Dynamic performance of Indonesian public companies: An analysis of financial decision behavior

Abstract

The purpose of this research is to investigate the effects of financial decision behavior on firm performance of Indonesian public companies using panel data. The dynamic generalized method of moment is utilized in this study. The results show that firm performance is dynamic in nature, which indicates that last year performance affects current performance significantly. Empirical result of financial decision behavior shows that investment, leverage, and dividend per share (DPS) have significant impact on firm performance. Specifically, investment has negative impact on firm performance. Meanwhile leverage has negative effects on return on assets (ROA), but positively affects Tobin's Q. Moreover, DPS positively affects ROA and Tobin's Q. This finding suggests that investment decision of Indonesian firms is overinvestment, indicated with higher investment affects firm performance negatively. Similarly with leverage, the finding reveals that Indonesian public companies borrowed external fund more than they required (overleverage). The positive effect of DPS on firm performance implies that dividends payout to

Macroeconomic factors or firm-specific factors? An examination of the impact on corporate profitability before, during and after the global financial crisis

“…Therefore, this study uses the same indicators as proxies for firm profitability to represent both accounting and market-based measures of profitability. Muchtar et al (2018) study the impact of listed Indonesia firms' financial behaviors on firm performance and find that the impact is more salient on the market-based measure of performance as compared to accounting-based measures. ROA is derived by dividing net income by total assets.…”

“…A rise in sales growth rate, hence, leads to an increase in firms' profit. Dietrich and Wanzenried (2011), Lee et al (2017), andMuchtar et al (2018) believe that the inclusion of lagged profitability reflects the persistence of earnings throughout a period. They also find that the previous profit is a significant determinant of current profitability, thus justifies the use of previous year's profitability to explain current year's performance.…”

“…While ROA and ROE ratios are drawn from the accounting report, Tobin's Q reflects market expectations with regard to firms' growth opportunities and underlying value. Since Muchtar et al (2018) identify that market-based measures of firm performance are more sensitive to managerial decisions than accounting-based measures, the use of both types of measures could reveal additional implications about the impact of the crisis on firm profitability in two highly successful economies in Asia.…”

Determinant of sharia banks profitability in Indonesia: The moderating effect of non performing financing

“…Profitabilitas menjadi aspek yang penting dikarenakan profitabilitas dapat merefleksikan prestasi bank dalam menjalankan operasionalnya dalam satu periode (Syamni et al, 2018). Profitabilitas juga dianggap penting karena menjadi ukuran keberhasilan kinerja secara akuntansi (Muchtar, Nor, Albra, Arifai, & Ahmar, 2018). Semakin tinggi nilai profitabilitas, maka semakin optimal suatu bank dalam menjalankan aktivanya dan menjadi indikator kesuksesan bank tersebut dalam berkompetisi di sektor keuangan (Yusuf & Surjaatmaja, 2018;Menicucci & Paulucci, 2016).…”

“…CAR, merupakan rasio kecukupan modal, dihitung dengan perbandingan antara modal bersih dibanding dengan total asset (aktiva tertimbang menurut resiko), sementara BOPO dihitung dengan beban operasional dibagi dengan pendapatan operasional, sementara NPF dihitung dengan perbadingan antar pembiayaan bermasalah dengan total pebiayaan. Profitabilitas dalam penelitian ini diproksikan dengan return on asset (ROA) yang dihitung dengan laba bersih dibagi dengan total asset (Paulin & Wiryono, 2015;Said & Ali, 2016;Hakim & Sugianto, 2018;Muchtar et al, 2018;Alsharari & Alhmoud, 2019). Metode analisis data yang digunakan adalah static panel model yang terdiri dari ordinary least square (OLS), fixed effect model (FEM) dan random effect model (REM).…”