Ida Giyanti, Anita Indrasari, Wahyudi Sutopo and Eko Liquiddanu
The purpose of this paper is to investigate the drivers of the depth of halal standard implementation in the halal-certified food manufacturing small- and medium-sized enterprises…
Abstract
Purpose
The purpose of this paper is to investigate the drivers of the depth of halal standard implementation in the halal-certified food manufacturing small- and medium-sized enterprises (SMEs). The second aim of this paper is to empirically examine the effect of halal standard practices on the SME’s performance.
Design/methodology/approach
Of the 143 halal-certified SMEs in Solo Raya, Province of Central Java, Indonesia, 83 were willing to take part in the present research. The survey was carried out by an on-site visit to the targeted respondents. A structured questionnaire was used to gather primary data. Partial least square structural equation model was then used to analyze the collected data.
Findings
The results proved that internal motivation and organization commitment positively affect halal standard implementation, while external pressures do not. The external pressures influence the depth of halal standard implementation through internal motivation as a mediating variable. Furthermore, the depth of halal standard implementation leads to the improvement of operational performance. The improvement of operational performance can further encourage the increase of market performance and financial performance.
Research limitations/implications
The first limitation of this research is about the samples in which they are small-sized and restricted to food manufacturing SMEs. Another limitation is the subjectivity of SME’s managers when evaluating performance, which may provide imprecise measures of performance.
Practical implications
The findings suggest the notion that success of halal standard implementation depends on the capabilities of SMEs to convert the external pressures into internal motivation. Moreover, food-manufacturing SMEs should consider halal standard as an innovative tool to be applied in their daily operation and production as the halal standard has a significant role in influencing SME’s performance.
Originality/value
To the best of the authors’ knowledge, this research is the first attempt in integrating drivers, halal standard implementation and performance in the specific context of food manufacturing SMEs in Indonesia.
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Paulina Sutrisno, Sidharta Utama, Ancella Anitawati Hermawan and Eliza Fatima
This study aims to examine the impact of founder or descendant chief executive officers (CEOs) on the relationship between tax avoidance and firms' future risk. This issue is…
Abstract
Purpose
This study aims to examine the impact of founder or descendant chief executive officers (CEOs) on the relationship between tax avoidance and firms' future risk. This issue is important because of an ongoing debate about founder and descendant CEOs' impacts, contributions and implications for firms.
Design/methodology/approach
This study uses a sample of publicly listed nonfinancial Indonesian firms in 2012–2019, most of which are family firms and adhere to a two-tier governance system that was understudied in previous studies. The authors use panel-random effect data regression for the statistical analysis.
Findings
The results demonstrate that founder or descendant CEOs do not affect the positive relationship between tax avoidance and firms' future risks.
Research limitations/implications
This research supports the upper-echelon theory, arguing that top management teams affect firms' strategic policies and outcomes.
Practical implications
CEOs play weaker roles in countries with a two-tier governance system than in a one-tier one. Additionally, in relation to Hofstede's cultural dimensions, Indonesia has collective and feminist characteristics that emphasize elements of togetherness and group so that firms reflect the firms' top management teams and not only CEOs.
Originality/value
This research fills a research gap on the role of founder and descendant CEOs in the relationship between tax avoidance and firms' future risks by analyzing firms in Indonesia, a country with a two-tier governance system and collective and feminine cultural characteristics.
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The purpose of this paper is to develop a methodology to study profit vs non‐profit seeking firms usefully to compare corporate performance. It aims to apply the methodology to…
Abstract
Purpose
The purpose of this paper is to develop a methodology to study profit vs non‐profit seeking firms usefully to compare corporate performance. It aims to apply the methodology to measure if state vs non‐state firms with different objectives are comparable in performance. If relevant, the paper also aims to comment on the applicability of this method to analysis of other firms, e.g. Islamic banks in Indonesia.
Design/methodology/approach
The paper applies Malmquist data envelopment analysis method to different classes of firms: state vs non‐state firms; aggregated at the industry and at national levels; and develop appropriate time trend analysis as well. Findings – The common belief that all state firms are inefficient is not upheld by test results: in some sectors (agriculture and chemicals) state firms are more efficient than private firms. Efficiency is very low, but did improve over time across all sectors and types of firms particularly before the 1997‐1998 and in recent years. Efficiency is mostly achieved through technology adoption (technological change) accounts for most efficiency gains.
Research limitations/implications
This study overturns findings of many accounting performance based studies and revisits policy implications.
Practical implications
No one policy fits all in Indonesia for privatization programme.
Originality/value
The paper provides more valid methodology to compare state firms with non‐state firms for the first time.
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Mokhamad Anwar, Sulaeman Rahman Nidar, Ratna Komara and Layyinaturrobaniyah Layyinaturrobaniyah
The purpose of this paper is to examine the relationship between rural banks’ efficiency and their lending provision for micro and small businesses (MSBs) in West Java Indonesia…
Abstract
Purpose
The purpose of this paper is to examine the relationship between rural banks’ efficiency and their lending provision for micro and small businesses (MSBs) in West Java Indonesia. Rural banks are special banks that are generally located in the district and sub-district areas and they are very involved in providing loans to MSBs.
Design/methodology/approach
The study includes 212 rural banks in various districts in West Java province over the 2012–2016 period. Data envelopment analysis is employed to obtain banks’ technical efficiency and panel data analysis is used to reveal the impact of rural banks’ efficiency on their loan provision to MSBs.
Findings
The findings reveal that technical efficiency of the rural banks has a significant positive impact on their loan provision to MSBs in West Java Indonesia. These results have underscored the importance of rural banks in maintaining and increasing their bank efficiency levels to enhance their capacity in providing loans to MSBs.
Practical implications
The results of this study have brought some implications for practitioners (rural bank management) to maintain and improve their efficiency in order to expand their capacity to lend to MSBs. The roles of Otoritas Jasa Keuangan or the Indonesia Financial Services Authority in monitoring the efficiency of rural banks and overseeing the provision of their loans to MSBs are also very necessary in ensuring good performance of rural banks in terms of both aspects, respectively.
Social implications
This study highlights the importance of rural banks in providing loans to MSB segments. The contribution of rural banks in stimulating the development of MSBs is believed to be able to produce positive social implications in terms of empowering the economic and social life of MSBs in their local communities.
Originality/value
The study fills the literature gap by revealing a significant relationship between bank efficiency and loan provision for MSBs in the context of rural banks.
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This study aims to investigate the role of bank ownership (foreign versus domestic) and the type of service (Islamic versus conventional) on bank lending to large enterprises and…
Abstract
Purpose
This study aims to investigate the role of bank ownership (foreign versus domestic) and the type of service (Islamic versus conventional) on bank lending to large enterprises and small and medium enterprises (SMEs).
Design/methodology/approach
Based on previous literature, the study proposes that foreign banks lend more to large enterprises and less to SMEs than domestic banks do. It also proposes that Islamic banks lend more to SMEs than conventional banks do. It utilizes unique hand-collected data of Jordanian banks from 2007 to 2018 to carry out its investigation. It applies regression estimation methods and propensity score matching to test its hypotheses.
Findings
Consistent with prior empirical evidence, the findings show that foreign banks lend significantly less (more) to SMEs (large enterprises) than their domestic counterparts. However, the findings indicate that Islamic banks lend significantly less to SMEs than their conventional counterparts. Further analysis shows that Islamic banks operating in Jordan are ultimately owned by foreign investors hence their incentives to adopt full features of Islamic financial instruments are confounded by their incentives to utilize transaction lending technologies which in turn attenuates the expected positive impact of Islamic banking services on SMEs finance.
Originality/value
This research provides novel evidence on the impact of Islamic banks on SMEs finance as the results suggest that the success of Islamic finance in bridging the gap of SMEs finance is conditional on embracing its full features.
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Fakarudin Kamarudin, Nazratul Aina Mohamad Anwar, Annuar Md. Nassir, Fadzlan Sufian, Khar Mang Tan and Hafezali Iqbal Hussain
This study aims to examine the impact of country governance and other potential bank-specific characteristics and macroeconomic condition determinants on bank productivity in the…
Abstract
Purpose
This study aims to examine the impact of country governance and other potential bank-specific characteristics and macroeconomic condition determinants on bank productivity in the period of 2006–2016.
Design/methodology/approach
The productivity level of total 167 banks selected from Malaysia, Indonesia, Brunei and Singapore are evaluated using the data envelopment analysis-based Malmquist productivity index method. A panel regression analysis framework based on ordinary least squares, a fixed effect and a random effect models then are used to identify its main determinants.
Findings
The empirical findings indicate that the total factor productivity changes of Islamic banks is higher than conventional banks. The liquidity and global financial crisis influence both banks’ productivity. Bank size, credit risk, market power, management efficiency and inflation merely influence Islamic banks’ productivity. On the country governance dimensions, voice and accountability are found to positively influence both banks’ productivity. Regulatory quality and rule of law (RL) significantly influences the conventional parts. Political stability and absence of violence, government effectiveness, RL and control of corruption negatively influence the banks’ productivity, but this influence is only significant for the Islamic banks.
Originality/value
Country governance has received surprisingly little attention in the banking industry over the past few decades. Majority of the studies that examine the effect of governance on bank performance have focused more on the micro governance dimension. Thus, to the best of the researcher’s knowledge, no study has been done to address the effect of country governance on the productivity of the Islamic and conventional banks.
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Fakarudin Kamarudin, Chiun Zack Hue, Fadzlan Sufian and Nazratul Aina Mohamad Anwar
This paper aims to explore the level of productivity of Islamic banks specifically in selected Southeast Asian Countries from the period 2006 to 2014. Besides, this study also…
Abstract
Purpose
This paper aims to explore the level of productivity of Islamic banks specifically in selected Southeast Asian Countries from the period 2006 to 2014. Besides, this study also investigates the potential determinants of bank-specific characteristics and macroeconomic conditions that may influence the productivity of banking sector.
Design/methodology/approach
The present study gathers data on the 29 Islamic banks from Southeast Asian countries, namely, Brunei, Indonesia and Malaysia. The productivity level of the Islamic banks is evaluated using the data envelopment analysis-based Malmquist productivity index method. The authors then used a panel regression analysis framework based on the ordinary least square to identify potential determinants.
Findings
The domestic and foreign Islamic banks have exhibited progress in total factor productivity change solely attributed to the increase in efficiency change (EFFCH) which were mainly managerial rather than scale related. Foreign-owned banks have been slightly more productive compared to their domestic-owned bank counterparts, attributed to a higher EFFCH but insignificantly different. Furthermore, capitalisation, liquidity and world financial crisis determinants have significantly influenced productivity level of Islamic banks.
Originality/value
The study on the productivity of Islamic banking is still in its formative stage. To date, very limited study has been conducted to examine the productivity level in Southeast Asian, which is a strong regional hub for Islamic banking. This study intends to fill the gaps with a specific focus on the productivity level, specifically narrowing down to Southeast Asian countries in the domestic and foreign Islamic banking sector.
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The aim of this paper is to identify the major determinants of bank asset quality in an era of regulation‐induced industry consolidation, using the Nigerian case to demonstrate…
Abstract
Purpose
The aim of this paper is to identify the major determinants of bank asset quality in an era of regulation‐induced industry consolidation, using the Nigerian case to demonstrate how consolidation can heighten incidences of non‐performing credits in a fragile banking environment.
Design/methodology/approach
The paper makes use of panel data from 19 out of a total of 25 banks operating in Nigeria. A multivariate constant coefficient regression model is adopted as the estimation technique. The dependent variable in the model is quality of bank assets, proxied as the proportion of non‐performing loans (NPL) to total loans; while operating efficiency, profitability, asset liquidity, loans to deposits ratio, predictability of depositors' behaviour, size of bank capital, and board skill constitute the exogenous variables.
Findings
The study reveals that deterioration in asset quality and increased credit crisis in the Nigerian banking industry between the periods 2004 and 2008 were exacerbated by the inability of banks to optimally use their huge asset capacity to enhance their earnings profiles. It shows that excess liquidity syndrome and relatively huge capital bases fueled reckless lending by banks; and that increase in the level of unsecured credits in banks' portfolios ironically helped to mitigate the level of NPL within the studied period.
Research limitations/implications
The findings here should be interpreted with caution. The reason is because of the relatively fewer number of observations and the likely biases associated with the use of pooled regression approach.
Originality/value
This paper is one of the first to investigate the specific impact of banking consolidation on the quality of bank assets in an underdeveloped financial system. Among such countries facing such challenge, the Nigerian case is unique considering that the 2004/2005 banking consolidation in the country was recorded as the largest in the history of banking in Africa. The findings here make clearer the policy/practical implications of using regulation‐induced consolidation to pursue the goal of increased credit flows in a less developed financial system.
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Aries Susanty, Nia Budi Puspitasari, Sumunar Jati and Oktivia Selvina
The purpose of this paper is as follows: first, this study aims to identify the impact of internal and external factors on the implementation of halal logistics (IHL). Second…
Abstract
Purpose
The purpose of this paper is as follows: first, this study aims to identify the impact of internal and external factors on the implementation of halal logistics (IHL). Second, this study aims to investigate the impact of internal factors on the IHL through competitive pressure (COP) as a moderating variable.
Design/methodology/approach
This study used primary data that were collected through offline questionnaires. The questionnaires were intended to identify the internal and external conditions of a company and the level of the IHL. The internal condition consists of five factors, namely corporate image and reputation (CRE), entrepreneurial intensity, social responsibility (SRE), expected business benefit and halal integrity (HIN). The external factors consist of demand or customer pressure (DCP), government support (GOV), market share expansion and COP. This study considered the factors belonged to internal and external companies on the basis of the conceptual model from Ab Talib et al. (2015), Zailaini et al. (2015) and Ab Talib and Chin (2018) as they have clearly distinguished the important factors for the implementation of the concept of halal into internal and external groups and most of those factors are frequently stated by the other researchers.
Findings
There were 148 questionnaires administrated, 84.5% of which were properly filled in, completed and returned. For internal factors, the result of the study confirms that CRE, SRE and HIN have a positive significant impact on the IHL. For external factors, the result of the study confirms that DCP, GOV and COP have a positive significant impact on the IHL. Then, the result of the study also confirms that COP can make the impact of good CRE on the IHL stronger. This condition did not happen for the other internal factors.
Research limitations/implications
First, it is debatable that internal and external factors and the IHL are only measured by the Likert scales. Future research may take the benefits of inducing qualitative approaches to better measure the condition of internal and external factors and the level of IHL practices through observation and probing. Second, this study was limited to the respondents from companies in Indonesia, which is a Muslim-dominant country and this study does not take into account the differences in the target market and the company’s owner, size of operation and financial capacity. Future research should test the conceptual model in a non-Muslim country and should include controlling for variables to generate a more conducive finding. Third, this study only uses the limited variable as the internal and external factors. Therefore, as many variables represent technological, organisational and environmental factors, they could be included in the future research framework.
Practical implications
This study practically contributes to the halal concept implementation body of knowledge by identifying the relationships between the internal and external factors and the IHL. Understanding this relationship will help the management of food, beverage and ingredient companies, as well as the government or policymakers in making better decisions and strategies to strengthen the IHL.
Social implications
The IHL may help the food, beverage and ingredient companies to be competitive and achieve organisational improvements.
Originality/value
This study is among the few studies that scrutinized the rationale behind the IHL by Indonesian companies. Although halal logistics plays a key role in protecting the halal status of any given product, this topic is still rarely explored, especially with the case study of Indonesian companies.