of institutional ownership on firm value have been conducted by (Dhaliwal et al.,
2010; Wida & Suartana, 2014; Sienatra et al., 2015; and Julianti, 2015). Meanwhile, (Mollah et al., 2012; Radhitiya &
Purwanto, 2017; Ambarwati & Stephanus, 2014; Lestari et al., 2014) found that institutional ownership was not proven to
affect firm value.
The large number of previous studies that show the results of different effects between managerial and institutional
ownership on firm value are interesting to do research again by presenting profitability as a mediating variable. Profitability
is a type of information that can be used as a signal for investors (Abd Rahman & Ahmad, 2018).. Information related to
company profitability is a signal that can influence market reactions in the form of requests to buy company shares. Previous
research has shown that profitability has a positive influence with a relatively high coefficient on firm value. Wulandari,
(2013) shows that profitability affects firm value with a coefficient of 0.397. In line with these results, (Rasyid, 2015) and
(Sucuahi & Cambarihan, 2016) show that profitability affects firm value. Research that shows that the profitability variable
as a mediating variable on the effect of ownership structure on firm value is not widely found. Sienatra et al., (2015) tested
leverage and dividend policy variables as mediating variables on the effect of ownership structure on firm value.
Based on the background of differences in interests due to differences in ownership structure between each of the parties
mentioned above, the author will analyze the effect of ownership structure on profitability and company value based on
company data listed on the Indonesia Stock Exchange in 2012 which is contained in the Indonesian Market Capital Directory.
(ICMD) 2013.
113
This study uses secondary data from companies listed on the Indonesia Stock Exchange obtained from the Indonesian
Capital Market Directory (ICMD ) 2013.
No. Sample Characteristics Number of Companies

1. Companies listed on the IDX based on 2013 ICMD data 458
2. Companies that did not / have not published complete financial reports in 2012 (18)
3. Companies that did not have data on institutional ownership in 2012 (6)
4. Companies that do not have data managerial ownership in 2012 (378)
Final sample size 56
Samples were collected using the purposive sampling method and analyzed using Path Analysis (Path Analysis).
Table 2. Definition of Research Variables and Measurement
Variable Name Definition Measurement

Managerial Ownership Percentage of shares owned by KM = (Number of shares owned by
management who actively participates in management) / (Total number of shares
company decision making outstanding) x 100%
(commissioners and directors).
Institutional Ownership Ownership of company shares KI = (Number of shares owned by
owned by institutions or institutions such institutional investors) / (Total number of
as insurance companies, banks, or shares outstanding) x 100%
investment companies.
Public Ownership Public ownership according to KP = (Number of shares owned by the
Wijayanti (2009: 20), is the proportion or public) / (Total number of shares
number of shares owned by the public or outstanding) x 100%
the general public who do not own
special relationship with the company.
The formula for public ownership is
(Wijayanti, 2009: 20):
Profitability The company's ability to generate profits ROE = (Profit after tax) / (Total equity) x
during a certain period 100%
Company Value Valueor shareholder value reflects the PBV = (Market price per share) / (Equity
stock market reaction to the company. per share)

Result Analysis
Based on the company's financial statement data in the Indonesia Capital Market Directory (ICMD) 2013, an analysis
was carried out to describe the pattern of relationships that reveal the effect of a set of variables on other variables, either
directly or indirectly through other variables.
Based on the effects seen in the path diagram and the regression coefficients obtained, we can make 2 (two) regression
equations as follows:
Sub-structural equation 1
Y1 = 0.246 X1 + 0.287 X2 + 0.248 X3
Sub-structure Equation 2
Y2 = 0.216 X1 + 0.267 X2+ 0.333 X3 + 0.236 Y1
114
Hypothesis Testing
The value P (p-value) or a probability/level of significance can be used to see the results of testing in this study, the
researchers used a limit on the error rate of 5% (á = 0.05) so that P values less than 0.05 were significant. After seeing the
significance level, the next step is to assess the effects of exogenous variables on endogenous variables. It needs to be done
considering the possibility of an indirect effect (influence) as a result of the correlation between exogenous variables.
The results of testing the level of significance, direct effect, indirect effect, and total effect of each variable as shown in the
table above indicate that all hypotheses have a significant effect both directly and indirectly.
Hypothesis Variabel Indirect Direct Total P - Value Info

Exogenous Intervention Endogenous Effect Effect Effect
1 X1 - Y1 - 0,246 0,246 0,041 Significant
2 X2 - Y1 - 0,287 0,287 0,017 Significant
3 X3 - Y1 - 0,248 0,248 0,039 Significant
4 X4 Y1 Y2 0,058 0,216 0,274 0,049 Significant
5 X5 Y1 Y2 0,058 0,267 0,335 0,016 Significant
6 X6 Y1 Y2 0,058 0,333 0,392 0,002 Significant
7 X7 Y1 Y2 - 0,236 0,236 0,047 Significant
Discussion
Effect The results of testing Hypothesis 1 show that managerial ownership has a positive effect on profitability. The
results of the above research are in line with the results of previous researches such as (Mudambi, 1995) in (Christiawan &
Tarigan, 2007) which shows that share ownership by managers affects company performance. Likewise, Kumar and Coles'
research shows that there is a relationship between managerial ownership and company performance, as well as various
other studies that have identified a positive relationship between insider ownership and company performance, among others,
conducted by (Kim et al., 1988; Schellenger et al., 1989; and Oswald & Jahera Jr, 1991). Managerial ownership has been
shown to contribute positively to firm profitability. This is because the manager acts not only as a paid professional, but also
as the owner of the company. Good company performance will have an impact on dividends that will be received by
shareholders, because dividends are always based on the current year's net income and net income is a measure of the
company's performance. Managers who own company shares will enjoy this dividend distribution. The behavior of
managerial ownership variables shows an effect on profitability that is in accordance with the basic concepts of agency
theory. The basis of an agency conflict is that the agent as the party trusted by the principal to manage the company does not
always act according to the wishes of the principal where the agent tends to take opportunistic actions. The existence of
managerial ownership can be a harmonizer so that conflicts of interest will be reduced. Management who is involved in
share ownership will try to improve its performance so that the company's profits, given that the dividends to be distributed
will also increase. Therefore, the higher managerial ownership will be able to significantly increase profitability with a
positive relationship.
Has a Positive Effect The results of testing Hypothesis 2 indicate that institutional ownership positively affects
profitability. The results of the above study are in line with several previous studies, including (Jensen & Meckling, 1976)
who stated that managerial ownership and institutional ownership are the two mechanisms of corporate governance that help
agency problems. So, according to Jansen and Meckling, in addition to managerial ownership, institutional ownership also
contributes to increasing company profitability. Wiranata & Nugrahanti, (2013) research results also show that institutional
ownership has a positive effect on the company's financial performance. The behavior of institutional ownership variables
shows an effect on profitability by the agency theory view. This theory explains a gap between the principal and the agent
due to a conflict of interest. This conflict of interest causes agency costs as a consequence that the company must bear.
Increasing institutional ownership in companies is considered as an alternative that can reduce agency conflicts that occur.
It is because the institutional ownership of supervision of management performance is guaranteed. Management
performance can be seen from the amount of profit the company receives in a certain period. Management will strive to
generate high profits so that its position is not threatened, considering the consequences of management if it takes an action
that could harm the principal. Therefore, higher institutional ownership will increase profitability. The results of this study
are in accordance with research conducted by (Rimardhani & Hidayat, 2016). Meanwhile, different research results are
shown by (Mollah et al., 2012) and (Wiranata & Nugrahanti, 2013) which prove that institutional ownership has no effect
on profitability. Other research conducted by (Nurkhin et al., 2017) confirms that institutional ownership has no effect on
profitability.
Has a Positive effect the results of testing Hypothesis 3 show that public ownership positively influences profitability.
The object of research is companies listed on the Indonesia Stock Exchange which are companies that have gone public.
Thus, it is inevitable that in the ownership structure of the company, there is public ownership. The results of the above
115
research are in line with the results of Zulkifli's research without years, which analyzes and explains the effect of ownership
structure on profitability and market performance comprehensively at BUMN Tbk Indonesia, concluding that increasing
public ownership in the ownership structure can increase profitability.
The results of research on the effect of managerial ownership on firm value are consistent with several previous studies
which prove that there is a positive influence between managerial ownership and firm value, including (Slovin et al., 1993)
and (Chen & Steiner, 2000). (Slovin et al., 1993) suggest that firm value can increase if the institution is able to become an
effective monitoring tool. Meanwhile, (Chen & Steiner, 2000) according to their findings, there is a positive and significant
relationship between analysts' coverage, which is an external monitoring function, and Tobins' Q as a proxy for firm value.
Besides having a direct effect, the results of the above research also show that managerial ownership also indirectly affects
firm value. The indirect effect of managerial ownership is because there is an intervening variable, namely profitability.
Because the research results show that profitability has a significant effect on firm value, indirectly managerial ownership
also has a positive effect on firm value. The aforementioned research results support several other research results which
also show the relationship between the influence of ownership structure on firm value, among others, (Bathala et al., 1994)
and (Fuerst & Kang, 2000). (Bathala et al., 1994) stated that the main objective of the company is to increase firm value
through increasing the prosperity of owners and shareholders. Firm value is significant because it reflects the company's
performance, which can affect investors' perceptions of the company. Meanwhile, (Fuerst & Kang, 2000) found a positive
relationship between insider ownership and market value after controlling company performance. Associated with the results
of previous research, the results of this study are relevant to research conducted by (Bona-Sánchez et al., 2018) It proves
that the relationship between managerial ownership and firm value is negative, which means that other factors will connect
the two variables. The theory of stewardship, in contrast to agency theory. Theory Stewardship describes a situation where
managers are not motivated by individual goals but instead aimed at their main outcome goals to benefit the company or
entity they run. This theory has psychological and sociological aspects that have been designed for managers where
motivation is formed according to actions for principal desires. (Frischmann et al., 2014) the theory is stewardship more
closely related to the results of research that the level of managerial ownership does not affect management behavior in
improving the company..
Based on the results of hypothesis testing in table 3, it is known that institutional ownership has an influence on firm
value both directly (direct effect) and indirectly (indirect effect). The results of research on the effect of institutional
ownership on profitability are consistent with several previous studies which prove that there is a positive influence between
institutional ownership and firm value. The results of the above research are consistent with the results of research by
(Shleifer & Vishny, 1986) which argued that the level of institutional ownership in a large enough proportion will affect the
market value of the company. The greater the level of share ownership by the institution, the higher the effectiveness of the
control mechanism on management performance. The research results above also indicate that institutional ownership has a
direct or indirect effect on firm value. It is in line with the results of research by (Shiller & Pound, 1989) which explains
that institutional investors spend more time doing investment analysis and they have access to information that is too
expensive to obtain for other investors. Institutional investors will monitor effectively and will not be easily deceived by
manipulation by managers. In connection with the presence of the profitability variable, among the effects of institutional
ownership on firm value, there are interesting findings in this study. In this case, it is found that the profitability variable
does not directly affect firm value. On the other hand, it was found that there was a positive regression coefficient on the
influence of institutional ownership on firm value through profitability. This finding means that the presence of profitability
as an intervening variable strengthens the effect of institutional ownership on firm value. This finding shows evidence that
the profitability variable is showing its role as an intervening variable. The effect of this mediation is a whole mediation
category. It is because institutional ownership can not have a direct effect on firm value. However, the presence of
profitability can make institutional ownership affect firm value. Institutional ownership will have a more substantial
influence if the company obtains good profitability. Signal theory states that companies must issue signals to which market
participants (investors) can respond. Within the framework of signal theory, it can be understood that profitability is assessed
as a signal issued by a company to attract investors to invest in the company. When investor interest in the company's shares
is high, the share price will increase which in turn will increase the value of the existing company. The conditions that we
can see in this study are in accordance with the findings of (Sucuahi & Cambarihan, 2016) which prove that profitability is
able to influence and be a good mediator for institutional ownership of firm value.
The results of research on the effect of public ownership on firm value which indicates a positive influence of public
ownership on firm value are different from the results of research by (Adnantara, 2013). (Adnantara, 2013) which conducted
research on the influence of Ownership Structure on CSR, the effect of Ownership Structure on Firm Value, the influence
of CSR on Firm Value, and the indirect effect of Ownership Structure on Corporate Value through CSR, suggests that public
ownership has no significant effect on Firm Value. There are differences in the results of the research with the research of
Adnantara, 2013, this can occur because of differences in the sampling of companies under study. Adnantara's research takes
a sample of state-owned companies (BUMN) listed on the Indonesia Stock Exchange. In contrast, the sample used by the
author is a sample of non-state-owned private companies listed on the Indonesia Stock Exchange. In addition, the large
portion of public ownership in the companies selected to be the sample will undoubtedly affect the significance of the
research results.
116
It is known that profitability has a positive effect on firm value. As stated in Chapter 3 of the Conceptual Framework,
profitability is one factor that becomes the reference for investors in buying shares. For companies, increasing profitability
is a must, so that company shares remain attractive to investors. Investors make an overview of a company by looking at
financial ratios as an investment evaluation tool because financial ratios reflect the high and low value of the company. If
investors want to see how much the company generates a return on their investment, what they will look at first is the
profitability ratio, especially ROE, because this ratio measures how effectively the company generates returns for investors.
Company value is significant because high company value will be followed by high shareholder prosperity. The higher the
share price, the higher the company value, which indicates the company's prospects and reflects the assets owned by the
company. Signal theory basically explains that a company must provide a signal or sign through the information issued in
the form of financial reports and non-financial matters from the company that can provide an overview for the external
parties of the company regarding the company's strengths. Profitability is one of the signals issued by the company to which
the market (investors) will respond. The response from the market is realized in the form of demand for company shares.
The higher the demand for shares in the company, the higher the share price. The share price is an indicator of the value of
the company. Therefore, a high level of profitability will increase firm value. The results of this study are in line with research
conducted by (Tjahjono & Eko, 2013), (Rasyid, 2015), and (Sucuahi & Cambarihan, 2016) which shows a significant
positive influence between profitability and firm value. This study does not support the results of research conducted by
(Astriani, 2014) which found that profitability has no effect on firm value. This difference in findings is due to the relatively
small amount of data used by (Astriani, 2014) (involving 27 companies) and the observation period is only three years. This
allows for a different analysis. Profitability is an indicator of a company's financial performance. If profitability is increasing,
it will affect firm value. The market value of the company's shares will increase. It is because investors see positive signals
of improving company profitability. Investors thus use the information contained in the company's financial statements.
Investors prefer a company that can maintain its profitability well because it will maintain unstable fluctuations in company
value.
4. Conclusions
From the research results, can be seen that the indirect effect between ownership structure and firm value. However, the
average size of the indirect effect is smaller than the direct effect of ownership structure on firm value. Thus, it can be
concluded that the use of variables intervening to examine the effect of ownership structure on firm value is not significant.
It means that the direct motivation of investors to increase company value as reflected in the market value of the company's
shares (maximizing firm value) is greater than the indirect motivation of investors towards firm value through an increase
in company profit (maximizing profit). The rapid development of the business world demands continuous research on
economic and business issues. A business decision that was right in the past is not necessarily the right one to apply today.
In addition, it is necessary to carry out further research on other variables which in this study can still be developed further,
for example, the analysis of the effect of foreign institutional ownership, national private ownership, and government
ownership on profitability and firm value.
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Dessy Ekaviana, Iwan Triwuyono & Ali Djamhuri / ATESTASI: Jurnal Ilmiah Akuntansi, Vol 4, No 1, (2021), 120-131
Mosque Transparency under Frame Qur'an Surah At Taubah Verse 18:

Analysis at the Mosque of Jogokariyan
1* 2 3
Dessy Ekaviana Iwan Triyuwono Ali Djamhuri
Received: November 29, 2020 Revised: January 12, 2021 Accepted: January 22, 2021
Abstract
The purpose of this study is to formulate accountability policies at the Jogokariyan Mosque. The research was conducted using
the Islamic ethnomethodology scheme. Via interviews with several Jogokariyan mosque takmirs, the information was collected.
Direct observation is also performed so that the requisite data can be thoroughly obtained. The results of the exploration show
four ways in which the takmir of the Jogokariyan Mosque performs accountability practices: 1) ensuring the best for the
mosque's needs; 2) providing special needs facilities for pilgrims; 3) accommodating the fulfillment of congregational worship
in Maliyah; and 4) providing social security for the community. In the four phases, mutual value is included. As mentioned in
verse 18 of QS At-Taubah, the adoption of accountability practices in these four ways is based on the spirit of the prosperity of
the mosque. In order to receive the happiness of Allah, the takmir of the Jogokariyan Mosque uses the entire course of
transparency training
Keywords: Accountability; Case Study; Mosque
1. Introduction12
Accountability is critical to accounting and has evolved into a critical component of any relationship's trust. In its simplest
form, accountability is a relationship in which individuals are asked to explain and accept responsibility for their actions
(Osman & Agyemang, 2020; Mcgrath & Whitty, 2018; Agyemang, O'Dwyer, Unerman, & Awumbila, 2017). Accountability
is inextricably linked to transparency, as openness and clarity are integral to the concept of accountability. Accountability is
now widely recognized as a concept derived from agency theory and born out of secular accounting's womb (Basak & Werf,
2019; Burga & Rezania, 2017; Kusdewanti & Hatimah, 2016; Yuesti, Novitasari, & Rustiarini, 2016). As a result, as it is
currently understood, accountability is limited to transactional mechanisms involving the principal (owner) and agent
(management) in a formal contract. The relationship is framed in terms of human control based on egoism and materialism.
Implementation of accountability caters to the profit-oriented organizations (profit-oriented) as a public company and
nonprofit organizations, particularly religious organizations. Over the last few decades, research on accounting and
accountability in religious organizations has accelerated (Iskandar & Budyastuti, 2018; Yasmin, Ghafran, & Haniffa, 2018;
Senander, 2016; Jayasinghe, 2009; Carmona & Ezzamel, 2006; Walker, 2002; Booth, 1993; Laughlin, 1990). It is because
religious organizations are critical to the functioning of society. Their activities extend beyond ritual worship to include
social worship, which necessitates significant human and financial resources (Zain, Samad & Armia, 2020; Hassan, &
1* First Author and Corresponding Author. Department of Accounting, Faculty of Economics and Business , Universitas Brawijaya Malang, Malang City,
East Java, Indonesia, [ Email: dekanprasetya@gmail.com ]
2 Second Author. Department of Accounting, Faculty of Economics and Business , Universitas Brawijaya Malang, Malang City, East Java, Indonesia, [
Email: itriyuwono@gmail.com ]
3 Third Author. Department of Accounting, Faculty of Economics and Business , Universitas Brawijaya Malang, Malang City, East Java, Indonesia, [
Email: alidjam@gmail.com ]

Rashid, 2019; Ekeh, 2016; Basri & Nabiha, 2012; Berger, 2003). Mohamed, Aziz, Masrek, and Daud (2014) researched
mosque accountability, focusing on the Jameq Mosque's financial management in Malaysia. The findings indicate that the
mosque's internal control system still has weaknesses, particularly in the receipt and disbursement of funds. It is necessary
to improve the recording system to increase the mosque's accountability. This finding is corroborated by the findings of
Sanusi et al., (2015), who discovered that accurate and complete recording of financial transactions could increase mosque
administrators' accountability, thereby increasing productivity and effectiveness. In addition to these two studies, Andarsari
(2016) concluded that mosques require accounting under PSAK 45 of 2011.
Most research on mosque accountability has been conducted within the framework of agency theory relationships
between principals and agents, focusing on material accountability mechanisms on paper (see Hartono, Rapini, & Putro,
2020; Suprianto, 2018; Andarsari, 2016). PSAK 45, which was later updated to ISAK 35, was used as a reference or standard
for implementing mosques' accountability during the research. Both PSAK 45 and ISAK 35 are concerned with mosque
accountability, emphasizing the importance of financial reporting on paper as a means of ensuring mosque accountability.
They view mosques and their accountability as highly technical and materialistic. The mosque's accountability was
established as a result of the mosque's management of financial resources. In contrast, accountability in non-profit
organizations requires contextual adjustment with those who accept accountability for organizational culture and activities
(Jayasinghe, 2009).
In essence, the mosque's function is not limited to physical places of worship such as prayer and the birth of a society
with a lifestyle and values of life that adhere to Allah's rules in all aspects of life (Ekaviana et al., 2019). When referring to
the Prophet's Sirah, the mosque served as a focal point for all activities during the Prophet Muhammad's lifetime, including
parliament, administration, soldiering, education, preaching, and baitul maal (Cholil, 2016; Alwi, 2015; Mulawarman, 2009).
Regarding the function of mosques during the Prophet's lifetime, Shihab (1996) explains that the Prophet's Mosque served
at least five functions during that period: 1) as a place of worship (prayer, dzikir); 2) as a place for consultation and
communication (economic, social, and cultural issues); 3) as a place of education; (4) as a place for social assistance; and
(5) as a place for military training and pre-training. The mosque's various functions demonstrate that the mosque establishes
the unity of human relationship with Allah (hablum minallah) and the human relationship with one another (hablum
minannas). As described, the function of the mosque demonstrates that the mosque is involved in both ritual and social
worship.
Currently, the role of mosques as places of social worship is waning. It occurs because mosques are primarily associated
with physical prostration during prayer (Sucipto, 2014). Shihab (1996) argues that one of the reasons mosques historically
played such a broad role is the ability of mosque builders to integrate social conditions and community needs into the
mosque's description and activities. Sucipto (2014) asserts that the mosque's prosperity is a reflection of its accountability.
It means that the more accountable and prosperous a mosque is, the more prosperous it will be. We conduct this research
objectively at the Jogokariyan Mosque in Yogyakarta. The remarkable thing about this mosque is that, despite its small size
as a village mosque, the Jogokariyan Mosque has achieved worldwide success (Hadi & Permana, 2019). This mosque must
not adhere to various general standards, such as ISO or general standards irrelevant to mosques or local values. On the
contrary, the mosque strives to implement its various policies under Islamic law and the surrounding community. Due to the
numerous measures taken by the Jogokariyan Mosque to prioritize community service, the mosque was named the 'National
Pilot Mosque' by the Indonesian Ministry of Religion in 2016. (Thobib, 2016). Based on the description of the Jogokariyan
Mosque's uniqueness, we believe that the practice of accountability at the Jogokariyan Mosque is critical to study holistically
to develop a more comprehensive formulation of mosque accountability practices.
This study was conducted at the Jogokariyan Mosque, which is located at Jl. Jogokariyan No.36, Mantrijeron Yogyakarta.
To accomplish the research objectives, an Islamic ethnomethodological approach was used. Garfinkel (1967) explains that
ethnomethodological studies are concerned with routine activities and are thus concerned with groups' daily activities, not
with individuals. However, ethnomethodology must be refined further to accomplish the study's objectives, as it falls under
the interpretive paradigm's "umbrella." According to Kamayanti (2016), ethnomethodology is a secular methodology because
inductive truth alone becomes knowledge. Scientific truth is founded on empirical truth, and as Garfinkel (1967) points out,
empirical truth is a daily occurrence. As a result, ethnomethodology recognizes that humans, not God, are the creators of
reality. This perspective is not consistent with the research objectives, including examining mosque accountability in light of
Islamic values. The research objectives are to investigate the Jogokariyan Mosque's accountability, which views divine truth
through revelation as a way of life, pure ethnomethodology, which views truth exclusively as the result of human intellect
achievements, will be unable to see this holistically. Thus, it requires tazkiyah, or purification, of this ethnomethodology
through an Islamic paradigm that incorporates tawhid-based thinking, examining physical and non-physical realities, and the
use of reason and intuition informed by revelation in the pursuit of truth. Sanctified ethnomethodology is now referred to as
Islamic ethnomethodology.
The Islamic ethnomethodology employed is one derived from Talib (2017). Due to the Islamic paradigm's influence on
121
this methodology's development, there are ontological distinctions between pure ethnomethodology and Islamic ethnometrics.
In pure ethnomethodology, the only way to understand how group members solve everyday life problems is for humans to
interact with their groups. Meanwhile, Islamic ethnomethodology maintains that the human way originates with the source of
truth, namely Allah SWT. Not only that but there are also differences in the epistemologies of the two. Pure ethnomethodology
epistemology holds that knowledge is only obtained through daily activities conducted under a society's methods. According
to this assumption, reality is defined as something that is realized and integrated into human comprehension. A comprehended
truth is distinct from God's truth, mind, and heart and stands in opposition to everything that cannot be observed (Talib, 2017).
According to Kuntowijoyo (2006), revelation recognized as divinely inspired verses plays a critical role in Islamic
epistemology. There is no distinction between the mind, heart, and revelation in the methodology based on the Islamic
paradigm; revelation becomes the manifestation of Allah SWT's words. The ontology and epistemology assumptions
advanced to demonstrate that Islamic ethnomethodology believes that truth is holistic and integral, including truth derived
from natural phenomena and human life and truth derived from God through revelation. Regarding methodological
assumptions, Islamic ethnomethodology does not distinguish between objective (research) and subjective (researchers),
material and non-material, rational and observational. These factors contribute to the development of science (Triyuwono,
2015), ensuring that Islamic ethnomethodology captures the entirety of reality.
Participant observation is accomplished through participation in various takmir-led activities, including recitation, five-
fold congregational prayer, mosque management training, and joint meetings of the Jogokariyan recitation groups.
Additionally, researchers obtained additional information from the official Takmir Jogokariyan document. The following is a
list of the study's informantts.
Table 1. Informantt List
Informant Position / Role

Informant 1 Syuro Council
Informant 2 Takmir's General Chairman
Informant 3 Treasurer Coordinator
Informant 4 Coordinator of the Sakinah Family Association Bureau
Informant 5 Coordinator of the Imam and Muezin Development Bureau
Informant 6 Coordinator of the Bureau of Islamic Education and Studies
Informant 7 Director of Baitul Mal Masjid Jogokariyan
Five stages of analysis were then performed on the data obtained, namely charity, knowledge, faith, revelation data, and
tawhid integration, as recommended by Talib (2017). In Islamic ethnomethodology research, all forms of informantt
expression, expressions, and actions captured by the senses during the researcher's research are charitable. The following
stage is to consider the significance of each charity discovered. The self-potential utilized at this stage of analysis is why
searching for the meaning of charity through this thinking process is referred to as scientific analysis. However, using reason
to discover meaning falls short of justifying this knowledge. In scientific analysis, the truth of any meaning discovered through
reason is predicated on the truth of divine revelation, as stated in the Al Quran and hadith. Following that, a faith analysis was
conducted. According to Talib (2017), faith is divine signals captured through intuition and then directed toward a conclusion
in the form of values, both mental and spiritual values. Following faith analysis, the disclosure data are analyzed. At this point,
the researcher connects the Al Quran values and hadith to the values of the research findings, charity, science, and faith. The
divine truth obtained from the Al Quran and hadith is used to justify the right or wrong deeds discovered in the field. Finally,
an examination of tawhid's integration unites charity, knowledge, faith, and revelatory information to produce divine
consciousness. This stage denotes the synthesis of God's revelation and human knowledge. This series of analysis stages are
depicted in Figure 1.
Figure 1. Data Analysis Stages (Islamic Ethnometodology)
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Result Analysis
This mosque is called the Jogokariyan Mosque, which refers to the fact that it houses the preaching in the Jogokariyan
Village. To that end, the following is an excerpt from the Informantt 6 interview.
“Numerous individuals have inquired as to the name of our mosque and why it is considered un-Islamic.
What is the origin of the name Jogokariyan Mosque? Additionally, we responded that our mosque's name
was under the Prophet SAW's sunnah; the Prophet named mosques after the village in which they were
located to establish an absolute limit on who was responsible for his da'wah. Thus, we in Jogokariyan imply
that preaching is responsible for a single Jogokariyan village with four RW and eighteen RT”.
According to Informantt 6, the naming of the Jogokariyan Mosque was related to the takmir's responsibility in carrying
out his duties, specifically to clarify the boundaries of his area of responsibility. Although it is frequently referred to as un-
Islamic, Takmirs continue to believe in the Prophet's Sunnah. Without an Arabic name, it is unclear where the preaching
area is located; it is also unclear who is responsible for the congregation. For example, a mosque may be named Al Mukhlisin
Mosque (sincere people) or Al Muttaqin Mosque (pious people), indicating that preaching responsibility boundaries are not
definitive. This responsibility's ambiguous boundaries will erode the mosque's function, rendering it incapable of
shouldering responsibility for the mosque's prosperity.
Takmir of Jogokariyan Mosque believes that the best way for a mosque administrator to be accountable is to provide the
best service possible, tailored to the congregation's needs and the community they are responsible for. Takmir believes that
the mosque is Allah's house, and Takmir is Allah's employee, tasked with the responsibility of prospering Allah's house
through service to God's guests, namely the congregation. In an interview opportunity, as Informantt 3 indicate..
“The way to be responsible is to adapt tasks to roles and continually improve services. So do not just stop
or settle for the current state”.
As indicated by Informantt 3, the Takmir of the Jogokariyan Mosque's service principle serves mosque congregations'
needs and interests for individuals to feel happy while interacting and participating in mosque activities. The services
provided are limited to facilities for the five daily prayers and other worship-related activities. The services provided by the
Jogokariyan Mosque can be classified into two categories: worship services and services for the poor. Based on information
gathered during the mosque management training held at the Jogokariyan Mosque Hall on February 27, 2020. More
specifically, there are three ways to practice accountability in worship services: providing the best for the mosque's needs,
providing facilities for congregations with special needs, and accommodating congregational worship. There is one way to
ensure accountability in data worship services, and that is through community social security.
The First Accountability Practice Method: Providing the Best for the Mosque Needs
One of the mosques' primary functions is to serve as a place of worship for Muslims, reflecting mosques' function during
the Prophet's lifetime. Worship is one of the primary purposes of human creation. The broad scope of worship is evident
from Ibn Taimiyyah's definition of worship in the Al Ubuddiyah Book.
Worship is a term that includes all that Allah loves, and Allah is pleased with both speech and deed, what
is born (visible, can be seen), and what is mental (invisible, invisible).
More precisely, the worship services discussed in this section include prayer, zakat, donations, and alms, all of which
fall within the broad definition of worship. As Informantt 3 stated in the previous interview, the only way to maintain
accountability is to continue striving to provide the best service possible. Takmir also adheres to this principle by providing
facilities for this worship. From the beginning, takmir strives to provide the best possible prayer facilities, including high-
quality carpets, women's prayer clothing that is always clean and available in sufficient quantities, qualified imams, and
muadzins high-quality sound system mosque that is always kept clean. The following excerpts from Informantt 4 and
Informantt 2 interviews attest to this.
“We will select the finest carpets for mosque facilities. Yesterday, we returned some donated carpets because
they were not number one. We are looking for Turkish rugs of the highest quality. Yes, we communicate
with donors carefully to avoid offending them”.
“For the facility of the Sound mosque, we will use the services of experts. Even for this sound, there is an
interesting story in it. In the past, this mosque had a person named Agus (sound system technician) who
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initially came to fix and check the sound system to ensure that it worked properly. When prayers arrived,
he frequently returned to his house to listen to his house's call to prayer. Alhamdulillah, now wishes to pray
in the mosque and is extremely conscientious about meeting the mosque's equipment needs. Additionally,
we select imams and muezzins in their youth because their voices are so beautiful. The congregation will
also feel more at ease and humble if the imam's voice is melodious”.
According to the two interview excerpts provided, takmir provided the best for the mosque's needs, as evidenced by the
charity "we want Turkish carpets of the highest quality" and "sound we consult experts." Additionally, we select imam and
muadzin, who are young and have good voices. This method implies that takmir makes every effort to provide the best
facilities and infrastructure possible for the congregation to feel at ease while worshipping in the mosque.
The Second Accountability Practice Method: Providing special needs facilities for Congregations
Besides providing congregations in general with the best prayer facilities, attention is also paid to various other facilities
needed by pilgrims with special needs, such as the elderly, people with disabilities, and children. How the mosque provides
facilities for congregants with special needs is demonstrated by (charity). The findings of observations, namely the provision
of special prayer shafts for children, prayer chairs for the elderly who can not stand prayer, access roads by rallying to help
elderly congregations; and people with disabilities go to places of ablution and toilets, ramps (sloping roads) to help elderly
and disabled wheelchair users and other walking aids to be able to enter the mosque to worship.
Figure 2. Jogokariyan Mosque is Child Friendly, Elderly and Disabled

Source: Jogokariyan Mosque Takmir Documentation
Takmir's various deeds imply that (knowledge) takmir strives for everyone to have the same opportunity to pray as
comfortably as possible in the mosque. Without disturbing each other congregations, a special prayer for children allows
them to practice participating in congregational prayers at the mosque. The child-friendly Jogokariyan mosque is also shown
through the colorful writing in front of the mosque, as shown in picture 2. This article conveys that mosques are a place for
fun, enjoying living in the world through worship, and living in the hereafter because I got His heaven. The mosque is the
cradle of civilization to come, so the younger generation must be friendly. Having a prayer chair facility enables the imam
to recite long letters or verses of the Koran in his prayers without worrying about burdening the elderly who participate in
congregational prayers. Besides, various other facilities are all tailored to the congregation's needs to worship the mosque
as best as possible.
Third Accountability Method: Facilitation of the Worship Performance of Maliyah Jamaah

According to the researchers' observations, takmir accommodates the fulfillment of maliyah's congregational worship
through (charity) the provision of various infak boxes according to their designation and the existence of the Baitul Mal
Foundation. The following is an excerpt from Mr. Rizki's interview as the treasurer of the Jogokariyan Mosque.
“Occasionally, infaq individuals have varying preferences. Those desiring the virtue of alms at Fajr will
receive an infaq Fajr box. Those who wish to receive priority in the distribution of drinks will be provided
with an infaq box for drinking water, and so forth. We will direct those who wish to distribute their zakat
mal to the baitul mall. When someone wishes to donate, we will undoubtedly inquire about the purpose of
the donation so that we, as mosque managers, can take responsibility for it”.
In the informantt 3 accounts, many infaq boxes labeled with various purposes provided the acquired knowledge of takmir.
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The number of Infaq boxes with varying allocations is intended to accommodate the congregation's donation preferences.
Additionally, Informantt 1 stated in connection with numerous donation boxes that this was done to make it easier for the
congregation to donate, even requiring them to remove their shoes. Additionally, there was an Infaq box on the shoe holder's
edge.
Additionally, the Jogokariyan Mosque has the Baitul Mall Foundation, managed by the mosque's takmir. This Baitul Mal
was established to separate zakat collection and distribution from infaq because zakat is transparent as to the recipient. In
comparison, infaq is entirely free as long as it is used for the people's greater good. The Baitul Mal was also formed in
response to government regulations requiring legal entities for institutions that collect and distribute zakat. The separation
of zakat and infaq management demonstrates that takmir wishes to serve congregants who wish to perform maliyah worship
under Islamic law.
Fourth Way of Accountability Practice: Providing Communities with Social Security

In Jogokariyan Village, the Jogokariyan Mosque provides religious services and social services to the poor. The following
is an excerpt from an interview with Informant 7 regarding the mosque's role as a social security provider in the community.
“Mosques must serve as a social safety net for the community. According to the Prophet SAW's history, the
Prophet's mosque once had pillars with pegs. Individuals with excess flour or food will bring it to the
Prophet's mosque and hang it on the mosque pillars' pegs. Congregants in need of food may take an adequate
amount and take it home”.
One of the programs performed by takmir was to provide monthly rice compensation for residents in need. A box of rice
infaq was provided by Takmir so that the congregation going to the mosque could bring some rice to put in the box of rice
infaq. This program began when one of the congregation told Informant 1, at that time the chairman of the takmir, about the
difficulties in meeting his family's basic needs. In response, Informant 1 told this story to all the mosque congregations the
next day.
“It turns out that some of our residents cannot afford their rice needs. God willing, takmir starting tomorrow
morning to provide sadaqah boxes of rice. So ladies and gentlemen who still cook at home, if you want to
cook rice, leave a handful or two handfuls, we provide a box of sadaqah rice. We use the collected rice to
help residents who are unable to meet their needs. So this is the tradition of jimpitan in Javanese society; I
used to live it in the mosque. Alhamdulillah, the response was extraordinary; some brought a pinch, some
brought a sack of two sacks a month and could collect up to 2.7 tons. So that the poor people we give rice
at this time. Now made easy with an ATM.”
Based on the interview with Ustadz Jazir, a way for the mosque to provide the poor with social security for the community
in rice assistance was found. There are at least 1380 needy people in Jogokariyan Village, based on data held by Takmir.
They do not have rice to collect at the mosque with the rice compensation. In addition to the growing number of donors, the
Takmir Mosque has developed a program to distribute compensation for basic needs in the form of rice and other basic
needs, such as cooking oil, nuggets, etc. (Knowledge) from this charity, the mosque assists people who can not meet their
basic needs so that their income is not used only for food when they do not have a permanent job.
The interview results with Ustadz Jazir also learned that mosques play a role in maintaining the local wisdom that exists
in the community. It is reflected in the statement by Ustadz Jazir, who said that the sadaqah rice program is a development
of the traditional jimpitan that exists in the Javanese community, where villagers voluntarily put a little rice using a small
container hung in front of their house then the patrol officers maintain security every night the village will collect it.
Takmir also offers Sahur subsidies to pilgrims in need, in addition to providing rice compensation. The following is an
excerpt from an interview with Ustadz Jazir concerning this matter.
“It is difficult for poor people to sleep because they may be holding back hunger, thinking about lack. As
soon as I could sleep, I was woken up for sahur, but there was no sahur food. Therefore, we are responsible
for providing them with food assistance for sahur. If we break the fast, we have prepared it at the mosque”.
The excerpt from the interview with Ustadz Jazir shows how the mosque provides the community with social security,
which can be seen by helping with Sahur meals. This Sahur subsidy is granted before the month of Ramadan comes. This
aid includes essential food items, such as rice, eggs, and oil. Ustadz Jazir said that this service is a form of responsibility for
takmir because, in the early morning, it had awakened residents to eat sahur. In addition, he said that the Suhoor tradition of
waking people up is common in all Indonesian mosques. They nevertheless forgot to pay attention to whether or not the
individuals they had awakened had food for sahur. This type of behavior reflects the irresponsible conduct of Takmir.
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Figure 3. Rice Compensation and Subsidy for Sahur Jogokariyan Mosque

Source: Documentation of Takmir Jogokariyan Mosque
In addition to providing services to the poor in essential food items such as rice compensation and subsidy for sahur,
takmir also provides tuition assistance to people in need. The following is an excerpt from an interview with Ustadz Jazir
regarding the educational funding assistance provided by Takmir Jogokariyan Mosque.
"You don't have to excel. If you can't afford it, come to the mosque. We immediately pay for school or
college needs”
The charity recorded from the interview excerpt above is “we pay for the school or college needs”. This charity implies
that the knowledge of the mosque helps ease the burden on society in meeting the educational needs of children. Takmir
realizes the importance of education in shaping a quality civilization. So far, educational assistance is only aimed at those
who excel with various complex requirements, to not all people access the assistance. Therefore, takmir seeks to overcome
these problems by providing educational assistance to those in need without complicating the various requirements that must
be met. Other services provided by takmir are freeing pilgrims who are in debt to moneylenders or loan sharks. The following
is an excerpt from Ustadz Jazir's interview regarding this matter.
“Removing pilgrims from loan sharks. In the fiqh of zakat, there is a name called gharim. The difficulty for
him is that he wants to go later to meet a debt collector. The mosque helps to pay off his debts.”
Through the interview excerpt above, it is recorded charity is that "helping to pay its debts". This charity implies that
the knowledge of the congregation in debt must be helped so that he is free and feels calm in carrying out his worship in the
mosque. In addition, people who cannot pay their debts are also one of the groups (asnaf) recipients of zakat. So their
existence is the responsibility of the mosque. When helping the community pay off debt, the takmir also educates the public
not to get used to debt because debt behavior is not recommended in Islam, especially to moneylenders who involve
multiplying debt with interest (usury). Every year the takmir also routinely carries out a house cleaning program so that the
congregation has a proper and healthy place to live, as stated by Ustadz Welly in the following interview excerpt.
“If you clean up the house in one year, there will be 18 RTs, and each RT has 1 house. The average budget
is 2 to 3 million per house. So, the concept is a healthy house, not like the house renovation on television
(expensive). Only if there is a bathroom, the toilet has not been tiled, and we are ceramic. There is a stuffy
room, and we give the window ventilation, something is leaking or something.”
The deeds recorded from the interview excerpt above are “if there is a bathroom, the toilet is not tiled, we are ceramic.
There are stuffy rooms, we give ventilation windows, there are leaks or something.” From this charity implied knowledge,
takmir trying to help villagers to have a decent place to live. In this case, the measure of takmir's eligibility is a healthy
house. This effort was carried out as a form of takmir's responsibility for the health of the residents of Kampung Jogokariyan.
In addition, efforts to pay attention to the congregation's health are also carried out by takmir by providing free polyclinic
services.
Through picture 4, it is recorded that the charity "provides free health services for worshipers through the mosque
polyclinic". This practice implies knowledge. The mosque intends to be a solution to various community problems, including
in terms of health. The provision of free polyclinic services starts from 18.30 (after Maghrib prayer) until 20.00 (after Isha
prayer). The choice of time is not without reason. Takmir saw that the community health center services could only be
obtained from morning to evening so far. When some people experience pain at night, they have to wait in the morning so
that a doctor can examine them. It is indeed troubling. Therefore, takmirs try to overcome these problems. On the other hand,
the mosque is also not redundant in providing services because it follows the community's needs, especially the congregation.
In addition, the choice of service time from after sunset until after Isha also has its reasons, namely takmir wants pilgrims
who seek treatment at the polyclinic at least to meet two congregational prayer times, namely Maghrib and Isha prayers. So
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they get outward benefits and get inner benefits by attending congregational prayers in the mosque. Thus, indirectly takmir
also fulfills two of their responsibilities, namely paying attention to the health of the congregation and inviting the public to
pray in congregation at the mosque.
Figure 4. Jogokariyan Mosque Polyclinic

Source: Takmir Jogokariyan Mosque Documentation
Analysis of Faith, Revelation Information and Integration of Tawhid from Worship and Dhuafa Services
Based on how takmir provides worship services and services for the poor, the enthusiasm that can be felt from these
various ways is caring. Takmir cares about various factors that make worshipers comfortable in worshiping in the mosque.
The takmir's caring spirit can also be felt from the services they provide for the poor. Takmir also endeavors (sincerely) to
provide the best facilities to accommodate the congregation's needs to all worship as best they can in the mosque under
Islamic law. Both of these values are supported by the takmir's value of trustworthiness. They never worry about running
out of funds to provide the best services for the congregation and the community, especially the people of Kampung
Jogokariyan.
If explored more deeply, the primary value (faith) contained in the method is found in the value of takaful (mutual
bear). In Arabic, takaful comes from the root word kafala, which means weak (Hafiz & Abdul Manas, 2017). Takaful has
meanings such as share, similar, guard, witness, mutual support, and mutual guarantee (Alfin, 2011). In principle, all
linguistic meanings lead to one basic meaning, namely, to bear each other. The purpose of joint bearing here is to unite or
combine something weak with something more substantial so that the weak object becomes stronger. In other words, takaful
can be interpreted as an act carried out either by an individual or a group of community members to guarantee each other,
protect each other, and cooperate in order to improve the standard of living.
Back to takmir's belief that the best way of accountability is to carry out tasks according to their roles. In this case, the
task of the takmir as an employee of Allah is to prosper the mosque. Furthermore, according to the takmir's view, the main
activity in prospering the mosque is QS At Taubah verse 18 (revelation information). This view is understood by individual
takmirs and the shared views of the takmirs of the Jogokariyan Mosque, as explained by Ustadz Rizal and Ustadz Jazir in
the following interview excerpt.
"So according to this verse (QS At-Taubah verse 18), whose name is prospering the mosque, the main
activity is first to establish prayer. So for every individual Muslim must feel obliged to uphold prayer. So it
means that the name of establishing prayer is upholding prayer in the mosque. How can the mosque prosper
if he prays at home? So what we understand is that what is meant by establishing prayer is praying in
congregation in the mosque. The takmir's obligation is to invite them (the community), to make them aware
of praying in congregation in the mosque. Like it or not, we have to go... It turns out that Allah not only
ordered the prayer, but also wa atazzakat. Not only in this verse, Allah compares the command to pray with
paying zakat. There are about 62 verses that juxtapose the command to pray with paying zakat. Meaning
this is a one-packed command. Ask him to do it by means of giving zakat. We make people prosperous so
we can invite them to the mosque. The mosque prospered not only in the number of worshipers, but also in
the welfare of the community around the mosque. With the help of the mosque, the economic hardship is
gradually lessening.” (Ustadz Rizal)
“The mosque must have two main activities, aqimusshalah wa atuzzakah. It means that the takmir can move
as much as possible the congregation (community) for the 5 daily obligatory prayers carried out in the
congregation in the mosque so that the mosque is said to be prosperous if in five prayer times it is always
filled with worshipers. Second waatuzzakah, that the mosque must build the community's prosperity so that
the community increases its status from mustahik or zakat recipients to zakat payers. (Ustadz Jazir)
Based on the two excerpts of the interview, it was found that for the takmir, the prosperity of the mosque, which is a
mandate from Allah, can only be realized by establishing congregational prayers in the mosque and paying zakat. In
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connection with these two things, it is the responsibility of the takmir to invite and remind the public in carrying out both.
By carrying out this task, the takmir can be said to have shown his accountability.
Finally, the researcher reiterates that every way of practicing mosque accountability found through charity, explained
through knowledge, felt through faith, and confirmed through revelation is a whole way of practicing accountability. So that
researchers realize the integration of monotheism or the reason why Allah SWT created the accountability practice is to
provide lessons so that humans have a spirit of caring, endeavor, and trust in the realization of a physically and spiritually
prosperous society that Allah blesses.
Formulation of Accountability Practice of Jogokariyan Mosque

Based on all the analysis stages described, it can be broadly formulated that the mosque accountability practice
implemented by the Takmir of the Jogokariyan Mosque can be formulated. The formulation can be seen in Figure 5.
Figure 5. Accountability Practices of Jogokariyan Mosque

Source: Processed Data
Figure 5 is a formulation of accountability practices applied by the Takmir of Jogokariyan Mosque. Several charities
were found in the first analysis stage, broadly grouped into four ways of practicing their accountability. First, give the best
for the needs of the mosque. Second, providing facilities for pilgrims with special needs. Third, accommodate the
performance of congregational maliyah worship. Finally, providing social security for the community. These four methods
have a rational explanation which is the second data analysis stage in this study, namely scientific analysis. The rational
explanation for the findings of the first method is that the takmir tries to provide the best facilities and infrastructure for the
congregation so that the congregation feels comfortable performing their worship in the mosque. Regarding the finding of
the second method, there is a rational explanation that takmir tries to make everyone have the same opportunity to worship
as well as possible comfortably in the mosque. Furthermore, the rational explanation of the findings of the third method is
that the takmir provides many infaq boxes with various purposes written on the boxes to accommodate the pilgrims'
preferences in giving infaq. The findings of the last method have a rational explanation. Namely, takmir seeks to provide
social security to improve the standard of living of the Jogokariyan community, both in terms of economy, education, and
health. The third stage of analysis is faith (values). In this case, the value of takaful (mutual sharing) is the spirit that is the
primary driver of the accountability practice of the Jogokariyan Mosque. In this study, the purpose of mutual support is that
takmir tries to provide various facilities that make it easier for his brother to carry out ritual worship (prayer) comfortably
and solemnly and try to help his brother who is having difficulty meeting his needs.
The first, second, and third stages of analysis are then confirmed through the word of God. It is the fourth stage of data
analysis (reveal information). In this case, the revelation information from the accountability practices applied by the Takmir
of the Jogokariyan Mosque is QS At-Taubah verse 18.
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"Surely the mosques of Allah prosper are those who believe in Allah and the Last Day, and keep up prayer,
pay zakat and do not fear (anyone) other than Allah, then they are the ones who are expected to be among
the people who got a clue.” (Surat at-Taubah: 18)
In this verse, Normatively explains that the prosperous mosques are people who believe in Allah and the Last Day. In
this case, a believer is a person who upholds prayer, pays zakat, and does not fear anything other than Allah (Tafsir Surah
At-Taubah Verse 17-18). Furthermore, Tafsir Ibn Kathir explained that prayer is the most incredible physical worship. In
contrast, zakat is an essential charity whose benefits flow to others in the form of compensation. Technically, in this verse,
Allah explains that the way to prosper the mosque is to establish prayer and pay zakat. In this regard, Rowi (2020), as an
interpreter who is a member of the Indonesian Ulema Council (MUI) explains that in this verse, prayer is an indicator of the
upward (vertical) relationship between humans and God. Zakat is an indicator of the sideways relationship (horizontal)
between humans and humans. Furthermore, Sucipto (2014) suggests that the prosperity of the mosque is a reflection of the
accountability of the mosque. Referring to the explanation of the meaning of QS At-Taubah verse 18, it can be said that the
way that the takmir can take to prosper the mosque is to remind the people who are within the limits of their responsibility
to carry out these two things. That way, the takmir can be said to have shown his accountability. The takmir of the
Jogokariyan Mosque applies the whole way of accountability practices to gain the pleasure of Allah. This objective is the
final analysis stage of this research.
4. Conclusions
Based on the description of the accountability practices applied by the takmirs of the Jogokariyan Mosque, it can be seen
that the implementation of accountability practices is based on the spirit of prospering the mosque as stated in QS At-Taubah
verse 18, namely enforcing prayers and paying zakat. This spirit encourages takmirs always to provide the best service. The
analysis results obtained four ways of accountability practices at the Jogokariyan Mosque, namely providing the best for the
needs of the mosque, providing facilities for worshipers with special needs, accommodating congregational maliyah worship,
and providing social security for the community. The four methods indicate that the practice of accountability is in the form
of providing the best service to the congregation in the form of physical needs, such as facilities for pilgrims with special
needs, food and beverages, and social security; and ritual needs in the form of performing maliyah worship. Based on the
spirit of mutual responsibility (takaful), these four methods are carried out by takmir. The community becomes close to the
mosque and is always closer to Allah SWT. God created this accountability practice, namely to provide lessons so that
humans have the spirit of caring, endeavor, and trust to realize a physically and spiritually prosperous society that God
blesses. The limitation of this research is that the researcher is not free to interact with the takmir, who are informants in this
study. It is because the majority of takmir are male while researchers are female. The takmir highly uphold Islamic values,
including in terms of communicating with the opposite sex. However, the researcher tried to cover this limitation by
confirming the answer. Confirmation of answers in question is to give similar questions to several different informants. In
addition, the researchers also confirmed the answers through continuous observation of various activities at the Jogokariyan
Mosque over a long period. Suggestions for further researchers who want to research mosque accountability can research
mosques with different social and cultural conditions. It is because mosque accountability is a concept full of mutually
agreed upon values by its members. Therefore, the accountability of mosques with different social backgrounds has the
potential to produce different findings.
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i

Theory of stewardship in the marriage of female migrant workers: Perspectives of

Intellectual Capital's influence on the Financial Performance of Manufacturing

Several factors affect the audit quality in South Sulawesi Inspectorate

Abnormal Returns Before and After the January Effect

Effect of Cash Turnover, Receivable Turnover, Inventory Turnover and Growth

Is it possible that intellectual Capital Affects Performance?

Financial Literacy, Financial Behavior and Financial Attitudes Towards Investment

Does Tax Avoidance Make Do Earning Opacity?

Several Factors Affecting Audit Judgment with Moral Reasoning Moderation

Impact of Cash Flow and Dividend Policy on Manufacturing Firm Value

Influence of Ownership Structure on Company Profitability and Value In

Print ISSN: 2621-1963 / Online ISSN 2621-1505

Theory of stewardship in the marriage of female migrant workers: Perspectives

Keywords: Household Accounting; Accountability; Stewardship Theory; Female Migrant Workers

2. Research Design and Method

Table 1. List of Name of Informants and City of Origin

Name District/City Info

Figure 1. Garfinkel Ethnometodology Data Analysis Phase

3. Results and Discussion

Notes : ** Have a revised language for more accurate readability

** “….. Savings for myself, my parents and my children.” (Informan 4)

Notes : ** Have a revised language for more accurate readability

Notes : ** Have a revised language for more accurate readability

Notes : ** Have a revised language for more accurate readability

Notes : ** Have a revised language for more accurate readability

Notes : ** Have a revised language for more accurate readability

Notes : ** Have a revised language for more accurate readability

Notes : ** Have a revised language for more accurate readability

Notes : ** Have a revised language for more accurate readability

Figure 2. Flow of TKW Families' accounting practices

Indonesian Journal of Accounting Research, 18(1), 74–96. https://doi.org/http://doi.org/10.33312/ijar.365

Print ISSN: 2621-1963 / Online ISSN 2621-1505

Keywords: Earnings per share; Dividend per share; Firm Value

H2: Dividen Per Share has a negative impact on firm value.

2. Research Design and Method

3. Results and Discussion

Table 1. Central Tendency Measurement

N Minimum Maximum Mean Std. Deviation

DPS 24 3,12 46076,00 2781,5829 9596,07735

Table 2. Normality test after Ln transformation

Ln_Stock Price Ln_DPS Ln_EPS

Table 3. Multicollinearity Test

Ln_EPS ,398 2,515

Table 4. Research model test

Model R R Square Adjusted R Square Std. Error of the Estimate

Table 5. Partial t-test

Table 6. Simultaneous F-Test

Model Sum of Squares Df Mean Square F Sig.

Print ISSN: 2621-1963 / Online ISSN 2621-1505

Intellectual Capital's influence on the Financial Performance of Manufacturing

Keywords: Intellectual Capital, Financial Performance

ⓒ Copyright: ATESTASI: Jurnal Ilmiah Akuntansi (2021)

2. Research Design and Method

3. Results and Discussion

Table 1. Statistik Deskriptif

N Minimum Maximum Mean Std. Deviation

Figure 1. Normality Test Results

Table 3. Autocorrelation Test

Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson

Figure 2. Heteroscedasticity Test Results

Table 4. Regression Test Results

Model Unstandardized Coefficients Standardized t Sig.

Y = -6,684 + 3,797 X1 + 2,127 X2 + 10,162 X3 + e