THE IMPACT OF KEY AUDIT MATTERS DISCLOSURE ON COMMUNICATIVE VALUE OF THE AUDITOR’S REPORT: A SYSTEMATIC LITERATURE REVIEW

This research aims to discuss whether the disclosure of key audit matters (KAM) increases the communicative value of the auditor’s report. It also examines factors that need to be considered related to KAM disclosure. It is carried out in connection with the issuance of the Exposure Draft of Indonesia Audit Standard (AS) 701 on ”Pengomunikasian Hal Audit Utama dalam Laporan Auditor Independen” which was adopted from the International Standard on Auditing 701. In Indonesia, no research was found yet related to this topic. By conducting a systematic literature review of the latest articles from 2012 to 2021, this study found that KAM disclosure increases the communicative value of the auditor’s report, which is useful for report users in their decision-making. This study also informed specific areas that were often disclosed as KAM and provided information related to the factors that can decrease the communicative value of KAM disclosure. The results support the plan of AS 701 implementation in Indonesia because it will increase the communicative value of the auditor’s report. This study will be of interest to auditors in preparing the implementation of AS 701, report users in understanding KAM disclosure, and regulators as initial infor­mation regarding KAM disclosure to support their duties when AS 701 has been effectively implemented in Indonesia.

DO SHARIA AND NON-SHARIA LISTING SECURITIES INVESTORS RESPOND DIFFERENTLY TO TAX AVOIDANCE?

This study empirically tests the behavior of Sharia and non-Sharia securities investors towards corporate tax avoidance. If Sharia securities investors make investment decisions considering Sharia principles, corporate tax avoidance should be viewed as a bad practice which is contradictory to Sharia principles and it is intolerable for this type of investors. Using companies from the financial industry for the period of 2007-2018, the final sample comprises 378 observations for Sharia securities and 167 observations for non-Sharia securities. This secondary data research is conducted by applying moderated regression analysis to test the hypothesis. This study finds that the market responses regarding corporate tax avoidance practices on average are lower (higher) for Sharia (non-Sharia) securities.

THE DIGITAL BANKING PROFITABILITY CHALLENGES: ARE THEY DIFFERENT BETWEEN CONVENTIONAL AND ISLAMIC BANKS?

This study aims to analyze the digital banking industry in uncertain global financial conditions. This analysis used binary logistic regression models, to predict the Indonesia commercial digital banking profitability performances in new normal life based on the analysis of digital banking performances in the second wave of global financial crisis 2017. The probability of bank profitability improvement as dependent variable. The Liquidity Risk, Bank Size, Bank Portfolio Risk, and E-Money transactions as independent variables. Fintech and Bank Type are used as control variables. The analysis period is 2015-2019, based on the time when the rapid progress of digital banking technology was adopted in Indonesia. Data obtained from 57 commercial bank annual reports, statistics of Bank Indonesia and The Financial Services Authority. By the Logit Regression Model, it is concluded that Liquidity Risk, Fintech and Bank Type do not statistically significant, while the Bank’s Portfolio Risk, E-Money transactions and Bank Size statistically significant influencing The Digital Banking Profitability Improvements. From the structural break analysis conducted at the level of the digital banking profitability, there is a difference in the time of "shock" between conventional and Islamic banks. The conventional banks was experienced a structural break over global financial conditions two months before Islamic banks.

THE INFLUENCE OF THE CEO POPULARITY ON PERFORMANCE OF BANKING COMPANIES AT THE EARLIER STAGES OF COVID-19

This study aims to obtain empirical evidence about the influence of CEO popularity on banking performance at the earlier stages of the COVID-19 pandemic in Indonesia. The CEO popularity significantly improve based on their achievements in the public mass media. The study sample consisted of 108 banking companies listed on the Indonesia Stock Exchange in Q1 - Q3 2020. Panel data regression with a common influence model approach was used for analysis, while the company performance was measured using Tobin's Q. The result showed that CEO popularity in the banking sector positively affects company performance. Therefore, hiring popular CEO helps obtain better company performance.

FOREIGN INSTITUTIONAL SHAREHOLDERS AND CORPORATE PAYOUT POLICY

This study examines the effect of foreign institutional shareholders (FIS) on corporate payout policy. The study employs 97 Indonesian manufacturing firms listed on the Indonesia Stock Exchange period 2011-2015. Multivariate Tobit and Logit are employed to estimate the model. The result confirms the bird in the hand theory that FISs need assurance of their investments in the emerging market. FIS has a monitoring role over the firms since they have the ability to detect the firm’s quality and the agency problem within. The result confirms that the presence of the FIS in the firm has a positive and significant effect on both measures of corporate payout policy, dividend to net income and dividend to total asset. The presence of the FIS increases the propensity of the firm to pay a dividend.

ACCOUNTING INFORMATION IN THE FAMA AND FRENCH THREE-FACTORS MODEL

The purpose of this study is to reexamine the ability of the Fama-French Three Risk Factor Model to explain stock portfolio returns in countries with different economic levels, as well as examine the effect of accounting information derived from book-to-market on stock portfolio returns. The sample used was a manufacturing company on the Indonesia Stock Exchange and the Tokyo Stock Exchange from 2013-2018. The results show that the three risk factors of the Fama-French model apply consistently to explain the variation in stock portfolio returns in developed markets. For the portfolio of shares in the emerging market, model Fama-French does not consistently assess stock portfolio returns. This research also provides empirical evidence that accounting information contained in book-to-market risk factors is only retained earnings, which has a contribution to the valuation of stock portfolio returns. The results of this study indicate that investors in developed markets are more rational and knowledgeable than emerging markets.

FEEDBACK’S EFFECT ON BUDGETARY SLACK AND SELF-EFFICACY AS MODERATION VARIABLE

This study aimed to examine the effect of positive and negative feedback on budgetary slack and the interaction between feedback and self-efficacy on budgetary slack under a condition of information asymmetry. Preliminary researches have tested various ways of mitigating budgetary slack practices, which did not separate the effects of positive and negative feedback. This study hypothesized that positive feedback minimizes the potential for budgetary slack under conditions of information asymmetry—and vice versa. Additionally, high self-efficacy reinforces positive feedback in reducing budgetary slack under conditions of information asymmetry—and vice versa. By employing experimental data, this study documented the results that positive feedback significantly minimizes (the potential for budgetary slacking under conditions of information asymmetry—and vice versa. However, there is no difference in the average budget slack on managers with high or low self-efficacy, who get positive feedback.

RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENT AND STOCK MARKET DEVELOPMENT IN A SMALL SOUTHERN AFRICA ECONOMY

This paper investigates the relationship between foreign direct investment and stock market development in a small southern African economy. Specifically, the paper analyses long-run, short-run and causal relationships between foreign direct investment and stock market development in Eswatini for the 1990 to 2018 periods. Results of preliminary analyses of the variable show existence of positive skewness, fat-tailed, non-normal distribution, and I(1) order of integration for the foreign direct investment and stock market return series. Estimates from the ARDL model indicate evidence of a positive and statistically insignificant long-run relationship between foreign direct investment and stock market development in the kingdom of Eswatini. But in the short-run, there exist no relationship between foreign direct investment and stock market development in Eswatini. Estimates from Granger causality test do not show any evidence of causal relationship between foreign direct investment and stock market development in Eswatini. We recommend amongst others that capital market authorities should establish measures to increase the number of listings in the market so as boost investment options. In addition, there should be massive domestic investor-education on benefits of financing projects with a combination capital market funds, which has long-term tenor, and money market funds, which are of short-term nature.

THE OBSTACLE FACTORS OF MUSHARAKAH AND MUDHARABAH APPLICATION IN PAKISTAN

Islamic Banking is based on the Islamic financial system. It is a banking system whose fundamental rules and regulations are established on Shariah laws i.e., Islamic jurisprudence originated from the Quran and Sunnah of the Prophet Muhammad peace be upon him. Its functions must comply with Shariah rules and must not violate any Shariah principle. The Islamic finance system is based on Profit-loss sharing financing namely, Musharakah and Mudharabah but there are numerous issues and challenges faced by Islamic bank during the implementation of Musharakah and Mudharabah financing contracts. The various paper has been revealed some of the internal and external factors in this context, but the study is still unexplored in Pakistan. This paper aims to highlight those obstacles factors that affect the application of Musharakah and Mudharabah financing by Islamic Banks in Pakistan. This paper is based on the critical analysis of the related literature on the concepts of Profit-loss sharing based financing by Islamic Banks. The finding suggests 4 (four) main factors which hinder the application of Musharakah and Mudharabah by Islamic bank in Pakistan namely high risk, lack of awareness, Regulatory constraint and Low rate of return. Finally, this paper concludes by making recommendations that may be adopted by Islamic banks and regulators to facilitate the promotion of Musharakah and Mudharabah Financing.

PREDICTIVE VALUE OF OTHER COMPREHENSIVE INCOME: EVIDENCE FROM ASEAN

This paper examines the predictive value of other comprehensive income and its disclosure in ASEAN. Unlike value relevance, the predictive value of other comprehensive income has not been extensively addressed in the literature. We conduct the first study examining the predictive value of other comprehensive income and its disclosure to prove that not only fair value as relevant information, but also other comprehensive income reflecting the changes of fair value. We use hand-collected data taken from the financial reports. This study employs a panel regression model to test the ability of other comprehensive income and its disclosure to predict firms’ future performance. The results confirm that as relevant information, other comprehensive income and its disclosure have predictive value. In addition, other comprehensive income which interacted with disclosure of other comprehensive income resulted predictive value only for one year ahead. Furthermore, other comprehensive income components which belongs to fair value level 1 and 2 have predictive value because it uses market-based input. Meanwhile, other comprehensive components which belong to fair value level 3 only have predictive value for one year ahead because it uses unobservable input that can ­­lead to higher subjectivity.