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1 – 10 of 35Iman Harymawan, Damara Ardelia Kusuma Wardani and John Nowland
This study investigates the relationship between companies with military directors and audit fees in Indonesia.
Abstract
Purpose
This study investigates the relationship between companies with military directors and audit fees in Indonesia.
Design/methodology/approach
Using upper echelon and audit pricing theories, the authors examine military directors' roles in the demand for and supply of auditing services. The authors use Indonesia as their research setting as their military forces have a long history of involvement in business. The study sample includes 898 firm-year observations on the Indonesia Stock Exchange during 2014–2018.
Findings
The authors find a negative relationship between military connections and audit fees. This is consistent with auditors assessing lower audit risk and charging lower audit fees to companies that have leaders with military experience. The study findings are strongest where there is military experience on the board of directors and where the military experience is from the Army.
Originality/value
This study extends the literature on the benefits of military experience in company leadership, especially in the context of auditing research. The study findings also have implications for the selection of board candidates and auditor risk assessments.
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Agnes Aurora Ngelo, Iman Harymawan and Mohammad Nasih
This study aims to examine the relationship between the presence of ex-auditor chief executive officers (CEOs) and ex-auditor chief financial officers (CFOs) with the company's…
Abstract
Purpose
This study aims to examine the relationship between the presence of ex-auditor chief executive officers (CEOs) and ex-auditor chief financial officers (CFOs) with the company's investment efficiency decisions.
Design/methodology/approach
The authors use non-financial Indonesian listed firms, and the authors obtain 2,763 firm-year observations of ex-auditor CEOs and 2,708 firm-year observations of ex-auditor CFOs from 2010–2019.
Findings
The results show that ex-auditor CEOs tend to make efficient investment decisions, while ex-auditor CFOs do not. However, when a company has a CEO and a CFO who are both former auditors, there is a significantly stronger positive relationship with investment efficiency. These results indicate that working experience as an auditor can optimally facilitate the decision regarding investment level. Moreover, the results suggest that the CEO, as top management, has more influence in providing the company's final investment decisions, whereas the CFO plays a role in providing investment recommendations to the CEO. The results of this study are consistent with the use of alternative measurements and the robustness test of Coarsened Exact Matching (CEM).
Practical implications
The results of this study can contribute as material for consideration by company management in selecting company organs with an auditor background to secure efficient investment.
Originality/value
This study specifically examines the experience, values, and particular characteristics of top management with an auditor background on the company's strategic decisions. This study is also based on the phenomenon that the number of ex-auditor CEOs and CFOs in Indonesia tends to increase every year.
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Vidia Gati, Iman Harymawan and Mohammad Nasih
This study aims to examine the relationship of Indonesia’s Sharia Stock Index (ISSI) firms on environmental, social and governance (ESG) disclosure. This study is interesting…
Abstract
Purpose
This study aims to examine the relationship of Indonesia’s Sharia Stock Index (ISSI) firms on environmental, social and governance (ESG) disclosure. This study is interesting because ISSI firms are supposed to comply with Islamic values as this has been reflected in good corporate governance activities, demonstrating responsibility to others and participating in preserving nature/environmental activities.
Design/methodology/approach
The authors use sample firms that are listed on the Indonesia Shariah-compliant Stock Index (ISSI) from 2011 to 2020, which also published sustainability reports.
Findings
The study found that sharia firms are positively related to ESG disclosure. The authors also found that ESG disclosure of sharia firms is more pronounced in the reporting section of general, economic, environmental and social. Other findings suggest differences in the segments reported in the COVID and pre-COVID periods. This result is also robust by conducting a self-selection bias test with Heckman’s two-stage regression and Coarsened Exact Matching regression.
Practical implications
For policymakers, these results indicate that different characteristics of firms can affect ESG disclosure, and economic conditions will determine which sectors are disclosed the most.
Originality/value
This study provides empirical evidence that Indonesian Shariah-compliant stock index firms carried out their mission to disclose more information about their environmental and social responsibilities and governance issues.
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Iman Harymawan, Fiona Vista Putri, Melinda Cahyaning Ratri and Mohammad Nasih
A company needs to use auditing procedures to ensure the reliability of financial statements while also providing transparency to stakeholders. The extent of risk associated with…
Abstract
Purpose
A company needs to use auditing procedures to ensure the reliability of financial statements while also providing transparency to stakeholders. The extent of risk associated with the company depends on the directors’ involvement in its daily operations. This paper aims to study the relationship between busy chief executive officers (CEOs) and audit fees.
Design/methodology/approach
This study uses 1,037 data samples from companies listed on the Indonesia Stock Exchange from 2010 until 2018. It adopts the ordinary least squares method to test the hypothesis. Furthermore, this study performs robustness tests, such as propensity score matching (PSM) and Heckman’s two-stage least square tests (Heckman, 1979), to address the endogeneity issues.
Findings
This study finds that the appearance of a busy CEO in a company will significantly increase the audit fee. It also concludes that a long tenure of a busy CEO will substantially weaken the positive relationship between the CEO and the audit fee. However, this study discovers that, in a company with a busy CEO, a monitoring mechanism through the independent commissioner and risk management committee will only help to maximize the firm’s practical risk evaluation a little. This result is robust because the PSM and Heckman tests display consistent results, so it is free from endogeneity issues.
Practical implications
This study is valuable for theoretical and practical development in Indonesia. Due to the minimum regulation about multiple positions on boards in Indonesia, the shareholders must be aware of the need to choose a board with more skill and commitment to improve the position of the company. This result also warns the C-level of the company to pay more attention to its risk-monitoring process to make it more effective and efficient.
Originality/value
Indonesia is one of the countries that have implemented the two-tier governance system. With the minimum regulation about multiple directorships in Indonesia, this study offers new insights into how a busy CEO will be related to the audit outcomes.
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Ranto Partomuan Sihombing, I Made Narsa and Iman Harymawan
Auditors’ skills and knowledge of data analytics and big data can influence their judgment at the audit planning stage. At this stage, the auditor will determine the level of…
Abstract
Purpose
Auditors’ skills and knowledge of data analytics and big data can influence their judgment at the audit planning stage. At this stage, the auditor will determine the level of audit risk and estimate how long the audit will take. This study aims to test whether big data and data analytics affect auditors’ judgment by adopting the cognitive fit theory.
Design/methodology/approach
This was an experimental study involving 109 accounting students as participants. The 2 × 2 factorial design between subjects in a laboratory setting was applied to test the hypothesis.
Findings
First, this study supports the proposed hypothesis that participants who are provided with visual analytics information will rate audit risk lower than text analytics. Second, participants who receive information on unstructured data types will assess audit risk (audit hours) higher (longer) than those receiving structured data types. In addition, those who receive information from visual analytics results have a higher level of reliance than those receiving text analytics.
Practical implications
This research has implications for external and internal auditors to improve their skills and knowledge of data analytics and big data to make better judgments, especially when the auditor is planning the audit.
Originality/value
Previous studies have examined the effect of data analytics (predictive vs anomaly) and big data (financial vs non-financial) on auditor judgment, whereas this study examined data analytics (visual vs text analytics) and big data (structured and unstructured), which were not tested in previous studies.
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Iman Harymawan, Melinda Cahyaning Ratri and Eka Sari Ayuningtyas
This study aims to investigate the correlation between a CEO's business background and the readability of financial statement footnotes in Indonesia.
Abstract
Purpose
This study aims to investigate the correlation between a CEO's business background and the readability of financial statement footnotes in Indonesia.
Design/methodology/approach
This study utilizes a sample period spanning from 2010 to 2018 and employs various statistical tests, including Propensity Score Matching (PSM), Coarsened Exact Matching (CEM) and the Heckman Model, to demonstrate that it can address issues of causality and endogeneity without introducing bias.
Findings
As a result, the findings of this study indicate a statistically significant negative relationship between CEOs with busy schedules and the readability of financial statement footnotes. This suggests that companies led by busy CEOs are more likely to have financial statement footnotes that are easier to read.
Research limitations/implications
These findings hold significance for clarifying research related to the challenges of contextual analysis in financial statement footnotes, which are distributed by companies on a sentence-by-sentence basis.
Practical implications
The practical implications of the findings pertain to actionable steps that management can undertake and also offer regulators opportunities to monitor the potential for standard setting.
Originality/value
Based on the results presented, the authors are optimistic that the findings will pave the way for broader research on the impact of a busy CEO, encompassing not only financial aspects but also non-financial dimensions. The growing popularity of readability is driven by the proliferation of textual reports that pose challenges in analysis and raise numerous inquiries.
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Iman Harymawan, Fajar Kristanto Gautama Putra, Amalia Rizki and Mohammad Nasih
The study aims to examine the military-connected firms' risk preference, specifically in the innovation intensity level context. The authors argue that firms with…
Abstract
Purpose
The study aims to examine the military-connected firms' risk preference, specifically in the innovation intensity level context. The authors argue that firms with military-experienced top management have conservative and risk-averse behavior, influencing the innovation investment policy.
Design/methodology/approach
The authors use nonfinancial Indonesian-listed firms from 2010 to 2018 amounted to 2,504 firm-year observations.
Findings
The authors document a negative relationship between military connection with both innovation activities and outputs. The additional analysis documents that risk-preferences of military-connected firms will be drastically changed when the industry has a high digital level, which confirms that risk-averse military-experienced management is less dominant with adaptation skill. The authors also identify that veterans did not need a long tenure to influence firms' innovation investment policy. Lastly, the result is robust due to various endogeneity tests employed.
Originality/value
This study further examines military-connected firms' technological innovation compared to prior studies and enriches the related literature.
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Keywords
Iman Harymawan, Nadia Klarita Rahayu, Khairul Anuar Kamarudin, Wan Adibah Wan Ismail and Melinda Cahyaning Ratri
This study aims to explore the relationship between the level of busyness of Chief Executive Officers (CEOs) and investment efficiency in the context of emerging markets.
Abstract
Purpose
This study aims to explore the relationship between the level of busyness of Chief Executive Officers (CEOs) and investment efficiency in the context of emerging markets.
Design/methodology/approach
The sample includes firms listed on the Indonesia Stock Exchange from 2010 to 2018 using ordinary least square estimation.
Findings
The findings suggest that companies led by busy CEOs tend to exhibit lower investment efficiency, thus providing support for the hypothesis that as CEOs’ commitments increase, their ability to concentrate on the company diminishes. Furthermore, our analysis reveals that companies with busy CEOs tend to demonstrate a greater tendency to over-invest, potentially in response to market pressures to showcase strong performance. A more in-depth examination of the data shows that the negative impact of busy CEOs on investment efficiency is especially noticeable in firms lacking risk and management committees (RMC).
Practical implications
These findings have substantial practical implications for the structuring and composition of corporate boards. They highlight the significance of conducting comprehensive assessments to gain insights into the external commitments of incoming CEOs.
Originality/value
This study underscores the importance of establishing RMC.
Details
Keywords
Khairul Anuar Kamarudin, Wan Adibah Wan Ismail, Iman Harymawan and Rohami Shafie
This study examined the effect of different types of politically connected (PCON) Malaysian firms on analysts' forecast accuracy and dispersion.
Abstract
Purpose
This study examined the effect of different types of politically connected (PCON) Malaysian firms on analysts' forecast accuracy and dispersion.
Design/methodology/approach
The study identified different types of PCON firms according to Wong and Hooy's (2018) classification, which divided political connections into government-linked companies (GLCs), boards of directors, business owners and family members of government leaders. The sample covered the period 2007–2016, for which earnings forecast data were obtained from the Institutional Brokers' Estimate System (IBES) database and financial data were extracted from Thomson Reuters Fundamentals. We deleted any market consensus estimates made by less than three analysts and/or firms with less than three years of analyst forecast information to control for the impact of individual analysts' personal attributes.
Findings
The study found that PCON firms were associated with lower analyst forecast accuracy and higher forecast dispersion. The effect was more salient in GLCs than in other PCON firms, either through families, business ties or boards of directors. Further analyses showed that PCON firms—in particular GLCs—were associated with more aggressive reporting of earnings and poorer quality of accruals, hence providing inadequate information for analysts to produce accurate and less dispersed earnings forecasts. The results were robust even after addressing endogeneity issues.
Research limitations/implications
This study found new evidence of the impact of different types of PCON firms in exacerbating information asymmetry, which was not addressed in prior studies.
Practical implications
This study has a significant practical implication for investors that they should be mindful of high information asymmetry in politically connected firms, particularly government-linked companies.
Originality/value
This is the first study to provide evidence of the impact of different types of PCON firms on analysts' earnings forecasts.
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Keywords
Effiezal Aswadi Abdul Wahab, Iman Harymawan, Damara Ardelia Kusuma Wardani and Mohammad Nasih
This study examines the relationship between the characteristics of militarily experienced directors and financial statement footnote readability. The second research question…
Abstract
Purpose
This study examines the relationship between the characteristics of militarily experienced directors and financial statement footnote readability. The second research question considers whether CEO busyness impacts the relationship between military-experienced directors and financial statement footnotes readability.
Design/methodology/approach
We use nonfinancial listed firms on the Indonesian Stock Exchange from 2010 to 2018, which amounted to 1,002 firm-year observations. We test the hypotheses and use fixed effects and Heckman's two-stage regression.
Findings
This study documents a negative relationship between military directors and financial statement footnote readability. We extend this relationship by factoring board busyness into the equation. We find that the presence of military-connected and busy CEOs negatively impacts the readability of financial statement footnotes. The results remain robust after additional analyses.
Research limitations/implications
Future research should consider a more robust measure of military-experienced directors. A broader context of directors' busyness should be considered, such as including multiple directorships.
Originality/value
We revisit the literature on military-experienced directors by considering political connections as one of the proxies for military connections in Indonesia. The findings largely support the convergence of the political connections literature in which rent-seeking activities are prevalent and prevent sound financial reporting.
Details