Factors Explaining the Market Discipline of Sharia Mutual Funds from a Behavioural Finance Perspective: A Theoretical Approach

Widyastuti, Umi; Febrian, Erie; Sutisna,; Fitrijanti, Tettet

doi:10.35808/ijeba/319

Cited by 5 publications

(7 citation statements)

References 47 publications

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“…Because of the limited literature that explains market discipline, especially in the context of investors' withdrawal behavior, this study refers to some literature related to the numerous types of financial behavior in developing research hypotheses. These hypotheses are followed up by the propositions that develop in our conceptual study (Widyastuti et al, 2019). The relationship between every two variables is explained in the following section and the conceptual framework is presented in Figure 1.…”

Section: Research Hypothesesmentioning

confidence: 99%

“…In the context of Sharia mutual fund investments, market discipline will exist when investors punish investment managers for the excessive risk the managers take; the investors express their dissatisfaction with the managers' services (Eling, 2012). Widyastuti et al (2019) defined market discipline in Sharia mutual fund investments as "withdrawal behavior that reflects investor sensitivity to excessive risks taken by fund managers." Shafii et al (2010) reinforced that one of the risks faced by IFIs is operational risk, like non-Sharia-compliant risk.…”

Section: Introductionmentioning

confidence: 99%

“…Nevertheless, to the best of our knowledge, there is a lack of study about market discipline in the behavioral finance perspective, which is defined as an investor's withdrawal behavior. This study examined a model that has been built from the conceptual framework as described by Widyastuti et al (2019) and emphasized the psychological factors behind making investors' decisions about withdrawing funds in Sharia mutual funds. This study fills the research gap by observing determinant factors of market discipline using a case in Sharia mutual fund investments.…”

Section: Introductionmentioning

confidence: 99%

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Market discipline in the behavioral finance perspective: a case of Sharia mutual funds in Indonesia

Widyastuti

Febrian

Sutisna

et al. 2021

JIABR

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Purpose This study aims to determine antecedents of market discipline. A model was constructed by extending the theory of planned behavior (TPB) to explore the cognitive, psychological and social factors that influence the market discipline in the form of withdrawal behavior. Design/methodology/approach This study applied a quantitative approach by surveying 181 Indonesian retail investors in Sharia mutual funds, which were represented by civil servants. The samples were collected using the purposive sampling technique. This study used the partial least square–structural equation model to analyze the data. Findings The results revealed that the Islamic financial literacy, the attitudes toward withdrawal, the subjective norms and the perceived behavioral control had a positive significant effect on the withdrawal intention, whereas financial risk tolerance had an insignificant impact. Then, all the exogenous variables and intention to withdraw had a significant contribution in explaining market discipline. Contrary to the proposed hypothesis, the attitude toward withdrawal had a negative impact on market discipline. The structural model indicated that the TPB could be extended by adding some exogenous variables (i.e. Islamic financial literacy and financial risk tolerance) in determining the intention to withdraw and withdrawal behavior, which indicated the market discipline in Sharia mutual funds. Research limitations/implications This study was limited to individual investors who work as civil servants. This study did not accommodate different demographic factors such as age and gender, which influence fund withdrawal behavior. Practical implications The government must focus on the inclusion of market discipline in Sharia mutual funds’ regulation to encourage the risk management disclosure, specifically that related to Sharia compliance. Originality/value Previous studies applied a traditional finance theory to predict market discipline, but this study contributes to filling the theoretical gap by explaining the market discipline from a behavioral finance perspective that was found in Sharia mutual funds.

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Section: Research Hypothesesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Market discipline in the behavioral finance perspective: a case of Sharia mutual funds in Indonesia

Widyastuti

Febrian

Sutisna

et al. 2021

JIABR

Self Cite

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“…Thus, there is an automatic control between the public and the banking industry. Research in a country where the banking industry has advanced, such as in the United States, shows that depositors, both those with savings funds and those who are without, will monitor and control effective banking (Goldber and Hudgins, 1996;Park and Peristiani 1998;Khorassani, 2000;Goldber and Hudgins 2002), in Switzerland (Birchler and Maechler 2002), and in Indonesia (Widyastuti, et. al., 2019), In these circumstances, the reward and punishment mechanism works flawlessly, not only depositors who care about the world banking, but the banking industry will also be more concerned with the level of risk encountered and will be directly related to the security of customer funds.…”

Section: Introductionmentioning

confidence: 99%

Bank Size, Risk and Market Discipline with A Deposit Insurance: Evidence of Banking in Indonesia

Haryanto

Chandrarin

Bachtiar

2019

AFRE

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The Indonesian banking system has implemented a deposit guarantee. Deposit guarantees are carried out in order to provide a sense of security for customers. Moral hazard tends to be higher in the banking industry This study aims to examine the relationship of bank characteristics with market discipline. Bank characteristics include: capital, bank risk, profitability, efficiency and bank size. The population in this study is banks in Indonesia. The sample selection uses a purposive sampling method. The number of samples of 30 banks with peroide 2009-2015. Data analysis techniques used multiple linear regression. The results showed the profitability and size of the bank affect market discipline. Where profitability and bank size have a positive effect on market discipline. This research has implications for the importance of banks in increasing bank assets, especially for private banks.

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“…They expect their money to be managed by the professional investment managers without breaching Islamic principles. In fact, as noted by Widyastuti, Febrian, Sutisna, and Fitrijanti (2019), non-Sharia compliance maybe occur in Sharia mutual fund investments, while investors will react toward this risk by withdrawing their funds. Nowadays, investors have concerns about the importance of Sharia compliance for their investment.…”

Section: Introductionmentioning

confidence: 99%

Sharia Compliance in Sharia Mutual Funds: A Qualitative Approach

Widyastuti¹,

Febrian²,

Sutisna³

et al. 2020

IJEBA

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Purpose: This study aims to describe the elements of Sharia compliance found in Sharia mutual funds, according to the fatwa of the National Sharia Board or Dewan Syariah Nasional (DSN)the Indonesian Ulema Council or Majelis Ulama Indonesia (MUI) and some regulations which were issued by the Financial Services Authority or Otoritas Jasa Keuangan (OJK) in Indonesia. Design/Methodology/Approach: This study applied a qualitative approach using documentary and secondary data including fatwa and regulations which are needed to explore the Sharia compliance of Sharia mutual funds. This study highlighted and identified the elements of Sharia compliance using a hierarchy map. Findings: This study shows that Sharia mutual funds are Sharia compliant since they are obey Islamic principle including non-interest transaction, offering the halal product, no uncertainty (gharar) and no element of gambling. The OJK's regulation and fatwa from the DSN-MUI emphasised other Islamic principles, including the prohibition of margin trading, short selling, and insider trading in Sharia mutual fund investments. They permit to payment of compensation (ujrah) for the service which are provided by the investment managers. Practical Implications: This study notes that economic activities (mu'amalah) should be conducted based on Islamic law. Due to the limited number of Islamic banks that being permitted to act as custodian banks in Indonesia, the mu'amalah of the Sharia mutual funds is conducted through conventional banks. This finding means the policymakers need to create more Islamic custodian banks for Sharia mutual fund investments. Originality/Value: The study has a contribution in identifying the elements of Sharia compliance in Sharia mutual funds in Indonesia.

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Factors Explaining the Market Discipline of Sharia Mutual Funds from a Behavioural Finance Perspective: A Theoretical Approach

Cited by 5 publications

References 47 publications

Market discipline in the behavioral finance perspective: a case of Sharia mutual funds in Indonesia

Market discipline in the behavioral finance perspective: a case of Sharia mutual funds in Indonesia

Bank Size, Risk and Market Discipline with A Deposit Insurance: Evidence of Banking in Indonesia

Sharia Compliance in Sharia Mutual Funds: A Qualitative Approach

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