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ISSN: 977 2528581002
i
2016 International Conference on Business, Economics, Socio-culture and Tourism
ii
2016 International Conference on Business, Economics, Socio-Culture & Tourism
PREFACE
We are very pleased to present The 1st International Conference on Business, Economics, Socio-Culture and
Tourism in Semarang University, Central java, Indonesia. The 65 abstracts were presented on 24th August
2016 formed the heart of the conference and provided ample opportunity for discussion. This change,
allowing the conference to end with invited talks, was a departure from the format used of ICBEST
gatherings in which the conferences ended with announcement of Best Paper. The abstracts were split almost
equally between the four main conference areas, i.e., business, economics, socio-culture and tourism.
The 1st ICBEST presents 2 keynote speakers from National Kaohsiung University of Applied Sciences -
Taiwan (Prof. Jen-der Day, Ph.D) and Mahidol University International College - Thailand (Dr.Nipawan
Thirawat), and many presenters from 5 countries (Indonesia, Malaysia, India, Pakistan and Australia). This
international conference on Business, Economics, Socio-Culture and Tourism is as a medium for academic,
scholar and practitioners on exchange information, research idea and as a discussion forum to open network
on matters that need to be anticipated by the policy maker who caused the global powers.
All in all, the 1st ICBEST in Semarang, Central Java, Indonesia was very successful. The keynote speakers
and the progress and special reports bridged the gap between the different fields of many subjects, making it
possible for non-experts in a given area to gain insight into new areas. Also, included among the speakers
were several young scientists, namely, postdocs and students, who brought new perspectives to their fields.
Hopefully we able to continuing success of this conference series means that planning can now proceed with
confidence for the next event.
Semarang, 24 August 2016
iii
TABLE OF CONTENT
Preface ......................................................................................................................................................... iii

Table of Content ........................................................................................................................................... iv
Stepwise Strategies for Taiwan's Semiconductor Industry as Core Technology ............................................. 1
Organizational Significance and Impact of Employee Value Proposition ....................................................... 9
Willingness to Pay as an Indication of Public Sharing in The Efforts of Improving Clean Water Service
in Bekasi Regency........................................................................................................................................ 17
Modelling of Timely Submission of Financial Statements in Manufacturing Companies Listed in
Indonesia Stock Exchange ............................................................................................................................ 27
Banking Competition and Capital Ratios: Evidence From The Indonesian Banking Industry ........................ 35
Musharaka: Perceptions & Importancce ....................................................................................................... 45
Social Capital and Innovation Capabilities: Strategic Resource to Improve Entrepreneurial and
Performance of SMEs Creative Industry ...................................................................................................... 55
Entrepreneurial Orientation, Access to Finance and Business Performance: A Preliminary Study............... 65
Underwater Cultural Heritage in Karimunjawa Islands ................................................................................. 75
The Impact of Service Quality on Customer Loyalty Toward Customer Satisfaction as Intervening
Variable (Case Study on Alam Indah Restaurant Semarang) ........................................................................ 83
Analysis Macroeconomic on Islamicity Performance Index Through Third Fund Third Parties The
Islamic Cooperation ..................................................................................................................................... 93
Budgetary Goals Characteristics and Managerial Performance ................................................................... 107
Questioning The Readiness of Manado as a Tourism Destination; Poor Service of Waitresses in The
Local Restaurants ....................................................................................................................................... 113
The Effect of Market, Innovativeness and Crativity Marketing Strategic on Marketing Performance: A
Research From Welahan Jepara Rattans SME ............................................................................................ 123
The Model of Relationship Quality Student Loyalty ................................................................................... 131
Masjid Raya At-Taqwa Cirebon as an Alternative Tourism Religi.............................................................. 143
Fraternal Culture in Build Harmony Selling Price Determination: Perspective of Kejawen Panunggalan
Community ................................................................................................................................................ 155
The Role of Coaching Organization Forum Peduli Remaja Jambi (FPRJ) Applicative Value of Planting
Means The Religion of Islamic with Mentoring.......................................................................................... 167
Readiness of Traditional Fishermen in Kali Adem, Muara Angke Jakarta in Using Smart Fishermen
Information System .................................................................................................................................... 175
Company‘s Measurement and Management Substitution as an Indication of the Change in
PublicAccountingFirms at Manufacturing Companies Listed in Indonesia Stock Exchange........................ 187
Repeat Purchase Intention in Freight Service Company in Semarang ........................................................ 193
Japanese Honorifics Speech within Tourism Vocabulary Used by GRO Staff at HIS Information Centre
in Ubud ...................................................................................................................................................... 203
Capital Structure, Working Capital, Firm Performance and Firm Value: An Empirical Study in
Manufacturing Industry on Indonesia Stock Exchange .............................................................................. 211
Earnings Response Coefficient (ERC): Market Reaction to Earnings Announcement ................................. 219
Capital Expenditure Budget Allocation (Provincial Government of Indonesia) .......................................... 237
Triple Helix Models for Agro-Tourism Development in West Sumatra ..................................................... 249
iv
Analysis of Knowledge of Entrepreneurship, Self Efficacy, and Attitude to Intention Entrepreneurship

Entrepreneurial Women (Case Study of Koperasi Setia Bhakti Wanita Surabaya) ...................................... 257
Orientation Marketing Partnership Increase in Operating Performance of The Company: A Theoretical
Development (Development Model At Company Multifinance in Indonesia)............................................ 269
Implementation Program of Corporate Social Responsibility at Batik SMEs in Kampung Batik
Semarang .................................................................................................................................................. 289
Capital Intencity Ratio (CIR), Firm Size (SIZE), Earning Per Share (EPS), Debt to Equity Ratio (DER),
and Dividend Payout Ratio (DPR) to Financial Performance (ROA) With Earnings Management as
Variable Moderating. (Study on Manufacturing Company Food And Beverage Sector That Go Public In
Indonesia Period 2010-2014) ..................................................................................................................... 297
Factors – Alignment of Factors Affecting The Provision of Income Smoothing Assets: (Practice
Management Income on Islamic Banking in Indonesia in 2011-2015) ...................................................... 305
The Analysis of Business Performance of SMEs ....................................................................................... 315
The Impact Factors of Default Risk ........................................................................................................... 329
Job Characteristics and Perceived Organizational Support as Driving Employee Engagement (A Study
on Employee PT. Semen Indonesia) ......................................................................................................... 339
Socio-Economic Impact of Islamic Microfinance: An Overview of Malaysian Experiences ....................... 347
Effect of Non Financial Factors on The Financial Performance ofFarmer Cooperatives in Bali ................ 355
Employee‘s Green Work life Balance (Case Study on Employee of Bank A and Bank B in the city of
Semarang) ................................................................................................................................................. 365
Biopsychosocial as an Investment Decision Insurance Determinants (The case studies in the districts of
Semarang Tembalang) ............................................................................................................................... 371
Decision of Saving and The Factors of Being Determination (Studies on banks in Semarang) ................... 383
Identification the Factors That Cause The Lack of Absorbtion of Regional Budget (APBD) in Semarang
City in 2014 ............................................................................................................................................... 391
Creating Collective Intelligence Through Corporate Social Responsibility for Sustainable Performance .... 403
Analysis Financial Performance Bank Before and After Merger and Acquisition (Studies in Banking
Companies Listed on the Stock Exchange Period 2009-2014 ) .................................................................. 411
Strengthening Agricultural Based SMEs Through Microfinancing ............................................................. 419
Brand Replacement: Factors Affecting Customers' Purchase Intention....................................................... 425
Factors Affecting the Possibility of Fraudulence in Financial Statement: Empirical Study on Non-
Financial Companies Listed on the Stock Exchange Year 2010-2013 ........................................................ 447
Theoretical Framework of Retail Service Quality Benchmarking Using Competitive Zone of Tolerance
Base IPA (Case Study Carrefour and Hypermart in Semarang) .................................................................. 459
The Effect of Profitability, Leverage and Company Size to Income Smoothing Practice ............................ 465
Analysis of Communication between Traders and Moneylenders in the Study Coordinated Management
of Meaning ................................................................................................................................................ 477
Community Participation in Developing Destination Branding: TowardSustainability of Green Urban
Kampung ................................................................................................................................................... 485
An Effectiveness of Credit Financing Model and A Potential of Regional Economic for Micro and
Small Business Entreprises in South Sumatera-Indonesia .......................................................................... 493
Demographic changes and Structural Transformation of the inter-Regional Workforce in Central Java ..... 501
The Effect of Leadership, Motivation and Working Environment on Employees'Performance in
Department of Regional Finance and Asset Management Semarang .......................................................... 511
The Effect of Job Satisfaction, Job Stress, Organizational Commitment, and Turnover Intention on PYP
Company in Ungaran, Semarang Regency ................................................................................................. 519
v
Population Growth, Education and Labor Market in Central Java .............................................................. 527
Effect on Internal Control Systems Non Performing on Financing Akad Mudharabah Microfinance
Institutions of Islamic in Semarang City: An Agency Theory Approach ..................................................... 535
Implementation of EFI Based Entepreneurhsip In Mataram ........................................................................ 545
Environmental Uncertainty, Organizational Structure and Internal Control in Quality of Management
Accounting Information Systems ............................................................................................................... 551
vi
STEPWISE STRATEGIES FOR TAIWAN'S SEMICONDUCTOR INDUSTRY

AS CORE TECHNOLOGY
Jen-Der Day1& Muhammad Farid2

1
Dept. of Industrial Engineering and Management,National Kaohsiung University of Applied
Sciences,Taiwan
2
College of Engineering, Universitas Negeri Makassar, Indonesia
(jdd@kuas.edu.tw, adhefarid@gmail.com)
ABSTRACT
Even thoughTaiwan is small, she has become the industry‘s leading in the field of semiconductor. The result
can be seen, Taiwan occupies a position in the semiconductor industrydevelopment. The semiconductor
manufacturing equipment export markets is number one in the world in 2016 and contributed the Taiwan
export amount to 41.4% in 2015. To determine a core technology requires a decision-making process
considering existing resources potential and competent to other countries that have been and will develop
theircore technologies. To find out how Taiwan government prepares their process, this article discusses the
stepwise strategies adopted by Taiwan‘s government to define the core technology and prepare the policies
to support that realization. A variety of data, including government policies, industrial technology research
institute programs, research universities, industry and economic news, and relevant literature are surveyed.
Four stepwise strategies are developed as follows. Firstly, fast-follower approach makes a critical decision
determining semiconductor industry. Secondly, establish industrial technology research institute (ITRI).
Thirdly, initiate development Hsinchusciences park (HSP), and finally linkage between universities and
industry to integrate academic-industrial resources. The study suggests that stepwise strategies to develop
and maintain core technology in competitive semiconductor technology challenge to create innovation step
by step.
Keywords: Semiconductor Industry, Core Technology, Stepwise Strategies, ITRI.
1. INTRODUCTION
Competitiveness of a nationrelies upon the ability of its industry to innovate and improvement, to compete
and survive in an era of global competition. Companies gain advantage against the world‘s best competitors
because of pressure and challenge. Demands and dispute make firms expand enhancement against the
world‘s best(Porter, 1990). According to the World Economic Forum (2015), there are 12 pillars that affect
the global competitive index, among others: Institutions, infrastructure, macroeconomic environment, higher
education and training, technological readiness, , financial market development, business sophistication,good
market efficiency, market size, labor market efficiency, and innovation.
A technological factor affecting the country becomes an important point in increasing competition index. In
addition, the ability of a country to determine the core technology and also take a strategic step in
determining policies and deciding that technology will have an impact on the competitiveness of nations.
Having regard to the ability of internal resources and external conditions with attention to technology that has
been and will be developed other nations. This will give an estimate in terms of policy making the right
technology in a country. Superior technology and core technology will provide an overview of each country
in a position to determine the direction that technology will take.
Taiwan as small island country has the potential of such natural resources and human resources. The ability
to determine the excellent and core technology is ushering Taiwan became one of the world's largest
semiconductor exporter. There are three questions, 1) How do Taiwan‘s strategic steps in determine its
superior technology and core technology?, 2) How can Taiwan survive with an increasingly competitive
environment?, and the last 3) How to face the challenges in the future.
2. IDENTIFYNG CORE TECHNOLOGY
To identify the core technology to be applied in a country needs to consider aspects such as the condition of
the existing resources in the country. Furthermore, considering the market conditions, competition, and
opportunities in a country. Several countries in the world to quickly be able to determine appropriate the
1
technologies in accordance with their capabilities. For example Japan define as core automotive and
electronics technology, and South Korea select electronics as a base technology.
Some potential industry from Taiwan those have been developed and have become export commodities
include electronics, flat panels, energy, agriculture, machinery, petrochemicals, metals, textiles, plastics, and
chemicals. Based on the results of studies conducted by the Taiwanese government in 1970 to make critical
decisions by adopting a fast-follower approach (Wang & Chiu, 2014). In 1973, the government established
Industrial Technology Research Institute (ITRI) has been committed to serving industries stay sustainable
and competitive.
SEMICONDUCTOR INDUSTRY DEVELOPMENT
According to Greve (2012) ―Semiconductors are materials that have an electrical conductivity intermediate
between the electrical conductivity of good conductor (such as aluminum and copper) and good insulators
(some glasses and plastics). Semiconductor technology refers to sequence of process steps used to fabricate
semiconductor devices‖ (p. 2).
By the end of 2014 (Table 1), Taiwan semiconductor industry involved of 16 fabrication companies, 245 IC
fabless design houses, 7 substrate suppliers, 37 packaging and testing houses, 11 wafer suppliers, 14 lead
frames company and 3 mask makers.
Table 1: Taiwan Semiconductor Industry
No Company Amount
1 Fabrication 16
2 IC fabless design houses 245
3 Substrate suppliers 7
4 Packaging and testing houses 37
5 Wafer suppliers 11
6 Lead frames 14
7 Mask makers 3
Total 333
Source: Taiwan Semiconductor Industry Association (TSIA) 2015
Based on data from Workman (2016) explained the order of commodity exports by Taiwan can be seen in the
figure 1 below.Other chemical goods: $3.6 billion (1.3%), iron or steel products: $7.2 billion (2.6%), iron and
steel: $8 billion (2.8%), organic chemicals: $8.6 billion (3.1%), vehicles: $10.2 billion (3.6%), oil: $11.6
2
Taiwan Export
Other
chemical
Others
goods
Iron or steel
18%
products 1%
3% Iron and Electronic
steel equipment
Organic
41%
chemicals 3%
3% Vehicles
4%
Oil
Medical, 4% Machines,
technical engines,
equipment Plastics pumps
6% 7% 10%
Figure 1. Taiwan Export

Source: Worksman (2016)
billion (4.1%), medical, technical equipment: $17.8 billion (6.4%),Plastics: $18.5 billion (6.6%), machines,
engines, pumps: $29 billion (10.4%), and electronic equipment: US$116 billion (41.4% of total exports).
According to International Trade Administration (ITA) (2015) positioning Taiwan rank the seventh in a top
semiconductor export market to 2016 and the first rank in top semiconductor manufacturing equipment
export markets can be seen in Table 2.
Table 2: Top Semiconductor and Manufacturing Equipment Export Market to 2016
Semiconductor Export Semiconductor Manufacturing
Rank
Markets Equipment Export Markets
China 1 Taiwan
Japan 2 South Korea
Germany 3 China
South Korea 4 Japan
Singapore 5 Singapore
Mexico 6 Germany
Taiwan 7 Netherlands
Malaysia 8 Ireland
Brazil 9 Israel
Thailand 10 Malaysia
Source: ITA (2015)
4. STEPWISE STRATEGIES
In developing the semiconductor industry as a core technology, Taiwan government through the four steps
strategic shown in Figure 2 namely, 1) fast-follower approach to making a critical decision determining
semiconductor industry 2) in 1973 establish industrial technology research institute (ITRI), 3) in 1980
establish Hsinchu Science Park (HSP), and 4) develop semiconductor research with collaboration universities
and industries.
3
Lingkage Between Industries

and Universities
1980
Established
Hsinchu Science Park (HSP)
1980
Established
Industrial Technology
Research INstitute (ITRI)
1973
Fast-follower Approach
1970s
Figure 2. Stepwise Strategies of Taiwan to develop Semiconductor Technology
4.1. Fast-Follower Approach

According Wunker (2012) firms or countries searching for approaches to support development by catching
new markets, there is a squeezing need to ponder in case it‘s sensible to be alate follower, fast follower
orearly mover.Every of these alternatives requirea different competitive strategy. A more astute methodology
is to watch how early mover preferred standpoint may bond initiative in specific markets, after consider what
methodologies and industry environmentsaccept fast followers or late followers in different settings to
triumph.
Firstly early mover approach,if the suitability of an early mover position is controlled by the components, an
organization meeting these criteria ought to drain its points of interest for all they are worth. Secondly fast-
follower approach, followers require the control to keep and after that to move rapidly before an industry's
aggressive request gets to be an unavoidable. In any case, there is a basic admonition: Many organizations
think that its difficult to be a fast follower; when they get the chance to showcase fundamentally, they will be
past the point of no return. Due to variables, for example, decision-making timeframes, product-
improvementsequences and the distance of the sales procedure, an organization's consequent passage into a
rapidly moving business sector might be so deferred as to be superfluous (Wunker, 2012).
Taiwan government has acted a critical role in the development of Taiwan Semiconductor Industry (TSI). In
the 1970s, as a result of little size of nationalcompanies and their falling behind externalcompanies in
technology and innovation, the government created a strategically basic choice to begin TSI by adopting fast-
follower approach. It implies the government would endeavor to secure technological abilities from foreign
sources and give essential assets to begin domestic pioneer research (Wang & Chiu, 2014).
With a suitable fast follower approach to begin the industry, trailed by the fruitful improvement of a positive
industrial nature and creative plans of action, and reinforced by a hard-working and knowledgeable
workforce fit for reacting to change with prodigious organizational and operational adaptability, Taiwan
semiconductor industry has prospered to end up a top player in the worldwide semiconductor market. This
achievement has additionally added to the accomplishment of other innovative commercial ventures in the
country (Wang & Chiu, 2014).
4.2. Industrial Technology Research Institute (ITRI)

So as to empower the national industrial segment to put resources into research and development deeds, the
real type of government specialized help to industry is to contract non-profit research organizations to
perform non specific innovative improvement and after that to exchange their research outcomes to the
national industrial segment (Hsu & Chiang, 2000).
4
The government established ITRI has been dedicated to helping industries stay competitive and sustainable.
Since 1973, this institution is a nonprofit R&D organization aiming to innovate a improve future, engaging in
applied research and technical services. ITRI has played a vital role in Taiwan's economic growth as it shifted
from a labor-intensive industry to a value-added, innovation-driven one.
As a national research institute, ITRI attempts connected research with the mission of quickening industrial
technology improvement in Taiwan to advance industrial development and social prosperity. Generally, ITRI
publishes research results to the industrial segment in time with the end goal of keeping up the intensity of
national industries in the worldwide business sector. Mainly, It gives facilities and assignments the
technology improvement to small and medium entrepreneurial firms (Hung & Chu, 2006).
Moving forward, the organization will keep serving as a pioneer for industries by establishment its abilities of
multidisciplinary advancement and collaboration with global accomplices everywhere throughout the world.
Services delivered of ITRI to the industry in Taiwan, including: industrial consultancy services, new ventures,
education, and training service, testing and certification, open lab/incubator, technology transfer, and R&D
collaboration (ITRI, 2016).
4.3. Hsinchu Science Park (HSP)

Developed in December 1980, the Hsinchu Science Park (HSP) with a specific end goal to pull hi-tech
entrepreneurs and encourage their progressive in Taiwan. It is entirely government oriented, for instance, by
competently supported one stop service;the improvement of accessible area with infrastructure facilities;
national and global network; automated customs service and on-job coaching. Through its proceeded with
endeavors, the pursuing industries have been effectively created: Integrated Circuits (IC), Computers and
Peripherals (C&P), Telecommunications (Telecom), Biotechnology (Biotech), and Precision Machinery
(PM). Its performance additionally exhibits its honor in appropriate as benchmarking model of first hi-tech
industry improvement in Taiwan furthermore its exceptionally good reputation in the world (Lee & Yang,
2000).
HSP give effect to accelerate the development process of semiconductor industry. If we look at Figure 2
shows the increase in the number of firms from year to year increased significantly. Firms that join at the
beginning totaling 17units, along with the growth and increasing activities in the field of electronics by 2015
company in HSP amounted to 478 units.
Firms in HSP
600
500
400
Unit
300
200
Firms (Unit)
100
0
1981
1985
1989
1993
1997
2001
2005
2009
2010
2011
2012
2013
2014
2015
Year
Figure 3. Firms in HSP

Source: http://www.sipa.gov.tw/english
Further aspects of the total sales in HSP, based on the figure 3 below shows the fluctuations in sales at the
beginning of the establishment precisely in 1985 still amounted to US$ 3.27(hundred million).The next year
to increase rapidly through 2007 reached US$ 357.79(hundred million).When the economic crisis in 2008,
sales decreased until 2009. Then rose again in 2010 and then fluctuated until 2015 to reach US$ 343.70
(hundred million).
Lee and Yang (2000) identified contribution achieved and main impact and by HSP are that it: 1) effectively
introduces the related hi-tech human resources for economic and technology improvement, also successfully
founded the initial science park model in Taiwan, 2) through the cross licensing and strategic alliance
5
cooperative operations could encouraged R&D innovative investment, 3) upgraded the national core
competence, 4) encouraged the hi-tech quality of life society for public progress development, 5) for the next
local hi-tech industry expansiondesign by provided a worthy real references model, 6) best fit adaptation by
demonstrated permanent dynamic flexibility.
Combined Sales in HSP

400
300
200
100 US$ 100 Million
0
Figure 4: Combined Sales in HSP

Source: http://www.sipa.gov.tw/english (2016)
4.4. Linkage Between Universities and Industry Resources

In addition to supported by the research institute that has been founded at the beginning, also sustained of
research on product development and innovation prospect. These two institutions that encourage Taiwan
could persevere through the competition in the semiconductor technology. System for technology diffusion
between industry and universities to combine academic assets and successfully direct R&D outcomes, a
strategy of Taiwan government (MOEA) launched three disseminations into practice, one of them are
Technology Transfer Centers (TTCs) and universities (Mathews & Hu, 2007).Industrial Technology
Research Institute, National ChiaoTung University (NCTU),and National TsingHuaUniversity (NTHU), there
are research and educational institutes nearby region of the HSP (Lee & Yang, 2000).
Table 3: Piloting Cooperation Project Between Industries and Academia

at Science Parks, statistics, 2010-2014
Amount
Cases R&D Personnel from High-tech industrial
Year (US$ participating companies Manpower training
(Units)
1 Million) (Persons) (Persons)
2010 33 4.431 538 197
2011 23 2.634 313 123
2012 21 2.546 265 106
2013 20 2.390 260 96
2014 18 2.186 245 79
Total 115 14.188 1,621 601
Source: HSP Annual Report (2014)
Based on HSP annual report (2014) description piloting cooperation project between industries and academia
at science parks. During 2010-2014 total cases 115 units or average 23 units per year. The grants research
project total US$ 14.188 Million or average US$ 2.837 Million per years. R&D personnel from participating
companies amount 1,621 personnel or average 324 personnel per year. Furthermore, high-tech industrial
manpower training amount 601 people or average 120 people per year shown in Table 3.
6
5. FUTURE TECHNOLOGICAL CHALLENGES
With experiences that have been there, Taiwan can contribute to the development and advancement of the
global semiconductor industry technology to affect the development of the nation. On the other hand,
whether there has been this experience will lead Taiwan to be able to survive in global competition and able
to respond to the dynamic changes in the semiconductor industry.
ITRI role in conducting research and development is crucial challenges of technological change. At the
beginning of its founded to focus on the semiconductor industry, along with the development then expanding
the study in several fields of research. Publication ITRI spring Issue (2016) featuring some of the latest
research results, among others: New development Internet of things (IoT), panel display industries, self-
driving cars and drones, green industry application, LED Technology creates new value for agriculture, water
technology, next -generation technology for desalination.
6. CONCLUSION
During five decades, Taiwan has able to survive and develop semiconductor technologies and industry. It is
caused by government policy in determining the strategic steps and encourages innovation in following
market needs. Four stepwise were carried out starting fast-follower approach to making a critical decision
determining semiconductor industry, in 1973 establish industrial technology research institute (ITRI), in 1980
establish Hsinchu Science Park (HSP), and develop semiconductor research with collaboration universities
and industries.
Challenges ahead, if Taiwan was able to survive with the competition getting tougher with countries that
earlier develop industry or the emergence of new countries that try to develop this technology. In order to
survive in the competitive semiconductor industry, Taiwan continues to innovate in the field of
semiconductor technology.
In addition, developing other technologies to be an alternative to sustain the core technologies that have been
run. Industry developed, among others: optoelectronics, computer and peripherals, telecommunication,
precision machinery, and biotechnology. This will provide support in Taiwan's technology and industry in the
future.
7. REFERENCES
Dahlman, C.(2007). Technology, globalization, and international competitiveness: Challenges for developing countries.
In: United Nations Department of Economic and Social Affairs (ed): Industrial Development in the 21st Century:
Sustainable Development Perspectives. New York: United Nations: 29-83,
http://www.un.org/esa/sustdev/publications/industrial_development/full_report.pdf (27.08.2012).
Lee, W-H. & Yang, W-T.(2000).The cradle of Taiwan high technology industry development-Hsinchu Science Park
(HSP), Technovation, 20, 55-59.
Grave, D.W.(2012).Semiconductor devices and technology,
file:///F:/Paper%20Prof.%20Jen%20Der%20Day/gREVE%20(2012)%20SEMICONDUCTOR%20DEVICES%20A
ND%20TECHNOLOGY.pdf
Hsinchu Science Park (2014).Annual Report. http://pavo.sipa.gov.tw/sipaCa/AReport/103/en/index.html#
Hsu, C-W. & Chiang, H-C.(2001).The government strategy for the upgrading of industrial technology in Taiwan,
Technovation, 21, 123-132.
Hung, S-C.& Chu, Y-Y.(2001). Simulating new industries from emerging technologies: challenges for the public sector,
Technovation, 26, 104-110.
ITRI (2015). Innovating a better, ITRI Brochure,
https://www.itri.org.tw/eng/Content/Publications/book_abstract.aspx?&SiteID=1&MmmID=617731525164776565
&CatID=617756023740326001
ITRI (2016).How ITRI's LED technology creates value for agriculture, ITRI Today, 84 Spring Issue.
Mathews, J.A.& Hu, M.C.(2007). Enhancing the role of universities in building national innovative capacity in Asia: the
case of Taiwan, World Development, 35 (6),1005–1020.
Porter, M. E. (1990).The competitive advantage of nations, Harvard Businees Review¸ March-April.
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TSIA (2015).Overview on Taiwan Semiconductor Industry, http://www.tsia.org.tw/Uploads/2015%20Overview-Final.pdf

TSIA (2016). http://www.tsia.org.tw/en/index.php
Wang, C-T & Chiu, C-S.(2014). Competitive strategies for Taiwan's semiconductor industry in a new world economy,
Technology in Society, 36, 60-73.
World Economic Forum (2015).The Global Competitiveness Report2015-2016, http://www3.weforum.org/docs/gcr/2015-
2016/Global_Competitiveness_Report_2015-2016.pdf
Workman, D.(2016). Taiwan's Top 10 Export, World's Top Export http://www.worldstopexports.com/taiwans-top-
exports/
Wunker, S.(2012).Better growth decisions: early mover, fast follower or late follower?,Strategy & Leadership, 40 (2), 43-
48
8
ORGANIZATIONAL SIGNIFICANCE AND

IMPACT OF EMPLOYEE VALUE PROPOSITION
Avinash Pawar
University of Pune, Rajiv Gandhi Business School
(Corresponding Email: avinash.research@outlook.com)
ABSTRACT
Employee Value Proposition (EVP) is the balance of the rewards and benefits that are received by employees
in return for their performance at the workplace. Organizations generally develop an EVP to provide a
consistent platform for employer brand communication and experience management. In this study,
researcher has discussed about many aspects related to the significance and impact that employee value
Proposition creates on the organizations. The study starts with discussing factors that comprise Employee
Value Proposition and the way these factors weigh against one another. An endeavor has been created to
determine however these factors modification happens with strategical changes. These expressed factors will
then be compared with the Employee Value Proposition factors of assorted different firms to envision
however the factors expressed are enforced. This study any discusses however alongside keeping the strategy
of the corporate seeable and benchmark exercises and surveys for Employee Value Proposition for a
company will be sculptured.
Keywords: Employee Value Proposition (EVP), Career Development, Compensation, Offerings and Benefits
1. INTRODUCTION
Employee's value proposition has begun picking up good faith until since the ideas of talent management,
employee retention, wearing down and employer branding and so on has picked up prominence. Caught
between these two assumptions lies the actual effectiveness of the concept, which has helped a lot of
organizations in giving their employees what they actually expect, in increasing engagement, in bettering
efficiency and in slashing turnover rates. Discussed below are the underlying factors and research which has
gone into the nativity of the concept of an Employee Value Proposition. The HR professionals many a times
looks at it, if at all, as a document which they need to create because competition around them is creating one
whereas the line managers consider it an ineffective piece of paper which adds to their budget and has no
consequential use in helping them increase the top line. For a long time now Employee Value Proposition has
been a rather defied topic in the field of Human Resource Management. Different articles as under have
acknowledged the helpfulness of employee's value proposition as a vital employment branding apparatus. In
the article" connecting the Employee's Value Proposition and business results: preparatory discoveries from a
linkage research pilot study (Heger Brian K., 2007) uncovers that Employee's value proposition has been
recommended to be a determinant of employee engagement and retention, both of which affect basic business
results. An article distributed "the war of talent" in the McKinsey Quarterly, recommended that organizations
with prevalent Employee's Value Proposition helps customizing an organization's "brand" and "products" the
occupations it brings to the table to speak to the particular people it needs to discover and keep.
1.1 Why do companies have an EVP?

Most companies have an employee value proposition to:
1) Attract, motivate, and retain the right talent
2) Provide line-of-sight to the company‘s culture.
It also helps provide line-of-sight between the firm brand, leadership brand, and employee brand. To be
effective, the EVP needs to be more than a mere corporate tag line or words on a piece of laminated paper.
The EVP needs to be made real to employees and also has to provide clear principals/guidelines that are
globally shared but adaptable to different geographies, talent segments, and industries. It‘s a theory, no it‘s a
training, or wait, is it just a fancy document? These are the most frequent comments which pop up in the
mind of a ‗layman‘ when the term EVP or Employee Value Proposition is discussed. The problem gets more
serious when HR professionals not deft with the concept may agree to its importance but put it on a
backburner or even worse, create something not up to the mark. Truly, a half-baked EVP can be much worse
than none at all as it not only damages the ‗Values‘ which the current employees perceivably derive from the
9
organization, but also scares away new talent. The concept is very new to the HR industry and it is only in the
period over last few years that organizations have acknowledged the importance and the impact that an EVP
can have on all facets of HR be it employee recruitment, selection, engagement or retention.
2. THEORETICAL FRAMEWORK
For the uninitiated, it is an answer to the employee‘s questions: ―What‘s in it for me?‖ and ―What more can
you offer?‖Formally, Minchington (2005) defines an Employee Value Proposition (EVP) as a set of
associations and offerings provided by an organization in return for the skills, capabilities and experiences an
employee brings to the organization. It is an employee-centered approach that is aligned to existing,
integrated workforce planning strategies as it has been informed by existing employees and the external
target audience.
Tandehill (2006) reinforces it as a statement of why the total work experience at an organization is superior to
that at other organizations. The value proposition should identify the unique people policies, processes and
programs that demonstrate the organization‘s commitment to i.e., employee growth, management
development, ongoing employee recognition, community service, etc. It should list out the central reasons
that people will choose to commit themselves to an organization.
EVP, of late has become closely related to the concept of employer branding, and the term EVP is being used
to define the underlying ‗offer‘ on which an organization‘s employer brand marketing and management
activities are based. In this context, the EVP is also often referred to as the Employer Brand Proposition.
2.1 Pillars of Employee Value Proposition

Gone are the days when the employer defined the workplace. According to a NASSCOM-McKinsey report,
only 25 per cent of fresh engineers; and a mere 10% of fresh graduates are actually employable, giving the
employable talent pool (old and fresh), an uncanny leverage over employers. They want a better
understanding of their employment options and a greater say in how work is assigned, assessed and
rewarded; rather, employees‘ priorities and preferences dictate what the workplace should look like,
particularly now that technology makes it easier than ever to design a variety of flexible arrangements.
Companies operating with both young and aging workforces have to craft methods to engage and re-engage
the talent and those that fail to respond to this change and do not succeed in defining their employee value
proposition will fail to attract, retain or develop talent effectively.
As an EVP affects both internal and external perceptions of a company, human resource professionals should
act as a facilitator among the various verticals and should ensure collaboration to ensure the employee and
customer experiences are integrated and aligned. According to Tandehill Human Capital Consulting, some
questions which should be answered during the collaboration include:
1) How unique are our non-traditional rewards? For example, Nucor offers $2,000-per-year college
scholarships to each child of an employee who has more than 2 years of service. The Levi Strauss
Foundation donates $500 to community organizations in which an employee actively participates for
a year. McDonald‘s give 3 months sabbatical after 10 years of service.
2) How are we better at our management? For example, Boeing has a ―no messenger‖ policy. Team
members must solve problems on the spot and are discouraged from finding a manager to solve it.
Whole Foods runs its grocery, baking and produce departments with self-managed teams. Self-
directed work teams at Baylor Medical Centre set their own schedules and do their own interviewing
and hiring.
3) What makes our culture special? For example, Starbucks creates an inclusive culture by providing
part-time employees with full benefits and stock options. First Federal Bank of California has an
informal culture reinforced by a policy that requires employees to address each other on a first-name
basis. And among the many ways Ben & Jerry‘s differentiate itself as it donates 1 percent of profits
to programs that support peace.
After defining all of the above, then the company discusses the role compensation plays in the employment
value proposition. The pay should exist to provide employees with a fair return on the investment they make
of time, skills and energy, but ideally, it should not be the fundamental reason they come to work. According
to Jeffrey Pfeffer, professor of organizational behavior at Stanford Business School in the May 1998 edition
of Harvard. Business Review, ―People work for money, but they work even more for getting meaning out of
their lives. In fact, they work to have fun. Companies that ignore this fact are essentially bribing their
10
employees and will pay the price in lack of loyalty and commitment.‖ According to a survey done by Mercer,
the top drivers for employee engagement are as shown in the figure on the left. It is evident that employees
consider Career Development, Confidence in senior management and Recognition as the three most
important factors for being engaged with their work.
3. ATTRIBUTES OF EVP
Sibson Consulting has created a ―Reward of Work‖ (ROW) model which talks about reward elements and the
process of creating a ‗formalized‘ clear framework for building a total rewards strategy which translates into
a proposition of value for the employees. Under this approach, rewards, both financial and non-financial are
prioritized according to the needs and preferences of key talent segments in an organization. This EVP
framework has five elements:
Compensation: The money employees receive for their work and performance
Benefits: Indirect compensation including health, retirement, and time off
Work content: The satisfaction employees receive from their work
Career: The long-term opportunities employees have for development and advancement
Affiliation: The feeling of belongingness employees have towards the organizations
Figure 1: Attributes of Employee Value Proposition

(Source: http://www.sibson.com)
11
4. RESULTS AND TRENDS
4.1 Employee Engagement Trends
Others 3%
Employer of choice/Brand recognition… 9%
Performance feedback.Training… 15%
Work/Life balance 17%
Rewards equity 18%
Organization communication 18%
Benefits/teamwork 21%
Meaningful work and sense of… 23%
Recognition 33%
Leadership/Build confidence in senior… 49%
Career Development 52%
0% 10% 20% 30% 40% 50% 60%
Figure 2: Employee Engagement Trends in Asia

Source: Employee Engagement Trends in Asia – Survey (May, 2010)
Organizations need to consider this as a skeleton framework and understand and design their own value
proposition, the preferences of their staff, and the causes of any gaps between employee and/or organization
aspirations and the actual EVP.
Sibson then went on to study the importance which different age groups within an organization attach to the
five elements. The data from Sibson Consulting ―Rewards of Work‖ study, based on 1,059 respondents,
reveal the elements that employers can use to drive employee performance over the course of their careers.
The research shows that:
1) Benefits are of average importance for employees of all ages. Employees aged 30 and younger rated
benefits fourth for driving performance. Benefits tied for fourth place among workers ages 31 to 50;
tied for third for those ages 51 to 60; and ranked third among those aged 61 and older. Surprisingly,
the youngest respondent group was the most likely age group (62%) to rate benefits as important or
very important. This finding does not indicate that benefits are less important to older employees
than to younger employees, but it does indicate that benefits tend to become less effective
motivators as people age.
2) Work content is the top motivator for every age group. Respondents of every age chose this element
as the primary driver of good performance. It was the only element to maintain the same relative
importance in each age group.
3) Career elements, such as title, status and opportunities for growth, decline in value among older
employees. Career elements were rated second most important by employees age 30 and younger.
They slipped to a third place for workers ages 31 to 50 and finally dropped to last place for
respondents age 51 and older. While 81% of workers age 30 and younger indicated that career
elements were important or very important in motivating their performance, only 41% of those older
than 60 agreed.
4) Compensation gains - and then loses - importance as the age brackets progress. Although employees
age 30 and younger ranked compensation as the third most important motivator, it rose to second
place for those age 31 to 60. Once employees reached 61 and older, however, compensation fell to
fourth place.
5) Affiliation is more important among older employees, compared to the other age groups. Of all the
elements, affiliation was the one that grew in importance among the older respondents. It was
ranked last among the five motivators by employees age 30 and younger, and tied for last until
12
employees reached age 51 to 60. At that point, it rose to fourth place, only to leap into second place
among those aged 61 and older.
Generally, most of the elements lose some of their ability to motivate performance among older employees.
The opposite is true for affiliation. It is interesting to note that after age 30, less than two-thirds of
respondents said they were motivated to perform by affiliation, career, compensation and benefits. Thus,
while tailoring elements to each employee is not advisable or practical, knowing how cross sections of the
workforce perceive these elements can help organizations communicate its offerings for optimal impact. A
company may be able to improve its ability to motivate and engage its workers by understanding what
elements to focus on to yield the greatest return on investment. A program that gives an organization the
flexibility to adapt and communicate reward vehicles as needed, will be a more effective motivator than one
that adheres to a rigid, one-size-fits-all message. Given the differences in what motivates employees in
different age groups, as the demographics of the workforce shift, organizations should consider whether their
employee value proposition needs to shift as well.
An article on Talent and Analytics talks about ways of using analytics to calculate what employees value
most, and by using that data to create a model that will boost retention rates. This application of analytics
leads to predictive action, a rung on the ladder in which companies anticipate employees‘ preferences and
future behaviors and tailor HR practices to help them hold on to their valuable talent. This was the approach
taken by Convergys, a company that manages billing, payroll, benefits and pensions for businesses in 40
countries. After the company‘s initial public offering in 1999, the Convergys workforce doubled to 35,000,
but turnover was a major headache – the company had to recruit 50,000 new people in 1999 to maintain that
level of staffing. To reduce attrition, Convergys turned to a consumer marketing technique, conjoint analysis.
When used with products, such analysis helps companies determine how people value different combinations
of features. When used with employees, it helps companies figure out the mix of benefits most likely to
encourage people to stay with the organization.Accenture is working to map their EVP into their delivery
framework. The emphasis is on their programs and processes and ways to bring the EVP to life though these.
They use an employee experience framework, which helps them connect the EVP framework to their HR
processes.
At Statoil, how goals are delivered is just as important as what is delivered. Both are important and valued
equally at Statoil and linked to employee reward and recognition programs.
As the member practices show, there is a menu of options when it comes to trying to make EVPs a reality in
the organization. These examples highlight the need to focus on how companies communicate with their
employees, how work is done and delivered, providing role clarity, establishing patterns, linking EVPs to
recruiting efforts, linking EVPs to the performance management system, producing scorecards, providing
leadership autonomy for local adaptation, providing events and programs to reinforce the EVP, and mapping
the EVP to the HR delivery system.
4.2 Effectiveness of Employee Value Proposition

Following figure classifies the percentage of organizations with formalized EVPs according to their
performance. It is evident that a higher number of high performing and global organizations have an EVP in
place.
13
U.S. Organizations 25%
Global Organizations 34%
Low-Performing Organizations 28%
Average-Performing Organizations 32%
High-Performing Organizations 42%
0% 10% 20% 30% 40% 50%
Figure 3: Classifying Percentage of Organizations with Formalized EVPs

Source: “Creating a sustainable Rewards and Talent Management Model.”, Global Talent Management and Rewards Study,
Towers Watson (2010)
According to a research article (Attracting and Retaining Critical Talent Segments, Building a Competitive
Employment Value Proposition, Corporate Leadership Council, Corporate Executive Board, 2006), an
effective EVP provides organizations with quantifiable benefits:
Improved attractiveness: Organizations with effective EVPs are able to source from a much deeper pool of
talent in the labor market. Top-performing organizations draw candidates from about 60% of the labor
market, including ―passive‖ candidates who would otherwise be content to stay with their current job. Lesser-
performing organizations are able to source only from the most active 40% of the workforce.
Greater employee commitment: Organizations with effective EVPs enjoy significantly higher levels of
commitment from their employees. Top-performing organizations have 30-40% of their workforce displaying
high levels of commitment, compared to less than 10% in under-performing organizations.
Compensation savings: Organizations with effective EVPs are able to reduce the compensation premium
required to attract new candidates. Top-performing organizations are able to spend 10% less on base pay
compared to under-performing organizations.
5. CONCLUSION
A Well designed Employee Value Proposition (EVP) can help to attract the talent, increasing Employee
Engagement and Organizational Performance
A strong employer brand that helps you create competitive advantage in the talent market begins with a well-
defined Employee Value Proposition (EVP). Employer brand is the impression candidates have of a company
and what it would be like to work for that company.
The employee value proposition defines the full array of elements a company delivers to employees in return
for the contribution they make to the organization. It‘s a deliberate construct of the underlying ―offer‖ on
which the organization‘s employer brand is based. According to research by the Corporate Leadership
Council, a well thought through and executed EVP can:
Improve the commitment of new hires by up to 29% and Reduce new hire compensation premiums
by up to 50%.
Increase the likelihood of employees acting as advocates from an average of 24% to 47%.
Helps you attract and retain talent you might otherwise lose to organizations with more attractive
EVPs and appeal to people in different markets and tough-to-hire talent groups.
Helps you re-engage a disenchanted workforce and understand your HR priorities.
Helps you gain a reputation as a great place to work.
14
Show a turnover rate up to 40% lower than companies with lower levels of engagement
Gain up to 18% higher levels of productivity and 35% more efficiency
Be 59% more likely to innovate
Improve customer loyalty: 41% of customers are loyal because of good employee attitude
Improve customer experience: 70% of brand experience is determined by people experience
6. REFERENCES
Backhaus, K, &Tikoo. S., (2004). Conceptualizing and researching employer branding. Career Development
International, 9(5), 501-517.
Bergstrom, K., & Anderson, M. (2001). Delivering on promises to the marketplace: using employment branding to build
employee satisfaction. Journal of Integrated Communications.
Corporate Executive Board. (2006). Attracting and retaining critical talent segments, identifying drivers of attraction and
commitment in the global labour market.
Corporate Leadership Council Research. (2006). Employment Value Proposition Survey.
Corporate Leadership Council Research. (2012). Employment Value Proposition Survey.
Eshiteti S, Okaka, O., Maragia, S., Odera, O. and Akerele, E. (2013). Effects of Succession Planning Programs on Staff
Retention. Mediterranean Journal of Sciences
Handler, C. (2007). Hiring for potential vs. Skill: Hiring for potential vs. hiring for key knowledge, skills and experience.
Heger, B.K. (2007). Linking Employment Value Proposition (EVP) to Employee Engagement and Business Outcomes:
Preliminary Findings from a Linkage Research Pilot Study. Organizational Development Journal, 25(2): 21 -33
Kathy Kibbe, Laura Sejen, Kathryn Yates. ―why an Employee Value Proposition Matters: Creating Alignment,
Engagement and Stronger Business Results,‖ Towers Watson, October 13, 2010
http://www.mercer.com.hk/webcasts/OptimizingYourBenefitsInvestment
http://www.sibson.com/services/organization-and-talent/employee-value-proposition/
Talking ‗about my generation: Segal examines what motivates employees of different ages. By Trevor Kunkle and Aaron
Sorensen (September 1, 2008)
Talent and analytics: new approaches, higher ROI by Jeanne G. Harris, Elizabeth Craig and David A. Light; Journal of
Business Strategy. VOL. 32; NO.6, 2011
Towers Watson, ―Creating a sustainable Rewards and Talent Management Model.‖, Global Talent Management and
Rewards Study 2010.
http://www.performancesolutions.nc.gov/evp/EmploymentValuePropositionB.pdf
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16
WILLINGNESS TO PAY AS AN INDICATION OF PUBLIC SHARING IN THE

EFFORTS OF IMPROVING CLEAN WATER SERVICE IN BEKASI REGENCY
Ninin Gusdini1), M.Yanuar J Purwanto2),

Kukuh Murtilaksono3) and Kholil4)
1)
A Student of Natural Resources Management Study Program– IPB
2)
Department of Civil and Environmental Engineering - IPB
3)
Department of Soil Science and Land Resources Management - IPB
4)
Environmental Engineering Study Program-Usahid
(Corresponding Email: 1)ninin.gusdini@yahoo.com)
ABSTRACT
Clean water services fulfilling the quality, quantity, continuity and affordability requirements are absolute in
each effort of meeting clean water needs. The government as the authority holder in the efforts of fulfilling
public needs for clean water requires the support and cooperation from numerous stakeholders, including the
community. The public support may be indicated based on their willingness to pay for various attempts
related to improvement of clear water service. The research is aimed to analyze the amount of public‘s
willingness to pay as an indication of public sharing value and to identify the level of public affordability for
clean water. The method used in this research was the Contingent Valuation Method (CVM). The results
indicate that nominally, the amount of public sharing increases in line with increasing income, as indicated
by the WTP value. The public willingness to pay with pipeline service is higher than the non-pipeline services
in each income group. The amount of individual WTP in Bekasi Regency, at around IDR 58.333 to IDR
140.909 per month varies based on the income level.
Keywords: clean water, willingness to pay, public sharing, CVM
INTRODUCTION
Background
The main pillar in the strategy of development in a region is by ensuring the fulfillment of clean water needs
in the region (Vasquez W 2013). Based on this, various parties should allocate adequate investment in water
infrastructure. More often, the provision of clean water infrastructure done by the government is based on
political aspects and less considers the public participation, both in terms of material and non-materials. It
results in the discontinued water service that has been provided; hence there are plenty of investments that are
not functioning optimally. The success in clean water service can be met by estimating the value of clean
water services, so it can be adapted to the existing policies, economic incentives, and institutional
management (Birol E 2006; Vasquez W 2013).
Bekasi Regency is one of areas with highly rapid development prospects. It is due to the location of Bekasi
Regency which is relatively close to Jakarta and Bekasi City, in which the cities have extremely high density
and are difficult to develop horizontally. This development has a consequence on the increasing population,
which in turn leads in increasing clean water needs of the community (Cheng Qi 2011; Pingali 2007). The
local government as the authority in the development of clean water infrastructure and facilities in its
jurisdiction requires the support of many parties, including the public. One of the roles/ involvement of the
society is on the economic aspect, where people contribute to the efforts made by the government to meet the
of public‘s clean water needs.
Willingness to Pay (WTP) is a description of public purchasing power based on consumers' perceptions
(Dinauli 2006). The WTP value implies indicators of utility obtained from goods or services. The high utility
of a product would encourage someone to be willing to contribute to the sustainability/ benefits of these
goods and services (Delaney L 2004). The amount of WTP value can be used to predict the amount of public
participation, and can also be used to estimate the clean water service tariff from the consumers
(Yudariansyah H 2006), as well as to determine the condition of the existing water service based on the
perception of the public /users (Irawan 2009).
In this study, the amount of WTP value used is to provide an illustration of public contribution in addressing
the needs of clean water and to evaluate existing water service in Bekasi. The results of this study can be used
17
by local government and Regional Water Company to formulate strategic and tactical policies in addressing
the clean water needs in a sustainable manner in Bekasi Regency.
Objectives
The objectives of this research are:
1) To analyze public perception on clean water service that they currently receive.
2) To analyze the value of public sharing based on the willingness of the community to pay in efforts
of improving water service
3) Identifying the factors affecting the selection of clean water main source
THEORETICAL BASIS
The community participation in the provision of clean water is influenced by many factors, including socio-
cultural condition and the public economic abilities. The high level socioeconomic condition in the
community will lead to increased participation in water supply activities, especially activities in meeting the
needs in their neighborhood. According to (Wirdanaf 2006), the forms of community participation in the
development process that is commonly found are:
1) Participation in decision making: the role undertaken on the stage of an activity being planned, all
provisions which are later used are prepared and determined in the implementation of development
activities.
2) The participation in plans implementation activities, namely the roles of the public when the plans
are being carried out.
3) The participation in enjoying the outcome; it is the community who should enjoy the outcome of an
activity.
4) The participation in the evaluation, namely the role of the community to provide feedback after the
implementation of the development is completed.
In generating public participation, a real program is required that can be utilized by the community directly.
Various efforts for the fulfillment of public facilities requiring public involvement in maintaining the
sustainability of the program need the fulfillment of the three basic principles of community-based services,
namely (McIntosh 2003):
1) Affordability, i.e. fee for utilizing service facilities should result in access to the services provided.
2) Capable of self-financing, thus the services can be sustained.
3) Capable to be applied in other places; it does not only apply in particular locations only.
One of community participation in water supply is realized in the form of public sharing economically which
is used to maintain the sustainability of clean water supply system. The public will use their income to obtain
maximum satisfaction from water services which will be enjoyed and reflected on the price scale by the
willingness to pay on clean water supply services. McIntosh (2003) states that someone willingness to pay in
the household scale (domestic) depends on the household income, the amount of water consumption, the
amount of tariffs and their alternative water sources.
Someone willingness to pay certainly will not grow by itself, instead comes from certain factors. Jacobsen et
al. (2013) argue that the concept of willingness to pay (WTP) highly depends on economic abilities,
preferences and awareness of individuals related to the benefits for the use of a product. Preferences can
emerge due to excellent service, whilst the awareness will emerge due to awareness efforts undertaken by the
government by performing a variety of dissemination on the importance of environmental security and
participation of all segments in the society within. Yudarniansyah H et al. (2006) proposes that the value of
public willingness to pay for clean water services implemented by Malang Regional Water Company is IDR
750/ m3, lower than the ability to pay the community of IDR 1768/ m3 and also lower than water tariff
prevailing at that time, i.e. IDR 1300/ m3. In research done in different location, namely in Surakarta
Regional Water Company, conducted by Irawan (2009), it is showed that WTP value is still between IDR
489/ m3 up to IDR 1065/ m3 depending on customers‘ classification. From two similar studies, it appears that
WTP value remains under water price prevailing currently and in each location. It implies that the water
service performed by both Regional Water Companies have not met the desired expectations of the society,
thus they would only contribute in a relatively small amount in the fulfillment of clean water needs.
Nonetheless, the condition of both Regional Water Companies is included in good work performance
category. It indicates that the fulfillment of good clean water cannot only relies on a Regional Water
18
International Conference on Business, Economics, Socio-Culture & Tourism 2016 (ICBEST2016)
Company as the provider of clean water, but there must be synergy efforts of all stakeholders involved in the
provision of clean water.
METHODOLOGY
Sampling
The sampling was done based on purposive method. The number of samples in this research was 250
families, composed of the community using the non-pipeline and pipeline services. Sample points were
determined based on the development areas of Bekasi Regency set forth in the RTRW. The development
areas in question were divided into four groups; each development area was represented by the development
centers and areas with poor clean water service. The number of samples from each sample location was taken
proportionally.
The information taken through a questionnaire in this stage included:
1) General data of the respondents, including name, age, education, occupation, gender and address.
2) The socioeconomic data of respondents, including the number of people living at the same house,
family income, costs incurred for electricity and water consumption per month and the allocation of
household expenditures in a month.
3) The data related to the fulfillment of clean water needs, including clean water sources, the condition
of the water source, the distance to the water source, the distance between the water source and
septic tank, the types of activities using clean water, the amount of water used, methods to obtain
clean water, costs incurred for clean water fulfillment, the amount of funds that incurred for the
needs of sustainable clean water.
The Analysis of Public Willingness to Pay

The Wilingness to Pay (WTP) is the willingness of users to incur reward upon services obtained or the
amount of average rupiahs incurred by the public as payment of clean water supply service unit that they
enjoy. WTP is an individual economic assessment on a service being received (Irawan 2009). WTP is highly
influenced by the quality of care received, public economic ability, and socio-cultural condition of the society
(Wicaksono 2006).
The determination of the clean water fulfillment‘s economic value in Bekasi Regency is done through
sampling. Willingness to Pay value or WTP is directly obtained directly from respondents (direct approach)
on the performance clean water needs fulfillment in Bekasi Regency. The method commonly used to
determine the WTP value based on the survey results is Contingent Valuation Method (CVM).
In this context, the bid value is set based on fund allocation used to meet the clean water needs, as determined
by UNICEF (4% of the average income). The form of the services offered is a piped water supply system
which can be utilized directly in their houses by fulfilling qualify, quantity and continuity.
Steps taken in this method include:
1) First Step: Making Market Hypothesis
This stage is a preliminary stage that is aimed to obtain a preliminary description on water services
in Bekasi Regency. Questionnaires containing information on clean water supply in Bekasi Regency
meets the requirements for clean water provision and the means on how the government obtains
funds to meet public access to quality clean water needs.
2) The Second Step: Getting the Bids Value
The auction value got through direct surveys using questionnaires spread to the respondents. Via the
questions in the questionnaires, the information of maximum value in willingness to pay of the
respondents. The value of public willingness to pay in a certain range set earlier. This value is
shown to the respondents via the card or using the structured questions thus the respondents can
choose the answers provided.
3) The Third Step: Calculating the Average WTP
WTP average value calculated from the average value and the median value of the bids value
obtained from the survey. At this stage, the existence of data outliers (values deviated much from the
average is highly possible), in case any outlier value exists, then the value is not included in the
calculation.
19
4) The Fourth Step: Aggregating the Bids Curve

The bids curve is obtained by regressing WTP as the dependent variable with several independent
variables.
5) The Fifth Step: Aggregating the Data
At this stage, the bids mean obtained is being aggregated in step three. This process involves the
conversion of sample mean data to population mean as a whole. One way to convert the sample is
by multiplying the sample mean with the number of households in the population (N).
RESULTS AND DISCUSSIONS
Respondents
The total respondents used in this research are 250 families. They are spread in 12 districts out of 23 districts
in Bekasi Regency. The sampling site is determined based on the development area (WP) set forth in the
RTRW of Bekasi Regency; each WP is taken three districts representing the central development area, clean
water areas of which clean water service is poor and the areas with good clean water service. The total
respondents from each sampling location are set proportionally. The determination of the location has been
confirmed to Bekasi Regional Water Company to minimize error in determining the sample location.
The respondents are consisted of 61.2% males and 38.8% females at the age distribution between (25- > 55)
years, with the dominant age (25-34) years. The dominant age profile of the respondents is in line with the
dominant age profile of the Regional Socio-Economic Survey (Suseda) of Bekasi Regency, 2014. From these
survey results, the he society's dominant age is (25-34) years old (Regency BPS, 2014). In terms of
education, the respondents are relatively varied, from elementary school to university graduates; with
dominant education level is High School of 54%. This condition is in line with the results of Bekasi
Regency‘s Suseda 2014, stating that the dominant education level is high school graduates (BPS 2014). The
type of respondents‘ work is quite varied with the dominant type being the private sector employees at 59.6%
.They work mostly in the industry, spread in the area of Bekasi Regency. The result is in line with the
dominant profile of workers‘ livelihood as industrial sector workers conveyed in the result of Suseda 2014
(Regency BPS of 2014). Based on the description of the respondents in general, the respondents‘ profile is
similar with the community profile in Bekasi Regency surveyed by BPS in 2014.
From the economic side, the dominant income of the respondents ranges from IDR 1,000,000 – IDR
3,000,000 at 35.6%. The dominant amount of respondents‘ monthly spending is between IDR 1,000,000 -
IDR 2,000,000, and IDR 2,100,000 - IDR 3,000,000 at 33%. The dominant total people within one household
are around 4-5. The result of 2014 Suseda shows that the average spending per capita population is IDR
646,843 or equivalent to IDR 2,587,374 per family. The description of expenditure per family amongst the
sampling is relatively the same with 2014 Suseda result. Based on the description of respondents‘ economic
condition, it shows that the community income and expenditure is relatively balanced, thus the potential for
income monthly saving is relatively low. The economic condition of the respondents is in line with the
dominant education level and the type of work. The description of socioeconomic respondents can be seen in
Table 1.
Table 1. The Socioeconomics Condition of the Respondents
No Socio-economic Condition Category Total (%)
1 Education Did not finish elementary school 2.4
Elementary School 4.0
Junior High School 15.6
High School 54.0
Diploma 11.2
Bachelor 12.8
2 Age <25 years old 14.0
(25-34) years old 37.0
(35-44) years old 22.0
(45-54) years old 14.0
>55 years old 7.0
3 Occupation Doctor/Teacher/Consultant/Service Sector 4.0
Farmer 2.4
Housewives 11.2
Industry/ private sector employees 59.6
20
No Socio-economic Condition Category Total (%)

Students 1.6
Retiree 2.4
Civil servants 2.0
Police Officers/ Soldiers 1.6
Self-employed 13.2
Unemployed 2.0
4 Income < IDR 1 million 8.8
IDR 1 million – IDR 3 million 38.0
IDR 3.1 million – IDR 5 million 30.4
> IDR 5 million 22.8
5 Expenditure < IDR 1 million 8.4
IDR 1 million – IDR 2 million 34.3
IDR 2.1 million –IDR 3 million 33.8
> IDR 5 million 4.0
Source: Survey Results, 2015
Public Perception on Clean Water Service

The public water needs are fulfilled through a pipeline system and non-pipeline system. Pipeline system is
served by Regional Water Company and private water company, whilst the non-pipeline is served
independently for each family or community. Based on sampling results, the dominant source of water used
by the respondent is pumped wells of 36% and 22% for water gallons, while the Regional Water Company at
28% and the rest uses surface water, public hydrants and bulk water.
Each water service must meet the requirements of quality, quantity, continuity (Alayla 1998) and
affordability (Regulation of Minister of Home Affairs No 23 of 2006). The quality aspect can affect the
safety of water users from the health side. The quantity aspect and water continuity can affect sanitation and
health, whilst the affordability will affect welfare of the water users.
The sampling results show that in terms of quality, 61.9% of respondents using the pipeline water users are
satisfied, and the rest are unsatisfied with the quality of water that they use. Meanwhile for the respondents
using non-pipeline water, 62.7% of them are satisfied and the rest are unsatisfied with the quality of the water
resources that they use. The level of satisfaction on water quality between the pipeline system and non-
pipeline system is relatively almost equal, but the satisfaction level on non-pipeline water sources is higher. It
becomes an input as an initial indication on the water quality supplied through the pipeline system. In
general, the quality of the pipeline system should be more secure than non-pipeline system, as it has gone
through the treatment process. The test result on water quality samples at several locations show that most
samples do not meet the drinking water standards set by Regulation of Minister of Health 416 of 1999. All
samples of well water using pumps and dipper does not meet the standard, especially for minerals and metals
parameter (such as iron, magnesium, hardness, chloride), Total Dissolved Solids (TDS) and bacteorology,
except for ground water source using jetpump. As for the resources managed by the community, there are
also some parameters that do not meet quality standard, such as organic matter and bacteria. This would
potentially disrupt and endanger users, especially in the long run, both in terms of health aesthetics. For
samples of pipeline water, some sources are derived from the Regional Water Company management still
have incompatible parameters with such standards, including clor, bacteria, and pH. This parameter needs to
get attention from the Regional Water Company as it is thought to emerge due to leaks in the distribution
network, causing water cross connection. Meanwhile the quality of pipeline water is managed by private
Regional Water Company has met the standards. The incompatibility of water quality consumed by the
public is relatively difficult or does not visible by naked/ physical eye, thus people commonly do not feel that
the water source is not in trouble or is not fit for consumption, or in some areas, the community basically
know that the water resource quality is not feasible, but they do not have other alternatives, hence they still
use it, but only for limited use or not for cooking and drinking. The water needs for cooking and drinking for
the community are met by utilizing recycled water gallons.
The respondents' perceptions of the quantity of water in the context of clean water adequacy for meeting their
daily needs show that dissatisfied respondents are more dominant compared to satisfied respondents. Based
on the service type (pipeline or non-pipeline) satisfied respondents proportion is higher in those using non-
pipeline system compared to the pipeline system. It occurs because the non-pipeline resources vary, thus
21
there are more clean water alternative source. In water pipeline system, there are many factors affecting water
adequacy on customers, including leakage of distribution network, processing condition, or disorders of the
source. If there is disturbance on one of these factors, it will affect the water quantity received by the society.
Thereby, the performance of treatment plants, distribution networks and source become one of determinant in
the fulfillment of customers‘ clean water source. The illustration of respondents‘ satisfaction level proportion
on the quantity of clean water can be seen in Figure 1.
All Type of Service
Figure 1. The Proportion of Satisfaction Level on Clean Water Quantity
Based on the continuity, in the context that the existing water source can be utilized for 24 hours, the result
obtained is that 75.6% of respondents have water source that can be used 24 hours, and there are still 24.4%
of the respondents whose water source cannot be utilized within 24 hours. In proportion, the respondents who
have not been able to take advantage of clean water source for 24 hours are higher than the respondents
groups who use pipeline water resources, compared than those utilizing non-pipeline system. Based on 2014
performance evaluation result on Regional Water Company, average service time from Regional Water
Company reaches 20:31 hours per day. This evaluation result also shows that the regional water company has
not been able to meet the water needs of the society according to the requirements of service continuity. The
community that cannot utilize the water in 24 hours are doing individual water reservoirs to meet the clean
water needs for 24 hours.
The affordability of water service is related to public ability in terms of economic sector in meeting water
needs. The Regulation No. 23 of 2006 requires that costs allocated public to meet monthly water needs
should be no more than 4% of family income. If the spending on clean water is more than 4% of the income,
it will affect the welfare level of the community. The sampling results indicate that the average respondents‘
expenditure based on income is shown in Table 2.
Table 2. The Proportion of Water Cost Expenditure on Income
No Income Average Expenditure for Water The proportion of expenditure on
(IDR) income (%)
1 < IDR 1 million 50.000 5.00
2 IDR 1 million – IDR 3 87.000 4.35
million
3 IDR 3.1 million – IDR 5 120.000 3.00
million
4 > IDR 5 million 140.000 2.80
Source: Sampling, 2015
Based on Table 2, it appears that the expenditure burden to meet the clean water needs for very low-income
people (< IDR 1 million) is the highest amongst the other groups that are classified based on income. It
shows that the public with income < IDR 3 million are vulnerable to non-prosper condition due to spending
to meet the clean water needs. Judging such condition, the government role in ensuring the fulfillment of
water needs and building prosperous society, thus it is necessary to be focused on a program that is intended
for families with income < IDR 3,000,000/ month. Besides, for Regional Water Company managing the
water supply pipeline system, the water pricing with full-cost recovery criteria should be set for customers
22
with family income > IDR 3,000,000 / month. Currently, the full-cost recovery is IDR 5.183/m3 with an
average water usage of 16.9 m3 per month shows that the cost of clean water in an average is IDR 87.593/
month. If compared with the dominant income of respondents, i.e. between IDR 1,000,000 - IDR 3,000,000,
the water expenditure at 4.38% of the average family income or larger than the maximum water expenditure
standards set by Regulations of Minister of Home Affairs No. 23 of 2006.
The Clean Water Service Value Willing to be Paid

The public willingness to pay a water service is in line with public perception on the service quality that they
receive. The higher the level of community satisfaction on clean water service, the willingness value to pay
for service improvement efforts will also be higher. Failure in clean water services can be caused by several
factors including the unavailability of adequate water resources, or the non-optimal management of water
supply system.
If the water service is treated as public goods (monopoly is inapplicable and not included in the market
mechanism), the results of the public desire survey on the service quality would be made as input in the
policy and planning in order to improve the water service quality (Freeman 2003). The service quality
achievement can be calculated based on public participation (sharing) (Vasquez 2009).
In the context of clean water service in Bekasi Regency, the sampling results show that 56.7% of respondents
are satisfied with the services of clean water, and the remaining at 43.3% of respondents are unsatisfied with
the clean water services that they receive. nevertheless, when the respondents are offered whether they would
switch to using pipeline clean water supply system of which quality, quantity and continuity are guaranteed,
thus 81.4% of respondents would switch to the system offered; and the remaining 18.6% respondents are not
prepared to switch to the new system (sticking with the old system) (the visualization of respondents'
perception can be seen in Figure 2). Respondents who do not wish to switch to the system offered are mostly
respondents who have been served by the Private Drinking Water Company; they state that the water service
system that they currently receive is in accordance with their expectation.
Not Agreeto Switch

Not Agree To
Switch
Agree to Switch
Agree to switch
Not Satisfied
Not SatisfiedSatisfied
0,00% 20,00% 40,00% 60,00% 80,00% 100,00%

Satisfied
Not Agree to
Satisfied Not Satisfied Agree to Switch
Switch
Series1 56,70% 43,30% 81,40% 18,60%
Series 1: Respondents’ Preference

Figure 2. The Respondents‘ Preference on Clean Water Service
The value of respondents' willingness to pay in the efforts of increasing clean water provision into the
pipeline system with a guarantee of quality, quantity and continuity varies based on the level of income. The
WTP value is classified by variations in monthly income and type of service. The amount of WTP value per
family ranges from IDR 58.333 - IDR 140.909, the details of WTP value can be seen in Table 3.
23
Table 3. The WTP Value per Family based on Income

Willingness to Income
Pay
< 1 million 1 million – 3 3,1 million – 5 > 5 Average
million million million
Total Service 67,500 77,353 87,500 121,296 89,956
Pipeline System
95,000 111,111 115,385 140,909 123,077
Non-pipeline
System 58,333 61,638 71,023 90,476 70,471
Based on Table , it is visible that the public sharing value initialized with the largest WTP value is the
respondents who have enjoyed the clean water system service via pipeline system is IDR 123.077, whilst for
respondents with a non-pipeline system, the sharing value lower, i.e. IDR 70.471. It indicates that
respondents are more satisfied with the water pipeline service system compared to non-pipeline system so
they are willing to do higher sharing. The clean water supply provision via pipeline is done centrally by a
governing body, such Regional Water Company of private water company, thus in terms of quality, it is more
guaranteed because it is equipped with management. It causes the respondents to be willing to give higher
share.
Based on variations in income, it appears that consistently, the higher the income level, the willingness to pay
or public sharing is higher. The level of someone willingness to pay to a service will consider their economic
abilities and income level is one indicator to express the level of one's ability. However, when compared to
the proportion of water expenditure burden, the community public sharing of people with high income is
lower than respondents with low income (< IDR 3 million). Actually, the anomaly condition on ideal
condition in which the public burden with higher income provides greater sharing, or in other words the
cross-subsidy is currently not optimal. Judging this condition, the government, especially the local
government having the authority in the water provision in their regions controls tariffs imposition and an
average public burden, especially in low-income communities. The full cost recovery tariff progressively
regarding clean water supply for high-income people ( > IDR 3,000,000). Through this control mechanism,
the water burden for low-income people is expected not to exceed 4%, thus the level of community welfare
can be fulfilled.
The survey results say that there are several factors influencing the selection of the respondents in
considering clean water main source. These factors will become input to the management of water services as
a key factor in maintaining the performance having orientation towards the consumers. Those factors are: (1)
the water quality, the community realizes that the water quality is very important because it can affect their
health. The condition existing in some parts of Bekasi Regency, the potential of water resources quality used
by many people is in polluted condition, and partly in particular the Northern areas, the groundwater and
surface water has been exposed to sea water intrusion. Therefore, the water quality becomes a primary
consideration for selecting the clean water system service. (2) Price, the price factor becomes an
consideration for most respondents, because of the survey result, it is shown that the dominant income of the
community ranges IDR 1,000,000 – IDR 3,000,000, and it is classified as low income (below minimum
wage). The Socioeconomic survey results from Bekasi Regency in 2014, shows the level of per capita
expenditure in the community is classified as middle down, i.e. < IDR 700,000. Thereby, the price
consideration becomes an important thing, given the respondents' income level which is still relatively low.
(3) The quantity, the amount of water available becomes their consideration; because if the water supply
becoming the main source is insufficient, hence the respondents will seek other alternative water sources,
namely refill water gallon. With alternative use, it will affect the amount of spending in order to meet water
needs. (4) Continuity, this factor is deemed important only by a small amount of the respondents because
they can adapt to the existing service pattern, for example by using water tanks to be filled in during the
operation of water service. (5) the service type of clean water services. There are only a few respondents who
consider this type of service become the deciding factor in the selection of clean water source, as for them the
most important is the availability of water resources, whilst for the service type, they can adapt to the existing
condition. The description visualization in the factors taken into consideration in the selection of the main
clean water source can be seen in Figure 3.
24
Continuity (24
hours service)Air (24 jam)
Ketersdiaan 8%
Kuantitas Air 10%

Quantity
Kualitas Air 39%
Quality of water
Jenis Layanan 8%
Kind of service
Harga/biaya 35%
0% 10% 20% 30% 40%
Series1
Series 1: Factors to Chose the type of water service

Figure 3. The Factors in Main Clean Water Source Selection
CONCLUSIONS
The fulfillment for public clean water takes huge investment. The government should not ignore the
obligation to fulfill the basic rights of the public. However, the government also has their limitations in terms
of resources. Therefore, active community participation in supporting the government's obligation becomes a
crucial thing. The community participation should be realized in the form of economic public sharing. The
amount of public sharing is influenced by the service quality received by the public and their income. Public
sharing can be utilized to improve public water clean service either in quality, quantity or continuity.
The public sharing value in the efforts of improving the quality of clean water services increases along with
increasing public income, as well as satisfaction on the clean water service received by the community. The
public sharing value based on income variation ranges from IDR 67.500 to IDR 121,000 per family.
Meanwhile, by including the service type factor, the public sharing value ranges from IDR 59.333 to IDR
140,000 per family, where the public sharing amount of respondents served by pipeline connection is greater
than those served with non-pipeline system.
To make efforts in fulfilling clean water needs, the public mainly prefer the water quality factor that can be
utilized, followed by price, quantity and continuity factors. Therefore, various government‘s attempts in
upgrading the water service should consider the quality and price of the services. Government intervention
should be carried out also in order to protect the basic needs of low-income community (< IDR 3 million) by
regulating the lowest tariff for such community class, either served by Regional Water Company or private
water company with an indication of water expenditure not exceeding 4% of family income. In addition, it is
necessary to educate water users to make savings and adjustment in water consumption as one of non-
material sharing.
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26
MODELLING OF TIMELY SUBMISSION OF

FINANCIAL STATEMENTS IN MANUFACTURING COMPANIES
LISTED IN INDONESIA STOCK EXCHANGE
Meitryna Pangestu1, Saifudin2

Semarang University
(Corresponding emails: meindutpngst66@gmail.com1, saifudin@usm.ac.id2)
ABSTRACT
This research aims to reveal the factors that affect the punctuality of financial statements of the companies
listed in Indonesia Stock Exchange (BEI). This research uses the variables of the companies‘ characteristics.
Methods of data analysis used in this research is the logistic regression. The data used is secondary data.
The samples of this research were the companies listed in BEI year 2010-2014. The variables of the
companies‘ characteristics studied in this research are the companies‘ size, profitability, liquidity, leverage,
commissioners board size and the companies‘ registered age.
The results of this research indicate that there are the effects of profitability on the punctuality of financial
statements. However, the other variables such as companies‘ size, leverage, liquidity, commissioners board
size, and the companies‘ registered age do not affect the punctuality of financial statements.
KEYWORDS: Financial statements, punctuality, the companies‘ characteristics, manufacturing companies.
INTRODUCTION
Along with the increasing development of capital market in Indonesia influences the requests for information
in the form of the companies‘ financial statements for investors in making decisions. Financial Statements,
which is one of the sources of information that is often used as a basis for consideration in the context of
making a decision, financial statements can also be used as a vehicle for companies to communicate a variety
of information and economic measurement on the resources owned as well as their performance to various
parties who have an interest (Yogi and Wijana, 2014).
The punctuality of financial statements is one of the indicators to measure the quality of financial statements.
According to PSAK No. 1 par.38 2009 a report benefits will be reduced if the report is not available on time.
The punctuality of financial statements submission of is an important characteristic for accounting
information as the information that has passed will be less used by market participants in the investment
decision-making process, because the information conveyed is likely to loss its relevance (Evi et.al, 2014). So
punctuality is an important element and it is expected that the companies do not postpone to report their
financial condition to the public. According to Suwardjono (2011) in Yogi and Wijana (2014) explains that
punctuality (timeliness) is the availability of information for decision-makers at the time needed before the
information lose the ability to influence a decision. Decree of Chairman of Bapepam-LK No. Kep-346 / BL /
2011 Number X.K.2 mention the submission of annual financial statements and accounting reports with
common income to the BAPEPAM-LK no later than March 31, i.e 90 days after the date of the annual
report.One of the phenomena that occurs in Indonesia, namely Management of Indonesia Stock Exchange
(BEI) suspend the trading of five issuers temporarily. That's because they were late in submitting the
financial statements and penalties for late submission of the financial statements. Stock has given a written
warning III and an additional fine of Rp 150 million to the listed companies which were late in submitting
financial statements and the fine.
Based on the monitoring of the stock, until June 29, 2014 there were five listed companies that have not
submitted financial statements as of December 31, 2013. Quoting from BEI site, Monday (06/30/2014). The
five listed companies included PT Berlian Laju Tanker Tbk (BLTA) have not submitted audited financial
statements of 2013 and the payment of fines. BLTA stock suspension was done throughout the market since
January 25, 2012.
Then the stock of PT Borneo Lumbung Energy and Metal Tbk (BORN) also has not submitted financial
statements of 2013. PT Buana Listya Tama Tbk (BULL) also has not submitted financial statements of 2013
and has not made the payment of fines. Both of these stocks issuers are active throughout the market. PT
Truba Alam Manunggal Engineering Tbk (TBLA) has not submitted audited financial statements of 2013 and
27
has not made the payment of fines. TBLA stock suspension was done in regular and cash markets since July
1, 2013, and PT Tri Banyan Tirta Tbk (ALTO) has not made the payment of fines. ALTO stock suspension
was done throughout the market since May 2, 2014.
Considering that, the exchange suspend the trading of securities on the regular market and cash market
temporarily on June 30, 2014 to two companies namely BORN and BULL. Then the stock exchange
authorities also extended the suspension of the trading of securities for BLTA, TRUB, and ALTO. (Ahm)
(Liputan 6, June 30, 2014).
In the financial statements, the developments of information technology is also needed to facilitate and speed
up the information conveyed to the interested parties on time. By using the internet media can also eliminate
the limitations due to differences in the region and can also increase the frequency of reporting the financial
information to the public due to the need for the provision of information quickly (Noni et.al, 2014).
The use of the internet as a medium to present accurate information is marked by the creation of web-side
provider that can be accessed by all internet users worldwide and has no time limit in doing access (Elvi et.al,
2014). Currently, many companies use the company website to disclose their financial and business
information. Although many companies have already used the website as a means of communication, but it
does not mean that the existence of the company website has a standardized quantity and quality among the
companies. The development of internet-based financial reporting is today considered as the development of
accounting practices disclosure what has existed though the development of this practice is not based on the
standardization of disclosure of financial information by internet media (Almilia, 2008) in Sulistyanto and
Nugrahanti (2013).According to Noni, et.al. (2014) Corporate Internet Reporting is financial reporting
conducted by the companies over the internet that are served on the companies‘ website. The companies‘
financial reporting through the companies‘ website becomes new method for dissemination of financial
information (Ashbaugh et.al., 1999, in Noni, et.al., 2014). According to Jones and Stanwick (2001) in
Widaryanti (2011) the investors realized that the value of financial information will decrease by the time.
This causes the cycle of financial reporting shortened from its annual into quarterly interval to streamline the
reporting which is real-time. So the internet becomes an essential tool for the companies to disclose
information that is up-to-date (timely information) (Abdelsalam and Street, 2007 in Widaryanti , 2011).
Elvi et.al, (2014) revealed that the companies‘ increasing ability to make publication of financial statements
on time via internet can be done when the companies can manage the fundamental financial instruments
including liquidity, leverage up to profitability. Another variables commonly arising that affect the
punctuality of financial statrmrnts are companies size, profitability and companies age. Profitability is the
ability of the company to make a profit after compared to the total assets and own capital (Sartono, 2001) in
Yogi and Wijana (2014). Companies that have high profitability will submit annual financial statements on
time because they feel there is good news in its report. Research on the relationship of profitability affects
positively on the punctuality of financial reporting has been done by researchers Respati (2001) and Ukago
(2004) in Permata and Wirakusuma (2014).Weston and Brigham (1993) in Khiyanda (2013) defines liquidity
as the ratio that measures a company's ability to meet short-term liabilities maturing. Companies that have a
high liquidity ratio will tend to make more extensive disclosure of information to the parties that need it
because the company wants to be seen credible (trustworthy) (Oyelere et.al., 2003 in Widaryanti, 2011).
According to Subramayam (2005) in Elvi et.al, (2014) Liquidity Ratio also allow management to check the
efficiency of working capital used in the company. If the company has a high ability to repay short-term
liabilities then the company has high liquidity.
According to Sjahrian (2009) in Noni, et.al (2014) leverage is the use of assets and resources that have fixed
costs or expenses derived from the loan to increase the potential profits of the shareholders. High leverage
describes a company relies heavily on its creditors (Permata and Wirakusuma, 2014). When the company was
late in submitting financial statements, it can be said that the company was having financial difficulties.The
size of the company is a scale which can be classified the large or small of a company (Widaryanti, 2011).
According to Sudharmadji (2008) in Elvi et.al, (2014) the large size of the company is expressed in total
assets. Large companies tend to have a strong internal control system with consequences the auditor spend
very little time in loyality testing and substantive testing, Carslaw and Kaplan (1991) in Yogi and Wijana
(2014).According to Noni, Taufik and Rofika (2014) the commissioners board size is one of the
characteristics of the board relating to the information content of profit. The number of commissioners in the
company plays an important role in monitoring the company and in making strategic decisions (Kusrinanti
et.al, 2012). The function of the commissioners board is as a watchdog over the delivery of information.
Starting from the establishment of a company up to unlimited period is the age of the company. Companies
that have a relatively longer lifespan, usually prefer collecting, processing and delivering information, it is
28
because the company already has many working hours, Owusu and Ansah (2000) in Pramana and Ramantha
(2015). Similarly, the companies listed in Indonesia Stock Exchange (BEI) tend to make their financial report
more transparent compared to the companies that are not yet listed in BEI (Noni et.al, 2014). Here is a table
of the gap research of the previous research.
This research is the development of the research conducted by Yogi & Wijana (2014) with findings that the
profitability and liquidity affect the punctuality of delivering financial statements, whereas the companies
size do not affect the punctuality of delivering financial statements. The reason for choosing this title due to
the existance of research gap phenomena from several previous researches. The difference of this research
with the previous research is the research period that is longer than the previous research and the addition of
three variables as well as eliminating the GCG variable because the coverage is too broad and the time is
limited. The researches conducted by Noni et.al, (2014), Widaryanti (2011), and Kusrinanti et.al, (2012)
stated that company size affects the punctuality of delivering financial statements. However, Elvi et.al,
(2014), Jewel and Wirakusuma (2014), Yogi and Wijana (2014), Khiyanda (2013) researches obtained results
that company size does not significantly affect the punctuality of delivering financial statements.
THEORETICAL FRAMEWORK AND HYPOTHESIS DEVELOPMENT
The agency theory reveals the relationship between the agent and the principal. Agents are those who manage
companies such as: company manager or the board of directors acting as decision-makers in running the
company. Principals are parties that evaluate information, i.e the shareholders. There is asymmetry of
information between the agents and principals according to Bonus Plan Hypothesis. Agents and principals
have different purpose for each individual is assumed to act on the basis of personal interest. By presenting
the financial statements punctually, it can reduce the risk of asymmetry of information that occurs between
the agents and principals. The difference of interest between the two parties lead to the agents to give or
withhold the information requested by the principals if it gives benefit to the agents, though it has become
liability for the agents to provide the information required by the principals.
Hendriksen (2000) states the punctuality implies that the financial statements should be presented at an
interval of time, to explain the changes in the company that might affect the users of the information in
making the decision predictions. Punctual means the information should be got as early as possible to be used
as a basis for making economic decision and to avoid the delays of those decisions (Baridwan, 2000) in
Khiyanda (2013).
In Indonesia the regulation regarding the punctuality of financial statements submission is regulated by the
Capital Market Supervisor Agency (BAPEPAM). The regulations is stipulated in Law No. 8 year 1995 and
BAPEPAM regulation No. X.K.2 BAPEPAM chairman decision No.80 / PM / 1996 on obligations to deliver
periodic financial statements that is every public company is obliged to submit audited annual financial
statements not later than 120 days from the date of expiry of the fiscal year. On September 30, 2003
BAPEPAM issued BAPEPAM Regulation No. X.K.2, the appendix of BAPEPAM chairman decisions No.
Ke.36 / PM / 2003 on obligations to deliver periodic financial statements to renew BAPEPAM chairman
decision No.80 / PM / 1996. On the decision of BAPEPAM chairman, ir is explained that the financial
statements must be accompanied by an auditor's report to the prevalent opinion and submitted to BAPEPAM
not later than the end of the third month or 90 days after the date of the annual financial statements. If the
company does not submit its financial statements on time, then it will be subject to administrative sanctions.
Hypothesis Formulation
H1: It is expected that company size affects the punctuality of financial statements.
H2: It is expected that profitability affects the punctuality of financial statements.
H3: It is expected that liquidity affects the punctuality of financial statements.
H4: It is expected that leverage affects the punctuality of financial statements.
29
X1
X2
X3
X4
X5
X6
Figure 1-Theoritical Models
RESEARCH METHOD
The dependent variable in this research is the punctuality of financial statements. The punctuality of financial
statements is measured by using dummy variable with category each company is given number "1" if the
companies reporting financial information on the internet ≤ 90 days and given the number "0" if the
companies reporting financial information on the internet >90 days. In this research, the independent
variables are Company Size (X1), Profitability (X2), Liquidity (X3), Leverage (X4), Commissioners Board
Size (X5), and Company Age (X6). The population is the total number of analysis units containing
information that will become the object of research. The population in this research are all companies listed
in Indonesia Stock Exchange (BEI) in 2010-2014. While the sample is a fraction of the number of the
population. The research samples are manufacturing companies in the year 2010-2014 that publish their
financial statements. Samples are selected by using purposive sampling method, where a selected sample of
companies is based on predefined criteria.
The analysis method used is quantitative data analysis method with the data processing through SPSS
(Statistical Package for Social Science) 20 software. And hypothesis testing in this research uses binary
logistic regression, because the dependent variable used is dummy variable (profit leveling = 1, instead of
profit leveling = 0).
Logistic regression equation can be expressed as follow (Ghozali, 2005):
= β + β1SIZE + β2PROF +β3LK + β4LEV + β5BSIZE+ β6AGE+e
Note:
30
= Dummy variabel of punctuality (category 0 for companies that are not punctual and category 1 for
companies that are punctual.
β = Constanta
LK = Liquidity
LEV = Leverage
PROF = Profitability
SIZE = Company Size
BSIZE = Commissioners Board Size
AGE = Company Age
e = Error Term
RESULTS
Logistic regression model can be established by looking at the estimation value of the parameter in Variables
in the Equation.
Estimation of the parameters of the model and the level of significance can be seen as follow:
Table 1 Hypothesis Testing
B S.E. Wald df Sig. Exp(B) 95% C.I.for EXP(B)
Lower Upper
SIZE ,288 ,513 ,316 1 ,574 1,334 ,488 3,642
ROE 7,233 3,124 5,361 1 ,021 1383,909 3,035 631130,648
CR -,056 ,325 ,029 1 ,864 ,946 ,500 1,790
Step 1a DAR -4,293 3,366 1,627 1 ,202 ,014 ,000 10,019
BSIZE -,555 ,445 1,555 1 ,212 ,574 ,240 1,374
AGE -,100 ,136 ,542 1 ,462 ,905 ,693 1,181
Constant 2,079 13,025 ,025 1 ,873 7,997
a. Variable(s) entered on step 1: SIZE, ROE, CR, DAR, BSIZE, AGE.
Source : Data processed using SPSS 20, 2015
Regression model established based on the estimated value of the parameters in the Variables in The
Equation is as follow:
= β + β1SIZE + β2PROF +β3LK + β4LEV + β5BSIZE+ β6AGE
=2,079 + 0,288(SIZE) + 7.233(PROF) – 0,056(LK) – 4.293(LEV) -0.555(BSIZE) - 100(AGE)
This hypothesis testing is done by comparing the significant level (sig) with an error level (0,05) = 5%. Based
on the above results, the results can be interpreted as follow:
First Hypothesis Testing (H1)

The first hypothesis states that company size (Size) affects the punctuality of financial statements. The test
result shows a significant level of 0.574 which is greater than 0.05. Based on this result, it can be concluded
that the company size variable (Size) does not affect the punctuality of financial statements, in other word H1
is rejected.
31
The Second Hypothesis Testing (H2)

The second hypothesis states that profitability (ROE) affects the punctuality of financial statements. The test
result shows a significant level of 0.021 which is less than 0.05. Based on this result, it can be concluded that
the profitability variable (ROE) affects the punctuality of financial statements, in other word H2 is accepted.
The Third Hypothesis Testing (H3)

The third hypothesis states that liquidity (CR) affects the punctuality of financial statements. The test result
shows a significant level of 0.864 which is greater than 0.05. Based on this result, it can be concluded that the
liquidity variable (CR) does not affect the punctuality of financial statements, in other word H3 is rejected.
The Fourth Hypothesis Testing (H4)

The fourth hypothesis states that leverage (DAR) affects the punctuality of financial statements. The test
result shows a significant level of 0.202 which is greater than 0.05. Based on this result, it can be concluded
that the leverage variable (DAR) does not affect the punctuality of financial statements, in other word H4 is
rejected.
The Fifth Hypothesis Testing (H5)

The fifth hypothesis states that the commissioners board size (BSize) affects the punctuality of financial
statements. The test result shows a significant level of 0,462 which is greater than 0.05. Based on this result,
it can be concluded that the commissioners board size variable (BSize) does not affect the punctuality of
financial statements, in other word H5 is rejected.
The Sixth Hypothesis Testing (H6)

The sixth hypothesis states that the company age (AGE) affects the punctuality of financial statements. The
test result shows a significant level of 0.873 which is less than 0.05. Based on this result, it can be concluded
that the company age variable (AGE) affects the punctuality of financial statements, in other word H6 is
accepted.
CONCLUSION, IMPLICATION AND LIMITATION
From the above analysis, this research can be concluded as follow:

1) The company size does not affect the punctuality of financial statements.
2) Profitability affects the punctuality of financial statements.
3) Liquidity does not affect the punctuality of financial statements.
4) Leverage does not affect the punctuality of financial statements.
5) Commissioners Board Size does not affect the punctuality of financial statements.
6) The company age does not affect the punctuality of financial statements.
Implication
As for suggestions that may be granted in connection with the research that has been done is the result of this
research shows that there are still many other variables that have not been included in this research model that
can affect the punctuality of financial statements in manufacturing companies in Indonesia Stock Exchange.
It is recommended that further research can retest it by adding year of research or by using other different
analysis method, so the results obtained are consistent.
Limitation
1) This research only examined manufacturing companies with only 30 samples during 5 years of
observation of 140 population.
2) This research demonstrates the Nagelkerke R Square value of 0.300 or 30% of 6 (six) variables only
1 (one) variable that is significant. This means that the ability of independent variables to influence
the dependent variable of the punctuality of delivering financial statements is only 30%, the
remaining 70% is influenced by other variables outside of this research.
32
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33
34
BANKING COMPETITION AND CAPITAL RATIOS: EVIDENCE FROM THE

INDONESIAN BANKING INDUSTRY
Rizky Yudaruddin
Faculty of Economics, University of Mulawarman, Samarinda
(Corresponding Email: aa_rizkyyudaruddin@yahoo.co.id)
ABSTRACT
Indonesian Banking Architecture (API) is the basic policy framework of the Indonesian banking policy
formulation in accordance with Presidential Instruction Number 5 Year 2003. API has affected the structure
and level of banking competition in Indonesia directly through two Bank Indonesia‘s policies, the minimum
amount of capital and the single ownership policy. The purpose of research is to test the impact of
competition on banks' capital ratios. The model is estimated with annual panel data from all bank in
Indonesia period between 2009 and 2014. The result indicates that competition, measures by the H-Statistic
decreases bank capital ratios in Indonesia banking industry.
Keywords: Competition, Capital Ratios and Indonesia Banking industry.
1. INTRODUCTION
Using panel data technique, this study examined the strategy of banks in Indonesia in determining the
minimum limit of capital due to increasing competition between banks. A verification of the relationship
between competition and bank capital ratio may provide information on how the regulator should establish a
policy within the framework of strengthening bank to face competition among banks from the side of the
bank's capital. This study used the main model introduced by Allen et al (2011) with the proposition that in a
competitive environment, the bank will raise its capital ratio. The issues observed in this study are relevant to
the phenomenon of increased competition between banks in Indonesia and the new regulations regarding the
minimum capital of banks.
Bank competition at national level has become more stringent since the enactment of ASEAN Economic
Community (AEC) in 2015. Banks in Indonesia are not only competing with national and regional bank, but
also with foreign banks. Based on the situation, various regulations are made to help the banks face the
competition, specifically those regarding bank capital. The policy of Indonesian Banking Architecture (API)
is one form of the policy of Bank Indonesia as the banking regulator in strengthening the bank to deal with
competition. Mulyaningsih and Daly (2011) revealed the API has affected the structure and level of banking
competition in Indonesia directly through two policies of Bank Indonesia, those are the minimum capital
level and the single presence policy. This policy led to the increased economic scale of banks which carry out
consolidation, especially small and medium banks and the growth of the distribution of market share which
cause the increasing in the competition but the major banks have monopolistic powers so that the market
becomes less competitive.
Strengthening bank capital also helps in dealing with the economic crisis. Berger and Bouwman (2013)
explains that the bank's capital is able to support bank to remain profitable when encounter any crisis (before
the crisis, during the crisis and at normal time). In addition, capital helps medium and large banks during the
crisis although with little intervention from the government. In Indonesia, the strengthening of capital in the
face of crisis stipulated in Bank Indonesia Regulation (PBI) No.17 / 22 / PBI / 2015 on the Establishment of
Countercyclical Buffer Obligations issued on December 28, 2015. Bank Indonesia requires banks to establish
additional capital in a boom period for anticipated losses from the growth of credit / financing excessive. So
the additional capital can serve as a buffer which can absorb losses in deteriorated economic conditions (burst
period).
Over the last 10 years, capital condition persisted above the minimum threshold set by Bank Indonesia at 8
percent (figure 1) though the minimum limit of capital is considered to be no longer corresponds with the
economic conditions faced by banks. Actually, Bank Indonesia has anticipated this condition by continuously
adjusting the provisions on minimum capital adequacy requirement (CAR) of banks through the Bank
Indonesia Regulation. For example, Bank Indonesia Regulation (PBI) No.15 / 12 / PBI / 2013 the capital
adequacy ratio (CAR) with the following restrictions: first, eight per cent of Risk Weighted Assets (RWA) is
for the banks with rating 1 (one) risk profile ; second, nine per cent up to less than ten per cent of RWA is for
35
the banks with rating 2 (two) risk profile; third, ten per cent up to less than eleven percent of RWA is for the
banks with rating 3 (three) risk profile; and the last, eleven percent to fourteen percent of RWA is for the
banks with rating 4(four) or 5 (five) risk profile.
SOB FECB
24 22
22
20
20
18 18
16
16
14
12 14
05 06 07 08 09 10 11 12 13 14 05 06 07 08 09 10 11 12 13 14
N_FECB RDB
28 26
24
24
22
20 20
18
16
16
12 14
05 06 07 08 09 10 11 12 13 14 05 06 07 08 09 10 11 12 13 14
JVB FB
36 50
32
40
28
30
24
20
20
16 10
05 06 07 08 09 10 11 12 13 14 05 06 07 08 09 10 11 12 13 14
Figure 1: Capital Adequacy Ratio (%) Bank in Indonesia Period between 2005 and 2014
Note : SOB = State Owned Bank; FECB = Foreign Exchange Commercial Bank; N_FECB = Non Foreign Exchange
Commercial Bank; RDB = Regional Development Bank; JVB = Joint Venture Bank; FB = Foreign Bank
Source: Indonesia Banking Statistics January 2005 - December 2014
The main purpose of this study is to investigate the impact of bank competition on the capital ratio of banks
in Indonesia over 2009-2014. This study also involved control variables such as bank specific attributes and
macroeconomic conditions. The results of empirical studies showed the impact of bank competition on
capital ratio are positive and significant (Bolt and Tieman, 2004; Schaeck and Cihak, 2005).
36
2. THEORETICAL FRAMEWORK AND HYPOTHESIS DEVELOPMENT
The capital structure is the problem faced by companies in implementing funding decisions (financial
decision making). The company will overcome these problems by optimize its capital structure. The purpose
of the optimal capital structure is to increase the value of the company. Modigliani and Miller (1963) states
that the value of the company was affected by capital structure by considering their taxes. However, the
capital structure of financial institutions is different from other companies. Berger et al. (1995) explained that
there are two differences: first, the bank prefers a low capital ratio to increase profits assets, resulting in a
high rate of return on equity, while second, the regulator prefers a capital increase for the safety and
soundness of banks. Regulatory capital requirements are motivated by two main concerns which include the
safety net and economy protection from negative externalities.
Although there was regulation on capital, some previous studies showed that capital regulation did not affect
banks capital ratio. Conversely, incentives, competition in credit markets and the risks that increase bank
capital ratio. Ashcraft (2001) found that in 1980 an increase in capital ratio does not happen because of
capital requirements, but because of the incentives received by the bank. Borrios and Blanco (2003)
described that capital regulation is not a crucial matter in increasing the capital ratio of Spanish commercial
banks, but market pressure is the most determinant of capital ratio banks. Flannery and Rangan (2008) only
found little evidence of capital increase as the impact of regulations there, but it was found that there was a
correlation between capitalization and risk.
In specific, the study on the impact of bank competition against the bank capital ratio was based on the
proposition initiated by Allen et al (2011) and was examined empirically by Schaeck and Cihak (2005).
Allent et al (2011) predicted that an increasingly competitive in the banking industry, the need for capital
increases with capital assuming more expensive than other sources of funding. The basic idea of this
proposition is the establishment of competition in the credit markets provide an incentive for banks to use the
capital as a mean to greater monitoring. The study results Schaeck and Cihak (2005) on Eropean Banks find
capital ratio continues to increase when banks operate in a more competitive environment. But Bolt and
Tieman (2004) found that an increase in competition between banks will make the bank lead to risky
behavior of banks. This increase in competition has become the justification for the financial sector
regulatory authority to set higher capital adequacy to reduce the possibility of insolvent condition of banks
H1: The greater the competition, the higher the bank capital ratio
Capital has a role in regulating the types of loans disbursed by banks. This is because there is a difference in
banks ability to do the monitoring. Gropp and Heider (2008) found small banks are more involved in
monitoring the credit in small or medium enterprise. Berger et al, (2005) described that monitoring only has
an impact on the relationship loan rather than transactional loan since small banks is superior in information-
intensive bond with their borrowers compared with big banks. To sum up, capital provides an incentive for
banks to monitor their borrowers thus made Allen et al (2011) developed a proposition that it is better for
small banks to carry out a capital increase for monitoring intensity.
Empirically, negative correlation was found between small banks with bank capital ratio in some studies. A
study conducted by Schaeck and Cihak (2005) revealed that the bigger the bank, the lesser the capital because
the big banks need less monitoring in their loan activity. Ahmad. et al (2008) also found out that the effect of
bank size is significantly negative to bank capital ratios, where big banks suffered less pressure in raising
capital than smaller banks. Another finding from Francis and Osborne (2012) also claimed that size has
significant negative effect on capital ratios where big banks hold low capital ratios, hence this condition are
dominated by small banks with relatively high capital ratios. The same result was found by Rime (2001)
which showed that the size has significant negative effect on capital ratios with a large bank holding low
capital ratios. In addition, the capital ratios of big banks ae reduced due to deteriorating economic conditions.
H2: The more intensive bank monitoring, the greater the bank capital ratio
Besides analyzing the competition between banks, this study also analyzed some variables that include bank
specific attributes (profitability and risk) and macroeconomic conditions. Profitability of banks was proxied
by the Return On Assets (ROA) and Net Interest Margin (NIM), whereas Risk was measured from Non-
Performing Loans (NPL) and risk index (Zrisk). Meanwhile, macroeconomic conditions variable was proxied
by Gross Domestic Product (GDP) and Inflation (INF).
The correlation between profitability and capital ratio was expected to be positive. Increased profitability of
banks leave a space for the banks to get the excess of internal capital derived from retained earnings. This
37
supplementary capital will protect banks from liquidity risk. In addition, for a profitable bank capital increase
aims to protect its charter value (Demstez, et al, 1996). Empirical studies conducted by Rima (2001) found a
positive and significant impact with a capital ratio which indicates an increase in the profitability of the bank
which encourage banks capitalization through retairned earnings. This finding was similar with Flannery and
Rangan (2008) and Schaeck and Cihak (2005) that revealed profitability significantly increases bank capital
ratio. On the other hand, Ahmad. et al (2008) found different results that is the negative effect of NIM and
not significant to banks capital ratio in a developing country (Malaysia). It indicates the high profits do not
impact on capital ratio increasing.
H3: The higher the profitability, the higher the bank capital ratio
In theory, banks with low risk will choose low capital and risky assets due to inefficiently priced deposit
insurance (Kim and Santomero, 1988). According to Shrieves & Dahl (1992), there is a positive correlation
between capital changes with the risk imposed on banks by raising capital over the limit of set minimum
standards to stimulate banks to work on a total limit risk exposure. Rima (2001) and Ahmad. et al (2008)
found changes in the risk have a positive and significant effect to capital changes. In contrast, Francis and
Osborne (2012) found a negative and significant relationship between risk and capital ratio targets.
H4: The higher the risk , the higher the bank capital ratio
Macroeconomic conditions also affect banks capital ratio. According to Eral et al (1992) macroeconomic
conditions variable is an important determinant in increasing bank capital since macroeconomic downturns
will affect the loan quality of the borrower. Cook and Tang (2010) found evidence that macroeconomic
conditions affecting the companies in deciding capital structure adjustment and more quickly in making debt
adjustments in good economic conditions than the poor economic conditions. Similarly, Laeven and Majnoni
(2003) found that many banks made adjustments to bad debts as the result of the cyclical downturns that
affect the revenues and capital of banks. In addition, macroeconomic conditions proxied by inflation also had
an impact on reducing capital ratio (Hortlud, 2005; Schaeck and Cihak, 2005).
H5: Macroeconomic downturns will reduce bank capital ratio
3. RESEARCH METHOD
The data of this study was derived from the individual bank financial statements published by the Indonesian
Central Bank (Bank Indonesia) over the period from 2009 to 2014, while the data of macroeconomic
conditions used in this study are GDP and inflation each year as published by the Bureau of Statistics
Indonesia. From 110 banks, 96 banks were taken as the sample to be analyzed exclude syariah bank. This
number consist 73 domestic banks (4 public banks, 28 national private banks, 17 national non-private banks,
and 24 regional banks) and 23 foreign and joint venture banks (8 foreign banks and 15 joint venture banks).
The model used in this study was based on a model developed by Allen et al (2011), Schaeck and Cihak
(2005) and Ahmad. et al (2008). Capital ratios as fuctions of competition models, size, profitability, risk and
macroeconomic conditions. The model was constructed with panel multivariate regression models formula.
The panel regression model is written as follow:
CARi,t = α + β1Comi,t + Sizei,t + β2ROAi,t + β3NIMi,t + β4NPLi,t + β5Zriski,t + β6Infi,t + β7GDPi,t + εi,t (1)
where CARi,t, the capital adequacy ratio, defined as capital to risk-weighted assets of bank i at time t; Comi,t,
compotition of bank i at time t; Sizei,t monitoring intensity of bank i at time t; ROAi,t retur on asset of bank i
at time t; NIMi,t net interst margin of bank i at time t; NPLi,t monitoring intensity of bank i at time t; Zriski,t
monitoring intensity of bank i at time t; Infi,t inflation in Indonesia at time t; GDPi,t productifity in Indonesia
bank i at time t; εi,t is the error term. The operational of each variable is described in the following table:
Tabel 1. Description of the Variables Used in the Regression Model
Variables Description Expected sign
Capital adequacy ratio measure ratio of equity capital to risk-weighted assets
CAR
of banks in the year t
Com H-Statistik in year t obtained by the sum of βy + γy + δy +
Size Used to describe the size of the bank (monitoring intensity) measured -
38
Natural logarithm of total assets of banks in the year t

ROA is used to measure the profitability of banks. ROA measure of profit
ROA
before tax divided by average total assets in the year t +
NIM is defined as the ratio of the net interest income to total earning Asset +
NIM
NPL Ratio of non-performing loans to total loans for bank i at time t. -
The risk index ZRISK is calculated as follows : Return on Asset (ROA) plus -
Zrisk capital ratio (E) with Total Asset (A) divided by standard deviation ROA of
i-bank in t-year
GDP (Gross Domestic Product) Indonesia Upper Constant Prices of 2000 +
GDP was used to measure the condition of the national economy. In the measure
Growth of GDP in year t.
INF The annual inflation rate in Indonesia -
α Constants
β1- β9 The regression coefficient
ε it residual value (error)
To measure competition (H statistic), this study followed the well known Panzar and Rosse's (PR) approach
(Panzar and Rosse, 1987). Furthermore, Bikker and Haaf (2002) developed Panzar and Rosse's (PR)
approach composed in the form of income-modified equations (reduced form revenue equation) as follows:
ln FINRit it ( y ln AFRTit y y ln PPEit y ln PCEit ) ln OI it it BSFjit j X jt vit (2)

y j j
Table 2. Operational Definition of Competition Variables
Variables Description
FINRit Fnancial The ratio of (gross) total financial revenue to total assets of banks in the
revenue year t
AFRit Average The ratio of annual interest expenses to total funds of banks in the year t
Funding Rate
PPEit Price of The ratio of personnel expenses to the total balance sheet of banks in the
Personnel year t
Expenses
PCEit Price of Capital The ratio of physical capital expenditure and other expenses to fixed assets
Expenditure of banks in the year t
OIit Other Income The ratio of Other Income to the Total Balance Sheet of banks in the year t
EQit Capital Risk The ratio of Equty divide by total asset of banks in the year t
DDCit Deposit Mix demand deposits from customers to total customer and short-term funding
LnSizeit Size the log natura of total real assets of banks in the year t
α Constants
ε it Residual value (error)
39
H - statistics value obtained by the sum of H = βy + γy + δy . PR model shows that if the value of H -statistic
is less than or equal to zero, then the level of competition in the banking industry is monopoly. If the H -
statistic values are between 0 and 1, it indicates the level of competition in the banking industry is
monopolistic competition. On the other hand, the level of perfect competition occurs if the value of H -
statistic is equal to 1.
The analytical tool used in this research is panel data regression. Selection of panel data regression model
testing is test chow and Hausman test so that it can be seen that proper regression model that models PLS,
Fixed Effect or Random Effect. Although the results of Hausman test would be more appropriate to use the
Random Effect, but if it does not give an interpretation Random Effect (R Square) better than the Fixed
Effect model used Fixed Effect. Fixed effect uses the cross section for troubleshooting weight
heteroskedasticity and autocorellation. Implications autocorrelation and heteroskedasticity on panel data can
be corrected with the model Cross-section SUR. Gujarati (2004) explain to overcome the problems
heteroskedasticity method is used GLS (Generalized Least Square) by using a cross section weights
4. RESULTS
Descriptions of all variables are listed in Table 3. Overall the mean values of all variables are smaller than
the standard deviation so as to provide information that the mean value of each variable into represents of
each variable analyzed. Overall, the variable is a normal distribution variabel.
Table 3. Summary Statistic of Dependent and Explanatory Variables

Mean Median Maximum Minimum Std. Dev.
CAR 22.35489 18.39000 146.8500 8.340000 13.85365
COM 0.500721 0.478365 0.682669 0.323739 0.105394
SIZE 16.11162 16.08825 20.55603 12.22947 1.700131
ROA 2.210777 2.170000 8.790000 -15.82 1.846483
NIM 6.021134 5.495000 18.04000 -6.25 2.517741
NPL 2.388858 1.940000 37.59000 0.000000 2.615266
ZRISK 4.259141 3.512342 21.00343 -2.82587 3.651414
INF 5.420000 4.300000 8.380000 2.780000 2.239670
GDP 5.920535 6.198038 6.979810 4.790000 0.883590
Source: Primary Data Processing, 2016
Tabel 3 presents information on the degree of correlation between the independent variables used in
multivariate regression analysis. Matrix shows that in general the correlation between the explanatory
variables is not strong multicolinearity problems occur.
Table 4. Correlation Matrix for the Explanatory Variables
COM SIZE ROA NIM NPL ZRISK INF GDP
COM 1.0000 -0.0311 -0.3060 -0.1600 -0.0739 -0.0753 -0.0646 -0.0682
SIZE 1.0000 -0.0909 0.0827 0.0767 0.0088 0.0333 -0.3590
ROA 1.0000 0.2192 -0.0908 0.0573 0.3504 0.0680
NIM 1.0000 0.4636 -0.0942 0.4690 0.0332
NPL 1.0000 -0.0857 0.2443 -0.0261
ZRISK 1.0000 -0.1852 -0.0850
INF 1.0000 0.0218
GDP 1.0000
40

Regression analysis is focused on the relationship between the variables of economic conditions and
characteristics of the banks with bank profitability that can be seen in Table 4. Analysis using panel data
regression model Fixed Effect. Overall the whole model that looks worthy of R Square and the value of F
count significantly.
Table 5. Estimations Results of Panel Regression
Explanatory Regression models
Variables Pooled OLS Fixed effects Random effects
Constant 80.51197 90.93625 78.05072
(13.63403)*** (5.633960)*** (5.303761)***
COM -4.563945 -6.556273 -5.627881
(-1.088771) (-4.374002)*** (-2.202424)**
SIZE -2.686490 -3.815529 -2.919271
(-8.882562)*** (-4.237944)*** (-3.558666)***
ROA -0.682576 -2.311926 -1.977355
(-1.264008) (-3.839087)*** (-3.920783)***
NIM -0.569435 0.981143 0.525581
(-2.143867)** (2.756327)*** (1.615853)
NPL -0.346741 -0.121336 -0.110283
(-1.413483) (-0.608438) (-0.540940)
ZRISK 0.426432 0.696382 0.650895
(2.389781)** (1.227438) (1.751773)*
INF -0.396618 -0.277591 -0.329744
(-2.414482)** (-3.860851)*** (-3.165150)***
GDP -1.107220 -1.009665 -0.927864
(-2.439298)** (-4.843604)*** (-3.895679)***
R-squared 0.132386 0.671552 0.118901
F-statistic 12.64563 11.27521 11.18364
Prob(F-statistic) 0.000000 0.000000 0.000000
Prob. Chow Test 0.0000
Prob Hausman Test 1.0000
Number of obs 672 672 672
Note: *** coefficients is significant at the 0.01 level; ** coefficients is significant at the 0.05 level; **
coefficients is significant at the 0.10 level
Table 4 reports the regression results from the impact of competition on the capital ratio of banks in
Indonesia, including the effects of profitability, risk and macroeconomic conditions. For comparison purpose,
this study presents three regression models, they are Pooled OLS, Fixed effects and random effects. Some
variables showed consistent results. The best model is Random Effect model after being examined using
Chow test and Hausman test. But the R-squared value is lower than the R-squared value in Fixed effects.
During the study period, the banks‘ capital ratio was at specified minimum level, that was 8 percent. On the
other hand, competition between banks was in the category of monopolistic competition. In table 4, the
impact of competition on the bank's capital ratio is negative and significant in Fixed Effects and Random
Effects Model. This negative result did not correspond with the expectations that is the increase in
competition will raise bank's capital ratio and with the previous study conducted by Schaeck and Cihak
(2005). This indicates an increase in banks capital ratio does not occur as a result of competition but rather of
the supply of capital adequacy in accordance with the provisions of minimum capital.
41
Monitoring intensity has a negative and significant impact on capital ratio. In line with expectations, capital
ruled in determining the ability of a bank to a credit monitoring. In line with a study conducted by Schaeck
and Cihak (2005), Ahmad. et al (2008), Francis and Osborne (2012) and Rime (2001), bank size has negative
and significant impact on capital ratio since the smaller the banks, the higher the capital ratio required for
monitoring.
Beside competition, another variables which include profitability, risk and macroeconomic conditions also
affect bank‘s capital ratio. Profitability was proxied with ROA and NIM. In fixed effect model, ROA gave
significant negative impact on bank capital ratio, while NIM has significant positive impact on bank capital
ratio. Previous studies have found negative and significant impactof ROA to bank‘s capital ratio (Rima,
2001; Flannery and Rangan, 2008; Flannery and Rangan, 2008; Schaeck and Cihak 2005 and Büyükşalvarcı
and Abdioğlu, 2011). With negative result of ROA, it indicated that an increase in bank profits was not used
to increase capital. On the other hand, the increase of NIM generated positive and significant impact on
bank's capital ratio increase. This condition occured as the result of the remained high NIM of banks in
Indonesia which cause the shareholders to rise their capital. In addition, for the risk variable, it was found that
there was no significant effect on capital ratio, which means that risk was not a part of banks‘ capital ratio
determinant.
The results of regression analysis using fixed effect model indicated that macroeconomic conditions variable
contributed negative and significant impact on capital ratio. For inflation variable, as it is expected to happen
in this study, it gave negative impact to capital ratio. Similarly, GDP variable was also in line with the
expectation and previous studies conducted by Hortlud (2005) and Schaeck and Cihak (2005). The results
indicated that a depression in economic conditions was responded by the banks by increasing their capital
ratio.
5. CONCLUSION, IMPLICATION AND LIMITATION
This study found that competition generate negative and significant impact to bank‘s capital ratio. This result
showed that although there was a decrease in competition between banks, bank‘s capital ratio continued to
increase as a result of supplying the minimum limit of bank capital. In addition, the results of regression
analysis using fixed effect model showed that only risk variable which caused insignificant impact to capital
ratio, while profitability and macroeconomic conditions significantly affected capital ratio.
The calculation of competition adopted Panzar and Rosse's (PR) approach which has been modified (Bikker
and Haaf, 2002). But in the model, inflation variable was excluded since the research object only happened in
Indonesia which cause near singular matrix error in the analysis. For further research, it is suggested to
replace inflation variable with other equal variables so that Bikker and Haaf model can be used integrally in
the analysis.
The results of this analysis have important implications for regulators, in which the results showed that
competition among banks was not followed by the increase of bank capital ratio. The increase in bank capital
ratio only happened to meet the minimum capital requirements of banks so that the financial sector regulatory
authority may make provision to increase the minimum capital of banks when competition is increasing.
6. ACKNOWLEDGEMENTS
The author would like to thank Bank Indonesia as the data source of the annual financial statements of banks.
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44
MUSHARAKA: PERCEPTIONS & IMPORTANCCE
Muhammad Aqib Ali

International Islamic Finance & Insurance Institute (IIFII)
(aqib@iifii.org/email_aqib@yahoo.com)
ABSTRACT
Musharaka is a truly profit and loss sharing Islamic finance technique and is fully in accordance with the
principles and guidelines of Shariah. Being an equity-based and participatory mode of Islamic finance,
Musharaka mechanism conforms to Shariah in letter and spirit. But on the contrary, the use of Murabaha
and other Islamic finance modes is prevalent in Islamic banking industries around the world, these modes
being non-equity-based involve the element of debt which creates negative perceptions regarding overall
Islamic banking and finance paradigm. The study discusses the Musharaka structure in the viewpoint of one
of the major stakeholders i.e. the Islamic bankers, to promote this mode and to improve the general outlook
regarding Islamic finance. The study is conducted to critically analyze the perceptions and opinions of
Islamic bankers regarding musharaka as an important mode of Islamic finance and to derive conclusions
about the vitality of musharaka by evaluating the views of Islamic banking executives. The research is aimed
at assessing the viewpoint of Islamic bankers regarding the different matters that are ancillary to musharaka
and to identify the important factors pertinent to this concept. The research findings are based on survey data
collected chiefly through questionnaires and interviews.
KEYWORDS: Musharaka, Islamic Banking, Islamic Finance, Pakistan, Bankers, Islamic Perspective
1. INTRODUCTION
Islamic economic and financial paradigm is founded on the principle of mutual and collective welfare as
opposed to the interest-based conventional economic setup which entails individual welfare and satisfaction
of individual‘s wants and desires, ignoring the concept of cooperative welfare. The idea of Islamic economic
structure is truly in contrast to the modern interest based economic structure which is based on the pillars of
capitalism that entails unbridled resource production and consumption while ignoring the distribution aspect
of these resources and the materialistic interests of individuals precede all other considerations. Islamic
system of finance emphasizes risk sharing by offering Islamic financial tools like musharakah, murabaha,
mudaraba, ijarah, salam and istisna – based on the Islamic guidelines derived from Holy Quran and the
Sunnah (sayings and acts) of the Holy Prophet (SAW) to eventually facilitate trade and business in the
society and to consequently bring economic well-being and prosperity. (Aqib Ali 2014) This is an amazing
fact that Islamic sacred texts from the times when paper money did not even exist, offered guidance on
complex and intricate economic/financial matters. Besides this, Islamic principles also provide guidance on
the architecture of a system that is economically just and fair and is based on the schema of socio-economic
welfare of all and not just certain wealthy individuals or groups. (Zaman 2013) The Islamic modes of finance
are broadly grouped into two main classes, first are the equity or participatory based modes like mudaraba,
musharakah and sukuk and the second group includes trade based or sale based mechanisms and modes like
salam, istisna and murabaha. Although the trade-based modes like murabahah, istasna and ijarah etc are not
loans in real terms, yet these create debts on the basis of deferred sales. (Usmani, Taqi 1999)
Any venture or business undertaken by two or more people can be termed as a Musharaka. To be more
specific, Musharaka refers to a form of business partnership wherein two or more than two parties/persons
share profits at a mutually agreed ratio and share losses in proportion to their investment. Musharaka is
derived from the root word Shirka/Sharika which means being a partner. The term Musharaka should not be
confused with terms like Mudaraba or Murabaha. Mudaraba is also a equity based mode of Islamic finance
but very different from Musharaka while Murabaha is a kind of sale in which the original cost is also known
to the client along with the final price of the product. (Usmani, Imran 2002)
Musharaka is an equity-based and participatory technique in Islamic financial framework. But unfortunately
the product assortment of Islamic banks which represent the majority of Islamic Financial Institutions (IFIs)
(Adel & Mustafa 2013), is dominated by debt-based financing mechanisms i.e. financing modes that involve
debt-repayment like Murabaha and Ijarah etc. By employing equity-based financing tools like Musharaka,
Islamic banks may enhance the goodwill of Islamic banking paradigm and improve the overall level of
Shariah compliance in their offerings. Musharaka is a structure that is fully in line with the principles of
45
Shariah and follows the Shariah guidelines in true spirit, this makes Musharaka, a truly Shariah compliant
financial tool. Shariah conformity is not the only benefit of Musharaka, but it is the versatility and diverse
nature of the concept that makes Musharaka, suitable for any kind of banking and finance transactions, from
long-term financing to short-term funding, from project finance to working-capital finance, from corporate to
consumer finance transactions, Musharaka offers solutions for almost all the contemporary finance dealings.
2. REVIEW OF RELATED LITERATURE
Musharaka is a form of business partnership in which the partners contribute capital and jointly work to earn
profits. The profits are shared based on mutually decided ratios while the loss is always shared in proportion
to the contribution of capital. Musharaka is broadly classified into two main categories that are further
divided into sub-categories. These two chief categories are Shrikat-ul-Milk and Shirkat-ul-Aqd. Milk means
ownership while Aqd means a contract so we can also term these as partnership through ownership and
partnership through contract. The Shirkat-ul-Aqd is a more vital category which is more relevant in the
context of Islamic banking and financial framework. The Shirkat-ul-Aqd is further divided into three kinds:
i) Shirkat-ul-amwal in which all the partners contribute some capital into a business enterprise; ii) Shirkat-ul-
amaal whereby all the partners jointly undertake to render some services for their customers, and the
consideration or fee charged from them is distributed among the partners based on a pre-agreed ratio and the
third sub-category is iii) Shirkat-ul-wujooh where the partners have no capital contribution but they buy the
commodities on a deferred price and sell them at spot, In this case of Shirkat-ul-wujooh, the profit earned by
the partners is distributed between them at an agreed ratio.(Arshad & Ismail 2010) In Musharaka, every
partner has a right to take part in the management, and to work for the enterprise jointly formed (Gafoor
1996). There is also an option to the partners wherein they can choose any one or more partners from among
themselves to act on other‘s behalf and run the business. In this case the working partners run the business
while the non-working partners who only act as investors and never participate in business can share profits
not exceeding their capital contribution ratio. This means that ratios of profit sharing of the sleeping partners
would not be higher than their capital contribution ratio. The partners may contribute capital in cash or kind
i.e. in shape of physical assets like building, machinery and equipment etc but subject to the condition that
the value of these must be clearly and mutually agreed by the partners beforehand, so as to avoid any future
disputes and to determine the capital contribution ratios in an unambiguous manner.
According to Rammal (2004), Musharaka is not as popular as other Islamic financial instruments, Musharaka
is still deemed to be one of the most authentic forms of Shariah compliant financing. As discussed earlier
Musharaka is originally a Shariah-complaint contract but to make sure this contract does not exceed the
boundary of the Shariah and does not get assimilated with the interest based contracts, some conditions set by
the scholar of Islamic commercial law need to be followed. (Al-Kawamelah, 2008; International Fiqh
Academy, 2004) These conditions relate to various aspects like capital, profit sharing mechanism, business
operations, rights and obligations of partners, and termination. Now we will discuss the significance of
Musharaka by looking at its cotemprary usage in the modern Islamic banking and finance context.
Application of Musharaka
Musharaka can be used quite easily to facilitate financing requirements of trade and industry both in the Short
term and Long term:
Working Capital – Working capital needs such as Purchase of raw material for manufacturing concerns can
be facilitated through Musharaka. Musharaka can also be used to finance imports & exports for the benefit of
the industry.
Project Finance – Musharaka can be used to for project finance based on equity participation by the fund-
giver and sharing the returns once the project starts generating revenue.
Long Term Finance – Medium to long-term requirements for purchase of land, building, machinery and
equipments can also be facilitated through Musharaka.
Consumer Finance – Financing for consumer durables can be offered on the basis of Musharaka. It can also
be used for financing purchase of house or construction material for building a house. Usually in cases like
these banks use a Musharaka variant called Diminishing Musharaka.
Unfortunately Musharaka being such a vibrant structure fails to find its due share in the product mix of
Islamic banking around the world. The reason is the utilization of modes like Ijarah and murabaha by the
Islamic banks. Tarik (2004) mentioned in his work regarding domination of murabaha in Islamic finance and
46
examined that the ―murabah syndrome‖ has dominated Islamic banks‘ product assortment almost everywhere
Islamic banking is in operation and notes that because of this factor divergence exists between the theory of
equity-based financing and the common practices of Islamic banks. The inability to develop a uniform and
homogeneous knowledge base to accommodate the beliefs and value systems of various Muslim sects and
schools has also posed a great difficulty in conceiving and implementing a system of Islamic banking and
finance which conforms to the standards of general banking consumers. The procedure of improvement
demands the renewal of fiqh in the direction of Ijtihad to design new rules that have not been pondered upon
by early Islamic scholars, or to modify these rules in line with the contemporary financial and economic
issues triggered by globalization (tajdeed). The requirement is to craft a sense of harmonization of economic
and fiqh schools of thoughts keeping in view the outlook of recent socio-economic facts and circumstances.
To be precise, we must be relatively more accommodating and supple to deal with the current economic
development and financial trends which in fact call for new research in Islamic finance along-with the re-
invigorating of Islamic thinking and taking into account, the Islamic scholars‘ viewpoint on global
developments. (Ibrahim, 2006). All this would not only help to lift the overall Islamic banking industry in the
global context but would also contribute and facilitate the new-product development process especially in the
area of equity-finance in which domain, the Musharaka structure falls.
Another reason of not employing and utilizing Musharaka-based financing is that the Islamic banks, in a
mixed banking system, as well as investment companies need to offer relatively less risky modes of financing
as compared to Mudaraba or Musharaka in the wake of severe competition from conventional banks and
other financial institutions. (Ibrahim & Khalifa 2011) Most Islamic banks employ murabaha as their most
preferred financing option/product which is in fact one of the least preferable alternatives of Islamic
financing modes according to the majority of Islamic finance scholars around the world. In countries where
Islamic banking is setting standards and benchmarks like Malaysia and some of the Middle eastern countries,
Islamic modes of finance including murabaha and tawarruq etc are most utilized which shows the lack of
compliance levels in accordance with pure Shariah guidelines. As a matter of fact if we profoundly look into
the products and offering structures of Islamic finance institutions and banks, we can clearly witness
murabaha as the most dominant choice. According to the Islamic Banking Bulletin of SBP (March 2013),
murabaha leads the financing share mix of Islamic banks which is 36% just after diminishing musharakah
which is 35.7%. The financing through murabah by the IFIs (Islamic financial institutions) up to March 2013
was 90.4 Billion Rupees and 89.7 Billion Rupees from dimisnhing musahrakah was financed. Almost same
or mostly similar is the scenario, in other countries where Islamic banking is thriving. For instance, share of
murabahah in financing mix of IBIs (Islamic banking institutions) and IFIs in Malaysia and Bahrain is more
than 54% (Abdus Samad, Norman, Gardner and Cook 2005), and in Sudan it is over 43%. These statistics
clearly portray Islamic banks hesitation in adopting equity-finance models like Musharaka and hence the
issue needs urgent attention on the part of all the concerned stakeholders to move ahead in this positive
direction.
In Shariah point of view equity-based and participatory modes of investment and finance are preferred and
are more acceptable as compared to other mechanisms and transactions e.g. salam, ijarah, murabaha etc. The
fact of the matter is that any truly co-operative and well coordinated enterprise must be extensively
participatory in nature (Choudhury 2001) and the Islamic banks and IFIs (Islamic finance institutions) need to
operate on these lines, in order to be truly ―Islamic‖ and ―Shariah-complaint‖ in their dealings and
transactions. Islamic banking lags behind in the process of research and new-product development when it
comes to the area of equity-financing tools and techniques like sukuk, Mudaraba and most importantly
Musharaka. This perception is held by the critics of Islamic banking that the views of Islamic bankers are
most relevant to facilitate and promote Musharaka because their views are the opinions of insiders of the
industry and this study aims to determine the viewpoint of these important stakeholders regarding
Musharaka.
3. RESEARCH METHODOLOGY
Research Questions:
The approach used in the research study is both quantitative and qualitative in nature. Initially the descriptive
analysis is done by use of various statistical measures and afterwards, the inferential statistical tools like the
regression analysis are utilized to analyze the data. The research is actually a review of the musharaka as a
vital Islamic finance mode. The research questions are therefore designed accordingly, keeping in view the
nature of the study. The following are the research questions:
Research Question No.1: Whether the generally held views and opinions of Islamic bankers regarding
musharaka are adverse or favorable.
Research Question No.2: To identify the important factors that contribute to the favorable opinion of
musharaka by looking at the perceived variables like musharaka Shariah compliance, musharaka operations
transparency, musharaka business support value, knowledge and awareness of musharaka.
Research Question No.3: In order to promote Musharaka mode of finance, what options could be explored
and what measures should be taken keeping in view, the soundness of musharaka in terms of Shariah
compliance and its risk-sharing nature.
In every research study, research questions form a vital organ of the study by endeavoring to quest for
answers to some important phenomena or issue to help solve problems and to enhance the present body of
knowledge by providing directions for future pertinent and similar research studies. Keeping in view the
vitality of research questions, the above research questions were chalked out after careful analysis and
consideration of previous research relevant to the research study and subsequently after a review of the
literature, the answers to the above discussed research questions will be sought in the following sections of
the study. The study will proceed in a logical manner by explaining the research methodology first, and then
the instrument utilized for the conduct of research study will be discussed along with the sample details.
Later, the analysis will be performed on the data collected. Afterwards, the sections of results and
conclusions will follow to sum up the research investigation.
Research Design:
The study is designed in such a way to effectively gauge and evaluate the attitudes and perceptions towards
musharaka to assess the perspectives of Islamic bankers. The research design comprises of a structured and
well organized questionnaire mostly administered/delivered personally and at few instances through mail, in
cases where there were time and cost constraints. Apart from getting the questionnaires filled directly by the
target audience i.e. the Islamic bankers, several informal and casual interview sessions also took place. The
interviews were conducted to feed the answers in the questionnaire in cases where the bankers were not
willing to write the answers themselves or otherwise preferred viva/ oral method over written research-
technique. This proved quite vital for the research study because this helped the researcher to gain the
subjective feedback simultaneously with the quantitative approach. Besides the blend of quantitative and
qualitative data collection, the random interview sessions helped in confirming the responses given by the
participants through filled questionnaires, in an effective way. The reasons for selecting the mentioned
research design are many. The main reason is the nature of data to be collected. Questionnaires are
considered as one of the best ways to fetch primary data and in this case, the data is primary – collected
directly from the research participants. Apart from primary data, the nature of the research study has a rather
qualitative inclination and in such cases, survey method of research is most preferable. The qualitative nature
of the data is actually because of the fact that the study entails an evaluation of perceptions of Islamic bankers
towards musharaka financing and in view of Hussey and Hussey (1997), questionnaires are a best method to
know the perceptions and attitudes of research participants. The assessment of attitudes and behavior of
respondents is actually done by seeking their opinions pertaining to the particular research issue/topic and
questionnaires are an important instrument in this regard. (Ghauri and Gronhaug, 2002) The research study is
conducted by performing a field survey across all five pure Islamic banks. According to Attwergy (1998), the
questionnaires not only facilitate the data collection procedure but they also improve the overall validity and
reliability of the collected data which is actually a positive consequence of a standardized questioning
approach that is based upon previous similar research responses. The questionnaire was devised keeping in
view the similar studies like that of Gerrard and Cunningham (1997), Dusuki (2008), and Saeed, Shah and
Shahin (2012). The detailed anatomy and precise features of the questionnaire will be discussed in the later
section of research methodology.
The Sample:
The survey encompasses all the pure Islamic banks that include Meezan Bank, Dubai Islamic Bank, Al-
Barakah Bank, Bank Islami Pakistan and Burj Bank in the order of maximum branches in the country. The
sample size comprises 100 Islamic bankers belonging to these five full-fledged Islamic banks. The actual
number of questionnaires distributed is not 100 but the researcher kept on getting the questionnaires filled
irrespective of the actual number of questionnaires distributed until the sample size of 100 was reached and it
was made sure that all the 100 questionnaires are complete, valid and suitable to be considered for their
48
inclusion in the data collection process in the course of the research study. The samples were randomly
selected from the customers by visiting different bank branches during business hours. To avoid sampling
errors and any sort of sampling biases, the researcher varied visit timings, contacted both genders subject to
their availability at the time of the visit to the banks, and avoided any kind of prejudices while collecting data
like considering any characters of participants like ethnicity, social status and any type of attributes, for the
judgment which could hinder the objective collection of data from the target participants. The bank branches
were randomly visited in the four major cities of Pakistan including Islamabad, Karachi, Lahore and
Faisalabad. In all these cities there are branches of almost all the mentioned Islamic and conventional banks
which are selected for the survey study. The reason behind the selection of Islamabad is that it is the capital
city of the country and hence it makes sense to choose this city and it is indeed one of the obvious choices for
such kind of research study. Karachi on the other hand, is termed as the heart of Pakistan, it is the largest city
in Pakistan and is the economic hub of the country having most head offices of the banks selected for the
survey study. Lahore is the biggest city of the largest province of the country and has maximum number of
Islamic banking branches after Karachi (State Bank of Pakistan Islamic Banking Bulletin 2013), this was the
logic for choosing this city in the sample frame. The raison d'être of Faisalabad being in the survey is that it
comes at number five in terms of Islamic banking branch count, after Karachi, Lahore, Islamabad and
Rawalpindi respectively. Another aspect to select the city of Faisalabad in the survey is the fact that it is
called the Manchester of Pakistan because it is the industrial hub of the country with a powerful textile sector
and a very broad Islamic banking base.
The Instrument Employed:

As described earlier, a structured questionnaire was employed to collect the data from the respondents. The
intention was to keep the questionnaire as simple as possible for the respondents and hence this was kept in
mind while designing the questionnaire. The structured questionnaire used in the study is dissected into two
broad sections. There were single line brief instructions as how to answer the entries with ease and
convenience by the participants and most importantly without mistakes and errors. The questionnaire
contained a total of twenty questions/ items asked from the respondents. The questions were designed
keeping in view the literature review and previously conducted relevant studies especially the ones conducted
by Gerrard and Cunningham (1997) and Saeed, Shah and Shahin (2012). The number of questions was
planned very carefully as the length and layout of the questionnaire has a close relationship with the data
accuracy and reliable data collection. The same point was highlighted by Giuseppe Iarossi (2006), that the
length of questionnaire has a considerable effect on accuracy of data. Before the first section in the
questionnaire starts, there is a brief introduction to the survey conducted, along with an assurance that the
principles and ethics of research would be followed by ensuring the anonymity and confidentiality of the
respondents. The first section aims at grasping the social and demographic attributes of the participants. In
this initial division of the questionnaire, respondents are requested to give answers to questions about their
gender, age and education etc. The second more elaborate and vital segment in the context of the research
problems being investigated, in this study is focused on having an insight of the perspectives and opinions of
participants regarding Islamic financing method under consideration i.e. musharaka. This section comprises
fourteen Likert Scale (1932) statements. The Likert Scale was laid on a scale of one to five where one
denotes Strongly Disagree and five indicates Strongly Agree on the scale where the questions are positively
worded. Most of the statements were positively worded but there were a couple of statements that were
negatively worded to assess the varying attitude and participation level of the respondents. The scale is thus
reversed in case of negatively worded statements which suggest that one implies Strong Agreement whereas
five signals Strong Disagreement with the given statement.
4. ANALYSIS AND RESULTS
In the initial part of this section, the demographic information of the respondents, contained in the first
section of the questionnaire, is presented. In the later parts the second section of questionnaire is analyzed
through various statistical measures including the measures of variation and inferential statistics like
regression analysis.
Demographic Analysis
The findings of the first section showed the details of personal attributes of participants like their age, gender
and religion. From the total of 100 respondents, 82% of the respondents were male and 18% of them were
female, 61% of the respondents have age less than 36 years which shows that most of the respondents are in
the mid or start of their banking careers. This fact is also verified when we analyze the rank or grade of
bankers involved in the study. The analysis shows that 60% of the respondents were middle level employees
while 25% of the respondents were having rank of managerial or upper level and the rest were junior level
Islamic bankers. With respect to the respondents educational profile, 22% of the respondents have
professional qualification while only a small percentage of 2% of participants hold a PhD degree. Most of the
research participants were the holders of a Bachelors degree; they account for 42% of total respondents.
When we consider the income level of respondents, we can see that majority of them, 36% to be precise, earn
more than 25,000 PKR per month. Out of the total 100 participants, 30 had income level of more than 50,000
PKR per month. There were also a small proportion of the respondents having extremely low earning of less
than PKR 10,000, these were 8% and on the other there also respondents having a very high level of earnings
those who earn more than 100,000 per month. These were 9% of the total research participants. Lastly in the
section of demographics, respondents were asked about their religion, the result was anticipated as Pakistan is
a Muslim majority population, so this was expected, there was only one Non-Muslim among the total 100
respondents who took part in the research study. Now we will discuss the analysis in the context of our
research questions in the following section which deals with the percepts of respondents regarding
musharaka.
Regression Analysis
In order to assess the perception of Musharaka based products and services, from the viewpoint of Islamic
banks‘ employees; the second section of the questionnaire was developed. As discussed 100 employees of
five full-fledged Islamic banks were randomly selected for survey. Personally administered questionnaire was
distributed to Islamic banks' employees. There were 14 items in the second section of the questionnaire to
fetch data about the musharaka financing mode. The distribution of these 14 items and their respective
variables is given in table 1.1. These items were commuted into five variables for further analysis. Out of the
total fourteen likert statements, the five key variables were chalked out. These were extracted keeping in view
the previous similar research studies and based on the researcher experience and knowledge on the given
subject i.e. musharaka finance.
Table 1.1
Sr. No Variable Type of Variable Items and questions
1 Shariah Compliance Independent variable Question No. 1,7,11,&12
2 Operations and Transparency Independent variable Question No. 5,9,10
3 Business support and value Independent variable Question No.6,4
4 Knowledge and awareness Independent variable Question No. 2,3,13,14
5 Perception of Musharaka Dependent variable Question No. 8
Descriptive Statistics for Variables

Table 1.2 shows the descriptive statistics results for five variables of the study. Shariah compliance,
operations and transparency, business support has mean value more than 3 which means majority of the
respondents have neutral attitude in respect of these above variables. Knowledge and perception of
Musharaka has mean value near to 4 which means respondents agree with the researcher. Normality of all
these variables can be evidenced from histogram with normal curve, value of skewness and kurtosis.
Following table indicates that assumption of normality is fulfilled in all variables as all of these variables
have skewness value ranges from +1 to -1.
Table 1.2 Descriptive Statistics of Variables

Shariah Operations & Business Knowledge & Perception of
Compliance Transparency Support Awareness Musharaka
Mean 3.0525 3.1667 3.3300 3.9125 3.74
Median 3.2500 3.3333 3.5000 4.0000 4.00
Std. Deviation .79717 .78639 .91624 .67828 1.307
Skewness -.556 -.186 -.367 -.841 -.803
Std. Error of .241 .241 .241 .241 .241
Skewness
50
Kurtosis -.064 -.532 -.506 1.430 -.678

Std. Error of .478 .478 .478 .478 .478
Kurtosis
In order to generalize the above results of descriptive statistics multiple ordinary least square regression is
performed by taking one dependent variable and four independent variables.
The general model of regression analysis is as follows:
PMi = b0 + b1SCi + b2OTi + b3BSi+ b4KAi+ ui
Where
PM = Perception about Musharaka
SC = Shariah compliance
OT = Operations and transparency
BS = Business Support & Value
KA = Knowledge and Awareness
Table 1.3: ANOVA

Model Sum of Squares df Mean Square F Sig.
1 Regression 91.711 4 22.928 28.095 .000a
Residual 77.529 95 .816
Total 169.240 99
a. Predictors: (Constant), Knowledge and awareness, Shariah Compliance, Business support and value,
Operations and Transparency
b. Dependent Variable: Perception of Musharaka
In order to proceed to the regression estimates first we have to check whether going through the process of
estimation is worthwhile as compared to checking means only or not? From table 1.3, it can be evidenced that
at 5% level of significance, model is highly significant so model estimation is more appropriate than mean. In
order to assess, explanatory power of the model, coefficient of determination (R square) can be observed
from table 1.4 which is 0.736. It means 73.6% variation is dependent variable can be explained by
independent variables in the model. This is very strong but can be misleading that is why adjusted R square is
verified. Overall model is good and can be used for estimation of coefficients.
Table 1.4 Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate
1 .736a .542 .523 .903
a. Predictors: (Constant), Knowledge and awareness, Shariah Compliance, Business support and value,
Operations and Transparency
Table 1.5 Coefficients

Correlations Collinearity Statistics
Model Sig. Zero-order Partial Part Tolerance VIF
1 (Constant) .005
Shariah Compliance .000 .600 .370 .269 .697 1.435
Operations and Transparency .001 .596 .337 .243 .666 1.501
Business support and value .743 .317 -.034 -.023 .750 1.332
Knowledge and awareness .001 .595 .322 .230 .581 1.722
In table 1.5, at 5% level of significance, only business and support value is statistically insignificant variable
and all other variables are statistically significant. Zero-order correlation to part correlation of all the
variables is declining. From this we can assume that there might be the problem of multicollinearity existing
among the independent variables. In order to verify the problem of multicollinearity, collinearity diagnostics
are estimated in table 1.6. If Eigen value falls near to zero and condition index is more than 15 then the
problem of multicollinearity may exist. In table 1.6, using Eigen value all dimensions have problem of
multicollinearity and using condition index dimension 5 may have the severe problem of multicollinearity
and dimension 2 to 4 have minor problem of multicollinearity.
Table 1.6 Collinearity Diagnostics
Model Dimension Eigenvalue Condition Index
1 1 4.877 1.000
2 .049 9.976
3 .033 12.248
4 .029 12.949
5 .013 19.667
After identification of multicollinearity, there may be more than one solution. Now we will perform stepwise
regression, initially variables with high correlation are dropped and included one by one in order to explore
the model with high statistical significance and explanatory power. In order to remove problem of
multicollinearity, stepwise regression is performed and results are displayed in table 1.7. The entire three
models are statistically significant which means bank employees have favorable perception of Musharaka.
Although all models are significant but model 3 is preferred because it considers majority of the variables and
excludes only one variable that is business support and value.
Table 1.7 ANOVA
1 Regression 60.836 1 60.836 54.997 .000a
Residual 108.404 98 1.106
Total 169.240 99
2 Regression 82.021 2 41.011 45.610 .000b
Residual 87.219 97 .899
Total 169.240 99
3 Regression 91.623 3 30.541 37.774 .000c
Residual 77.617 96 .809
Total 169.240 99
a. Predictors: (Constant), Shariah Compliance
b. Predictors: (Constant), Shariah Compliance, Operations and Transparency
c. Predictors: (Constant), Shariah Compliance, Operations & Transparency, Knowledge and awareness
d. Dependent Variable: Perception of Musharaka
As far as explanatory power of models is concerned, R square is increased as compared to initial regression
with problems of multicollinearity. But after removal of multicollinearity problem in table 1.8, model 3 has
more explanatory power as compared to model 1 and model 2. It means model 3 has good fit.
Table 1.8 Model Summary
1 .600a .359 .353 1.052
2 .696b .485 .474 .948
3 .736c .541 .527 .899
52
a. Predictors: (Constant), Shariah Compliance

b. Predictors: (Constant), Shariah Compliance, Operations and Transparency
c. Predictors: (Constant), Shariah Compliance, Operations and Transparency, Knowledge and awareness
d. Dependent Variable: Perception of Musharaka
Table 1.9 Coefficients

Unstandardized Coefficients Standardized Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .738 .418 1.765 .081
Shariah Compliance .983 .133 .600 7.416 .000
2 (Constant) -.423 .447 -.947 .346
Operations and Transparency .668 .138 .402 4.854 .000
3 (Constant) -1.616 .547 -2.954 .004
Operations and Transparency .491 .140 .295 3.495 .001
Knowledge and awareness .562 .163 .291 3.446 .001
So on the basis of table 1.9, our final regression model with three independent variables is as follows:
PMi = b0 + b1SCi + b2OTi + b3KAi
PM = -1.62 + 0.53SCi+0.49OTi+ 0.56KAi
From the above regression equation, we can interpret that Shariah compliance has positive impact on the
perception of bank employees. It means if extent of Shariah compliance will increase by one unit then
perception about Musharaka will improve by 52.6%. Similarly if transparency in operations of Islamic banks
and knowledge levels about musharaka improve by one unit, this will also improve the impression of
musharaka perceptions by 49% and 56% respectively.
5. CONCLUSION AND LIMITATION
From the analysis and perusal of results of the research study, this can be concluded that musharaka opinions
and viewpoints of Islamic bankers are generally very favorable. This is also the answer of our first research
question. The answer is further validated by the relevant statistics like a very high mean of 3.74 to entry no.8
in the second section of the questionnaire which was directly focused about research question one. And apart
from this, the informal interviews along with filling up of questionnaires also ratify this favorable view of
Islamic bankers, who participated in the study. The answer to research question two is found through the
inferential statistical method of regression, in which three key variables emerged with their positive impact
on the favorability of musharaka namely the musharaka Shariah compliance, transparency in musharaka
operations, and knowledge and awareness level regarding musharaka. The last two entries in the
questionnaire were pointed at the discovery of answer to the last research question which was regarding the
options to promote Musharaka technique in Islamic banking. The responses of the participants clearly gave
an answer for our last research question stating that improving and modifying the operations and mechanisms
involved in musharaka and enhancing the knowledge and awareness levels of stakeholders would have a
positive bearing on the views and perceptions regarding musharaka. Enhancing the knowledge levels would
also facilitate the process of new product development to deliver more innovative products and services
based on the models and structure of Musharaka. The descriptive statistics also corroborate the responses of
the participants. The extremely high means to both the questionnaire entries – both above 4.40 and lower
standard deviations suggest that the Islamic banking executives have no doubts that both the mentioned
options are best suited to enhance and promote various products and services based on the structure and
model of Musharaka.
The limitation of the study is that the sample of the study only focuses on one major industry stakeholder i.e.
Islamic bankers, so the results may not be generalized for other stakeholders like customers, regulators, and
others. Further research studies may be conducted by incorporating other stakeholders as well to have more
significant research findings on this important mode of Islamic financing.
6. REFERENCES
Abdus Samad, Norman D Gardner, & Bradley J Cook (2005). Islamic Banking and Finance in Theory and Practice: The
Experience of Malaysia and Bahrain. The American Journal of Islamic Social Sciences, Vol 22:.2, 69-86.
Adel Mohammed Sarea, Hj Mustafa Mohd Hanefah (2013), The Need of Accounting Standards for Islamic Financial
Institutions, International Management Review, Vol. 9, No. 2
Al-Kawamelah, Nuruddin A. Karim (2008) Musharakah and Its contemporary practice: Jordan Islamic Bank as an
Example, Dar al-Nafa'is, Jordan.
Aqib Ali, Muhammad (2014), Evolution & Development of Islamic Banking: The Case of Pakistan, European Journal of
Islamic Finance, Volume 1, Issue. No.1 Dec-14
Attwergy, A.B. (1998), The Islamic Banking Practices: Possible Acceptance in the US as Perceived by Islamic and
US/Western Bankers, University of Nova, Davie, FL.
Badr-El-Din A. Ibrahim & Mohammed Osman Khalifa, (2011), ―Why Musharaka Mode of Finance is Worth
Considering?‖, Journal of Islamic Banking and Finance Volume 28 Oct. – Dec. 2011 No. 4.
Dusuki, A.W., (2008) "Understanding the objectives of Islamic banking: a survey of stakeholders' perspectives",
International Journal of Islamic and Middle Eastern Finance and Management, Vol. 1 Iss: 2, pp.132 - 148
Gafoor, A.L.M. (1996). Interest-Free Commercial Banking. Malaysia: A.S.Noordeen.
Gerrard , P . and Cunningham , J . B . (1997) ‗ Islamic banking: A study in Singapore ‘ , International Journal of Bank
Marketing , Vol. 15 , No. 6.
Ghauri, P.N. and Gronhaug, K. (2002), Research Methods in Business Studies: A Practical Guide, Financial Times
Prentice Hall, New York, NY.
Giuseppe Iarossi (2006), The Power of Survey Design: A User‘s Guide for Managing Surveys, Interpreting Results, &
Influencing Respondents, The World Bank, Washington DC.
Hussey, J. and Hussey, R. (1997), Business Research: A Practical Guide for Undergraduate and Postgraduate Students,
MacMillan Business, Oxford.
Ibrahim, Badr El Din A., (2006),"The "missing links" between Islamic development objectives and the current practice of
Islamic banking - the experience of the Sudanese Islamic banks (SIBs)", Humanomics, Vol. 22 Iss: 2 pp. 55 – 66.
International Fiqh Academy of the Organization of Islamic Conference (2004) 15th Session, Resolutions of Musharakah
Mutanaqisah and its Shariah principles, http://www.fiqhacademy.org.sa/.
Masudul Alam Choudhury (2001), Islamic venture capital: A critical examination, Journal of Economic Studies, Vol. 28
No. 1, 2001, pp. 14-33
Meezan Bank Limited, Pakistan (2013), Shariah Advisor‘s Report 2013.
Noraziah Che, Arshad and Abdul Ghafar, Ismail (2010), Shariah parameters for Musharakah Contract: A comment,
International Journal of Business and Social Science Volume 1 No. 1.
Rammal, H.G. (2004) ―Financing Through Musharaka: Principles And Application‖, Business Quest, Online, Available
at: http://www.westga.edu/~bquest/2004/musharaka.htm.
Saeed Akbar, Syed Zulfiqar Ali Shah, Shahin Kalmadi, (2012) "An investigation of user perceptions of Islamic banking
practices in the United Kingdom", International Journal of Islamic and Middle Eastern Finance and Management,
Vol. 5 Iss: 4, pp.353 - 370
State Bank of Pakistan (2013), Islamic Banking Bulletin March 2013.
Tarik M. Yousef, (2004), The Murabaha Syndrome in Islamic Finance: Laws, Institutions and Politics, Edinburgh
University Press, United Kingdom.
Usmani, Muhammad Imran Ashraf (2002), Guide to Islamic Banking (Meezan Bank), Darul Ishaa‘t. Karachi.
Usmani, Muhammad Taqi (1999), Islamic Finance, New Steps, Darul Uloom, Karachi.
Zaman, Dr. Asad, (2013), ―Islamic economics and the global financial crisis‖, Islamic Economist, 18 th July, 2013.
54
SOCIAL CAPITAL AND INNOVATION CAPABILITIES: STRATEGIC

RESOURCE TO IMPROVE ENTREPRENEURIAL AND PERFORMANCE OF
SMES CREATIVE INDUSTRY
Kesi Widjajanti 1, Eviatiwi Kusumaningtyas Sugiyanto2

Semarang University
(Corresponding emails: kesi_widjajanti@yahoo.com, eviatiwi.sugiyanto@gmail.com)
ABSTRACT
This research focuses on the development of performance creative economy especially the crafts sector.
Based on the concept of resource based theory and research gap, this study examines the effect of company
resources such as social capital, innovation capabilities, and entrepreneurial marketing towards marketing
performance in craft creative industries sector. The sampling method is quota sampling and the number of
samples are 100‘s SMEs creative industry actors. The data analysis technique in this study used the
Structural Equation Modelling (SEM) of the software package AMOS 22.0. The result of this study shows
that social capital without innovation capabilities can‘t improve the marketing performance. While social
capital that owned by craftsmen can be explored to improve innovation capabilities. Furthermore, this
innovation capabilities can be used to improve marketing performance. The innovation capabilities is a
driving force for the creative industries sector to succeed in marketing. Furthermore, innovative capabilities
has significant effect to the entrepreneurial marketing, although entrepreneurial marketing has no significant
effect on marketing performance.
KEYWORDS: Entrepreneurial Marketing, Social Capital, Innovation Capabilities, Marketing Performance
1. INTRODUCTION
Creative economy, which is mostly driven by Small and Medium Enterprises, is a craft sub sector. This sub
sector is one of dominant sectors contributing to economy. This craft sub sector is a kind of creative economy
based on culture potential to develop in Indonesia because Indonesia is the third largest country having craft
activities in Asia and also has human and heritage resources. One of the focus of the development for this
industry is marketing.
The process in creating good marketing performance comes from the concept of Resource Based Theory of
Firm in which one of the resources contributing to competitiveness is resources developed through social
approaches such as social capital (Ferdinand, 2005). It means that social capital is considered as one of
strategic elements in developing competitiveness for better marketing performance and ensuring its
sustainability. Some studies have investigated the effect of social capital on the marketing performance, but
empirically, they have showed a research gap.
A research conducted by Lee (2015) showed that social capital contributes to competitive advantage that can
create better marketing performance of women enterpreneurs in Korea. In line with this study, Sainaghi
Baggio (2013) mentioned that the effect of social capital on hotel performance in Germany. It said that social
capital has positive impact on micro enterprises in Malaysia (Muniady, et al, 2015). However, a study
conducted by Pranoto et al (2013) showed different result. It was mentioned that there was negative effect of
social capital on company‘s performance of SME in Malaysia and Indonesia. The research of Perin et al
(2013) also showed that social capital had no significant effect on marketing performance of companies in
Brasil.
Related to Resource-Based view, Scheepers (2012) mentioned that entrepreneurial skill was defined as an
ability of entrepreneur in maximizing resources and seeing potentials for the improvement of competitive
advantage of the company. One of significant capabilities is a skill to innovate. Innovation improves
company‘s condition to attract consumers leading to marketing performance of the company. However, some
studies, one of them was conducted in manufacture company in Pakistan, showed one of research gaps
related to innovation towards competitiveness or marketing performance. It said that there was positive
impact of innovation towards company performance (Hassan, et al, 2013). Similar results occured in a study
of Small and Medium Enterprises (SME) of Farmacy industry in Iran (Dadfar, et al, 2013), a study of SME of
Garment in West Java, Indonesia (Hamali, 2013), a study of organizations in Brasil (Perin, et al, 2011), a
study of service companies in Taiwan (Chih, et al, 2011) and a study of company in Tunisia (Ladib, 2015).
55
Meanwhile, some studies showed that there was negative effect on innovation and company performance
(Padgett & Maura-Leite, 2012), and a research conducted by Yunidiawati (2013) on Leather Craft in
Magetan, Indonesia, showing that there was no relationship between innovation and the competitiveness of
company.
The concept of entrepreneurial marketing is an approach of contigency from the perspective of limited
resources and existing problems of SMEs (Stokes, 2000). Based on literature, entrepreneurial marketing
(EM) is viewed as special marketing for new businesses seen from the age or size of the company (Kraus,
2011). However, a research conducted by Pardanyi et al (2012) showed a different result. It was mentioned
that EM had effect on marketing performance without influenced by the age and size of the company.
Based on the research gap explained above and the research based view, this paper reconstructed previous
research models. The research problem of this paper was how to improve the marketing performance and
develop a model of development for entrepeneurial marketing through innovation capabilities and social
capital.
The Impact of Social Capital on Entrepreneurial Marketing

The concept of entrepreneurial marketing is related to the concept of social capital and exploration of social
capital facilitated by networking (Mayasari, 2009). Then, Mayasari explained that marketing through
networking is a natural aspect embedded in entrepreneurship when the enterpreneurs exchange ideas,
knowledge, market information of related businesses to support their marketing activities. Ionita (2012)
defined three frameworks of competences required in entrepreneurial marketing; functional, social and
general entrepreneurial competencies. She suggested that there was social competencies related to the skills
required to interact with others such as team work, communication, leadership, and ability to establish
networking. Therefore, the first hyphothesis is:
H1: Social Capital has impact on Entrepreneurial Marketing
The Impact of Social Capital on Innovation Capabilities

Fleming (2013) said that innovation in creative industry was driven by complicated relationship between
content and technology; collaboration between craftmen and scientists, so that there is a need to improve
conducive innovation climate to better develop the networking with the existing parties such as culture
institutions and other organizations. Networking was used to explore how the parties can work together in
creating innovation on arts and content, and developing skills, etc. Then, Fleming (2013) explained that
establishing partnership with other supporting institutions was a kind of innovation aspect so that social
capital can be explored to improve the ability to innovate. The determining factor of innovation is knowledge
sharing coming from qualified social capital. Hence, the second hypothesis is:
H2: Social Capital has impact on Innovation Capabilities
The Impact of Social Capital on Marketing Performance

Social capital can contribute to the success of organization by creating flexibility for organization. Social
capital plays a role in making more efficient use of resources (Sargent, 2010). Social capital is an important
aspect for small business such as it gives access for entreprises to gain resourcess through information. In
marketing, information of consumers is important for a salesman in improving his marketing performance
(Claro & Neto, 2009). Social capital is a powerful aspect for the success of organization to gain specific
knowledge from colleagues or networking. Then, for those who are able to adapt the resources with internal
operation will bring them to succeed in the market (Perin, et al, 2011). Further, (Burt in Perin, et al, 2011)
said that external social capital facilitates self-development, norms enforcement, and trust that can make
someone able to achieve his goal in the society leading to better business performance. Therefore, the third
hypothesis is:
H3: Social Capital has impact on Marketing Performance
The Impact of Innovation Capabilities on Entrepreneurial Marketing

Entrepreneurial Marketing is a spirit, orientation and process in gaining opportunities and business
development in creating values to consumers through innovation, creativity, selling, market immersion,
56
networking and flexibility (Morris & Deacon, 2009). It means that innovation exists in entrepreneurial
marketing. Further, Fleming (2013) explains that innovation should be explained holistically (not limited to
new technology). It is mentioned that innovation is a process and prospect of openness, awareness of
unpredictable issues, and a commitment to work hard by having better ideas. Ionita (2012) said that
entreprenurial marketing consists of two elements; entrepreneurship (proactivity, opportunity, risk taking and
innovativeness) and marketing (customer focus, resource leveraging, guerilla marketing and value creation).
Different from the classic marketing concept which believes that marketing requires assessment of market
prior to product development, enterpreneurial marketing is a concept of entrepeneur started from ideas, and
then, its market. To make it happen, the skill to innovate is required. To conclude, it is agreed that the skill to
innovate is required to develop ideas of entrepreneurship including entrepreneurial marketing. Hence, the
fourth hypothesis is:
H4: Innovation Capabilities have impact on Entrepreneurial Marketing
The Impact of Innovation Capabilities on Marketing Performance

According to Brown and Eisenhard in Perin et al (2011), a company or an organization having ability to
innovate will be able to cope with and respond to any challenges fast and better so that it will improve the
marketing performance. Innovation can be understood as adaptation to new idea or behaviour in organization.
In fact, innovation which stimulates through learning will facilitate the success of a product and company‘s
marketing performance (Damanpour, Gopalakrishnan, Baker, Sinkula in Perin, et al (2011). Innovation as a
creativity and/or new ideas, new process, new product and service is meant to improve the consumers‘
assessment, and contribute to performance and effectiveness of a company (Hansen, et. al.,2006). An ability
to innovate is very important to survive and compete with other competitors in fierce competition. Keeh, et al
(2007) mentions that innovation plays role in creating marketing segment development, better company‘s
position, and improving company‘s growth. Hence, the fifth hypothesis is:
H5: Innovation Capabilities have impact on Marketing Performance
The Impact of Entrepreneurial Marketing on Marketing Performance

Entrepreneurial marketing adapts interactive marketing approach of direct interactions with consumers
(personal selling) and marketing activities such as word of mouth. Besides, in collecting market information,
they use informal ways such as personal observation or information through networking (Ionita, 2012).
Entrepreneurial marketing focuses on how to give values for consumers, friendly marketing activities,
personal observation, and firm networking in entrepreneurial marketing are needed to improve marketing
performance. Entrepreneurial marketing integrates enterpreneurship and marketing so that the problems of
marketing and high production cost can be solved to improve marketing performance. Further, Birley (2007)
said that marketing activities based on the enterpreneurship concept will determine the company‘s
performance. Generally, good salesmen come from persons having high entrepreneurship skill. This will
make them become firm, and aware of any changes on environment, and also can see market opportunities to
create products to offer at the market. Eventually, salesmen having entrepreneurial skills are required to
achieve the goal of marketing, and the company should have a concept of marketing and entrepreneurship
especially for micro, small, and medium entreprises (Hadiyati, 2012). Hence, the sixth hypothesis is:
H6: Entrepreneurial Marketing has impact on Marketing Performance
57
Research Framework
Figure 1. Research Framework
3. RESEARCH METHOD
The population of this research was all creative industries, and sampling method used was non-probability
sampling employing quota sampling as many as 100 craftmen.
The research variable and its indicator are in table 1.
Table1. Variable and Indicator
No Variable Indicator Source
1 Social Capital Sharing Information Widodo (2009),
Interaction and exchange ideas Huselid et al (1997)
Optimize knowledge
Networking quality
2 Innovation ability to develop new products that meet market Adler & Shenhar
Capabilities needs (1990)
ability to apply appropriate process technologies to
producing these new products
ability to develop and adopt these new products and
process technologies to satisfy future needs
ability to respond to related technology activities
and unexpected activities created by competitors
3 Entrepreneurial Opportunity Vigilance Niehm, et al (2013)
Marketing Consumer-Centric Innovation
Value Creation
Risk Management
4 Marketing Selling volume Ferdinand (2000),
Performance selling growth Lambin (1972)
consumer growth
market share
Profitability
The evaluation of empirical model in this research used Structural Equation Modeling (SEM) analysis
employing software Amos 22.0 and the analysis employed two approaches; outer model and inner model test
(Ghozali, 2011).
58
4. RESULTS
Figure 2. Equation Structural Model using AMOS
Analysis Factor of Confirmatory and Construct Validity

Three measurements of construct validity used was convergent validity, variance extracted, and construct
reliability. Based on output standardized loading estimate, generally, all loading factor was significant and
the value of loading was over 0.50 and the value of AVE for social capital construct was 0.584, innovation
capabilities was 0.636, entrepreneurial marketing was 0.712 and marketing performance was 0.696. All of
them had good convergent (>0.50). The value of CR for social capital construct was 0.847, 0.875 for
innovation capabilities, 0.908for entrepreneurial marketing and 0.919 for marketing performance in which
all had> 0.70 so that the latent construct had high reliability.
The assessment of Evaluation of Structural Model Assumption.

The criteria of structural equation showed the value of RMSEA 0,079 < 0,08, GFI 0,831, TLI 0,938, NFI
0,879, IFI 0,950, CFI 0,949fulfilling the fit criteria and fit marginal (> 0.90 and between 0.80-0.90). The
value of mahalonabis distance (17,0.001) = 40,790 was resulted from program of excel (=
CHIINV(0.001,17)) and it was due to there was no value of mahalanobis of more than 40,790. Therefore, it
can be concluded that there was no outlier in the data.
The result of amos gave the value of Determinant of Sample Covariance Matrik = 0.00 so that it can be
concluded that there was a problem of multicolonierity and singularity in the data analysed by the test result
(Table 2).
Tabel 2. Significant Test using Bootstrap Procedure
Regression Weights: (Group number 1 - Default model)
Parameter Estimate Lower Upper P
IC <--- SC .921 .716 1.131 .004
IM <--- SC .250 -.052 .512 .137
IM <--- IC .732 .484 1.075 .004
MP <--- IM .309 -.074 .740 .169
MP <--- IC .617 .251 1.208 .036
MP <--- SC .117 -.208 .414 .536
Y1 <--- IC 1.000 1.000 1.000 ...
Y2 <--- IC 1.233 1.062 1.452 .004
Y3 <--- IC 1.080 .903 1.316 .004
Y4 <--- IC .902 .712 1.149 .004
Y9 <--- MP 1.000 1.000 1.000 ...
Y10 <--- MP 1.011 .869 1.214 .004
Y11 <--- MP .726 .588 .880 .004
59
Parameter Estimate Lower Upper P

Y12 <--- MP .863 .724 1.066 .004
Y13 <--- MP .831 .665 1.020 .004
Y8 <--- IM 1.000 1.000 1.000 ...
Y7 <--- IM .990 .840 1.165 .004
Y6 <--- IM 1.156 .986 1.377 .004
Y5 <--- IM 1.292 1.066 1.546 .004
X4 <--- SC 1.000 1.000 1.000 ...
X3 <--- SC 1.181 .958 1.486 .004
X2 <--- SC 1.029 .748 1.350 .004
X1 <--- SC .985 .743 1.299 .004
Discussion
1. Social Capital has no impact on Entrepreneurial Marketing
Social capital potential (Network)owned by the creative industry craftmen came from their own family.
The social capital has no impact on entrepreneurial marketing because as found by Ionita (2012), two
dimensions of network influencing entrepreneurial marketing were diversity and content. According to
Rocks, et al (2005), diversity was related to relationship coming from various sources or heterogeneous
contacts facilitating access to any information and ensuring high flexibility in gaining resources. There
was no diversity in the network of the craftmen . According to Martinez &Aldrich (2011), two
weaknesses of network were 1) Limited coverage, limited information and capability provided by
network, especially when their network was their own family, while various contacts would bring
higher possibility to gain professional support; 2) Cost, ―Strong ties require a high degree of
reciprocity‖ meaning that craftmen should provide additional economical value or reward emotionally.
Therefore, social capital owned by the craftmen was not able to influence entrepreneurial marketing.
2. Social Capital has impact on Innovation Capabilities

The better the existing social capital the better the capability to innovate for creative industry craftmen.
The result was in line with Fleming (2013) mentioning that the innovation climate can be improved
through better relationship with other parties (networking) as one of forms of social capital such as
culture institution and other related organizations. Networking was used to explore how craftmen can do
the work together to support innovation, art, and content, and also to develop skills in creative industry.
Further, Fleming (2013) explained that partnership with other supporting institutions was a form of
innovation aspect so that social capital can be explored to improve the capability to innovate. One factor
determining innovation was knowledge sharing coming from qualified social capital (Innovation in
Family Farming, 2014). The result supported a research conducted by Lee (2015) Sainaghi & Baggio
(2013) and Fleming (2013). For craftmen, potential networking was family with similar profession. The
benefit from this relationship in the family was closeness, trust, and reciprocity. Hence, they can share
information, interact, and exchange ideas on new product, technology used, and production process
whenever and wherever needed informally. The key for social capital improvement was to develop the
relationship with someone ready to cooperate and support others in facing problems. Having partnership
with similar profession in a family and location can make them easier to interact and find solution to
any existing challenges to run the business, including innovation development. This is a form of social
capital to improve innovation for craftmen.
3. Social Capital has no impact on Marketing Performance

Social capital has no impact on marketing performance in creative industry. This result confirmed the
previous research conducted by Perin, et al (2011). The potential network owned by the craftmen was
their own family having the same profession and there was very few craftmen involved in organization
or certain groups in related sector. Such existing network cannot make them able to improve their
marketing performance significantly. Most of their networking partners were family having the same
profession. The characteristics of the network was a kind of small enterprises running their family
business. The existing values of this network were long term approach, quality, trust, and close family
relationship. Most of them had no specific goal on growth, butto develop their basic service or service
quality (Szabo, et.al, 2011). Marketing activities conducted by craftmen was personal selling and word
of mouth without considering its effectiveness. Recommendation coming from consumers to other
60
consumers was considered enough to market their product so that social capital was only used as a
platform for interaction, information sharing, idea exchange related to product and production and it
rarely involved the marketing ideas. Therefore, existing social capital had no impact on marketing
performance of the craftmen.
4. Innovation Capabilitieshave impact on Entrepreneurial Marketing

The better the innovation capability, the better the Entrepreneurial Marketing performance. According
to Ionita (2012), entrepreneurial marketing consisted of two elements; entrepreneurship (proactivity,
opportunity, risk taking and innovativeness) and marketing (customer focus, resource leveraging,
guerilla marketing and value creation). Different from classic marketing which requires market
assessment prior to product development, entrepreneurial marketing using the concept of entrepreneurs
started from ideas, then find the market so that the creativity and innovation capability can be driven to
develop entrepreneurial marketing. Most of enterprises were dominated by small and medium type,
Niehm et al (2013) said that Entrepreneurial marketing (EM) is a perspective of small businesses in
finding new ways and create innovation to market their products and create values for consumers.
Therefore, it is obvious that innovation had impact on entrepreneurial marketing.
5. Innovation Capabilities have impact on Marketing Performance

The higher the capability of craftmen to innovate, the higher the marketing performance is. According
to Brown and Eisenhard in Perin, et al (2011), the company or organization having capability to
innovate will be capable to respond fast the existing challenges so that it can create marketing
performance. Innovation can be understood as adaptation to new ideas or behaviour in organization. It
fact, the innovation stimulated through learning will improve the success of new product and marketing
performance of a company (Damanpour, Gopalakrishnan, Baker, Sinkula in Perin, et al : 2011).
Creative industry relies on skills, talent, creativity, and innovation which will produce unique products
potential to create success in marketing performance. The competitive advantage of creative industry is
its ability to give significant added value and its highly competitiveness. In fact, its high value is
creativity and innovation using small capital. Similar to creative industry in this study, the craftmen‘s
capability to innovate will determine the success of marketing performance. It is a driving force to
develop products of creative industry leading to trigger the improvement and success of marketing
performance.
6. Entrepreneurial Marketing has no impact on Marketing Performance

Entrepreneurial marketing has no impact on marketing performance. Similar to other marketing
activities, entrepreneurial marketing is understood as a marketing activity with entrepreneurial mindset
(Szabo, et al 2011). In its practices, entrepreneurial marketing has two dimensions; mindset and process
(Zulkarnain, 2010). Further, Zulkarnain (2010) explained that entrepreneur‘s
mindset is very related to opportunities and sources. However, small and medium enterprises have
fewer opportunities compared to bigger company (Szabo, et al., 2011). Therefore, entrepreneurial
marketing is able to effect marketing performance if entrepreneurial mindset and consumers‘ process in
creating values can work well. The characteristics of creative industry‘s craftmen in this study is a type
of family business having low level of human resources on management and marketing knowledge. This
condition makes opportunities of small business smaller so that it is difficult for them to improve their
marketing performance. Eventually, entrepreneurial marketing activities conducted by the craftmen
were not able to improve marketing performance.
Some amount of social capital without the capability to innovate cannot improve marketing performance.
However, social capital owned by craftmen is possible to explore in improving their capabillity to innovate.
Next, the capability for innovation can be used to improve the marketing performance. This kind of capability
is a driving force for creative industry of craftmen to make the marketing performance better. The capability
to innovate also effects entrepreneurial marketing activities. While Entrepreneurial Marketing has no impact
on marketing performance. This research implied that the capability to innovate should be developed by
craftmen through information sharing or trainings to improve their skills either to create new products or
technology use and also production process. Moreover, the level of education of the craftmen both formal and
61
informal is still low. The limitation of this research covers only samples of the study so that it does not
represent the whole condition of creative industry.
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64
ENTREPRENEURIAL ORIENTATION, ACCESS TO FINANCE AND

BUSINESS PERFORMANCE:
A PRELIMINARY STUDY
Syamsuriana Sidek1, Mohd Rosli Mohamad2 & Wan Mohd Nazdrol Wan Mohd Nasir3
Faculty of Entrepreneurship and Business
Universiti Malaysia Kelantan
(syamsuriana_sidek@yahoo.com1, m.rosli@umk.edu.my2, nazdrol@umk.edu.my3)
ABSTRACT
Small and Medium Enterprises (SMEs) can be a cushion for unstable economic condition. They are believed
to be able strengthen the economic development of a country. The statistics shows that they are accounted for
more than 95 per cent of enterprises across the world. Acknowledging the importance of various
contributions of SMEs business performance to an economy, many studies on internal and external factors
affecting business performance including entrepreneurial orientation and access to finance has been done.
Business performance, however, requires more than resources. To cope with these situations, they must have
enough financial access in order to finance their business development. Despite its increasing importance to
the economy and individual entrepreneurs, SMEs struggle hard to access to finance. Unfortunately, there is
limited study to prove that entrepreneurial orientation would increase access to finance and ultimately
increase performance. Therefore, the purpose of this study is to test the relationship of entrepreneurial
orientation and access to finance on SMEs performance and unearth whether access to finance can be a
mediator in the relationship between entrepreneurial orientation and business performance. For start-up,
this study employed a primary data set drawn from 30 SMEs and using regression analysis to test all
hypotheses. By testing the mediator effect, this study advances the previous works on this area which
considers this effect on business performance simultaneously. The main findings indicate that
entrepreneurial orientation and access to finance are positively significant on business performance and
entrepreneurial orientation would help business to get access to capital and hence its performance could be
improved. Since this study is preliminary stage, the small sample size was the major limitation of this study
which inhibited the comparison of the results between industry sectors. A study of this nature is vitally-
important to highlight the stakeholder such as government, private bodies, NGOs, policy maker and
entrepreneurs on the important of entrepreneurial orientation and accessibility to finance on business
performance.
KEYWORDS: Entrepreneurial orientation, access to finance, business performance, preliminary study,
mediating.
1. INTRODUCTION
The contemporary studies in small business normally discuss the issues of business performance in their
studies (Steffens et al., 2009). This issue sparked a heated debated not only to business media but policy
makers, too (Storey, 2011). However, this area of research still limited in their empirical base (Blackburn &
Jarvis, 2010), dependent on normative assumptions (Gibb, 2000) and theoretically weak (Leitch et al., 2010).
This topic is need for more empirically robust studies subject to a series of complex factors that determine
growth and performance in small business (Levie & Lichtenstein, 2010).
Many studies have been done focus on business performance. Factors associated to the performance are also
many such as sector activities, firm size, management experiences (Baldwin, 2005; Storey, 2004), customer‘s
satisfaction, government policy (Dobbs & Hamilton, 2007), socio-cultural factors involved in entrepreneurial
activity (Welter & Smallbone 2011), including entrepreneurial orientation (Bolton & Lane, 2012; Awang et
al., 2010) and access to finance (Harvie, Oum, & Narjoko, 2011; Mohammed & Obeleagu-nzelibe, 2014).
Some studies and empirical evidence show that entrepreneurial orientation would enhance access to finance
(see Covin & Lumpkin, 2011; Pandula, 2011; Ghimire & Abo, 2013). Unfortunately, there is limited study to
prove that entrepreneurial orientation would increase access to finance and ultimately increase performance.
Moreover, entrepreneurial orientation in some studies had no significant impact on firm performance (Khalil,
Nejadhussein & Fazel, 2013). This shows that entrepreneurial orientation had no direct impact on business
performance (see Lumpkin & Dess, 1996; Wiklund & Shepherd, 2005). This might be true for sustain
65
business operation capital is more important. Entrepreneurial orientation would help small business to get
access to capital and hence its performance could be improved. Therefore, the purpose of this study is to test
the relationship of entrepreneurial orientation represented by three main dimensions (innovativeness, risk
taking and aggressive competitiveness) on SMEs performance and unearth whether access to finance can be a
mediator in the relationship between entrepreneurial orientation and business performance.
2. THEORETICAL FRAMEWORK AND HYPOTHESES DEVELOPMENT
2.1 Entrepreneurial Orientation and Business Performance

Performance of an organisation is based on the result from various strategies that are adopted by the
organization itself. Harabi (2007) indicated that the principal factors of firm performance are related to
business strategies, location, price competitor, company liability, market demand and certain government
policies. Prior researchers suggested that financial measure should have a linkage with the market based
measures (Dess & Davis, 1984).
The suitability of exploring the dimensions of entrepreneurial orientation multidimensionality or in
unidimensionality is a matter of theoretical viewpoint (Covin & Wales, 2012; Covin, Green, & Slevin, 2006).
Historically, the model of entrepreneurial orientation is introduced by Miller (1983) with prior dimension o f
entrepreneurial orientation are innovation, risk taking and pioneering (also known as aggressive
competitiveness). Since entrepreneurial orientation model has been developed since last decades, many
studies whether quantitative and qualitative had been done. The significant impact of entrepreneurial
orientation on business performance and growth has been proved by previous researchers. It has been
revealed that entrepreneurial firms, profitability, growth, firm performance and product innovation are
closely related each other (see Moreno & Casillas, 2008; Avlonitis & Salavou, 2007). Zampetakis et al.
(2011) added that firm with high entrepreneurial orientation will perform better than firms that are less.
Empirical evidences by Rauch and Frese (2009) resulted 24 per cent of the firm performance was explained
by entrepreneurial orientation. Justin et al. (2010) found that top managers with high of entrepreneurial
orientation for instance willing to take risk, show high degree of ahead compared competitor and favour
innovative activities have positive related to performance of the firm. Therefore, the main hypothesis of this
study was the following:
H1: Entrepreneurial orientation is positively and significantly related to business performance.
However, since entrepreneurial orientation has multi-dimensional construct, this study had the following
expectations:
H1a: The innovativeness is positively and significantly related to business performance.
H1b: The risk taking is positively and significantly related to business performance.
H1c: The aggressive competitiveness is positively and significantly related to business performance.
2.2 Entrepreneurial Orientation and Access to Finance

Entrepreneurial orientation and access to financial services is inter-related each other. Even lack of the
previous literature identifies the direct relationship between them, however, without adequate resources, all
strategic intentions and plans cannot be accomplished (Tang et al., 2008). Covin and Lumpkin (2011)
reminded that the dimensions of entrepreneurial orientation can support getting capital or financial resources
to the firm.
Not only to the business performance, has entrepreneurial orientation also opened up many chances for
company in order to access to external finance too. To Mukiri (2011) the firms that have an entrepreneurial
orientation are more focus and effort toward seeking opportunities from supply of capital. While, Haung et al.
(2011) believed that entrepreneurs with high risk-taking behaviour is willing to take any risk including access
to external financial capital. In other words firm strategic activities improve firm‘s cash flows, sales volume
and profit which could increase the availability of financing (Ghimire & Abo, 2013; Pandula, 2011). They
argue that extent of financing and the choice of capital sources are both driven by a multitude of firm
strategic abilities. Therefore, entrepreneurial characteristics found to have positive influence on SMEs access
to debt (Fatoki & Asah, 2011). Likewise, entrepreneurial skills enhance better access to resources including
financial resources (Mohammed & Obeleagu-nzelibe, 2014). On the basis of previous research this study
assumes the second hypothesis and sub-hypotheses as below:
66
H2: Entrepreneurial orientation is positively significant with access to finance.

H2a: Innovativeness is positively significant with access to finance.
H2b: Risk taking is positively significant with access to finance.
H2c: Aggressive competitiveness is positively significant with access to finance.
2.3 Access to Finance and Business Performance

In most industrially developed and developing economies, a growing number of SMEs need access to a wide
range of sources of finance (Hussain, Millman, & Matlay, 2006). Based on previous studies, access to enough
financial resources would give many benefits to business. Access to finance is believed helps all firms to
grow and prosper (Butler & Cornaggia, 2009; Stam & Garnsey, 2008). Ayyagari et al. (2011) found that bank
financing has a high impact on growth of firms. Nevertheless, they noted that the growth of firms relies
heavily on alternative financing conduits despite the formal financing. Moreover, the study in US depicted
that financial access gives a positive significant change to agricultural crop yields. The states that have a high
access to finance relatively increase their production levels (Butler & Cornaggia, 2009).
Many studies highlighted access to finance as one of the driving factors of an enabling economic
environment (see Isern et al., 2009; Hussain et al., 2006). Increased access to finance for SMEs can improve
economic conditions in developing countries by fostering innovation, macroeconomic resilience and GDP
growth (Bouri et al., 2011). In other words, aggregate economic performance will be improved by increasing
the access to capital (World Bank, 2011). Accordingly it is hypothesized that:
H3: Access to finance is positively associated with SMEs performance.
2.4 Entrepreneurial Orientation, Access to Finance and Business Performance

Ability of enterprise to get required business capital is relying on various firm strategies. Firm that create
effective strategic orientation can make more returns and profits and attract more external finances (Cheng,
Ioannou, & Serafeim, 2014). Subsequently, Ganbold (2008) point out that firm‘s failure to utilize principles
that will direct and influence viable behaviours and activities are a significant reason impeding SMEs to get
obliged financial resources. In fact, poor strategic actions in SMEs are one of the primary reasons that SMEs
could not access finance. Aktan and Bulut (2008) stated that strategic activities positively affect the firms‘
financial access in the future. However, getting sufficient financial resources is determined by the firm
operation and strategic activities (Mazanai & Fatoki, 2012; Rahaman, 2011; Steinerowska-streb & Steiner,
2014). Therefore, configuring operative strategic orientation may enable firm to attract external investors.
There are several previous studies had introduced access to finance as a mediator variable. For instance, the
study by Zampetakis et al. (2011) which examine the relationships among entrepreneurial orientation, access
to financial resources, and broadcasted product performance. The Results of Bayesian path analysis indicate
that access to financial resources fully mediates the effect of entrepreneurial orientation on product
performance. Likewise, Fatoki (2012) investigates the impact of entrepreneurial orientation on access to debt
finance and performance of small and medium enterprises (SMEs). The results also indicate that access to
debt finance partially mediates the relationship between entrepreneurial orientation and the performance of
SMEs. Consequently, based on these arguments and prior research findings, there is possibility of
entrepreneurial orientation has significant relationship to access to finance and directly could improve the
firm performance. Hence, the third hypothesis and the sub-hypotheses can be derived as follows:
H4: Entrepreneurial orientation and business performance is a mediated by access to finance rather than
direct relationship.
H4a: Innovativeness and business performance is mediated by the access to finance rather than direct
relationship.
H4b: Risk taking and business performance is mediated by the access to finance rather than direct
relationship.
H4c: Aggressive competitiveness and business performance is mediated by the access to finance rather than
direct relationship.
67
3. RESEARCH METHODS
This study is employed quantitative approach in preliminary data collection and analysis. This approach is
most suitable since this study will test the relationship among constructs. As mentioned by Burns and Grove
(2005) define quantitative research as a formal, objective, systematic process to test relationship and examine
the cause and effect of interactions among variables.
3.1 Sample and Data Collection

As a preliminary study, 30 samples are set drawn from SMEs comprise various sectors by using the judgment
sampling technique which confined to specific types of people who can provide the desired information,
either because they are the only ones who have it, or conform to some criteria set by the study (Sekaran &
Bougie, 2009). Therefore, a strict instruction applied for collecting data which are; 1) the number of fulltime
employees in the firm must be between 5 and 75; 2) the business must be operated in 3 years and above; and
3) the respondent must be owner or manager of the business.
Data can be collected from primary and secondary sources (Ngehnevu & Nembo, 2010). Therefore, self-
administered questionnaire is used as primary data in this study. For practical used in Malaysia environment,
the questionnaire was provided into two languages, English and Bahasa Melayu. While, the secondary data
was gathered from books, journal articles, annual reports, websites and theses including published and
unpublished work since they also important to provide necessary information regarding the areas of study.
3.2 Variables and Measurement

The dependent variable for this study is business performance. Business performance is represented by six
items reformed from previous studies (see Ar and Baki, 2011; Gathenya et al., 2011) namely; sales, market
share, customer satisfaction on product, product quality level, profitability level and production level. All
items are subjectively measured by using five-point of Likert scale which is represented by 1 is significantly
lower, 3 is unchanged and 5 is significantly higher. Next, the independent variable is entrepreneurial
orientation which is represented by three common dimensions specifically; innovativeness, risk taking and
aggressive competitiveness adjusted from the study by Callaghan (2009), Bulelwa (2008) and Hughes and
Morgan (2007). All dimensions exemplified by five items reviewed from many previous studies (e.g. Bolton
and Lane, 2012; Lan and Wu, 2010). Meanwhile, the mediating variable is access to finance which is
represented by four item indicating the level of accessing external financial sources measured by five-point
which are 1= no access, 2= irregular, 3=medium, 4=regular and 5= highly regular. All items were adapted the
study by Oni, Paiko and Ormin (2012).
4. PRELIMINARY RESULT AND ANALYSIS
For preliminary stage, 40 questionnaires were initially provided by the researcher to the respondents.
However, only 30 questionnaires were considered to be legitimate and had met the required inclusive criteria
for this research. 10 questionnaires were returned as they were deemed unusable since they were either blank
or the respondents did not complete two or more question in the questionnaire.
Table 1 depicts the entrepreneurs‘ background. A total of 30 samples were used in this pilot study all are
Malays. In terms of the gender of the respondents, it shows that the majority, 70% were male compared to
30% female. The majority of participants are aged between 31 to 50 years old, while only three respondents
were aged above 60. This shows that a large of the participants were in middle-age group. Furthermore, most
of the entrepreneurs in this study had business experiences 6 to 10 years. Based on the business owners‘
experiences, as mentioned by Rosman and Mohd Rosli (2011), majority of them had experience before they
start business. In terms of their educational level, most of the respondents completed their studies from
secondary school which is 67%, while, the rest 10% attended post-secondary education and 23% graduated
from tertiary education. Generally, most of the respondent has received the basic education. Non-schooling
respondents are basically the older generation.
Table 1: Entrepreneurs Background
Frequency
Item
N=30 100.0%
Gender Male 21 70.0
Female 9 30.0
68
Age ≤ 30 years old 4 13.3

31-40 years old 8 26.7
41-50 years old 9 30.0
51-60 years old 6 20.0
> 60 years old 3 10.0
Experiences ≤ 5 years 7 23.3
6 – 10 years 11 36.7
11 – 15 years 3 10.0
16 – 20 years 3 10.0
26 – 30 years 5 16.7
> 30 years 1 3.3
Educational Level Secondary 20 66.6
Post-secondary education 3 10.0
Tertiary education 7 23.3
Source: Based on data preliminary survey.
Table 2 presents the enterprise background. Business activities are divided into four main categories which
are services, construction, manufacturing (including retail and wholesale) and agricultural. From the survey
of 30 enterprises, this study found that most of them are involved in services (66.7%) compared to others. In
line by comparing to national percentage, services sector is contributing 90% compared to others (SME
Annual Report, 2015). In term of business ownership, almost of them are sole-proprietorship (93.3%)
compared to partnership (6.7%). More than that, over 90% of them operated their business more than 10
years. This shows that most of the entrepreneurs were operating established business. According to Ngehnevu
and Nembo (2010), the duration of business are related to the stage of development like newly started (below
1 year), young but established (1-5 years), growing (5-10 years) and mature but needs renewal (10 years and
above). Moreover, majority of the enterprises have number of full-time employees between 5 and 25
(83.4%). Overall, utmost half of enterprises could generate average monthly sales over RM 40,001 (43.3%).
Table 2: Enterprises Background
Frequency
Item
N=30 100.0%
Business Type Services 20 66.7
Manufacturing 8 26.7
Construction 1 3.3
Agriculture 1 3.3
Ownership Type Sole-proprietorship 28 93.3
Partnership 2 6.7
Business Age 3-5 years 6 20.0
6 -10 years 13 43.3
11-15 years 4 13.3
16-20 years 2 6.8
21-25 years 1 3.3
> 25 years 4 13.3
No. of Fulltime Employees 5 – 25 25 83.4
26 – 45 4 13.3
> 45 1 3.3
Monthly Sales(RM) ≤ 10,000 7 23.3
10,001 – 20,000 6 20.0
20,001 – 30,000 3 10.0
30,001 – 40,000 1 3.3
> 40,001 13 43.3
Source: Based on data preliminary survey
.
Based on the result of a preliminary reliability tests, the Cronbach‘s Alpha for all constructs were range 0.66
to 0.94. Even not all constructs exceed 0.70 of Cronbach‘s Alpha value as suggested by Nunnally (1978,
p.245), but, majority of the constructs showed the Cronbach‘s Alpha value higher than 0.70. The alpha
69
coefficient for the all items are suggesting that the items have relatively high internal consistency to represent
each construct (see Table 3).
Table 3: Reliability test for preliminary study
Construct Cronbach’s Alpha Value No. of items

Dependent variable
Business performance 0.936 6
Independent variables
Innovativeness 0.888 5
Risk taking 0.759 5
Aggressive competitiveness 0.848 5
Mediator variable
Access to finance 0.655 4
In order to test all hypotheses stated earlier, this study used regression analysis test to conclude findings.
Since this study has a mediating variable (access to finance), mediating effects for the model is tested by
following the steps suggested Baron and Kenny (1986). Three conditions must be fulfilled for a mediator to
exist; 1) the independent variable must be significantly related to the dependent variable, 2) the independent
variable must be significant to the mediator, and 3) the mediator must be significant to dependent variable.
Then, to conclude the effect of mediating, the impact of independent variable on dependent variable is either
insignificant (total mediation) or less significant (partial mediation) when the mediator is included in the
model.
As in Table 4, step 1 and step 2 indicate that only risk taking and aggressive competitiveness had positive
significant on business performance and access to finance, while innovativeness is not significant. Just as
study by Justin et al. (2010) found that top managers with high of entrepreneurial orientation for instance
willing to take risk, show high degree of ahead compared competitor have positive related to performance of
the firm. As mentioned by Awang et al. (2010) the ability of a firm to sustain is directly related to a firm‘s
intensity to take calculated risks. Next step 3 resulted that access to finance is positively significant to
business performance. This result is support by the mumerous prior studies which underlined that financial
access as one of the crucial factors of an enabling economic environment (e.g: Isern et al., 2009; Hussain et
al., 2006).
Lastly, in step 4 where mediator is included in the model. It shows that the relationship between risk taking
and business performance is still significant, but the impact is less significant (decrease significant from
0.001 to 0.05), leads to partial mediation. Next, the relationship between aggressive competitiveness and
business performance indicate insignificant when access to finance (mediator) included in the model. This
stated that full mediation or total mediation. Firm with better strategies firm will have more access to
financing and ought to have the ability to enhance their performance (Achleitner, Braun, & Kohn, 2011).
Thus, an effective entrepreneurial orientation may be a good predictor of firm access to financial resources.
Table 4: Hypotheses Testing
Step Constructs t-value Hypothesis Result

Step 1 Innovativeness → Business 1.904 H1a Not Significant
performance
Risk taking → Business 4.069*** H1b Significant
performance
Aggressive competitiveness → 3.616*** H1c Significant
Business performance
Step 2 Innovativeness → Access to 1.302 H2a Not Significant
finance
Risk taking → Access to finance 3.543*** H2b Significant
Aggressive competitiveness → 3.053** H2c Significant
Access to finance
Step 3 Access to finance → Business 3.017** H3 Significant
performance
70
Step 4 Risk taking → Access to finance 2.482* H4b Partial mediation

→ Business performance
Aggressive competitiveness → 1.578 H4c Total mediation
Access to finance → Business
performance
Note:* p<0.05, ** p<0.01, and *** p<0.001 are significant at the 0.05, 0.01 and 0.001 level respectively.
5. CONCLUSION, LIMITATIONS AND FUTURE RESEARCH
As conclusion, SMEs plays crucial roles in economic development in domestic as well as international
market. Due to this, recognizing the significance of various contributions of SMEs performance to an
economy, many studies on business performance has been done. Factors associated to the performance are
also many including entrepreneurial orientation and financial support. So, the main objective of this study is
to test whether the dimensions of entrepreneurial orientation namely; innovativeness, risk taking and
aggressive competitiveness are positively related on business performance. Also, this study aims to unearth
whether access to finance can be a mediator in the relationship between entrepreneurial orientation and
business performance. By testing the mediator effect, this study advances the previous works on this area
which considers these effect on business performance simultaneously. For start-up, this study employed a
primary data set drawn from 30 SMEs and using regression analysis to test all hypotheses. The main findings
indicate that only risk taking and aggressive competitiveness were positively significant translated into
business performance. Also, this study found access to finance is positively significant on business
performance and concluded that entrepreneurial orientation would help enterprise to get access to capital and
hence its performance could be improved.
Since this study is preliminary stage, the small sample size was the major limitation of this study which
inhibited the comparison of the results between industry sectors. The sample for this preliminary study
comprised of 30 enterprises which the sample is very small proportion of the entire population of SMEs in
the Malaysia. Hence, it is rather biased to assume that an individual response is a reliable and valid indicator
for represent the whole population. Later, future researcher should extend this study by considering sufficient
enough of data based on the population number of the studies. Additionally, the data collection was confined
only one state in Malaysia. The replication of this study at different regions of Malaysia would enable better
generalisability of the findings and have better responses to improving the findings. Then, this study only
consider entrepreneurial orientation and access to finance as internal factors to business performance, while
there are many other internal as well as external factors that should be consider in contributing to business
performance. So, future work should ponder other factors such as business networking, economic factors and
competition (Rosman and Mohd Rosli, 2011).
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74
UNDERWATER CULTURAL HERITAGE

IN KARIMUNJAWA ISLANDS
St. Prabawa Dwi Putranto1 & Prof. Agus Aris Munandar2

Doctoral Degree of Archaeology, University of Indonesia1
& Professor of Archaeology, University of Indonesia2
(Corresponding Email: stprabawa@yahoo.co.id1)
ABSTRACT
Indonesian people evolved in the archipelago along the equator. Its strategic location and natural wealth of
producing spices appeals foreigners to come since many centuries ago. At that time, people in Nusantara are
common with seafaring and thrive as a maritime nation.
Cultural contact with foreign traders and a long history have left many cultural heritages, most buried
underground, and some sunk to the bottom of the sea. These cultural heritages contain information connected
to the history and the culture of Indonesian people.
Cultural heritages have characteristic, they are finite, un-renewable, fragile, irreversible, and unique.
Therefore, it needs proper preservation, especially underwater cultural heritage. Based on survey by the
Directorate of Underwater Cultural Heritage in 2011, in Indonesia it is estimated that there are 3807
underwater archeological site. From that many site, there are location which has concentrated sites, one of
them is Karimunjawa in Jepara District, Middle Java.
There have been 11 sites identified in Karimunjawa, consist of wooden and iron ships. They are Geleang
Site, Menyawaan Site, Kumbang Site, Parang Site, Indonor Site, Genteng Site, Seruni Site, Genting Site,
Kapal Mati Site, Gusung KetelSite, and Pulau Nyamuk Site. In order to preserve the area as an
conservationalarea, in 1988 Karimunjawa Islands were inagurated as a National Park covering 111.625
Hectares.
This paper will talk about the significances and values of the underwater cultural heritages in Karimunjawa
Islands. It aims to have a better attention from stakeholders such as government, private sectors, and
communityto raise the quality of preservation. Therefore, the existence of cultural heritage can be maintained
for the next generation, so they could understand about thir ancestors.
KEYWORDS: Karimunjawa, maritime, sites, underwater cultural heritage.
1. INTRODUCTION
Indonesian people evolved in the archipelago along the equator. Its strategic location and natural wealth of
producing spices appeals foreigners to come. At first these foreigners are merchants, but some of them then
dominate Indonesia in economics and politics. Therefore, Indonesia had many influences from foreign
cultures such as India, Chinese, Islamic, and Europe.
During the century, when trade between the east and the west world begin to thrive through the Silk Road,
people in the Archipelago are accustomed to the seafaring activity. These lead to the rise of central commerce
in the coast of Sumatera, Java, and Kalimantan. Historical evidence stated that in the 2 nd century Nusantara
has had a trading connection with India. Furthermore in the 5 th century it also formed a diplomatic connection
with China. The emergence of maritime kingdom also reinforces evidence about the connection of Nusantara
with foreign countries. Sriwijaya is one of the kingdoms that controlled trading in Malaka and Sunda Straits.
In the next century is the emergence of Majapahit Kingdom. The growth of commerce increases at the time
of Islamic Empire and the arrival of European nation (Sulistiyono, 2008, p. 42-43).
The cultural history as a maritime people thrived through the Independence Declaration of Indonesia at
August 17th 1945. At this time the Archipelago region was united as one country Indonesia. Based on its
territory, Indonesia has more water area than land. Cultural contact and a long history have left cultural
heritage, most buried underground, and some sunk to the bottom of the sea. These cultural heritages contain
information connected to the history and the culture of Indonesian people.
Cultural heritage usually undergoes changes in shapes and locations. Some buried in land, and some sunk to
the bottom of the sea. Cultural heritage are resources that are finite, un-renewable, fragile, irreversible, and
75
unique (Green & Moore, 2010, p. 108). Therefore, it needs proper management to preserve it, especially
underwater cultural heritage1 (UCH).
In the context of preservation, UNESCO has issued a regulation called The UNESCO Convention On the
Protection of The Underwater Cultural Heritage. In the 1 st article it is explained the definition of UCH as
follows:
―Underwater cultural heritage‖ means all traces of human existence having a cultural, historical or
archaeological character which have been partially or totally under water, periodically or continuously,….
Therefore, it is stated that all traces of human existence having a cultural, historical or archaeological
character which have been partially or totally under water, periodically or continuously need to be treated as
an underwater cultural heritage and need to be preserved its existence.
Indonesia has an abundance of UCH, but preservation had not received full attention. There is obstacle that
made the preservation difficult, such as
1) unreachable because in deep waters
2) requires a lot of energy, equipment, and high cost in handling
3) no special law that manage the preservation
4) lack of human resource in underwater archaeology
5) salvage by private company for commercial purposes
UCH in Indonesia are scattered through the Indonesian waters. According to the Directorate of Underwater
Heritage in 2011, there are estimated about 3807 sites (2011). From that many site, there are location which
has concentrated sites, such as Bangka Belitung waters, Thousand Islands Archipelago, and Karimunjawa
Archipelago.
This research is specifically in the Karimunjawa Archipelago. Karimunjawa Archipelago is located in Jepara
District, Middle Java. In Karimunjawa water there are 10 underwater sites identified which consist of wood
and iron ships. These sites are Geleang, Menyawaan, Kumbang, Parang, Indonor, Genteng, Seruni, Genting,
Kapal Mati, and Pulau Nyamuk. In order to protect the natural resource, in 1988 Karimunjawa Archipelago
established as a National Park.
In this research there are two problems that will be the base, which are:
1) how are the application of cultural resource management in Indonesia, and
2) how are the format of cultural resource management appropriate to be applied in Indonesia, with
case study of sites in Karimunjawa Archipelago, Central Java
This research is aim to find the best model of management of UCH in Indonesia, through the case study of
Karimunjawa Archipelago. This model has to adapt and adopt the value, condition, and law so that the region
can be protected, develop and use for the greater good of Indonesian people according to the Law of the
Republic of Indonesian Number 11, 2010 concerning Cultural Heritage.
In the world of Culture Resource Management often comes a lot of term divining cultural remains such as
cultural heritage, cultural resource, and cultural properties. In this case, it needs a proper explanation about
this term so that the research aim is clearer.
In the Asian Declaration on Cultural Heritage year 2000, cultural heritage have many meanings and are very
broad, such as:
a) significant cultural values and concepts;
b) structures and artifacts: dwellings, buildings for worship, utility structures, works of visual arts,
tools and implements, that are of a historical, aesthetic, or scientific significance;
c) sites and human habitats: human creations or combined human creations and nature, archaeological
sites and sites of living human communities that are of outstanding value from a historical, aesthetic,
anthropological or ecological viewpoint, or, because of its natural features, of considerable
importance as habitat for the cultural survival and identity of particular living traditions;
1
For the next mention will be refer to as UCH
76
d) oral or folk heritage: folkways, folklore, languages and literature, traditional arts and crafts,
architecture, and the performing arts, games, indigenous knowledge systems and practices, myths,
customs and beliefs, rituals and other living traditions;
e) the written heritage;
f) popular cultural heritage: popular creativity in mass cultures (i.e. industrial or commercial cultures),
popular forms of expression of outstanding aesthetic, anthropological and sociological values,
including the music, dance, graphic arts, fashion, games and sports, industrial design, cinema,
television, music video, video arts and cyber art in technologically-oriented urbanized communities.
Lipe (1984: 2) explains that cultural remains, including cultural landscape, that have survived from the past,
are cultural resource, which have potential value and use in the present and for the future. According to Edi
Sedyawati (2003: 6-7) the term ‗resource‘ refer to the certain usage and utilization of something, for the
achievement of a purpose that can be measured from the perspective of productivity. Furthermore, when it is
combine with the word ‗culture‘, it means that what is being utilized is a things that are cultural, or to be
more precise is the product of culture. Therefore, cultural resource is the product of culture that will be used
or utilized its usefulness.
According to the Law No 11 Year 2000 about Cultural Properties article 1 paragraph 1, cultural properties are
―cultural heritage with material characteristic in the form of things, buildings, structures, sites, and region in
land or water that needs to be preserve its existence because of its value to the history, knowledge, education,
religion, and/or culture through the process of establishment.
Based on the explanation of those terms, the scope of cultural heritage consists of a broader study. Tangible
and intangible cultures are included inside the term. Therefore this term will not be used. Whereas, for the
term of cultural properties, the cultural remain have to go through a legal establishment process.
Therefore, in these research will use the term cultural resource. This is done because the sites in
Karimunjawa Archipelago is cultural resource that have value and will be use for the community.
3. RESEARCH METHOD
This research uses qualitative method. Qualitative research is defined as a process that tries to get an
understanding about the complexity in human interaction (Marshal & Rossman: 1995: 1). It comprise of three
stages, which is data collecting, analysis, and interpretation.
Observation and interview is conducted in data collecting. Observation is conducted to gather data about
activities done to the UCH in Karimunjawa, such as sites protection by the Central Java Office Preservation
of Cultural Heritage, Yogyakarta Office of Archaeology, and the Karimunjawa National Park. Moreover,
observation conducted to gather data about activity done o the UCH by the local resident, fisherman, and
tourist. Furthermore, interview of stakeholder involved in the preservation of UCH is conducted, such as the
Director for The Preservation of Cultural Heritage and Museum, Head of Karimunjawa National Park, Head
of Karimunjawa Sub-District, Head of Jepara Tourism and Culture Office, Head of Central Java Culture and
Tourism Office, and local figure.
After data collecting, began the data process and integration of literature and field study to determine the
value of Karimunjawa UCH. Afterwards, strategic planning analysis is used to generate a suitable strategic
management. Strategic management known as SWOT (Strength, Weakness, Opportunity, and Threat) is use
considering the internal and external factor of the management of the UCH sites done by the Karimunjawa
National Park.
4. RESULTS
Karimunjawa Archipelago is located northeast of Semarang precisely in 5°40΄39‖ - 5°55‘00‖ S dan

110°05΄57‖ - 110°31΄15‖ E. It is located in the administrative region of District Jepara, consist of three
village, Karimunjawa, Kemujan, and Parang. Its land and water area covers a 117.237 Ha, consist of 27
islands. There are only four inhabitant islands which are Karimunjawa, Kemujan, Parang, and Nyamuk
Island.
77
Figure 1: Map of Karimunjawa Archipelago
Karimunjawa Archipelago location is very strategic to the shipping line and trade route of Java Sea.
According to the Chinese chronicles, in the year 1292 A.D a 20.000 fleet envoy of Kubilai Khan led by Shih
Pi, Kau Sing and Ike Mese sailed to Java to punish King Krtanegara (Singasari Kingdom). These fleet stop at
Biliton (Belitung), and then anchored in Karimon (Karimunjawa), waiting for the opportunity to enter Du-
bing-zu (Tuban) (Groeneveldt, 2009: 32). In other Chinese Chronicles, Shun Feng Hsiang Sung who made
the shipping route between China and Indonesian Archipelago, Chi Li Wen or Karimunjawa is depicted as an
important place to the shipping between Wu Yu near Amoy (China) and Tu Ping Shu (Tuban) (Noerwidi,
2008, p. 5).
In the times of Demak Sultanate, when the main harbor shifted from Tuban to Jepara, Karimunjawa was still
considered as a strategic location for transit in the Java Sea. Political control of Karimunjawa was managed
by the Islamic Sultanate by sending mubaliq to convert the people to Islam. Among these notable figures are
Sunan Nyamplung or Mbah Amir Khasan (Koestoro, 1997, p. 41-43).
In the 17th century, Jepara‘s role as the main harbor was replaced by Semarang. Although the main harbor
changes again, Karimunjawa was still considered as an important transit harbor. According to Dutch record,
in 18th and 19th Century furniture craftsmen in Batavia bring in its sonokeling wood (Indonesian rosewood)
from Karimunjawa. In the year 1815, Carel Rudolph von Michalovski, a Germany officer appointed as the
first posthouder to govern Karimunjawa. At the time of the Dutch Indies, Karimunjawa is administratively
under the Resident of Semarang (Anwar, 2004, p. 188-189).
In the course of history, there are numerous cultural heritages in Karimunjawa, both in land and sea. There
are 10 UCH sites in Karimunjawa, among other
1. Geleang site
This site is located southwest of Geleang Island, a
wooden ship in 48 m deep. Its condition in 70 percent,
but there are still big ropes bound to the capstan. It size
at 48 m long, 14.17 width, and 6 m high.
Photo 1. Wooden ship in Geleang Site
78
2. Menyawakan Site
This site is located near Menyawakan sandbar, 1 km
from the coastline, an iron ship in 3-9 m deep. It is
partially intact and buried in coral reef, but still
identifiable its stern, bottom deck, hold, boiler,
framework, steering wheel, main deck, and hatch. It
size at 47 m long, 22 width, and 7 m high.
Photo 2. Ship in Menyawakan Site

3. Kumbang Site
This site is located south of Kumbang Island, an iron
ship in 2-13 m deep. Most of it is covered in coral, but
80 percent are still intact, such as the bridge, hold, stern,
hatch, stair to the main deck, and a four windowed main
deck. Based upon its hold layout, it is estimated as a
cargo or a sand carrier. It size at 29 m long, 5.8 width,
and 5 m high.
Photo 3. Iron ship in Kumbang Site
4. Parang Site
This site is located west of Parang Island, a wooden
ship in 34-38 m deep. It is only 20 percent, most of the
wood stolen by fisherman. There is still a stern 34 m,
portside, keel and framework, barrel and hoses. The
ship sunk with the bow in the north and its stern in the
south. According to fisherman, the ship is Palipur Ship,
a motorized sailing ship carrying building material. It
size at 23 m long, 16 width, and 12 m high. Based on
the age of coral reef by the National Park, it is estimated
that the ship sunk in 2000-2005 (Karimunjawa National
Park, 2010). Photo 4. Palipur ship in Parang Site
5. Indonor Site
This site is west of Karimunjawa Island. The site is S.S
Indonor, an iron ship in 15 deep. It size at 99.94 m long,
14.17 m width, and 6 m high. According to history, S.S
Indonor was made by a ship manufacturing company
called William Gray & Co. Ltd. With 22 other ship it
was build in West Hartlepool shipyard, England in the
year 1941-1944. By the time of its manufacture, the
ship was called Empire Pilgrim. S.S Indonor was a
cargo ship ―Scandinavian‖ type with a dead weight of
2858 Gross Tonnage of steel. It ended its journey on the
way from Palembang to Surabaya on Wednesday,
February 3th 1960, with its cargo of coal (Central Java Photo 5. Bow of the S.S. Indonor
Office Preservation of Cultural Heritage, 2011).
6. Genteng Site
This site is west of Little Menjangan Island. The site is Masa Indah, a motorized sailing ship in 29-30 m
deep. It size at 21.97 m long, 7.69 m width. A wooden ship sunk on its way from Madura to
Kalimantan carrying food, clothing and building materials. The ship sunk from a leak due to heavy
wave. The ship is identified as motorized sail ship Masa Indah. It sunk on September 3rd 2007
(National Park Karimunjawa, 2010).
79
7. Seruni Site
This site is east of Seruni Island, 300 m from the coastline. It consists of fragments of wood from a ship
in 10 m deep. It special features is a double construction of a ship.
8. Genting Site
This site is west of Genting Island, 500 m of the
coastline. It consists of fragments of Chinese ceramics
in 2 m deep. It is estimated from ancient Chinese
dynasty.
Photo 6. Chinese Ceramics in Genting Site

9. Dead Ship Site
This site is southeast of Karimunjawa Island, 3 km from the coastline and 53 m deep. It was found only
through a GPS Map Sounder. According to local source, the ship is made of wood.
10. Nyamuk Island Site
This site is west of Nyamuk Island, 200 m of the
coastline and 3-4 m deep. On this site was found a 1 x 1
m of iron ship remains.
Photo 7. Iron fragment from Nyamuk Island
4
3 2
5
1
8
7
1 9
6
1. Situs Geleang 6. Situs Genteng

2. Situs Taka Menyawakan 7. Situs Seruni
3. Situs Kumbang 8. Situs Genting
4. Situs Parang 9. Situs Kapal Mati
5. Situs Indonor 10. Situs Pulau Nyamuk
Source World Conservation Society

(with addition of UCH sites location)
Map 2. Map of UCH Sites in Karimunjawa Archipelago
80
As an UCH in Karimunjawa, these sites have values for the people of Indonesia. These values are, among
other:
1. Historical Value
With its strategic location, Karimunjawa was used as a transit harbor in Java Sea. It was busy harbor
visited by many foreign and local ships. A considerable UCH in Karimunjawa describes Indonesia as a
maritime nation who is capable of roaming the sea and have relation with foreign nation.
2. Education and science Value
Sites in Karimunjawa can be a place for education and science about the history, culture, and nature. The
community can learn the importance to preserve cultural resource to last for the future.
3. Political Value
The preservation of UCH can support the Government program to make Indonesia as a maritime axis
with the concept of Nawa Cita from the President of Indonesia, Joko Widodo.
4. Economical Value
Economically, tourism in Karimunjawa is very high. Wreck diving can be of the main attraction. Other
than that, economical benefit can lift the standard of living of the Karimunjawa people.
5. Information Value
Information value needs to be developed and packed to be publicized to the people. Therefore can
increase the people awareness to protect and preserve UCH in Karimunjawa and furthermore in other
region in Indonesia.
To determine the best management for the preservation of UCH in Karimunjawa, a SWOT analysis is use on
the existing management by identifying the strength, weakness, opportunity and threat.
Table 1. SWOT Strategy
Strength Weakness
1. The high potential of value to be 1. UCH site has not been determine as
develop a National Cultural Heritage
2. Sufficient infrastructure to be 2. National law and policies that is
SWOT MATRIX
develop as a tourism spot unclear about the preservation of
3. Sufficient tourism promotion UCH
4. Community awareness to protect 3. Lack of information about UCH
sites in Karimunjawa
4. No management of UCH
Opprotunity S-O Strategy W-O Strategy
1. Strategic location 1. Preparing a holistic tourism program, 1. Research on UCH sites to determine
for development that can give a comprehensive its status. (W1 – O2)
with many UCH experience about the history, natural 2. Protection by community with the
sites beauty, and culture of Karimunjawa. help of Karimunjawa National Park.
2. The development (S1 – O3) (W1 – O4)
of research 2. A development plan in maximizing 3. Research on the UCH sites of
3. The people vew the region potential toward an Karimunjawa as a reference to the
of the potential educational, learning, and research law. (W2 – O2)
of UCH to be region. (S1, – O2) 4. Reviewing the Karimunjawa
develop 3. Region development execution by the National Park Law as a reference
4. Protection by the government, private, and community. (W2, O4).
Karimunjawa (S2 –O2). 5. Information through print and
National Park 4. Special promotion about UCH in electronic media. (W3, O3)
Karimunjawa and the importance of 6. Management cooperation of many
its preservation. (S3 – O3) government agency such as
5. Preservation cooperation of many Directorate for Preservation of
government agencies such as Cultural Heritage and Museum and
Directorate for Preservation of Karimunjawa National Park (W4,
Cultural Heritage and Museum and O4)
Karimunjawa National Park. (S4 –
O4)
81
Threat S-T Strategy W-T Strategy

1. Conflict between 1. Socialization about the importance of 1. Establish a governing body with
the natural and preservation of UCH can be bone stakeholder of government, private,
cultural through promotion media.(S3, T2) and community. (W4, T1)
conservation 2. Creating a visitor management with 2. Coordination between government
2. Vandalism the utilization of existing facilities. agency about UCH preservation (W4,
through human or (S2 – T2) T1)
natural activity 3. Increasing a pro active attitude of
3. Lack of access to locals to outside fisherman about
Karimunjawa preservation. (S4, T2)
4. Better access involving private sector.
(S3, T3)
5. CONCLUSION
One of the important factors in Cultural Resource Management is management. Management is necessary so
that utilization can be done without interfere the cultural preservation. Cooperation between the Directorate
of the Preservation of Cultural Heritage and Museum that preserve the UCH and Karimunjawa National Park
that preserve the natural resource is vital as a leader in a Governing Body. Private sector and the community
can be the support and control of this management. This would be in accordance with the Law of the
Republic of Indonesian Number 11, 2010 article 97 that stated that the management of cultural heritage is not
contradictory with the community‘s interest, and that the governing body consists of government, private,
and community.
6. REFERENCES
Anwar, Rosihan (2004). Sejarah Kecil ―Petit Histoire‖ Indonesia. Jakarta: Kompas.
Central Java Office Preservation of Cultural Heritage (2011), Laporan Pemetaan Kapal Indonor, Kepulauan
Karimunjawa, Kabupaten Jepara.
Directorate of Underwater Heritage (2011). Himpunan Data Cagar Budaya Bawah Air Indonesia. Jakarta: Ministry of
Education and Culture.
Green, K, & Moore, T (2010). Archaeology: An Introduction. New York: Routledge.
Groeneveldt, W. P (2009). Nusantara dalam Catatan Tionghoa. Jakarta: Komunitas Bambu.
Karimunjawa National Park (2010), Laporan Inventarisasi dan Identifikasi Wreck Dive Site di Taman Nasional
Karimunjawa. Semarang: Karimunjawa National Park.
Koestoro, L.P. (1997). Karimunjawa dan Sisa Benda Budaya Masyarakat Pulau-pulau di Perairan Utara Jawa. Berkala
Arkeologi, Tahun XVII No 2 November 1997. Yogyakarta: Balai Arkeologi. 37-51.
Law of the Republic of Indonesian Number 11, 2010.
Lipe, William D. (1984). Values and Meaning in Cultural Resource. Approaches to The Archaeological Heritage.
London: Cambridge University Press. 1-11.
Marshal, C & Gretchen B R. (1995). Designing Qualitative Research. California: Sage Publication Inc..
Sedyawati, E. (2003). Warisan Budaya Intangible yang ‗Tersisa‘ dalam yang Tangible. Ceramah Ilmiah Arkeologi,
Depok : Fakultas Ilmu Pengetahuan Budaya, Universitas Indonesia.
Sulistiyono, S.T. (2008). Dinamika Kemaritiman dan Integrasi Negara Nasional di Indonesia. Setengah Abad Deklarasi
Djuanda 1957 – 2007. Jakarta: Departemen Kebudayaan dan Pariwisata Direktorat Jenderal Sejarah dan Purbakala
Direktorat Geografi Sejarah. 40 – 71.
82
THE IMPACT OF SERVICE QUALITY ON CUSTOMER LOYALTY TOWARD

CUSTOMER SATISFACTION AS INTERVENING VARIABLE
(CASE STUDY ON ALAM INDAH RESTAURANT SEMARANG)
Dina Rahmawati1 and Tri Endang Yani2

Economics Faculty of Semarang University
(Corresponding Email: triendangyani_usm@yahoo.com2)
ABSTRACT
The background of the problem in this research is the existence of several Alam Indah Restaurant customers‘
complaints on services received. This shows that customers have not felt the service as desired. These
conditions could affect customers‘ satisfaction and loyalty. This research aims to analyze the impact of
service quality on customers‘ loyalty through customers‘ satisfaction as intervening variable. The population
of this research is Alam Indah Restaurant customers with sample of 96 people. The sampling technique used
was purposive sampling, while the analysis tool is Path analysis. The results showed that the service quality
that consists of five dimensions: tangible, reliability, responsiveness, assurance and empathy, affects
positively on customers‘ satisfaction. This means that the higher the quality of the service, the customers‘
satisfaction will increase. The customers‘ satisfaction also affects positively on customers‘ loyalty. This
means the higher the customers‘ satisfaction will increase customers‘ loyalty. Path analysis results showed
that customers‘ satisfaction was not able to become an intervening variable between dimensions of service
quality on customers‘ loyalty.
Keywords: Service Quality, Customers‘ Satisfaction and Customers‘ Loyalty.
1. INTRODUCTION
The competition in the business world is very rapid nowadays. Business players are competing to win
customers. Companies that provide qualified goods and services which will win the competition. Therefore,
the factors that affect customers‘ satisfaction and loyalty should be noted for the sake of the companies‘
survival.
Generally satisfaction is defined as someone‘s feeling of happiness or disappointed arising from comparing
the perceived performance of products against their expectations (Kotler, 2009). Customers will feel satisfied
if they get as their expectations or exceeding their wishes to keep them. The company will perform wisely to
measure satisfaction regularly, because one of the keys to retaining customers is customers‘ satisfaction
(Kotler, 2009). The fulfillment of customers‘ satisfaction will result in loyalty in a very long time, in which if
the company introduce a new product they will buy more, talking about the good things of the company's
products on the people around them, they do not care other products and are not sensitive on price.
In the service company, service quality is a factor that can affect customers‘ satisfaction. Service quality is
good or poor condition of services provided to customers. Quality is very difficult to define, because it relates
to the customers‘ perspective. Parasuraman suggests there are five dimensions of quality to measure the
quality of service, that are tangible, reliability, responsiveness, assurance and empathy.
Alam Indah Restaurant is a company that is currently very concerned about the quality of service. Alam
Indah Restaurant wants to improve the quality of its services in order to compete with other restaurants. The
restaurants customers are usually very sensitive to the service it received. They will choose a restaurant that
provides service in accordance with their expectations. Therefore, this research will look at how the impact of
service quality on customers‘ satisfaction and customers‘ loyalty. Quality of service in this case, is seen from
five dimensions of service quality proposed by Parasuraman et.al, which include tangible, reliability,
responsiveness, assurance and empathy.
The purposes of this research are:
1) To analyze the tangible effects on customers‘ satisfaction.
2) To analyze the reliability effects on customers‘ satisfaction.
3) To analyze the responsiveness effects on customers‘ satisfaction.
4) To analyze the assurance effects on the customers‘ satisfaction.
5) To analyze the empathy effects on customers‘ satisfaction.
83
6) To analyze the customers‘ satisfaction effects on customers‘ loyalty.

7) To analyze tangible effects on customers‘ loyalty through customers‘ satisfaction as an intervening
variable.
8) To analyze the reliability effects on customers‘ loyalty through customers‘ satisfaction as an
intervening variable.
9) To analyze the responsiveness effects to customers‘ loyalty through customers‘ satisfaction as an
10) To analyze the assurance effects on customers‘ loyalty through customers‘ satisfaction as an
11) To analyze the empathy effect on customers‘ loyalty through customers‘ satisfaction as an
Service Quality
According to Tjiptono (2006) quality is a dynamic condition related to services products, people, processes
and environments that meets or exceeds expectations. Meanwhile, Kotler (2009) provides definition of
service as any action or activity that can be offered by one party to the others, which is essentially intangible
and does not result in any ownership. The production may be linked or may not be linked to a physical
product. Service is a producer behavior in order to meet consumers needs and desires in order to achieve
satisfaction on the customers. The behavior occurs at the time before and after transaction. Lovelock in
Tjiptono (2006) defines the good or bad condition level of service quality given by the company services in
order to satisfy customers by providing services that exceed customers‘ expectations. Meanwhile, according
to Rangkuti (2006) service quality consists of the work result itself and the quality of the delivery way of
such services. In general, the service at higher levels will generate high satisfaction and more often repeat
purchase.
There are several opinions about the dimensions of service quality. Parasuraman, Zeithaml, and Berry (1988)
in Tjiptono (2004) simplified ten dimensions of service quality in the previous research into five dimensions
of service quality, namely: Tangible, Reliability, Responsiveness, Assurance, and Empathy.
Customers’ Satisfaction
Generally satisfaction is defined as someone‘s feeling of happiness or disappointed arising from comparing
the perceived performance of products against their expectations (Kotler, 2009). According to Zikmund,
McLeod, and Gilbert in Tjiptono (2006), satisfaction is defined as evaluation after the purchase, results of the
comparison between the expectations before the purchase with actual performance. According to Mowen and
Minor (2002), satisfaction is defined as the entire attitude shown by consumers on goods / services after they
got and used them. Customers‘ satisfaction according to Tjiptono (2004) is the customers‘ response on
evaluation of incompatibility or disconfirmation perceived between prior expectations and actual
performance product that is felt after the use. When performance exceeds expectations, the customers will be
satisfied and on the contrary if the performance does not meet expectations then they will be disappointed.
Customers’ Loyalty
Customers‘ loyalty according to Sumarwan (2011) is defined as a consumer positive attitude on a brand, the
consumer has strong desire to repurchase the same brand in present and future. Strong desire is proved by
always buying the same brand. Repeat purchases only describe repetitive buying behavior on a brand and
does not reflect consumers feeling on the brand. Consumers who are loyal to a brand are the consumers who
love the brand and then buy and use the brand. Customers‘ loyalty are strongly associated with the employees
who serve the customers, particularly in the service sector companies. According to research conducted by
Ferrinawati and Djati (2004), the role of skilled employees can influence loyalty through satisfaction and
trust of customers resulted from the performance of the employees. Loyalty can be created if the consumers
are satisfied on a product. Customers‘ loyalty is the most important part on repetition purchases on the
customers (Caruana, 2002).
84
HYPOTHESIS
1. Tangible Effects on Customers’ Satisfaction

The good tangible will influence customers‘ perception. Parasuraman et.al.in Tjiptono (2001) said that to
assess the quality of services in order to increase customers‘ satisfaction can be judged by the service quality,
one of which is through tangible given. The better the customers' perception on tangible, the customers‘
satisfaction will be higher. Research conducted by Atsatalada and Mudiantono (2012) concluded that tangible
affects customers‘ satisfaction. From the explanations, may be made hypothesis:
H1: Tangible affects customers‘ satisfaction.
2. Reliability Effects on Customers’ Satisfaction

Reliability relates to the company's ability to provide accurate service since its first time without making any
mistakes and to deliver their services in compliance with the agreed time (Parasuraman in Tjiptono, 2004).
The higher the customers‘ perception on reliability that exist in the company, the higher the customers‘
satisfaction. This is in accordance with the research conducted by Iskandar (2007) and Atsatalada and
Mudiantono (2012) that Reliability affects customers‘ satisfaction.
H2: Reliability affects customers‘ satisfaction.
3. Responsiveness Effects on Customers’ Satisfaction

Responsiveness with regard to the willingness and ability of employees to assist customers and to respond
their requests, as well as to inform when the services will be provided and then to provide appropriate
services (Parasuraman in Tjiptono, 2004). With the Responsiveness in the company, the customer will feel
happy, which ultimately will be satisfied. This is in accordance with the research conducted by Iskandar
(2007) and Atsatalada and Mudiantono (2012) that Responsiveness affects on customers‘ satisfaction.
H3: Responsiveness affects customers‘ satisfaction.
4. Assurance Effects on Customers’ Satisfaction

Assurance is the behavior of the employees who are able to grow the customers' trust in the company and the
company can create a sense of security for the customers (Parasuraman in Tjiptono, 2004). The good level of
assurance will increasingly make the customers trust the company, which can ultimately increase customers‘
satisfaction. This is in accordance with the research conducted by Iskandar (2007) that Assurance affects the
Consumers‘ Satisfaction.
H4: Assurance affects customers‘ satisfaction.
5. Emphaty Effects on Customers’ Satisfaction

Emphaty is companies understand their customers‘ problems and act in the interest of the customers, and
provide personal attention to the customers and have convenient hours of operation (Parasuraman in
Tjiptono, 2004). With the willingness to understand and to pay attention to the customers, of course, will
make customers feel happy, which could eventually increase the customers‘ satisfaction. This is in
accordance with the research conducted by Iskandar (2007) that Emphaty affects customers‘ satisfaction.
H5: Emphaty affects customers‘ satisfaction.
6. Customers’ Satisfaction Effects on Customers’ Loyalty

Satisfaction is someone‘s happy or disappointed feeling arising from comparing the perceived performance
of products against their expectations (Kotler, 2009). By feeling the satisfaction the customers will always
come back to buy the company's products in the long term, and look forward to new products that will be
sold. This is in accordance with the research conducted by Iskandar (2007) that Customers‘ Satisfaction
affects Customers‘ Loyalty.
H6: Customers‘ Satisfaction affects Customers‘ Loyalty
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7. Tangible Effects on customers’ loyalty through customers’ satisfaction as an intervening variable

The tangible high level will increase customers‘ satisfaction. By feeling this satisfaction, the customers will
always have desire to buy the products again in the long term. This is in accordance with the research
conducted by Atsatalada and Mudiantono (2012) showed that Tangible have effects on Customers‘
Satisfaction and Loyalty.
H7: Tangible affects Customers‘ Loyalty through Customers‘ Satisfaction as an intervening variable.
8. Reliability Effects on the customers’ loyalty through customers’ satisfaction as an intervening

variable
The Reliability high level will increase customers‘ satisfaction. The high degree of satisfaction leads
customers to be loyal that is come back to buy the products sold. This is in accordance with the research
conducted by Iskandar (2007) showed that Reliability has effects on Customers‘ Loyalty with Customers‘
Satisfaction as an intervening variable.
H8: Reliability affects Customers‘ Loyalty through Customers‘ Satisfaction as an interening variable.
9. Responsiveness Effect on customers’ loyalty through customers’ satisfaction as an intervening

variable
The Responsiveness high level will increase customers‘ satisfaction. By always responding to the customers‘
wishes will increase customers‘ satisfaction that will eventually make customers loyal to the company. This
is in accordance with the research conducted by Iskandar (2007) showed that Responsiveness has effects on
Customers‘ Loyalty with Customers‘ Satisfaction as an intervening variable.
H9: Responsiveness affects customers‘ loyalty through customers‘ satisfaction as an intervening variable.
10. Assurance effects on customers’ loyalty through customers’ satisfaction as an intervening variable
The assurance high level can lead to the increasing satisfaction, because if the company can be trusted by the
customers, the customer will feel happy that eventually customers will always be back to buy and this will
increase customers‘ loyalty. This is in accordance with the research conducted by Iskandar (2007) showed
that Assurance has effects on Customers‘ Loyalty with Customers‘ Satisfaction as an intervening variable.
H10: Assurance affects customers‘ loyalty through customers‘ satisfaction as an intervening variable.
11. Empathy Effects on customers’ loyalty through customers’ satisfaction as an intervening variable.
Emphaty high level can cause high level of customers‘ satisfaction. The willingness to understand and to pay
attention to the customers, of course, will make customers feel happy, which can ultimately increase
customers‘ satisfaction. By feeling the satisfaction of getting the attention from the companies can increase
loyalty, by coming back to the company to buy the products. This is in accordance with the research
conducted by Atsatalada and Mudiantono (2012) that customers‘ satisfaction is able to become an intervening
variable between Empathy and Customers‘ Loyalty.
H 11: Emphaty affects customers‘ loyalty through customers‘ satisfaction as an intervening variable.
Research Model
In this research, the Quality of Service used the five dimensions of service quality namely tangible,
reliability, responsiveness, assurance, and empathy, that will affect customers‘ loyalty through customers‘
satisfaction as an intervening variable. The relationships among variables can be seen in the picture below.
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Figure 1: Research Model
3. RESEARCH METHOD
The variables used in this research are independent variable, dependent variable and intervening variable. The
independent variables are: Tangible, Reliability, Responsiveness, Assurance and Empathy. The dependent
variable is Customers‘ Loyalty, while the intervening variable is Customers‘ Satisfaction.
The definitions of Operational variables:
1) Tangible, which include physical attractiveness, equipment and materials used by the company, as
well as employees‘ performance (Parasuraman in Tjiptono, 2004).
2) Reliability, related to the company's ability to provide accurate service since its first time without
making any mistakes and to deliver its services in compliance with the agreed time (Parasuraman in
Tjiptono, 2004).
3) Responsiveness, with regard to the willingness and the ability of employees to assist customers and
to respond to their requests, as well as to let you know when the services will be provided and then
provide appropriate services (Parasuraman in Tjiptono, 2004).
4) Assurance, which is the employees‘ behavior, can raise the customers' trust in the company and the
company can create sense of security for the customers (Parasuraman in Tjiptono, 2004).
5) Empathy, namely the company understands its customer problems and acts in the interest of the
customers, and provides personal attention to the customers and has convenient hours of operation
(Parasuraman in Tjiptono, 2004).
6) Satisfaction is defined as someone‘s happy or disappointed feeling as a result of comparing the
performance of the product perceived in relation to the expectations (Kotler, 2001).
7) Customers‘ loyalty is defined as positive attitude of consumers on a brand; consumers have strong
desire to repurchase the same brand in the present and future time (Sumarwan, 2004).
The population in this research is the customers who come to Alam Indah Restaurant, while the method of
sample collection used is purposive sampling. Purposive sampling is method of determining the sample with
certain considerations which are adapted to the purpose or the problem developed. This method used the
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consideration of customers who come and enjoy the entertainment at Alam Indah Restaurant aged at least 20
years and maximum of 60 years. The number of samples used in this research is 96 people.
Data analysis method:
1) Validity and Reliability Test
2) Classical Assumption Test:
a. Normality Test which aims to test whether in the regression model, both the independent
variables and the dependent variables have normal distribution or not (Ghozali, 2007).
b. Multicollinearity Test which aims to test whether in the regression model correlation
among the independent variables is found (Ghozali, 2007).
c. Heteroskidastity Test to determine whether there are differences in residual variance from
one observation to another observation.
3) Path Analysis
4) Path Analysis is an extension of the multiple linear regression analysis, in which path analysis is
used to analyze the patterns of relationships among variables in order to determine the direct or
indirect effect of a set of independent variables (exogenous) to the dependent variables
(endogenous) (Ghozali, 2007). The regression equation can be formulated as follow:
Y1 = a1 + b1x1 + b2X2 + b3X3 + b4X4 + b5X5 + e1 Equation......... (1)

Y2 = a1 + b1x1 + b2X2 + b3X3 + b4X4+ b5X5 + b6Y1+ e2 Equation......... (2)
Note:
Y1 = Customers‘ Satisfaction
Y2 = Customers‘ loyalty
X1 = Tangible
X2 = Reliability
X3 = Responsiveness
X4 = Assurance
X5 = Emphaty
b1, b2, b3, b4, b5 = regression coefficient
e1 = Variance variable of customers‘ satisfaction which can not be explained by Tangible, Reliability,
Responsiveness, Assurance and Empathy (e1 = 1- R2).
e2 = Variance variable of customers‘ loyalty which can not be explained by Tangible, Reliability,
Responsiveness, Assurance, Empathy and Customers‘ Satisfaction (e2 = 1-R2).
Model Path Analysis
To know the total effect of Tangible on Customers‘ Loyalty through Customers‘ Satisfaction can be
calculated using the formula (Ghozali, 2006):
The direct effect = p1
The indirect effect = p2 x p3
The total effect = p1 + (p2 x p11)
4. RESULTS
Based on the validity test results using SPSS, it is known that all the indicators used to measure the variables
used in this research have correlation coefficient greater than r table = 0.2404. So that all of the indicators are
valid. Reliability testing is done by using Cronbach Alpha, the result is that all variables have Alpha
coefficients relatively big, that is above 0.60. So it can be said that all the measuring concepts of each
variables of the questionnaire are reliable. Therefore the items on each variable concept is proper to be used
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as measuring tool. Data normality test of Kolmogorov-Smirnov Test shows that the significance value of
0.891 is greater than alpha level of 5%. So it can be concluded that the data were normally distributed.
Multicolinearity test shows that the tolerance value is greater than 0.10 and VIF value shows less than 10
point. So it can be concluded that all variables have fulfilled the requirements, which means that there is not
problem of multicollinearity among variables. Heteroscedasticity test using the scatterplot shows that
heteroscedasticity problem does not occur. This is evident from the points spread randomly or irregularly and
spread both above and below zero on the Y axis and does not form specific pattern.
Path Analysis
Regression Model 1: Tangible, Reliability, Responsiveness, Assurance and Empathy Effects on Customers‘
Satisfaction.
Based on regression analysis using SPSS program, the regression equation 1 is as follow:
Y1 = 0.187 TAN + 0.190 REL + 0.310 RES + 0.151 ASS + 0.202 EMP
From the regression equation 1, it is seen that all regression coefficients are marked positive, which means
the higher the customers‘ perception on the Tangible, Reliability, Responsiveness, Assurance and Empathy
then the more increasing the Customers‘ Satisfaction.
Regression Model 2: Tangible, Reliability, Responsiveness, Assurance, Empathy and Customers‘ Satisfaction
Effects on Customers‘ Loyalty
Based on regression analysis using SPSS program, the regression equation 2 is as follow:
Y1 = 0.172 TAN + 0.177 REL + 0.176 RES + 0.144 ASS + 0.185 EMP + 0.205 KP
From the regression equation 2, it is seen that all regression coefficients are marked positive, which means
the higher the customers‘ perception on Tangible, Reliability, Responsiveness, Assurance, Empathy and
Customers‘ Satisfaction, then Customers‘ Loyalty will increase.
Hypothesis testing
Probability figure of tangible effects on customers‘ satisfaction of 0,033 is less than the alpha level of 0.05. It
can be concluded that tangible effects on customers‘ satisfaction are significant. The higher the Tangible then
customers‘ satisfaction will increase. Therefore, if the company wants to increase customers‘ satisfaction, it
can be done by improving Tangible. Probability figure of Reliability effects on customers‘ satisfaction of
0.026 is less than the alpha level of 0.05. It can be concluded that Reliability effects on customers‘
satisfaction are significant. The higher the Reliability, then the Customers‘ satisfaction will increase.
Probability figure of Responsiveness effects on customers‘ satisfaction of 0,000 is less than the alpha level of
0.05. It can be concluded that Responsiveness effects on customers‘ satisfaction are significant. The higher
the Responsiveness, then the customers‘ satisfaction will increase. Probability figure of Assurance effects on
customers‘ satisfaction of 0,042 is less than the alpha level of 0.05. It can be concluded that the Assurance
effects on customers‘ satisfaction are significant. The higher the Assurance, then the Customers‘ Satisfaction
will increase. Probability figure of Emphaty effects on customers‘ satisfaction of 0,019 is less than the alpha
level of 0.05. It can be concluded that Emphaty effects on customers‘ satisfaction are significant. The higher
the Emphaty, then customers‘ satisfaction will increase.
Probability figure of customers‘ satisfaction effects on customers‘ loyalty of 0,038 is less than the alpha level
of 0.05. It can be concluded that the customers‘ satisfaction effects on customers‘ loyalty are significant. The
higher the Customers‘ Satisfaction, then the Customers‘ Loyalty will increase. The magnitude of the total
effects of Tangible on Customers‘ Loyalty through Customers‘ Satisfaction is 0.134; with t count value of
0.014 is smaller than t table value of 1.9870. This proves that the Customers‘ Satisfaction is not able to
become an intervening variable between Tangible and Customers‘ Loyalty. The higher the Tangible given,
then customers will only feel satisfaction but will not affect the customers to remain loyal. From these results,
it can be concluded that directly Tangible has effects on Customers‘ Satisfaction and Customers‘ Loyalty,
however, Customers‘ Satisfaction is not able to mediate the Tangible relationship with the Customers‘
Loyalty. The magnitude of the total effect of Reliability on Customers‘ Loyalty through Customers‘
Satisfaction of 0.131 with t count value of 0.015 is smaller than t table of 1.9870. This shows that customers‘
satisfaction is not able to become an intervening variable between Reliability and Customers‘ Loyalty. The
high Reliability given by the management in providing services to customers will affect only customers‘
satisfaction, but this satisfaction can not affect customers to be loyal to the restaurant in the long term. It can
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be concluded that reliability just affects directly on Customers‘ Satisfaction and Customers‘ Loyalty, while
Customers‘ Satisfaction is not able to mediate the relationship between Reliability and customers‘ loyalty.
The amount of total effects of responsiveness on Customers‘ Loyalty through Customers‘ Satisfaction of
0,157 with t count value of 0,018 is smaller than t table of 1.9870. This shows that customers‘ satisfaction is
not able to become an intervening variable between Responsivenesss and Customers‘ Loyalty. The high
responsiveness provided by the restaurant management in providing services to customers will affect only
customers‘ satisfaction, but this satisfaction can not affect customers‘ loyalty to the restaurant in the long
term. It can be concluded that Responsiveness only affects directly on Customers‘ Satisfaction and
Customers‘ Loyalty, while Customers‘ Satisfaction is not able to mediate the relationship between
Responsiveness and customers‘ loyalty.
The amount of total effects of Assurance on Customers‘ Loyalty through Customers‘ Satisfaction of 0.120
with t count value of 0.014 is smaller than t table of 1.9870. This shows that customers‘ satisfaction is not
able to become an intervening variable between Assurance and Customers‘ Loyalty. The high Assurance
given by the restaurant management in providing services to customers will affect only customers‘
satisfaction, but this satisfaction can not affect customers to be loyal to the restaurant in the long term. It can
be concluded that Assurance only affects directly on Customers‘ Satisfaction and Customers‘ Loyalty, while
Customers‘ Satisfaction is not able to mediate the relationship between Assurance and customers‘ loyalty.
The amount of total effects of Empathy on Customers‘ Loyalty through Customers‘ Satisfaction of 0.149
with t count value of 0.015 is smaller than t table of 1.9870. This shows that customers‘ satisfaction is not
able to become an intervening variable between Emphaty and Customers‘ Loyalty. The high Emphaty given
by the restaurant management in providing services to customers will affect only customers‘ satisfaction, but
this satisfaction can not affect customers to be loyal to the restaurant in the long term. It can be concluded
that Empathy only affect directly on Customers‘ Satisfaction and Customers‘ Loyalty, while Customers‘
Satisfaction is not able to mediate the relationship between Emphaty and customers‘ loyalty.
Based on the results of the research, it can be concluded that there is direct effect of Tangible, Reliability,
Responsiveness, Assurance and Empathy on Customers‘ Satisfaction partially. This means that the higher
Tangible, Reliability, Responsiveness, Assurance and Empathy then it will increase customers‘ satisfaction.
Tangible, Reliability, Responsiveness, Assurance and Empathy also directly affect on Customers‘ Loyalty
partially. The result of Sobel test shows that Customers‘ Satisfaction is not proven as an intervening variable
among the five dimensions of service quality and Customers‘ Loyalty. Tangible, Reliability, Responsiveness,
Assurance and Empathy indeed proven to directly affect customers‘ satisfaction and Customers‘ Loyalty. But
Customers‘ Satisfaction is not able to mediate the relationship between Tangible, Reliability,
Responsiveness, Assurance and Empathy on Customers‘ Loyalty.
By the existence of the effects of Tangible, Reliability, Responsiveness, Assurance and Empathy on
Customers‘ Satisfaction and Customers‘ Loyalty, it is advisable to increase Customers‘ Satisfaction and
Customers‘ Loyalty, management Alam Indah Restaurants should improve the five dimensions of quality, for
example by regularly improving restaurant facilities, providing training to its employees about services to the
customers, always conducting products innovation so that their products are more varied. To enhance
Customers‘ Loyalty, the company must conduct service improvement continuously.
Limitations in this research is the research was conducted limited on one business place of the restaurant
only, so that the results can not be generalized to the entire restaurants business. For the future research, the
researchers should add the object of research, so that the results can be generalized.
6. REFERENCES
Caruana, A. (2002), Service Loyalty The Effects of Service Quality and The Mediating Role of Customer Satisfaction.
European Journal of Marketing, 36
Ferrinawati, E. dan Pantja DS. (2004). Upaya Mencapai Loyalitas Konsumen dalam Perspektif Sumber Daya Manusia,
Jurnal Manajemen & Kewirausahaan 6: 15-26
Ghozali, Imam. (2013). Aplikasi Analisis Multivariate Dengan Program SPSS. Badan Penerbit Universitas Diponegoro,
Semarang
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Iskandar, Andreas dan Innocentius Bernarto. (2007). Pengaruh Kualitas Pelayanan Restoran Platinum Lippo Karawaci
Terhadap Loyalitas Pelanggan, Kepuasan Pelanggan Variabel Intervening, DeReMa- Jurnal Manajemen, Vol 02
No.02
Kotler, Philip & Kevin Lane Keller. (2009). Manajemen Pemasaran: Analisis, Perencanaan dan Implementasi dan
Kontrol, Jilid 1, Edisi 13, Erlangga, Jakarta
Mowen JC, Minor M. 2001. Perilaku Konsumen.Kartini Y, penerjemah; Nurcahyo M., editor. USA: Harcout College
Publisher. Terjemahan dari: Customer Behaviour, 5 th Ed.
Mudiantono, Nanda Atsatalada. (2012). Analisis Pengaruh Kualitas Pelayanan Terhadap Kepuasan Konsumen dan
Dampaknya Pada Loyalitas Konsumen Dalam Menggunakan Jasa Transportasi PO.Sumber Alam. Universitas
Diponegoro, Jurnal of Management, Vol 1 No.1
Rangkuti, Freddy. (2006). Measuring Customer Satisfaction. PT. Gramedia Pustaka Utama, Jakarta
Tjiptono, Fandy dan Gregorius Chandra.(2005). Service, Quality and Satisfaction. Andy, Yogyakarta
Tjiptono, Fandy. (2004). Manajemen Jasa. Andi Ofset, Yogyakarta
Tjiptono, Fandy. (2006). Pemasaran Jasa. Banyumedia Publishing, Malang
Ujang, Sumarwan. (2011). Perilaku Konsumen: Teori dan Penerapannya Dalam Pemasaran. Ghalia Indonesia, Jakarta
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ANALYSIS MACROECONOMIC ON ISLAMICITY PERFORMANCE INDEX

THROUGH THIRD FUND THIRD PARTIES THE ISLAMIC COOPERATION
Oyong Lisa1, Noviansyah Rizal2, Ratna WDP3

STIE Widya Gama Lumajang-Indonesia
(oyonglisa12@yahoo.com1, Noviansyah.Rizal@gmail.com2, pradnyataj@gmail.com3)
ABSTRACT
Islamicity Performance Index aims to help stakeholders in assessing the performance of sharia
cooperative.This study aimed to analyze the effect of macroeconomic consisting of the exchange rate,
inflation and Bi rate to deposit and islamicity performance index, analyze the influence of third party funds to
islamicity performance index. analyze the influence of the macroeconomic performance index islamicity
through third-party funds. The samples used in the study of 76 cooperatives of sharia in Indonesia. The
analysis technique used path analysis. Based on the results of the analysis indicate that the macroeconomic
path which consists of the exchange rate and the BI rate significantly influence third-party funds and
islamicity performance index, while inflation does not affect the third-party funds and islamicity performance
index. Third party funds islamicity significant effect on the performance index. Third party funds were able to
mediate the effect of the exchange rate and the BI rate to islamicity performance index through third party
funds.
KEYWORDS:BI rate, inflation,Islamicity Performance Index,kurs,third party fund
1. INTRODUCTION
Cooperative Sharia is the body of cooperatives doing business with the Islamic principles. If the cooperative
has a productive unit savings and loan, then the whole product and operations must be carried out with
reference to the fatwa of the National Sharia Council MajelisUlama Indonesia. Development of Cooperatives
Sharia in Indonesia is growing rapidly, as well as Islamic banking, accompanied by the growth of third party
funds, In order to obtain optimal results, the cooperative sharia required to manage funds efficiently and
effectively, whether the funds collected from the public. As for the public fund is derived from third party
sources or the so-called public funds, namely the Giro, savingand deposits based on the principle of
Mudharabah or Wadiah. The ultimate goal to be achieved by a cooperative or bank is to obtain maximum
profit or gain. By obtaining the maximum profit cooperative sharia can be done by improving products and
making new investments. Therefore, cooperative management in practice is required to be able to meet the
set target means the amount of profit to be achieved as expected and are not necessarily the origin of profit.
Cooperatives possess the measurement tools for measuring the performance,both appraised in terms of
financial and management aspects (Lisa et al., 2014:145).To measure the level of performance of a
cooperative sharia Islamicity Performance Index. Islamicity Performance Index is one method that can
evaluate the performance of cooperative sharia, not only financially but also be able to evaluate the principles
of justice, halal and cleansing (Tazkiyah) conducted by the cooperative sharia. Islamicity Performance Index
aims to help stakeholders in assessing the performance of sharia cooperative.
The biggest source of funds owned by the cooperative sharia comes from public deposits or deposits in the
form of savings, current accounts and deposits. Source of these funds will be channeled back to the
community in the form of financing. On the public deposits, Cooperative Sharia rewarding form of profit
sharing or profit because the public funds in the form of deposits it will be managed by cooperatives sharia to
the people who need these funds to finance a business. Research on third party funds and the factors that
influence has been done by previous researchers. Sutono and Kefi (2012) proved that inflation negative effect
but not significant to DPK. Exchange rate is positive but not significant effect on the DPK. SBI interest rate a
significant negative effect on the DPK. Ability of cooperatives to generate income sharia influenced by the
macro. Factors macro nature are all factors that affect the performance of all companies or industries, such as
exchange rates, inflation and the BI rate. Kewal (2012) states that inflation significantly influence Islamicity
Performance Index. Bilal et al. (2013) and SehrishGulet al (2011) showed that the inflation effect on ROA.
However, the results of research Alperand Anbar (2011) shows that inflation does not affect the ROA.
This study aimed to analyze the effect of macroeconomic consisting of the exchange rate, inflation and BI
rate to deposit and islamicity performance index, analyze the influence of third party funds to
93
islamicityperformance index. analyze the influence of the macroeconomic performance index islamicity
through third-party funds.
Theory Stakeholder
The company's survival depends on the support of stakeholders and the support should be sought so that the
activity of the company is to seek such support. The Company is not the only entity that operates for its own
interests, and to gain the support of the stakeholders of the company should provide benefits to stakeholders.
Definition of stakeholders according Fahrizqi (2010) as follows every group or individual who can affect or
be affected by the achievement of organizational goals.
The main purpose of the stakeholder theory is to help corporate managers understand their stakeholder
environment and manage more effectively in the presence of the relationships in their corporate environment.
However, the broader objectives of stakeholder theory is to help corporate managers in enhancing the value
of the impact of their activities, and to minimize losses for the stakeholders. In fact, the overall core
stakeholder theory lies in what will happen when corporate and stakeholder running their relationship (Ulum,
2007). According to Guthrie and Ferrier (2006), financial reporting is the most efficient way for
organizations to communicate with stakeholder groups considered to have an interest in controlling certain
strategic aspects of the organization.
Makroeconomic
Macroeconomic factors are factors that are outside the company, but have an influence on the increase or
decrease in the company's performance, both directly and indirectly. These factors may also affect the
company's performance and the performance of companies that can fundamentally affect the price of shares
in the market. If the performance is increased, then the stock price will rise and if the company's performance
declines, then the stock price will decline. Macro factors changed suddenly and are difficult to predict and
can come at any time. Investors were able to estimate the arrival of such changes will be able to act first in
making the decision to sell or buy shares, and will make higher profits than investors who are late in taking a
decision. In this study, the macroeconomic variables used are: deposit interest rates, inflation rates, and
foreign exchange rates. Changes in macroeconomic factors will not immediately affect the company's
performance, but slowly and in the long term.
Exchange Rate
Exchange rate is the exchange rate of a country's currency against another country's currency. International
currencies are always used as the standard currency of countries in the world is the US Dollar (USD). One
reason is because the USD has a relatively constant rate against any currency. Despite these movements,
changes in the exchange rate is very small so it does not give a significant effect. According to Samsul,
(2006: 202) issuers who have debts in dollars and its products are sold locally will have a negative impact.
Inflation
Inflation is a general tendency prices increased continuously, within a certain time. Interpreted as well as
rising prices are constantly on the economy due to the increase in aggregate demand or a decrease in
aggregate supply. (Daryono and Endah, 2003: 101). Inflation may harm the overall economy, which can
create a lot of companies experiencing bankruptcy. So high inflation can lower stock prices, while low
inflation will result in economic growth to be sluggish, and eventually the stock price will also move slowly.
The increase in inflation can be measured using Price Index, among others: the Consumer Price Index
(consumer price index), WPI (wholesale price index), and the GNP deflator.
BI Rate
BI Rate is the interest rate that reflects the attitude of policy or monetary policy stance set by Bank Indonesia
and announced to the public (www.bi.go.id). According to Churchill et al. (2014: 50) that the bank interest in
full is the difference between the benefit of the rate of return on savings and deposits provided to customers.
Problems that occur is small amount of the difference to the customer is often used by the bank to increase
the level of profits the bank itself. Meanwhile, according to Ayub and Masih (2013), the interest rate is one of
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the tools of monetary policy used by central banks, also one of the main forms of financial risk faced by the
bank.
Islamicity Performance Index

Islamicity Performance Index (IPI) is a performance measurement tool that is capable of expressing the
values sharia that exist in Islamic banks. The use within the scope of the practitioner, IPI has not been
established for use by regulators, either in Malaysia, and Indonesia.
Third Party Funds

Dendawijaya (2009) defines the third-party funds are funds in the form of deposits from the public. It turns
out the biggest funding sources most relied upon by the bank (it can reach 80% - 90% of all funds managed
by the bank (Dendawijaya, 2009). The Bank may utilize funds from the third party is to be placed on items
that generate income for the bank , one of which is in the form of credit. Further Kuncoro (2002) states in
third party funds are are funds from the community, both individuals and business entities, obtained bank by
using various instruments of deposit products held by banks (Kuncoro, 2002 ). the funds from the public
(third party funds) is an important source of funds for the operations of the banks and the Brazilians is the
measure of success if the bank is able to finance the operations of these resources (Martono, 2010: 38).
According to Bank Indonesia Circular Letter No. 6/23 / DPNP dated May 31, 2004 by the public funds
entrusted to the bank or funds from third parties and collected by the banking sector are as follows:
a) Saving (deposit) are deposits that can be withdrawn only under certain conditions agreed upon, but it
can not be withdrawn by check, giro. Fund savings are usually owned by people with business
activities is relatively small, even non-existent.
b) Time deposits are deposits that can be withdrawn only at certain times based on the agreement with
the bank depositor. Funds from the most expensive deposits are funds that must be borne by the
bank. Funds from savings deposits are generally compiled from medium entrepreneurs and people
from the upper middle class who are not businesses.
c) Demand deposits (demand deposit) is a deposit which may be withdrawn at any time by check,
demand deposit, government facilities other payment, or transfer items. Current accounts are
generally used by businessmen with high liquidity and the movement of funds very quickly. Having
a checking account for entrepreneurs is an absolute requirement for smooth business and affairs of
the payment.
d) Certificates of deposit (certificate of deposit) is a deposit in the form of certificates of deposit
transferable evidence storage.
Funds owned a bank the more, the greater the opportunity for the bank to carry out activities in achieving
objectives.
Hypothesis
H1 : Macroeconomic consisting of the exchange rate, inflation and BI rate effect on third-party funds.
H2 : Macroeconomic consisting of the exchange rate, inflation and BI rate influence on Islamicity
Performance Index.
H3 : Third party funds affect the Islamicity Performance Index.
H4 : Macroeconomic consisting of the exchange rate, inflation and BI rate influence on Islamicity
Performance Index through third-party funds.
3. RESEARCH METHOD
Islamicity performance index

Islamicity Performance Index is a measurement tool that is able to reveal the financial value of the
materialistic and spiritual values contained in the financial statements of Islamic Cooperation. This variable is
proxied by the Profit Sharing Ratio, this ratio is used to identify the result is a form of how far Islamic
cooperative have succeeded in achieving the purpose of the existence of cooperatives, using the following
formula:
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Profit sharing ratio = Mudharabah Musyarakah

Total Financing
Third party funds

Third party funds is the most important funding source for the operational activities of cooperatives sharia
and sharia cooperative measures of success if it is able to finance its operations from other sources such as
demand, savings and time deposits in rupiah unit.
Macroeconomic
Macroeconomic explain the economic changes that affect many households (household), companies and
markets. The indicators used are:
a) Exchange rate
Exchange rate measured by the average of the middle rate of the rupiah against the US dollar in
2010-2014, units of the exchange rate stated in rupiah.
b) Inflation
The inflation rate is the monthly inflation rate as measured by the consumer price index growth of
each month starting in 2010-2014, units inflation rate expressed as a percentage.
c) BI Rate
In the study measured the rate of interest per month during 2010 to 2014 in units of percent (%).
The population used in this study are all incorporated in the Syariah Cooperative Inkopsyah for the time
period 2010 - 2014. The sampling method used is purposive sampling method, where the population to be
sampled is a population study that meets certain criteria samples. Those criteria are as follows:
1) Cooperative Sharia incorporated in Inkopsyah respectively for the period 2010-2014.
2) The Company has published its financial statements for the period from 2010 to 2014 respectively.
Based on these criteria the number of samples in this study were 76 Cooperative Sharia.
Path analysis is a further development of the multiple regression analysis and bivariate. Path analysis wanted
to test the regression equation involving several exogenous and endogenous variables at once so as to allow
testing of the variables mediating / intervening or intermediate variable. Besides, the path analysis can also
measure the direct relationships between variables in the model or indirect relationships between variables in
the model. A direct relationship between exogenous variables on the variables can be seen in the beta
coefficient. Indirect relationships is how big the influence of exogenous variables on endogenous variables
through an intervening variable. The net effect can be obtained by summing the direct and indirect
relationships.
Sub-structureI : Z = ρZX1 + ρZX2 + ρZX3 + 1
Sub-structureII : Y = ρYX1 + ρYX2 + ρYX3 + ρYZ + 2
Information :
X1 : Kurs
X2 : Inflation
X3 : BI rate
Z : Third-party funds
Y : Islamicity Performance Index
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Figure 1: Model Research
4. RESULTS
Descriptive statistics
The following descriptive statistics presented each study variable.
Table 1: Descriptive Statistics Test Results

Variable Mean Std. Deviation Minimum Maximum
Kurs 9.840 1.106,11157 8.512 12.169
Inflation 5,6337 1,55722 3,43 8,79
BI 6,5625 0,66324 5,75 7,75
Third party funds 11,9507 0,22798 11,58 12,30
IPI 16,6262 2,03510 14,25 20,78
Source: Data processed.
Path Analysis Test Results
Path Coefficient Macroeconomics consisting of Exchange Rate, Inflation and BI Rate to Third Party
Funds
Estimation of the path coefficient which shows the influence of Macroeconomic consisting of Exchange
Rate, Inflation and BI Rate on Deposits made using regression analysis. The path coefficients obtained from
the standardized regression coefficients (beta). For more details, description regression analysis results
obtained are presented in Table 2.
Table2: Results from the Strip Coefficient Macroeconomics consisting of Exchange Rate, Inflation and
BI Rate to Third Party Funds
Variable Beta t-value p-value Influence
Kurs 0,957 8,767 0,000 Positiveand significant
Inflation -0,025 -0,242 0,810 Negativeandnot significant
BI rate 0,324 2,845 0,006 Positiveand significant
Coefficient of Determination (R2) = 61,7%
F-value = 30,123
From Table 2, it can be obtained by the following equation:
Z = 0,957X1- 0,025X2 + 0,324X3 ; R2 = 61,7%
In Table 2 explains that the simultaneous exchange rate, inflation and BI rate effect on third party funds with
a coefficient of determination of 61.7%. The results of this test explains that the great diversity of third-party
funds that can be explained by macroeconomic consisting of the exchange rate, inflation and the BI rate by
61.7%. Partial effect of macroeconomic variables consisting of the exchange rate, inflation and the BI rate to
deposit performed using t-test. T-test results for the path coefficients are significant (p-value <0.05).
Exchange rate path coefficient of 0.957 with a significant effect on third-party funds. This was evident from
97
the value t count = 8.767 or p-value = 0.000 p-value <0.05, statistically significant path coefficient of the
exchange rate against the third party funds is significant. Inflation with path coefficient of -0.025 no
significant effect on third-party funds. It is seen from the value of t-test = -0.242 or p-value = 0.810 p-value>
0.05, there is statistically the path coefficient of inflation towards Customer Satisfaction is not significant. BI
rate path coefficient of -0.324 with a significant effect on third-party funds. This was evident from the value t
count = 2,845 or p-value = 0.000 p-value <0.05, statistically significant path coefficient of BI rate to deposit
is significant.
Path Coefficient Macroeconomics consisting of Exchange Rate, Inflation and BI as well as third party
funds to Islamicity Performance Index
Estimation of the path coefficient which shows the influence of Macroeconomic consisting of Exchange
Rate, Inflation and BI as well as third party funds to Islamicity Performance Index is done using regression
analysis. The path coefficients obtained from the standardized regression coefficients (beta). For more details,
description regression analysis results obtained are presented in Table 3.
Table3: Results from the Strip Coefficient Macroeconomics consisting of Exchange Rate, Inflation and
BI as well as third party funds to Islamicity Performance Index
Variable Beta t-value p-value Influence
Kurs 0,538 8,161 0,000 Positiveand significant
Inflation 0,037 0,911 0,365 Positif andnotsignificant
BI rate 0,251 5,265 0,000 Positiveand significant
Party party funds 0,309 5,909 0,000 Positiveand significant
Coefficient of Determination (R2) = 94,2%
F-value = 224,866
From Table 3, it can be obtained by the following equation:
Y = 0,538X1 + 0,3037X2+ 0,037X3 + 0,309X4 ; R2 = 94,2%
In Table 3 explains that the simultaneous exchange rate, inflation, BI and third party funds islamicity affect
the performance index with a coefficient of determination of 94.2%. The results of this test explains that the
great diversity of islamicity performance index can be explained by the exchange rate, inflation, BI and third
party funds amounting to 94.2%. Partial effect of variable rate, inflation, BI and third party funds to
islamicity performance index performed using t-test. T-test results for the path coefficients are significant (p-
value <0.05). Exchange rate path coefficient of 0.538 with a significant effect on performance index
islamicity. This was evident from the value t count = 8.161 or p-value = 0.000 p-value <0.05, statistically
significant path coefficient of the exchange rate against islamicity performance index is significant. Inflation
with path coefficient of 0.037 islamicity not affect the performance index. It visits of the value t count =
0.911 or p-value = 0.366 p-value> 0.05, there is statistically the path coefficient of inflation on islamicity
performance index is significant. BI rate with path coefficient of 0.251 islamicity significant effect on the
performance index. This was evident from the value t count = 5.265 or p-value = 0.000 p-value <0.05,
statistically significant path coefficient of BI rate to islamicity performance index is significant. Third party
funds with a path coefficient of 0.309 islamicity significant effect on the performance index. This was evident
from the value t count = 5,909 or p-value = 0.000 p-value <0.05, statistically significant path coefficient of
third party funds to islamicity performance index is significant.
From Table 2 and 3 explained that from the seventh overall path can be presented in Figure 2.
98
Figure 2: Results Path Analysis

The Accuracy Model

The accuracy of capital hypothesis of the research data measured from the third correlation coefficient of
determination (R2) in the third equation. The results of model accuracy is:
R2 model = 1 – (1 – R21) (1 – R22)
= 1 – (1 – 0,617) (1 – 0,942)
= 1 – (0,381) (0,854)
= 1 – 0,325
= 0,675or67,5%
The result of the calculation model accuracy of 67.5% explained that the contribution of the structural model
to describe the relationship of the five variables studied was 67.5% and the rest is explained by other
variables not involved in the model.
Discussion
Macroeconomic consisting of Exchange Rate, Inflation and BI Rate Effect on Third Party Funds
The analysis shows that the macroeconomic consisting of exchange and BI rate significantly influence third-
party funds, while inflation does not affect the third-party funds. This means that if there is an increase in
deposits, the rate will be increased. This is reinforced by the results of research Sutono and Kefi (2012). In
his research led to the conclusion that if the exchange rate goes up, then the production of goods and services
produced by the country will become more expensive when calculated with the currencies of other countries.
So the demand for the goods / services will decline and will depress demand, if demand falls will be
addressed by the manufacturer to reduce production. When production has decreased, then the community as
the recipient of factors of production will experience a decline in income. Consequently the funds available to
invest and the store will be less. It Causes bank difficulty in third-party funds.
Inflation is a macro economic variables have no effect on the funds raised bank. Inflation has a negative
influence and insignificant in third party funds. That is, in case of rising inflation, it is not followed by third
party funds. This indicates that inflation is not a consideration for customers to keep their funds in Sharia
Cooperative.
BI Rate as the interest rate on the accompanying commercial banks, either directly or indirectly have an
impact on bank performance. Savings in the view of classical economics, is a function of the interest rate.
The high interest rates will encourage someone to save and sacrifice current consumption to be used for
consumption in the future. The high interest of customers to save is affected by the interest rate, this indicates
that the current interest rate is high, people are more interested in sacrificing current consumption in order to
increase savings. BI Rate is the interest rate that reflects the policy stance of monetary policy set by Bank
Indonesia and announced to the public. BI Rate arise when inflation has increased. With the adoption of BI as
a solution to the growing problem of inflation, the interest rates on deposits increased and followed with
99
interest rates on loans in order to avoid negative spread. With rising interest rates, the public wants to save
money in the bank.
Macroeconomic consisting of Exchange Rate, Inflation and BI Rate Effect on Performance Index
Islamicity
The analysis shows that the macroeconomic consisting of exchange and BI rate islamicity significant effect
on the performance index, while inflation does not affect the performance index islamicity. A strong link
between the exchange rate and islamicity performance index actually reflects the substitution relationships
between the foreign exchange market and islamicity performance index, which allows the movement of funds
between them. The depreciation of the domestic currency that occur in the long term will make foreign
investors shift their funds to the foreign exchange market so that investors are more interested in distributing
their funds into foreign currency. As investors look than having assets in the form of savings in a country that
continues to weaken its currency, its value would be lower if the converts in the form of foreign currency
such as US Dollars. It is also in line with the results of Liu and Shrestha (2008) as well as Amperaningrum
and Court (2011).
Inflation does not affect the islamicity performance index, this suggests that the level of inflation does not
affect the performance index islamicity. Inflation is a measure of economic activity that is also often used to
describe the condition of the national economy. Inflation can also be defined as the tendency of prices to rise
in general and continuously (Boediono, 2006). Besides inflation can also be interpreted as a decline in
purchasing power of money (Arifin, 2002). Conditions of inflation have shown an increase in some
commodity or service. Prices of goods / services will decrease purchasing power, so that investment will
decrease and will encourage lower interest rate. The higher the inflation rate, the interest rate will tend to
decline. The results of this study are not consistent with the empirically Kewal (2012) which states that
inflation significantly influence Islamicity Performance Index.
BI Rate islamicity significant positive effect on performance index. This means that customers see the rise in
the BI Rate in the long term will bring a positive influence to islamicity performance index Cooperative
Sharia, because in practice the policy of BI Rate is applied to indirectly dampen the volatility of inflation due
to the rise in the BI Rate, the interest rate is more expected to follow not only the interest rate savings and
loans, with deposits rising interest rates are expected to reduce the amount of money circulating in the
community, it will affect the inflation to be controlled, not only was it then also can impact the strengthening
of the rupiah. Also, results are in line with research Liu and Shrestha (2008).
Effect of Third Party Funds to Islamicity Performance Index
Third Party Funds variables affect the IslamicityPerfomance Index, it shows that the DPK capable compiled a
Cooperative Sharia Sharia indicates that cooperatives are healthy or good, so that customers save their money
to the cooperative. System cooperative sharia flexible and can follow various lines of social labor becomes an
added value in the eyes public, people feel safe using cooperative sharia as profit-sharing system means that
each person bear the risk together, and also one plus is that people feel joining with sharia cooperative will
create value for their money to be halal because it is still within the corridor of religion, do not forget each
cooperative has a supervisory board sharia sharia qualified in economics or religion. These conditions make
the customers will see that the cooperatives are able to collect DPK sharia tend to have good prospects in the
future. Cooperative sharia with the ability to collect DPK is bigger then the sharia cooperative will have the
potential ability to channel financing. One of the sources of funds that can be used by banks for the financing
is saving. According to Keynes (2005), if based on the theory of money demand, where there are three
reasons why people hold money, the transaction motive, precaution, and investment. To meet these motives,
the bank offers deposit products such as checking, savings, and time deposits. Thus, the amount of funds
deposited in the bank based on the motive power customers. Dana bank debt and capital are all recorded on
the liabilities side of banks balance sheets that can be used as operating capital bank for the purposes of
distribution / placement of funds. Bank funds are used as operating capital in the business activities can be
sourced from one of public funds (third party funds). Third party funds are funds from the community, both
individuals and business entities, obtained by using various instruments bank savings products owned by the
bank. The public fund of funds owned by banks and in accordance with the bank's function as a fund of
parties surplus funds in the community. As the opinion of Kashmir (2002) for banks, third party funds is the
most important source of funds for its operations and is a measure of success if the bank is able to finance its
operations from this funding source. In addition, the cost of seeking funding from this source is relatively
easy when compared to most other sources.
Third party funds are funds greatest composition and influence on bank operations. Collector of funds from
the public can be said to be relatively easier compared to other funds, benefit from the funds raised from the
100
community is an infinite number. Most of the capital held by banks is sourced from public funds this (third
party funds). As one of the functions of banks conducting fund raising from the public or the excess funds
(surplus units). In conducting their daily business activities, the bank must have the funds to provide loans to
the public. One is the public funds which is the majority of all funds raised by banks in their daily business
activities (Kuncoro and Suhardjono, 2011: 68). Third party funds are a source of public funds collected by
banks consisting of demand deposits, savings and time deposits.
Macroeconomic consisting of exchange and BI rate significantly influence third-party funds and islamicity
performance index, while inflation does not affect the third-party funds and islamicity performance index.
Third party funds islamicity significant effect on the performance index. Third party funds were able to
mediate the effect of the exchange rate and the BI rate to islamicity performance index through third party
funds. This shows that the higher third party funds may increase islamicity performance index, so that people
will save their money in banks, which means that islamicity performance index into consideration the
community in saving their money in the bank, in addition to macroeconomic factors such as exchange rates
and the BI rate can raise funds a third party, when the interest rate rises people tend to invest in the bank, so
the impact on the increase in third party funds.
The implications of this study are as follows.
1) To improve the performance index islamicity, sharia cooperatives can improve third-party funds in
advance, especially savings, deposits and current accounts, because if third party funds increased,
islamicity performance index will also increase.
2) Third party funds are not only influenced by internal factors alone, but is also influenced by other
factors, namely macroeconomic, such as exchange rates, inflation and the BI rate, thus, should observe
the Sharia Cooperative macroeconomic conditions exist.
This research effort has been made and implemented in accordance with scientific procedures, yet still has
limitations that can be generalized to more research is still needed.
6. ACKNOWLEDGEMENTS
Thanks researchers say the Sharia Cooperative managers who have helped in obtaining the data that
researchers need.
7. REFERENCES
Journal articles
Alper, DegerdanAdem Anbar. 2011. "Bank Specific and Macroeconomic Determinants of Commercial Bank
Profitability: Empirical Evidence from Turkey", Business and Economics Research Journal, Volume 2 ,Number 2:
78-92.
Amperaningrum, Izzatidan Robby SuryawanAgung. 2011. Pengaruh Tingkat SukuBunga SBI, NilaiTukar Mata Uang,
dan Tingkat InflasiTerhadapIslamicity Performance Index Proceding PESAT (Psikologi,Ekonomi, Sastra,
Arsitektur, danSipil), Volume 4.
Ayub, Aishahtondan Mansur Masih. 2013. ―Interest Rate, Exchange Rate, and Stock Prices of Islamic Banks: A Panel
Data Analysis‖,INCEIF, Malaysia.
Bilal, Muhammad dan Asif Saeed danAmmar Ali Gull danToquerAkram. 2013. ―Influence of Bank Specific and
Macroeconomic Factors on Profitability of Commercial Banks: A Case Study of Pakistan‖. Research Journal of
Finance and Accounting, Vol.4, No.2.
Churchill1, RansfordQuarmynedan Collins OwusuKwaningdanOwusuAbabio. 2014. "The determinant of bank interest
rates spreads in Ghana", International Journal of Economic Behavior and Organization. Vol. 4. No. 3: 47-62.
Daryono, Soebagiyo dan Endah Heni Prasetyowati. 2003. Analisis Faktor-faktor yang
MempengaruhiIndeksHarga Saham di Indonesia. Jurnal Ekonomi Pembangunan. Volume 2. Nomor2 : 93-109.
Kewal, SuramayaSuci. 2012. PengaruhInflasi, SukuBunga, Kurs, danPertumbuhan PDB TerhadapIslamicity Performance
Index. JurnalEconomia, Volume 8, Nomor 1.
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Lisa, Oyong, GrahitaChandrarindan Edi Subiyantoro. 2014. Firm Characteristics, DemandFor External Auditing
ServicesAnd Financial Performance: AnEmpirical Study On CooperativeEnterprises In East Java, Indonesia. Asia-
Pacific Management Accounting Journal, Volume 9 Issue 2: 141-162.
Liu, Ming-Hua danKeshab M. Shrestha, 2008, Analysis of the long term relationship between macroeconomic variables
and the Chinese stock market using heteroscedasticcointegration. Managerial Finance, Vol.34 No.11.
Sutonodan Batista SufaKefi. 2012. PengaruhFaktorMakroEkonomiTerhadapPenghimpunan Dana Pada Bank Umum Di
Indonesia. JurnalEkonomiManajemenAkuntansi.Vol 5. No. 34: 81-92.
Books
Arifin, Sjamsul. 2002. EfektifitasKebijakanSukuBungadalamRangkaStabilisasi Rupiah di MasaKrisis. Jakarta: Bank
Indonesia.
Boediono, 2006. EkonomiMikro Seri Sinopsis: PengantarIlmuEkonomi No.1. Yogyakarta: BPFE.
Dendawijaya, Lukman. 2009. ManajemenPerbankan. Jakarta: Ghalia Indonesia.
Kuncoro. 2002. ManajemenPerbankan (TeoridanAplikasi).EdisiPertama, Yogyakarta: BPFE.
Martono, 2010. ManajemenKeuangan. Edisi 3. Yogyakarta :Ekonosia.
Samsul, Mohamad. 2006. Pasar Modal dan Manajemen Portofolio. Jakarta: Erlangga.
APPENDIX
Exchange Rate, Inflation, BI Rate, IPI and Third Party Fund Years 2010 - 2014
Month Exchange Rate Inflation BI Rate IPI Third Party Fund
Jan-10 9.362,34 3,72 6,50 15,67 11,77
Feb-10 9.310,67 3,81 6,50 15,58 11,60
Mar-10 9.094,97 3,43 6,50 15,22 11,60
Apr-10 9.025,74 3,91 6,50 15,11 11,62
Mei-10 9.309,90 4,16 6,50 15,58 11,60
Jun-10 9.057,95 5,05 6,50 15,16 11,72
Jul-10 9.008,60 6,22 6,50 15,08 11,66
Agu-10 8.963,43 6,44 6,50 15,01 11,62
Sep-10 8.932,64 5,80 6,50 14,96 11,58
Okt-10 8.917,20 5,67 6,50 14,93 11,60
Nov-10 8.948,01 6,33 6,50 14,98 11,62
Des-10 8.998,06 6,96 6,50 15,07 11,94
Jan-11 9.045,49 7,02 6,50 15,15 11,79
Feb-11 8.854,28 6,84 6,75 14,83 11,59
Mar-11 8.710,98 6,65 6,75 14,59 11,66
Apr-11 8.622,19 6,16 6,75 14,44 11,65
Mei-11 8.574,28 5,98 6,75 14,36 11,67
Jun-11 8.582,98 5,54 6,75 14,37 11,78
Jul-11 8.512,80 4,61 6,75 14,25 11,82
Agu-11 8.544,28 4,79 6,75 14,30 11,70
Sep-11 8.944,99 4,61 6,75 14,97 11,81
Okt-11 8.871,40 4,42 6,50 14,85 11,91
Nov-11 9.145,67 4,15 6,00 15,31 11,86
Des-11 9.168,65 3,79 6,00 15,35 12,16
Jan-12 9.014,10 3,65 6,00 15,09 12,02
Feb-12 9.076,61 3,56 5,75 15,19 11,82
Mar-12 9.163,04 3,97 5,75 15,34 11,86
Apr-12 9.170,29 4,50 5,75 15,35 11,86
Mei-12 9.531,32 4,45 5,75 15,95 12,06
Jun-12 9.457,82 4,53 5,75 15,83 12,07
Jul-12 9.471,77 4,56 5,75 15,85 12,04
Agu-12 9.524,61 4,58 5,75 15,94 12,01
Sep-12 9.559,20 4,31 5,75 16,00 12,05
Okt-12 9.605,57 4,61 5,75 16,08 11,96
Nov-12 9.610,70 4,32 5,75 16,08 12,08
102
Month Exchange Rate Inflation BI Rate IPI Third Party Fund

Des-12 9.776,50 4,30 5,75 16,36 12,24
Jan-13 9.765,71 4,57 5,75 16,34 12,10
Feb-13 9.665,79 5,31 5,75 16,18 11,97
Mar-13 9.694,89 5,90 5,75 16,23 11,96
Apr-13 9.685,59 5,57 5,75 16,21 12,13
Mei-13 9.783,84 5,47 5,75 16,38 12,03
Jun-13 9.925,28 5,90 6,00 16,61 12,17
Jul-13 10.227,65 8,61 6,50 17,12 12,11
Agu-13 11.346,06 8,79 6,50 19,00 12,15
Sep-13 11.474,58 8,40 7,25 19,21 12,10
Okt-13 11.202,92 8,32 7,25 18,76 12,12
Nov-13 11.789,95 8,37 7,50 19,74 12,11
Des-13 12.169,61 8,38 7,50 20,37 12,21
Jan-14 12.154,33 8,22 7,50 20,35 12,08
Feb-14 11.638,86 7,75 7,50 19,48 12,13
Mar-14 11.358,66 7,32 7,50 19,02 12,14
Apr-14 11.525,19 7,25 7,50 19,29 12,26
Mei-14 11.572,80 7,32 7,50 19,37 12,18
Jun-14 10.500,76 6,70 7,50 20,09 12,26
Jul-14 11.491,44 4,53 7,50 19,23 12,14
Agu-14 11.663,01 3,99 7,50 19,52 12,20
Sep-14 11.879,86 4,53 7,50 19,88 12,25
Okt-14 11.933,05 4,83 7,50 19,97 12,27
Nov-14 10.104,56 6,23 7,50 20,26 12,30
Des-14 10.410,11 8,36 7,75 20,78 12,27
Des criptive Statis tics
N Minimum Max imum Mean Std. Deviation

Kurs 60 8512,80 12169,60 9840,5667 1106,11157
Inf lation 60 3,43 8,79 5,6337 1,55722
BI 60 5,75 7,75 6,5625 ,66324
Third party funds 60 11,58 12,30 11,9507 ,22798
IPI 60 14,25 20,78 16,6262 2,03510
Valid N (lis tw ise) 60
Regression (Sub-structure 1)
Mean Std. Deviation N

Third party f unds 11,9507 ,22798 60
Kurs 9840,5667 1106,11157 60
Inf lation 5,6337 1,55722 60
BI 6,5625 ,66324 60
Variable s Enter ed/Re m ovebd
Variables
Model Variables Entered Remov ed Method
1 BI, Inf lation, Kursa . Enter
a. All requested variables entered.
b. Dependent Variable: Third party f unds
103
Model Sum m ary
Adjusted Std. Error of

Model R R Square R Square the Estimate
1 ,786 a ,617 ,597 ,14474
a. Predictors: (Constant), BI, Inf lation, Kurs
ANOVAb
Sum of
Model Squares df Mean Square F Sig.
1 Regression 1,893 3 ,631 30,123 ,000 a
Residual 1,173 56 ,021
Total 3,067 59
a. Predictors: (Constant), BI, Inf lation, Kurs
b. Dependent Variable: Third party f unds
Coe fficientsa
Unstandardiz ed Standardized
Coef f icients Coef f icients
1 (Cons tant) 10,761 ,207 51,971 ,000
Kurs ,000 ,000 ,957 8,767 ,000
Inf lation -,004 ,015 -,025 -,242 ,810
BI -,111 ,039 -,324 -2,845 ,006
a. Dependent Variable: Third party f unds
Regression (Sub-structure 2)
Mean Std. Deviation N

IPI 16,6262 2,03510 60
Kurs 9840,5667 1106,11157 60
Inf lation 5,6337 1,55722 60
BI 6,5625 ,66324 60
Third party f unds 11,9507 ,22798 60
Variables Entere d/Re movebd
Variables
Model Variables Entered Remov ed Method
1 Third party f unds,
a BI,
. Enter
Inf lation, Kurs
a. All requested variables entered.
b. Dependent Variable: IPI
Model Sum m ary
Adjusted Std. Error of

Model R R Square R Square the Estimate
1 ,971 a ,942 ,938 ,50598
a. Predictors: (Constant), Third party f unds, BI, Inf lation,
Kurs
104
ANOVAb
Sum of
1 Regression 230,276 4 57,569 224,866 ,000 a
Residual 14,081 55 ,256
Total 244,356 59
a. Predictors: (Constant), Third party f unds , BI, Inflation, Kurs
b. Dependent Variable: IPI
Coe fficientsa
Coef f icients Coef f icients
1 (Cons tant) -31,425 5,078 -6,188 ,000
Kurs ,001 ,000 ,538 8,161 ,000
Inf lation ,048 ,052 ,037 ,911 ,366
BI ,771 ,147 ,251 5,265 ,000
Third party f unds 2,760 ,467 ,309 5,909 ,000
a. Dependent Variable: IPI
105
106
BUDGETARY GOALS CHARACTERISTICS AND MANAGERIAL

PERFORMANCE
Ardiani Ika Sulistyawati1, Saifudin2, Dini Anggraheni3

Faculty of Economics, Semarang University Indonesia
(Corresponding email: ardiani.ika2005@gmail.com1)
ABSTRACT
Budget is one tool for monitoring and controlling on improving performance. Budget is also helping
managers in the management of the company to detail with each responsibility. Some studies which were
connecting on budgetary goal characteristics and managerial performance of companies have been done but
there is still slack on results. The purpose of this study was to examine empirically and analyze the impact of
five determinants of budgetary goal characteristics on managerial performance in 95 managers from various
lines in Central Java manufacturing companies. The analysis tool used is multiple regressions. The results of
this study showed that budget participation, budget goal clarity, budget goal difficulty, budget evaluation,
and budget feedback have effect on managerial performance. The coefficient of determination is quite large,
it was 89.2 percent
Keywords : budgetary goal characteristics, managerial performance
1. INTRODUCTION
The development of the business world is rapid growth and full of competition. Being survive in the business
world, managers are required to always proficient in managing companies. In a company, budget is one of
the most important control tools available. It used by upper manager as a tool to do the organizational goals
into quantitative dimension and time, it also communicate to lower managers as a long or short term work
plans. Budget targets can be achieved through the implementation of a series of activities which previously
set out in the form of budget.
The other function of budget is a tool to coordinate, communicate, motivate, and evaluate achievements.
According to previous statement, managerial performance required to have the ability to determine budget.
Factors which can affect managerial performance is budgetary goal characteristics. To make budget
implementation can run effectively, the budget arrangement and implementation should pay attention of five
dimentions of budgetary goal characteristics, they are budget participation, budget goal clarity, budget goal
difficulty, budget evaluation, and budget feedback.
Some studies which relate the budgetary goal characteristics on managerial performance are already done,
but the contradiction still available on the results of some studies. A study in Temanggung and Kupang
regency was done by Istiyani (2009) and Munawar (2006). The conclusion of the study shows that a
budgetary goal characteristic has significant effect on managerial performance. Murthi‘s study (2008) stated
that a budgetary goal characteristic has no effect on, managerial performance of Goverment Hospital in
Denpasar.
Some previous reseaches gap becomes the main reason of this study on a manufacturing company in Central
Java because the company's management is not optimal yet. This case can be seen in a number of companies
listed in Department of Industry and Trade in Central Java but most of them were no longer in operation
because of less optimum management of the company. The problem in this study is whether budget
participation, budget goal clarity, budget goal difficulty, budget evaluation, and budget feedback have effect
on managerial performance.
2. LITERATURE REVIEW AND DEVELOPMENT HYPOTHESIS
Logical Relationships between Variables and Hypotheses Formulation Relationship of Budget

Participation on Managerial Performance
The budget arrangement process is an important and complex activity because of the possibility of the
functional or dysfunctional impact of attitudes and behavior of the organization members (Chong and Chong,
2002). To prevent the dysfunctional impact of budget, lower managers need to be involved in the drafting
107
process. Subordinates who feel their aspirations are respected and involved in the budgeting process will be
more responsible and have moral consequences to improve their performance, according to the targeted
budget (Carruth et.al, 2003). The research results of Brownell and McInnes (1986), Yuen and Cheung (2003),
Hoque and Brosnan (2004) found that there was positive and significant relationship between managerial
participation and performance. But Fisher et.al (2002) concluded that budget participation did not affect the
managerial performance. While Murray (1990) showed that there was significant negative impact between
budget participation and managerial performance.
H1 : Budget participation has an effect on managerial performance
The Relationship between Budget Goal Clarity and Managerial Performance

The budget target needs to be stated specifically and easily understood; including budget priorities, the
achievement of budget targets, expertise and high knowledge, as well as the work done in setting budget
targets in achieving optimal managerial performance. Locke (1968) in Pasoloroan (2002) suggests that
specifically targeting will be more productive and encourage employees to do their best than if there is no
targeting. Budget target clarity can help managers to achieve the company's objectives as stated in the budget
planning, so that performance can be achieved (Darma, 2004).
H2 : Budget goal clarity has an effect on managerial performance.
The Relationship between Budget Goal Difficulty and Managerial Performance

Managers who have too tight budget goal, have high work stress, low work motivation, budget performance
and cost efficiency compared to the tight budget goal but can be achieved (Munawar, 2006). Anthony and
Govindarajan (1995) in Pasoloroan (2002) argued that the ideal budget is tight budget, but the managers
believe that they can achieve it. The harder budget target will result in better performance compared to the
easier budget target (Locke, 1968 in Kurnia, 2004 and Istiyani, 2009).
H3 : Budget goal difficulty has an effect on managerial performance
The Relationship between Budget Evaluation and Managerial Performance

Budget Evaluation is an action which taken to trace deviations of the budget in the departments concerned
and used as the basis for the assessment of departmental performance (Kurnia, 2004). This action will be
influence the manager‘s behaviour, attitude and performance. Manager‘s ability is very important to provide
an explanation of the budget efficiency and explanation about budget irregularities during the evaluation also
affect the manager‘s work performance and it can use to evaluate the performance of managers in running the
company‘s operations.
H4 : Budget evaluation has an effect on managerial performance
The Relationship between Budget Feedback and Managerial Performance

Kenis (1979) in Munawar (2006) found the feedback about the achievement level of budget goal was not
effective to improve performance and it just work marginally in improving the attitude of the manager. Kenis
(1979) in Kurnia (2004) stated that budget feedback on target budget which achieved will provide a
motivation to the manager. If the members of the organization do not know the results of its efforts to achieve
the target, so they do not have a level to feel success and failure, and finally unsatisfy (Becker and Green,
1962 in Kurnia, 2004). Manager, who knew about the result from their effort to get the target and get
insentive from the better performance, will encourage the improvement of managerial performance (Istiyani,
2009).
H5 : Budget Feedback has an effect on managerial performance
Review of Previous Study

Ratnawati Kurnia‘s research (2004) concluded that budgetary goal characteristics have no significant impact
on managerial performance, paternalistic culture was not the best fit and unable to act as moderating variable
on the relationship between the five dimensions of budgetary goal characteristics and managerial
performance, as well as the commitment of the organization was not the best fit and unable to act as
moderating variable on the relationship between the five dimensions of budgetary goal characteristics and
managerial performance.
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Munawar‘s research (2006) on the local government authorities in Kupang Regency concluded that the
characteristics of the budget goals significantly affect behavior, there was simultaneously significant impact
from the characteristics of the budget goal on the attitudes and the characteristics of the budget goal
simultaneously affect performance.
3. RESEARCH METHOD
Budget Participation
Indicators of budget participation were developed by Kenis (1979) in Kurnia (2004) measured by indicators
(a) the opinion of budget arrangement, (b) budget scoring, (c) the opinion demand on budget (d) budget
effect, and (5) manager involvement.
Budget Goal Clarity

Budget goal clarity indicators developed by Kenis (1979) in Kurnia (2004) are (a) budget clarity, (b)
indistinctness of budget target, (c) having clear understanding than the others, (d) budget priority, and (e) the
achievement of budget target.
Budget Goal Difficulty

Budget goal difficulty was measured by (a) the easy of achieving the budget target, (b) the difficulties in
achieving the budget, (c) hard effort, (d) skill and knowledge, (e) category of budget target (Kenis, 1979) in
Kurnia (2004).
Budget Evaluation
Indicators of budget evaluation were developed by Kenis (1979) in Kurnia (2004), the indicators are (a)
budget description from higher authority, (b) budget deviation at the time of evaluation, (c) budget deviation
in considering the salary increases, (d) responsible on deviation, (e) dissatisfaction on budget deviation.
Budget Feedback
Indicators of budget feedback as developed by Kenis (1979) in Kurnia (2004), are (a) accepting feedback, (b)
getting feedback and instruction on deviation, (c) the effort done by higher authority in achieving budget
target.
Managerial Performance
To measure the managerial performance self-rating instrument developed by Mahoney et.al in Brownell and
Mc Innes (1986) which has been used in Gul et.al research (1995) was used.
Population and Sample

The population in this research was all managers of various levels of the manufacturing companies listed in
the Directory of Manufacturing Industry in Central Java. Industrial manufacturing companies were chosen by
consideration of the existence of operational activities separation in accordance with the main functions of
the company (i.e production, marketing and administration as well as general) that allows the involvement of
managers at the company's goal setting process, which in turn is expected to improve managerial
performance of the company.
The method of taking sample used convenience sampling. In this research, the number of population that
would be observed was not known clearly. Therefore, the number of sample determination was based on the
number of minimum sample required by using multiple linear regression equation models.
Type, Source and Method of Data Collection

The type of data in this research is primary data obtained directly from the source by sending questionnaires
to respondents.
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Data Analysis Method

Before data analysis technique was conducted, descriptive analysis was conducted then instrument test which
consists of validity test and reliability test then classical assumtion test that consists of normality test,
multicolinearity test and heteroscedasticity was conducted. While the hypothesis testing used multiple
regressions with the equation:
Y = α + ß1X1+ ß2X2 + ß3X3 + ß4X4+ β5X5 + e
4. RESEARCH RESULTS AND DISCUSSION
Of the 150 questionnaires distributed to various companies, questionnaires returned were 110; questionnaires
which were not filled completely were 15, so the questionnaire that can be processed were 95 with response
rate of 63.33 percent. General description of 95 respondents in this research was 45 male respondents and 50
female respondents. 21 respondents got Diploma certificate, 53 respondents got Graduate (S1) certificate and
only 21 respondents who got education equal with S2.
Seen from their work fields, as many as 33 respondents work in production department, 28 respondents in
marketing department, 14 respondents in financial and accounting department, 14 respondents in general /
personnel department and 6 people in the other department. Seen from year of service in the company, as
many as 15 respondents have year of service of 1-3 years, 48 respondents have year of service of 4-6 years
and the respondents who have worked more than 6 years are 32 respondents.
After research data tabulation had been done, then validity test was done. The result of validity test proved
that all indicators were stated valid to measure research variables. The result of reliability test showed the
score of cronbach alpha was above 0,60 for all respondents answer variable to be able to be said rely on.
Normality test results showed that the data were normally distributed. The data in this research were also
progressed from classical assumptions. Statistical test results of multiple linear regression obtained regression
equation as follow:
Y = 0,218X1 + 0,270X2 + 0,128X3 + 0,177X4 + 0,289X5
The equation of regression analysis results can be explained as follow:
1) The coefficient of budget participation of 0,218 means the increase of budget participation will
potentially improve managerial performance.
2) The coefficient of budget goal clarity of 0.270 means the increase of budget goal clarity will
potentially improve managerial performance.
3) The coefficient of budget goal difficulty of 0,128 means if budget goal difficulty increases, it will
lead to an improvement in managerial performance.
4) The coefficient of budget evaluation of 0.177 means if budget evaluation increases, managerial
performance will also improve.
5) The coefficient of budget feedback of 0,289 means the increase of feedback will be followed by an
increase in managerial performance.
F test result showed that together, all the independent variables proved influential to the managerial
performance. Then the adjusted R-square generated was 89.2 percent. Furthermore, the hypothesis testing
results proved that partially, variables of budget participation, budget target clarity, budget target difficulty,
budget evaluation and budget feedback were significantly influence managerial performance.
Participation in the budget arrangement involving managers of various lines and then becomes the basis for
creating goals or standards then the managers will internalize these destinations and feel partially responsible
to achieve the company's goal since they have been involved before. The higher the level of involvement of
the managers in the budgeting process, the higher the level of managerial performance. Then associated with
clear and specific budget target setting, the clear understanding of the budget priorities, the achievement of
budget target as well as skills and adequate knowledge of the managers, will contribute in improving their
managerial performance.
The budget goal difficulty is target range from very loose and easily reached until very tight so that difficult
to achieve. These results proved that the higher level of manager difficulty in setting budget will make
manager feel challenged to be able to achieve it, so the managerial performance also improve. Then
associated with budget target evaluation affecting managerial performance are the lack of communication,
dissatisfaction on the results achieved and the comments on budget deviation. The result of this research also
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showed that feedback influences the managerial performance. It means if the managers know the results of
their efforts to achieve the target, it will affect the improving of managerial performance.
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QUESTIONING THE READINESS OF MANADO AS A TOURISM

DESTINATION; POOR SERVICE OF WAITRESSES IN THE LOCAL
RESTAURANTS
Benny Irwan Towoliu1, Fonny Sangari2, Dimas Ero Permana3

Tourism Department, Manado State Polytechnic, North Sulawesi, Indonesia
(Corresponding Email: benny.tourism@gmail.com1)
ABSTRACT
In the last two decades Manado local government has forwarded a vision Manado as a tourism destination.
Due to this policy, many accommodations and restaurants are built here. Certainly, this is an opportunity
for local people to work in the hospitality industry. Meanwhile, so far the tourism development industry is
only physical, it was not supported by the human resource local tourism development, in this case the
waitresses who work in local restaurants. This study identified the quality of service of waitresses who work
in local restaurants. The research was conducted from October to December 2015, and locations of the area
where data were taken are Mega Mas and Sabua Bulu Malalayang. These areas are the centers of local
culinary industry. The research method used is descriptive qualitative supported by quantitative data. Field
research includes a survey involving 116 respondents, observation and documentation, and the analysis by
serv-qual method. Service quality measured based on visitors‘ perceptions of the five dimensional aspects.
They are the tangible aspect, responsiveness aspect, assurance aspect and empathy aspect. Research results
are satisfactory where service performance appraisal is 3.18 while the guest expectations of service quality
were 4.32. Guest rating on the performance expectations of service and quality of service shows a minus
value. This indicates that the guest is not satisfactory with the performance of services provided by a waitress
with an average value of -1.14 satisfaction which means that the value of service of local waitress is ≤ 0.
Recommendation is that the local governments should encourage business manager of local restaurants
training to improve service quality of waitress. The methods of training suggested are video presentation,
vestibule, role plays and case studies.
KEYWORDS: Readiness of Manado, Tourism Destination, Poor Service, Waitresses, Local Restaurants
1. INTRODUCTION
Tourism is a phenomenon, that is difficult to be explained. It can be interpreted as a tourism industry; because
in many fields that were able to move significantly interrelated; does not stand alone, is more intangible, so
many experts call it as industry without smoke (smokeless industry); Yoeti, 2008.
The tourism industry has several elements that can be referred to DNA of tourism‘s such elements consist of:
(1) accommodation, (2) catering or restaurants, (3) transport or transportation, (4) money changer, (5) the
tourist attraction, (6) souvenirs, and (7) the travel agency, (Endar and Sulartiningrum, 2001). All seven
elements that form the tourism industry. When all the elements are driven together properly it will have a
positive impact (Multiplayer effect) for the country or region where the tourism sector is featured.
The government is expected to support the tourism, because it can increase and strengthen foreign exchange
and receipts tax (Clement, 1959: 35). This means that tourism could provide a double impact on the economy
of a country or region where the tourism is developed. This is the basis for the government of Manado to
establish tourism as a sector featured over the past 10 years. Currently, Manado government is too intense
speeding up the construction.
However, the development of tourism cannot only be approached by the development of unique and beautiful
location, but also by human activity involved in the tourism. During this time, the understanding of tourism is
only in how to sell a unique and beautiful location with a variety of infrastructure facilities and infrastructure
in that location, and forget the readiness of human as a operation engine to drive the tourism.
Tourism industry is also known as labor-intensive industries that involve a lot of human resources in them,
that will interact with each other; including with tourists as a consumer. In addition, tourism is an industry in
which the art of man who plays it; it must show an element of his art to play tourist‘s (guest‘s) emotions to
always be loyal and travel to a destination.
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Accommodation and catering (restaurant) are the two elements that play the key role of human resources
involved to attract tourists (guests) to visit. Inherent factor for human resources is the attitude of hospitality.
This attitude is very enforced standards in hotel or restaurant business. A worker in a hotel or restaurant
should always apply the standard in interacting with tourists. It means is how it shows that workers are
friendly, polite and emphatic in serving tourists (guests).
So far quality service standards apply only to the order of the hotel industry. While in the food service
industry (culinary) did not seem so considered. This trend occurred at various local restaurants in Manado
city. The stake holders in the local culinary businesses hire employees noticed that the service quality does
not good, actually the service will also affect the business carried on.
Several cases that occur at this time, so many workers from outside the city of Manado dominated jobs in the
restaurant industry. Especially in well known restaurants and shaped the franchise, it is very rare for the
original local employees. It is common knowledge that the information obtained by human resources
(workers) are not ready to work in the local culinary industry. The low quality of service is extremely felt by
guests who enjoy the culinary of Manado. It is not only felt by new visitors, but also local people who enjoy
the local culinary proves that the quality of services delivered by local workers is far below the standard of a
culinary industry. Moreover the city government strongly supports the development of original culinary of
Manado as a tourist attraction besides marine attraction. Given the local restaurants offer very competitive
products with the franchise from outside the area, in terms of visitors who come to enjoy a menu that is
offered, then the local workers also need to be considered, so that a single package of quality services. How is
the readiness of the servants who work in the local restaurants in favor of Manado as a tourist destination?
The purpose of this study examine perceptions of service quality of local restaurants waitress to support
tourism destination Manado.
Ten major factor which determines the quality of services, are: (1) reliability, includes two main things,
namely consistency of work and the ability to be trusted. This means the company provides its services right
since the first moment. Furthermore the company fulfills its promise, for example, deliver the service in
accordance with the agreed schedule, (2) responsiveness, namely the willingness or readiness of employees to
provide the services required by customers, (3) competence, means that everyone in a company has the skills
and knowledge needed in order to provide certain services, (4) access, including ease of contact and
encounter. This relates to the location of service facilities within easy reach, the waiting time is not too long,
the communication channels of the company can easily be reached, and others, (5) courtesy, including
politeness and courtesy, respect, attention and hospitality owned by the contact personnel (such as
receptionist and telephone operators), (6) communication, it means that company provides information to
customers in a language that can be understood. In addition, always listen to suggestions and complaints of
customers, (7) credibility, namely the nature of honest and trustworthiness. Credibility includes the company
name, company reputation, personal characteristics personal contact and interaction with customers, (8)
security, which is safe from danger, risk, or hesitancy. These aspects include physical security, financial
security, and confidentiality, (9) understanding, the customer is the effort to understand customer needs and
(10) tangibles, the physical evidence of the service, could in the form of physical facilities, equipment used,
and the physical representation services, (Parasuraman, Zeithaml, and Berry, 1995 in Nasution, 2004: 55).
Furthermore, in its development, the overall factor is summarized in five dimensions. These five key
dimensions of service quality are: (1) tangible (direct evidence), formed the appearance and capabilities of
facilities, equipment, tools and facilities and physical infrastructure that is reliable, (2) reliability, the ability
to provide promised service with immediate, accurate and reliable including timeliness, the same service to
all customers, the level of error skimpy and other things, (3) responsiveness, namely providing fast service to
customers and understand what necessary, could include responsiveness, awareness serve and other matters,
(4) assurance (collateral) is the guarantee will get the service properly and appropriately so as to develop a
sense of trust and comfort for the customers, could include knowledge, skills, politeness, and nature
trustworthy owned by the staff, free from danger, risk or doubt and (5) empathy, is giving special or personal
attention to its customers in terms of satisfying consumer needs. Empathy also includes the communication,
contacts and presence and understand what they need, (Parasuraman et.al in Tjiptono, 1996: 70).
The relationship between the product with the service, that the service company in providing products
divided into two parts, namely the construction of service and service delivery, in other words the total
quality of service is determined by a relatively construction service (service design) and service delivery.
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Construction services consist of construction products, construction of facilities, construction process and
construction process operations services to customers. Construction services and delivery services is related
to the other in shaping the service quality, (Ramaswamy 1996: 12-14).
Additionally Grönroos, 1998 in Nasution, 2004: 47 states that service quality can also be seen from the aspect
of technical and functional aspects could affect the company's image and impact on service delivery. While
the criteria of good quality services is the presence of skill and professionalism, attitude and behavior, access
and trust, recovery and reputation credibility.
Culinary is part of the attraction of a destination, which is in development is strongly influenced by the
service provided is good from food products offered as well as human resource airport (delivery). The
customer satisfaction also affects the development of a tourist destination, in a comprehensive manner in
future.
Tan, Oriode and Fallon (2014), highlighting the lack of assurance and empathy on chinese fast food, so they
suggest the need for spending on training both for the quality of food and food supervisors to be trained.
Markovic, Raspor and Segaric (2010) highlights the quality of service in Croatia with the advanced
measurement Restaurants Serqual and Dine-Serv modified; they find that there is a gap between the
expectations and the reality of the respondents, which the service expectation too high, while in fact the result
of the service is low; This research despite the small sample with limited geography they also provide
recommendations for improvement against the food industry in Croatia.
From two previous studies that represent the service of two different cultures, namely Chinese cuisine with
oriental and restaurants Croatian representatives from Eastern Europe concluded that while the industry
traditional cuisine that represents the hallmark of geography or a certain area has a tendency to neglect
service to customers or visitors to their place ,
The present study is carried out at a local restaurant in Manado industry to assess the service provided guests
who visit. This study is different as well with previous research, ie location, tradition and its products.
Besides, treatment is only on a local worker who works in a local restaurant
The concept of five dimensions of service will be used to assess aspects of the service provided a waitress in
a series of service activities in the restaurant area at Sabua Malalayang and Mega Mas Manado. Teare (1994:
5) states the following services: "The service offered consist of both tangible and intangible components
roommates are designed and managed by the producer with the aim of satisfying the needs of the consumer"
Service products have different characteristics from other tangible products. The characters are: (a)
intangible, in a sense that services are intangible and cannot be touched, but can only be felt through the
process provided by the service provider, (b) heterogeneous, because the service is generated by humans, the
results from a ministry that is done will be different results depending on the perception to receive it, where
these perceptions will be affected by the experience and knowledge of each recipient of the service, (c)
Produced as consumed or integral (simultaneous production and consumption), product service is a service
process itself in terms of when the provider of manufacturing services, at the same time service products sold
and (d) vulnerable (perish ability), a service cannot be stored, sold, or returned, because it is not able to
separate between production and consumption (Berry, 1991 in Nasution, 2004: 8)).
Relative to the Fitzsimmons (1994: 24) states that the product is a collection of goods and services consisting
of several formations, namely: (a) supporting Facility, a support facility that can be consumed or used by
consumers is often called means of support, ( b) facilitating Goods, a suggestion physical must be provided
for the benefit of service delivery or what is often called the infrastructure, (c) explicit service, a service
provided by a real (product key services) and can be felt perpetually directly by consumers, and (d ) implicit
service, a form of indirect services whose shape is more unreal but can be perceived by the consumer and
explicit support service.
While the quality of service is the use of the product suitability to meet customer needs and satisfaction,
(Hunt, 1993 in Nasution, 2004: 40). Matches are based on the use of five main characteristics, namely; (1)
technology, which is the strength or endurance, (2) psychological, namely the image of race or status, (3)
time, namely reliability, (4) contractual, namely the guarantee, and (5) ethics, the manners, friendly and
honest
Suitability of use of a product is when the product used has a long durability, the products used will enhance
the image or status of consumers who wear them, the product is not easily broken, having quality assurance
and in accordance with ethical when used. Especially for services, needed services to customers are welcome,
polite and responsive to customer complaints, which may be pleasant or satisfying the customer. Referring to
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the service, the level of good service quality will always be seen and measured from the consumer side as
well as the fulfillment of satisfaction with the service received.
Kotler (1997: 40) states the meaning of feeling happy or disappointed is as a result of a someone‘s
comparison between the achievements or products felt and are expected. Nasution (2004: 41) quality is fully
customer satisfaction. A quality product is a product that can provide utmost satisfaction to the consumer,
which is in accordance with what consumers expect of a product.
Quality is something that must be done properly by the service provider. Application quality as the nature and
appearance of the product or the performance of a key part of the company's strategy to achieve sustainable
excellence, both as a market leader as well as a strategy for growth. The advantages of a product depends on
the uniqueness of the quality services that are shown, namely the suitability of the premises expectations or
desires of consumers
One way of selling the services of a company superior to its competitors is by providing quality service and
quality, which meet the level of consumer interest. The level of consumer interest towards the services they
receive can be formed based on the experience and advice they receive. Consumers choose a service provider
based on the ranking of interest. And after enjoying the services they tend to compare it with what they
expect.
The level of service quality cannot be judged based on the viewpoint of the company but should be viewed
from the perspective of the customer ratings. Therefore, in formulating a strategy and program service, the
company must be oriented to the interests of customers by paying attention to service quality components.
In the service concept, the role of the perpetrators service is of no less importance, as players will directly
deliver services products to consumers. Horney, 1996 (in Olsen, 1996: 71) states that in a series of service are
important aspects, namely the perpetrators of service or human resources itself.
One aspect to note is the problem of training of human resources in order to increase the performance of the
service process. The important thing to note is the knowledge and skills of human resources. Referring to of
the approach, it can be said that the formation of the delivery of services performed by the actors and the
affected service will be based on the ability or competence of human resources which can be formed from
educational background. While the service process itself also influences the formation of the functional
aspects of service quality, such as consumer contact, attitudes, internal relations, behavior, service
mindedness, appearance, accessibility (Grönroos 1998, Nasution, 2004: 47)
There are four strategies for improving human resources to create customer satisfaction. The fourth strategy
is to hire the right employees, building workers to deliver services properly, providing system services that
support and retain workers who have the capability. In this study, a review of aspects of the service or human
resources in relation to the quality of service will be seen as part of the product services are offered in one of
activity in the room section (Zeithaml, 1996 in Tjiptono, 2004: 126).
3. RESEARCH METHOD
The approach used in this study is a qualitative and quantitative because in determining the value of
perception, the perception of the size of the respondents used the Likert scale. The research location was in
the city of Manado precisely in two places at the culinary center‘s namely Mega Mas and Sabua Malalayang
area. The choice of location is deliberately based on several considerations, namely (1) it is a locally-based
culinary location, (2) the location of the area is used as a culinary tourism in the city of Manado. Sampling
technique accidental a sampling is sampling which done deliberately to the population encountered / related
to the research objectives. Sample sizes (respondents) taken amounted to 116 diners at two specified
locations mentioned in Culinary Region Sabua Bulu and Mega Mas Manado. Data collection techniques used
were, interviews, questionnaires and observation of any activity related to the data required in the study.
Research tools used are interview guides and questionnaires. The analytical method used is Likert scale and
servqual methods.
4. RESULTS
Based on the problems and the expected goals then the following is illustrated profile of the 116 respondents
including: gender, the majority of respondents felt that the waitresses of culinary are dominated by women,
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51.72% and men 48.28%, it indicates that women prefer the street activity; hanging out at the same time
sitting and eating in the city of Manado.
Then age affect people's motives also assess the waiters who work, as well as maturity in judgment
objectively based on the experience of working, interacting with other cultures. Respondents aged 41-50
years was 37.93%, age 31-40 years is 34.48%,> 51 years of age are 15:52% and s / d 20 years; 1.72%
From the level of 43.10% of undergraduate education, postgraduate diploma 24.14% 19.83%, while the SMU
/ SMK only 12.93%. At work, professions influence people to spend time after routine work that takes a lot
of time. Profession as the private sector has contributed 28.45%. PNS 25.86%, 19.83% students,
professionals 13.79% whereas only 6.90% of entrepreneurs.
Characteristics of the area of origin that showed 97.50% of respondents came from the province of North
Sulawesi (Manado, Minahasa, Sangir Bolmong and Bitung), while from outside the area was 2.50% coming
came from Bogor and Ternate). This suggests that the local communities, especially those in Manado and its
surroundings are the main culinary connoisseurs native to the area.
The following is analysis of the expectations and performance of waiters in serving guests who ate at two
locations of culinary places in the city of Manado, namely Sabua Bulu Malalayang and Mega Mas Manado.
Quality of care is centered on addressing the needs and desires of guests and accuracy of delivery to keep
pace with guest expectations. If the services received or perceived as expected, then the perceived service
quality is satisfactory
Interpretation on each aspect of service expectations and performance levels of local waitresses, based on the
five dimensions of service indicators (tangible, reliable, responsiveness, assurance and empathy) is derived in
several sub-indicators of questions, as follows:
(a) Aspects of waitresses dressed clean and tidy.

The waiter is a person who plays an important role in preparing the table service to guests. The waiter should
have a clean appearance, and hospitality to welcome guests. Then the arrangement of the dining room which
was clean with regular tableware and available menu. Reception it‘s were polite and nice to guests when
guests came would greatly affect the impression (image) which was nice of guests. Although sometimes the
taste of the food is not too bad, but because it looks good service from the waitress who lead guests are also
interested in the restaurant dining place. The analysis showed that the 116 respondents indicated 51.72% are
expecting, 48.28% expect. While the performance of services resulted in 41.38% satisfied, very satisfied
3:45%, while the remaining 31.03% is quite satisfied, 20.69% less 3:45% satisfied and dissatisfied. These
conditions need to be observed by the manager of the restaurant, where necessary enhance to performance
waitresses.
(b) Aspects of waitresses setting up chairs and completeness of eating at the table
From the aspect of waiters setting up chairs tables and other equipment for the preparation of a meal of
respondents gave the hope: 48.28% are expecting, 3.45% expect and reasonably expect. While the
performance of services showed: 37.93% quite satisfied, 34.48% satisfied, 3.45% and very satisfied. For the
category of negative results showed 20.69% less satisfied, and 3:45% dissatisfied. This means there is still a
shortage of waiters in preparing creative layout and complete seat of dining table.
(c) Aspects of waitresses prepared with a list of menu

Preparation and knowledge of diet is needed by a waitress. Readiness with menus in hand indicates that the
waitress is ready to serve the guests who will come to enjoy dishes that will be sold. Expectations of
respondents to the waitress who prepared the menu list, ie: 55.17% expect, 34.48% so expect, and 6.90% is
quite expect. While the resulting performance are: 51.72% satisfied, 3:45% very satisfied, while 27.59% were
quite satisfied. Poor performance are: 13.79%, less satisfied and, 3:45% more dissatisfied. This shows that
the waitresses must constantly be reminded to prepare a menu list at the time of serving guests.
(d) Aspects of waitresses assured conformity with the food on the menu ordered
In this aspect it appears that the respondent gives hope that are: 75.86% are expecting, 20.69% expect and
3:45% quite expecting. While the performance of services produced in which: 10.34% dissatisfied, 13.79%
less satisfied, 34.48% fairly satisfied, 37.93% satisfied and 3:45% very satisfied. This assessment was given
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by the respondents are sometimes caused by negligence in caring waitresses or waiter does not repeat order to
a guest at the time of booking guests ordering food.
(e) Aspects of waitresses serve exactly the food ordered by guests

This aspect shows respondents' answers to the right attitude right of waitresses serving food were booked
guests, ie: 51.72% are expecting, 41.38% were expecting, and the same percentage 3:45% to the answer not
expect and enough. While the assessment of performance, namely: 6.90% dissatisfied, 13.79% less satisfied,
37.93% fairly satisfied, 34.48%, satisfied and 6.90% very satisfied. Results of the assessment of respondents
are still a value that indicates the disappointment of the guests to order food that is certainly far from the time
it is delivered at the time of ordering food.
(f) Aspects of waitresses skilled to serve the guests order

In this aspect respondent seem to give hope that are: 68.97% very important, 24.14% expect and 6.90% quite
expecting. While the resulting performance show: 3.45% dissatisfied, 41.38% less satisfied, 44.83% fairly
satisfied, 6.90% satisfied and 3:45% very satisfied. From these results the gap is far enough between the
positive attitude of hope and the resulting service performance. This indicates, there should be training for
waitresses, remember skills in the general hospitality industry is the most fundamental thing for a waiter in
serving guests.
(g) Aspects of waitresses willing to help guests

This aspect of the respondents expect the waiter to always be willing to help guests ie: 48.28% are expecting,
44.83% expect, and the percentage is 3.45% share fairly and do not expect. While the expected performance
are: 3:45% dissatisfied, 20.60 less satisfied, 37.93% fairly satisfied, 34.48%, satisfied and 3.45% very
satisfied. These results indicate that the waitress should be responsive to the needs of guests, so managers
need to provide training for the waitresses.
(h) Aspects of waitresses serve in a fast time

This aspect indicated the respondent‘s answers: 55.17% are expecting, 41.38% expect and 3.45% quite
expecting. While performance is obtained: 3.45% dissatisfied, 10.34% less satisfied, sharing the same
percentage is 41.38% sufficient and satisfactory, while 3.45% very satisfactory. The management should give
a warning to the waiter to deliver services quickly and do not delay in serving guests or make guests wait
long for things that need to be done fast.
(i) Aspects of waitresses are ready and alert serve guests

For guests who enjoy the food provided restaurant, always think to be treated better by the waiters, where
guests expect waitresses always give special attention, alert to the needs of guests. The respondents answer:
58.62% are expecting, 34.48% expect, and 6.90% reasonably expect. While performance is obtained: 6.90%
dissatisfied, 31.03% less satisfied, 27.59% fairly satisfied, 31.03% are satisfied and 3.50% very satisfied.
(j) Aspect of waitresses master restaurant menu

This aspect assesses menu knowledge of waiter where the respondents answered: 65.52% are expecting,
27.59% expecting and 6.90% quite expecting. This is a fundamental aspect of how the waitress could serve
well, when they do not control the content of the menu that can be held. However, the performance found
base on the respondents answers: 3.45% dissatisfied, 27.59% less satisfied, 13.79% fairly satisfied, 48.28%
satisfied and 6.90% very satisfied.
(k) Aspects of waitresses provide information about the menu

This aspect is urgent for guests who enjoy the food, and should not be allowed. Sometimes there is a food
menu which up, and no information by the waitresses. When guests book and have to wait a long time, and
inform that the ordered menu is up, it causes disappointment have for guests. Expectations of respondents to
this aspect are as follows: 75.86% are expecting, 20.69% expect and 3.45% quite expecting. Meanwhile,
respondents' assessment of the performance was produced was 6.90% dissatisfied, 17.24% less satisfied,
fairly satisfied 20.69%, 48.28% and 6.90% satisfied very satisfied.
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(l) Aspect of waitresses able to communicate well

Related to the communication aspect, it is fundamental where the waitresses, equipped with the essential
good way of talking to guests, because guests are consumers who always ask for good service from the
waitresses. It is necessary to understand the culture of origin which is sometimes greatly affect oracle of the
people to communicate, especially in high levels of work pressure, this will greatly affect the emotions of the
workers. Expectations of respondents: 65.52% are expecting, 27.59% expect and 6.90% enough. Meanwhile,
respondents' assessment of performance is: 3:45% dissatisfied, 27.59 less satisfied, 13.79% fairly satisfied,
48.28% satisfied and 6.90% very satisfied.
(m) Aspect of waitresses being friendly, polite and orderly while serving
In this aspect, respondents rates are: 79.31% are expecting, 17:24% expect and 3.45% reasonably expect,
while performance assessment by respondents: 6.90% dissatisfied, 17.24% less satisfied, 20.69% were quite
satisfied, 48.28% satisfied and 6.90% very satisfied. Restaurants may get a good image at a time when the
guest entered already greeted with a friendly smile, polite and orderly serve guests. Because first impressions
are decisive guests can feel at home even sit back enjoy a menu that is sold. So from these results is actually
reminiscent of the manager to always tell the waiter when guests come to their restaurant.
(n) Aspect of waitresses was able to hear guest complaints

This aspect may sometimes be overstated, and may be considered when guests arrive, guests book the
existing food on the menu. But sometimes there are guests who need special attention this case the possibility
of a particular disease that may need to remind the waiter to tell the chef to decrease slightly from the usual
standard processed by the chef to give to guests. The waiter should always pay attention to this. Ratings given
by respondents are: 48.28% expect and 51.72% crave. While the performance appraisal is: 10.34%
dissatisfied, 13.79% less satisfied, 27.59% fairly satisfied, 41.38% satisfied and 6.90% very satisfied. This
aspect is actually must always be a concern for waitresses and should not be underestimated.
(o) Aspect of waitresses was able to understand guest suggestions

Sometimes waiters consider themselves more knowledgeable than guests who come to eat, and even less
likely to want to hear or understand a suggestion, or even angry and tend to ignore the show busyness and
irresponsive. In terms of advice could have been a good improvement in performance. The respondents'
expectations following aspects: 68.97% and expect, 31.03% crave. While performance is assessed as: 10.34%
dissatisfied, 24.14% less satisfied, 27.59% fairly satisfied, 31.03% satisfied, and 6.90% very satisfied.
(p) Aspect of waitresses able to provide solutions guest complaints

In this aspect, sometimes not controlled well by a waitress that resulted restaurants lose prospective guests to
enjoy a dish. This can be seen when the guests are preparing dishes turns table ordered menu is up, and the
waitress who serves merely convey and do not provide an alternative solution similar menu is probably better
than that booked by guests that have been depleted. Expectations of respondents to the question: 51.72% so
expect and 48.28% expecting. While the performance appraisal can be: 10.34% dissatisfied, 13.79% less
satisfied, 27.59% fairly satisfied, 41.38% satisfied and 8.69% very satisfied.
(Q) Aspect of waitresses provide clear information to the guest services

Information services is strongly needed by a sometimes waitress who received an order different menus with
the waitress who serves the table, and could be wrong at the time of delivery of the food menu, as this aspect
should not be underestimated by the manager and must be considered. Therefore in this aspect of respondents
rate: 72.41% are expecting, and 27.59% expecting. While performance assessments show: 10.34%
dissatisfied, 24.14% less dissatisfied, 27.59% fairly satisfied, 31.03% satisfied and 6.90% very satisfied.
The manager of the restaurant should pay attention to this case should not be allowed because it would create
a bad image for the local culinary industry that is the city of Manado.
Furthermore, various indicators of these aspects of service quality seen a waitress at a local restaurant. If the
perceived service is lower than expected, then the perceived poor quality of service. From the results of
questionnaires distributed to guests who enjoy original culinary Manado. The results are based on a
perception of service quality local waitresses are satisfied by 3.92 while guest ratings expectations of service
quality is 4.84. Rate guests' expectations and service performance shown in Table 1 below.
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From the ratings in the table it appears that all aspects of the show minus values indicating that the guest is
not satisfied with the service and the local waitress service performance when viewed from the average total
satisfaction with the service, looks average guests have the satisfaction level of-1.14 Means the average total
guests are not satisfied from the performance of services provided.
Table 1. Average Value Expectations, Service Performance of Local Waitress at two locations culinary, 2015
Indicator Average1 Average2 Average

∑NE ∑NP ∑NS
Tangible
a. Aspects of waitresses dressed clean and tidy 4.37 3.07 -1.30
b. Aspects of waitresses setting up chairs and completeness of eating at the table 4.20 3.00 -1.20
c. Aspects of waitresses prepared with a list of menu 3.80 6.17 2.37
Reliable
d. Aspects of waitresses assured conformity with the food on the menu ordered 4.47 2.90 -1.57
e. Aspects of waitresses serve exactly the food ordered by guests 4.10 3.03 -1.07
f. Aspects of waitresses skilled to serve the guests order
Responsiveness
g. Aspects of waitresses willing to help guests 4.07 3.03 -1.03
h. Waiters serve in quick time 4.27 3.17 -1.10
i. Aspects of waitresses are ready and alert serve guests 4.17 2.77 -1.40
Assurance
j. Aspect of waitresses master restaurant menu 4.23 3.17 -1.07
k. Aspects of waitresses provide information about the menu 2.93 3.13 0.20
l. Aspect of waitress able to communicate well 5.03 3.17 -1.87
m. Aspect of waitress being friendly, polite and orderly while serving 4.50 3.13 -1.37
Emphaty
n. Aspect of waitress was able to hear guest complaints 4.33 3.00 -1.33
o. Aspect of waitress was able to understand guest suggestions 4.53 2.80 -1.73
p. Aspect of waitress able to provide solutions guest complaints 4.37 3.10 -1.27
q. Aspect of waitresses provide clear information to the guest services 4.57 2.90 -1.67
Account of value 73.40 54.07 -19.33
Account of average value 4.32 3.18 -1.14
Source: research data
One thing needs to be explored further that waitresses to the local restaurant has same tendency in serving the
guests are weak in terms of service standards. It is also a tendency in many places both in Asia and in Europe
(especially Eastern Europe) Tan, Oriode and Fallon (2014), Markovic, Raspor and Segaric (2010).
Supposedly in the pattern of tourism development approach, not only be approached from the standpoint of
the location will be developed but also human akitivitas (local resources) should also be considered.
Solutions should move in order to improve the quality of service waitress at a local restaurant is stiffened by
recruiting local workforce has the basic skills of food and baverages services namely recruitment of tourism
vocational school graduates. But the conditions of new tourist areas tourism is certainly faced with a shortage
of schools that provide education skills of food and beverages services.
The city authorities in long-term planning skills necessary to allocate the opening of school-based tourism
skills, so the link between the vision and mission of the city is a tourist town supported by the provision of
local workforce competent in the field of tourism.
Connected with the problems in this case, of course, need a short-term solution that must be done by the city
government to support service improvements at a local restaurant in the city of Manado. The government
should suggest to the owners of local eateries in the city of Manado so that The waitress had to be trained to
support the quality of service to guests.
Training methods suggested in the form on the job or off the job training. Methods of training to be
undertaken depending on the availability of time and working conditions and the situation of employment.
When the method of on the job training that will be implemented then the method of job rotation and
demonstration and example, it is suitable to the type of work for the waitresses.
When on the job training could not be done then the second solution is off the job training. Especially for off
the job training, the proper method is: a video presentation, vestibule method and role play and simulation.
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5. CONCLUSION
Guest rating the performance of services and service quality expectations will guest waitress. Almost all
aspects of the show minus values indicating that the guest is not satisfied with the services provided by the
waitress.
Some inputs that need to be considered, among others: general manager should improve the quality of service
by improving every aspect dimension in the quality of services provided to guests. Manado City Government
through the Department of Tourism and Culture should encourage local culinary entrepreneurs to pay
attention to provide training to local waiters in local culinary industry. As a suggestion for solving the
problem of weak local restaurant waitress service quality training is done waitresses. The training can be
done on the training and off the job training. For the method of on the job training and job rotation, the
demonstration and example, is very suitable for this type of work waiter, while off the training genius proper
method is: a video presentation, vestibule method and role play and simulation. The next suggestion of this
study need to be added to the training model for the waitresses.
6. ACKNOWLEDGEMENTS
The author regards to the Ministry of Research, Technology and Education via Research Institution in State
Polytechnic of Manado which funded this research
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THE EFFECT OF MARKET, INNOVATIVENESS AND CRATIVITY

MARKETING STRATEGIC ON MARKETING PERFORMANCE:
A RESEARCH FROM WELAHAN JEPARA RATTANS SME
Adijati Utaminingsih1
Economic Faculty Management Departemen Semarang University
(Corresponding email: adijatioetomotoeloes@gmail.com)
ABSTRACT
As it is emphasized in marketing, management, and strategic management literature, "market orientation",

"innovation", and "creativity of marketing strategy" are regarded together as having a significant impact on
a marketing performance. The objective of this study was to find out the interrelationships of these variables
and their impacts on marketing performance in the rattan handicraft SME in Teluk Wetan Welahan Jepara
by using Multiple Regression Analysis. The study findings revealed that the rattan handicraft SME in Jepara
was market oriented and innovative, it also had creativity of marketing strategy and all variables were
effective on marketing performance enhancement
KEYWORDS: Market Orientation, Innovation, Creativity of Marketing Strategy, Performance Marketing,
Rattan Handicraft SME
1. INTRODUCTION
Every company has a goal to achieve growth and viability for the long term. In this global era marked by
same competitions due to purpose, complexity, and high acceleration rates, companies are required to have
ability to develop a strategy selection in marketing management so that they can be able to adapt to a
dynamic environment. Based on that fact, market should be managed by applying systematic efforts to gain
advantages of superior market performance (Nerver & Slater, 1990) in Samtim Eko Putranto (2003: 93).
This business world nowadays is experiencing a very complex and volatile competition. In Hanny N
Nasution (2004: 3), D'Aveni (1994) said that the turbulent environment or known by the
term 'hypercompetitive environment' is described as a condition where the level of competition is increasing
rapidly which it includes a position battle between price and quality, creation of new science and benefits
development as first-mover advantage. It is more appropriately described as an environment because of new
products, new technologies and new competitors threatening the quality of market (Hooley et. al.2000). In
these conditions, customers are very demanding to obtain higher quality level of products/services with cheap
cost. It is important for the company to develop a market orientation in order to survive in this dynamic
environment.
Market-oriented companies (market oriented) are the companies that make customers as the center for the
company to run the business (customer orientation). In order to be able to keep orienting to customers,
companies should also simultaneously orient to the competitors (competitor orientation). Both of these
orientations can be accomplished if companies are able to coordinate (interfunctional coordination) well
(Hanny N Nasution, 2004: 3).
A company should also seek to use its resources in order to innovate. Product innovation is one of the most
important competitive factors for success because business environment has been rapidly changing (Lou,
1999, p. 1; Han et. al., 1998, p. 35) and Amabile (1996, p. 1154-1155) in Mudiantono and Nur Khamidah
(2005: 65) said that the innovation is the successful implementation of creative ideas within
companies. Innovation is the mechanism of a company to adapt in a dynamic environment. Therefore, a
company is required to be able to create new assessments and new ideas, offer innovative products and
improve services performances that satisfy customers.
Strategies creativity is important in carrying out the activity, especially in strategy preparation. Creativity
allows a person or organization to bring new ideas in every planning (Filis and McAuley, 2000) in Widodo
(2008: 152). Similarly in the field of marketing, creativity is considered to be important in marketing
strategies arrangement.
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Performance is all system related to the activities and results (outcome) obtained. Marketing performance is
defined as the performance level measurement effort which includes the volume of sales, number of
customers, profit and sales growth (Voss & Voss, 2000, p. 69). Performance marketing is a concept to
measure the achievements of companies in market for a product. A company needs to know its achievements
as a reflection of the business success in a competitive market. A marketing performance enables a company
to know where its success position measured by required time period (Mudiandono and Nur Khamidah, 2005:
68).
Overall in all sectors of economy, the number of small and medium enterprises is very large and growing,
even in economic crisis period, there was a lot of small and medium entrepreneurs in some sectors that were
forced to stop their business activities due to various problems, such as the price of imported raw materials
that were expensive because of depreciation of the rupiah against the US dollar, the decline of market
demand due to the real value of people's incomes that decreased, and the high cost of the industry caused by
high interest rates on loans. The number of small and medium enterprises was more than the number of large
enterprises, and there were especially small and micro enterprises found everywhere in urban and rural area
(Tulus Tambunan, 2002: 3).
In general, small industries are one of the alternatives expected by the government to solve economic
problems, because they are still able to survive and anticipate the lethargy caused by inflation and other
factors. Likewise, small and medium industries of woven rattan handicrafts in the village of Teluk Wetan
Jepara solve the economic problem and also serve as the support of the economy to meet the daily needs.
Jepara regency is an area that most of the population is self-employed. Entrepreneurship is a decision-maker
who helps to create the economic system of free enterprise. Most of the drivers of change, innovation, and
economic progress will come from entrepreneurs, i.e. people who have the ability to take risks and accelerate
economic growth.
Jepara regency consists of 16 districts, according to data from the Department of Trade and Industry in 2013
there were 11 types of small and medium industries spread across the districts. One of the centers of small
and medium industries was woven rattan handicraft industry center in Welahan district. Teluk Wetan village
as a center of industry had 235 business units that produced rattan which included tables, chairs, bags and
parcels.
The following are the data of woven rattan handicraft production in Teluk Wetan village, District Welahan,
Jepara regency during 2014:
Table 1.1 Total production of woven rattan handicraft of Teluk Wetan village, Welahan district,
Jepara regency in 2014
Month Unit Sales Unit
January 173.652 Pcs / set
February 90.021 Pcs / set
March 205.940 Pcs / set
April 154.390 Pcs / set
May 122.860 Pcs / set
June 57.760 Pcs / set
July 38.588 Pcs / set
August 64.356 Pcs / set
September 147.987 Pcs / set
October 74.622 Pcs / set
November 43.733 Pcs / set
December 109.365 Pcs / set
Source: Data of Industry and Commerce Department in 2014
As the other small industries, small industry of woven rattan handicraft in Teluk Wetan Jepara also had
various problems, in 2014 the number of woven rattan craft production had fluctuated from the sale of
business units, this was due to the increase of raw material prices and the change of consumers demand for
products made from rattan to products made from aluminum and plastic. Based on interviews with the woven
rattan handicraft entrepreneurs, many customers complained about the products innovation that was lack of
color, type and model, they were also less developed when being compared with woven crafts made from
aluminum and plastic.
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The marketing of rattan products in the local market nowadays does not have significant improvement, the
products are more marketable in the area of Yogyakarta, Bali and Jakarta for Indonesia. There are also many
of them which is exported, mainly in the regions of Europe, for example in Denmark, Italy, Netherlands, and
Australia. Although the employers have the broad market orientation to the international market, but the fact
is the company's marketing performance has decreased, this is evidenced by the number unit sales that
fluctuated. The level of market competition is quite high and the rattan entrepreneurs have not maximized
applying strategies to deal with the competition, then the rattan entrepreneurs in Teluk Wetan village, District
Welahan, Jepara regency try to maintain their position by increasing the volume of product sales
The purpose of this study was to analyze the marketing performance improvement in small industry of woven
rattan craft in Teluk Wetan Village through the variables of market orientation, innovation, and marketing
strategy creativity. The research question in this study was how to influence market orientation, innovation,
and creativity of marketing strategy on marketing performance on small industry of woven rattan craft in
Teluk Wetan Village?
Market Orientation
A market-oriented company is a company that makes the customer as the center for the company to run its
business. The definition of market orientation popularized by Kohli and Jaworski (1990) in Hanny N
Nasution (2004: 3) as the collection of market intelligence to meet customer needs today and in the future,
the spread of market intelligence to the various divisions and functions within the company and how the
company responds. The spread of market information on all components of the market organization is
expected to produce customer orientation, competitor orientation and interfunctional coordination that lead to
two decision criteria, namely long-term focus and profitability, (Wahyono, 2002: 25).
In Hanny N. Arai (2004: 3), market orientation is defined slightly different by Nerver & Slater (1990), that
market orientation consists of three components, namely the behavior of customer orientation, competitor
orientation and interfunctional coordination, and two decision criteria that are the long term and profit .
This study adapted the definition of market orientation developed by Nerver & Slater (1990) in Hanny N
Nasution (2004: 4), market orientation as an organizational culture of company that orients in customers,
competitors, and interfunctional coordination in creating customer value.
By adapting the definition developed by Nerver & Slater (1990) in Hanny N Nasution (2004: 4), the indicator
of market orientation in this study was customer orientation, competitor orientation, and interfunctional
coordination.
Innovation
Product innovation is one of the most important competitive factors for success in business environment that
is changing rapidly (Lou, 1999, p. 1; Han et al, 1998, p, 35) in Mudiantono and Nur Khamidah
(2005:65). Amabile (1996, p. 1154-1155) in Mudiantono and Nur Khamidah (2005:65) also said that
innovation is the successful implementation of creative ideas within the company. Innovation is a mechanism
for a company to adapt in a dynamic environment. Therefore, companies are required to be able to create new
assessments and new ideas, offer innovative products and improve the performances of services that satisfy
customers.
According to Hurley and Hult (1998) in Bagas Prakosa and Imam Ghozali (2005: 189) innovation is a
mechanism for companies to adapt to a dynamic environment. Therefore a company is required to be able to
create new thoughts and new ideas by offering innovative products and improve services to satisfy customers.
Innovation is a method to continue building and developing organizations that can be achieved through the
introduction of new technologies and new applications in the form of new products, and finally those
organizations as a mixture of various aspects will create innovation field (Leonard, 1995) in Bagas Prakosa
and Imam Ghozali (2005: 189). Innovation is distinguished with creativity, in which creativity is about new
ideas, while innovation is about doing something new or transferring new ideas for business
success. (Humphrey, 1997 in Gana 2003) in Bagas Prakosa and Imam Ghozali (2005: 189).
Sustainable innovation in a company is a fundamental requirement, which will be able to create a competitive
advantage, thus innovation is an important function of management because it will determine a superior
business performance. Innovation becomes more important as a tool for survival, it is not only for growth but
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also it is for competitions which increasingly intense and for uncertainty of the environment, further,
technical innovations have a strong influence and positive impact on company performance (Gronhaug and
Kaufmann, 1998, in Han, et al, 1998) listed in Wahyono (2002: 29).
Based on the definition by Luke Bryan A and Farrel OC (2000) in Wahyono (2002:30) the innovation
indicators in this study were; products expansion, products imitation and new products.
Creativity of Marketing Strategy

Creativity of marketing strategy is defined as an act extension taken to market products which illustrates a
significant difference of the implementation of marketing strategies within its product category (Andrews &
Smith, 1996, p. 175) in Mudiantono and Nur Khamidah (2005: 66), while according to Hennesey & Amabile
in Andrews and Smith (1996, p.177) that creativity is centered on something new and meaningful from some
outputs, relative to the public implementation in the area of marketing and creativity requires the
development of newer alternative and more radical because it is a business solution for companies. Creativity
in formulating marketing strategies will improve marketing performance (Menon et al, 1999).
Creativity is the first step of innovation, which is the success of novelty implementation, suitability of ideas
and innovation is very vital for the success of long-term change. Because the business world is dynamic,
movement changes should be done in harmony with the acceleration, there is no company constantly offering
the same goods or services can survive for a long time (Wynder, 2008) in Hendro Tanoko (2010:
116). Hendro Tanoko also stated that creativity of strategy is a result of a person's thoughts or work team to
realize a meaningful innovative work.
Based on the reference from statement of Menon et. Al (1999) and support from Andrews and Smith (1996),
it could be concluded that indicators of creativity of marketing strategy in this study are reward, individual
performance and work team performance.
Marketing Performance
Performance is all system related to the activities and results (outcome) obtained. A market oriented company
provides a positive impact on the performances of large companies (Kohli and Jaworski, 1993) and small
companies (Pelhant and Wilson, 1996), marketing performance is defined as an attempt to measure the
performance levels including sales volume, number of customers, profit and sales growth (Voss & Voss,
2000, p. 69) in Mudiantono and Nur Khamidah (2005:67). Marketing performance is a concept to measure
the product achievements of companies in market. Companies need to know their achievements for a
reflection of their business success in a competitive business (Wahyono, 2002: 27).
Ferdinand, A (2000, p. 47) in Mudiantono and Nur Khamidah (2005: 67) states marketing performance is
something that wants to be achieved by company in streamlining the company, increasing market share, and
profitability. In addition, Han, Kim & Srivastava (1998, p. 30) in Mudiantono and Nur Khamidah (2005:67)
also provide that innovation in the organization is successful if it can produce superior performance gained
from commitment of customer total satisfaction due to sustainable innovation. The desire to create superior
value for consumers and to create a continuous competitive advantage will encourage companies to develop
innovations that affect their performance.
By adapting the study of Droge et al (1995) and also the statement of Pelham and Wilson (1996) above, it
could be concluded that the indicators of marketing performance variables in this study are customer growth,
sales growth and market share.
Research Model
Based on the reviews of theoretical basis and previous research, the research model in this study is as
follows:
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Figure 1. Research Model
Hypothesis development
Wahyono (2002) in his research found that was a significant influence between the marketing orientation and
marketing performance, it meant that if the market orientation was implemented well, the marketing
performance will be better, of course, with the increase of sales value. The first hypothesis is as follows:
H1: Marketing Orientation positively affects marketing performance.
Bagas Parakosa and Imam Ghozali (2005: 189) said that innovation positively and significantly affects
company's performance. It is also supported by the results of Wahyono‘s study (2002) that showed
innovation has a positive and significant impact on marketing performance. It means if innovation keeps
being developed, it will improve sales results. Then the second hypothesis is as follows:
H2: Innovation positively affects marketing performance.
Menon et al (1999) in his research stated that the creativity of marketing strategy has a significant effect on
company's performance, it is also supported by the research from Hendro Tanoko (2010) that creativity of
marketing strategy has positive effect on marketing performance, it means if creativity of marketing strategy
is implemented well by a company, it can improve its marketing performance. Then the third hypothesis is as
follows:
H3: Creativity of Marketing Strategy positively affects marketing performance.
3. RESEARCH METHOD
The population in this study was 235 entrepreneurs or business units of rattan handicraft in Teluk Wetan
Village, Welahan District of Jepara regency. The samples in this study were some of the entrepreneurs of
rattan handicraft in Teluk Wetan Village, Jepara. The sampling technique used in this study was random
sampling technique with lottery because all subjects in the population were considered to be homogeneous in
this study, and thus it was given the same rights for people in the population to become samples. Random
sampling was used to take samples from a population of 235 entrepreneurs and it was 70 entrepreneurs
domiciled in the Teluk Wetan were chosen to become samples. Samples total were determined by using
Slovin formula.
Multiple regression analysis was used to predict the effect of two or more predictor variables (independent
variables) towards one criterion variable (dependent variable) or to prove whether there was a functional
relationship between two independent variables (X) or more and dependent variable (Y) (Usman and Akbar,
2006: 241). In this study, it was used to prove relationship between market orientation (X1), innovation (X2)
and creative marketing strategies (X3) and marketing performance (Y). Moreover it was to determine the
extent of influence of independent variables and dependent variables.
Multiple regression equation could be written as follows (Usman and Akbar, 2006: 242):
Y a b1 x1 b2 x 2 b3 x 3
Operational variable definition

Market orientation is the behavior of organizations covering the collection, dissemination and response to
market intelligence that is reflected in the orientation of customers, competitors and coordination mechanisms
in creating customer value. Innovation is a mechanism for enterprises to adapt to a dynamic environment.
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Creativity, marketing strategy is the expansion of the actions taken to market the product, which illustrates a
significant difference from the implementation of marketing strategies in the product category.
Marketing performance is a concept to measure the achievements of companies in the market of a product as
a reflection of the success of the business in a competitive business.
4. RESULTS
The respondents based of sex classification can be seen in Table 1 as follows:

Table 1. The Respondents based on Sex
Sex Amount Percentage
Male 58 people 82.86%
Female 12 people 17.14%
Number of Respondents 70 people 100%
Source: The Processed Primary Data in 2013
The results of multiple regression analysis can be seen as follows:
Table 2. The Result of Multiple Regressions
Unstandardized Standardized Collinearity
Coefficients Coefficients Statistics
Model B Std. Error Beta t Sig. Tolerance VIF
1 (Constant) .004 .510 .008 .993
Market Orientation .294 .077 .288 3.831 .000 .304 3.285
Innovation .398 .126 .391 3.150 .002 .111 8.984
Marketing Strategy
.337 .126 .310 2.675 .009 .128 7.817
Creativity
a. Dependent Variable: Performance
Source: The Processed Primary Data in 2013
The Effect of Market Orientation on Performance Marketing

The influence of market orientation on performance marketing was evidenced by t-test result of 3.831 with
sig. 0,000 <α = 0.05. Because sig. value is smaller than α = 0.05, it means that Ho 1 is rejected and H1 is
accepted so that the hypothesis stated that market orientation positively affects marketing performance is
acceptable. This is consistent with the results of study of Wahyono (2002) in his research that also found that
there was positive influence between marketing orientation and marketing performance.
The Effect of Innovation on Performance Marketing

There was influence on performance of marketing innovation was evidenced by t-test results amounted to
3,150 with sig. 0,002 <α = 0.05. Because sig. value is smaller than α = 0.05, it means Ho 2 is rejected and
H2 is accepted so that the hypothesis stated that innovation positively affects marketing performance is
acceptable. This is consistent with the study results of Wahyono (2002) which also stated that innovation had
a positive influence on the performance marketing.
The Effect of Creativity of Marketing Strategy on Performance Marketing

The influence of creativity of marketing strategy on marketing performance was evidenced by t-test results
amounted to 2,675 with sig. 0.009 <α = 0.05. Because sig. value is smaller than α = 0.05, it means Ho3 is
rejected and H3 is accepted, so that the hypothesis stated that creativity of marketing strategies positively
affects marketing performance is acceptable. This is consistent with the results of study of Hendro Tanoko
(2010) stated that creativity of marketing strategy had positive influence on the performance of marketing.
To find out how much performance marketing is able to be explained by independent variables that are
market orientation, innovation, and creativity of marketing strategy, this is the following test results used
SPSS:
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Table 3. The Result of Determination Coefficient

1 .942 a .887 .882 .878
a. Predictors: (Constant), Creativity of Marketing Strategy, Market Orientation,
Innovation
b. Dependent Variable: Performance Marketing
Based on the table above, the value of Adjusted R Square shows value of 0.882, it means that marketing
performance variable is able to be explained by the independent variables (market orientation, innovation,
and creativity of the marketing strategy) with the percentage of 88.2%, while the remaining percentage of
11.8% (100% - 88.2 %) is explained by other variables which are not examined in this study.
Market Orientation has positive and significant effects on performance marketing, which can be proved from
t-test result of 3.831 with sig. 0,000 <α = 0.05. By using these results, we can conclude if market orientation
is better, it can give effects on the improvement of marketing performance at the Small and Medium
Industries of Rattan Handicraft on Teluk Wetan village, Welahan district, Jepara regency.
Innovation has positive and significant effects on marketing performance, which can be proved from t-test
result of 3.150 with sig. 0,002 <α = 0.05. By using these results, it can be concluded that if innovation
increases, there will be effects on the improvement of marketing performance at the Small and Medium
Industries of Rattan Handicraft on Teluk Wetan Village, Welahan District, Jepara regency.
Creativity of marketing strategies has positive and significant effects on performance marketing, which can
be proved from test - t result of 2.675 with sig. 0.009 <α = 0.05. By using these results, we can conclude if
creativity of marketing strategy increases, it will affect the improvement of marketing performance at
the Small and Medium Industries of Rattan Handicraft on Teluk Wetan Village, Welahan District, Jepara
regency.
From the three variables above, it could be seen that market orientation gives dominant effects on marketing
performance in the Small and Medium Industries of Rattan Handicraft at Teluk Wetan Village, Welahan
District, Jepara regency. Creativity of marketing strategy gives the smallest effects on marketing
performance. The most influential variable from the largest to the smallest is market orientation (39.67%),
innovation (32.62%), and creativity of marketing strategy (27.71%).
The rattan handicrafts entrepreneurs should better understand what their customers desire, understand the
strengths and weaknesses of the products of its competitors to create products according to market
demands, opening the outlet or showroom in other areas so that consumers more easily obtain the products
produced rattan handicraft entrepreneurs,other than that so that potential customers can be served.
The small and medium industry entrepreneurs rattan handicraft in Teluk Wetan should always innovate its
products, with more ways to add variety to the other feedstock materials, for example: banana leaf, water
hyacinth and bamboo so that the business is more developed, other than that employers also have to update
the model the craft -model of the shape, the color is to be able to face the competition.
Employers should promote creativity rattan craft marketing strategies of its business, it is a way to empower
the creativity of employees, creative employees who can assist companies in solving problems or provide
new ideas for the preparation of a good strategy to achieve corporate goals.
Research carried out in the scope of the Small and Medium Industries Rattan Teluk Wetan Welahan District
of Jepara district so that research results can not describe to a broader scope that other rattan handicraft
industry spread in Indonesia.
Variable limited research on the influence of market orientation, innovation, and creative marketing strategies
seen its effect on marketing performance
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6. REFERENCES
Andrews, Jonlee and Daniel C. Smith, (1996), In Search of Marketing Imagination: Factors Affecting The Creativity of
Marketing Program For Mature Products, Journal of Marketing Research, 33 (May), 174-187
Ferdinand, A. (2002), Structural Equation Modelling Dalam Penelitian Manajemen, Universitas Diponegoro, Semarang.
Glenn B. Voss, Zannie Giraud Voss, (2000), Strategic Orientation and Firm Performance in an Artistic Environment.
Journal of Marketing: January 2000, Vol. 64, No. 1, pp. 67-83.
Ghozali , Imam , (2009), Applications Multivariate Analysis With SPSS , Semarang : Diponegoro University
Publishers Agency
Ghozali , Imam , (201)1, Econometric Theory , Concepts and Applications With SPSS 17 , Semarang :
Diponegoro University Publishers Agency
Jaworski, B.J., & Kohli, A.K., (1993), Market orientation: antecedents and consequences. Journal of Marketing, 57 (3),
July, 53-70.
Menon, A., Bharadwaj, S.G., Adidam, P.T. and Edison, S.W., (1999), ―Antecedents and consequences of marketing
strategy making‖, Journal of Marketing, Vol. 63 No. 2, pp. 18-40.
Mudiantono, Khamidah Nur, (2005), the Environmental Factors Influence Analysis Of Product Innovation andCreativity,
Marketing Strategies to Improve Marketing Performance (Study At Company Crafts, CeramicSentra Kasongan
Bantul district of Yogyakarta),Journal of Business and Economics Vol. 12 No. 1
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of June, Page 3-9
Pelham, A.M., & Wilson, D.T., (1996), A longitudinal study of the impact of market structure, firm structure, strategy, &
market orientation culture on dimensions of small-firm performance. Journal of the Academy of Marketing Science,
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Performance Against Company To Achieve Competitive Advantage (Empirical Study On Manufacturing Industries
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Strategy, Journal of Management Dynamics, Vol I, No.2 Page 115
Umar, Husein, (2005), Methods For Thesis and Thesis Business, Jakarta: PT. King Grafindo Persada
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THE MODEL OF RELATIONSHIP QUALITY STUDENT LOYALTY
Yuli Budiati1 &Nuria Universari2

Semarang University, Semarang University
(yulibudiati@yahoo.com1, uni_nur@yahoo.com2)
ABSTRACT
This study examines the effect of relationship quality dimensions to the loyalty of students in the
undergraduate student management department at several universities in Semarang, Central Java, Indonesia.
Relationship quality dimensions used are service quality, trust, cognitive commitment, emotional commitment
and goal commitment.
The data obtained through the survey by questionnaires. The unit analysis used 250 sample undergraduate
(S1) Management student which study minimum on third semesters and Structural Equation Modelling
analysis. The result show loyalty is influenced by the service quality, emotional commitment and cognitive
emotions. Service quality also affects on trust and emotional commitment. On the other hand the trust does
not affect the loyalty and emotional commitment, and goal commitment no effect on loyalty.
The implication of this research is the program should improve the image of the course so that students have
the emotional attachment to the course, increase a trust to staff performance, and provide clarity of vision
and mission of the program, so that students know what the achievement or objective commitment after
graduation.
Keywords: relationship quality, service quality, trust, emotional commitment, cognitive commitment, goal
commitment, student loyalty.
1. INTRODUCTION
Customer loyalty in service provider, including on higher education is becoming an important task for
marketers to be handled properly. According to Hennig-Thurau et al. (2001), some of the consequences if the
student is less loyalty among others that are decreasing the number of financial institutions, furthermore its
impact on the future of the course. Student loyalty also had an impact on the quality of the lecture. If students
loyal to a course of study, it will have an impact on student motivation when learning activities and create a
good academic atmosphere. Moreover the impact of student loyalty is on how much support the students after
graduation. This means that when the level of student loyalty is low, then the support of alumni on the course
which is also low, furthermore promotion of the study of the alumni program will also decrease, which have
an impact on decreasing the collaboration with several institutions required for program development.
It needs to be observed for the factors that affect the loyalty of students, including students with regard to the
perception of the quality of the lectures (or quality of service), the trust at the university‘s employees and
commitment. This study tried to reveal the influence of these variables on the students' loyalty in accordance
with the model student loyalty proposed by Hennig-Thurau et al. (2001) with research subjects students at
several universities in Semarang.
Some researchers have studied on customer loyalty in the retail sector, hospitals, and banks. Several recent
studies using the concept of customer loyalty by placing students in higher education institutions as
customers that need attention. According to Hennig-Thurau et al. (2001), an educational institution with a
loyal customer benefit is not limited only when students are formally registered as a student at the
educational institution, but also when the student has graduated. The term loyalty of the students in this study
refers to the loyalty of students during college and after graduating from university.
Relationship quality approach is based on the assumption that customer loyalty is determined by a number of
limited constructions that reflects the "degree of accuracy the relationship" from the perspective of the
customer (Hennig-Thurau and Klee 1997). Up to now there is no clear consensus on a series of dimensions
that make up the construct of relationship quality, although there is agreement that relationship quality is a
131
construct that is higher, which consists of several different dimensions, although from one dimension to
another dimension interrelated (Dorsch et al., 1998).
Hennig-Thurau et al. (2001) propose a model relationship quality-based student loyalty by combining the
primary element of the model student loyalty developed by Tinto (1975, 1993 in Hennig-Thurau et al., 2001)
and Hennig-Thurau and Klee (1997). The model of student loyalty developed by Tinto interprets traditional
student loyalty by designing academic institutions that have an active role in generating a high level of
loyalty. In line with the relationship marketing perspective, the university is a major factor in generating
student loyalty to the institution. In addition, the model Relationship Quality Student Loyalty (RQSL) in line
with the theory of relationship marketing that involves various aspects in educational research, such as tuition
payments for institutions with particular characteristics and its relationship with the student as a customer.
In the model RQSL, student loyalty is determined by three components that include student perceptions on
the quality of teaching (quality of service), trust of the student in the institution staff and student commitment
of the staff. Model RQSL also consider several variables in order to obtain a better understanding of the
loyalty and the processes involved in it.
This study is a replication of the loyalty-based relationship quality students from research Hennig-Thurau et
al. (2001). The dimensions of relationship quality consists of quality of service, trust and commitment and
loyalty to the research Hennig-Thurau et al. (2001) can be seen in Figure 1.
Trust in
the
institution’
s
Perceived
quality of Student
teaching
service Loyalty
Cognitve Emotional
commitme commitme
nt to the nton the Goal
institution institution commitmen
t
Figure 1: The Model of Relationship Quality Student Loyalty
Service quality is an important factor in developing and maintaining relationships with customers (Park et
al., 2006). In the higher education sector, the quality of services to be a component that differentiates one
institution to another institution (Phadke, 2011) and it is an essential element for the success of the university
(Taecharungroj, 2013). From the standpoint of loyalty, service quality is a variable that is a powerful
influence on student loyalty (Bergamo, et al., 2012).
Mohamad and Awang (2009) studied that the guarantees of student satisfaction through high quality service
is very important to gain the loyalty of the students. The research of Fares et al. (2013) and Hennig-Thurau
et al. (2001) proved that the quality of service a positive effect on student loyalty. In line with this, Lin and
Tsai (2008) in his study found that the quality of teaching services direct effect on student loyalty. Therefore,
the hypothesis about the quality of service is as follows:
Hypothesis 1: Student perception on the quality of services at educational institution has a positive effect
on student loyalty.
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The trust of students in higher education has understood as student believes in the integrity and reliability of
the university (Morgan and Hunt, 1994, Rojas-Mendez et al., 2009). Hennig-Thurau et al. (2001) states that
trust is based on the personal experience of each student to staff. Taecharungroj (2013) provides a definition
of trust as a student believes in the reliability and integrity of the university based on the personal experience.
Several studies in university services found that trust causes student loyalty (Garbarino and Johnson, 1999;
Carvalho and Mota, 2010; Puttawong et al., 2012).
Carvalho and Mota (2010) argue that the education sector is very suitable for investigating the role of trust in
creating loyalty because the student involvement to institutional are very high and the service process takes
place in a long time. Furthermore, this study found that students really are no different than other consumer
on the trust services sector. The stronger student trust can impact on the positive effect of loyalty
components such as willingness to recommend the college to the other.
Hypothesis 2: The trust of students at educational institutions has a positive effect on student loyalty
Commitment refers to a continuous desire to maintain a relationship (Morgan and Hunt, 1994). The desire to
continue a relationship and a willingness to make efforts to maintain it shows the opportunities for higher
customer loyalty (Bloemer and Odekerken-Schroder, 2007). Thus, it can be assumed that no relationship with
customer loyalty.
In higher education, Hennig-Thurau et al. (2001) define commitments into two categories, there are
emotional and cognitive. Some researchers use the term affective commitment or the emotional commitment
variables (eg Bowden, 2011; Moore and Bowden-Everson, 2012). Affective commitment is customers
emotional ties on service providers who indicate psychological closeness with service providers (Garbarino
and Johnson, 1999). According to Bowden (2011) the affective commitment has the positive effect of on the
loyalty of the students, even the most determine student loyalty. Furthermore, the deeper emotional
connection between the students and the university on affective commitment will create a strong and stable
relationship so that students become loyal to the university. Hennig-Thurau et al. (2001) and Moore and
Bowden-Everson (2012) proved that affective commitment has a positive effect on student loyalty. Thus, the
hypotheses can be formulate is:
Hypothesis 3: The emotional commitment of students in educational institutions has a positive effect on
student loyalty.
Cognitive commitment is a commitment that considers the benefits and costs as a decision to continue the
relationship (Kanter, 1968 in Frow, 2007). Many researchers say the calculative commitment or continuant
commitments to mention the variable cognitive commitments. Some research suggests that the calculative /
cognitive / continuant commitment has a positive effect on loyalty (Evanschitzky and Plassmann, 2006;
Huang et al., 2007;) and an intention to maintain a relationship (Wetzels et al., 1998). On the other hand,
cognitive commitment has a negative effect on intention to switch on service providers (Bansal et al., 2004).
Furthermore, the following hypothesis is :
Hypothesis 4: cognitive commitment of students in educational institutions has a positive effect on student
loyalty.
Hennig-Thurau et al. (2001) acquired a relationship quality dimension in the college by involving the goal
commitment as a variable that predicted student loyalty. According to Hennig-Thurau et al. (2001), based on
the characteristics of the service and the need for active learning, students usually get some external
influence during their studies at the university. Furthermore, external influences can result the interest of
students and the evaluation of their relationship with the university. In line with the research Hennig-Thurau
et al. (2001), then the hypothesis goal commitment proposed in this study is as follows:
Hypothesis 5: Goal commitment of students in educational institutions a positive effect on student loyalty.
Qin et al. (2009) found that service quality has strong influence on trust in the long-term relationship.
Research conducted by Aydin and Ozer (2005) on telecommunications services in Turkey. It proves there is a
positive relationship between service quality and trust. In the services sector of education, research Bergamo
et al. (2012) on students in Brazil shows that service quality affects the trust.
Hypothesis 6: Perception of students on the service quality has a positive effect on trust.
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Research Fullerton (2005) in three sectors of services includes financial services, telecommunications and
food shows that service quality is positively related to affective commitment. In line with this, Dean (2007) at
two call centers in Australia proves that service quality is positively related to affective commitment.
According to Dean (2007), it is not out of the employee's role in interacting with customers. In research on
call center business, Ruyter and Wetzels (2000) states that the attention of a consultant in serving customers
resembling quality perceptions and lead to positive feelings about yourself customer. Thus, the hypothesis is:
Hypothesis 7: Perception of students on the quality of service has a positive effect on emotional commitment.
Lin et al. (2006) proved that a person's trust in the service provider makes it attach to maintain contact with
their providers. Attachment and dependence on providers happen if he felt the relationship may be relied on
to support its interests and respond to their needs. Cater research results (2007) show that trust causes a high
level of affective commitment, or in other words the belief led to a strong desire to maintain the relationship.
In line with this, the research Geyskens et al. (1996) and Zhang and Bloemer (2008) proved that trust has a
positive effect on affective commitment. Therefore, the formulation of hypotheses to be investigated are:
Hypothesis 8: The belief of students at educational institutions a positive effect on emotional commitment.
3. RESEARCH METHOD
The samples of this research were undergraduate students (S1) Economic Faculty in several private
universities in Semarang. The sampling was based on a purposive sampling technique using judgment
sampling, by choosing students of management department, which minimum on third semesters as the
sample criteria. Data collecting use questionnair and it collected 250 resopondents , all variables were
measured using a 5-point Likert scale.Research variables used in this study are the loyalty, quality of service,
trust, emotional commitment, cognitive commitment and goal commitment.
Model Student Loyalty developed by Tinto interprets traditional student loyalty by designing academic
institutions, which have an active role in generating a high level of loyalty. In relationship marketing
perspective, the university is a major factor in generating student loyalty to the institution. In this study,
student loyalty measured by the wishes of student to recommend the department, faculty and university, the
desire of students to re-use the services of the university and the department if they would continue their
education and will be a member of the graduate organization.
The theory of Parasuraman (1998) holds that the quality resulting from a comparison of perceived
performance with the expected performance. Model Nordic states of two-dimensional quality of services
consisting of the functional quality (which shows how services are delivered, so that shows consumer
perceptions of the interactions that occur during the delivery of services) and technical quality (which reflects
the outcome of active services or what is acceptable to consumers in the delivery of services). Model
SERVQUAL (Parasuraman et al, 1988) proposed five dimensions: reliability (ability to deliver the services
they have promised consistently and accurately), responsiveness (willingness to help customers and provide
prompt), empathy (individualized attention to the consumer), Assurances (knowledge and courtesy of
employees and their ability to make consumers believe), and tangible (includes physical facilities, equipment,
and personnel performance). In this study, the quality of service is measured by measuring students' academic
staff services, infrastructure, teaching faculty, solving problems during the lecture to the faculty and staff, and
administrative services.
Emotional Commitment is defined as a desire to continue the relationship because the relationship is fun for
its own sake, apart from the instrumental value and because of a sense of loyalty and sense of belonging
(Allen and Meyer, 1990; Geyskens et al., 1996 cheat in Bloemer and Odekerken-Schroder, 2007). Emotional
commitment is based on a relationship that is sustainable, not for short-term economic benefit, but for each
party to feel emotional or psychological proximity to one another. Commitment of emotion in this study was
measured using student assessment of the level of emotional closeness and a sense of pride in the university,
faculty and department.
Calculative commitment or cognitive commitment is the degree of experience that makes a person has a need
to maintain relationships (Allen and Meyer, 1990; Geyskens et al., 1996 cited in Bloemer and Odekerken-
Schroder, 2007). Cognitive commitment involves advantages associated when students kept in a relationship
and associated costs, if not to continue the relationship (Kanter, 1968 in Frow, 2007). Calculative
commitment is measured by using the judging of study program is connected with the tuition fees, living
expenses and disadvantage if they moved to another place.
134
The basic concept of goal setting goal commitment is the theory propounded by Locke (1968), who argued
that a person's behavior is determined by two cognition, namely values and goals or objectives. Values are
what someone appreciated as an effort to obtain prosperity (welfare). People have a set goal for his behavior
in the future and these objectives will influence the actual behavior. Goal commitment measured by student
assessment of the level of interest of achieving the target of lectures, concern and seriousness in achieving
the target university.
Trust is a feeling of security, based on the belief that the behavior of the party directed by goodwill towards
the best interests of the other party and the ability of businesses to keep their promise (Delgado-Ballester and
Munuera-Aleman, 2001). Consumer confidence is also defined that the service providers can be trusted or
relied upon to fulfill his pledge (Sirdeshmuhk et al., 2002). Belief in this study was measured using a level of
integrity to the staff, the judging of the actions of his staff, trust of complete service and precision of staff
appointment.
Table 1: Mean and Standard Deviation of Respondent Summary

Variables Mean SD
Service Quality
University academic staff is providing a good service 3,23 1,027
University infrastructure is supporting the implementation of the lecture. 3,17 ,930
Lecturer able to teach well.
3,15 ,971
Employees and lecturers are able to solve the problem nicely.
Mid exam and the final exam are done well. 3,15 ,959
Administrative services carried out well.
3,15 ,971
Graduates of the course in which I studied easily get a job.
3,24 ,968
3,30 ,996
Trust
Integrity is a word I used in describing the university staff. 3,14 ,985
I guarantee that the university staff is always doing the best action.
3,21 ,960
I believe that the university staff provides a complete service.
The university staff always kept his promise 3,07 ,922
3,28 1,036
Emotional Commitment
I feel I have an emotional attachment to the university in which I studied. 3,21 ,963
I feel I have an emotional attachment to the faculty in which I studied.
3,27 1,011
I feel I have an emotional closeness in the study program in which I studied.
I am proud to be studying at the university where I study now. 3,17 ,986
I am proud to be studying in the faculty which I studied now.
3,25 ,979
I am proud to be studying in a program of study in which I studied now.
3,18 1,041
3,18 ,994
Cognitive Commitment
I chose this course of study for practical reasons (proximity to residential / boarding, 3,27 ,995
affordable, easy transportation)
I'm not going to get out of this university because it is very heavy to move to other
universities. 3,33 1,02
It is important for me to study here, if moved to another university filled with
uncertainty.
3,25 ,991
135
Goal Commitment
It is important for me to achieve learning targets 3,26 1,021
I am always concerned about the achievement of learning
3,27 1,006
I'm always serious in achieving learning targets
I always wanted to achieve learning targets 3,21 ,975
3,25 ,984
Loyalty
I would recommend a course / subject me to others. 3,15 ,984
I would recommend the university where I study with others.
3,12 ,890
I am very keen to keep in touch with "the faculty where I study"
If I am faced with the same choice again, I would still choose the same course of 3,19 1,011
study.
3,08 1,009
If I am faced with the same choice again, I would still choose the same university.
I will be a member of any organization of alumni of the university or faculty.
3,21 1,031
3,05 1,008
4. RESULT
Table 2: Test of Goodness of Fit Full Model

Goodness of Fit Cut-off Value Result Evaluation
Index
Chi-Square < 210,130 208,848 Good
Probability ≥ 0,05 0,057 Good
RMSEA ≤ 0,08 0,029 Good
GFI ≥ 0,90 0,911 Good
AGFI ≥ 0,90 0,885 Marginal
CMIN/DF < 2 ,00 1,173 Good
TLI ≥ 0,95 0,981 Good
CFI ≥ 0,95 0,984 Good
Source: Primary data, 2015
The results of confirmatory factor analysis on the overall models suggest that all the indicators that are used
to form the model of this research has met the criteria for goodness of fit (Table 2). Thus the constructs that
are used to form a research model has fulfilled the eligibility criteria of a model.
Table 3: The Result of Regression Weight on Full Model
Estimate S.E. C.R. P Label
Trust <--- Service _Quality .542 .085 6.398 *** par_20
Emotional_Commitment <--- Service _Quality .697 .104 6.726 *** par_21
Emotional_Commitment <--- Trust .099 .097 1.023 .306 par_22
Student_Loyalty <--- Service _Quality .372 .143 2.606 .009 par_16
Student_Loyalty <--- Trust .029 .089 .322 .747 par_17
Student_Loyalty <--- Emotional_Commitment .309 .126 2.456 .014 par_18
Student_Loyalty <--- Cognitive_Commitment .279 .128 2.175 .030 par_19
136
Estimate S.E. C.R. P Label

Student_Loyalty <--- Goal_Commitment .029 .111 .262 .793 par_23
Source : Primary Data, 2015
From the results, it can be concluded that the hypothesis 1 in this research hypothesis testing could be
accepted. This study is consistent with research Hennig-Thurau et al. (2001) and Phadke (2011) who did
research on the relationship between service quality and loyalty in an educational context. The results of this
study are also consistent with the analysis of the fundamental research by Palaima and Banyte (2006). It
shows that the dimensions of service quality are the most fundamental relationship quality as well as having
the greatest influence as a determinant of consumer loyalty.
Hypothesis 2 in this study cannot be accepted. This research was different with previous studies that show
trust in the services sector is an important factor in determining loyalty (e.g. Research Berry, 1995;
Chaudhuri and Holbrook, 2001; Morgan and Hunt, 1994; Verhoef et al., 2002). This illustrates that the
student did not consider the trust of the staff in determining loyalty of university students. Although the
general level of confidence in the staff has been good, but this less affected the student loyalty to recommend
or choose the same services at the college.
Higher education is a service which is authorized and regulated for the general public, the trust ratings may
be based on the reputation of the college, the college-age education services in the market competition,
image, and reputation of the college as a whole (Bowden & Wood, 2011). In the current context, the
education services sector is monitored by quality assurance agencies involved in setting minimum quality of
performance goals, as well as the management of curriculum development and rating of accreditation, in this
case managed by the National Accreditation Board. Therefore, institutions of higher education are considered
trustworthy naturally.
Hypothesis 3 in this study can be accepted. It shows that the deep emotional relation between students and
universities in the form of emotional commitment will produce a strong and stable relationship, and therefore
will generate loyalty. This is in line with previous studies which stated that the commitment affective or
emotional commitment will result in behavior that is beneficial (e.g. Research Harrison-Walker, 2001;
Hennig-Thurau et al., 2002; Wetzels et al., 1998). The results indicate that higher education institutions must
invest in service development program that targets the development of affective attachment. In particular,
management should strive to actively promote and strengthen the relationship between the student-institution
by concentrating on the development of interpersonal closeness that are based on familiarity, attention,
friendship, trust, and relationships (Gremler and Gwinner, 2000).
Hypothesis 4 in this study has been accepted. This is in accordance with previous studies that have found
that cognitive commitment predict customer loyalty (Ahluwalia et al., 1999; Fullerton, 2003; Hansen et al.,
2003). Consumers who only activates the cognitive stage can be hypothesized as consumers are most
vulnerable to brand switching because of marketing stimulation.
On the other hand, consumers are fully integrated into loyalty can be hypothesized as consumers had lower
levels of vulnerability to brand switching. Furthermore, universities should cultivate marketing stimuli to
students through programs such as scholarships for outstanding students and an affordable cost, considering
the students that only activate cognitive commitments and susceptible to marketing stimuli from other
universities.
Hypothesis 5 in this study cannot be accepted. According Muciiri, 2007 (in Albari, 2009), goal commitment
depend on the institution's mission. Someone will be committed to the goal that is proportional to the mission
and vision of the institution. Therefore, clarity of mission and clarity of purpose and how specific purposes in
accordance with the mission are what actually determines the buy-in is done by someone
From this research, student goal commitment has been high, but no effect on loyalty. Despite the vision and
mission of the study program are in accordance with each of the students, but they are less able to explore a
sense of pride for being able to college students in the course and university and jointly strive to maintain
long-term success achieved by the university.
137
Hypothesis 6 in this study is the quality of service has a positive influence on trust, so the higher quality of
service, the higher the trust. Based on the data, it is well known that C.R (Critical Ratio) for influence of
service quality as shown in Table 2 amounted to 6.398 with a P value (Probability) of 0.000. Both of these
values showed a qualified, that is above 1.96 for C.R (Critical Ratio) and below 0.05 for the value of P
(Probability). So it can be concluded that hypothesis 6 has been accepted.
The results are consistent with research Aydin and Ozer (2005) who found a positive effect of service quality
on trust. The implications are when a student receives good service quality of the faculty and staff at the
college, students will be more trusting in college. Therefore, it takes effort to increase student trust in college.
Trust in a company is customer to believe in the reliability and integrity of service offered by an organization
(Garbarino and Johnson, 1999). Colleges can increase student trust through reliable service and to implement
of quality teaching and learning so that services colleges have high integrity.
Hypothesis 7 in this study has been accepted. Students perceive the quality of services from staff, lectures
and infrastructure measure by the student is good, but is still in the category of standard or average (3,19).
This had an impact on the assessment of the students on emotional commitment are less (below the average is
2.6). Provider which gives standard service, will result by students less emotionally feeling to the place where
they learn, so students lacked of trust to lecture at the university.
This needs to get the attention of managers regard to how the increasing service of staff, lecture,
infrastructure and the outcome of study that distinguish the university much better than elsewhere, so that
students feel more proud and have a high emotional attachment. It will take effect after they graduate student
will create a strong and extensive network that encourages emotional pride level as a graduate of the
university respectively.
Hypothesis 8 in this study was rejected. This result is not consistent with Bansal et al. (2004), Black (2008),
Li et al. (2006), Wetzels et al. (1998) and Zhang and Bloemer (2008). This indicates that despite students
have trust on collage, but they do not feel emotionally attached to the college.
Students have a low level of emotional attachment on the service provider. They tend to have less feelings
towards the entity, conscious planning, policy and prudent actions to fulfill certain commitments. The
development of emotional connection between the brand (company) and consumers can lead to consumers'
emotional commitment to the brand (Albert et al, 2010). Commitment emotions closely associated with the
brand function expressions, the source emotions and feelings, reflecting the degree of involvement and
identification of a person with the organization and the next stage will lead to a sense of membership.
The implication is when emotional commitment is low, then the strength of the emotional ties is low. This is
a prerequisite for a strong future relationship in the form of habit or re-purchase. Second, emotional
commitment has a tendency to increase the willingness of customers to support the company through WOM.
If WOM is low- emotional commitment is also low. Third, if customers involved emotionally may be more
forgiving if there is a case of failure of the service, which in this case is not found in research results.
5. CONCLUSIONS, IMPLICATION AND LIMITATION
This study concluded that the loyalty of the students can be achieved, as described below.
1. Variable cognitive commitment is the dominant variable affecting student loyalty in higher education. The
proximity of the campus to the residence and resilience in the face of temptation is an important factor of
cognitive commitment in improving student loyalty.
2. The results of structural equation analysis indicate the quality of service is a variable that affects the
loyalty of students, either directly or through a trust or through emotional commitment. In both these
variables intervening emotional commitment is stronger than belief. Improved quality of service at the
College in Semarang is a major determinant in improving student loyalty.
3. Emotional Commitment is a third variable that affect the loyalty of students directly. Emotional
commitment that is able to attach emotionally and pride of the students as the key success factor of
universities in improving student loyalty.
The implication can be given for this research:
138
1. The department should improve emotional commitment to students through enhancing image of courses,
so there is pride in the students to learn in the course. If the students feel proud of the courses will be
formed emotional attachment between courses with alumni.
2. It is necessary to improve the trust with increasing performance of the staff in the department, so the
students believe that the staff is working optimally and add value for trust through give reliable service.
3. In the variable goal commitment, it is necessary to clarify of vision and mission of the department, what
are the achievements of the course and how to achieve it. Potential users will be understood and can
answer what benefits will be obtained when taking classes on the course, because of the vision and
mission courses according to what is desired by prospective students.
Limitations of this study are as follows:

1. Research object only to students at Undergraduate student in the Management Department in several
private universities, so that the results of this study cannot be generalized to the scope of all departments
in other cities or country
2. The variables used there is no empirically proven effect on the dependent variable (student loyalty). So
that the model used in this study still needs to be further developed according to relevance or the results
of other studies.
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142
MASJID RAYA AT-TAQWA CIREBON

AS AN ALTERNATIVE TOURISM RELIGI
Nurul Chamidah1, Mudhofar2

Muhammadiyah Cirebon University, College of Technology Cirebon
(Nurulismayana@yahoo.com1, Mudhofarch@yahoo.co.id2)
ABSTRACT
Since the completion of the renovation and construction of minarets in 2005 are increasingly making At-
Taqwa Centre became one of the icons of new religious tourism in the city of Cirebon. Evidenced by the
many visits of society from within and outside the city of Cirebon, even some who come from outside the
province of West Java. Sharing religious activities take place on a regular basis. In 2013 Kingdom At-Taqwa
Mosque and Islamic Centre Cirebon melt into At-Taqwa Center.
Structuring the new management is more focused in serving the pilgrims. But one thing that has not been
fully worked out by management Taqwa is the potential for religious tourism. That potential has not been
fully realized by the board and management At-Taqwa Center to be explored and developed into alternative
tourism.
This study used a qualitative descriptive method by collecting data. Beginning with the observation,
documentation and interview. This study aims to assess the tourism potential and facilities for both physical
and non-physical given to pilgrims / visitors and pilgrims perception of the At-Taqwa Center services.
This study will provide an understanding that the At-Taqwa Centre became one of community pride Cirebon.
Mindless magnificent architecture and also become one of the new tourist attractions. Moreover, its existence
is the strategic center of the town provides its own value as a choice of places for people to worship and
conduct religious activities. Board At-Taqwa Center also seeks to provide an integrated service of worship
for all people and the whole society.
KEYWORDS: travel icon, Masjid At-Taqwa Cirebon, religious tourism
1. BACKGROUND
Since the beginning until today the concept that was built in the governance of Indonesia's tourism is more
directed to natural attractions, including beaches, mountains, sea, garden or zoo. This concept is still believed
to be attracted so many local and foreign tourists, which in turn will bring in massive foreign exchange. It did
not escape from the abundant natural resources in the territory of Indonesia. Not match the potential of the
sea, forest wealth and vast mountain, a cluster of sprawling coastline and beautiful, as well as various
national parks dazzling eyes of anyone who visited.
But on the other hand when nature has experienced its peak, it will be many tourists who seek a new
alternative in the tour. That's because the saturation will travel the concept of natural grain. That's why it will
begin to appear different types of alternative tourism are trying coveted by tourists, one of them is religious
tourism.
According to Prof.Tafsir stating that the issue here is currently amid modern mysticism and workers
perkoataaan experienced the longing for religious nuance experienced when past while kampong page. Be
dragged term office workers seeking God. This refers to office workers there are people who are accustomed
to working environments typical paced and busy urban hedonist. Now they need a religious touch to their
souls.
In line with this, Syaifullah Yusuf or often called Gus Ipul, vice governor of East Java said that the local
revenue (PAD) is the highest obtained from the tourism sector and tourism concept developed is religious
tourism. The concept of religious tourism is developed by introducing historic heritage places such as
mosques, the tomb guardian or the clergy, as well as boarding school. Still according to Syaifullah Yusuf that
the potential of this exciting sizeable number of tourists both local and foreign (Herman, 2013: 220).
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How to Cirebon City, dubbed as the city's mayor. A city that has the potential strategic because it is located
on the border of West Java and Central Java, as well as very easy access to the capital. Especially with the
presence of the Tomb of one of the Wali of the nine who spread Islam on the island of Java, Sunan Gunung
Jati.
Cirebon development as a destination or a transit town of the national capital region to Central Java and East
Java, was one of the great potential to be developed. Moreover, the opening of the highway access Cikampek
-Palimanan made travel quicker to be reached within one hour. This saves time from the usual four hours to
reach the travel time of five hours. The construction plan International Airport in Majalengka Kertajati would
later make Cirebon as one international tourist destination.
The central government through the Ministry of Tourism and Creative Industry and the Provincial
Government has launched Cirebon of West Java as a leading tourist destinations. The existence of Cirebon to
be very strategic and the potential for cultural tourism float. This is because the region is to witness the
history of how the cultural development of the Hindu-Buddhist, Chinese, Arabic, Portuguese and Dutch
colonial period until the independence of Indonesia. This has been one of the hallmarks that make Cirebon
city called Heritage.
One was a famous religious tourist is where the tomb of Sunan Gunung Jati as one of the Wali Sanga
spreading propaganda of Islam in Java, especially in western Java. Besides the existence of Keraton
Kasepuhan as a symbol of Islamic rule and mosques Sang Cipta Rasa is closely linked to the Islamic
government in the past is no less attractive to serve as a cultural attraction.
But there is one more to become a place for tourists to enjoy the different religious tourism, by visiting the
Masjid Raya At-Taqwa which became one of the land mark of Cirebon. Landmark is one element of the
image of the city. Thus the existence of Masjid Raya At-Taqwa which has undergone renovations and
building additions in the form of a tower construction in 2005 through 2013 is expected to offer an
atmosphere of religious and architectural beauty and complete services to the pilgrims and visitors.
2. LITERATURE
Etymologically, the word comes from the Sanskrit tourism, which consists of the word stingray and travel.
Pari has a sense of many, many times, circling, complete (remember the word plenary). While Wisata means
traveling or traveling, which is synonymous with the word travel in English.
From the above understanding, then tourism can be interpreted as a journey made repeatedly or circling, from
one place to another. In English, also called the word tour, while for the plural sense of the word "tourism"
can be used tourisme word or tourism. (Sham. 2010: 105)
Travel is a travel activity undertaken by a person or group of people to visit a particular place for the purpose
of recreation, personal development, or to learn the uniqueness of the visited tourist attraction in the interim
time period.
In UU. Kepariwisataan No. 10 2009 Bab 1 pasal 1 is tourism are:
1) Travel is a travel activity undertaken by a person or group of people to visit a particular place for the
purpose of recreation, personal development, or learn about the uniqueness of the visited tourist
attraction in the interim time period.
2) Travellers are people who do travel
3) Tourism is a wide range of tourist activities and supported sharing facilities and services provided
by the public, employers, government and local government.
4) Tourism is the overall activities related to tourism and multidimensional model that appears as a
manifestation of everyone's needs and the state, as well as the interaction between tourists and the
local community, fellow travelers, governments, local authorities and employers.
5) The tourist attraction is anything that has a uniqueness, beauty and value in the form of natural
diversity, cultural and man-made results of the target or destination tourism visit.
6) Regional tourism destination, hereinafter referred Tourism destinations are the geographic regions
that are within one or more administrative in which there are tourist attraction, public facilities,
tourism facilities, accessibility and community are interrelated and complementary realization of
tourism.
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Communication Tourism
The role of communication is very important in the field of tourism, both in the aspect of the components and
elements of tourism. The important role of communication is not only limited to the components of tourism
marketing, but also on all the components and elements of tourism. Which would require the role of
communication, both personal communication, mass communication, persuasive communication, as well as
other communications. World tourism as a complex product that requires a need to optimize the role of
tourism marketing communications, improve accessibility, diversity of destinations, and resources to tourists
and tourism stakeholders including institutional form of tourism.
Tourism Communication Components

Communication helps optimize the various elements of tourism marketing. Because in principle the field of
communication plays a very vital both in media communication and communication content.
Elements of marketing communications departed from the definition of Kotler defines it as "a societal-
process by the which individual and group obstains what they need and what through creating offering and
freely axchanging products and services of value with others", a process which forms the relationship
between the manufacturer with an individual or groups in delivering products, ie goods and services made to
the needs and desires in order to achieve a higher rate of satisfaction through the creation of a quality product.
Kotler also describes the marketing mix which consists of the product, price, promotion and place or more
commonly known as the 4Ps. At this point, the close relationship between marketing and communication or
so-called Marketing Communications is a communications app that aims to help the marketing activities of a
company or institution / organization. This app is strongly influenced by three basic things that form of media
used, charm, messages and frekensi presentation. (Herman, 2013: 222).
This study used descriptive qualitative data collection begins with observation of the object of study,
followed by an interview to the Chairman At- Taqwa Centre is H. Ahmad Yani , M.Ag and supported by
documentation that comes from a team of architectural construction and renovation of Masjid Raya At -
Taqwa Cirebon.
4. RESULTS AND DISCUSSION

In the last decade of Religious Tourism has become a new trend for the world community, including
Indonesia complements other types of travel such as nature, culture, maritime, culinary, education, and
others. Among globalization is sometimes manifest "noise and confusion" for the human face of this earth, so
they began looking for more realistic alternatives for their spiritual awareness . The goal is clear: to find inner
peace, adding religious insight , and others . Therefore, many people flocked to the centers of spiritual
development, one of which is the Masjid Raya At-Taqwa. The building is located in one of the smallest cities
in West Java province seems firmly established. Building form and majestic architecture typical of the
Middle East with a blend of Javanese culture make it as one of the destinations that never empty of visitors.
Masjid literally the place of prostration comes from the word sajada. If the term is meaningless as the
Mosque House of Allah SWT, Baitullah. The place where Muslims pray praise and worship Allah SWT.
Points hone silence conscience and nobility based on the values in the holy book of the Qur'an. As well as
knitting a real brotherhood among human beings who bring the spirit of mutual love, nurturing and
equipping.
Besides the mosque also has a special meaning and common. The mosque in the general sense is all the
places that used to prostrate. It was like that related by the Prophet Muhammad; "God made the earth as a
mosque". While specifically mosque is a place built and have uses in particular for conducting worship,
especially prayer in congregation. The function associated with the mosque worship are grouped into several
categories, including; Great Mosque, Masjid Raya, Jami ', Musholla or surau / langgar.
Architecturally Masjid by definition has a meaning as a building having axis orientation towards a certain
point (Qibla) surrounded by a barrier, can be wall or any other holy boundary to boundary confirms outer
space.
According to its function as a center of worship, the mosque can be divided into four functions, namely the
function of religious, educational function, social function and economic function. Religious functions held
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by the mosque meant that there is a place where people bow down to draw closer to Allah SWT, because
prostration is the closest momentum in relations with the servant of his Lord. Inside the frame is a slave has a
special space weeks to communicate to his Lord. It is also in this prostration is also a servant usually ask and
beg His forgiveness for all the mistakes and sins made.
The function of education is intended that the mosque as a center for teaching and knowledge of religion and
science both regular recitals, public lectures, and religious discussion. The third function is a social function,
through this function the Masjid into a place of interaction between Muslims and expand social
communication among humans. As well as a center to study the problem in the community and provide
positive solutions to what happened with the Islamic perspective. At the time of the Prophet Muhammad if
there is one masjid congregation who are sick or having problems, then jama'ah others will soon find out the
situation and help him.
While the function of the fourth is fungis economy, through this function, the masjid became a basis of
economic empowerment. So that would make the whole potential adverse economic action from the public
on the wane. For example, by making Islamic financial institutions that will help improve the community
economy and suppress practices of loan sharks that are clearly contrary to the teachings of Islam.
Through this mosque is also the collection of the pilgrims who were unable in economic terms, then assisted
and empowered comprehensively. Not only that, because of the mosque of the Prophet Muhammad also
always teaches Muslims to love and love between each other in any context.
OVERVIEW OF THE MASJID RAYA AT TAQWA CIREBON

Masjid Raya At- Taqwa Cirebon was established in 1918 in a village called Kejaksan. At the beginning of
this mosque consists of two parts, one to be used as Tajug Agung (Masjid At- Taqwa now), and the other half
is used as the main square (Alun-alun Kejaksan now). In the same year a RA.Kartini Road Railway heading
to the Port which is then moved to Jl. KS Tubun.
Name Masjid Raya At- Taqwa Cirebon itself is actually original Tajug Agung. Structure has been quite a
long time and older, while the room is too small and is located less precision in the direction of the Qibla. So
then Mr. R. M. Arhatha who at that time served as Chief Coordinator of Religious Affairs in Cirebon had the
idea to renovate the Tajug Agung.
(Masjid At-Taqwa in 1940)
Formerly in the place of the old mosque called Masjid At-Taqwa, because there has been great mosque
located in Kasepuhan now the Masjid Besar Cirebon. Because at that time there was not justified mosque has
two names are the same and still located in one city, namely Tajug Agung and Masjid Besar.
Masjid Besar Kasepuhan Cirebon and Masjid Raya At Taqwa are like two pillars of strength of Islam in
Cirebon, confirming that Cirebon as city mayor. With the establishment of two major masjid in the same
region, it gives strength in the pillars of the Islamic civilization that flourished in the area of Cirebon.
In 1951 the realization of the masjid building is at once his name on an agreement of close friends R.M
Arhatha. Although the beginning of its establishment encountered some obstacles, but does not reduce their
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spirit in building the monumental and historic. When the first mosque built in the design of many of the
rooms have a versatile, because previously the father. R.M Arhatha commissioned Mr. Urip Abdul Manan as
the creator of the design drawings masjid with father R.M Djazuli Wangsa Saputra, who later as the Chief
Coordinator of Religious Affairs District or Municipality of Cirebon for reviewing and researching the masjid
legendary when it is Ash-Shuhada in Yogyakarta, which has been regarded as a modern masjid.
(The first phase of renovation of the Masjid Raya At Taqwa in 1951)
As part of the existing building in the city of Cirebon, the Masjid Raya At-Taqwa is a place of worship that
indirectly ownership and management is the responsibility of the City of Cirebon, it is evident from a few
notes about the stewardship of the Board of Prosperity Masjid Raya At Taqwa Cirebon is always led by the
Head of Department or the Head Office and the Director of enterprises in the city of Cirebon. This occurs
because since the beginning of the construction of up to 1963's role in completing the bureaucratic elements
Masjid Raya At Taqwa very large. Although the role of the wider community was also great in the process of
building the mosque. For example, as the cost of construction of the mosque at the time always comes from a
donor is Mrs. Garmini, but many people who participate in helping them ABRI and the wider community and
other parties are very concerned about the development of Islam. Finally Masjid Raya At Taqwa was
inaugurated in 1963. Over time, management Masjid Raya At-Taqwa has undergone several regeneration,
among others, after the father of RM Arhatha lead to an end, so he was replaced by Mr. A. Dasuki and
forwarded by Mr RA Djazuli Wangsa Saputra.
That position is always occupied by government bureaucrats is the Head of Religious Affairs coordinator
Region III Cirebon. Starting Mr R.A Djazuli Wangsa Saputra of 1969. This was followed by Mr. R.H
Hulaemi, Mr. Rohana in 1970, then in 1971 to 1980 led by Mr. K.H Syamsudin. Then Drs. H Syarief as the
head of the religious affairs office in 1984 led the Masjid At-Taqwa. In that year also carried out the
renovation process back and change the name to Masjid Raya At Taaqwa , sebaba origin of two buildings
which later became one of the building until now. As for its lead already after Drs. H.Syarief 1987 continued
by Drs H. Ghofar as head of the Public Works Department of the city of Cirebon, then two subsequent
periods held by Mr. H.Nurdin Amardinata and Mr Ir.H.M. Subakat Soehada, MM. While the period from
2002 to 2007 as well as its extension period until Masjid Raya At Taqwa in Cirebon city inaugurated, still led
by Mr. H.Abas Sirad, SH.
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(At- Taqwa Masjid Raya, when the manufacture of concrete roof with aluminum momolo in 1963)
(At- Taqwa Masjid Raya in 2004)
(Raya Masjid At- Taqwa in 2009 with a wall/floor granite, Masjid converted two floors and built the main tower)
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MEANING AND SYMBOLS MASJID AT-TAQWA

Masjid Raya At-Taqwa become one of the landmarks or the image of the city. Very prominent existence in
the midst of Cirebon city are felt at all. It can be seen from the tower architecture Masjid Raya At-Taqwa that
resembles a tower in Masjid Nabawi in Madinah. The tower has a height of 65 meters which also has a
meaning would the number 6, which means the pillars of faith and 5 are the pillars of Islam. Perfect shape
high towers symbolize well as a number that symbolizes all the monotheistic late to Allah SWT. With height
reaches 65 then for anyone can see clearly Cirebon city views from the top of the tower.
In addition to the tower, Masjid Raya At-Taqwa is equipped with a four-minaret coupled with one memolo
also showed that totaled five pillars of Islam. With the minaret is made easily seen from a distance. Shape
own mosque roof shaped Joglo. Referring to the roof of the Masjid Demak and several other large masjid in
Java, which is thick with acculturation. This shows that the Masjid Raya At- Taqwa universal elements blend
Islam with local wisdom.
In Hierarchy buildings, pilgrims or visitors will be guided to follow the flow of the journey through the
masjid to begin by passing through the main gate or door of the masjid. In this part of the masjid was
designed in curved shapes that mimic the architecture typical of the Persian or Turkish. In addition there are
also ornaments calligraphy at the entrance that read the two sentences creed. This suggests that the incoming
pilgrims are those who have been convinced that there is no god but Allah SWT, and the Prophet Muhammad
SAW as His messenger. Other ornaments that also dominates the masjid building is octagonal star that
showed the eight cardinal directions. It also symbolizes nature Rahmatan lil Alamin.
After passing through the gate, the pilgrims / visitors akanmelewati main door of the mosque were made of
wood with carvings coated iron containing verses of the Qur'an. The main door adopts the shape of one of the
main door in the Kraton Kasepuhan Cirebon. The first Kraton in West Java which is an Islamic state and
separated from the power of the Hindu kingdom. After that the pilgrims/visitors will enter the main hall of
the mosque and found four main pillars called the pillar.
Masjid Raya At- Taqwa from a distance looks very beautiful during the day with natural colors radiating
from marble imported from Italy and India. Even still looks elegant and enchanting at night by reflecting the
rays of light. Election material was not without purpose, besides being a decoration that looks luxurious is
also one of the alternative treatments easiest masjid. The durability of this material for a long time, so it is
very durable and really durable.
MASJID RAYA AT TAQWA IN THE MANAGEMENT AND MANAGERIAL

Masjid Raya At-Taqwa now certainly very much different from the conditions of Masjid At-Taqwa two
decades ago when the author began activities as a teenager masjid there. With the vagaries of the struggle of
the activists were always longing for change for the better, then this mosque activity continues to
metamorphose into the coveted Masjid to Ummah. With the motto "Prosperity, Serving and Enlightening"
activists in it continues to work for all functions of the masjid is sustainable, both functions Idaroh
(administrative and organizational), Imarah (co-prosperity program) and Ri'ayahnya (maintenance and
development).
Thanks to the permission of Allah, through various activities that can brighten the prosperity of the mosque
congregation and maximize the service, from time to time visit to the congregation Masjid Raya At-Taqwa
increasing. The survey results by Open Mind Research Institute (2014) the number of pilgrims who visit the
Masjid Raya At-Taqwa on Monday-Thursday amounted to an average of 400-600 people. Meanwhile, on
Friday-Sunday at between 700-900 pilgrims with different objectives, professional background, and a variety
of ages. But it does not include the data last two years after increasing education facilities, such as Rumah
Tahfidz Qur'an At-Taqwa with students over 200 people; juvenile cadres and beginners da‘i and others.
Authorized Capital
Masjid Raya At-Taqwa in addition to its primary function as a central guidance to the congregation Worship /
Muslims, have also served as one of Religious Tourism Destinations in the Cirebon city and surrounding
areas. Among the basic capital to strengthen these functions include:
1) The masjid trustees qualified (multi culture and multi profession, a combination of young and old)
2) Good management;
3) Location of the building is strategically adequate means of support;
4) Management of the masjid-based congregation (broad autonomy from Cirebon City Government);
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5) Practicing independently by optimizing the potential of the congregation;

6) The vision and mission is clear;
7) The motto of the organization: Prosperity, Serving and Enlightening;
8) The network expansion by involving Ulama Archipelago and become a member Forsimas;
9) Trying to instill a vision of Islam that Aswaja and Rahmatan lil'aalamiin;
10) The programs are held as needed congregation;
11) Developing a culture of working 5 As (Kerja Ikhlas, Kerja Cerdas, Kerja Keras, Kerja Pantas dan
Kerja Tuntas).
Besides the 11 capital basis of the above , At- Taqwa Masjid Raya tried to maintain and enhance the
distinctive icons that have become branding and gain an appreciation for this congregation , among others :
1) Cleanliness WC/shower is always maintained;
2) Presentation of a typical drink Wedang Jahe;
3) Service Ta'jil to Sunnah fasting on Mondays and Thursdays;
4) Salat tarawih one night one Juz;
5) Guard and regulator of Jama‘ah in Shaf;
6) Kuliah Subuh every morning;
7) Provision Ta'jil Ramadan at least 500 servings;
8) Supplies of worship are always clean;
9) The free ambulance service for the Dhu'afa;
10) Serving activity Masjidil Haram and Masjid Nabawi (live) in every day.
11) Services parking and bathrooms are free.
INNOVATION AND DEVELOPMENT

To achieve goals more tangible, the Masjid Raya At-Taqwa as a destination of religious tourism is constantly
innovating and developing existing potential, among others:
1) Build Studio Mini Radio propaganda At- Taqwa Maritime Rasonia Cirebon ( to be operational in
Ramadan 1437 H ) ;
2) Making Laboratory Qur'an by making RTQ (Rumah Tahfidz Qur'an) At-Taqwa as a Quran Studies
Center in Cirebon region (operating Ramadhan 1437 H);
3) Make android based applications - ONLINE service (At-Taqwa Centre) is already in operation in
2016;
4) Develop information technology systems in the At-Taqwa Centre Cirebon (the pilot stage in 2016);
5) Have five cadres who have been trained by ministry of tourism in 2016;
6) Develop business and make Primkopjamas ABC as show windows of UMKM in Cirebon (2018);
7) Prepare the book about Masjid Raya At- Taqwa in three languages ( Indonesian, Arabic and English
);
8) Maximize the function of the minaret Masjid Raya At-Taqwa that already exist;
9) Maximize publicity function main house and Guest house through social media;
10) Open a health clinic for Jama‘ah Masjid Raya At Taqwa (plan year 2017);
11) Develop and Development Institutions of Raudhatul Athfal in Majid Raya At-Taqwa (2017);
12) Add 1 unit free ambulance services At-Taqwa (2016);
13) Expand the network of cooperation with Forsimas, Boarding School, Institute of Professional and
community organizations;
14) Establish a youth cadre of Masjid Raya At Taqwa into Da‘i/khotib each year;
15) Got the blessing and support of Sultan Sepuh XIV PRA Arief Natadiningrat, SE;
16) Establish Corps Dai / Khotib At-Taqwa Centre (established in 2016);
17) Establish Travel & Tours At-Taqwa (2017);
18) Maximizing the role of UKM (Unit Kegiatan Masjid);
19) Optimizing the publication of a At-Taqwa Centre via newspaper, magazine and tabloid;
20) Build a Museum (plan 2018);
21) Build a park in Masjid Raya At Taqwa (plan 2017).
RAYA MOSQUE AT-Taqwa AS AN ALTERNATIVE TOURISM RELIGI

Now the existence of Masjid Raya At-Taqwa has now become one of the landmarks of Cirebon. The masjid
is in contrast to other highways mosques managed and subsidized by local governments. While the mosque is
managed independently by the general public from various elements and backgrounds are different. As large
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organizations Islam (NU, Muhammadiyah, Persis), academics (professors and scientists), military (TNI and
Plori) and civil society. The membership on the board of SK (Surat Keputusn) directly from Walikota
Cirebon. Masjid Raya At-Taqwa did not get funding from the government in the field of management and
maintenance, they rely entirely on funding shodaqoh, infaq and revenue creatively through activities and
events. Therefore, the existence Masjid Raya At-Taqwa make managers strive to provide the best service for
the pilgrims. With the best service it will provide comfort and absorption of the jama‘ah and visitors who
come.
Based on the results of the satisfaction survey congregation Masjid Raya At-Taqwa services are as follows;
Keindahan arsitektur bangunan 20,8%
kebersihan masjid yang terjaga 15,7%
Kegiatan yang bagus 9,9%
pengelolaan yang baik 9,5%
Kegiatan keagamaan/pengajian 9,0%
Tempat rekreasi/ruang terbuka hijau 8,6%
Fasilitas kebutuhan yang lengkap 7,5%
Keramahan petugas 5,5%
Parkir yang cukup memadai 4,3%
Kepercayaan pada pengurus At-Taqwa 3,3%

Centre
Saran informasi yang mendukung 3,1%
Keamanan 2,3%
Sarana sholat yang baik. 0,2%
Pelayanan prima 0,2%
Lainnya 0,1%
(Reports satisfaction survey results congregation Masjid Raya At- Taqwa 2014)
In the author's observation, Masjid Raya At-Taqwa became one of the strategic places and potential. Even the
arrival of guests from various regions who deliberately want to visit Masjid Raya At Taqwa continues to
increase every time. No fewer than 20 buses out into the masjid complex. Starting from Jakarta, West Java,
Central Java to East Java. It makes Masjid Raya At-Taqwa as a favorite place for religious tourism
destination. Even the few times the national events held there. Including several national television stations
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and private activities in Masjid Raya At-Taqwa. Call it program Mamah dan Aa ' of Indosiar, Islam itu indah
at Metro TV, and also a visit of a da‘i Abdullah Gymnastiar and Arifin Ilham to speak there. Besides live
reports on current homecoming of television stations also carried out on the courtyard of the masjid with the
background of the tower and the Masjid Raya At Taqwa.
As one of the smallest grand mosque in West Java province does not make its activity is also minimal,
precisely caretaker Masjid Raya At-Taqwa intend to make it as a challenge to make the mosque as the most
active center of religious activity. Like the state of Singapore is a small but advanced and convenience.
In particular, the board Masjid Raya At Taqwa yet to plan and design it seriously as a destination of religious
tourism in the forefront in the area of West Java. But the existence of this masjid has actually become a
destination for jama‘ah who traveled religion, both from the surrounding communities, residents of the area
not far from Cirebon.
Hope in the future to Masjid Raya At- Taqwa into and entered in one of the tourist destinations in travel
guide books, so that more people get to know and visit the masjid.
THE POWER SUPPORT IN ACHIEVEMENTS AND CHALLENGES

With a capital base At- Taqwa Centre have, business innovation and development that have been and will
continue to do, not something that is not possible when the target achievement jama‘ah visit religious tourism
to Masjid Raya At- Taqwa Cirebon in 2017-2018 will range between 2,000-2,500 jama'ah per day. It is
closely linked to the four power support continuously captured and built, among other mutually beneficial
cooperation with the four components that once initiated Prof. DR. Jimly Ashshidiqqi, MA. (at Festival
Masjid ASEAN 2015 in Malaysia):
1) Higher Education in the Cirebon;
2) Palace (officials and government bureaucrats in Cirebon);
3) Market (Employers, agencies and UKM);
4) Community (Settlements, surrounding communities Masjid Raya At- Taqwa)
Among the four the carrying capacity is almost all Masjid Raya At-Taqwa achieved, but still there is always
the dynamics and challenges in the field, among others, are still inadequate means of supporting At-Taqwa
Centre Cirebon particularly for vehicle parking more days, increasing. While the ordinance, the City of
Cirebon as the party who has the authority to manage Alun-alun Kejaksan prohibit parking on the Alun-alun;
Jogging Track which was originally built for alternative vehicle parking switch the function to serve as the
street vendors selling land and not be used for parking. If it is still allowed to drag the more fat there is
congestion at Jalan RA. Kartini, therefore it will be more severe congestion occurs. For spills vehicles of
Alun-alun Kejaksan extends up there. Next the user traffic on Kartini street certainly will not feel
comfortable, including the Jama'a who want to worship at Masjid Raya At-Taqwa.
The question then is whether the parties involved in this case is the government dared to organize an orderly
manner without sacrificing the larger interests? Because the At- Taqwa Masjid Raya and Alun-alun Kejaksan
is Cirebon City Government assets. So do not let the existence of Masjid Raya At- Taqwa which has become
the icon and the pride of the community Cirebon being looked chaotic because of the arrangement of parking
lots and traders who are not well-thought and serious.
If all the policy makers can think of the best solution in the structuring of the area around the Masjid Raya At
Taqwa, of course, concerns many people of impending chaos and inconvenience while visiting the mosque
can be ignored. Meanwhile Cirebon city government was also urged to issue regulations to accommodate all
sides, so that no one harmed or neglected their rights. Thus they create an orderly and beneficial conditions
for all parties, as well as provide a positive impact for the development of tourism in Cirebon.
5. CONCLUSION
Masjid Raya At Taqwa has been transformed into a tourist destination has its own appeal as an alternative to
religious tourism in West Java Province. In addition to the clear segmentation, the expected level of tourists
will increase every time.
However still many things that must continue to be addressed in supporting the realization of professional
services for pilgrims and tourists. It was a manifestation of the seriousness of the manager in placing Masjid
Raya At Taqwa as well as land mark Cirebon tourist attraction.
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With this paper is expected to provide a clear picture of the complexity of managing a tourist destination in
order to remain an option for the tourists and provide a positive impact for the region. Due to tourism will
allow local revenues also increased as well as providing space for the existence of effective promotion tourist
places that exist to attract tourists to visit. The key word is commitment and courage of stakeholders and
actors tourism to improve and innovate on an ongoing basis for the creation of a competitive tourism climate
and marketable.
6. REFERENCES
Abdullah Ali, 2009. Gunung Jati sebagai salah satu wisata religi. STAIN Press Cirebon
Ahmad Yani, 2016. Prospektif: Meraih Cita dan Citra At-Taqwa sebagai Destinasi Wisata Religi, tulisan tercantum dalam
booklet Ramadhan At-Taqwa Centre 1437H. Cirebon
Achmad Herman, 2013. Strategi Komunikasi Pemasaran Dalam Pengelolaan Wisata Religi di Kota Palu Provinsi
Sulawesi Tengah dalam Prosiding serial call for paper Marketing Communication Pariwisata dan Korporasi di
Indonesia. Puskombis, Jakarta
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Banten. News Publishing, Bandung
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FRATERNAL CULTURE
IN BUILD HARMONY SELLING PRICE DETERMINATION:
PERSPECTIVE OF KEJAWEN PANUNGGALAN COMMUNITY
Whedy Prasetyo
Accounting Departement of Jember University,
(whedy.p@gmail.com)
ABSTRACT
This study aims to demonstrate cultural of fraternity in the build determining the selling price of harmony
conducted by seller basic commodities Panunggalan community in Traditional Market Gede-Surakarta. This
research was conducted by using Kejawen method where the value of the teachings of noble character is
used as an analytical tool. Data were collected through participant observation.
The results showed that the selling price of harmony is a combination of the economic value with non–
economic form of nrima (accept), tinarbuka (open), and welas asih (affection). This concept is less oriented
to profit because he prefers fraternal culture for transaction survival sell and buy.
Keywords: Fraternal relations, harmony selling price, mystical teachings Kejawen
1. INTRODUCTION
The selling price in the market Java (traditional market) develop a sense of the seller
to the buyer when the two met (Bonneff, 2012:9).
Olah rasa (inwardness) in the context of community penghayat (follower) Panunggalan rely soul movement.
The mind is the property of all follower. In life there is someone follower inner played a soul, mind Javanese
name.
Follower mental clarity reflects the inner life of empirical reality combined with a sense of Kejawen
(Religious Mysticism) are very intense. The phrase Kejawen iku nggone raos (Religious Mysticism is inner
places) means that the inner space is always in human interaction. Therefore, the mind has a role in managing
the life of a follower.
To make ends meet, a follower bring together joint inner senses of perception observations. According
Widagdho (2000:83), in the view of the world Kejawen, the soul of man living in harmony with the
fulfillment of pengupa jiwa (basic commodities). This suggests that anyone can live to be fulfilled anyway
material. This needs to be obtained by any step in the fulfillment of the market as a principal ingredient is
present.
Furthermore, according to Woodward (2012:114) and Sofwan (2000:124), states that the transactions in the
Java market affects pricing inner seller to the buyer. This shows the inner being with buyers, as sesanti that
wong urip dadi bakul kudune duwe rumangsa marang wong tuku supados cukupe pangupa jiwa, Gusti
Ingkang Maha Kuasa sing mbales (people living as a seller must be able to feel the buyer to be able to meet
basic commodities, the Lord reward him), meaning that as the seller to the buyer should have the feeling to
be able to buy their basic needs, rest assured the Supreme Authorization will reciprocate (Stange, 2009:82;
Supadjar, 2001:51, and Endraswara, 2006:288).
Inner embodiment is the same as if the inner Research results in a series of selling activity, namely the
realization that life must fulfill the need for a source of basic commodities. Fulfillment shows peace of mind
and the human body. Like the trees and animals are always awake adequacy necessities of life, let alone
Researchers although "not live to eat".
Philosophy and way of life of the sellers above is not simply a reflection of the reality of meet the needs of
everyday life, but also the guidance of the teaching behavior of noble character in life. Life guidance for
Panunggalan seller community is a form of behavior and real action in determination the selling price.
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The behavior teachings emphasizes harmony rather than conflict. The harmony of life, both in the realm of
social (community) as well as in the inner realm of inner spiritual form nrima (accept), tinarbuka (open), and
welas asih (affection). The third inner is a manifestation of tentrem utawa ayem (peace or comfort) life as
well as a desirable living conditions to the birth of the soul merchant tanpa ciri (without trait). Furthermore,
the explanation Slamet (1988:25) as cited Sulthon (2000:253 ) states that the purpose of obtaining the balance
of life make Kejawen seller behavior in pricing feel the presence of non-economic values and grusa-grusu
(actions are not hasty). This led to the seller by the buyer into a single unit.
Attitude and mindset that is used to run a life in accordance with the Kejawen characteristics. Kejawen life to
follow a certain idealism. Furthermore, economic idealism Kejawen requires the activity of smooth, it means
to go on (Endraswara, 2006:39; Radjiman, 2001:52; Purwadi, 2004:37).
Kejawen economic principles different from the other economic. Economic of Kejawen trying also to make a
profit. However, the profit is not only based on purely material gain, but also the inner profit. Performers
Kejawen believe this inner profit indirectly make economic wheel smoothly, therefore bebathen (profit) a
little or a lot of it does not matter (Endraswara, 2010:237; 2006:287). Profit or loss are measured not only
from the aspect of material, but also immaterial form of spiritual culture and social Java. Based on
description above, this research wants to build determining the selling price of harmony for basic
commodities based research question is how to determine the selling price of harmony based on the seller's
perspective of Kejawen Panunggalan community?
2. LITERATURE REVIEW
Determining the selling price in the traditional market formed from the interaction process of buyers and
sellers. This interaction determines the price received (Gafar, 2012). Related to this, as disclosed Samryn
(2012: 348) that the interaction of the two sides to determine the price agreement shows the selling price
elasticity.
Achievement of the selling price elasticity is a price agreement both parties are based on cost information.
The use of cost information makes determining the selling price be right (Ball and Seal, 2005; Welfle and
Keltyka, 2000; Cooper and Kaplan, 1992). However, the tradition of determining the selling price in the
traditional Javanese market shows not only a sheer cost calculation, but also there is an inner communication
that does not directly create the transaction smooth (Endraswara, 2006:287; 2010:243). Java 's economic
philosophy emphasizes the harmony between osik (inner intention) and busik (intention of birth) aspects.
Harmonization of these two aspects make bebathen (a profit) for the seller in the form of immaterial and
material.
Doctrine Kejawen awareness and inner strength born. Kejawen mystic is a form of Javanese culture
(mysticism) which seek to draw closer to God (Santosa, 2012a:199; Pranoto, 2008:18; Endraswara, 2006:39;
Negoro, 2001:19). This is similar to Pranoto statement (2008:81) as follows:
Doctrine Kejawen provide guidance on the daily actions of Java community. This action will forever
remember the origin (from God) about the reality of fulfilment the needs and desires of life. The reality of
living with always prayed and asked the God, because of all the activities of this life everything is God's will.
Kejawen emphasize his view on reality in the form of inner peace, harmony and balance. Achievement of the
reality of life is based on attitude accept, tolerant, mawas diri (introspective), andhap asor (modest), and
prasaja (homely) (Mulder, 2011:11; Endraswara, 2006:39; Negoro, 2001:19).
In this way, a person has a value of the humanities as a preparation for diuwongke (humanized). This belief
provisions make life safe and happy. The presence of this moral conviction sublime awareness to maintain
harmony together. This harmony together is milestone the mystical teachings Kejawen (Endraswara,
2006:279).
Fulfillment a harmony makes someone a seller puts a sublime expression in the form of tuna satak bathi
sanak (Santosa, 2012b:141; Afif, 2012:38; Endraswara, 2006:288; Amrih, 2007:48; Bonneff, 1994). That is,
the loss of material or money does not matter, the important brotherhood is maintained. Thus, doltinuku
(selling activities) not solely to achieve material gain, but also non-material gains are also expected.
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The sublime expression made for bathi (profit) not only achieved using only economic value, but the
Kejawen mystical ritual as non-economic value indirectly make selling activities smoothly. Mystical rituals
2 3
of noble mind is to provide sugesti (faith) and positive berpikir (thinking) in mind.
Faith and positive thinking as expressed Endraswara (2012:73 ) and Afif (2012:35) gives the motivation from
within to feel kelangan ora getun (the loss of material was not sorry). Encouragement this makes life easier
to bear for life to happiness. As a result, a inner of someone lila legawa (can receive) to not feel rushed and
vying for material possessions, all actions based on tentrem lan menep ing raos (peace and inner harmony).
Inner embodiment as above makes the seller easy ngraosaken raosing wong tuku (to feel what buyers feel)
and assume the buyer is dudu kowe (not you). This inner conviction raises seduluran (fraternal relations) as a
form of harmonious interaction (Atmosutidjo, 2012:xxiii; Purwadi, 2007:26). The fraternal relations creating
an atmosphere of togetherness in determination the selling price (Bonneff, 1994). The achievements of the
brotherly relationship makes the determination of the value of the sale price is a combination of economic
and non-economic. This combination led to harmony in carrying out activities in the traditional market
selling.
3. RESEARCH METHODS
Reality of life is an object that can be used in qualitative research

(Watloly, 2013:27; Daito, 2011:10,63; Creswell, 2010:4-5; Muhadjir, 2004:9).
This research is a qualitative research case study to explore the non-economic values in constructing the
concept of harmony selling price. Application of non-economic values indirectly make selling activity to be
smooth, with the support of bargain culture and price information disclosure as the traditional market realities
Gede-Surakarta.
Non-economic studies are based with in-depth interviews with seller's staple of Panunggalan community in
Traditional Markets Gede-Surakarta and intellectual among others:
First, Prof. Heddy Shri Ahimsa-Putra, MA., Ph.D (Professor of Anthropology, Faculty of Humanities,
University of Gadjah Mada). Determination him as an informant based on the willingness and scientific
expertise of cultural competence. His presence to support the development of the teaching tradition Kejawen
as a form Tatanan Paugeraning Urip (Guidelines Running Life). Cultural guidelines that influence the
process of determining the selling price to the seller Kejawen in Traditional Markets Gede-Surakarta.
Second, Dr. Suwardi Endraswara, M.Hum (Doctoral Mystical Kejawen, Faculty of Language and
Humanities, State University of Yogyakarta). Determination him as an informant based on competence and
interest to develop the tradition culture noble character of Kejawen in the level of the concept and practice.
Support he was able to reveal the presence of the cultural tradition of noble mind this Kejawen in study
concept and practice of determining the selling price to the seller in Traditional Markets Gede-Surakarta.
Third, Dr. Nanik Prihartanti, M.Si (Doctor of Psychology, Faculty of Psychology, University of
Muhammadiyah Surakarta). Determination him as an informant based on soul scientific competence.
Scientific soul of healthy personality development based olah rasa (inwardness) Kejawen. In addition, his
willingness and interest to bring the development of the teaching tradition of noble mind Kejawen as a guide
runs live to the seller in Traditional Markets Gede-Surakarta. The use of these guidelines on the concept of
the process of determining the selling price a form of a healthy life and a real form that can be applied.
Fourth, Bandung Mawardi (Humanist of Kejawen and Pawon Sastra editor-Surakarta so Bale Sastra Kecapi
manager). Determination of him as an informant, based on the willingness and interest he developed a
tradition of teaching of noble mind Kejawen as the embodiment of the cultural survival of Java. The presence
he supports the emergence of Javanese culture in the form of serenity life activities seller in the culture of
doltinuku (sell and buy) in Traditional Markets Gede-Surakarta.
This process is carried out for fourteen months from the date of March 1, 2013 until May 1, 2014. In addition
to in-depth interviews are also supported with the direct involvement of researchers in selling activity. In the
2
Faith is a strong inner urge, until someone does not misgivings act (Endraswara, 2012:72).
3
Thinking is inner activity in total (Endraswara, 2012:72; Amrih, 2007:51).
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next stage, the interpretation of the text from the field and interviews were developed in the context of
interpretation.
This research is based on the validity and reliability of the data. The validity concerning the validity of the
data, while reliability related to the reliability of the data (Silverman, 2008:288; Sarantakos,1995:80). The
results of the non-economic value of these are the findings of this study. The concept of harmony selling
price is based reality of practice staple seller of Panunggalan community in Traditional Market Gede-
Surakarta with buyers all this time.
Sellers in Panunggalan community applying inner confidence in determining the price. This inner conviction
indirectly make selling activity to be smooth. In selling, profit a little or a lot for them do not become a
problem. Gains and losses are not measured on the material aspect alone, but of non-material inner form is
serenity, harmony and togetherness. This inner base make belief that sustenance of selling has been arranged
by God. This belief as stated Suwardi Endraswara (Interview, March 14, 2013, 08:30 am):
Belief provide motivation from inside to feel kelangan ora getun (the loss of material was not sorry).
Encouragement this makes life easier to bear for life to happiness. As a result, one's inner lila legawa
(heartfelt) to not feel rushed and vying for material possessions, all actions based tentrem lan menep ing rasa
(on serenity and inner harmony).
Inner embodiment as above makes the seller easy to ngraosaken raosing wong tuku (feel what buyers feel)
and assume the buyer is dudu kowe (not you). This inner conviction raises seduluran (fraternal relations) as a
form of harmonious interaction. The fraternal relations creating an atmosphere of togetherness in determining
the selling price.
The results achievement fraternal relations makes determining the selling price is a value combination of
economic and non-economic. This combination led to harmony in carrying out trade activities in the form of
constantly nrima (accept), tinarbuka (open), and welas asih (affection). This explanation as described in
Figure 1 below:
Figure 1: Fraternal Relations In Determination Selling Price Harmony
The third embodiment of non-economic value in the image above creates a harmonious activity in
determining the selling price. This harmonious activity distanced cheating and disappointment. Explanation
the third embodiment of non–economic value is described in the following three sub-chapters:
Sub-Chapters of First: Constantly Nrima (Accept)

Accept a manifestation of inner, means in terms of selling their thanks with sincerity, the most important has
been the business to a certain level of ability, the new accept. Selling activities like this in harmony with the
teachings of noble character Kejawen, namely honesty of sellers to not make the buyer disappointed.
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Accept tradition as mentioned above make selling activities staple not solely to generate maximum profit, but
the profit slightly but ajeg (continuously). This advantage is an advantage associated harmonious with the
buyer and the embodiment of God's gifts.
Achievement of the seller's confidence create inner becomes calm, peaceful, and subtle, but not in a hurry.
Related to this such as that disclosed Mrs. Sulasmi at the time when determination the selling price received
by the buyer as follows:
Ora ana rasa apa-apa nalika aku nemtokake rega beras wolung ewu gangsal atus sak kilo kasebut dituku
karo sing tuku, aku percaya menawa aji kerta wolung ewu gangsal atus iki minongko rejeki titipane Gusti
kanggo aku lantaran wong tuku dino esuk iki.
[No of my inner anything in determining the selling price of rice eight thousand five hundred one kilo is
received by the buyer, believes that the value of money eight thousand five hundred is a deposited sustenance
Gusti (God) to me by the buyer this morning].
Confidence as Mrs Sulasmi above expression makes the atmosphere of harmonious interaction with the
buyer. This interaction eliminates the inner expression nggrundel (disappointed in the back). Inner
disappointed behind is inner embodiment full attainment of material values (numbers) only. It is as well
expressed by Mrs. Partiningsih following:
Pathokan rega adol beras per kilo wolung ewu gangsal atus sing adhedhasar mung padha kapengin rega
kukuh iku bae ndadekake nggrundel. Rasa sing ora nyadari anane keyakinan menawa ana rejeki liya sing
dudu dhuwit yaiku rejeki saka Gusti lan urip iki butuh padha-padhane urip. Rejeki ikilah sing paling gedhe.
[Determining the selling price of rice one kilo of eight thousand five hundred which is based solely on the
desire of rupiah only have led to regret. A inner that is not aware of the belief that there are other sustenance
not matter namely the sustenance of God and this life takes fellow. This is the greatest fortune.]
The recognition of not absence the inner for disappointed in the back that form accept sellers in prices
determination. The result a set price be appointed show sincerity for receive vend profit in the form of
material and peace of inner.
Further, inner of accept the seller made care to the buyer. This care is relevant to model motivation theory
of hierarchy needs Abraham Maslow 's that it needs tiered of basic needs until self-actualization. It is as well
as expressed by Mrs.Sri Wulansari as follows:
Napa malih kok ngecakaken piyambak, ajining diri, raos tresno, aman lan slamet. Lha wong kebetahan
sembako mawon mboten kekekapan. Menawi kebetahan sembako beras mawon taksih sok kantu, ateges kula
niki taksih ngrumaosi klebet tiyang miskin, pekir miskin kok supados gadhah raos PD.
[Thought to prioritize self-actualization, self-esteem, love, safe, and happy.Lha sembako (staple food) just is
not fulfilled. If you need to eat rice only unfulfilled much less those needs. It's poor form kok commanded to
be PD (confidence).]
Mrs.Sri Wulansari statement may be disclosed that the basic material necessities of life are to be met. Such
awareness is inner mirror accept sellers in Gede Market, namely a mirror bening (clear) receipt of
determining the selling price. This inner is a road to the birth of soul merchant tanpa ciri (without trait).
Sub-Chapters of Second: Constantly Tinarbuka (Open)

Non-economic profit confidence of seller in determining the selling price show anyway the presence of a
inner that is always tinarbuka (open). Open inner means open communication with buyers based on inner of
seller which is always evolving. These inner able to accept the reality of the materi relativity of selling price.
Relativity the materi value of selling price make the pricing is subject to change at the time associated with
the goods, the presence of the buyer, and ideas. Related to this, as stated by Suwardi Endraswara (Interview,
October 24, 2013, 10:30 am) that:
Seller Java, especially Kejawen community, in determining the price of pangupa jiwa (basic commodities)
are guided by the inner presence. Inner with not impose materi value calculation as profit centers. However,
with open inner self wishes match reality relationship together buyers which makes determining the selling
price of basic commodities in light. It is in the soul for the seller is an inner advantage.
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Tinarbuka inner as stated above Suwardi Endraswara makes the selling price is not only based on rational
analytical of materi (number), but rather to use the reflective properties. This trait is the result of inner self-
seller that the fulfillment of basic commodities as needs a live reality buyers sourced from tak kasat mata (his
own inner) to be met.
The reflective nature will make the seller introspective so it will not harm the buyer. Introspective like this
makes determining the selling price is more flexible and awareness to pay attention to the buyer. It is as well
as expressed by Mr. Jumadi following:
Sanajan to kula saged pikantuk bathi saking anggen kula ngregani dagangan kalawau kathah, menawi bathi
ageng kalawau ndamel raos awerat ingkat tumbas, raosipun ati niki lepat lan nelongso. Napa malih menawi
ingkang tumbas mboten purun wangsul malih, namung margi tansah mikiraken anggen kula ngregeni kukuh
mboten saged dinyang, kanthi pamrih pikantuk bathi kathah, mendalnea lumanipun anggen kula dados bakul
pangupa jiwa ing ngriki. Bebathen arta ingkang kula tampi, mboten damel bambange raos marem kula
salebetipun sesrawungan kaliyan tiyang tumbas. Sadar utawi mboten tiyang kalawau mesthi ngraosaken
anggen kita sesrawungan, jalaran sampun mboten purun blonja maleh dhateng kula ngriki, ateges saged
nyebabaken raos kebangkrutan manah lan arta kula tampi, jalaran tiyang tumbas kalawau lajeng tuwuh raos
gething.
[Even if I can gain an advantage in determining the selling price in the form of large materi, if such material
gains make heavy buyers inner, the soul feels guilty and empty. If after buying back no longer, just because
debating determining the selling price which I keep to gain that much of the materi, how to lose today my life
so sellers staple here. I obtained materi gain, do not inner me happy to interact with buyers. Conscious or
not, staple buyers definitely feel the interaction with me, when it does not want to come shopping here again,
can lead to bankruptcy of my inner and at the same my materi because buyers have grown hate.]
The same thing also expressed by Mr. Darmaji as follows:
Paguyuban niki nuwuhaken raos dhateng bakul pangupa jiwa kanthi ukara; umpama sawijining kewan
laron, wonten ingkang ikhlas nyabetaken laripun dhateng dimar lan kobong kelangan lan nggih kraos
nikmat. Senajanto arta regi bade saged owah, ananging kanthi saged kepanggih tiyang tumbas sampun
dados bebathen, amargi bakul pangupa jiwa punika minongka kangge laku urip lan kapitadosan diri pribadi
kabetahan arta kangge gesang pun cukup.
[this community grow inner of staple seller with allusion is like an insect, namely that there are willing
flapping its wings in the headlights, and afire even lost his wings feel enjoyable. Although of the materi
selling price of the change, but to meet the buyer has to be an advantage because the staple is a necessity for
life activity, and confidence materi needs of our life will suffice.]
Both expressions sellers above shows the harmony atmosphere together buyers. The atmosphere is made as if
there are no sellers and buyers. This not because both sides are familiar. This familiarity atmosphere makes
the selling price to be relatively, so the price agreement to be fast.
Atmosphere transactions as mentioned above of belief sellers make selling activity to be smooth. So, selling
is not solely to achieve material gain as much as possible, but little material gains and ajeg (continuous).
Advantages constantly this requires harmonious relationship with the buyer. In terms of the meaning
harmonious relationship, Mr Darmaji express as follows:
Kula lan warga paguyuban ngraosaken ing salebeting manah minongka raos ugi mlebet kangge mutusaken
regi sade beras wolung ewu gangsal atus sak kilo, sahingga mboten sisah ngetang. Kanthi mekaten, warga
sedaya sami dhateng nampi keputusan regi kalawau, minongka bebathen regi sade pangupa jiwa saking
nampine regi tiyang tumbas. Kangge, warga paguyuban pikantuk selangkung menapa kalih ewu gangsal atus
sami mawon, ingkang penting tiyang tumbas kalawau purun numbas. Niki sampun saged dipun wastani
minongka bebathen.
[Me and friends community feel in inner that the inner also go in determining the selling price of rice eight
thousand five hundred one kilo, so no need to calculate. Therefore, all friend community can receive such
pricing decisions, ie profit selling price of basic commodities if the admissibility of price by the buyer. For,
community residents receive twenty-five or twenty-five hundred same, important of buyers receive. It has to
be said as profit.]
Statement of Mr. Darmaji shows while the buyer accepts the price is also a non-economic profit for him.
Non-economic profit can be felt when inner of tinarbuka (open) for not to impose selling price as the final
160
decision. This is consistent with the statement Nanik Prihartanti (Interview, November 27, 2013, at 10:05 am)
as follows:
Characteristics of tinarbuka seller inner presenting "profit" if it can be seamlessly linked to the buyer. The
inner can be fun buyer, certainly makes serenity of soul seller, is happy buyers are also inner profit of seller.
This statement, as the result of my research in 2008 which I described as the form of thin foods in Kuwali big
should be taken with a Long Spoon, one group of lean because taken alone and scrambling. However, one
group of fat because it was taken with together.
The statement Nanik Prihartanti above strengthen that inner of tinarbuka able to accept other forces that
should not be forgotten, namely the power of togetherness. This togetherness as also disclosed Mr. Darmaji
and Heddy Shri Ahimsa-Putra. Where Mr. Darmaji revealed as follows:
Senajanta arta pathokan regi sade beras wolung ewu gangsal atus kangge C4 ngelatih ngasilaken bebathen
arta kathah menawi boten nate ngremenaken tiyang tumbas, raosipun manah niki kothong. Raos ingkang
tuwuh kanthi namung paring pangertosan kapitadosan arta rugi sade boten saged dipun owah. Rupiah
pathokan regi sade wolung ewu gangsal atus niku sanes minongka jaminan bebathen ingkan pingin kita
godhag ing ngriki namung kangge ndadosaken raos tentrem tumprap kita sami. Kados pundi ruginipun
gesang kita sedaya, menawi mboten ngraosaken hubungan kebatosan minongka wujud tuntunan budhi
pakerti luhur.
[Even if the materi determining the selling price of rice eight thousand five hundred to C4 (jasmine) generate
much materi gain, otherwise never fun buyer, inner felt empty. This inner grow if only insists materi of sales
price can not be changed. Materi determining the selling price of eight thousand five hundred it not as a
guarantee of profit we want to pursue here to make inner serenity for us. How to lose our lives, if not
presenting psychiatric relationship as a form of guidance noble character.]
Further Heddy Shri Ahimsa-Putra (Interview, October 25, 2013, at 08.15 am) as follows:
Understanding the concept of profit selling basic commodities, for seller of Kejawen mysticism community is
not only derived from the gratification achievement of any material value, but rather on achieving the
balance of life as a backrest open and obedient to Gusti (God). Basic commodities is a need to be able to live,
sell with openness to foster understanding the relationship remains or a materi change in the determination
of the selling price without regret. I remember the atmosphere Gede Market with community Kejawen seller,
which has a subscription if to Solo...Parti name. If I try to want to ask the materi value of the selling price
determination, she was with the language gives the details, fixed or down slightly its materi is still smiling at
me. This cue for me already showed his inner peace are ora ngaya (not force).
Both of the above expression of togetherness is the result of tinarbuka inner. This inner provide pangertos
(an objective mind) influence. Thoughts like this sellers based on the awareness that ―i'm not craving‖, so it is
easy to understand ―that way and that i also embarrassed‖, or in other words the buyer not as the goal of price
to be accepted, because without the buyer makes the price useless. Therefore, inner like this is the way to the
birth of soul merchant tanpa ciri (without trait).
Sub-Chapters of Third: Constantly Welas Asih (Affection)

Communications of the seller in determining the selling price in the underlying welas asih mring sesami
(affection with others) inner, means not discriminating inner of affection towards the buyer. Explanations like
this as in line with the statement passed by Nanik Prihartanti (Interview, Maret 27, 2014, at 9:05 am) as
follows:
I also feel and observe yourself, the presence of communication with affection inner in explain materi
(number) determining the selling price for basic commodities as profits also for community seller Kejawen, is
by way of trying to can be pleasant or happy buyers. It's a real response inner seller on the environment, with
leave inner egoistic to the human soul tanpa ciri (without trait).
The seller affection communications create confidence to not harm the buyer, because detrimental to the
buyer is tantamount to harm himself. This belief based on that there is no point in selling without the arrival
of the buyer. Therefore, sellers trying to make happy for buyer.
Achievement pleasure buyer is done by the seller while conveying the determination of the selling price
followed affection inner. This buyer pleasure when accumulated continuously make selling activity fluent,
because buyers will always come to shop every day. Since, selling activity for the seller not only crowded
one day later deserted, but constantly. It is as stated by Mr. Darmaji following:
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Bakul pangupa jiwa kados kula lan warga paguyuban sanes mboten bebakulan dhiten niki kemawon, amargi
mekaten pathokan rega sade saged menggalihaken kalian rundhingan kanthi raos welas asih. Asilinipun raos
niki minongka tuntunan luhur wawasan gesang, ingkang menawi dipun raosaken ibaratipun kados
dhawahipun embun ing wanci enjang ing nginggilipun ron-ronan ijem ingkang suasananipun sekeca. Bakul
ingkang sampun damel welas asih raos penggalihipun tentrem. Bab niki kangge kita sedaya sampun saged
nikmati minongka wujud bebathen anggen kita sami bebakulan. [Seller basic commodities like mine and
friends other community not only sell for today, therefore materi of selling price determination should be put
on communication with affection inner. Originally this inner as guidance sublime view of life that if the
perceived such as the fall in the morning dew on green leaves, comfortable atmosphere. Sellers who have
done feel buyer, soul serene. This is for all of us can already be interpreted as a form of profit selling.]
The same thing is also conveyed by Humanist Bandung Mawardi (Interview, 26 Maret 2014, 20:30 pm) as
follows:
Indeed, some sellers basic commodities in Pasar Gede as Kejawen mysticism community can grow
uniqueness about the presence of communication phrase of materi sales price with affection inner to the
buyer. Verbal communication that show pleasure seller of inner with the presence of buyers as confidence
profit the form of the balance of life. Selling a basic commodities there, a goal to be able to fulfill the needs of
the buyer lives, with communication seller affection inner believe in selling that I watched my desire for
quiet, not only the achievement of any materi in life activities. Therefore, anytime, how only, happyness to
buyer. This expression guidance noble character worldview beliefs seller in feeling profit, namely inner profit
alone is not necessarily just a matter but pleasure buyer does not argue determining the selling price and
receive is profit too.
Affection communication price determination referred to above materialized if the seller wants to feel inner
buyers. This capability is based in inner to not force themselves on achieving materi, because the materi does
not have to overflow, but goes on. As a result, bargaining as a means of familiarity transaction is not materi
desires.
The transaction familiarity is a form of non-economic profit of the seller get. This familiarity directly make
selling at Pasar Gede be fluent. This explanation is in line with that expressed by Mr. Darmaji following:
Dados bakul minongka warga paguyuban mujudaken laku emut gesang kawula lan kanca-kanca kangge
baten namung nggodhag bebathen arta regi sade kemawon. Kula dinten niki bathi selangkung menapa rugi
niku namung arta rugi sade kasebut, ananging menawi tiyang tumbas mboten remen kaliyan kula,
kanggenipun kula sampun rugi selangkung ewu kados ajaranipun kapitadosan budhi pakerti luhur raosing
manah kula bilih pathokan rega sade namung pados keuntungan arta tanpa dipun sambi ngobrol ingkang
damel tiyang tumbas remen, menapa malih menawi ngantos ngrugekaken sami kemawon kula nyepaki tali
kangge njiret gulu kula piyambak. [Being a seller as part of the community is a conscious act of my life and
friends for not only the pursuit of materi gain alone selling price. I am today a profit of two five dollars or the
loss just a materi of the sale price, but if the buyer is not happy for me have lost two five thousand such
beliefs noble character of my inner, that determining the selling price only seek materi gain without
communication that make buyers happy, especially if you get loss then the same thing I prepare a neck strap
to ensnare my own.]
Based on the statement Mr. Darmaji can be explained, that affection communication price determination an
expression not to make shoppers disappointed, thus avoiding arbitrariness in delivering sales price. It is as
also stated by Mr. Jumadi as follows:
Salebetipun arta pathokan regi sade gula pasir kalih welas ewu sak kilo kasebut, kanggenipun kita sedaya
ingkang ngrasuk paguyuban wonten kalih raos inggih punika raos boten sekeca amargi ngeraos ngindhak
aken regi ingkang langkung ageng, lan raos sakeca amargi mangertosi kalepatan ingkang sampun dados
sanes kula, inggih punika kalepatan ingkang tuwuh saking kepengenan arta ingkang tansah namung nuju
pados bebathen arta kemawon.
[In the materi of determining the selling price of sugar twelve thousand one kilo, for our community there are
two inner namely inner uneasy feeling raise the selling price of the materi is too big and inner good knowing
that mistakes had not I, ie errors arising from desire kramadangsa (egoistic) which always aims only seek
materi gain alone.]
Statement of Mr. Jumadi the show affection communication is communication of kraos (to feel), weruh (look
on) or ngira weruh (feel watched), and ngertos (understand) as an embodiment to avoid disappointment
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buyer. These communications as stated by Astiyana (2006:49) and Pranoto (2009 b:92) which makes the
buyer to believe and always be wise.
Avoiding buyer from disappointment the price determination is a form of affection communication seller.
This embodiment makes interaction with buyers created an atmosphere to tentrem (peaceful) and sumeleh
(quiet). Atmosphere interactions like this according to Pranoto (2009a:97-98) dan Negoro (2001:62) shows
the activity of selling that did not feel rushed and competing for materi convincing, but the attitude which has
menep ing ati menep ing ati (reassure in the heart). This awareness as perceived by Mr. Darmaji with the
following statement:
Niat kangge mbujeng pados rejeki mujudaken sumber saking sedaya tumindak meksa tenaganipun piyambak
salebetipun ngregeni arta pathokan rega sade pangupa jiwa, sahingga sanget ndamel gesang kula dados
bakul niki kados dipun godhag setan.
[Desire only to pursue materi is the source of all impose self -paced action in providing the material
determining the selling price of basic commodities, thus making my life as a seller as pursued devil.]
Statement of Mr. Darmaji such it shows interaction does not feel the rush and vying to achieve materi.
Related to this as researchers earn when undergoing selling activities as follows:
Reality, I sell today (12 Sep 2013) stay has commodity medium quality for rice and soybeans. When buyers
come, just bring money fifty thousand to buy rice and soybeans with medium quality criteria. However, when
the buyer notified the materi or number determining the selling price of rice and soybeans are the quality of
medium, the current price is equal to the selling price of low quality. This communication gives effect to the
buyer feel happy so do not spend fifty thousand rupiah, by delaying the desire to buy that does not conform
with the inner expected. Further, my inner soul as a seller too happy not to be receiving money fifty thousand
rupiah, as a sales transaction that may mislead the buyer. Further, two-day buyers come again to buy in
large numbers.
These reality Researchers is supported also by the statement Nanik Prihartanti (Interview, Maret 27, 2014,
10:20 am) with the following statement:
In psychiatric, affection communication of sellers create richer soul. Because attitudes to put the buyer 's
inner delish, the next will create inner good greater for him. Unlike the case when the seller put the interests
of the pursuit of only materi, inner good smaller because such a good inner only good for yourself seller and
not good for the buyer.
Affection communication as described above can be concluded as the embodiment of gumelaring agesang
(authenticity to life) for seller Panunggalan community. Related to this is in line with statement Pranoto
(2009a:106) and De Jong (1985:74) that affection of result inner clarity. These inner affect a person's speech
Kejawen mysticism to make peaceful with fellow and avoid conflicts.
Further, affection communication of seller indicate self commitment is an inseparable part from of the
presence of the buyer, so be aware if adverse buyer, the same to loss himself. Why is that? Because without
the presence and help buyers, sellers themselves powerless.
Based on the three explanations sub-chapters above regarding cultural of fraternity nrima (accept), tinarbuka
(open), dan constantly welas asih (affection) in build determining the selling price of harmony according
Panunggalan community perspective can be explained by figure 2 the following:
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Figure 2: Fraternal Culture in Building Harmony Selling Price
5. CONCLUSION
Referring to the statement of research results Bonneff (1994) that determining the selling price of basic
commodities in the traditional markets of Java enter values postulate noble soul sellers community of
mysticism (Kejawen). This noble soul as an expression of that wong Jawa iku nggone raos (inner is always in
the interaction space of the Javanese).
The inner of seller makes interaction pricing with buyer main harmonious than conflict. Inner of sellers as
mentioned in the form fraternity culture nrima (accept), tinarbuka (open), dan constantly welas asih
(affection). The inner third embodies of soul merchant tanpa ciri (without trait) towards peaceful, welfare
and happiness alive.
6. ACKNOWLEDGEMENT
This research is the result of dissertation. I would like to express my sincere thanks to the dedicated
individuals and organizations that assisted me throughout this research. This research would not have been
possible without their support and assistance.
I would also like to thank Accounting Departement Faculty of Economics, Jember University (Unej) Jember
for allowing me to pursue this research. I wish to express my heart felt gratitude to Professor Heddy Shri
Ahimsa Putra, Professor Suwardi Endraswara, Dr. Nanik Prihartanti and Humanist of Bandung Mawardi for
his encouragement, inspiring ideas, thoughtful suggestions, priceless critical comments, and professional
guidance.
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THE ROLE OF COACHING ORGANIZATION

FORUM PEDULI REMAJA JAMBI (FPRJ)
APPLICATIVE VALUE OF PLANTING MEANS THE RELIGION OF ISLAMIC
WITH MENTORING
Supriono
Sebelas Maret University
(Supriono92@student.uns.ac.id )
ABSTRACT
A big issue in Indonesia was the younger generation is Damage the morality plague growing alarmingly,
destruction of the young generation is the base of the destruction of the nation's future. Moral deterioration
must be immediately dealt with transmission is preventable, and should be a viable epidemic declared in
destroyed in massive. Therefore steps of caring and collective responsibility without exception. Due to the
lack of knowledge and religious education they have, need for activities which foster religious understanding
Teenagers currently. Forum Peduli Remaja Jambi (FPRJ) present as da‘wah Institute schools in Jambi
province with a mentoring programme in the religion of islam in a limited number of groups. Have a high
idealism, a comprehensive target, and devices program integrative. Participated in the youth of jambi
through da'wah school. as well as creating a new generation of intellectual and religious.
KEYWORDS: Forum Peduli Remaja Jambi, Means Of Applicative, Religious, Mentoring.
1. INTRODUCTION
Teenager is the next generation that is expected to continue the ideals of the nation and bring the nation
towards a better development. The youth is expected to study the specifics and detail and can apply the
science in everyday life so that it can help the community around it with its own science. Therefore, various
efforts undertaken to the maximum and best possible by each development and understanding teenagers
should be inculcated as early as possible in order to achieve success. Attended one of the ways to be able to
achieve the ideal of success but most importantly is how self-actualization teenagers in planting a good
individual characteristics and religiosity. One of the tasks of development of adolescents is gaining
independence. Independence holds an important role and bring a positive impact for adolescents (Steinberg
2002). Self-reliance is a task the development of teenagers who are not instant or so except through a long
process. Independence according to Steinberg "The ability to manage oneself responsibility in the absence of
monitoring by parents or teacher". The ability to organise oneself in responsibility in the absence of or away
from direct supervision of parents or other adults. Independence in adolescence include three aspects, namely
the emotional independence, self-reliance and independence, behavior value. Self-reliance is an aspect of
emotional independence that is associated with a person's ability to reduce the dependency of emotionally
against others, especially against the parents. Self-reliance self-reliance is an aspect of behaviour that is
associated with a person's ability to make independent decisions based on its own assessment and carry out
the decisions that have been taken. Self-reliance self-reliance is an aspect value that is associated with a
person's ability to retain what is good and important though got pressure from others.
It is hoped the teens were able to realize self-reliance as the lack of challenges and tasks of development in
adulthood. Teens who independently capable of trying its own fix the problem so it doesn't directly ask
someone for help, don't be swayed by information received, either oral or writing, was able to use the value
of the values which are important and which are true. In addition an independent Teenagers capable of
competing with others, he can immediately take the decision to act was going to do and not wait for the other
person decide for him (Steinberg, 2002). The more often Adolescents learn to cope with their own problems
that it faces, will be even greater opportunities for adolescents to develop his independence. Independence
must be nurtured since childhood so that teenagers can cope with the obstacles it faces in the future.
The Organization of the Forum Peduli Remaja Jambi, was one of the organizations who attended and took
part of coaching against Teens in the area of jambi province affiliated with Muslim school of non intra
school. Focus Map Da‘wah in accomplished was the first level of secondary schools (SMA) throughout the
City/County. With the construction of the characteristic, namely the development of understanding of Islamic
pattern insight focus group discussion of mentoring. Forum teenage of jambi contribute matter that is very
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important in an attempt to embody the ideals of the nation, faith, religious understanding islam community of
Jambi from the smallest sector. namely the mentoring to a group mentoring teens. It said included being part
of the concern for teenagers, look for mentoring against the average teenager who is the high school
student/Equal charge, the elder constructor called with the mentor usually always monitor the activities of
personal mentoring group, therefore, the Forum Concerned Teenage of Jambi is one of the Organization's
choice for adolescents in Jambi province.
2. WEAK RELIGIOUS KNOWLEDGE OF CURRENT GENERATION A REALITY.
Teenage is the period of the search for identity. If at the time of the previous conformity with standards
groups are considered much more important than individuality, or if in the past children were satisfied in
himself has been the same with his friends in everything, but now I want this Teen is the most important or
that didampakannya is the seeking and finding his identity (Alisyf Sabri 1995:27). According to Hurlock
(1989) adolescents are those who are at the age 12-18 years. Monks, et al (2000) gave the teen age limit is
12-21 years old. According to Stanley Hall (Santrock, 2007) teenager is at range 12-23 years. Based on the
given limitations of experts, it can be seen that the beginning of adolescence is relatively the same, but the
end of adolescence vary widely. There is even a dikenaljuga with an extended adolescence, and teenagers
who shortened. Adolescence is a time filled with problems. This statement is already far advanced in the past,
namely at the beginning of the 20th century by the father of Adolescent Psychology that is Stanley Hall. The
opinion of Stanley Hall at that time that adolescence is the period of storm and stress (storm and stress) is still
widely quoted person. According to Erickson, adolescence is a time of occurrence of an identity crisis or in
search of self identity. The idea is corroborated by the Erickson James Marcia which found that there were
four identity statuses on adolescents, namely: (1). Identity diffusion/confussion, that people who experience
confusion in achieving identity. He did not have a crisis and also do not have the determination to get it done.
(2). Identity Moratorium, the identity is marked by the existence of a crisis, but he did not have a strong
willpower (determination) to resolve the crisis. (3). Identity Foreclosure, identity is marked by the absence of
a crisis, but he had a commitment or determination. So that individuals often wonder about what you want to
accomplish in her life, but often does not correspond to the reality it faces. (4) Identity Achieved, an
individual is said to have had an identity, if he had undergone a crisis and he with full determination are able
to deal with it properly. (Santrock, 2007, Monks, dkk, 2000).
The characteristics of adolescents who are their processes to seek this identity also often cause problems in
adolescents. Based on a review of the theory of progression, adolescent phase is the phase of development
which are at times very good potential, as seen from the aspect of cognitive, emotional, or physical (Ali,
2008). Most teens are able to cope with this transition very well, but some teens may experience a decrease in
psychic conditions, physiological, and social. Some problems of teenagers usually are associated with
characteristics in adolescents. The youth delinquency in modern times this has exceeded all reasonable limits.
Many children under the already know smoking, drugs, Freesex, and involved many other criminal actions.
Behavior of juvenile delinquency can be caused by factors of adolescent itself (internal) as well as factors
from outside (external). Internal factors: a. the identity crisis. Biological and sociological change in teen
allows the occurrence of two forms of integration. First, the formation of feeling will be the consistency of
his life. Second, the achievement of identity roles. Juvenile delinquency happening because young failed to
reach the time of integration. b. weak self control. Teens who can not learn and discern acceptable behavior
with that unacceptable behaviour would be ' naughty '. As well as for those who already know the difference
of two such behaviour, yet could not develop self control to behave in accordance with his knowledge.
External factors: a. family. Parental divorce, the absence of communication between family members, or
disputes between members of the family can trigger negative behavior in teenagers. A wrong education in
families, such as pamper children, did not provide religious education, or rejection. against the existence of
the child, can be the cause of the occurrence of juvenile delinquency. 1). Interactions between peers. 2).
Community/neighbourhood.
Not be denied again, the quality of our younger generation is a reflection of the future of the nation. A nation
that fails to nurture the young generation – morality and capability-will become a nation of losers in the
future. Developed countries in the world is very concerned about the continuation of the future of their
country. What is the meaning of economic progress, the sophistication of technology and military leadership
over the world, while his young generation in such a damaged its moral, stupid and can not be expected in the
future. The shadows of the decline or even extinction as Nations look so threatening. Various elements of the
majority muslim nation of Indonesia must rise and each other side by side to develop a variety of programs
fostering the younger generation which boils down to achieving quality faith and piety as well as mastery of
science and technology. The construction of morality of the young generation is increasingly important when
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looking at the phenomenon of the nation increasingly Indonesia slumped in a severe economic crisis and
moral destruction comes down to en masse. Indeed we have an awful lot of clever people in various fields.
Well due to the efforts of the self-taught high education degrees or until the title doctor and Professor.
Indonesia also has rich natural and human resources that are unusually large. However, all of them raise the
degree of helplessness of the nation since the breakdown of moral that makes the round wheel development is
not powered. This deadlock does not mean we are not doing anything. There is a great work to do for a major
change in the future. To engender a new generation of completely different. Instill the faith in their hearts
most deeply. bonds of science in brain cells they are smart and scintillating. Navigate their potential so that
the directional and growing.
3. RESEARCH METHOD
To obtain the data, researchers using other types of research based on qualitative approaches with descriptive
analysis method. Qualitative research aims to describe or depict in a systematic, factual, and accurate about
the factors, as well as the nature of the relationship between the phenomena examined. The data used is the
publication of law No. 20 of 2003 On the national education, article 3 speaks of the national education goals,
namely, "development of learners in order to become a man of faith and piety to God Almighty, precious,
healthy, have learned, accomplished, creative, independent and become democratic citizens. And UU No. 2
of 1989 on the national education system that asserted that the content of the curriculum of each type, line,
and load the compulsory education level, civics, religious education and Pancasila. This is clearly the position
sabagi one of the religious education compulsory charge in any educational curriculum. In addition,
according to this law the existence of Islamic education clearly recognized, it's just that being the question of
how Islamic education itself placed himself in the right position and location, so that it can indicate its
existence.
4. THE IMPORTANCE OF THE ROLE OF COACHING
The theory of roles (role theory) is a theory which is a blend of various theory orientations as well as
disciplines. Basically the role can not be separated with the status of residence, although the two are different,
but interlinked between one another, so roles are diibaratkandua sides of different currencies (Sarlito
Wirawan Sarwono 2003:214). So the role is a set of actions or deeds, work performed by a person who is
domiciled in the community in an event or circumstance is going to accomplish a specific purpose.
Meanwhile, according to Gross. Mason and A. W. Mc Eachern (1995) as cited by David Berry's defining role
as a set of expectations imposed on individuals who occupy a position of particular social. According to
David Berry hopes a balance-balance of social norms, therefore it can be said that roles are determined by the
norms of society. Means required to do things that are expected by the community in its work and in other
jobs. The establishment of school Teen Forum Peduli Remaja Jambi in schools beginning with the realization
that the transformation of Islamic Science in the curriculum is extremely lacking in mental coaching efforts
and ahklak. This looks at the allocation of time given for eye palajaran Islamic studies is 2 hours/week, this
certainly will result in the student's competencies are not satisfactory because of the limitation of the delivery
of such materials. Schools as education organization has goals that must be realized. The purpose of the
school, among others, namely providing educational programs are planned to meet the needs of over things
that are related to education, personal and community needs and interests of individual students. The main
client is the students who should be served by school principals, teachers and other functional power.
Therefore, students must actively and appropriately, not only in the teaching and learning process but also in
the activities of the school. The most appropriate vehicle to engage students in school activities, namely
activities activities outside the curricular or extracurricular activities. In order to support attainment of
curricular and extracurricular program success required business coaching from principals, teachers and other
functional competent in the field of extracurricular activities.
In this Forum Peduli Remaja Jambi Attending the school as an organization for calling his presence to build
outside the hours of instruction. Build a pioneering youth certainly cannot be done with the blink of an eye.
Especially when they're experiencing the pain getting worse due to failed to be treated. Coaching is an
activity that is done consciously, planned, organised and directed to improve the knowledge, attitudes and
skills with the action-object direction and supervision to achieve objectives (Poerwadarminto, 2007:182). So,
the spiritual Organization of Islam in school Forum Peduli Remaja Jambi is a group of muslim students that
are arranged in a group are working together to achieve a common goal, namely the strengthening of Islam in
school environment, or in other terms is Islamic propagation organization in school that was implemented in
the form of extracurricular activities to support the success of intrakurikuler. Extracurricular activities are a
vessel to channel the interest and the talent of the students. Thus students can unearth potential that exists
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within them so that when out of the intstitusi school, they have become personally acquainted with the
potential and talents of each of them. Coaching is a great program, participants gathered for giving, receiving
and processing the information, knowledge and skills by developing existing ones by adding new ones. The
construction was followed by a number of participants reckoned from the purpose and effectiveness.
As for the principal function of the construction undertaken by the forum Peduli Remaja Jambi include three
things:
1) Delivery information.
2) The changes and development of attitudes.
3) exercise and the development of attitudes
There are 3 main reasons explaining the urgency of preaching school Forum Peduli Remaja Jambi namely:
(a) effective, (b) massive, (c) strategic. These reasons are very distinctive and differentiate it from other
segments of the Da'wah.
a) Effective
There is no doubt that instill faith and morality to adolescents and youth is far more effective than
preaching to the elderly that had been loaded with pragmatic interests and ideological
contamination. A young age was a golden period for learning, instilling knowledge and religious
values. An Arab proverb says ―"learning in small time is like carving in stone, while studying in the
old is like writing on water" Da'wah movement experience in many countries shows that the same
evidence. In Indonesia, the chance of da'wah and the process of effective tarbiyah many of da'wah,
either in Junior High School or High School.
b) Massive
Called a "massive" or bulk is because the student population numbers are very numerous and spread
all over the district/town in Jambi province. The object of massive Dawah of course is very vital.
When the influence of Dawah to such a big segment of the student, then the improvement of
morality and community fikroh will grow in the massif.
c) Strategic
Called strategic because preaching school in the long run will be supplying human resources for
religious in various walks of life at the same time, both labourers and workers, entrepreneurs and
professionals, as well as prospective leaders in the future. Given the highly strategic role, then no
wonder the land of da'wah school became rebutan a wide range of ideologies. So imagine what
happened when our school forward propagation and growing. When he managed to
menumbuhsuburkan the muslim cadres of cadres and sympathizers also quality-sympathizers
Da‘wah bulk. They will fill out and coloring the institutions the profession in the future: companies,
government agencies, universities, non-governmental organizations, private industries, and of course
in the community itself, as both leaders to level grass root (mass basis).
5. AN IMPORTANT FOUNDATION IN THE CONSTRUCTION OF WHICH WAS CARRIED OUT

BY "FORUM PEDULI REMAJA JAMBI".
Many of today's modern education research concluded that process too early maturity of a person's
personality can be immediately done. Moreover, there are indications that the biological maturity of a
teenager experiencing an acceleration in recent years due to increased nutrients and flow of information very
rapidly. Is the great danger, when maturity is not balanced with maturity of personality and even
independence, as will happen deviation deviation Association are not responsible. Then, it is not an
exaggeration if we say this from the school has very great influence for big changes in the country. Spiritual
goals of Islam in schools is very important to determine the direction of the activity to be performed. Spiritual
goals of Islam not only earthly-oriented but also ukhrawi. According to Koesmarwanti, the spiritual Islam in
schools aims to embody the ranks of student support and pioneered the tegaknya truth and able to face the
challenges of the future. Islamic Spiritual activities embody the young generation are strong, intelligent and
pious (Koesmarwanti & Nugroho Widyantoro, 2000:67-68).
Teaching Material
The material is what you are going to be taught in formation. By itself it is the teaching of Islam with all its
vastness. Islam contains teachings about tata live which covers all aspects of life, then the Islamic teaching
means teaching about the life contains the layout key guidelines are used by humans in live his life in the
world and to prepare for a prosperous life in the hereafter. Thus the subject matter agamaIsalam far-flung
encompasses all aspects of life. Nowadays, just to simplify the often done division between religious studies
170
and special meaning to public science is viewed in terms of religion thus dri, the outline, there are two group
lessons in mentoring, which is a group of religious knowledge and common knowledge.
a) Informative Approach
In this approach FPRJ run the program by passing on information to the participants with coaching
programs usually informative approaches using lectures. Or lectures by various speakers on various
things that are considered necessary for the participants of Mentoring. With that approach, the
participation of the participant in the construction of the minor. Participation is limited to request
explanations or submission of questions about things that are not yet considered to understand
really.
b) Participatory Approach
The participatory approach is based on the belief that the participants themselves are a source of
major construction. Then, in the construction of their knowledge and expertise utilized, is more of a
learning situation, where participants perform each other's interactions.
Prof. Muzayyin Arifin (1991) in his book "guidelines for the implementation of guidance and counseling of
religion", says:
"The subjective aspect Of (the human person), religion contains the notion of human behavior that is imbued
by the religious values which form the inner vibrations that can organize and direct the behaviour pattern of
the relationship between man and His God and patterns of human relationships with the community and
nature around".
Basically the instructional materials are delivered in school mentoring should lead to an understanding of
Islam syamil (includes everything), kamil (flawless), mutakamil (integral). The entirety of the material
presented is combined into four areas of study:
the basics of Islam: that includes the Qur'an, Hadith, aqeedah, morals and principles.
Self development: which includes a management and organization, independent study, methodology
of thinking, the Arabic language, health and physical strength, teacher training and education.
Da'wah and Islamic thought: covers the Fiqh of Dawah, history of Islamic civilization, Islamic
world, thought-provoking and contemporary Islamic movement.
Social Development: includes economic, social system, culture and art, science and the environment
and so on (Koesmarwanti & Nugroho Widiyantoro, 2000:175-176)
The involvement of patrons in Da'wah school intended to provide guidance and coaching to keep these
activities do not interfere with or harm the academic activity. In General, the idea of early Islamic Spiritual
activities that come from the Builder, but its implementation was done by stewards da'wah school. That in
mind, hence the need for the construction of student management in Islamic areas.
1. Mentor/Murobbi.
The Builder (murobbi) in calling this school is an alumnus of the Da'wah activists and non-alumnus who
has a role specifically for the mentarbiyah or build objects of charity school in dakwah khashshah
(Special) that terkoordinir directly organized. The mentors or Murobbi tutoring is the perpetrator of the
Dawah is also convenient. They are related to intensive with students from different schools. Da'wah that
they do, can provide color for Dawah in several schools at once.
2. Mentee
Is an active member of the cadre of activists collected da‘wah schools. These cadres is the prime mover of
da'wah in the school. It is they who will plan and run the program from the school.
6. CONCLUSION
From observations about the role of Coaching Organization Forum Peduli Remaja Jambi (Fprj) Means the
cultivation of the Applicative value of the religion of Islam with the Mentoring of this Foundation since its
inception i.e. 1 June 2000 by notary deed Dungcik Muslims, SH No. 2 on 6 November 2001 the great sebaian
has had branches throughout the County/city in the province of Jambi. the most typical in the program
planting value of islam this is this is a mentoring program or tarbiyah. This mentoring was the one who
became the core of cadre program, in addition to supporting devices such as: the night (stay), Ta'lim, Dauroh
Tarqiyah (Training Enhancement), etc.). Here's some explanation of the device the device construction.
171
a) Tarbiyah
Group liqo ' is a group study/mentoring Islam amounts to a maximum of 12 people (limited group) with a
relatively fixed membership within a certain period. A limited number of these will facilitate the delivery
of intensive supervision, material behavior and the development of the participants. One halaqoh is led by
a teacher supervisor/murobbi/mentor. Murobbi is what will do the process of tarbiyah Islamiyah
intensively to the participants.
b) Mabit/ overnight
The night was one means of tarbiyah ruhiyah in the form of a stay along with a switch on the night to
strengthen their relationship with God, increase the love of the Prophet, improving morals, embody a
miniature Islamic environment, strengthen "ukhuwah" and increased the supply of da'wah.
c) Ta‘lim
Ta'lim tarbiyah is a form of tsaqafiyah (broadening) organized independently or held by other parties.
These programs include more participants, impersonal and puts a resource person who are experts in their
field. Forms of activities, among others, ta'lim in mosques, television, radio, and so on. The murobbi
should be rajaalihaji.com these activities, tailored to the curriculum in tarbiyah and socialized to
participants of his halaqoh.
d) Dauroh
Dauroh is intensive forum to explore a theme or a particular skill with a resource person who are experts
in their field. Dauroh time usually full day up to 1 week (depending on the theme).
e) Rikhlah
Rikhlah is a recreational trip to a place that is as beautiful as the mountains or the beach. Rihlah is
expected to strengthen the relationship between members of the fraternity halaqoh, refreshing the mind
and the soul and nourish the body. Rihlah held at least once a year. Rihlah takes 1 to 3 days.
f) Mukhoyyam
Mukhoyyam is a camp for 2-3 days on camping or the mountains or the beach. Mukhayam mainly aims to
train physical and skills in addition to target Kevin and spiritually.
g) Assignment
The assignment is a form of self-contained tasks given by a murobbi to halaqoh participants. The
assignment can be memorizing the Qur'an, Hadith, even the assignment of da'wah
The result of the breakdown of the article above it can be concluded that the activities of the Islamic forum
Peduli Remaja Jambi taking the role of mentoring and guidance from unwanted negative influence other than
the responsibility of family, school and community. Expectations from the formation of the maximal
activities conducted by the school is the Da'wah activities:
1. Akhlakul karimah can be built through propagation studies, since it is included from one of the purposes
of da'wah, i.e. to form private muslim who has the power of life which is reflected in his faith,
steadfastness notability of their ways, the cleanliness of her heart in worship, and also the good of the
vagaries of the Act in the corporate environment or the environment of the community. Construction
usually is done with conditioning do good practices, delivery of material in the study of preaching, giving
examples, and so on.
2. Propagation being performed (FPRJ) has a big role on a process of change in Jamaa'ah towards better
conditions. This does not only give Dawah materials about Islam, but Da'wah attempted to form a private
muslim aqidah and who has the morals of a noble, has Islamic izaah (self-esteem) and also plays an active
role to pass back the positive things to the other performing.
3. The activities of Islamic Spirituality Forum Peduli Remaja Jambi (FPRJ), its activities are arranged by
each section in charge of the event. Of which the activity or program works as follows: Tahsin Qur'an,
Arabic language lessons, and tarbiyah jasadiyah which is a weekly activity. The monthly payroll, Mabit,
training, self development. These programs are implemented by the monthly Spiritual Islam. For the
annual programme, the Trustees are more focused activities in the month of Ramadan, such as pesantren
lightning, daurah, I'tikaf, and also compensation for orphans and disadvantaged children.
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7. REFERENCE
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Undang-Undang RI Nomor 20 Tahun 2003 Tentang SISDIKNAS, (Bandung: Citra Umbara) hal. 16 dan 116
Imam Suprayogo, Quo Vaofe Madrasah: Pengajaran Iman menuju Madrasah Impian (Yogyakarta: Hikayat Publishing,
2007), hal. 63-64.
Nurcholish Madjid, Islam Doktrin dan Peradaban: Sebuah Teteah Kritis tenfang Masalah Keimanan, Kemanusiaan, dan
Kemodernan (Jakarta: Paramadina, 2000), hal. 113.
George R. Knight, Issues and Alternatives in Educational pilosophy (Michigan: Andrew University Press, 1982)
Sarlito Wirawan Sarwono, Teori psikologi Sosial, ( Jakarta : PT. Raja Grafindo Persada, 2003 ), h.214
Sabri Alisyif, psikologi pendidikan berdasarkan kurikulum nasional , jakarta: pedoman ilmu jaya, 1995 cet. I
Monks, F.J., Knoers A.M.P., Haditono, Siti Rahayu, Psikologi Perkembangan: Pengantar Dalam Berbagai Bagiannya,
(Yogyakarta: Gajah Mada University Press. 1982)
Hurlock, E. B. (1999). Psikologi Perkembangan: Suatu Pnedekatan Sepanjang Rentang Kehidupan. Jakarta : Erlangga.
Santrock, John. W. (2007). Life Span Development 7th ed. New York : McGraw Hill. Companies.
N. Gross, W. S. Mason, and A. W. Mc eachern. Explorations in Role Analysis, dalam David Barry, pokok- pokok Pikiran
dalam sosiologi ( Jakarta; Raja Grafindo Persada 1995 )h.99
Steinberg L, Silk J. 2002. Parenting adolescents. See Bornstein 2002, 1:103–33
Poerwadarminta. 2007. Kamus Umum Bahasa Indonesia. Jakarta: PN Balai Pustaka.
Muzayyin Arifin, Pedoman Pelaksanaan Bimbingan dan Penyuluhan agama, (Jakarta: PT Golden Terayon Press, 1991)
Cet.II, H.1
Koesmarwanti, Nugroho Widiyantoro, Dakwah Sekolah di Era Baru, (Solo: Era Inter Media,2000).
Departemen Pendidikan dan Kebudayaan, Kamus Besar Bahasa Indonesia (Jakarta: Balai Pustaka; 1989) h. 581.
Suriati , Problematika Dakwah Dalam Meningkatkan Perilaku Keagamaan, Jurnal Almisbah Vol. 10 No. 2 : 175-200.
Mochamad Ridwan Arif, (2014) Kajian Moral dan Kewarganegaraan Nomor 2 Volume 1 , hal 190 205
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174
READINESS OF TRADITIONAL FISHERMEN IN KALI ADEM, MUARA

ANGKE JAKARTA IN USING SMART FISHERMEN INFORMATION SYSTEM
Diah Proboningtias1, Riyanto2

Magister of Planning and Public Policy Faculty of Economics and Business Indonesia University1,
Lecture in Faculty of Economics and Business Indonesia University2
(diahprobo@gmail.com1, riyantobinumar70@gmail.com2)
ABSTRACT
Ministry of Marine Affairs and Fisheries (KKP) has made Smart Fishermen Information System (SINP), the
product called Smart Fishermen (nelpin) application on smartphone with Android operating system.
Researcher interested to observe traditional fishermen readiness in using SINP, so this application can meet
fishermen needs of fishing information as one of solution to traditional fishermen issues. This study limits to
105 samples of traditional fishermen in Kali Adem, Muara Angke Jakarta. This location were selected
because it present traditional fishermen with near access on ICT (Information Communication Technology).
Data collections using questionnaire with interview technique, which contains profile questions with
category answers and also filling statements with Likert scale. The index result from average likert scale is
4.15, it shows that traditional fishermen in Kali Adem are ready in using SINP, but with conditional
guidance. The most influencing factor is knowledge factor, and the weakest is financial factor. From
dependency test with Chi-square statistics test explain the relationship between readiness factors with
fishermen profile.
KEYWORDS: Chi-square test, Readiness, Smart Fishermen Information System, Traditional Fishermen
1. INTRODUCTION
In the field of fisheries, fishermen is an important pillar in the development of Indonesia as the world's
maritime axis. This is due to their daily contact with the sea, and as economic actors presence is vital in
providing fish resources for household consumption and industry. Like farmers, fishermen also calls for
changes in technology. Because technology will greatly assist their activities which still rely on traditional
ways. For traditional fishermen, fishing is like the art of hunting, very speculative because the results are
difficult to estimate, and never certain (Nadjib, 2013). In addition, fishermen also face the problem of
weather change that rapidly changing nowadays, which led to fishermen often did not get the fish or catch at
all.
With the use of technology, such as GPS (Global Positioning System), the fishermen were able to steer the
boat directly to the location of potential fishing area. It will reduce the fishing operations time, and also save
or minimize the fuel and supplies. And this will certainly affect the fishermen were able to save their energy,
to spend more time with family, and in eventually will be able to improve the productivity of fishermen
(Hassan et al., 2011). But the benefits of GPS devices can be used by middleclass fishermen, because it
requires a large capital to buy this equipments.
Ministry of Marine Affairs and Fisheries (KKP) has launched Smart Fishermen Information System (SINP).
The system was built by the Center for Technology Assessment and Engineering of Marine and Fisheries
(P3TKP), Research and Development of Marine and Fisheries (Balitbang KP) - KKP. The fishing
informations are integrated: fishing area information, weather information, waters fertility, fish price
information, and port information. SINP is an information system, with tools perform in the application
named Smart Fishermen (nelpin) on smart phones with Android operation systems.
The previous study in Malaysia has been research by Osman et al. (2013) who examined the young fishermen
Malaysia related to their readiness in utilizing the technology of Global Positioning System (GPS) in fishing
operations. The results showed that young fishermen Malaysia was ready to use GPS technology in fishing
activities. This is due to the desire, readiness, and their ability to use gadgets in their daily activities. Notes
from this research is the need for improvements in financial aspects and infrastructure, the number of
extension staff, and GPS training.
It is undeniable that the presence of ICT is needed, and it has become one of the important parameters to
support economic growth. In the needs of fishing information for fishermen, these applications can be a
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solution at least three problems that faced by traditional fishermen nowadays. First, the changes of extreme
weather anomalies, which can not be predicted by traditional ways or instinctive as traditional fishermen
expertise for generations. So with weather forecasts from BMKG (Meteorology Climatology and Geophysics
Council) which contained in the nelpin application, will be able to minimize the risk of accidents at the sea.
Second, the total catch is little or even no catch at all. With the fish location in nelpin application, fishermen
can find out the fish potential location to get more chance to catch, and to increase fishermen productivity.
Thirdly, the other benefits of the nelpin application is fishermen will know about the information on fish
prices in accordance with market prices. This will certainly reduce or even eliminate the asymmetric
information about the fish price for fishermen, or monopsony practices that harmed traditional fishermen as a
seller.
Since 1996, the remote sensing technology has implemented the fisheries sector. In its development, there are
three satellites that provide fisheries information services, namely satellite NOAA (National Oceanic and
Atmospheric Administration), Sea Star satellites, and satellite Feng Yun. Data generated in the form of
information ZPPI (Potential Fishing Zone). Submission of this information will be delivered via facsimile
KUD (Koperasi Unit Desa) Mina selected as a pilot basis. For each fishermen village or groups of fishermen,
should be agreed upon personnel who believed to receive data via the facsimile.
Currently, providing the fishing information to fishermen were also following the development of ICT, with
the use of smart phones that make it more effective and efficient. So, fishing information can be reach by all
fishermen. This program also done by XL company with the mFish application, and PT. Telkom in
cooperation with the government in supporting 1000 fishermen villages development program, launched 10
digital fishermen villages, and installation of broadband at 18 ports. The success of ICT innovation adoption
in fisheries sector is largely determined by the readiness of the fishermen. Therefore, it is necessary to
research on the readiness of traditional fishermen in the use of ICT. In order for the programs and
applications that have been made are not wasted and can be used appropriately to fishermen and they respond
will positively with this innovation.
The purpose of this study is to analyze the readiness and the factors that affect the readiness of traditional
fishermen in Kali Adem, Muara Angke Jakarta in utilizing the SINP. This research is expected to provide
benefits as based line research or preliminary studies to assess the information of traditional fishermen
readiness in Kali Adem on ICT (Information and Communications Technology) based program, so Balitbang
KP can used this information for nelpin application development, and can be developed for further research.
Slameto (2010), readiness is the overall condition of a person who makes it ready to give an answer or
response in a certain way to a situation. Thus, the readiness of the fishermen are their willingness to respond
on something, in this case the utilization of nelpin application. According Soekartawi (1988), the adoption of
innovation implies a complex and dynamic meanings. It is because the actual innovation adoption process is
concerned to decision making process, which in this process many factors that influence.
Osman (2013) examines the readiness of young Malaysian fishermen in utilizing the technology of Global
Positioning System (GPS) in fishing operations. The questionnaire using variables: young fisherman
readiness factors, assessment readiness of fellow fisherman to another or within a group of fishermen,
infrastructure readiness and preparedness agency.
Literature on the measurement of readiness frequently about the aspects of learning, for example readiness in
e-Learning. Seakow (2011) uses the following components to measure the readiness of e-Learning, namely:
policy, technology, capital, human resources, and infrastructure. While Kirpatrick model is a method that
focuses on the reaction, knowledge, attitudes, and results.
Traditional Fishermen and Economic Approach
Kusnadi (2000) clarified the factors that makes the traditional fishermen structure remains poor. These
factors can be categorized into internal and external factors. Internal factors are factors relating to human
resources and the fishing activities, such as limitations on quality of human resources, capital and technology
capabilities; the working relationship between owner of boats and fisherman labor; difficulty to diversified
fishing activities; high dependence to the occupation of fishing; and fishermen way of life with no future
orientation. While external factors are factors relating to outside condition from the fishermen and their work
activities, which include the problem of development policy that more oriented towards productivity to
support the growth of national economy, but impartially to traditional fishermen; the fishery marketing
176
system that makes more profitable for trader; damage of coastal and marine ecosystems due to pollution from
land territory; fishermen practice destructive fishing; lack of post-processing technology and employment
opportunities beside fishing in their villages; the natural conditions and seasonal fluctuations do not allow for
fishermen to go fishing throughout the year; and geographic isolation of fishermen village disrupt the
mobility of goods, services, capital, and human.
According to Satria (2014), there are at least three types of fishermen effort. First, the traditional fishermen,
fishermen who conduct fishing activities in subsistence, it means the produce is used to meet everyday needs.
Using simple technology and operating in the coastal areas, being a fisherman is a way of life. Boat owners
often double as a skipper or crew. Second, commercial fishermen, the fishermen who are already oriented
towards profit and reinvested in their business. The technology is relatively modest, operating on the high
seas and still uses the pattern of profit sharing. Production has begun hierarchical organization and requires
specialized personnel, such as the helmsman, the interpreter engine, and the current interpreter. Ship owners
generally do not participate at fishing operation. Third, industrial fishermen, the fisherman who oriented
production on the advantages and added value. The technology is high so can operate on the high seas and
international sea. Their production was very hierarchical organization with more specialists. The general
pattern of profit sharing has been changed to wage patterns. Industrial fishermen like this would be more
appropriate called as the fishery entrepreneur.
Generally, in the case of asymmetric information and price discrimination discussion is the buyer who
suffered losses. But the market for fisheries in Indonesia, traditional fishermen as the seller is the party who
suffered losses because of lack information, or even none. Markets with asymmetric information in these
conditions characterizing monopsony market or oligopsony. According to Boediono (1982) monopsony
market is a situation where the business actors control the supply receipts or become the sole buyer of goods
and / or services in a commodity market. If a businessman bought a production factor in a perfectly
competitive with other employers, he individually can not affect the input price. But in monopsony market
structure, companies can influence prices by raising or lowering production factors he bought. Monopsony
market can arise due to various reasons, such as the influence of geographical location and the goods traded
are very specific.
Schumpeter illustrate his theory about the development process and the main factors that determine the
development in his book published in 1939 under the title Business Cycle. Schumpeter's theory of economic
growth is one of the neoclassical theory of economic growth. Economic growth occurs when there are
innovations of entrepreneurs (self-employed). In this case, innovation is the application of knowledge and
new technologies in the business world. Economic progress of a society can only be applied with innovations
by entrepreneurs. And economic progress is defined as an increase in society's total output (Budiman, 1995).
Smart Fishermen Information System
Information system is a set of components that work together to collect, process, store and disseminate
information to support decision-making, coordination, control, analysis, and visualization in an organization
(Nasrullah, 2015). Ministry of Marine Affairs and Fisheries (KKP) has launch Smart Fishermen Information
System (SINP) on August 11st, 2015. The concept of SINP or nelpin application is to encourage fishermen to
obtain the latest and qualified information about the potential fishing area, weather conditions, the price of
fish, etc. So, fishermen can go directly to the fishing area, and with this tools support can make vessel
operational costs reduced. After the completion of fishing activities, fishermen have many options for selling
these types of fish and place it to the fish auction at a good price. This is expected to improve the welfare of
fishermen (P3TKP-Balitbang Report, 2015). The nelpin application specification can be run with a minimum
operating system Android version 4.4 (KitKat).
The data and information contained in the nelpin application are as follows:
a) Information maps on fishing areas forecast (PPDPI), data taken from the Institute for Marine
Research and Observation (BPOL) in Perancak, Jembrana, Bali.
b) Weather forecast information, data taken from the website of BMKG.
c) Information on fertility waters, data taken from the project INDESO (Infrastructure Development
for
Space Oceanography) in KKP.
d) Information on fish price, data taken from the Information Center of Fishing Port, General
Directorate of Fisheries - KKP.
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3. RESEARCH METHOD
In line with the background and theories, so this study used a descriptive exploratory design. Because this
research is the initial or preliminary study, and nelpin application is classified as a new program. Descriptive
statistics with dependency test, using Chi-Square test statistics on a cross tabulation with SPSS software. The
primary method of data collection was conducted by questionnaire designed using closed-ended system,
respondents give the checklist on Likert scale (1-6) that most correct or most appropriate statements. And
there are questions about the respondents profile with categorized answer.
The population as an object in this research is the traditional fishermen in Muara Angke Jakarta, precisely
located in Kali Adem. In determining the sample of the population is by convenience sampling method, for
mutually convenient between researchers and potential respondents. Because the fisherman has a busy daily
activities in preparation to go fishing, loading and unloading of the catch, repair nets, and resting.
The scale for measuring readiness index of traditional fishermen in utilizing the SINP is based on the
measurement scale by Aydin & Tasci (2005). The difference, Aydin & Tasci using a Likert scale (1-5). The
scale used in this study is shown in Figure 1.
Reading of the scale is defined as follows:
- Not ready, it needs a lot of preparation to be able to get the advantage of SINP (index 1 to 2.49),
- Not ready, but only need some preparation to get the advantage of SINP (index of 2.5 to 3.49),
- Ready, but need assistance in utilizing the SINP (index of 3.5 to 4.49), and
- Ready to utilizing the SINP (index of 4.5 to 6).
1 2 3 4 5 6
1 2,55 3,55 4,5 6

5
Not ready Not ready Ready Ready
Figure 1: Measurement Scale of Fishermen Readiness Index

Source: Aydin & Tasci, 2005 with adjustment
Variables from respondents profile in this study classified to: demography, social economic, ICT adoption,
and fishermen and information. And variables from internal factors on Likert scale based on theory and
previous research, are: knowledge, skill, financial, and response. The hypothesis for descriptive analysis is to
look at the relationship between the variables in the questionnaire. The variables to be tested came from
internal factors of traditional fishermen in using SINP with the variables from respondents profile.
Respondents profile variable that selected were only by the logic assumption in framework to measure
traditional fishermen readiness in using SINP or nelpin application: formal education (FE), highest children
education (HC), job position (JP), experiences as fishermen (EF), income per month (IM), mobile phone
ownership (MO), type of mobile phone (TP), family members skill to operate smartphone (SS), fishing
information that need the most (FI), and know about nelpin application (KN).
Hypothesis regarding knowledge factor:
H0 : Knowledge factor not have relationship with variable FE, HC, JP, EF, IM, MO, TP, SS, FI, and KN
H1 : Knowledge factor have relationship with variable FE, HC, JP, EF, IM, MO, TP, SS, FI, and KN
Hypothesis regarding skill factor:
H0 : Skill factor not have relationship with variable FE, HC, JP, EF, IM, MO, TP, and SS
H1 : Skill factor have relationship with variable FE, HC, JP, EF, IM, MO, TP, and SS.
Hypothesis regarding financial factor:
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H0 : Financial factor not have relationship with variable FE, HC, JP, EF, IM, MO, and TP.
H1 : Financial factor have relationship with variable FE, HC, JP, EF, IM, MO, and TP.
Hypothesis regarding response factor:
H0 : Response factor not have relationship with variable FE, HC, JP, EF, IM, MO, TP, SS, FI, and KN
H1 : Response factor have relationship with variable FE, HC, JP, EF, IM, MO, TP, SS, FI, and KN.
Descriptive analysis of non-parametric study on the readiness of traditional fishermen in Kali Adem, Muara
Angke Jakarta is by using dependency test, obtained from the statistic test using Chi-square test.
(1)
Where:
Fij = observed frequencies of each cell or row-column
Eij = the expected frequency of each cell or row-column = lines total sample in category i multiplied by the
column total sample on j category divided by the total sample.
The decision to accept and reject H0 at significance level α (0.05) or a significance level of 5% depending on
the results of statistical tests Chi-square value distribution with degrees of freedom (df) (R-1) (C-1).
Decision-making can be written:
Reject H0 : if the p-value of the Chi-square count < 0.05 level of significance
Accept H0 : if the p-value of the Chi-square count ≥ 0.05 level of significance.
4. RESULTS
Table 1: Respondent Profiles

Variable Frequency % Variable Frequency %
Demography Social Economic

Age (years) DKI Jakarta ID
< 20 1 11.4 Have 24 22.9
21-30 2 26.7 Not have 81 77.1
31-40 38 29.5 Income per month (Rp)
41-50 12 21.0 500.000-750.000 2 1.9
>50 12 11.4 750.000-1.000.000 38 36.2
Experiences as fisherman (years) 2 1.000.000-2.000.000 32 30.5
<10 3 33.3 2.000.000-3.000.000 16 15.2
10-20 45 38.1 3.000.000-5.000.000 12 11.4
20-30 10 17.1 > 5.000.000 5 4.8
>30 81 11.4 Occupation per month (days)
Job position 2 0-15 40 38.1
Ship owner 1 10.5 16-20 31 29.5
Ship crew / labor 71 75.2 21-30 34 32.4
Ship captain 9 8.6 Catch area (mile)
Ship board 6 5.7 <5 67 63.8
Formal education 5-12 21 20.0
Never been to school 1 1.0 > 12 17 16.2
Not completed 1 16.2 Average catch per trip (Kg)
7 2-5 12 11.4
elementary school
Elementary school 5 50.5 5-20 32 30.5
3
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Junior high school 2 23.8 20-40 37 35.2

High school 59 8.6 > 40 24 22.9
Highest children education Selling catch to
No children 19 18.1 Collector 42 40.0
< High school 63 60.0 Fish auction 62 59.0
High school - diploma 19 18.1 Company 1 1.0
Bachelor degree 3 2.9
> Bachelor degree 1 1.0
ICT Adoption Fishermen and Information
Mobile phone ownership Fishing information that need the most
Have 96 91.4 Fish price 15 14.3
Not have 9 8.6 Weather forecast 46 43.8
Type of mobile phone Fish potential location 42 40.0
Not have mobile phone 9 8.6 Waters fertility 2 1.9
Not smartphone 39 37.1 Know about nelpin application
Smartphone 57 54.3 Know 23 21.9
Family members skill to operate smartphone Not know 82 78.1
Not able 18 17.1 Know online transportation apllication
Able enough 70 66.7 Know 73 69.5
Skillful 14 13.3 Not know 32 30.5
Very skillful 3 2.9 Using transportation application
Internet at smartphone Not know 32 30.5
Not smartphone 48 45.7 Not yet 61 58.1
Active 50 47.6 Already 12 11.4
Not active 7 6.7
Source: Data processing, 2016
Demography Da
From 105 samples of fishermen the answered for fisherman age is mostly at the age category 31-40, and this
is counted as productive age. For the youngest category were age < 20 years, and the oldest were age > 50
years were frequency is equally 12. These variations indicate a regeneration in the work as fishermen, it
could be means that this work is still promising in the search for income or they do not have other alternatives
job. Experience as a fisherman is also consistent with age, most answered in the category of 10-20 years,
followed by < 10 years. Generally working as a fisherman would be the job options throughout the life of
fishermen, it is rarely to shift or change from this job. According to Jamal (2014), the experience as a
hallmark of success for fisherman profession. But on the other hand is not a guarantee that can reflect the
revenue of a fisherman, because the fishing activities very depend on natural conditions.
Most samples are crew for 79 people, it is consistent with the study population was intended, the fishermen
who went to sea, along with the captain and ship owners who sometimes joined to go fishing. Ship board is
still included because his role was significant in fishing operations and can not be separated from traditional
fishing activities. Sellers are not included because it is no longer relevant to the characteristics of traditional
fishermen, generally they have much better economic conditions.
On average traditional fishermen formal education until elementary, they not continue their education due to
lack of money and therefore should help the economy of the family, so they choose to be a fisherman.
Kusnadi (2000), low level of fishermen education due to the difficult economic conditions and the school
location is far away. Fishermen also have thought that being a fisherman is a descent and to become a
fisherman does not need formal diploma. Highest in children education is not much that has reached in the
category high school - diploma only for 19 people, the most answered in the category < high school, because
in average fishermen have children who are in the elementary school age.
Social Economic
Samples of Kali Adem traditional fishermen origin from Jakarta generally as a ship board, who represent
Jakarta ID card with only 24 people. This indicates existing business relationship between indigenous peoples
and fishermen andon (fishermen who went fishing operation by following fish wanderer in the sea waters of
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the territorial authorities with the permission of legality among local governments). So the rest other do not
have Jakarta ID card because they origin mostly from Cirebon and Indramayu.
Income per month of traditional fishermen is still below the average of minimum wage of labour from the
highest answered at category Rp. 750.000 - Rp 1.000.000,-. This happens because their income structure is
erratic. The condition can occur due to weather factors, the fertility waters, and does not have information
regarding the location of potential fishing area. Other causes are the same way as the farmers, who is
enjoying a huge margin lies on middlemen or the broker because they know the existing market price,
whereas they as monopsony buying from fishermen or farmers at a price below the market price competitive.
This condition is the target of nelpin application, to encourage fishermen to know the fishing area, the
weather forecast, the fertility of the waters, and the price of fish. There is also a condition in which the
monopsony buyers as well as those who provide loans to fishermen, so fishermen increasingly dependent and
do not have bargaining position to get better price. But from the answered it can also be analyze as under
value, because people seem to not giving riil number of income, more likely to get better answer its from
expenditure.
The number of days sea occupation in a month no choice categories that stand out, the third choice answers
have considerable amount of distribution. However, the characteristics of traditional fishermen in Kali Adem
known by one day fishing, which is generally go to the sea at night around 9 pm, and return in the morning
around 9 am. If follow this pattern, the selection should answer most in the category of 21-30 days, but the
most answered is in the category 0-15 days. This is caused by three things: first, there are some traditional
fishing boats that go to sea for 3-4 days from payang vessel types. Second, the fisherman did not go fishing
every day, because the weather conditions, need to repair damaged nets, less capital to purchase diesel fuel
and supplies, or takes time to rest for a while. Third, there is a answers component from the ship owners and
ship board or managers who rarely participate on fishing operations.
Working hours at the sea affects the amount of fish caught (Jamal, 2014). For information on the average
catch per trip, the answer mostly in the category of 20-40 kg of fish. This result is quite a lot for traditional
fishermen, because the fishing area were not so far at around 5 miles from the location of departure in Kali
Adem. For the catch selling is generally conducted in TPI (fish auction) Muara Angke, and also through
middleman or broker who stand by at the site where the ship docked for unloading catches. The results of
research recommendations by Viyana (2014), to maximize the improvement of the welfare of fishermen
household is through selling their fishery catch to the fish auction place (TPI) not to a middleman. Because if
the fishermen directly sell the fish to TPI, the price received by fishermen is higher than the price that
fishermen received from middlemen. However, the results of research were 62 fishermen have been doing
transactions directly into TPI, its greater than the fishermen who sell to collectors or middlemen for 42
people.
ICT Adoption
The fact comes out that 91.4% of traditional fishermen already have a mobile phone. Traditional fishermen
usually use mobile phones to inform the other fishermen colleagues regarding the location of the fish, so that
fellow fishermen will go to the sea location according the information by his colleagues. But this would
require a credits and a strong signal. This information is so important and as the basis to known that at least
the fishermen have been able to operate a mobile phone, even the function only to make a call or send a
message. Yet nowadays mobile phone has been owned by various professions of human life. As long as they
have the need to communicate and have enough money to buy a mobile phone and it credits. So, the mobile
phone is not strange things to traditional fishermen.
Another fact which shows that 54.3% of fishermen phones have been classified as types of smart phones,
with 47.6% of active internet. When fishermen are able to operate the smart phone based on Android, he also
would be able to use nelpin applications. This fishermen's group can be best as first target to involve in
training on how to use the nelpin application, because it will not take a lot of effort and time. Then they can
assist the information dissemination on how to use the application to other fishermen. And the ability of
family members to operate smart phones, especially fishermen children can also support the knowledge and
skills of fishermen in using smart phones. It can be seen from 66.7% of the family members of fishermen is
able enough to operate smart phone.
Fishermen and Information
The best answer for the most useful fishing information is the weather forecast information, only different
with four people who answer that the fish location information is needed the most. Some fishermen believe
that the weather is the very first thing, if the weather is not friendly then the fishermen decide not to go
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fishing. Others argue with information of fish potential location, because its the main purpose of fishing
activity.
Based on the results from the questionnaire 21.9% of the fishermen already know or have heard about the
nelpin application. Socialization by Balitbang KKP was already set up in Nizam Zachman port (PPS), Muara
Baru. This information is thought to have spread to Muara Angke from ship owners and managers, who
attend the socialization. And the socialization it should be implementation carried out by the Department of
Fisheries in every territory, and each fishing port also run for dissemination activities regarding the utilization
of nelpin applications, and it would be much better if not only a socialization but also training on how to use
nelpin application.
Information about online transportation applications, such as Gojeg, Grab, and Uber also inquire, because
this phenomena of transportation application were able to improve productivity of the riders, it almost no
waiting time, due to the demand call from consumers via online. 73 samples of traditional fishermen who
know or have heard about the online transportation applications, but has not yet used the application. Because
they not really need the service regarding fishermen activities mostly at the boat and they return to their
hometown using the bus, which available at the Muara Angke bus station.
Readiness Index of Traditional Fishermen
The measurement results for fishermen readiness index is 4.15, it means that traditional fishermen are ready,
but still need assistance or guidance in utilizing the SINP. This value is consistent with the data of mobile
phone ownership and type of mobile phone. But things to be note is still relatively low index on average skill
and financial factor, respectively 3.87 and 3.75. Skill factor can be upgrade with training on how to use
nelpin application, and for financial factor must follow with series of policy recommendation in
infrastructure, such as wifi accessibility at port area, providing screen media that perform the information
inside nelpin application, or with through give away cheap internet quota package to the fishermen. This
policy is to bring the information closer to the fishermen. The factors that most contributed is knowledge
factor at 4.50. So, if the traditional fishermen have good knowledge about nelpin application and it
usefulness, the fishermen will be well prepared to get the advantage of SINP.
Skill Index Financial

(3.87) Index (3.75)
Knowledge Response
Index (4.50) Fishermen Index (4.47)
Readiness
Index
(4.15)
Figure 2: Internal Factors Affecting Fishermen Readiness Index

Relationship Between Internal Factors and Respondents Profile
Table 2 give a summary in the relationship between internal factors and respondents profile. This result
comes from SPSS software output on cross tabulation with Chi-square test. Relationship is exist when p-
value of the Chi-square count < 0.05 level of significance. And next step is to conclude whether the
relationship is positive or negative.
Table 2: Relationship Between Internal Factors and Respondents Profile
Respondent Profile Variables Internal Factors
Knowledge Skill Financial Response
Dependency Dependency Dependency Dependency
Formal education Exist, positive Exist, positive Exist, positive Not exist
Highest children education Not exist Exist, negative Not exist Exist, negative
Job position Not exist Not exist Not exist Not exist
Experiences as fisherman Exist, negative Not exist Not exist Not exist
Income Not exist Not exist Exist, positive Not exist
Mobile phone ownership Not exist Not exist Exist, positive Exist, positive
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Type of mobile phone Not exist Exist, positive Exist, positive Exist, positive
Family members skill to operate smartphone Not exist Not exist Not exist
Fishing information that need the most Exist Exist
Know about nelpin application Not exist Not exist
Knowledge Factor with Respondents Profile
Fishermen who received formal education has a basic overview of knowledge or literacy regarding adoption
of a technology innovation, compared to fishermen who have never attended to school. So, with higher
education, fishermen will be more open and easy to understand the usefulness of nelpin application.
The relationship between experience as a fisherman with knowledge index, shows that fisherman who has
experiences between 10-20 years old have the highest index of knowledge. This is consistent with the age of
the fishermen who still relatively young and at productive age. However, longer experiences as a fisherman
or over 20 years, the knowledge index decreased, it could be explained that the fishermen already classified
at the old age. Old fishermen will become increasingly difficult to understand or to know the use of ICT.
For the relationship between information that is most needed in fishing activities with knowledge index, it
shows that fishermen need more access to information about the weather forecast compared with other
sources of information. Therefore it gives illustrate that fishermen need fishing information (that provide in
nelpin application), to gain more knowledge.
Skill Factor with Respondents Profile
Based on the results of cross tabulation, the skill index in utilizing the SINP influenced by formal education,
highest children education, and type of mobile phone. For the fishermen with the highest formal education,
which at the high school stage has also the the highest skill index. It means that more fishermen educated, the
skill in operating the smart phones are also higher or positive relationship. And this is in line with
Notoatmodjo (2003), that the factors affecting skill is knowledge, education, experience, environment and
facilities, customs, culture and age.
The relationship between the children education with skill index shows that fishermen who do not have
children, have a better skill index. It means the fishermen was young or unmarried or not have a children.
This young fishermen more capable to operate smart phone. And for fishermen who have the highest child
education until bachelor degree, the skill index is lower. This can be explained as old fisherman, and other
reason based on the interviews, because they do not live together or at the different city. So, the children does
not teach the fishermen to operate the mobile phone.
The relationship between type of mobile phone and skills index shows that the fishermen who already have
smart phones have the highest skill index. Because the fisherman who already have smart phones in naturally
will be able to operate the smart phone, from daily interaction with his smart phone.
Financial Factor with Respondents Profile
Fishermen financial index in utilizing the SINP influenced by formal education, income per month, mobile
phone ownership and types of mobile phones. These results are consistent with studies Muflikhati (2010),
that the influence factors on the fishermen income included age, formal education, experience, number of
dependents, and capital. The fishermen who have completed high school education had the highest financial
index. And fishermen who do not completed primary school had the lowest financial index. It has a
proportional or positive relationship, because the fishermen who more educated are more likely to have a
better life. Fishermen who have monthly incomes between Rp. 3.000.000 - Rp.5.000.000 is the highest in
terms of financial index. Fishermen who have the lowest income per month also have the lowest financial
index. Because the need to buy credits and internet data package, were excluded from fishermen income.
Fishermen who already have mobile phones, have higher financial index compared to the fishermen who do
not have mobile phones. And this continue to the relationship between type of mobile phone and financial
index is shown fishermen who already have smart phones have the highest financial index, compared with
the fishermen who do not have a smart phone or mobile phone. For fishermen who already have smart
phones, it will allocate a certain amount of money to purchase credits and internet data package.
Response Factor with Respondents Profile
The relationship between the children education with response index, fishermen who have the highest
children education actually has lower response index, or negative relationship. It indicates old fisherman
therefore have a lower response index in the use of ICT, or in this case the nelpin application. Or can also be
183
explained, the fishermen do not live with their child. Because the children have a better education in other
town, or has a steady job in the city, where the location is far away from fishermen village or coastal areas.
The relationship between mobile phones ownership and type of mobile phones with the response index shows
that the fishermen who have mobile phone and smart phones repeatedly have a higher response index. This
means fishermen response to nelpin application is affected by cell phone ownership and types of phones.
Fishing information that need the most and have the highest response index is information about the fish
price. And other information follow is also not much different on response index. Fertility waters was the
lowest, because the fishermen do not understand what is meant by the waters of fertility data. This is one
reason the importance of training to be undertaken, related to the use and content of the information in the
nelpin application. Such information is needed by fishermen to go fishing, therefore the fishermen responded
with good response regarding the utilization of SINP. According Prihandoko (2011), the availability of
information related to fishermen work motivation on basic needs, social needs, and the need for respect.
Fishermen motivation will increases by the availability of information.
Readiness index of traditional fishermen in Kali Adem, Muara Angke Jakarta in utilizing the SINP is 4.15, it
means that traditional fishermen are ready in utilizing the SINP, but still requires further assistance. The
readiness index derived from an average aritmetrik calculation on a Likert scale. Factors to be a component
of fishermen readiness index with largest contribution is knowledge factor, and the lowest contribution is
financial factor. Factors that affect the readiness of traditional fishermen in Kali Adem, Muara Angke Jakarta
in utilizing the SINP based on descriptive analysis using Chi-Square test was concluded: knowledge factor of
fishermen in utilizing the SINP has a positive relationship with formal education, negative relationship with
experience as a fishermen, and relationship with the fishing information that need the most; skills factor of
fishermen in utilizing the SINP has a positive relationship with formal education, negative relationship with
the highest children education, and positive relationship with the type of mobile phone; financial factors of
fishermen in utilizing the SINP has a positive relationship with formal education, income per month, mobile
phones ownership, and type of mobile phone; response factor of fishermen in utilizing the SINP has a
negative relationship with the highest children education, positive relationship with mobile phones ownership
and type of mobile phone, and relationship with the the fishing information that need the most.
This result of fishermen readiness index and factors that affect the fishermen readiness bring the implications
to maintain knowledge and skill factor by implementing training on how to use nelpin application, because
training is also consist of socialization, but socialization only covered gain knowledge, but not increase the
ability in using nelpin application. And recommendation to develop financial factor is to bring the fishing
information from nelpin application closer to the traditional fishermen. The infrastructure policy such as wifi
accessibility at port area; providing screen media that perform the information inside nelpin application; or
with through give away cheap internet quota package to the fishermen are some of alternatives to increase
financial factor.
Suggestions for future research from this preliminary study is the survey should expanded to other areas with
greater coverage, so the traditional fishermen readiness can be mapped in each region, and to research the
readiness in terms of infrastructure or nelpin technology side. So, nelpin application development is getting
better and can meet the needs of traditional fishermen for information on fishing activities.
6. REFERENCES
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Boediono. (1982). Pengantar Ilmu Ekonomi No. 1 Ekonomi Mikro. Yogyakarta: BPFE.
Budiman, Arif. (1995). Teori Pembangunan Dunia Ketiga. Jakarta: PT. Gramedia Pustaka Utama.
Hassan, Abu et al. (2011). Fishermen and ICT: Towards Creating Knowledgeable Fishermen in Malaysia. Australian
Journal of Basic and Applied Science, 5(9), 457-469.
Jamal B. (2014). Analisis Faktor-Faktor yang mempengaruhi Pendapatan Nelayan (Studi Nelayan Pesisir Desa Klampis
Kecamatan Klampis Kabupaten Bangkalan). Jurnal Ilmiah. Malang: Universitas Brawijaya, 2014.
Kusnadi. (2000). Nelayan: Strategi Adaptasi dan Jaringan Sosial. Bandung: Humaniora Utama Press.
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Laporan Akhir P3TKP Tahun 2015. Jakarta: Kementerian Kelautan dan Perikanan.
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Jawa Barat. Jurnal Ilmu Kelautan,hlmn : 1-10 Vol. 3, No. 1 ISSN : 1907 – 6037.
Nadjib, Mochammad. (2013). Optimalisasi Pemanfaatan Sumber Daya Ekonomi Kelautan: Sistem Pembiayaan Nelayan.
Jakarta: LIPI Press.
Nasrullah, Rulli. (2015). Media Sosial: Prosedur, Tren, dan Etika. Bandung: Simbiosa Rekatama Media.
Notoatmodjo, S. (2003). Pengantar Pendidikan Kesehatan dan Ilmu Perilaku Kesehatan. Jakarta: Widyatama.
Osman, Mohd. Nizam et al. (2013). Readiness of Young Malaysian Fishermen to Use Global Positioning System within
the Fishing Operation. Malaysia: Universiti Putra Malaysia.
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Perikanan di Pantai Utara Provinsi Jawa Barat. Jurnal Penyuluhan, Vol. 8 No. 2.
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Yayasan Pustaka Obor Indonesia.
Seakow. (2011). E-learning Readiness of Thailand‘s Universities. International Journal of e-Education, e-Business, e-
Management and e-Learning.
Slameto. (2010). Belajar dan Faktor-faktor yang Mempengaruhinya. Jakarta: Rineka Cipta.
Soekartawi. (1988). Prinsip Dasar Komunikasi Pertanian. Jakarta: UI Press.
Viyana, Anisa Trias. (2014). Analisis Tingkat Kesejahteraan Rumah Tangga Nelayan Kecil di Kecamatan Indramayu
Kabupaten Indramayu. Universitas Sebelas Maret Surakarta: Program Studi Agribisnis Fakultas Pertanian.
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COMPANY’S MEASUREMENT AND MANAGEMENT SUBSTITUTION

AS AN INDICATION OF THE CHANGE IN PUBLICACCOUNTINGFIRMS
AT MANUFACTURING COMPANIES LISTED IN INDONESIA STOCK
EXCHANGE
Febrina Nafasati Prihantini

Semarang University
(f_nafasati@yahoo.co.id)
ABSTRACT
The increasing demand for audit services by the companiesgives impact on the development of the public
accounting profession. Thus the increasing number of public accounting firms (PAF) can lead to competition
between one PAFandanother PAF. It is allowing the companies to move from one PAF to another PAF. It
becomes a question when a company conducts PAF change at the time of PMK-17/ PMK.01/ 2008 regulation
on when the company must perform PAF change exist. The aim of this study is to find out the evidences ofthe
factors affectingthe manufacturing companies listed in Indonesia Stock Exchange in conducting PAFchange
voluntarily.
This study uses variable ofcompany‘s measurement, auditor's opinion, management substitution and auditor
commitee substitution. The data used in this studyare the manufacturing companies listed in Indonesia Stock
Exchange in 2009-2014. The method of collecting data is conducted by using purposive sampling. Based on
the purposive sampling method, thetotal sample used is 32 companies. This study uses Multinomial Logistic
Regressionanalysismethod.
The results of this study shows that the company‘s measurement and management (CEO) substitution affect
on PAF change, while the audit opinion (OPINION) and the audit committee (PAF) changedo notaffect on
the PAF change.
Keywords : company‘s measurement, management substitution, audit opinion
1. INTRODUCTION
Any companies that go public are required to submit financial reports prepared in accordance with Financial
Accounting Standards (FAS) and have been audited by a public accountant registered in the Supervisory
Agency ofCapital Market (Bapepam). The more companies go public, the more audit services are required. It
is very influential on the development of the public accounting profession in Indonesia, so the more Public
Accounting Firm (PAF) that operates (Susan and Trisnawati, 2011). The increasing number of public
accounting firms (PAF), which operates can cause competition between one PAF and another PAF, thus
allowing the company to move from one PAF to another PAF (Damayanti and Sudarma 2007 in Endina et al,
2012). Public Accounting Firm (PAF) change can be divided into compulsory and voluntary changes.
Substitution must be conducted in accordance with the Decree of the Minister of Finance of the Republic of
Indonesia. Substitution must be conducted in accordance with PMK-17 / PMK.01 / 2008 on Public
Accounting Services in force since 5 February 2008. Voluntary change is done if the clients replace their
auditors, when there is no regulation requiring to substitute the auditor. Two possibilities that occur at the
voluntary changes are: if the auditor resigns from the assignment he hasagreed or client changesthe auditor
for services rendered. If companies replace PAF voluntarily then it should be questioned what things causing
companies to conduct PAF change (Susan and Trisnawati, 2011).
This study aimed to test whether the company‘s measurement, management substitution, audit committee
change and the audit opinion can lead to manufacturing companies listed in Indonesia Stock Exchange
perform PAF voluntarily.
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The Effect of Audit Opinion on Public Accounting FirmChange

According to Kawijaya and Januarti (2002) in Wijayani and Januarti (2011) that common opinion with
exception (qualified opinion) tends to be less favored by clients. Clients prefer auditors givingcommon
opinion without exception (unqualified opinion) on their financial report.Therefore, clients try to avoid
common opinion with exception (qualified opinion).
The audit opinion provides useful information for the users of external financial report because it is useful for
investment decision. Management of the company will replace its auditors because they provide the audit
opinion which is not expected on the financial report of the company and will look for auditors who are more
manageable. A company tends to move PAF after receiving qualified opinion on its financial report (Carcello
and Neal, 2003 in Wijayani and Januarti, 2011).
Divianto‘s (2011) and Buchari‘s and Marita‘s(2014)researches proved that the audit opinion affects PAF
change. In accordance with the above explanation,the hypothesisproposedis as follow:
H1 : Audit’sopinion affectsPublic Accounting Firm Change
The Effect of Management Substitution on Public Accounting Firm Change

Management substitution is company‘s director change caused of themeeting decision of shareholders or the
management quit because of their own willing. These management changes are often accompanied by
changes in the company's policies, including in choosing PAF. The new management hopes that the new PAF
can be more cooperative and more able to give their opinions as expected by management, accompanied by
their own preferences about the auditor intends to use. The company will look for PAF aligned with their
accounting policies and report (Sinarwati 2010 in Saputri and Achyani, 2014).
Susan‘s and Trisnawati‘s (2011) and Endina‘s et.al (2012) researchesshowed that the management
substitution affects PAF change. In accordance with the above explanation, the hypothesisproposed is as
follow:
H2 : Management Substitution affects Public Accounting Firm Change
The Effect of the Client’s Company Measurement on Public Accounting Firm Change
Company measurement is the bigness of the company measurement measured based on total assets (Saputri
and Achyani, 2014). Companies with small total assets tend to conduct PAF change. It means, the smaller the
company measurement will encourage PAF change and look for PAF that is not expensive to rent. Similarly,
the larger the scale of a company then the less tendency they have to change auditors because new auditors
will need more time to understand the company‘s procedures so that gives effect on the late submission of
audited financial report. So that large companies tend to retain their auditors (Wenny, 2014).
Vina Kurniaty‘sresearch (2014) proved that client‘s company measurementaffects PAF change. In
accordance with the above explanation, the hypothesisproposed is as follow:
H3: Client’s company measurementaffects Public Accounting Firm change
TheEffect of the Audit Committee Substitution on Public Accounting FirmChange.

The audit committee is a body set up in the client‘s company whose task is to maintain the independence of
the accountant inspectors on the management (Supriyono, 1998, in Endina et. al, 2012). The audit committee
also plays a role in supervising the financial reporting process by management, thus the agency problem such
as management measures for the prosperity ofthemselves can be minimized. One of the aims of the
establishment of the audit committee is to recommend the selection of an external auditor to audit the
company. The agency is in charge of selecting and assessing the performance of the company of public
accounting firms (Susiana and Arleen, 2007 in Endina et.al, 2012).
The audit committee should have the assessment criteria for the choice of external auditors to be his favorite
and have met the standards and criteria specified for auditing a company. If there is a change in the members
of the audit committee it is possible to get the recommendation result on the PAF appointment that is
different from the previous PAF (Endina et.al, 2012).In accordance with the above explanation,the
hypothesisproposed is as follow:
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H4: The audit committee substitution affects Public Accounting Firm change.
3. RESEARCH METHOD
Public Accounting Firm Change

Public accounting firm change is the auditor displacement (PAF) conducted by the client‘s company. The
variabel of PAF change herein refers toDadi‘s research (2013) by using dummy variable.If the client‘s
company changes toPAF upgrade, it is given point 1, whereas if the client‘s company changes to PAF
downgrade, it is given point 2 and if the client‘s company changesto PAFsamegrade, it is givenpoint 3.
Audit opinion
The audit opinion is a statement of opinion given by the auditor in assessing the reasonableness of an audited
financial report. Companies certainly want the auditors to give common opinion without exception
(unqualified) on the financial report. The variabel of audit opinion usesdummy. If the client‘s company
accepts opinion exceptcommon opinion without exception (unqualified) then it is given point 1. Whereas if
the client‘s company acceptscommon opinion without exception (unqualified), then it is given point 0
(Buchari and Marita, 2014).
Management Substitution
Management substitution is the substitution of the companies directors that can be caused of the decision of
general meeting of shareholders or directors quit because of their own willing. The variable of management
changes usesdummyvariable. If there is directors substitution in the company then it is given point 1. Whereas
if there is not directors substitution in the company, then it is given point 0 (Damayanti and Sudarma, 2008 in
Buchari and Marita, 2014).
Client’s Company Measurement

Client measurement is the bigness of a company measured based on total assets. The greater the total assets
of a company indicates that company measurement is big and vice versa. The variable of client measurement
in this study was calculated by conducting natural logarithm (Nl) of the total assets of the company (Nasser
et.al., 2006 in Buchari and Marita, 2014).
Audit Committee Substitution

The audit committee is a body set up in the client‘s company whose task is to maintain the independence of
supervisor accountants to management. The variabel of the audit committee substitution is dummy variable.If
there is a change of membership in an audit committee, it is given point 1 and if there is not a change of
membership in committee, it is given point 0 (Endina et.al, 2012).
Population and Sampling Determination

The population in this study are all manufacturing companies listed in Indonesia Stock Exchange in 2009-
2014supervision. The taking of samples in this study usespurposive sampling method (Buchari and Marita,
2014).As for the criteria used for sampling in this study among others are: (1) the manufacturing companies
listed in Indonesia Stock Exchange in 2009 to 2014, (2) Issuing financial reports which have been audited by
independent auditors, (3) the Company which has complete data required in this study during the observation
period, (4) issuing financial reports in Indonesian currency (Rupiah).
4. RESULTS
Data analysis method
Tabel 1 . Likelihood Ratio Tests

Model Fitting Criteria Likelihood Ratio Tests
Effect -2 Log Likelihood of Reduced Model Chi-Square df Sig.
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Intercept 1.631E2a .000 0 .

KLIEN 207.283 44.192 2 .000
OPINI 163.109 .018 2 .991
CEO 170.084 6.993 2 .030
KA 166.804 3.714 2 .156
The chi-square statistic is the difference in -2 log-likelihoods between the final model and a reduced model.
The reduced model is formed by omitting an effect from the final model. The null hypothesis is that all
parameters of that effect are 0.
a. This reduced model is equivalent to the final model because omitting the effect does not increase the
degrees of freedom.
The analysis used in this study is multinominal logistics regression analysis. Partial testing results showed
that :
1. The variable of company measurement (CLIENT) has a probability value 0.000 <0.05, which means that
the company measurement (CLIENT) significantly influences the dependent variable (auditor
substitution).
2. Managementsubstitution (CEO) has a probability value 0.030 <0.05, which means that management
substitution (CEO) significantly influences the dependent variable (auditor substitution).
3. For variable of auditor's opinion (OPINION) has a probability value 0.991> 0.05, which means that the
auditor's opinion (OPINION) does not influence the dependent variable (auditor substitution).
4. For the variable of audit committee (AC) substitution has a probability value0.156 > 0.05 which means
that the audit committee (AC) substitution does not influence the dependent variable (auditor
substitution).
Tabel 2. Parameter Estimates

95% Confidence Interval for Exp(B)
KAPaChange B Std. Error Wald Df Sig. Exp(B) Lower Bound Upper Bound
Upgrade Intercept -11.650 4.391 7.041 1 .008
KLIEN .381 .152 6.320 1 .012 1.464 1.088 1.971
[OPINI=0] -.035 .452 .006 1 .939 .966 .398 2.342
b
[OPINI=1] 0 . . 0 . . . .
[CEO=0] .325 .455 .509 1 .476 1.384 .567 3.376
[CEO=1] 0b . . 0 . . . .
[KA=0] .187 .547 .117 1 .733 1.205 .413 3.521
[KA=1] 0b . . 0 . . . .
Downgrade Intercept 15.894 3.802 17.476 1 .000
KLIEN -.590 .138 18.150 1 .000 .555 .423 .727
[OPINI=0] -.049 .375 .017 1 .897 .952 .457 1.985
b
[OPINI=1] 0 . . 0 . . . .
[CEO=0] 1.092 .421 6.723 1 .010 2.980 1.305 6.803
[CEO=1] 0b . . 0 . . . .
[KA=0] -.729 .438 2.773 1 .096 .482 .204 1.138
b
[KA=1] 0 . . 0 . . . .
a. The reference category is: Samegrade.
b. This parameter is set to zero because it is redundant.
Based on table 2, the interpretation of the model for each independent variable is as follow:
1. Fot PAFUpgrade categories:
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The larger the company measurement the more likely the company to choose PAFUpgradeis 1,464 fold
than Samegrade or the bigger the company measurement the more likely the company to chose
PAFSamegrade is 0.683 (1 / 1.464) fold than PAFUpgrade.
2. For PAFDowngradecategories:
The larger the company measurement the more likely the company to choose
PAFDowngradeis 0.555 fold than PAFSamegrade or the larger the company measurement the more likely
the company to choose PAFSamegradeis 1.801 (1 / 0.555) fold than PAFDowngrade.
3. Interpretation of CEO point 0 (there is not CEO substitution) on PAFUpgradecategory:
The tendency of the company with the absence of management substitution to choose PAF Upgrade
rather than PAFSamegradeis 1,384 fold than the company with the condition of conducting management
substitution.
4. The interpretation of CEO point 1 (there is not CEO substitution) on PAFDowngradecategory:
The tendency of the company with the absence of management substitution to choose PAF Downgrade
than PAFSamegradeis 2,980 fold than the company with the condition conducting management
substitution.
Model Goodness Test

Tabel 3. Pseudo R-Square
Cox and Snell .296
Nagelkerke .338
McFadden .169
Table 3 above gives point of R2 where the dependent variable (auditor substitution) that can be explained by
all the independent variables is 33.8% and the remaining 66.2% is explained by other variables outside the
model.
Discussion
1. Company measurement (CLIENT) affects PAF change

This means that a big company when deciding to change PAF then the big company will choose a more
qualified PAF or if the companyhas already used qualified PAF then the big company will change PAF by
choosing PAF which has the same quality as the previous PAF. This is because the big company has the
ability to pay for bigger PAF services. This indicates that a big company has a tendency to choose PAF
included inUpgrade category compared to choosing PAF included inDowngrade category. When a big
company does not choose PAF included inUpgradecategory then the big company tends to choose PAF
included inSamegradecategory. This is because the big company see there is notaudit quality differences
between PAFDowngradeand PAFSamegrade. Moreover with audit costs spent by the company to hire
PAFSamegrade that is not too costly but by using PAFsamegradethe company will obtain the same audit
quality as audit quality produced by PAFDowngrade.
2. Management Substitution (CEO) affects PAF change

This means that when there is management substitution in a company then there is also policy changes in the
company. However, the new management is more focused on how to increase the company's profits, so when
the new management do not get along with old PAF, the new management will choosePAF that does not
require the expensive cost for the audit but has audit quality that is not different with the quality of the
previous audit. So that the new management tend to choose PAF included inSamegrade category.
3. Audit Opinion (OPINION) does not affect PAF change

The auditor's opinion does not affect PAF change because the company that gets opinionexcept WTP will not
conduct PAF changesince it isfeared thar it could give negative image to the users of the company‘sfinancial
reports. In addition the company which gets opinion except WTP is more focus on improving the company's
operations in order to change the auditor's opinion in the next year than to conduct PAF change.
4. Audit Committee Substitution does not affect PAF change

Audit committee Substitution does not affect PAF change due to a change in the membership of the audit
committee in a company does not necessarily lead to the audit committee to recommend company to conduct
PAF change with the new one. Because the main purposes of the establishment of an audit committee isto
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choose and to assess the performance of the company of public accounting firms. Moreover in assessing the
company‘s performance the audit committee have assessment criteriaon the choice of external auditors to be
his favorite and have met the standards and criteria specified for the audit of a company. So the substitution
of the audit committee membership does not affect the choosing of PAFthat is different from previous PAF,
especially if the PAF auditing the company is already PAF believed to have high independency and
credibility (Endina et.al, 2012).
PAF change conducted by the company can be mandatorily change or voluntarily change. For the change that
is conducted mandatorily is caused by PAF assignment period restricted by PMK-17 / PMK.01 / 2008. It is
becoming question: what factors are driving a company to conduct PAFchange out of the regulations. The
company measurement and management substitution is proven to be able to encourage companies to conduct
PAF change. While the audit opinion and audit committee substitutionis not proven to be able to encourage
companies to conduct PAF change.
This study was only conducted in manufacturing companies so that the results of this study can not be
generalized to all types of companies and the dependent variable can only be explained by the independent
variable of 33.8%.
6. ACKNOWLEDGEMENTS
I would like to express myboundlessgratitudeto brother Hanif who has helped me in the process of data
collection as well as to Dani‘sArticles (2013) that I usedas the reference in this study.
7. REFERENCES
Buchari, Chana dan Marita, 2014. ―Pengaruh Ukuran KAP, Opini Audit, Pertumbuhan Perusahaan Klien, Pergantian
Manajemen Dan Ukuran Perusahaan Klien Terhadap Pergantian Auditor (Studi Pada Perusahaan Manufaktur di
Bursa Efek Indonesia)‖. Jurnal Akuntansi, Volume 2, Nomor 2, Halaman 52-65. ISSN: 2303-2235.
Dani, 2013. ―AnalisisFaktor-Faktor yang MempengaruhiPergantian Kantor AkuntanPublikUpgrade, Downgrade
danSamegradepada Perusahaan yang Terdaftar Di Bursa Efek Indonesia (BEI)‖. SimposiumNasionalAkuntansi
XVI.Manado, 25-28 September 2013. Halaman 1492-1520.
Divianto, 2011. ―Faktor-Faktor yang Mempengaruhi Perusahaan dalam Melakukan Auditor Switch (Studi Kasus :
Perusahaan Manufaktur di BEI)‖. Jurnal Ekonomi dan Informasi Akuntansi, Volume 1 Nomor 2, Halaman 153-
173.
Endinadkk, 2012.―AnalisisFaktor-faktorPergantian Kantor AkuntanPublik‖.Diponegoro Journal Of Accounting,
Volume 1 Nomor 2, Halaman 1-12.
Ghozali, Imam, 2013. Aplikasi Analisis Multivariate Dengan Program SPSS. Semarang: Badan Penerbit Universitas
Diponegoro.
Maida Mutiara 2013. Analisis Hubungan Auditor-Klien : Faktor-Faktor Yang Mempengaruhi Auditor
Switching.Skripsi. FakultasEkonomidanBisnisUniversitasDiponegoro.
Mahantara, A.A. GedeWidya, 2013.―Pergantian Kantor AkuntanPublikpada Perusahaan yang Terdaftar di Bursa
Efek‖.Thesis, Program PascaSarjanaUniversitasUdayana Denpasar.
Saputri, Vita Wahyu dan Fatchan Achyani, 2014. ―Analisis Faktor-Faktor yang Mempengaruhi Pergantian Kantor
Akuntan Publik (Studi Empiris pada Perusahaan Manufaktur di Bursa Efek Indonesia)‖. Jurnal Akuntansi FEB-
UMS, Halaman 337-349.ISBN: 978-602-70429-2-6.
Susan danEstralitaTrisnawati, 2011.―Faktor-faktor Yang Mempengaruhi Perusahaan MelakukanAuditor
Switch‖.JurnalBisnisdanAkuntansi, Volume 13 Nomor 2, Halaman 131-144.
Wijayani, Evi Dwi dan Indira Januarti, 2011. ―Analisis Faktor-Faktor Yang Mempengaruhi Perusahaan Di Indonesia
Melakukan Auditor Switching‖. Simposium Nasional Akuntansi XIV. Aceh.
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REPEAT PURCHASE INTENTION

IN FREIGHT SERVICE COMPANY IN SEMARANG
Dc. Kuswardani1 and Yeremi Wijayanto

Semarang University
(dhani_dc@yahoo.co.id1)
ABSTRACT
Studies related to increasing the return of growth in export volumes are necessary because there is a
business phenomenon of the decrease in export volume growth and the gap of previous studies on the effect of
the price on the repeat purchase intention. The purpose of this study is to test empirically how the influence
of the quality of service delivery and customer orientation towards customer value, the influence of customer
value and price competitiveness towards customer repeat purchase intentionmoderated by the variable of
relational commitment.
The model was tested using the inferential analysis based on the questionnaire data collected from 75
respondents. The inferential analysis is done using the software SmartPLS 2.0.M3.
The conclusion obtained is that customer orientation and quality delivery of services have a significant
positive effect on customer value. Customer value is also having positive influence on the repeat purchase
intention, while the price competitiveness have a negative effect but not significant to the repeat purchase
intention. Variable relational commitment is not shown to be able to moderate the relationship between the
price competitiveness towards repeat purchase intention.
Keywords: Relational commitments, service delivery quality, repeat purchase intention, customer value, and
customer orientation
1. PRELIMINARY
International trade, both exports and imports, has an important role for the economy of the country and the
world. Indonesia's economic growth is strongly influenced by the rate of exports and imports. Net exports
will add to foreign exchange and will be used to cover the foreign debt; but it is also used as a source of
payment of import of raw materials and/ or capital goods for domestic production. Globalization is the
integration of the global economy, which means that there are no barriers to the movement of goods and
services. Interdependence is evident by the increasing erosion of the boundaries between countries as a result
of improved communication and information, the linkage of international financial centers and the sensitivity
of both in structural and institutional (developed) country policy (Soejoto and Kaluge, 2005). Economic
activity with various countries is done to encourage economic development through the opening of divider
and market on foreign trade investment (Corbett and Winebrake, 2008).
One of the shipping companies in Port of Tanjung Emas Semarang that providesfreight transportation
services for exports and imports finds that that the export volume growth is not in line with the overall
growth in export volume in the Port of Tanjung Emas in the same period.
Several previous studies indicate that customer value has a significant influence on the buying interest
(Kusdyah, 2012; Ercis, et al, 2012; Noyan, et al, 2012), but there are differences in the results on the effect of
price on the value of the customer.Noyan, et al (2012) concluded that the perception variable discount a small
effect (minor) to the perception of customer value despite the perception of customer value posisif influence
the buying interest re vaiabel. Kusdyah (2012) concluded that the perception of prices has a positive impact
not significant buying interest again.
Based on the phenomenon of growth in export volume that is not inline with the import volume and
inconsistency of the findings of previous research, this study wanted to clarify the link between customer
value and price competitiveness towards dependent variable repeat purchase intentionand linkages between
customer orientation and quality of service delivery to the customer value for the resumption of growth in
volume export in one of the shipping company that provides freight transportation services for exports and
imports through the Port of Tanjung Emas Semarang, in order to bring the company to top 5 position of the
shipping company that operates in thePort of Tanjung Emas Semarang.
193
The purpose of this study was to empirically test what is the influence of the quality of service delivery and
customer orientation towards customer value, what is the influence of customer value and price
competitiveness towards customer'srepeat purchase intentions, and what is the influence of price
competitiveness towards customer'srepeat purchase intentions that is moderated by the relational
commitmentvariable.
2. THEORETICAL OVERVIEW
Repeat Purchase Intention

Being economically success in almost all service related industries depends on the ability to maintain or
establish long-term relationships with customers who make a purchase repeatedly (Reinartz, et al, 2005; Rust,
et al, 2004 in Wiertz, 2007). According to Oliver (2010) in Dasuki and Suryana (2013) the definition of
repeat purchase intentionis the tendency of purchase behavior of consumers on goods and services carried out
repeatedly within a certain period and actively like and have a positive attitude towards goods or services,
based on past experience.
Price Competitiveness
Price is one of the deciding factors in the selection of brand-related consumer buying decisions. When
choosing among existing brands, consumers will evaluate the price by comparing several prices as a
reference to make purchases.
Price competitiveness on the shipping industry is seen from the number of costs component for shipping
goods from point of origin/ port of loading to the port of discharge/ final destination. Kannan and Bose
(2011) identify five components of the price competitiveness in the shipping company, which are:
1. Low freight charges
2. Provision of credit facilities to customers
3. Provision of additional free detention of containers at the port of discharge
4. Flexible pricing, or a willingness to negotiate the price, giving a discount on the cost/ fees in order to
conform with competitors
5. Competitives fees detention tariff, delivery order fee, admin fee, etc.)
Customer Value
Zeithaml in Yunitasari and Yuniawan (2006), defines the value from a consumer standpoint, are:
1. Value is low price.
2. Value is whatever one wants in a product.
3. Value is the quality that the consumer receives for the price paid.
4. Value is what the consumer gets for what they give.
Zeithaml (1988), reveals consumer perceived value as a whole consumers' assessment of the usefulness of a
product based on perceptions of what is accepted as an advantage and what is given as a sacrifice. Sheth,
Newman and Gross (1991) in Kainth and Verma (2011) defines each dimension values are as follows:
1. Functional value
2. Social value
3. Emotional value
4. Epistemic value
5. Conditional value
Customer Orientation
Pelham (2000) in Putranto (2003) suggests that the market orientation construct was built by three main
areas:
1. Understanding Customer orientation,
2. Customer satisfaction orientation
3. Competitive orientation,
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Brown, et al (2002), describes the customer orientation as the tendency of employees to meet customer needs
in the context of the work, which consists of two dimensions, which isNeed dimention dan Enjoyment
dimention
Services Quality Delivery

Service quality offering is a fundamental strategy to succeed and survive in a tight business environment.
Competitive advantage will be enjoyed by the company if the company gives a commitment to quality.
Developing strategies to meet thecustomerexpectations and determine whether the quality of services
provided for the customer satisfaction is the main focus of the efforts of academic and managers
(Parasuraman, et al, 1994).
Table 1 includesthe criteria used by the shipper to choose the provider of shipping services based from some
researchs in the freight shipping field.
Table 1
Shipping Company Selection Criteria by Shipper
No. Research Title Researcher Criteria
1 An evaluation of ocean container Kannan dkk, Management Rate
carrier selection criteria: an Indian Research ReviewVol. 34 No. Customer Service
shipper‘s perspective 7, 2011 pp. 754-772 Operations
Reputation
Infrastructure
Scheduling
IT orientation dan
communication
2 Investigating Critical Factors That Jin-Long Lu, Journal of Schedule reliability
Influence Shippers‘ and International Marine Science and On-time arrival/departure
Freight Forwarders‘ Preferences In Technology, Vol. 21, No. 2, Transit time reliability
Carrier Selection Using Integrated pp. 182-190 (2013) Historical operation
Hierarchical Information Integration performance
Approach Carrier reputation
Negotiate rates
Transportation rates
Willingness to negotiate
service to satisfy needs
Expertise/Knowledge of sales
representatives
Interaction with customers
Space availability
3 Key Factors and Trends in Keith Roberts , The Journal Structure
Transportation Mode and Carrier of Undergraduate Research Cost
Selection at the University of Product
Tennessee Vol. 4:12012] Service
Relationship
Capacity
Security
Environment
4 Understanding the factors Affecting Kunal Gaurav, International Core Value
Selection of a Transport Service Journal of Reseach in Value Added Services
Provider– An Empirical Analysis Commerce & Management, Brand Image
Vol. No: 1 (2010), Issue No.
02 (June)
5 Shipping Marketing and Customer Evi I. Plomaritou, Vasco Provision of hight quality
Orientation: The Psychology and Plomaritou, Kostas Giziakis, transportation service
Buying Behaviour of Charterer and 2011, Management, Vol. 16, Compliance of shipping
Shipper in The Tramp and Line 2011, pp. 57-89 company with international
Market regulations of savety
management
Reputation and image of the
195
No. Research Title Researcher Criteria

ship-owner in the market
Low cost sea transport
operation
Satisfactory cooperation with
personnel and crew
Information system for
shipper
Source: Compiled from several journals
Relational commitment
In relationship marketing, commitment positioning is an integral part of a long term business relationship
(Anderson and Weitz, 1992, Gundlach et al, 1995, Morgan and Hunt, 1994). Geyskens (1996) Moorman, et
al (1992) as explained that in the context of marketers and customer relationships, commitment is customer
orientation to the business relationship bound by emotional ties that lead to long-term relationships.
In the context of the relationship between business marketing, Morgan and Hunt (1994) explains that building
a relational commitment between businesses needmutual trust. Trust is part of the exchange of positive social
behaviors that must be developed in each exchange in relational marketing, in order to create a high
socialbond between the parties cooperating.Social bond will foster relational exchange process between the
parties cooperating, meaning relational commitment will be developed well. Furthermore, it is also confirmed
in his studies (Morgan and Hunt, 1994) that the relational commitment is the cornerstone of cooperation,
because it will affect the outcomes gained from such cooperation.
Morgan and Hunt (1994) explains that the outcomes of relational exchanges between the partners is
collaboration/ cooperation. Morgan and Hunt's study concluded that the commitment to relation is an
important variable in building/increase the intensity of cooperation between the partners involved in the long-
term relationship. The key to the quality of relationships in relational marketing is shown through positive
behaviors during social exchanges take place, so that the cooperation will run in the diversity and high
intensity based on high relational commitment. Positive behaviors such as trust is the trigger to
relational commitment, which allows the strengthening of cooperation, to produce harmonious long-term
relationship (Dwyer, Schurr and Oh, 1987).
3. RESEARCH METHODS
Population
The population in this study is all the customer of freight services company in Semarang, which is limited to
forwarding company not direct shipper or direct exporter. In the last 6 months, there is 90 forwarding
company.
Samples
The minimum samples are75 respondents based on the following formula (Rao, 1996):
N
n= 1 + N (moe)2
Where:
N = the number of population
n = number of samples taken
Moe = maximum margin of error is still in the tolerance of 5%
Sampling Method
This study uses nonprobability sampling approach, with purposive samplingas the sampling method used.
Research variable
The design of this study consisted of four variables, namely:
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1. Independent Variables,Customer orientation, Quality of services delivery, andPrice competitiveness as

the independent variable.
2. Dependent Variables which is Repeat purchase intention
3. Intervening Variabel,customer value is positioned as an intervening variable affecting an indirect
relationship between the independent variables of customer orientation and quality of services delivery
towards the dependent variable repeat purchase intention.
4. Moderating Variabel,relational commitment is placed as variables suspected to affect the strength of the
effect on the price competitiveness towards repeat purchase intention.
Method of data collecting

Data is collected through questionnaires for selected respondents using the data scale interval of 1-10 as an
alternative answer to measure respondents' attitudes.
Techniques used to measure the data interval are bipolar adjective. The left end in the form of low numbers
that illustrate the negative answer, and the right end in the form of large numbers illustrate the positive
answer.
Analysis Technique
Reliability Test
The approach to assess the reliability of model fit is composite reliability and variance extracted for every
construct. Reliability coefficients ranged between 0 to 1. The higher the reliability coefficient (closer to 1),
the more reliable the model is (Yamin dan Kurniawan, 2009:8).
Validity Test
A questionnaire is considered valid if the questionnaire is able to express the meaning that will be measured
by the questionnaire. Confirmatory factor analysis (CFA) was used to assess the validity of each construct
which is a manifestation of the indicator. If all the loading of the latens construct showed a significant result
that is the t statistic> 1.645 (one-tailed) or t-statistic> 1,960 (2-tailed), then each question is a valid indicator
(Ghozali, 2008).
Data analysis method

Presented by Wold (1985) in Ghozali (2008), PLS is a powerful method of analysis, because it is not based
on many assumptions. The data is also not necessary to have multivariate normal distribution andlarge
sample. PLS other than to confirm the theory, as well as to explain whether there is any relationship between
the latent variables so that in the framework of research-based PLS predictions are more suitable for
analyzing data.
Model to be analyzed in the PLS, namely:
1. Assessing outer model or measurement models
2. Assessing inner model or structural models
The acceptance or rejection of the hypothesis is done with the following provisions:
1. Seeing the outer weight value of each indicator and its significance value. The recommended weight
value is above 0.50 and above its t-stasistic of 2.326
2. Seeing the inner weight value of the relationship between latent variables. Weight value of the
relationship must show a positive direction with the value of t-statistic is above 2.326 and p <0.01
(one-tailed). Value of t-table determined in this study is 2.326 for significance of p <0.01 (one -
tailed). Furthermore, t-table value is taken as the cutoff value for the acceptance or rejection of the
hypothesis.
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Research result
Validity test
Unidimensionalitas test of each construct to see convergent validity of each construct indicator. According to
Chin (1998) in Ghozali (2006) an indicator is said to have good reliability if the value is greater than 0.70.
Loadingfactor of0.50 - 0.60 can still be maintained for a model that is still in development.
Figure 1
Output Model Structure
Source: Output SmartPLS 2.0.M3

Figure 1 shows that the models already meet the convergent validity because all of loading factor is above
0.60.
A. Reliability Test
The value of a construct is reliable if it provides reliability composite value> 0.70 (Werts et al. 1974 in Imam,
2006).The test results demonstrate the value of Composite Reliability> 0.70, that means all the constructs or
variables in this study showed as a fit model, meaning that all items of questions were used to measure each
construct is reliable.Communality value> 0.5 also strengthens results that constructs in this study is reliable.
B. Structural Model Testing ( Inner Model)
From the value of R-Square it can be concluded that the Value Customers variable can be explained by
Customer Orientation variable and Quality Services Delivery variable by 43.05% while the remaining
56.95% is explained by other variable not included in this research model. Repeat purchase intention variable
can be explained by Customer Value variable, Prices Competitiveness variable, and the Commitment variable
of 61.22% of the model, and 38.78% is explained by other variables not included in this research model.
According to Chin (1998) in Gozhali (2006) R-Square value of 0.67 (strong), 0.33 (moderately) and 0.19
(weak).
C. Results of Inner Model Or Relationships Construct
Table 2 below gives the results of the relationship between the constructs; it turns out there is one that is
insignificant relationship between the price of the interest where t indicates a value below 1.282 to p <0.05
(one-tailed). While the relationship between the other constructs showed coefficients are significant at p
<0.01 (t is greater than t table 2.326) and p <0.10 (t is greater than t table 1.282).
Another criterion to measure themodel structure is to use predictive relevant Q2, which indicates that all Q2
values is above zero. The Q2 value of price is 0.509309, Q2 value of price*commitment is 0.507054, Q2 value
of commitment is 0.486721, Q2 value of interest is 0.616115, Q2 value of quality is 0.278274, Q2 value of
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value is 0.267356, and lastly Q2 value of orientation is 0.126198, this indicates predictive relevance for each
latent variable.
Table 2 Construct Crossvalidated Communality
Total 1-SSE/SSO
harga 0,509309
harga * komitmen 0,507054
komitmen 0,486721
minat 0,616115
mutu 0,278274
nilai 0,267356
orientasi 0,126198
Sumber: Output SmartPLS 2.0.M3
4. DISCUSSION
Hypothesis Testing and Discussion

Testing the hypothesis can be seen from the value of the t-statistic. The limits to reject and accept the
proposed hypothesis is 2.326 significant at p <0.01 (one-tailed). Table 3 presents the estimated output for
structural modeltesting.
Table 3
Path Cooefisien Result
Original Sample T Statistics
Hypothesis Variable Conclusion
(O) (|O/STERR|)
H1 Orientation ->Value 0,210621 4,189365 Accepted
H2 Quality ->Value 0,506621 12,537973 Accepted
H3 Value ->Interest 0,131185 3,396452 Accepted
H4 Price ->Interest -0,015012 0,254052 Rejected
H5 Price * Commitment -> -0,053984 1,417219 Rejected
Interest
Commitment ->Interest 0,721019 15,836781
Source: Outpur SmartPLS 2.0.M3
Testing Hypothesis 1
The test results of the parameter coefficient between the Customer Orientation towards Customer Value
indicates there 0,211 positive influence with the value of t-statistic at 4.189 and significant at 0.01. The value
of t-statistic is above the critical value of 2.326 (one-tailed), so the first hypothesis can be accepted.
Acceptance of the first hypothesis indicates that the higher Customer Orientation made by the company to the
customer, the higher Customer Value.
The calculation result of the coefficient parameters between Services Quality Delivery towards Customer
Value showed no positive effect (0.507), with a t-statistic value of 12.538 and above the critical value of
2.326 (one-tailed), thus the second hypothesis can be accepted.
Acceptance of the hypothesis 2 indicating that the better Services Quality Delivery performed by the
company to the customer, the higher Customer Value.
The calculation result of the parameter coefficient between the Customer Value towards Repeat purchase
intentions showed no positive effect (0.131), with a t-statistic value 3.396 significant at the 0.01 alpha. The
value of t-statistic is above the critical value of 2.326 (one-tailed), thus the third hypothesis is accepted.
Acceptance of the third hypothesis indicates that the CustomersValue have enough evidence to affect the
Repeat purchase intention.
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The calculation result of the parameter coefficient between the Price Competitiveness towards Repeat
purchase intentions showed negative effects (-0.015), with a value of t-statistic 0.254 but not significant at the
0.01 alpha.The t-statistic value is far below the critical value of 2.326 (one-tailed), thus H4 isrejected.
The rejection of the fourth hypothesis indicates that the Price Competitiveness not provide enough evidence
to improve Repeat purchase intentions.
Hasil perhitungan terhadap kofisien parameter antara Komitmen Relasionalterhadap Minat Beli Ulang
menunjukkan ada pengaruh negatif (-0,054) yang rendah, dengan nilai t-statistik 1,417 signifikan pada alpha
0,10 namun nilai t-statistik tersebut berada di bawah nilai kritis 2,326 (1-tailed), dengan demikian H5 tidak
dapat diterima.
The calculation result of the parameter coefficient between Relational Commitment towards Repeat purchase
intentions showed that there are low negative effects (-0.054), with t-statistic value of 1,417 is significant at
alpha of 0.10, but t-statistic value is belowthe critical value of 2.326 (one-tailed), thus H5 is rejected.
The rejection of the fifth hypothesis indicates that Relational Commitment did not provide enough evidence
to affect the strength of the relationship between the Price Competitiveness and Repeat purchase intention.
5. CONCLUSION
The acceptance of the first, second, and third hypothesis shows that it is reasonable to propose a conceptual
model of the process to increase Repeat purchase intention on Freight Service Company in Semarang.
Conceptual Model of Increasing Repeat purchase intentions Process (1)
To increase customer repeat purchase interest, improvement of service quality is a top priority. The dominant
factor in shaping the services quality delivery is qualified operational performance and good customer
service. Therefore, company must ensure the availability of space in both the feeder and connecting vessel
and has a dedicated and reliable customer service to provide information and accelerate service procedures to
the customer.
If the freight service delivery quality in Semarang is rated high perceived quality by the customer, then
customer will have expectation to get the value that corresponds to the quality of such services. Those value
in the future will become the deciding factor for customers in building a customer purchase interest in the
form of repeat purchases as seen in figure 2.
Figure 2
Service Quality Purchase

Customer Value
Delivery Interest
Source: Processed research data

The second model as seen in figure 3,puts the customer orientation as the next factor that determines the
increase in repeat purchase intention. Efforts to understand the customer's wishes is followed by efforts to
understand customer needs and responsespeed towards customer complaints as the basis for consumers to
measure the extent of customer orientation will create value for customers to create customers‘ repeat
purchase intention. Through customer orientation, company will have the opportunity to shape the customer
perception of the value. Perceived values will generate customer satisfaction and customer satisfaction will
encourage customers‘ repeat booking interest.
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Figure 3
Customer Customer Purchase

Orientation Value Interest

Relationalcommitment has the closest and mostsignificant relationship towards repeat purchase intention. In
the context of relational marketing, empirical evidence shows that relational commitment is a permanent
interest in establishing and maintaining long-term relationships. The third model as seen in figure 4,
illustrates that customers that are strongly committed towards mutually beneficial long term relationship will
show positive attitude to the company such as repeat purchase intention and giving recommendation to others
to make a purchase.
Figure 4
Service Quality Purchase

Delivery Interest
Suggestion
Managerial policy implications of this study will be done based on theoretical concepts that have been
developed, as follows:
1. The services qualitydelivery is a crucial element that underlies the formation of value for customers.
When customers benefit from service delivery quality ,customer value is formed in this process.
2. The next important element is the customer orientation. The company needs to increase employees'
ability to respond to customer complaints.
3. Marketing & Sales department should strive to always build relational commitment between
company and customer.
Future Research Agenda

1. Putother variables that can fill the research gap, for example marketing strategy and the role of the
sales force, as the results of research by Christopher, et al ( 2015) concluded that the trust of
salesperson and selling tactics affect the purchase interest.
2. Use more indicators based on preliminary research, so that the variables used in the study
(particularly the variable services delivery quality and customer orientation) will describes the real
condition of the concept.
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JAPANESE HONORIFICS SPEECH WITHIN TOURISM VOCABULARY

USED BY GRO STAFF AT HIS INFORMATION CENTRE IN UBUD
A.A.Ayu Dian Andriyani1 & Ni WayanMeidariani

STIBA Saraswati Denpasar
agungdianstiba@gmail.com1
ABSTRACT
This research is aimed at describing the Japanese honorific speech as used by the GRO staff at HIS Tour
information center in Ubud when they use Japanese tourism vocabulary to Japanese tourists who come to the
information center. This research uses some theories, like honorific speech theory or ‗keigo‘ in Japanese as
proposed by Iori Isao et al (2000), the 'SPEAKING' elements as the contextual situation theory proposed by
Hymes (1972), and theory of context by Joan Cutting (2008). This qualitative research uses observation
method supported by note taking technique (Sudaryanto, 1993). The research location of this study is at HIS
information center in Ubud. Pragmatic equivalence and referential equivalence methods (Sudaryanto, 1993)
are used to analyze the data. The result of the research shows that, the tourism vocabulary used in speaking
by GRO staffs is that of keigo or honorific speech which consists of sonkeigo, kenjougo mixed up with the use
of 'teineigo'. The way how tourism vocabulary is used by the staffs is determined by contextual situations
which consist of setting and scene of speech event, participants, purposes, sequences, mode, key,
instrumentalities, and norms in interaction of communication.
Keywords: utterance level , GRO staff , Japanese tourists, tourism vocabulary
1. INTRODUCTION
Every country has its own culture within which its norms and its belief system are used by the people who
live in that culture as a guiding tool to behave and communicate in appropriate manner with their fellow
speakers [FS]. Grudykunst (2002) states that culture is communication, and, communication is culture.
Culture and language as a means of communication are inseparable to one another because each supports the
other. Culture is a part of communication attitude and, in turn, communication attitude sustains the culture.
Culture is the guideline to judge whether a fellow-speaker is polite or not according to that particular culture.
Politeness is interpreted as an attempt to avoid conflict among fellow-speakers in the communication process.
(Chaer, 2010: 11) In the Japanese culture communication is greatly influenced by the in-group and out-group
concepts. What level of speech is being used by a speaker depends on who speaks what language level to
whom and about whom. One‘s speech level must be adjusted to that of the co-speaker‘s social status and
closeness in the community and to that of the third speaker‘s with respect to the honorific system. The
honorific system in Japan had been around for hundreds of years. It becomes the point of reference in
interaction which prioritizes politeness, or technically called as honorifics.
In general, apart from understanding the honorifics, a speaker also needs to understand the process how
speech happens when it involves three participants, i.e. the first speaker, the second speaker, and the third
person being talked about among the two sides/parts, depended on the communication process: WJ as Pn or
co-speaker and the third part with gro staff as speaker, hearer and third part so that emerging a mutual
relation and continuously interchanging between WJ and gro staff at information center at HIS Ubud. The
proccess of speech can be drawn in the following figure:
The process of speeach act Japanese guest and Gro staff :
P-1/2 P-2/1
(Speaker/co-speaker) (co-speaker/Speaker)
Explanation : Speaker (P-1/2) WJ

Co-speaker (P-2/1)
Looking at the schema above, we can read that the gro staff functions as Pn [speaker] when communication
occurs only in one direction and may function as an Mt in a two-way of communication. Understanding how
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the process of speech and honorifics happens in communication in Japanese is really important in tourism
industry. In order to help the tourism industry to move forward a guide as a tourism agent must have
sufficient amount of vocabulary to use according to the speech level the Japanese language has. Through
understanding the honorifics system one can expect to be able to give a better guiding service to the Japanese
tourists.
Seeing these fenomena, the questions we may ask, what speech levels are used by the staff when interacting
with the WJ, and what factors influence their choice of that speech level. Based on these questions it is
absolutely necessary to explore the honorifics regarding the usage of the Japanese vocabularies in tourism by
the staff at HIS information center in Ubud. Such an exploration aims at giving a better service to the
Japanese tourists who pursue their vacation in Bali Island.
2. THEORY REVIEW
Japanese Honorifics
Similar to the Javanese or the Balinese language, the Japanese languae also recognizes speech levels. The
speech level in Japanese is mostly influenced by age, economic level, education, and social status in the
society. The Japanese language can be classified into three into three categories:
a. The Polite Variety ( teinei-go)
This polite variety of language is used by a speaker to fellow-speaker when both speakers are unfamiliar to
each other. This variety is very neutral since it uplifts neither the speaker‘s status nor the status of the co-
speakers nor the person being talked about. This kind of speech is normally marked the particle masu.
Example: Sumimasenga, Kuta biichi made oshiete moraimasuka?
― Sorry, could you tell me the way to Kuta beach?‖
The example above, ―--te moraimasuka‖, derives from ―te-morau‖. This word is changed into polite form as
―—te moraimasuka?‖ The meaning does not change. Only the form is changed from the neutral variety of
speech to the polite one.
b. The Respectful Variety (keigo)
This respectful variety is used when the speaker feels that his/her fellow-speaker or the person being talked
about need respect. This is called keigo. (Djodjok, 2012 : 160) Similarly Iori, et al, (2003: 314) describe that
―Keigo is an honourific expression to the listeners or to other people under discussion. Many people confirm
that keigo is grouped into three: sonkeigo, kenjougo, and teineigo. Some elaboration of the three expressions
are given below,
1. Sonkeigo is an honour speech variety by the speaker to the co-speaker to demonstrate the honor
given by the speaker to his/her fellow-speaker. This raises the co-speaker‘s status to a higher
position based on the concept of in-group and out-group concepts of Uchi-Soto .
For example:
―Excuse me, is Mr. Kawasaki here?‖
The choice of the diction ―irasshaimasuka‖ in the above sentence implies that the speaker is paying
respect to the listerner/third person. The word : irasshaimasuka belongs to the verb of honour
qualification.
According to Djokjok [2012 : 164], regarding the pattern of its formation, sonkeigo is
classified into the patterns:
[a]. Sonkeigo for the verbs mostly has the pattern of O [GO] …. Ni Naru. In addition, speakers
should remember specific verbs which belong to the sonkeigo verb, such as meishiaguru,
irassharu, etc.
[b]. For the noun, it is initialized by the prefix ―o‖ for those words with the Japanese words in origin,
such as o-kane, o-namae. Whereas for those words with the Chinese kango in origin they are
given the prefix ―go‖, such as go-shujin, go-genki, etc.
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[c]. For the adjective ending with the suffix -I and -Na, and the adverb, the patterns used are those of
o-wakai, o-genki, o-yukkuri, etc.
[d]. Other patterns are ended with the suffix as –san or -sama .
[2]. Kenjugo is an honor speech variety spoken by a speaker to another fellow-speaker, by which this
speaker lowers his/her own position, thus, indirectly raises up the position of the listener.
Example : Watashi wa Baritou ni orimasu
―I am in Bali island‖.
The diction –orimasu, which derives from the neutral variety –iru, is a variety of kenjougo. It is in
this sense that the fellow-speaker attains a higher position and power than the speaker.
Vocabularies in Japanese Language.

Vocabulary means that all words used in a particular milieu either of nation or of an ethnic group, or the use
of a language by individuals or in the literary works. [Djokjok, 2012 : 86] Similarly Kindaichi (1977:444)
defines that vocabulary is a collection of words used in a certain milieu. When looking up the vocabulary of a
language, we may also examine whether the words are singular or plural. Vocabulary may also be defined as
the number of words that build that vocabulary as an integral unit. Depending on the capability of the speaker
in mastering the vocabulary, there are two kinds of vocabulary: active vocabulary ‗shiyougi‘ and passive
vocabulary ‗rikaigoki‘. Active shiyougi is for those who master the vocabulary well and put them into the
daily life practice. Whereas, passive rikaigoki is for those who only master and not practice them [Djojok,
2012 : 86]. Vocabulary is different from words. Vocabulary includes all words in a language and all those
words construct a set of words in language vocabulary. This concept proves that Japanese vocabulary is
manifold. There is tourism Japanese vocabulary, legal Japanese vocabulary, etc. Focusing on the characters
and importance, Japanese vocabulary is classified into two models: ―kihongoi‖ and ―kikangoi‖. Kihongoi is
the vocabulary which is used for language education. Whereas kikangoi is the vocabulary practiced in the
daily Japanese life. In Djodjok‘s sense [2012 :90], vocabularies are grouped as following:
1. Category based on the meaning of the word. Based on the meaning words are classified into some
categories, such as nomina which may further categorized into abstract relation, human thought and
action, things/tools, products, natural condition and its products. Besides nomina there is the
category of verbs, aspects and others.
2. Category based on the origin of the word. This includes wago, kago, dan gairaigo.
3. Category based on the grammatical function. This covers lexical meaning and grammatical meaning.
4. Category based on the word formation. This brings about two kinds of words: simple words
(tanjugo), complex words [goseigo] which refer to ‗haseigo‘ or words with affixes and ‗fukugougo‘
or compound words.
1.1.1. Classification of Goi
Sudjiyanto and Dahidi [2004] classify goi into several themes:
1]. The grammatical characteristics a. Verb, noun, adjektif etc

2]. The age and sex of the speakers: based on the age and gender of the speaker goi is divided
3]. The occupation and expertise of the speaker: economics, tourism, linguistics, doctors, etc.
4]. The period and region of the speakers.
5]. The origin of the words [wago, kango, gairaigo, dan koshuyo].
1.1.2. Japanese word class
There are ten word classes in Japanese:
1. The Verb. A verb is used to express an activity or a state, and it may undergo changes; and,
thus, it can be used as a predicate. Miru = Melihat
2. The –i Adjective. This adjective shows the characteristic of something and it may undergo
changes and can used as a predicate. Oishii = enak
3. The –na Adjective. Genki = sehat
4. The Noun. Noun is a word that indicates that something is an object or an event and does not
undergo any conjugation. Kaban = tas
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5. The Adverb. An adverb word never undergoes any changes and is an adverb by itself. Yatto =
akhirnya
6. The Pronoun. A pronoun is a representation of a noun and it does not undergo any changes.
E.g.....this
7. The Conjunction. A conjunction functions as a link or connector between two clauses or
sentences. It can undergo changes but it can become neither the subject nor the predicate of a
sentence. Shikashi = tetapi.
8. The Interjection. The form of an interjection is static. It can stands by itself without any
assistance of other words. Hai = iya
9. The Auxiliary Verb. It changes forms. It may be formed into a word in combination with other
words. ~ rareru
10. The Particle. A particle cannot stand by itself. Wa, Ga.
Speech Situational Context
The factors that support speech events and the elements that shape the contextual situation are given an
acronym SPEAKING by Hymes [1972: 10-14] as explained below:
S [setting and scene]: the place and time of an event, e.g. at the beach at the sunset or at the market in
the morning.
P [participants] : the persons involved, the speaker, co-speaker and the person spoken about, from
which we acknowledge that whether or not they are in close interaction.
E [Ends] : ―goals‖ , the end goal of a speech and it is more focused on the thing intended to be
achieved by the speaker and co-speaker.
A [acts sequence] : the sequence of the events, when a speaker speaks with co-speaker and in the form
and content of speech.
K [keys] : how the speech is being delivered and the tones: happy, sad, anxious, scared, etc, in direct
and indirect speech.
I [instrumentalities] : tool, medium used in the speech, oral or written communication.
N [norms] : the norms/rules in a speech or communication
G [genre] : type of speech, in formal or non-formal interaction or communication or a poem delivery,
etc.
Context is also essential in supporting the speech practice. Context has an important role in a conversation.
John Cutting mentions that context of situation tends to explore what is being known by the speaker when
talking about different things, the context of knowledge background specifically or in general or the cultural
knowledge that both interlocutors have, and the context in the text about which the two interlocutors talk
about.
Tourism
According to the Republic of Indonesia‘s Constitution, Chapter 1, Article 1: 1-2, it is formulated that that
tourism is a traveling activity or a part of that activity which is done on a voluntary basis and for a brief
period of time for the purpose of enjoying an object or objects and other forms of attraction. The Information
Center Activity owned by the private sector does not only sell tour package, but also do the best for the
tourists. In Article 2, it is formulated that tourists are those who pursue the tourism activities. Japanese
tourists, then, are those tourists who come from Japan and pursue tourism activities. Information Centers in
the tourism resorts are managed by the government or a private company that runs a travel agent. Such an
information center does not only serve the inbound guests but also the outbound ones by performing the
primary service to all tourists.
The Concept of Uchi and Soto [in-outgroup concepts].

According to Takehara [2005] in Elly Triasih [2003], the concepts of uchi and soto are explained as a
differentiating social status in Japanese society. Uchi [in-group] is a group of people who are closely related
with us, such as family members, employees in a workplace, etc. Soto [out-group] is a group of people who
are closely bound with us, such as members of other families or members of other companies who are
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significantly marked by the Japanese speech level called ‗keige hyougen‘, which is influenced by relationship
of participants ‗ningen kankei‘, place ‗ba‘ or ‗bamen‘.
3. METHODOLOGY
This research is a qualitative research. In Bodgam and Tailor‘s view [in Moleong, 1993:3]. Qualitative
method is a method with research procedure that produces descriptive data, oral or written words of fellow
human speakers and co-speakers and their observable attitudes. Such a research collects the original speech
data by using the strategy of observation and note taking without directly being involved in the dialogue
[Sudaryanto]. The place of research is at the Ubud Information Center which is managed by a private sector
named travel agent of HIS tour. It does not only give a primary service to the in-group guests, but also to the
out-group ones regarding any kind of information. In the phase of data analysis, the method used is pragmatic
equal method, i.e. a method with an analytical technique using the co-speaker as an instrument [Sudaryanto
1993:29]. The supporting method is the referential method. In analysis strategy, this method uses the tool of
referent which is able to distinguish the subject, object or even receiver. Dealing with data analysis,
Sudaryanto [1993] comments that after the data are gathered, they are classified in such a way based on the
classification of the Japanese speech level, i.e. sonkeigo, kenjougo, and teineigo.
4. DISCUSSION
Oral/speech data:
1. Oralist/Speaker Identity:
Gender : Man
Age : 25-30years
Occupation : Employee at office
Address : Kyoto
Place of Origin : Japan
Daily language : Japanese language
2. Counterpart/co-speaker status:
Gender : Woman
Age : 35-40 years
Occupation : Staff at Ubud information center
Address : Karangasem
Place of Origin : Bali
Daily language : Indonesian language [Balinese language]
3. Date of conversation : March, 12, 2016
4. Time of conversation : Morning [almost noon]
5. Relation of speaker & co-speaker : guest and staff.
Speech Data (1) :
JT [Japanese Tourist]: Sumimasen, ano jitensha o karintandesuga, mas mura o ikitakute, douyatte
ikimasukane?
―Excuse me, I have borrowed a bicycle and I‘d like to go to Mas village. How can
I get there?‖
Staff : Hai.. ima kara okyakusama ni goannai itashimasu, chizu kara miru to, ima, okyakusama wa kochira
ni irasshaimasune... koko kara massugu irasshatte kudasai, masu mura wa hidarigawa ni
arimasukara hidari ni magatte kudasai.
―Yes, I know. I will tell you. In this map, you are here. From here, please go straight. Since your
village
is located on the left side, please turn left.
JT : Souka!Kono chizu moratte ii? Hai wakarimashita..arigatou!

― Oh I see. May I have this map? Yes, I understand, thanks‖.
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Speaking Context. A Japanese young man whose status was an outbound guest came to the staff to ask for
how he could get to Mas village by bicycle. The conversation comes to pass among the Japanese tourist with
the staff. A conversation happened between the JT and the staff.
Analysis: Setting and scene in this speech is at the Ubud Information Center and the co-speaker/participant is
a Japanese tourist. In the atmosphere of holidays, many tourists come to the information center. A two way
interaction happened between the JT and the staff, talking about the direction to the village of Mas as a
tourism destination in which all kinds of artifacts are sold, particularly statues. Both of them were speaking in
Japanese. Looking at the honorifics used, it is obvious that the speech level of JT when he was asking the
question was ‗teinei‘, a keigo variety , yet, in this level, the sentence is ended with auxilliary verb –masu. JT
uses this to show a neutral respect without raising up or underestimating the level either the speaker or co-
speaker. Meanwhile the level of respect as a response to JT‘s question, the staff uses the respect variety
―teinei‖ in the sentence: ‖Masu mura wa hidarigawa ni arimasukara hidari ni agatte kudasai. The marker
~masu and ~tte at the end of verb is a form of teinei. Besides, it also uses sonkeigo in the diction of
okyakusama the marker ―o‖ in front of a noun, the marker ―go‖ and itashimasu for the verb go annai
itashimasu.and the choice of irasshatte kudasai which means ‗exist‘ in the sonkeigo variety. This is used to
indicate respect to the co-speaker because JT as visiting guest as an information service and this is absolutely
determined by the contextual situation.
Speech Data [2]:

1. Speaker identity:
Sex : Female
Age :25-30 years
Occupation : Staff at Ubud information center
Address : Denpasar
Place of Origin : Denpasar
Daily language : Indonesian language [Balinese language]
Gender : Female
Age : 30-35 years
Occupation : a barbershop employee
Address : Yokohama
Place of Origin : Yokohama
Daily language : Japanese language
3. Date of conversation : April, 5, 2016
4. Time of conversation : morning [almost noon]
5. Relation of speaker and co-speaker : staff and guest
Speaking (2):
Staff : Irasshaimase, nanika goannai itashimasuka?
―Welcome, What can I do for you?‖
JT : Ano, Uluwatu Jiin made takushii o yonde moraitai desuga..
― here, please, call me a taxi to Uluwatu temple‖.
Staff : Hai, kashikomarimashita, ima kara takushii o tehai itashimasu node shibaraku
omachi kudasai
―Okay, I will call the taxi immediately. Please wait for a moment‖.
JT : Onegaishimasu
‖Okay, help me please‖.
Speaking Context : The conversation happened between staff at information center and the Japanese tourist
who is asking for help to call for the taxi to Uluwatu temple. After welcoming the JT, she immediately calls
the taxi for Uluwatu temple.
Analysis: The vocabulary in tourism realm such as taxi, Uluwatu temple with the verb ~ tehai itashimasu,
gives speakers of the Japanese language various options as to what dictions to use. The above data were
obtained when the JT comes to the Ubud information center, and a greeting expression that the staff must say
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is irasshaimase.. nanika goannai itashimasuka? is a question sentence directed toward whoever comes to the
Ubud information center [IC]. The variety used is sonkeigo for service purposes and respect to the visitor
with any status. The diction of nanika, as a marker for go at the font of verb annai and is ended with
itashimasu as a real form of respect in the speech of sonkeigo. Such a variety is used for respect by the staff
to the JT as a guest. JT came to the IC with the intention to have a taxi be called for her to go to Uluwatu
temple. In this sense, even though there is not any closeness in social status among the staff and JT, but the
staff remains polite to the JT by using the form teinei. The factors that supports the above speech and the
basis for contextual situation consist of place and time, participant, goal, sequence, ways, tool, medium and
norms dealing with communication.
Speech (3)
1. Speaker identity:
Gender : Woman
Age : 35-40 years
Occupation : Lecturer
Address : Nagoya
Place of Origin : Nagoya
Daily language : Japanese language, English language
Sex : Woman
Age : 30-35 years
Occupation : Staff at Ubud IC.
Address : Denpasar
Place of Origin : Singaraja
Daily language: Indonesian language, Balinese language
6. Date of conversation : May, 2, 2016

7. Time of conversation : Morning [almost noon]
8. Relation of speaker & co-speaker : Staff and guest
Speech (3)
JT : Meria Bari hoteru de tomatteiru mono desuga, esute no shiharai….

―I am the guest staying at Melia Hotel Bali, I plan to pay....‖
Staff : Hai, ryoukai itashimasu..ima kara kakunin itashimasunode shoushou omachi
kudasai
―Yes I see. I will confirm you back. Please wait for a moment‖.
Jt : Hai, onegaishimasu
―Yes, help me please‖.
Staff : omatase itashimashita…kochira wa okyakusama no ryoushushou desu,
douzo kakunin shite kudasai.
―Sorry for waiting too long....This is the proof of payment and please recheck it.
For payment, you may use cash money or credit card.‖
JT : Jaa, genkin de onegaishimasu
―If so, in cash, ok‖.
Staff : Hai…
―Okay‖
Speaking Context: A conversation happens between the JT and a staff at Ubud IC Bali. JT is an
inbound guest of the travel agent. The travel agent handles the information. The JT comes and plans
to pay for the optional Spa which she ordered several days earlier. The guest will pay cash.
Analysis: The context of situation surely determines the speech. This situation happened in the
speech between JT and staff at Ubud IC. The guest asks how much she should pay for the optional
Spa. As a respect expression towards the staff, the JT uses kenjougo by lowering herself or the
person being talked about in her in-group including things, situation, activity, and other related
matters. The sentence used is marked by the diction of tomatteiru mono desuga, It is spoken out
indirectly at at the beginning of the sentence before continuing the subsequent speech. As a form of
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service to JT, the staff answers using kenjougo in the sentence: hai, ryoukai itashimasu, ima kara
kakunin itashimasu, .as a response to the request of JT for the optional Spa and it is continued in the
sentence: shoushou omachi kudasai in sonkeigo by raising up the position of JT as a worthily
respected-guest. The Japanese vocabulary in tourism domain are those which are very closely
interconnected with tourism activities, like those verb forms in the sonkeigo namely omatase
itashimashita and the variety of teinei for the verb douzo kakunin shite kudasai.
5. CONCLUSION
Based on the data above, it might be concluded that the speech which frequently occurs in tourism domain is
using the vocabulary that are often used in tourism domain. Tourism vocabulary used in speaking by the gro
staff as tourism agents is the speech of keigo which consist of sonkeigo and kenjougo, and it is supported by
the use of teineigo speech. The vocabulary of tourism used by the staff are absolutely determined by the
context of situation, namely where and when the speech happens, the participants, the goals/objectives, the
plots, tools, media, and the norms which are focused on the interaction norms in the communication.
6. REFERENCE
Ayano, Yuriko. 1981. Goi. Tokyo.The Japan Foundation.

Brown, P. dan Levinson, S. 1978. ―Universals in Language Usage: Politeness Phenomena‖. In Goody, Esther N., ed.
Questions and Politeness: Strategies in Social Interaction (Cambridge Papers in Social Anthropology). Cambridge:
Cambridge University Press, 56-310.
Chaer, Abdul. 2010. Kesantunan Berbahasa. Jakarta. Rineka Cipta.
Cutting, J. 2008. Pragmatics and Discourse, A Resourse Book for Students. London : Routledge.
Gudykunst, W.B. 2002. Intercultural Communication Theories. California: Sage Publication.
Hymes, Dell. 1972. Foundation in Sociolinguistic: An Ethnographie Approach, Philadelphia: University of Peunsylvania
Press.
Iori, Isao et al. 2000. Shokyuu o Oshieru Hito no Tame no Nihongo Bunpou o Handobukku. Tokyo: Surii Ee Nettowaaku.
Kindaichi, Haruhiko. 1997. Gakken Shougaku Kokugo Jiten. Tokyo. Gakken Gakushuu Kenkyuusha.
Leech, G. 1983. Principles of Pragmatics. London and New York : Longman.
Moleong, Lexy J. (2007) Metodologi Penelitian Kualitatif, Penerbit PT Remaja Rosdakarya Offset, Bandung.
Nadar, F.X. 2009. Pragmatik & Penelitian Pragmatik.Yogyakarta: Graha Ilmu.
Sudjianto. Ahmad Dahidi. 2004. Pengantar Linguistik Bahasa Jepang. Jakarta: Kesaint Blanc.
Sutedi,Dedi. 2003. Dasar-dasar Lingustik Jepang. Bandung: Humaniora.
Sudaryanto. 1993. Metode dan Aneka Teknik Analisis Bahasa: Pengantar Penelitian Wahana Kebudayaan Secara
Linguistis. Yogyakarta: Duta Wacana University Press.
Soepardjo, DjoDjok. 1999. Budaya Jepang Masa Kini (kumpulan artikel). Surabaya: CV. Bintang Surabaya.
_________.2012. Linguistik Jepang. Surabaya: CV. Bintang Surabaya.
Tamamura, Fumio. 2001. Nihongogaku o Manabu Hito no Tameni. Tokyo: Sekaishishousha
The Japan Foundation.2002. Kaigai Kyoushi no Tame Nihongo no Kyoujuhou. Saitama
Triasih, Elly. 2013. Sistem dan Fungsi Tingkat Tutur Bahasa Jepang dalam Domain Perkantoran. Disertasi. Universitas
Sebelas Maret.
Undang-Undang RI No:tentang kepariwisataan, Bab 1 Pasal 1 ayat 1 dan 2.
Yule, G. 1996. Pragmatics. New York: Oxford University Press.
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CAPITAL STRUCTURE, WORKING CAPITAL,

FIRM PERFORMANCE AND FIRM VALUE:
AN EMPIRICAL STUDY IN MANUFACTURING INDUSTRY ON
INDONESIA STOCK EXCHANGE
Bambang Sudiyatno1, Elen Puspitasari2, Sri Sudarsi3

Faculty of Economics and Business, University of Stikubank
(bofysatriasmara@yahoo.com, elenmeiranto@yahoo.com, srisudarsi@yahoo.com)
ABSTRACT
This study investigated the effects of working capital policy on firm performance and firm value. Research
conducted on manufacturing companies listed in Indonesia Stock Exchange from 2010 to 2013. Variables
used as a proxy for working capital policy are current assets to total assets and current liabilities to total
assets. This study uses capital structure as control variable, capital structure proxies by leverage. Variables
used as a proxy for the performance of the company are the return on assets, and the value of the company is
Tobin's Q. Methods of data collection using purposive sampling. The results showed that current assets to
total assets has positive effect and significant on firm performance. Current liabilities to total assets and
leverage have negative effect and significant on firm performance. Furthermore, return on asset has negative
effect and significant on the firm value.
KEYWORDS: Working Capital Policy, Firm Performance, Tobin‘s Q.
1. INTRODUCTION
Working capital is the capital required for the operations of companies, especially in the short term, so the
turnover is less than one year. Working capital is very important for the company, because the company's
working capital to run the daily operations. Thus, the working capital deficiency may cause the company
cannot work, and can interfere with the activity of the company. Given the importance of the working capital,
the working capital management becomes a very important part to ensure the sustainability of its business.
Working capital of the company consists of two main components, namely current assets and current
liabilities. Current assets is a form or manifestation of the real working capital or working capital dirty, which
is the sum total of current assets. However, the current debt is a source of working capital which is financed.
Both are very important in ensuring the implementation of activities of the company, where the position of
current assets shows the availability of working capital, while the position of current liabilities shows the
availability of sources of financing of the working capital. Therefore, the management of current assets and
current liabilities become a very important part for the companies; the management of current assets and
current liabilities is called working capital management.
Management of current assets and current liabilities will determine the future of the company, the company's
performance and development of the company, because the management will be related to the ability of the
company to run its operations. Current assets on the one hand, which include; cash, accounts receivable and
inventory demonstrate the company's ability to perform activities of productivity. While the current liabilities
on the other hand, which shows the company's obligation to be met by the availability of cash, accounts
receivable, and inventory within the company. Thus, management needs to determine the composition of
current assets and current liabilities for the company liquidity to gain the trust of the community.
Lamberson (1995), stated that the management of working capital is a very important issue within a
company, in which some financial managers seek to identify the concept of controlling working capital and
working capital adequacy level. The adequacy of working capital will affect the activities of the company,
and more broadly to the business activities. With sufficient working capital, then management can more
freely in creating products the market needs.
Working capital management can efficiently create economic value for the company, where the influence of
the economic value of this is to increase the performance and value of companies. Working capital
management is aimed to consider the balance between maintaining liquidity and profitability. If management
is too lax to maintain liquidity, so that the company's liquidity is high, then the impact will be able to reduce
profitability. Vice versa, if the management is too strict to maintain liquidity, so liquidity is low, then the
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impact will improve profitability. Therefore, to maintain the balance of liquidity to be very important for the
profitability of the company that produced the maximum.
Working capital management needs to be very important, because it can affect the performance of the
company. This requirement will also be able to influence the market value as the impact of business
activities, which will be an attraction for shareholders and investors. Therefore, according to Shin and Soenen
(1998), and Afza and Nazir (2007), the entry point of efficient working capital management becomes an
important part of the overall strategy of the company to create shareholder value. In line with these opinions,
Ganesan, V (2007) states that the optimization of the balance of working capital management means to
minimize working capital requirements and maximize revenue. So that the efficiency of working capital
management, the company's free cash flow increases, which means increasing the chances of growth and
returns for our shareholders and Noriza Azhar (2010).
Afza and Nazir (2007), stated that the company tries to maintain an optimal working capital to maximize the
value of the company. While Christopher and Kamalavalli (2009), states that the efficient working capital
management makes it possible to obtain significant results and this omission can be very dangerous for any
company. Eljelly (2004), states that an efficient working capital management related to the planning and
supervision of current assets and current liabilities in a way that eliminates the risk of inability to meet short-
term liabilities by clicking avoid excessive investment in these assets. While Siddiquee and Khan (2009),
indicates that the inefficiency of working capital management not only reduce profitability, but eventually
may also lead to a financial crisis at every company, regardless of profit orientation, size and business sfat
(Azar and Noriza, 2010). In other words, the inefficiency of working capital management will be a very
broad impact on the survival of the company.
Based on the explanation of the concept of working capital management mentioned above, the researchers
were motivated to do research this issue. Therefore, the problem in this research is how the relationship
between working capital management, corporate performance, and the value of the company, particularly in
the manufacturing companies listed in Indonesia Stock Exchange.
The term working capital comes from the street vendors in the US that fill his cart with merchandise, and
then sell it on the route each (Brigham and Houston, 1998). Merchandise in the cart that their working
capital, because the merchandise is sold or played back at a profit. Thus, the working capital was the capital
used for the purposes of the company‘s operations and generates profit and working capital turnover is
relatively short, i.e. less than one year. Brigham and Houston (1998), and Koh, et al (2014), states that the
working capital is the firm's investment in short-term assets, namely cash, marketable securities, inventories
and accounts receivable. While, net working capital is the difference between current assets less current
liabilities.
Conceptually working capital can be grouped into three, namely quantitative working capital, qualitative
working capital, and functional working capital. Quantitative working capital is the sum total of current
assets without seeing the quality of the current assets, working capital is often referred to as gross working
capital. Qualitative working capital represents the difference between current assets, current liability; working
capital is often called net working capital. Meanwhile, the functional working capital is appropriate working
capital assets within the workings of the functions generate revenue. Which according to this concept is
working capital is capital that generates current income.
The third draft of the working capital, then the elements rather than working capital is current assets and
current liabilities. Therefore, management of working capital includes the management of current assets and
current liabilities of the company. Liquid assets consist of cash, short-term securities, accounts receivable and
inventory, while current liabilities consist of accounts payable, notes payable, salaries payable, taxes payable,
accounts payable rent, etc. Working capital management is very important for the company, because it will
affect the company's performance and corporate value. According to Brigham and Houston (1998), and Koh,
et al (2014) working capital policy involves two fundamental questions; (1) how the amount of the current
assets should be owned by the company, either in total or for each specific account, and (2) how it should be
financed current assets? The management of working capital involves defining the working capital policy and
the implementation of those policies in daily operations (Brigham and Houston, 1998).
In connection with the policy of working capital, current assets as working capital, Brigham and Houston
(1998), stating that the policy of investment in current assets includes three alternative policies, namely;
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current asset investment policy loose, the investment policy of strict current assets, current assets and
investment policies are moderate. The impact of each policy will certainly brings different consequences for
the company, because it is closely related to policy risks, costs, and profits.
Current asset investment policy loose will cause the amount of cash, marketable securities, accounts
receivable, and inventory are large. This policy will assign credit sales loosely, causing a large amount of
accounts receivable. As a result, current assets turnover is low, the cost of investment in current assets rose,
and earnings to be reduced. This policy is to maintain the operating risk of the company, because the
company gets sufficient reserves of the amount of inventory to ensure smooth operation of the company. But
with a growing inventory, the cost incurred for maintaining the inventory of damage to be high, and this bias
reduce profits.
Current assets Investment policy tight will cause the amount of cash, marketable securities, accounts
receivable, and inventories are low. This policy will assign a credit sale strictly, resulting in a lower amount
of accounts receivable. As a result, current assets turnover is high, the cost of investment in current assets
down, and profits to rise. This policy can lead to a high risk operation, because the amount of the reduced
availability of the low may cause the company's working capital deficiency. So that the smoothness of the
operation can be interrupted, and may result in a delay in the delivery of product orders that could interfere
with the customer's trust.
Of the two policies can be known that the company is facing a fundamental balance (fundamental trade-off)
of current assets (working capital) needed to run the business. Here there is a trade-off between the interests
of maintaining high profit by keeping the liquidity of the company. Thus, the investment policy of moderate
current assets can be a realistic option for balancing the interests of profit and maintaining liquidity. This
policy is at the center position, the velocity of the current assets were (moderate), so the cost of inventories
can be suppressed not up to much lower earnings. While, liquidity is maintained, because of the amount of
inventory that is sufficient to maintain the company's operations.
Working capital management companies in the implementation is to manage cash, marketable securities,
accounts receivable, and inventory on the one hand, and on the other hand how the cash, marketable
securities, accounts receivable, and inventory will be financed. This management is essential to maintain a
balance between getting a high profit by keeping the liquidity of the company. Working capital management
(working capital management) will thus have an impact on the company's performance and corporate value.
High profits will show a good performance for these companies. Liquidity as a description of the ability to
run the company's operations will create investor confidence in the company, so investors interested in
investing. Investor appetite for investment will increase the company's share price, and thus the value of the
company will increase.
Several studies on the working capital management have been done before, and some of the researchers
assume that the working capital management is very important, because it can affect the performance of the
company and the value of the company. Taleb, et al (2010), states that the effectiveness of working capital
management is very important, as this will affect the performance and liquidity of the company. Nazir and
Afza (2008), stating that the efficiency of working capital management is a fundamental part of the
management strategy for creating shareholder value.
Deloof (2003), in his research found that managers can create value for shareholders by lowering the day of
collection of receivables and minimize the average rate of return for supplies. This research was conducted in
Belgium to non-financial corporations in the period 1992 to 1996, with a total sample of 1009 companies.
Thus, the results of this study indicate that the faster the shorter days of collecting receivables and inventories
can increase the confidence of investors, so the stock price goes up, and the value of the company or
shareholders increased. Azhar and Norita (2010), found that the current assets to total assets ratio shows a
positive and significant relationship to the firm value (Tobin's Q), and corporate performance (ROA and
ROIC). Cash convention cycle and current liabilities to total assets ratio have negative effect and significant
to firm value (Tobin's Q), corporate performance (ROA and ROIC), current ratio negative effect and
significant impact on ROA and ROIC, while the Tobin Q a negative effect but not significant. Research
conducted on the companies listed on Bursa Malaysia during the period 2003 to 2007 with a sample of 172.
The results of the Narware (2004), found a negative relationship between the profitability and working capital
management, where the proportion of the increase in the company's profitability is lower than the proportion
of decrease in working capital. The study was conducted at the Indian National Fertilizer Limited, from 1990-
91 to 1999-2000. Raheman and Nasr (2007), found a strong negative relationship between working capital
management (liquidity) with the company's profitability. The study was conducted on companies listed on the
Karachi Stock Exchange during the period 1999 to 2004, with a sample of 94 companies. While Chowdhury
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and Amin (2007), found that there is a positive relationship between working capital management and
financial performance in the Pharmaceutical Industry in Bangladesh. Likewise, the results of Mousavi and
Finger (2012) who found a significant positive relationship between working capital management (Net
Liquidity Balance) and corporate performance (ROA) and value (P/BV).
Uchida (2006), found that the company's performance (ROA) and a significant positive effect on firm value
(Tobin's Q). Likewise, the results of research from Alghifari, et al (2013), and Sudiyatno, et al (2012), found
that the company's performance (ROA) and a significant positive effect on firm value (Tobin's Q). The study
was conducted in the Indonesia Stock Exchange on food and beverage companies with the period from 2007
to 2011, and the company manufacturing the period 2008 to 2010. Vural, et al (2012), in his research found
that working capital management (Cash Conversion Cycle - CCC) a negative effect and significant impact on
the enterprise value (Tobin's Q). However, average days in accounts receivable, average days in inventory,
average days of accounts payable, and the operating cycle there is no relationship with the enterprise value
(Tobin's Q).
Somewhat different research conducted by Nazir (2009), which conducts research in Pakistan on non-
financial companies listed on the Karachi Stock Exchange during the period from 1998 to 2005 with a sample
of 204 non-financial companies. The results show that that there are indications that the market performance
(Tobin's Q) responds to aggressive working capital. But the opposite happened aggressive working capital
effect on corporate performance (ROA). The results of this study support the results of Afza and Nazir
(2007), where this research was to test the effect of aggressive working capital to the company's performance,
as measured by Tobin's. The result showed that the aggressive working capital related to stock market
performance (Tobin's Q).
3. RESEARCH METHOD
3.1. Data
This study uses data after the economic crisis of 2008, ie 2010-2013. Data obtained through the Indonesian
Capital Market Directory (ICMD), which is the data of the shares of manufacturing companies. In this study
limit the shares of manufacturing companies listed in Indonesia Stock Exchange 2010-2013. Methods of data
collection uses purposive sampling, where researchers determine the shares of manufacturing companies that
meet the specified criteria.
3.2 Research Variables

The variables used in this study are the capital structure, working capital, the company's performance, and the
value of the company. Where the capital structure and working capital is an independent variable is proxies
by Leverage, and Current Assets to Total Assets (CATA) and Current Liabilities to Total Assets (CLTA).
The company's performance is the dependent variable is proxies by Return on Assets (ROA) for the capital
structure and working capital. While the value of the company is also a dependent variable for the
performance of the company are proxies by Tobin's q.
The capital structure illustrates describe the structure of the use of long-term debt by the company. Working
capital illustrates the structure of working capital by the company. The company's performance (Return on
Assets) describes the overall operating performance net of capital employed, while the value of the company
described the development of the company's stock market value.
3.3 Specification Model

This study used multiple linear regression analysis. There are two models of the equations used in this study,
namely:
1. Firm Performance = a11 + b11Lev + b12CATA + b13CLTA + e11
2. Firm Value = a21 + b22ROA + e21
Where:
Lev = Leverage.
ROA = Return on Assets.
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CATA = Current Assets to Total Assets.

CLTA = Current Liabilities to Total Assets.
a11, a21, is a constant.
b11, b12, b13 and b22 are coefficients direction.
e11, e21 is residual.
4. RESULTS
4.1 Descriptive Analysis

As already described above, and in accordance with proxy used to measure company performance, this
research analyzed using two regression equations. Equation 1 analyzes the effect of capital structure and
working capital and company performance. While the second equation to analyze the effect of the company's
performance to company value.
Based on Table 1 and Table 2 above, it can be concluded that the average ROA generated manufacturing
companies in BEI is of 7.62 percent with a standard deviation of 5.40 percent. Average Leverage
manufacturing companies in the Stock Exchange amounted to 17.66 percent with a standard deviation of
17.19 percent. On average CATA manufacturing companies in the Indonesia Stock Exchange amounted to
52.65 percent with a standard deviation of 20.79 percent. On average CLTA manufacturing companies in the
Indonesia Stock Exchange amounted to 31.22 percent with a standard deviation of 16.62 percent. The
average firm value (Tobin's q) manufacturing companies in the Indonesia Stock Exchange amounted to 46.44
percent with a standard deviation of 26.52 percent.
Table 1: Statistics Description Equation 1

N Range Minimum Maximum Mean Std. Deviation
ROA 307 ,2217 -,0116 ,2101 ,076217 ,0539835
Lev 307 ,8868 ,0014 ,8882 ,176619 ,1719174
CATA 307 ,9779 ,0203 ,9982 ,526476 ,2078931
CLTA 307 ,8776 ,0118 ,8894 ,312247 ,1661736
Valid N (listwise) 307
Source: SPSS Output, 2016
Based on data from the descriptive analysis, then all the average value of the variables is higher than the
standard deviation. This shows that the condition of the capital structure, working capital, the company's
performance and corporate value relatively more stable, so the risk is relatively small amendments. However,
when viewed from the range is also relatively high, thus meaning there is a considerable difference between
one company with another company in the use of debt, working capital, and the performance and value of
companies.
Table 2: Statistics Description Equation 2
N Range Minimum Maximum Mean Std. Deviation
FV 307 1,9376 -,0633 1,8743 ,464373 ,2651793
ROA 307 ,2217 -,0116 ,2101 ,076217 ,0539835
Source: Output Statistic, 2016
4.2 Empirical Results
Empirical data were analyzed using regression model to estimate the effect of capital structure and working
capital to the company's performance, and influence the company's performance to company value. The
results of the analysis to the equation 1 and equation 2 respectively can be explained as follows:
Equation 1
Multiple regression equation 1 shows the three independent variables, namely the policy of working capital
proxies by CATA and CLTA, as well as the financing or capital structure policy proxies with leverage. The
dependent variable is a proxy for the performance of the company Return on Assets (ROA). Regression
analysis showed that the leverage and CLTA a significant negative effect on a significance level of less than
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1 percent. Meanwhile, CATA has positive and significant impact on a significance level of less than 10
percent.
Based on the results of the statistical test, there is statistically working capital management policies have a
significant effect on the performance of the company, so working capital management will have an impact on
the company's performance. CLTA positive effect although the significance level of less than 10 percent, this
indicates a positive effect, so if working capital plus, firm performance will increase. This condition is in
accordance with the basic concepts of additional working capital, which is to maintain the company's
operations so companies do not lack of working capital.
The existence of sufficient working capital will allow production to be smooth in running the production
process, because there is never a delay in raw materials. It is certainly very helpful in the sales department to
market its products to meet consumer needs, product shipments to customers are not constrained by delays in
production. Along with the smooth process of production and sales, the profit generated will also increase,
and if this condition can be maintained is certainly very good for the future development of the company.
Policy short-term funding sources (CLTA) a significant negative effect on a significance level of less than 1
percent, both statistically and illustrates the basic concept of the source of funding is appropriate. Increase in
short-term debt obligations will add capital cost increases, and this may reduce profits. This condition is not
the issues for the company for additional profit generated from the short-term debt are greater than their cost
of capital. In this study proved that the use of short-term debt will lower earnings or the company's
performance, and increased working capital will increase profits or performance of the company.
Further testing is through the control variables, namely the debt policy (leverage), where the results of
statistical analysis showed that leverage a significant negative effect on a significance level of less than 1
percent. These results indicate that the use of funds is not optimal, where the capital cost of the use of funds
is still greater than the rate of return. This condition can be understood considering that the study was
conducted in the period after the 2008 economic crisis, so that some manufacturing companies in BEI is still
in a state of recovery, and the global economy still faces pressure was very heavy.
The average of Return on Assets (ROA) of the manufacturing company during the period 2010 to 2013 is
7.62 per cent with the lowest ROA -1.16 percent and the highest 21.01 percent. Return on Assets (ROA) are
almost the same, and only slightly above the benchmark interest rate of Bank Indonesia amounting to 7.50
per cent. This shows that there are still many companies that manufacture ROA below the Bank Indonesia
benchmark interest rate as the impact of global economic pressures are very heavy.
Equation 2
Equation 2 is only one independent variable, namely the performance of companies that proxies by Return on
Assets (ROA), with one dependent variable, i.e. the value of the company is proxies by Tobin's q. Results of
the analysis showed that the corporate performance (ROA) a significant negative effect on firm value
(Tobin's q) at a significance level of less than 1 percent. Thus, the increase in corporate performance (ROA)
responded negatively by investors. The increase in corporate performance (ROA) is not to be perceived as a
positive signal for future investors. This condition could be caused because the Indonesian economy is not
yet stable global economic pressures, so that more investors are speculating to pursue short-term profits,
through the spread of stock prices.
Based on the analysis and discussion, it can be some conclusions as follows:

1. Policy working capital management in determining the amount of working capital; either through
management of current assets (working capital) or through the determination of short-term funding
sources affect the performance of the company.
2. Effect of the working capital management on corporate performance is in conformity both
statistically and conceptually.
3. Most of manufacturing companies in Indonesia Stock Exchange has not used its debts effectively
and efficiently and decreases the performance of the company.
4. The company's performance is not to be perceived as a positive signal for future investors, causing
speculative for investors to obtain short-term gains through share price spread.
As the implications of the results of this study are that the manager must increase the efficiency and
effectiveness of working capital management to improve company performance. On the other hand
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management should also increase more efficiency and effectiveness of overall debt (short term and long
term), given that the use of this debt will add to the company's expense. Therefore, management should be
able to improve its performance by generating a rate of return on the additional debt higher than their cost of
capital in order Return on Equity (ROE) increased. With increasing Return on Equity (ROE) will be a
positive signal to investors and potential investors to buy its shares.
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EARNINGS RESPONSE COEFFICIENT (ERC):

MARKET REACTION TO EARNINGS ANNOUNCEMENT
Ratna Wijayanti DP, Noviansyah Rizal, Kurniawan

STIE Widya Gama Lumajang
pradnyataj@gmail.com, noviansyah.rizal@gmail.com, kurniawan.se@gmail.com
ABSTRACT
This study Aimed to Obtain empirical evidence, examine and explain the factors (leverage, profitability, size
and persistence) that Affect earnings response coefficient (ERC) with voluntary disclousure and timeliness as
an intervening variable and its application in the financial statements at Manufacturing Companies listed in
the Indonesia Stock Exchange from 2010 to 2014.
Research on the relationship between stock returns with income to Determine the extent of Reviews their
relationship are many who use earnings figures as the dependent variable regressed with stock returns as the
independent variables are calculated by different methods. There are other methods that can be used to
measure income, by using a variable Earning Response Coefficient (ERC) Plan for the data analysis in this
study will be conducted using path analysis with apliksi Analisys of Moment Structure (AMOS) version 18.
The results of the research there is influence persistence towards Earning Response Coefficient (ERC), but
there is no influence of leverage, profitability, size, and voluntary tineliness disclousure towards Earning
Response Coefficient (ERC). There is significant influence towards Voluntary Disclosure Leverage but the
profitability of the voluntary disclousure did not show a significant effect. There is no effect on the
profitability and timeliness of variable size, but the persistence of earnings against Timeliness Showed the
opposite result. Voluntary disclousure and Timeliness an intervening variable for the effect of leverage,
profitability, size and persistence of earnings.
Keywords: Earning Response Coefficient (ERC), voluntary disclosure, timeliness
1. PRELIMINARY
Accounting information in the form of financial statements is a means which informs the company's
performance to the parties with an interest in the company, especially for investors who need the information
in making an investment decision, because in the financial statements contained the information required by
the parties concerned with company.
Ball and Brown (1968) disclose information about the contents of the analysis if the unexpected change in the
positive earnings have abnormal rate of return on average positive and vice versa if it is negative then it has
an abnormal rate of return on average negative, in other words, the information contained in figures
accounting profit real handy if different from the profit expectations of investors, this indicates that the
market reaction reflected in stock price movements around the announcement date. Relations accounting
earnings and stock returns have a positive relationship statically and significant. In this case the rise and fall
of income will affect the rise and fall of stock returns in the same direction. While the magnitude of the
relationship earnings and stock returns measured by Earning Response Coefficient (ERC.)
Some researchers who tested Earning Response Coefficient (ERC) tries to tie Earning Response Coefficient
(ERC) with other factors such as the size Earning Response Coefficient (ERC) (Easton and Zmijewski, 1989)
and Leverage by Earning Response Coefficient (ERC) (Dhaliwal et al, 1991), (Sri Mulyani 2003). Lang and
Lundholm (1993) examined the factors affecting the level of disclosure found that companies that have a
correlation of return and earnings lower more disclosure, in other words Earning Response Coefficient
(ERC) negatively related to disclosure. Murwaningsari (2008) and Paramita (2011 ) examines the path
analysis, using voluntary disclousure as an intervening variable. Research on the relationship with the
voluntary disclosure Earning Response Coefficient (ERC) is still rarely done with inconsistent results.
Research on the relationship between stock returns with income to determine the extent of their relationship
are many who use earnings figures as the dependent variable regressed with stock returns as the independent
variables are calculated by different methods. The problem in this study is whether other methods also can be
used to measure income, by using a variable Earning Response Coefficient (ERC) may indicate that the profit
has information content which is reflected in the stock price.
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Furthermore, this study examines the effect of direct and indirect earnings response coefficient
(ERC) with Voluntary disclousure and Timeliness placed as a intevening variable, to answer the research
problems.
The purpose of this study was to obtain empirical evidence, examine and explain the factors (leverage,
profitability, size and persistence of earnings) that affect e arnings response coefficient (ERC) with voluntary
disclousure timeliness as an intervening variable and the persistence of earnings as a control variable and its
application in the financial statements at Manufacturing Companies listed on the Indonesia Stock Exchange.
THEORETICAL FRAMEWORK AND HYPOTHESIS FILING
Capital Structure Theory

Capital structure theory to explain the influence changes in capital structure to the company's value, if
investment decisions and dividend policy are held constant. In other words, if the company's own capital
partially replace it with debt or conversely whether the stock price will change, if the company does not
change the financial decisions of other (Van Horne and Wachowicz, 2005).
The capital structure is best for the company's high growth rate is different from the company's growth rate is
low. Companies with a high growth rate, in conjunction withleverage, you should use debt as a source of
financing in order to avoid the cost of agency (agency cost) between shareholders with the company's
management, otherwise the company with a low growth rate should use equity as a source of funding for the
use of debt will require the company to pay interest regularly.
Agency Theory
Scott (2000) states that the company has many contracts, for example, the employment contract between the
company and its managers and the loan contract between the company and its creditors. The employment
contract in question is a contract between the owners of capital to the company manager. Where between
the agent and the principa lwants to maximize the utility of each with the information held.
But on the one hand, agents have more information (full information) compared with the principal on the
other side, causing the asimetry information. More information is owned by the manager may trigger to
perform actions in accordance with the wishes and interests to maximize utility his. As for the owners of
capital in this case the investor, it would be difficult to effectively control the actions taken by management
because it has little information exists. Therefore, sometimes the specific policies carried out by the
management company without the knowledge of the owner or investor capital.
Jensen and Meckling (1976) has developed an analytical treatment of the relationship manager and the
owner. In its findings, there is a conflict of interest if a manager has a stake less than the amount of the
company's shares, which give rise to agency problems. Owners partly caused the manager does not have the
main goal to increase the prosperity of the owner to solve agency problems have required additional expenses
that are called agency cost.
Signaling Theory and Information Asymmetry

Signaling theory address issues of information asymmetry. This theory is based on the premise that managers
and shareholders do not have the same access to company information. No specific information known only
to the managers, while shareholders do not know that information. So, there is information
asymmetry (asymmetric information)between managers and shareholders. As a result, when a company's
capital structure changes, it can bring information to shareholders which would result in the value of the
company changed. In other words, going on a sign or signal (signaling).
Signal theory explains that the company is of good quality would deliberately give a signal to the
market. Thus the market is expected to differentiate good and bad quality. To be effective then the signal
should be caught and perceived market well, and not easily imitated by other companies were of poor
quality. This theory reveals that investors can distinguish between companies that have a high value to the
companies that have low values by observing its capital structure.
Efficient Market Theory

Fama (1970) categorizes the efficient market hypothesis into three forms of the efficient market is weak, the
market is efficient half strong, very strong and efficient market.Weak form efficient market hypothesis states
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that stock prices already reflect all prior information / historically. Shape half strongly suggests that all the
information that has been published reflected in stock prices. Being strong form states that stock prices reflect
all the information including the inside information. The research provides empirical evidence of the
predictability of stock returns in time-series using the original information is closely related to proving weak
form efficient market hypothesis. However, please note that although the stock return proved to be predicted
by using historical information, can not automatically be claimed that capital markets are not efficient.
The theory underlying the semi strong market hypothesis about the information value relevance earnings
(earnings announcements influence on investor reaction). value relevance earnings information proving that
earnings have a known value relevance of its impact on investor reactions are described in the stock
price. The greater profit invetor then the reaction will be higher. to measure the value relevance information
to determine the relationship of profit or earnings to stock returns can be measured using earnings coeffisient
response (ERC).
Earning Response Coefficient (ERC)

Earnings quality may be indicated as the ability to gain information to respond to the market. In other words,
earnings are reported to have a response force (power of response). The strong market reaction to earnings
information reflected by the earnings response coefficients (ERC), shows the quality of reported
earnings. Scott (2000), Earning Response Coefficient (ERC) is one measure or proxy is used to measure the
quality of earnings (Collins et al. 1984).
Cho and Jung (1991) classifying the theoretical approach Earning Response Coefficient (ERC) into two
groups: (1) assessment model based on economic information(information economics based valuation
model) as developed by Holthausen and Verrechia (1988) and Lev (1989) which indicates that the strength of
investor response to the information signal gain is a function of the uncertainty in the future. The greater
the noise in the system of reporting companies (the lower the quality of earnings), the smallerEarning
Response Coefficient (ERC) and (2) assessment model based on time series earnings (time series based
valuation model) as developed by Beaver, Lambert and Morse ( 1980).
Calculation of Earnings Response Coefficient (ERC) can be done in two ways (Ambarwati, 2008: 130),
namely: 1). Cross Sectional known as pool regresion, in this case theERC will be the same for all companies,
usually in one industry. (Imhoff and Lobo, 1992). 2). Time Series or firm specific coeffisient, that each
company has a number forcast ERCobtained from previous years. (Teets and Wasley, 1996). Accuracy Time
Series is higher than the pool regresion, because the R-square value generated Time Series method is higher
than the pool regresion. (Chandrarin, 2002).
Beaver (1968) defines, Earning Response Coefficient (ERC) or the earnings response coefficient is the slope
coefficient on earnings. Earnings response coefficients measure the strength of the stock price in response to
the accounting profit. Coefficient accounting profit may indicate the quality of corporate profits.
Leverage
According to Brigham and Houston (2001: 14), Financial leverage (financial leverage) is a measure that
indicates the extent to which the securities fixed income (debt and preferred stock) used in the structure of
capital. Financial leverage shows the proportion of the use of debt to finance investment.
Leverage ratio is the proportion of total debt to equity shareholders. The ratio is used to provide an overview
of the capital structure of the company, so it can be seen the risk of non-collection of a debt (Luciana and
Ikka, 2007).
Profitabilitas
Profitability is the ability of a company to make a profit (profit) in a given period. Profitability ratios as a
means of measuring financial performance, profitability assessment is the process to determine how well the
business activities carried out company to achieve its strategic objectives, eliminates waste-waste and
presenting timely information to implement continuous improvement.
Return on Equity (ROE) according to Houston (2001), capital gains itself is a ratio used to measure the
benefit of the owner's investment capital and is calculated by dividing the net income (net profit after tax)
with its own capital.
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Size (company size)

In the study of Fitriani (2001) there are three alternatives that are used to calculate the size of the company, ie
total assets, net sales and market capitalization. In the study of Fitriani (2001) company size measured by
total assets, because she thinks the total assets of more shows company size compared to market
capitalization.
Voluntary disclousure
Hendricksen and Breda defines disclosure (disclosure) as providing some of the information needed for
optimal operation of an efficient capital market. The information disclosed in the annual report of listed
companies can be grouped into two categories, namely the expression compulsory (mandatory
disclosure) and voluntary expression (voluntary disclosure). The phrase is the information required to be
disclosed by issuers governed by capital market regulations in a country. While the voluntary expression of a
disclosure of information beyond the minimum requirements of the prevailing capital market regulations. The
Company has the discretion to make voluntary disclosures in the annual report, causing the diversity of
expression of a voluntary or a wide variation among companies (Widisatuti, 2002: 76).
Timeliness
Decision of the Chairman of Capital Market Supervisory Agency and Financial Institution Number: Kep-431
/ Bl / 2012 About Submission of Annual Report Issuer or Public Company said Issuer or Public Company
that statement registration has become effective shall submit an annual report to Bapepam and LK maximum
of 4 (four ) months after the fiscal year ends. Timely submission of financial statements is a factor that raises
questions for users of financial statements regarding the credibility or quality of the report (Murwaningsari:
2010).
Syafrudin (2004) examined the effect of inaccuracy when the earnings response coefficients and concluded
that the inaccuracy of financial reporting time has an effect on the credibility or quality of earnings. It is
based on the argument that the inaccuracy of time, for the users of the information will be perceived that the
information contained in the financial statements is information that contains noise (interference). As for
the noise that arises these are factors that affect the quality of earnings, which in turn is reflected in the
earnings response coefficients.
Persistence of Earnings
The persistence of accounting profit according to Scott (2003) is a revision in accounting profit is expected in
the future (expected future earnings) that is implied by the accounting profit for the year (current
eamings). The present value of the revision of future earnings can estimate the present value of the revised
future benefit ekspektasiannya front, ie in the stock price (Kormendi and Lipe, 1997). The smaller the value
of the future revision of the accounting profit (increasingly persistent accounting profit), the stronger the
accounting profit relationships with abnormal return (the greater the earnings response coefficients).
The higher the income, the higher persistence Earning Response Coefficient (ERC), this is related to the
strength of earnings. The persistence of earnings reflects the quality of corporate profits and show that the
company can retain earnings over time. Kormendi and Lipe (1987) showed that the persistence of earnings is
positively related to Earning Response Coefficient (ERC). Collins and Kothari (1989) also found a positive
relationship between the estimated ERC and persistency by using changes in earnings as a proxy
forunexpected earnings. In contrast to Ali and Zarowin (1992) who found that the estimated error on Earning
Response Coefficient (ERC) is negatively associated with persistence.This is due to several previous analyzes
of the relationship between Earning Response Coefficient (ERC) and persistency is excessive.
Murwaningsari (2008) states there is a negative effect of leverage on Earning Response coëficient
(ERC). Research results in line with Dhaliwal, Lee and Farger (1991) proved that Leverage negatively affect
earnings response coefficients are Earning Response Coefficient (ERC). Companies that leverage its high
level means having a greater debt than capital. Thus, if an increase in profits, the benefit is
the debtholders, so the better the condition of corporate profits, the more negative the response of
shareholders, as shareholders considered that such profits just hang creditors.
Wolk and Tearney (1980) stated the disclosure concerning the provision of information required by the
authorities and the voluntary by the company, in the form of financial statements, the information after the
date of the financial, management analysis on the company's operating future, financial predictions and
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operations in the will come, and additional financial statements that include uangkapan by segment and other
informai beyond cost.
Imhoff (1992) in Ainun Na'im and Fuad Rahman (2000) states quality as an important attribute in a
accounting information. Although the quality of accounting still has a double meaning many researchers are
using the index of disclousure methodology suggests that the quality of the disclosure can be measured and
used to assess the potential benefits of the annual report.
Results of Murwaningsari study (2008) revealed the size of the company (size) in the issue Earning Response
Coefficient (ERC) is used as a proxy for the stock price informativeness. Research inserting variable size as a
control variable. The results showed that the size of the company's significant negative effect on Earning
Response Coefficient (ERC). The larger the size of the company will have more information than a small
company. The results support the research Chaney and Jeter (1991) and Collins and Kothari (1989).
Hypothesis 1a: Leverage has an influence on Earning Response Coefficient (ERC)
Hypothesis 1b: Leverage has an influence on Voluntary disclousure
Hypothesis 1c: Profitability has an influence on Earning Response Coefficient (ERC)
Hypothesis 1d: Profitability has an influence on Voluntary disclousure
Hypothesis 1e: Profitability has an influence on Timeliness
Hypothesis 1f: Size has an influence on Earning Response Coefficient (ERC)
Hypothesis 1g: Size has an influence on Timeliness
Hypothesis 1h: The persistence of income has an influence on Earning Response Coefficient (ERC)
Hypothesis 1i: The persistence of income has an influence on Timeliness
Hypothesis 1j: Voluntary disclousure have an influence on Earning Response Coefficient (ERC)
Hypothesis 1k: timeliness has an influence on Earning Response Coefficient (ERC)
Murwaningsari (2008) investigated the effect of variable Leverage & Size of the respose Earning Coefficient
(ERC) with Voluantry disclousure & Timelinness as interveningvariables, as well as putting the persistence of
earnings, growth, reputation auditor and the auditor's opinion as control variables. The study concluded there
is a negative influence between leverage against Earning Response coëficient (ERC) and the Size of
the Earning Response coëficient (ERC), the positive influence to Leverage with Voluantry
disclousureand Voluantry disclousure Earning Response coëficient (ERC). As for Size and timeliness found
no significant effect and variable Voluantry disclousure and Timelinness according to research, is not
an intervening variable. While the research Paramita (2011) concluded that Voluantry disclousure an
intervening variable for the effect of size on Earning Response coëficient (ERC).
Hypothesis 2a: Leverage and Profitability has an influence on Earning Response Coefficient (ERC) through
Voluntary disclousure
Hypothesis 2b: Size and persistence of income has an influence on Earning Response Coefficient (ERC)
through Timeliness
Briefly conceptual framework that explains the effect of leverage, size, either directly or
through Timeliness of the Earning Response Coefficient (ERC), can be seen in Figure 1.
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Figure 1. Research Conceptual Framework
RESEARCH METHODS
Model Research
This study examined the direct and indirect influence on Earning Response coëficient (ERC), the research
model to test the hypothesis:
ERC = β0 + β1 Disc + β2 TIME + β3 LEV + β4 PROB +β5 SIZE + β6 EP + εit (1)
In this case :
ERC it = Coefficient response to the company's profit in period t
disc it = Voluntary disclosure (voluntary disclosure)
time = Timeliness of financial reporting (timeliness)
LEV it = Le verage company i in period t
EP it = Persistence of earnings the company i in period t
PROB it = Probability of firm i in period t
SIZE it = Magnitude of firm i in period t
ε it = Component error firm i in period t
Population and Sample Research

The study population includes all companies listed on the Indonesia Stock Exchange by using purposive
sampling method. Companies sampled must meet the following criteria:
1. Companies whose shares remain actively operating from 2010 until December 2014, and to publish
audited financial statements on a regular basis.
2. The Company did not experience losses during the estimation period.
3. Has the complete data is used as a variable in this study and consistently reported in Bapepam.
Operational Variables
The operational definition of variables and dimensions are as follows:
Leverage Variable
Leverage is calculated using the formula Debt to Equity Ratio (DER), which compares the total debt to total
equity capital. (Dhaliwal: 1991)
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Profitability Variable
The ability to generate profits using the formula's ability to generate profits with their own capital or
profitability of equity (ROE). (Burgstahler & Dichev: 1997)
Size Variable (Scale Company)
Company size was measured by using a natural log (Ln) total assets (Jogiyanto, 2000)
Timeliness variable
Timeliness is the span of the announcement of the annual financial statements have been audited (auditee) to
the public, namely the length of days it takes to announce the annual financial statements have been audited
to the public, since the company's fiscal year closing date until the date of submission to Bapepam.
Persistence Variable Gain
Variable earnings persistence in this study was developed from Scott (2003) and Kormendi & lipe, 1987,
with the following formula:
Xit = α + βXit - 1 + ԑ (2)
In case this:
Xit = Profit company i year t
Xit - 1 = Earnings company i year t-1
β = persistence profit
ԑ = component error
Variable Earnings Response Coefficient
Earning Response Coefficient variable in this study was developed from models Cho and Jung
(1991). Earnings Response coefficient (ERC) will becalculated from slope α 1on
relationships CAR with UE after controlled Annual return.
CAR i t = Α 0 + α 1 U E it + α 2 R it + ε it (3)
In case this :
CA R it = comulatif abnormal retur sidelines of a period long experienced at an + 5 days from publication
report finance
U E it = unexpected earnings
R it = return Annual
ε it = component error i on period t.
Value α 1 for each sample are value of ERC, that different for each company (Time series mode l)
Technical Analysis Data

Technical analysis of the data in this study will be done by using path analysis with software Analisys of
Moment Structure (AMOS). In this study, conducted through direct testing and it indirectly on the dependent
variable.
Testing directly between Leverage, Size and Timeliness of the Earning Response Coefficient (ERC).
Testing hypotheses using path analysis to determine the relationship of the variables tested
simultaneously. Relationships theoretical phenomenon, empirical research and development of hypotheses
can be seen from the path diagram. P-value in this study using a level of significant 5% (alpha 0.05). In the
process of testing the hypothesis if p> 0.05 means that the hypothesis has any real or significant influence
between the variables in the hypothesis, and vice versa.
225
Testing Indirect between Leverage and Size tehadap Earning Response Coefficient
(ERC) with Timeliness as an intervening variable
In the intervening testing, basic decision is to compare the coefficient indirect effect coefficient of direct
influence. Coefficient direct influence of two variables in the tablemultiplied Standardiedz
Direct Effect. Then the results will be compared, if the coefficient indirect effect (Indirect Effect) greater than
/ equal to than the direct influence coefficient(Direct Effect), then the variables tested an intervening variable,
and vice versa.
RESULTS AND DISCUSSION
Path Testing Results Analysis

Path test results anlysis showed various types of fit index used to measure the degree of correspondence
between the model hypothesized by the data presented have fulfilled the criteria.Data also meets the
criteria cr normal distribution with a kurtosis of 0.45 means that the whole or multivariate normal
distribution of data for is within the range of -1.96 to 1.96. Data were analyzed showed
no outliers in univariate level, the value of the determinant of the covariance matrix = 3,290,397,404.884
these results identify the value away from zero (very large), thus the assumption of multicollinearity and
singularity fulfilled because there are no multicollinearity or singularity in research data.
Figure 2. Path Analysis Model
Testing the hypothesis directly
Table 1. Regression Regression Weight (default model)
estimate CR P Information
disclousure <---
leverage -, 287 -2.966 , 003 significant positive
timeliness <---
profitability -, 037 -, 472 , 637 Not significant
disclousure <---
profitability -, 052 -, 557 , 578 Not significant
timeliness <---
size , 056 , 612 , 540 Not significant
timeliness <---
persistency , 561 6.028 *** significant positive
ERC <---
leverage , 113 1.204 , 229 Not significant
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ERC <---
profitability .019 , 227 , 821 Not significant
ERC <---
size -, 183 -1.790 , 073 Not significant
ERC <---
persistency , 447 , 598 *** significant positive
ERC <---
disclousure -, 109 -1.123 , 262 Not significant
ERC <---
timeliness , 414 3,759 *** significant positive
There Effect Between Leverage to Earning Response Coefficient (ERC)

Leverage ratio is the proportion of total debt to equity shareholders. The ratio is used to provide an overview
of the capital structure of the company. The survey results revealed that there was no significant effect
of Leverage by Earning Response Coefficient (ERC). This can be seen from the probability value (p-value) of
0.029.
Hypothesis testing results showed no influence of variables leverage against Earning Response
Coefficient (ERC). This means that there is no inter-relationship between the ratio of debt to ratio or the ratio
between debt and equity with the response given by shareholders on corporate profits. The capital structure of
the company does not give effect to shareholders to respond to the company's reported earnings. This can
happen due to shareholders or investors assume that creditors will only receive interest costs are relatively
fixed, while the excess profits will be part of the benefits (claims) for shareholders.
High leverage does not mean that only debtholder who would benefit, but shareholders will also receive part
of the profits of the company. Because large or small profits from the company, debtholder will still receive
at a relatively steady rate, so that the profits received by the company will be responded positively by
shareholders.
Ratios Leverage is the ratio of debt to equity and will move in tandem with the debt to equity if a company
can use the assets are at a higher return than the cost of debt, will increase the return on capital. If not, the
company's debts exceed assets, the cost of debt can be greater than the return on assets . In the long term,
this will lead to bankruptcy. So investors should take this into consideration when investing in a company
with a ratio of leverage is high, especially in times of rising interest rates. So that the shareholders of this will
affect the profits will respond. Although debtholder received flowers are relatively fixed, however large or
small reception shareholders to be obtained is the value after interest payments on debt to debtholder. The
greater the interest paid each period it will further reduce corporate profits.
There Effect Between Leverage Against Voluntary disclousure

The results showed that a significant difference between the Leverage on Voluntary Disclosure . It is
characterized by a probability value (p-value) of 0,003, which means p-value below 0.05. That is a hypothesis
which assumed a significant difference between Leverage and Voluntary Disclosure proven.
Companies with high capital structure publicize to the public so that potential investors or investors can
menggunkannya as consideration of investment. But in fact, although the company presents a report tahuanan
form of voluntary disclosure, completeness index is presented each year has not changed. This means that the
company presents the voluntary disclosure based on the report-lapoaran previous year, regardless of the
increase or decrease in capital structure. This is likely due to the disclosure of the annual report the company
voluntarily reported to BAPEPAM only as additional disclosures above minimum mandatory disclosure as
required by law, while the voluntary disclosure reported without required by regulations.
There Effect Between Profitability Of Earning Response Coefficient (Erc)

The results showed there was no influence significant between Profitability against Earning Response
Coefficient (ERC) with a p-value of 0.821.
Profitability is one indicator of the success of the company to be able to generate profits for the
company. The reported earnings which would then be addressed by investors.Return on Equity is a capital
gain itself is the ratio used to measure the benefit of the owner's investment capital and is calculated by
dividing the net income (net profit after tax) with its own capital. Response profit in companies with high
profitability found to be greater than those of companies with low profitability. Profitable companies able to
complete the operation that is being run at the moment, which is indicated by earnings.
227
There Effect Between Profitability of the Voluntary disclousure.

Against the hypothesis testing the effect of profitability on voluntary disclousure showed no significant
effect. Value regresion weight of the regression relationship betweenprofitability variable to voluntary
disclousure shown in a negative estimate of the value of -0.052 on the probability value (p-value) of 0.578 (p
= 0.578> 0.05).
Financial profitability of the company which is a measure of financial performance in terms of the company's
financial condition will be reflected in the financial statements presented by the company. However,
companies with high profitability can not be certain to complete all the items of voluntary disclosure in its
annual report.
There Effect between Profitability against Timeliness.

Against the hypothesis testing the effect of profitability on Timeliness showed no significant effect. Value
regresion weight of the regression relationship between profitabilityvariable on Timeliness shown in a
negative estimate of the value of -0.037 on the probability value (p-value) of 0.637 (p = 0.637> 0.05).
Profitability ratios as a means of measuring financial performance, profitability assessment is the process to
determine how the business activities carried out company to achieve its strategic objectives and presenting
timely information to implement continuous improvement. The company's ability to generate profits
associated with the presentation to the public (Carslaw & Kaplan: 1991) in which the company makes a profit
the higher will publish its report on time, compared to companies that suffered losses.
But in some companies there are obstacles in the timely submission of financial statements. So companies
with high profitability can not be ascertained in the timely submission of financial statements.
There Effect Between Size Of Earning Response Coefficient (Erc)

The results showed that Size does not have significant influence with Earning Response Coefficient (ERC). It
is characterized by a probability value (p-value) of 0.073, which means p-value above 0.05.
Hypothesis testing results showed no effect real between the size of the Earning Response Coefficient
(ERC). The results of the study can be interpreted that the size of the company does not affect the earnings
response coefficients or other assumptions that company size is not significant in explaining Earning
Response Coefficient (ERC). The results of this study also proves that the size of the company does not
provide additional explanatory power for the difference in earnings response coefficients.
Firm size may affect the reported earnings of companies which responded by investors. Based on the
argument that the more extensive information available on large companies provide a better form of
consensus on economic profit. The more information available about the activities of large companies, the
easier for the market to interpret the information in the financial statements. However, the availability of
information is not only given by the company with a large scale, so the size of the company does not provide
additional explanatory power against earnings response.
There Effect Between Size Of Timeliness

Results of testing the hypothesis of the influence of size on Timeliness obtained significant results that the p-
value 0.540 p-value is above 0.05. That is a hypothesis which assumed a significant relationship between
the size by Timeliness is not proven.
Large enterprises are more consistent for timely than small firms to inform the financial statements, since
many large companies is highlighted by the community (and Hugh Dyer, 1975). Then, according to Schwartz
and Soo (1996) that large companies have more knowledge about the rules. Therefore, large companies more
obey the rules regarding the timeliness than smaller companies. The result find empirical evidence that firm
size affects the timeliness of reporting.
This study proved the opposite, meaning that timeliness is not only determined by the size of the
company. Awareness of the company will be rules on reporting time limit or encourage companies to report
their financial statements more timely.
There Effect Between Persistence of Earnings Against Earning Response Coefficient (ERC)
Results of testing the hypothesis of the influence of earnings persistence against Earning Response
Coefficient (ERC) obtained significant results that the p-value 0.000 p-value is above 0.05. That is a
228
hypothesis which assumed a significant relationship between earnings persistence against Earning Response
Coefficient (ERC) is proved.
The higher the persistence of earnings, the higher Earning Response Coefficient (ERC), this is related to the
strength of earnings. The persistence of earnings reflects the quality of corporate profits and show that the
company can retain earnings over time.
There is the influence of persistence against Timeliness

Results of testing the hypothesis of the influence of earnings persistence against Timeliness obtained
significant results that the p-value 0.000 p-value is above 0.05. That is a hypothesis which assumed a
significant relationship between earnings persistence against Timeliness proven.
The persistence of earnings reflects the quality of corporate profits and show that the company can retain
earnings over time. Companies reporting earnings will tend to be persistent financial reports in a timely
manner, because the hope of reported earnings will be immediately responded by investor.
There Influence between Timeliness of the Earning Response Coefficient (ERC)

Hypothesis testing against the influence Timeliness of the Earning Response Coefficient (ERC) obtained
results that are not significant at the p-value was 0.402 means p-value above 0.05. That is the hypothesis that
suspect there is a significant positive effect between Timeliness with Earning Response Coefficient (ERC) is
unfounded. Correlation coefficient values shown in the value estimate is 0,000. This value is far from the
values of 0.5 and that can mean there is no correlation between the variables Timeliness withEarning
Response Coefficient (ERC).
There Effect of Voluntary disclousure against Earning Response Coefficient (ERC)

Against the hypothesis testing effects of Voluntary disclousure against Earning Response Coefficient
(ERC) obtained results that are not significant at the p-value was 0.262 means p-value above 0.05. That is the
hypothesis that suspect there is a significant positive effect between Voluntary disclousure with Earning
Response Coefficient (ERC) is unfounded.
The more voluntary disclosure, the higher the response of shareholders on corporate earnings. In other words,
reported earnings have the power response. While the strength responsive to the information presented is
strongly influenced by the extent of voluntary disclosure in the annual report. The influence of the
relationship voluntary disclousureagainst Earning Response Coefficient (ERC) in the study can be interpreted
voluntary disclosure does not have a strong influence. This could be because investors have confidence
on expectations of return, which is based on publicly available information. However, these beliefs are still
affected by how investors absorb the information received and make revisions.
Testing the hypothesis indirectly

As for testing the hypothesis indirectly or through intervening variables, can be seen in Table 2.
Table 2. The results of hypothesis formulation Indirectly
Direct Contact Effect Indirect The calculation Value Information

results *)
LEVERAGE  ERC Leverage (-0,06)(-0,11) 0,003 significant weak
Disclousure = 0,002
Disclousure ERC
PROFITABILITAS Profitabilitas (-0,054)(-0,11) -0,01 significant weak
ERC Disclusure = 0,01
Disclousure ERC
PROFITABILITAS  Profitabilitas (-0,039)(0,417) -0,01 significant weak
ERC Timeliness = -0,016
Timeliness ERC
SIZE  ERC Size Timeliness (0,056)(0,417) 0,023 significant weak
Timeliness ERC = 0,023
229
PERSISTENSI ERC Persistensi (0,549)(0,417) 0,232 significant

Timeliness = 0,223 strong
Timeliness  ERC
Sumber data: data diolah
*) Standardiedz Indirect Effect
There Effect of Leverage on Earning Response Coefficient (ERC) through Voluntary disclousure
Based on the results of the calculation of direct influence between variable leverage to variable Voluntary
disclousure (-0.06) and the direct influence of variables Voluntary disclousure to variable Earning Response
Coefficient (ERC) (0,011) of the obtained results (0,002). The direct effect is shown in the results
of standardized indirect effect to the effect of leverage on Earning Response Coefficient (ERC) of 0,003. This
means that the Voluntary disclousure an intervening variable to an indirect relationship between the
variables leverage to variable Earning Response Coefficient (ERC) . The coefficient of indirect is 0,003, the
value is below 0.05 so that the indirect effect resulting weak.
There Influence Profitability against Earning Response Coefficient (ERC) through Voluntary
disclousure
Based on the results of the calculation of direct influence between variable Profitability to variable Voluntary
disclousure (-0.054) and the direct influence of variablesVoluntary disclousure to variable Earning Response
Coefficient (ERC) (-0.11) -0.001 obtained results.
These results are significant to the direct effects shown in the results of standardized indirect
effect influences profitability against Earning Response Coefficient (ERC) of -0.010. This means that
the Voluntary disclousure an intervening variable for the indirect effect between variables Profitability to
variable Earning Response Coefficient (ERC) . The coefficient of -0.010 indirectly, the value is below 0.05 so
that the indirect effect resulting weak.
Influence Profitability against Earning Response Coefficient (ERC) through Timeliness

Based on the results of the calculation of direct influence between variable Profitability to
variable Timeliness (-0.039) and the direct influence of variables Timeliness to variable Earning Response
Coefficient (ERC) (0.417) -0.016 obtained results.
effect influences profitability against Earning Response Coefficient (ERC) of -0.010. This means that
the Timeliness an intervening variable for the indirect effect between variables Profitability to
variable Earning Response Coefficient (ERC) . The coefficient of -0.010 indirectly, the value is below 0.05 so
that the indirect effect resulting weak.
Effect of Size on Earning Response Coefficient (ERC) through Timeliness

Influence indirectly between variables Size variable ERC through intervening variables Timeliness. Based on
the calculation of direct influence between variable Size variableTimeliness (0.056) and the direct influence
of variables Timeliness to variable Earning Response Coefficient (ERC) (0.417) results are obtained 0,023 ,
effect influences Size on Earning Response Coefficient (ERC) amounted to 0,023. This means that
the Timeliness an intervening variable for the indirect effect between variables Size Size variable Earning
Response Coefficient (ERC) . The coefficient of indirect is 0,023, the value is below 0.05 so that the indirect
effect resulting weak.
Effect of persistence against Earning Response Coefficient (ERC) through Timeliness

Influence indirectly between variable persistence to variable ERC through intervening
variables Timeliness. Based on the calculation of direct influence between variablepersistence to
variable Timeliness (0.549) and the direct influence of variables Timeliness to variable Earning Response
Coefficient (ERC) (0.417) results are obtained 0.223 ,
effect influence persistence against Earning Response Coefficient (ERC) of 0.232. This means that
230
the Timeliness an intervening variable for the indirect effect of variable persistence to variable Earning
Response Coefficient (ERC) . The coefficient of indirect is 0.232, the value is above 0.05 so that the indirect
impacts generated strong.
CONCLUSIONS, IMPLICATIONS AND LIMITATIONS RESEARCH
Conclusion
Conclusion This study is not a significant difference between Leverage, Profitability, size and Timeliness as
well as Voluntary disclousure against Earning Response Coefficient (ERC), whereas the effect of earnings
persistence against Earning Response Coefficient (ERC) obtained significant results. There is a significant
relationship betweenleverage against the Voluntary Disclosure and the effect was not significant between the
profitability of the voluntary disclousure . Influence Profitability against Timeliness and sizeshowed no
significant effect whereas the effect of earnings persistence against Timeliness significant influence.
Voluntary disclousure and Timeliness an intervening variable for the effect of leverage, profitability, size and
persistence of earnings.
Implication
Results of research on leverage, profitability, size, earnings persistence, voluntary disclosure,
timeliness and Earning Response Coefficient (ERC) is associated to encourage information presented can be
useful for the analysis and investment decision making. This study also will provide benefits for researchers
further examined and revealed other factors that could affect Earning Response Coefficient (ERC) , either
directly or indirectly.
Research limitations
This study did not consider other events that have economic consequences, such as the distribution of
dividends, mergers and changes in accounting policies. The events that led to the economic consequences
resulting Earning Response Coefficient (ERC) produced are not good enough for their compounding effect.
Research on the factors affecting Earning Response Coefficient (ERC) either directly or indirectly, has a lot
to do with the secondary data (quantitative), it is necessary also examined the factors Earning Response
Coefficient (ERC) qualitatively. It is with this in mind that the investor or investors who will provide a
response to personal income is as irrational, besides investors also often fused her personal identity into a
collective identity. So the response of investors to the company's profit in turn is a manifestation of the
psychological condition of investors, not only because of the information (Goodnews / badnews) the
company's financial statements.
ACKNOWLEDGEMENTS
I would like to thank the icbest committee: for their accepted my paper.
I thank my friends in STIE Widya Gama Lumajang: Mr. Hartono, DR. oyong lisa to his support, Also my
fellow in LPPM for the stimulating discussions. Foremost, to mr. noviansyah and mr. kurniawan, for we
were working together before deadlines.
Last but not the least, I would like to thank my family: my mom and my lovely childs. Someone in my
feeling have supported to me. More and more thanks to Allah.
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2012 About Submission of Annual Report Issuers or Public Companies
Appendix
Part Testing Results Analysis with AMOS
Assessment of normality (Group number 1)
variable min max skew cr kurtosis cr
persistency 20.790 63.070 -1.235 -5.040 1,883 3.844
Size 21.750 70.460 -, 428 -1.748 , 429 , 876
profitability 37.270 88.030 1,374 5.610 1,318 2.691
leverage 37.270 88.030 1,461 5.966 1.941 3.962
timeliness 27.310 66.450 -, 257 -1.049 -, 614 -1.254
disclousure 27.310 66.450 -, 266 -1.084 -, 646 -1.319
ERC 31.790 71.420 , 606 2,473 -, 114 -, 233
multivariate , 954 , 425
Estimates (Group number 1 - Default model)
Scalar Estimates (Group number 1 - Default model)
Maximum Likelihood Estimates
Regression Weights: (Group number 1 - Default model)
estimate SE CR P Label
disclousure <--- leverage -, 287 , 097 -2.966 , 003 par_7
timeliness <--- profitability -, 037 , 079 -, 472 , 637 par_10
disclousure <--- profitability -, 052 , 093 -, 557 , 578 par_11
timeliness <--- size , 056 , 091 , 612 , 540 par_13
timeliness <--- persistency , 561 , 093 6.028 *** par_15
ERC <--- leverage , 113 , 094 1.204 , 229 par_8
ERC <--- profitability .019 , 085 , 227 , 821 par_9
ERC <--- size -, 183 , 102 -1.790 , 073 par_12
ERC <--- persistency , 447 , 118 , 598 *** par_14
ERC <--- disclousure -, 109 , 097 -1.123 , 262 par_16
ERC <--- timeliness , 414 , 110 3,759 *** par_17
Standardized Regression Weights: (Group number 1 - Default model)
estimate
disclousure <--- leverage -, 286
timeliness <--- profitability -, 039
disclousure <--- profitability -, 054
timeliness <--- size , 056
233
timeliness <--- persistency , 549

ERC <--- leverage , 114
ERC <--- profitability , 020
ERC <--- size -, 185
ERC <--- persistency , 047
ERC <--- disclousure -, 110
ERC <--- timeliness , 417
Total Effects (Group number 1 - Default model)
persistency size profitability leverage timeliness disclousure
timeliness , 561 , 056 -, 037 , 000 , 000 , 000
disclousure , 000 , 000 -, 052 -, 287 , 000 , 000
ERC , 279 -, 160 .010 , 144 , 414 -, 109
Standardized Total Effects (Group number 1 - Default model)
timeliness , 549 , 056 -, 039 , 000 , 000 , 000
disclousure , 000 , 000 -, 054 -, 286 , 000 , 000
ERC , 276 -, 162 .010 , 145 , 417 -, 110
Direct Effects (Group number 1 - Default model)
timeliness , 561 , 056 -, 037 , 000 , 000 , 000
disclousure , 000 , 000 -, 052 -, 287 , 000 , 000
ERC , 047 -, 183 .019 , 113 , 414 -, 109
Standardized Direct Effects (Group number 1 - Default model)
timeliness , 549 , 056 -, 039 , 000 , 000 , 000
disclousure , 000 , 000 -, 054 -, 286 , 000 , 000
ERC , 047 -, 185 , 020 , 114 , 417 -, 110
Indirect Effects (Group number 1 - Default model)
timeliness , 000 , 000 , 000 , 000 , 000 , 000
disclousure , 000 , 000 , 000 , 000 , 000 , 000
ERC , 232 , 023 -, 010 , 031 , 000 , 000
Standardized Indirect Effects (Group number 1 - Default model)
timeliness , 000 , 000 , 000 , 000 , 000 , 000
disclousure , 000 , 000 , 000 , 000 , 000 , 000
ERC , 229 , 023 -, 010 , 031 , 000 , 000
Sample covariances (Group number 1)
persistency size profitability leverage timeliness disclousure ERC
persistency 95.012
size 41.856 99.001
profitability 2,305 8.989 107.957
leverage 4.904 16.414 -3.185 98.990
timeliness 55.522 28.673 -2.231 5.375 98.995
disclousure 14.405 -14.886 -4.661 -28.269 19.971 100.190
ERC 18.803 -, 676 -, 224 13.620 36.711 -2.490 94.991
Condition number = 5.325
234
eigenvalues
198.009 138.457 112.468 97.353 67.382 44.280 37.186
Determinant of sample covariance matrix = 33,305,304,343,991.600
235
CAPITAL EXPENDITURE BUDGET ALLOCATION

(PROVINCIAL GOVERNMENT OF INDONESIA)
Novianyah Rizal, Oyong Lisa, Kurniawan

STIE Widya Gama Lumajang
(noviansyah.rizal@gmail.com, oyonglisa12@yahoo.com, kurniawan.se@gmail.com)
ABSTRACT
This study Aimed to Determine the effect of economic growth, regional income, special allocation funds, and
the general allocation fund capital expenditure budget allocation tehadap with the data collecting Regional
Budget Realization Annual Report. This research is quantitative, population of this study is Provincial
Government of Indonesia consists of 34 provinces with 29 samples used in the study. While technical analysis
of the data using multiple regression analysis tenik. Based on the analysis, the study concludes that there is
economic growth and the effect of general allocation funds to the allocation of capital expenditures. While
local revenues and special allocation funds Affect the allocation of capital expenditures. Simultaneously, the
significant effect this means economic growth, regional income, general allocation fund, the special
allocation fund simultaneously Affect the allocation of capital expenditures
KEYWORDS: Capital expenditures, economic growth, regional income, general allocation fund
PRELIMINARY
Financial reform is the area associated with changes in the sources of financing of local authorities including
changes in revenue sources of local finance. The local government be free to manage and utilize its local
revenue source in accordance with the aspirations of local communities. The local government should
optimize the revenue sources of the area to avoid the fiscal deficit. Demands renewal of the financial system
is that the management of public money is done in a transparent manner. Regional autonomy should be
followed by a series of public sector reforms, not just simply change the format of the institution, but also
includes updates to the tools used to support the passage of public institutions are economical, efficient,
effective, transparent and accountable.
In Law No. 33 of 2004 mentioned that the funding authorization can be done in two ways that leverage the
potential of its own local finance and financial balance mechanism center of the region and between
regions. The authority to utilize its own financial resources carried out in the locally-generated revenue
(PAD), which is the main source of local taxes and levies. While the implementation of the financial balance
dilakuakan through equalization fund which consists of revenue-sharing, the general allocation fund, and
special allocation funds.
Financial accounting area is one field in the public sector accounting which received great attention from
various parties since the reform. Besides, through the broad autonomy, regions can improve competitiveness
with due regard to the principles of democracy, equitable justice, privilege and specificity and the potential in
the region and a multifaceted system of the Republic of Indonesia. In line with these principles implemented,
the principles of real autonomy and responsibility. The principle of real autonomy is a principle that to deal
with government business conducted by duties, powers and obligations that in fact already exists and has the
potential to grow, live and develop in accordance with the uniqueness of the area.
Granting regional autonomy effect on growth the economy of a region because it gives freedom to the
government area to plan their own finances and make policies that can affect the progress of the region. The
economic growth encouraged local governments to do economic development by managing existing
resources and form a partnership with the community for the new jobs will mencipt Hill influence the
development of activities economies in the region (Nugroho: 2010).
Theoretically can provide feedback that enable an improvements concerning economic growth, regional
income, special allocation fund and general fund allocation to capital expenditure budget allocation.
Based on the description on the background of the above problems, the problems of this study can be
formulated as follows:
1) How influence on the Economic Growth Capital Expenditure Allocation ran Anga?
237
2) How to influence regional revenue to Pengaloka sian Capital Expenditure Budget?

3) How do the General Allocation Fund to the Capital Expenditure Budget Allocation?
4) How to influence the allocation of Special Allocation Funds for Capital Expenditure Budget?
5) How to influence economic growth, PAD, General Allocation Fund, Special Allocation Fund
simultaneously to the Capital Expenditure Budget allocator?
The purpose of this research is proposed based on the formulation of the problem is as follows:
1) To find out how the allocator Economic Growth Capital Expenditure Budget
2) To find out how the influence of the Local Revenue Capital Expenditure Budget allocator
3) To find out how the General Allocation Fund to the Capital Expenditure Budget allocator
4) To find out how the influence of Special Allocation Funds for the allocator Capital Expenditure
Budget
5) To know how to influence economic growth, PAD, General Allocation Fund, Special Allocation
Fund simultaneously to the allocator Capital Expenditure Budget
THEORETICAL BASIS
Theoretical Study
a) Public sector accounting
Accounting for the public sector is one of the pillars of accounting in Indonesia. In a relatively short period of
public sector accounting has been progressing very rapidly. Currently there are a greater concern to the
accounting practices conducted by institutions - public institutions, such as government agencies, state-owned
enterprises / regional, non-governmental public organizations, and various other public organizations. There
is a greater demand from the public for transparency and accountability of public institutions - the public
sector institutions.
Public sector accounting is the accounting system used by the institution - public institutions as a means of
accountability to the public. Now there is an increasing attention to the accounting practices conducted by the
institute - public institutions, both governmental sector accounting and public non-governmental
organizations. Public institutions getting demands from the public to be managed transparently and
responsibly.
Accounting for the public sector aimed at achieving, which has benefits for the public. In some cases
different accounting public sector with the private sector / commercial, caused due to an environmental
differences that affect. The nature of public sector organizations are non-profit organizations, not for
profit. The aim is to provide service to the community, and provide or improve their welfare. Lenders are not
willing to ask for refund, interest, or have organizations.
From the above explanation can be concluded that the public sector accounting is an accounting system that
is used by the government to be used as a tool of accountability to the public, and the main purpose of public
sector accounting in the form of services to the public (non-profit).
b) The Government Accounting Financial Statements
The financial statements according to the PP. 71/2010 for the government, "a government's financial
accounting used to prepare the financial statements of the Central Government / Local in accordance with
government accounting standards". Greater guidance to public accountability, implications for public sector
management. One of the information needed by the public is information concerning the financial
management of funds or public sector organizations. Information on the fund management or public finance
can be seen from the financial statements.
The financial statements are the result of the accounting process that contains financial information contained
in the financial statements used for parties - the interested parties, both internally and externally. In terms of
the management company (company official), the financial statements is a means of control and evaluation
managerial and organizational performance. In terms of external users, financial statements is one form of
accountability and as a basis for decision making.
c) Local Budgetary Public Sector
According Moh. Mahsun (2011: 65), "The budget is a statement regarding the estimation of performance to
be achieved by an organization in a given period that will be expressed in monetary measure". "The budget is
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a plan of financial operations which include estimates of proposed expenditures and revenue sources are
expected to finance it in a certain period of time",according to GASB (Governmental Accounting
Standards Board). According Mardiasmo (2004: 9), "The regional budget is the government's work plan area
in the form of money (rupiah) within a certain period (one year) ". From the definition above I conclude
budget, the budget is a plan for performance to be achieved by an organization with estimated expenditures
and expected revenues as measured by monetary within a certain period.
The regional budget as the main policy instrument for local governments, occupy a central position in the
development of capabilities and effectiveness of local government. The regional budget is a tool in
determining income and expenditure, to help make decisions and development planning, authorization of
expenditure, resource development of standard measures for evaluating performance, a tool for mobilizing
employees and means of coordination of all activities and work units.
Public budgets are always associated with executive accountability of the organization. The conflict in the
determination of the budget affects the capability executives to rein in spending.In practice, the executive will
use annual list of expenditure and income and aims its activities. Thus, the character of the budget is
uniformity, overall organizational transactions, order delivery of the draft budget per year. Public sector
budgeting process generally conform with the applicable rules of the organization. The process of drafting
and approval of the budget can be published to the public. Namely budgetary purposes, as a tool of
accountability, management tools, and instruments of economic policy. The end of the budgeting process is
the result of a political agreement, including items of expenditure that must be approved by legislators.
d) Regional Budget (APBD)
According to the PP 71 of 2010, "Budget (APBD) is the local government's annual financial plan approved
by the House of Representatives". According to Moh. Mahsun et al, (2011: 81), "Budget (APBD) is a list
containing details of local revenues and expenditures / shopping area for a year defined by local regulation
(Perda) for a period of one year, from March 1 January till December 31 ".
Budget revenue and expenditure is essentially a regional work plan is realized in the form of money (rupiah)
for a certain period of time (one year) and is one of the main instruments of policy in an effort to improve
public services and social welfare areas. Therefore, Parliament and the government must work real elapsed
areas and is structured to produce a budget that truly reflects the real needs of the public areas in accordance
with the potential of each. Handling finances in local government is set by dividing into common
maintenance and special maintenance. The local government has a budget in general maintenance and capital
of a region separated in a special arrangement.
Budgets as budget area has the following elements:
1) The activity plan of an area, along with a detailed description.
2) Their source of revenue that is the minimum target to cover the costs related to these activities, and
the cost of running a maximum limit of expenditure to be implemented.
3) Types of activities and projects as outlined in the form of numbers.
4) Budget period, usually one year.
The high economic growth and sustainable processes is the main condition for the sustainable development
of the regional economy, to gauge whether or not the regional economy forward.As a result of the program of
regional development is to observe how much the economic growth rate reached the area which is reflected
in the increase in Gross Domestic Product (GDP). The researchers used the GDP at current prices as a
measure to assess economic growth.
e) Local Revenue (PAD)
According to the laws of the Republic of Indonesia No. 33 of 2004 on the financial balance between the
central government and local government chapter 1 verse 18, "local revenues are earned income areas levied
by local regulations in accordance with the legislation". Regional Income is income that is sourced from the
local tax, the results of retribution, and the results of wealth management separated areas, and other local
revenue legitimate, which aims to provide flexibility to the regions in mobilizing funds in the implementation
of regional autonomy as the realization principle decentralization. According to Law No. 33 of 2004 Local
Revenue aims to give authority to local governments to fund the implementation of regional autonomy in
accordance with the potential of the area as the embodiment of decentralization. From the above explanation
I can conclude that the local revenue is revenue from the region itself, to explore and manage the wealth of
the area is owned by the region itself.
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To enhance the independence of the region, the local government must strive continually explore and
improve its own financial resources. Efforts to improve the ability of local revenues, especially revenues
from local revenues should be directed at efforts to continuous and continuity so that the local revenues
continue to increase, which in turn is expected to reduce dependence on revenues from government sources.
The government is expected to increase regional revenue to reduce dependence on the financing of the center,
thus increasing the autonomy and local discretion. An important step to the local government to improve the
reception area is to calculate the potential regional revenue which is owned by local real. Efforts to increase
the local fiscal capacity is actually essentially the optimization of the sources of local revenue. However it
also needs to be understood that the increased fiscal capacity does not mean a big budget amount. Budgets
are made large in number but are not managed properly it will cause problems, such as leakage. Most
important is the optimization of the budget, karana role and motivator in moving the development area. Local
community will play a part in accordance with the local development interests and priorities.
The low of locally generated revenue of a particular area is caused by the structural area are poor or do not
have the financial resources of potential, but due to the policy of the Central Government, is expected in the
future role of regional revenue can shift roles Balance Fund, so that the dependence on The central
government can be reduced.
f) General Allocation Fund (DAU)
central government and local government chapter 1 verse 21, "the general allocation fund is a fund sourced
from APBN allocated to bring equality among the regions financial ability to fund the needs of the region in
the implementation of decentralization". "General Allocation Fund is a fund that comes from the state budget
allocated for the purpose of financial equalization between regions to fund expenditure needs of each region
in the implementation of decentralization" (PP No.55 / 2005). According to the finance minister, "the general
allocation fund merupaka one government transfers to local government revenue sourced from the state
budget, which is allocated to bring equality among the regions financial ability to fund the needs of the region
in the implementation of decentralization". I conclude that the general allocation fund is one of the transfer of
funds from central government to local governments from the state budget, with the aim of equitable regional
finance to fund the needs of the region to the implementation of decentralization.
General Allocation Fund aims for equitable financial capability to reduce inequality between the regions
financial capabilities through the application of a formula that takes into account the needs and potential of
the region. General Allocation Fund an area determined by the size of the fiscal gap of an area which is the
difference between the local needs and potentials. Formula fiscal gap and additional variables General
Allocation Fund. DAU allocation for regional fiscal potential is great, but small fiscal needs would acquire
relatively lower allocation. Instead, local fiscal potential of small, but high fiscal need will receive a
relatively higher DAU. Implicitly, the principle confirms DAU as fiscal capacity equalization factor.
DAU can be categorized as an unconditional transfer or block grants, which is a kind of inter-governmental
transfer that is not associated with a particular expenditure program. The purpose of this rock is to provide
sufficient funds for carrying out local government functions - functions. As an unconditional transfer or block
grant the use of DAU determined solely by the area. Structure anatara financial balance of central and local
government need to be addressed to further promote the direction of fiscal capacity, which is oriented to the
source - their own local revenue sources as the main source of revenue. Measures taken by the central
government should be aimed at giving an opportunity for the region to increase revenue, without
exacerbating the allocation of resources - the source of production and economic and justice for the people.
g) Special Allocation Fund (DAK)
central government and regional governments chapter 1 verse 23, "special allocation fund is a fund sourced
from APBN allocated to a particular region with the aim to help fund special activities of regional affairs and
in accordance with national priorities" .
Special Allocation Funds allocated to help the region finance the physical facilities and infrastructure which
is a national priority in the field of education, health, population, roads, irrigation infrastructure, water supply
and environmental sanitation, government infrastructure, marine and fisheries, agriculture, environment, and
forestry (Regulation of the Minister of Finance act no/year: 1/2008). From the above understanding it can
conclude that the special allocation and that the funds allocated specifically to help local affairs in accordance
with national priorities.
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The purpose of the use of special allocation funds can be directed towards improving Humand Development
Index or the Human Development Index which is a national issue that must be resolved. It is given that the
level of poverty that exist areas. Besides it is also directed to the handling problems - social problems are
essential.
The direction of the special allocation funds are as follows:
1) Reduce the inequality of income distribution.
2) The increase in the provision of facilities and quality of healthcare.
3) Improving the quality of education.
4) Enhancement of the environment (outside reforestation).
5) Troubleshooting urban (urban areas
Special allocation funds can be allocated from the national budget to certain areas, the connotation that the
allocation is not intended for the whole area. Of the types of special needs set out in the Act - legislation, it is
clear that if an area does not have a need that can not be predicted and are not included in the commitment
needs or national priorities, then the area will not get part of a special allocation. For special needs that are
not can be estimated by using the formula of general allocation still needs to be put through the proposed
area. To get the DAK allocation of these needs, of course, require the skills to lobby the central
government. DAK receiving area is required to provide matching funds of at - least 10% of the value of DAK
received to fund physical activity. The matching funds shall be allocated in the budget of the current budget
year.
h) Capital expenditure
According to Regulation No. 71 Year 2010, "capital expenditure is the expenditure budget for the acquisition
of fixed assets and other assets that benefit more than one accounting period".The capital expenditures
include, among others, capital expenditures for the acquisition of land, buildings, equipment, intangible
assets.
According to Moh. Mahsun et al, (2010):
"Capital expenditure is the expenditure for the purchase or acquisition or construction of fixed assets
intangible that has a value benefit of more than 12 months for use in government activities, such as in the
form of land, equipment and machinery, buildings, roads, irrigation and network and fixed assets more ".
In Regulation 13/2006 Capex is defined as:
"Expenditure incurred in the purchase or acquisition or construction of fixed assets intangible that has the
value of benefits over twelve months to be used for the purposes of government, such as in the form of land,
equipment and machinery, buildings, roads, irrigation and networks, and assets other fixed ".
From the definition of capital expenditure can be concluded that each procurement / purchase of assets that
benefit more than twelve months and then the asset is used in government activities that are beneficial both
economically, socially and or other benefits that can improve the government's ability to serve the public is
an activity Capital expenditure (Investment).
According to the Minister of Finance Regulation No. 101 of 2011 concerning the classification of the budget,
capital expenditure is used for, among others:
1) Capital Expenditure Land
2) Capital Expenditure Equipment and Machinery
3) Building and Construction Capital Expenditure
4) Capital Expenditure Roads, Irrigation and Networks
5) Other Capital Expenditures
i) The relationship between the variables Economic Growth with Capital Expenditure
According to research Luh Putu (2014), a fundamental requirement for economic development is the level of
capital provision of balanced development with the population. Increased infrastructure and its improvement
by local governments is expected to spur economic growth in the region.
From the discussion above it can be concluded that with the increased infrastructure and adequate
infrastructures, then the public can perform daily activities - day safely and comfortably that will affect the
productivity improvement of society. With the increased productivity of the people, the economic growth rate
will increase.
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j) The relationship between the variables with the Local Revenue Capital Expenditures.
A source of revenue for governments in the region are from the tax sector and retribution, the allocation of
government funds and financial resources of the operator of regional assets. Financial resources for a
government area consists of three main sources, namely: the share of the central government, local revenue,
and other sources of finance are considered valid in this case especially of the Regional Owned Enterprises
(enterprises).
According to research Luh Putu, et al (2014), with increasing capital expenditure will have an impact on
future periods, namely increased productivity of society and increasing investor will increase revenue. Local
Government Improvement in capital investment (capital expenditures) is expected to improve the quality of
public services and in turn be able to increase public participation towards development that is reflected in
the increase in local revenue.
If adequate facilities and infrastructure of the community activities will be productive and if adequate
infrastructure will attract investors to open businesses in the area. With increasing capital expenditure, it will
berdamp ak in the period for the coming g ie increasing the productivity of society and increasing investor
will increase revenue. With the increase in capital expenditures is able to provide good service to the public,
so as to increase the level of public participation to regional development which is reflected in the PAD.
k) The relationship between the variables General Allocation Fund with Capital Expenditure
General Allocation Fund is a fund that comes from the state budget allocated for the purpose of financial
equalization between regions to fund expenditure needs of each region in the implementation
of decentralization. Each general allocation funds received by local governments is also used to shopping
areas. With decentralization devolving authority from central to local governments to manage their own
household. With decentralization, the area is able to optimize the region's ability to manage its resources so it
does not just rely on transfers from the central government. According to research Pungky Ardhani (2011),
the DAU transfer funds from the central government, the regions can focus menggunaka PAD to finance
capital expenditures used for public services, which indicates that there is a relationship between the DAU to
the allocation of capital expenditure.
l) The relationship between the variables of Special Allocation Fund with Capital Expenditure
Fund balance is the embodiment of the relationship between the central government and local
governments. One of the equalization fund is a special allocation. Special allocation fund is a fund sourced
from APBN allocated to a particular region with the aim to help fund special activities of regional affairs and
in accordance with national priorities. According to research Pungky Ardhani (2011), p emanfaatan DAK are
focused on the development investment, procurement, improvement, and improvement of physical
infrastructure with a long economic life, including the provision of supporting infrastructure. With the DAK
allocation is expected to affect the allocation of the capital expenditure budget, for DAK tends to add to the
fixed assets owned by the government to improve public services.
Research Review
As previous research related to the study of them. Darwanto and Yulia Yustikasari (2007) examines the
Effect of Economic Growth, Local Revenue and the General Allocation of funds to the Capital Expenditure
Budget Appropriations. Samples were used that district or city in Java and Bali Year 2004-2005 for reasons
of data availability. Find that economic growth, PAD and DAU significant effect on capital expenditure
budget. While partially PAD and DAU significant effect terhdap capital expenditure budget, while economic
growth had no effect.
Anggiat Situnggkir (2009) examined the effect of economic growth, PAD, General Allocation Fund and
Special Allocation Fund to the Capital Expenditure Budget by taking a sample in North Sumatra
regency. The results of the study variables Economic Growth no significant effect on Capital
Expenditure. While variable PAD, DAU and DAK significant effect on Capital Expenditure.
Pungky Ardhani (2011) investigated the effect of economic growth, PAD, General Allocation Fund and
Special Allocation Fund to the Economic Growth took a sample at district or city in Central Java. The
research proves the partial revenue (PAD) and the General Allocation Fund (DAU) significantly influence
Capital Expenditure. Meanwhile, Economic Growth and Special Allocation Fund (DAK) no significant effect
on Capital Expenditure. Simultaneously Economic Growth, Local Revenue (PAD), General Allocation Fund
(DAU) and Special Allocation Fund (DAK) significantly influence Capital Expenditure.
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Dini Arwati and Novita Hadiati (2013) studied the influence of Economic Growth, Local Revenue and the
General Allocation Fund against Appropriations Expenditure Capital took a sample at district or city in West
Java. The results showed that the partial regional revenue that significantly influence capital expenditure
budget allocation, while the Economic Growth and General Allocation Fund pegalokasian no significant
effect on capital expenditure budget. Simultaneously petumbuhan Economy, Local Revenue and the General
Allocation Fund affect the capital expenditure budget allocation.
Luh Putu Rani Mayangsari, et al (2014) investigated the influence of Economic Growth, Local Revenue and
the General Allocation Fund to the Capital Expenditure Budget Appropriations take a sample at Buleleng
regency government. The results showed that a significant difference between Economic Growth, Local
Revenue and the General Allocation Fund towards capital spending.
Development Hypothesis
Concept Framework Research
Economic growth
Locally-generated
revenue
Capital expenditure
General Allocation
Fund
Special Allocation
Fund
= Partial
= Simultaneous
Figure 1 Conceptual Framework Variables
Hypothesis
The hypothesis to be tested in this study are:
1. There is the influence of economic growth on the allocator of capital expenditure
2. There is the influence of the local revenue of the allocator of capital expenditure
3. There is the influence of the general allocation fund the capital expenditure allocator
4. There is the influence of special allocation funds towards capital expenditure allocator
5. There are significant economic growth, regional income, general allocation fund, a special allocation
of the allocator of capital expenditure
RESEARCH METHODS
Research design
This study is a quantitative study, designed to determine the effect of growth of the economy, local revenues,
a special allocation of funds, and the general allocation fund the capital expenditure budget allocation to data
collection form Realization Report Annual Regional Budget.
Population and Sample Research

The population of this study is se Provincial Government of Indonesia consists of 34 provinces. Data taken
with purposive sampling approach with the following criteria:
1) The Provincial Government is to publish financial statements consistently in 2010-2013.
2) The provincial government is using the funds of local revenue, general allocation fund, the special
allocation fund and capital expenditures.
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Of the 34 provinces that serve a population of only 29 that met the criteria to be sampled.
Conceptual and Operational Definition of Variables

Table 1. Conceptual and Operational Definition of Variables
Variable Definition Measurement Scale

Economic Economic growth is the increase in output per (PDRBt - PDRBt - 1)
growth capita PDRBt - 1 Ratios
Locally- local revenues areearned income withheld PAD = Local Tax Levies + Results
generated Regional Regional Regulation in accordance Separated Wealth Management + Other
Ratios
revenue with the legislation. Regions - other legitimate PAD.
General the general allocation fund is a fund sourced DAU = + Basic Allocation Fiscal Gap
Allocation from APBN allocated to bring equality among
Fund the regions financial ability to fund the needs of Where,
the region in the implementation of Ratios
decentralization . Fiscal Gap = Needs Fiscal - Fiscal
capacity
Special Special Allocation Fund is a fund sourced from

Allocation APBN allocated to a certain region with the aim
Ratios
Fund to help fund special activities of the region in
accordance with national priorities.
Capital capital expenditure is the Capital
expenditure
Expenditures
budget for= Capital Expenditures = Shopping Land
expenditure the acquisition of fixed assets and other assets Equipment and Machinery + Shopping +
that benefit more than one accounting period. Shopping Building and Roads, Irrigation
Ratios
and Network + Other Fixed Assets
Expenditure
Technical Analysis Data

Technical analysis of data using multiple regression analysis tenik regression equation:
Y = α + β1PDRB + β2PAD + β3DAU +β4DAK + e
Where:
Y = Capex (BM)
α = constant
β = Slope or Regression Coefficients
GRDP = P roduk Gross Domestic (GDP)
PAD = Revenue (PAD)
DAU = General Allocation Fund (DAU)
DAK = Special Allocation Fund (DAK)
e = Error
Test Hypothesis
Hypothesis testing is done by using the t value for partial hypothesis testing and using the f count for
hypothesis testing simultaneously. Furthermore, t and f arithmetic compared with p-value (0.05). If t <0.05, it
can be concluded there is significant influence between the variables tested, and vice versa.
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Result
Research conducted on the variables of economic growth, local revenues, general allocation fund and special
allocation funds as well as capital expenditures at 29 propensi in Indonesia.Here is a list of 29 provinces were
used as a sample.
Table 2.List of 29 provinces
Criteria
Province name samples
1 2
Aceh √ √ sample 1
North Sumatra √ √ sample 2
West Sumatra √ √ sample 3
Riau √ √ sample 4
Jambi √ √ sample 5
South Sumatra √ √ sample 6
Bengkulu √ √ sample 7
Lampung √ √ sample 8
Kep. Bangka Belitung √ √ sample 9
West Java √ √ sample 10
Java Central √ √ sample 11
In Yogyakarta √ √ sample 12
East Java √ √ sample 13
Banten √ √ sample 14
Bali √ √ sample 15
East Nusa Tenggara √ √ sample 16
West Nusa Tenggara √ √ sample 17
West Kalimantan √ √ sample 18
Central Kalimantan √ √ sample 19
Ka limantan South √ √ sample 20
North Sulawesi √ √ sample 21
Central Sulawesi √ √ sample 22
South Sulawesi √ √ sample 23
Southeast Sulawesi √ √ sample 24
Gorontalo √ √ sample 25
Moluccas √ √ sample 26
North Maluku √ √ sample 27
West Papua √ √ Samp el 28
Papuan √ √ sample 29
The regression equation

The regression equation generated in this study are:
Y = 5.579 + 0.004 PDBR +0.330 PAD -0.175 DAU +0.400 DAK + ε
Hypothesis testing
Hypothesis test results are shown in the following table:
ANOVAb
Sum of
1 Regression 4,417 4 1,104 16,227 ,000 a
Residual 7,554 111 ,068
Total 11,971 115
a. Predictors: (Constant), Dana alokasi khus us , Pendapatan asli daerah, Dana
alokasi umum, Pertumbuhan ekonomi
b. Dependent Variable: Belanja modal
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Coe fficientsa
Coef f icients Coef f icients Collinearity Statis tics
Model B Std. Error Beta t Sig. Toleranc e VIF
1 (Cons tant) 5,579 1,859 3,001 ,003
Pertumbuhan ekonomi ,004 ,011 ,045 ,361 ,719 ,363 2,758
Pendapatan as li daerah ,330 ,082 ,504 4,037 ,000 ,365 2,741
Dana alokas i umum -,175 ,171 -,100 -1,025 ,307 ,599 1,670
Dana alokas i khusus ,400 ,124 ,297 3,214 ,002 ,665 1,504
a. Dependent Variable: Belanja modal
Hypothesis #1 : There Pe influence Against Economic Growth Allocation of Capital Expenditures.

T Partial assay results indicate the significance level of 0.719. This value is greater than p-value of
0.05. Therefore we can conclude there is no influence of economic growth on the allocation of capital
expenditures.
Hypothesis #2: There Effect Against source revenue Allocating Capital Expenditures.
T Partial assay results indicate the significance level of 0.000. This value is lower than the p-value of
0.05. Therefore we can conclude there are significant local revenues to the allocation of capital expenditures.
Hypothesis #3: There Effect of General Allocation Fund Against Allocating Capital Expenditures.
T Partial assay results indicate the significance level of 0.307. This value is greater than p-value of
0.05. Therefore we can conclude there is no influence on the allocation of the general allocation fund capital
expenditures.
Hypothesis #4: There Effect of Special Allocation Funds for Capital Expenditure Allocation Against areas.
T Partial assay results indicate the significance level of 0.002. This value is lower than the p-value of
0.05. Therefore we can conclude there are significant special allocation to the allocation of capital
expenditures.
Hypothesis #5 : There Effect of Economic Growth, revenue, General Allocation Fund, Special Allocation
Fund regions simultaneously Against Allocating Capital Expenditures.
Partial assay results f count indicates the significance level of 0.00 0. This value is lower than the p-value of
0.05. It can be concluded this model is appropriate and tar can influenceeconomic growth, revenue, General
Allocation Fund, a special allocation to the allocation of capital expenditures.
Discussion
Hypothesis #1 :
The growth of a region is determined by the activity or the specific facilities and infrastructure that can
generate economic activity. Some of the infrastructure that fall into this category is the market, stadium,
housing, etc. Economic infrastructure will be equipped with facilities and infrastructure such as roads. The
success of Capex (investment) can not be measured with a refund that is directly obtained from the Capital
Expenditure (Investment) alone, but how far regional environmental activities capable of creating economic
activity.
Hypothesis #2.
The results of this study can also be found the result that the effect on the Local Revenue Capital
Expenditure. This is in accordance with the results of the research earlier conducted by Yulia Yustikasari &
Darwanto (2006) which menyatakanbahwa stating that there are positive and significant relationship
between PAD shopping modal.Hal This may imply that the higher the PAD, the expenditures of government
on capital expenditure is not necessarily also be the higher it is. In addition, this study also indicate that the
amount of PAD to be one of the deciding factors in determining capital expenditure. Meaning high to low
revenue in this period will have implications for the size of the allocation belanjamodal area.
Hypothesis #3.
From the results of this study showed that the general allocation funds do not affect the Capital
Expenditure. This may imply that the DAU received the region does not affect the allocation of capital
expenditure will be spent. This is in line with research conducted by Abdullah danHalim (2003) which states
that the General Allocation Fund does not have a significant effect terhadapbelanja capital, and research
246
conducted Carey (2004) which proves empirically that the large amount of capital expenditures was
not influenced by the General Allocation Fund yangditerima from central government
hypothesis #4.
DAK utilization are focused on the development investment, procurement, improvement, and improvement
of physical infrastructure with a long economic life, including the provision of supporting infrastructure.
With the DAK allocation is expected to affect the allocation of the capital expenditure budget, for DAK tends
to add to the fixed assets owned by the government to improve public services.
This study is in line with research Situnggkir (2009) which examines the influence of Economic Growth,
PAD, General Allocation Fund and Special Allocation Fund to the Capital Expenditure Budget by taking a
sample in North Sumatra regency. The results of the study variables Economic Growth no significant effect
on Capital Expenditure. While variable PAD, DAU and DAK significant effect on Capital Expenditure.
CONCLUSIONS, IMPLICATIONS AND LIMITATIONS OF RESEARCH
Conclusion
Based on the analysis, the study concludes that there is economic growth and the effect of general allocation
funds to the allocation of capital expenditures. While local revenues and special allocation funds affect the
allocation of capital expenditures.
Implication
The results of this study at the end d apat provide feedback theoretically which enable an improvements
concerning economic growth, regional income, special allocation fund and general fund allocation to capital
expenditure budget allocation.
Research limitations
Due to the value of Adjusted R Square that still tends to be low, namely 36.9 8% indicated that there are
other variables that are not used in this study that have a bigger impact on capex. So for further research
suggested that using more independent variables, because basically there are many other factors that affect
the realization of capital expenditures for example by adding a variable DBH Tax and Non-Tax Revenue
Sharing Fund as an independent variable. 2. To increase the budget allocations in the Local Government area
is expected to continue to explore the sources of regional revenue by intensification is to streamline the
collection of taxes or levies and streamline the way of voting on the object and subject suda calculating the
potential there is for example, counseling, increase supervision and service. In addition, by way of extending
that encompass new taxpayers through data collection and registration of new taxpayers or dig.
ACKNOWLEDGEMENTS
I would like to thank the icbest committee: for their accepted my paper.
I thank my friends in STIE Widya Gama Lumajang: Mr. Hartono to his support, Also my fellow in LPPM
for the stimulating discussions. Foremost, to mr. Oyong Lisa and mr. Kurniawan, for we were working
together before deadlines.
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TRIPLE HELIX MODELS FOR AGRO-TOURISM DEVELOPMENT

IN WEST SUMATRA
Widya Fitriana
Agricultural Faculty at Andalas University Padang
(widyafitriana66@gmail.com)
ABSTRACT
Nowadays, trends of global economy has shifted from natural resource-based toward creativity resource-
based. Therefore, agricultural sector, which is known as a producer of primary products required to be able
to diversify its business in order to increase the added value for the welfare of community, which one
diversified agricultural business prospective to be developed is agro-tourism. The development of agro-
tourism requires collaboration and synergy between intellectual, business and government (triple helix
framework) as the key to successful implementation of knowledge-based economy. So, this study was
designed with the aim to (1) mapping the role of each party and (ii) to make awareness of their roles, so then
each party may take action in accelerating Agro-tourism development in West Sumatera. As a means to
address its issue, it uses depth interview method, literature study and focus group research. The result shows
that: (1) the intellectual roles are: strengthen formal and informal basis of innovation and creativity through
the resulting research, business consulting, and training project in certain area that need improvement,
disseminating information to the wider network, and encourage the commitment that leads to formation of a
business unit that empowering local potential with strategic program and policies, (2) the business roles are:
economic exchange relation and transform creativity into economic value, (3) the government roles are:
provide guidance to public and business, strategic program and policy and provide conducive climate for
agro-tourism development. Those contributions should be a result from triple helix framework between
intellectual, business, and government. Finally the recommendation can be given each party in order to
established collaboration and synergies to develop agro-tourism.
KEYWORDS: economic creative, agro-tourism, rural development, triple-helix models, West Sumatera.
1. INTRODUCTION
Creative economic development in West Sumatra has been more prominent in industry-crafts, and culinary
arts. The development of this sub-sector is quite rapid and even has been known on the international market.
Nevertheless, based on national statistics, the value of handicrafts export tend to decrease due to entry of new
competitors fairly aggressive in the international market, are China and Thailand. In response to this, West
Sumatra need to find a new icon to creative economy development more competitiveness, and one alternative
with the potential to be developed is agro-tourism. Agro-tourism development in West Sumatra has enough
potential to be developed based on natural resources and unique local culture. Each district /city has its own
peculiarities on-farm, cultural values and traditions inherent in agricultural activities. This becomes a
potential asset for agro-tourism development. It is expected to give a multiplier effect to accelerate regional
economic growth through increasing the income of farmers and rural communities, absorbing labor,
preserving image and value of local culture, the growth of the business and investment and also poverty
reduction.
Agro-tourism is a hybrid concept that merges elements of two complex industries -agriculture and tourism- to
open up new profitable markets for farm products & services as well provide a market for rural tourists and
travelers. It is important to consider these factors in planning and developing agro-tourism as a rural business
(Mahaliyanaarachchi, 2015). Refers to "The development of creative economy Indonesia 2025" by the
Ministry of Trade Republic Indonesia (2008 ), agro-tourism development in Indonesia requires a symbiotic
mutualism between three main actors: the government , intellectual, and business. This relationship is known
as the triple helix models. Theories about the triple helix was originally popularized by Etzkowitz &
Leyderdorff as a method -based innovation policy. This theory reveals the importance of creating synergy of
three actors namely academician, business and government. The development of agro-tourism as a rural
development strategy would require an understanding of the role of each actor in forming a synergistic
relationship. The Triple Helix model is increasingly relevant as a conceptual framework for regional
development. Its capacity to describe the process as the result of the joint workings of the University,
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Industry and Government institutional spheres is expanded by introducing the novel concept of ―Triple Helix
Spaces‖: Knowledge, Innovation and Consensus Spaces, which show the process and mechanisms by which
the institutional spheres interact and co-evolve over time (Etzkowitz, 1993).
This study was designed with the aim to (i) mapping the role of each party/stakeholders and (ii) to make
awareness of their roles, so then each party may take action in accelerating agro-tourism development in
West Sumatera. Therefore, the result can be used to provide the recommendation to each party/stakeholders
in order to established collaboration and synergies to develop agro-tourism
Most of the alternative tourism approaches are closely related with rural economy and thereby rural
development. The main reason for this is that tourist destination of these alternative tourism approaches are
rural areas. Therefore, agro-tourism as an alternative tourism creates a new economic opportunity in rural
areas as well as to the macro economy of a country (Mahaliyanaarachchi, 2015).
Agro-tourism is one of the many pro-poor strategies which have success stories in reducing extreme poverty.
It is credited for poverty reduction in Uganda (Lepp, 2004), South Africa (Mafunzwaini and Hugo, 2005),
Namibia (Ashley, Boyd and Goodwin (2000), India and Philippines (Ashley et al, 2000). Rural tourism is
particularly relevant in Southern Africa given the challenge of economic and political transformations
currently taking place in most Southern African countries (Ashley and Roe, 2002). Rural tourism
development in the village of Fundata did not affect the beauty of the local landscape (Balan & Burghelea,
2015). Certain characteristics of tourism makes it a development tool of choice in the rural areas; it is labor
intensive, inclusive of women and informal sector based on natural and cultural assets of the poor and
suitable for poor rural areas with few other growth options (Ashley and Roes,2002, Mafunzwaini and
Hugo,2005)
Triple helix is one of the concepts used in agro-tourism development models. The concept of the Triple Helix
of University-Industry-Government relationships developed in the 1990s by Etzkowitz (1993) and Etzkowitz
and Leydesdorff (1996), encompassing elements of precursor works by Lowe (1982) and Sábato and
Mackenzi (1982), interprets the shift from a dominating industry-government dyad in the Industrial Society
to a growing triadic relationship between university-industry-government in the knowledge society. Through
subsequent development (e.g. Etzkowitz and Leydesdorff, 1998, 2000; Leydesdorff, 2006) the concept has
grown into a conceptual framework for exploring the complex dynamics of the knowledge society and for
informing policy makers at national, regional and international level in the design of new innovation and
development strategies (Ranga & Etzkowitz, 2012)
Triple helix models can be elaborated in various directions (Laydesdorff, 2012). Firstly, the networks of
university-industry-government relations can be considered as neo-institutional arrangements which can be
made the subject of social network analysis. This model can also be used for policy advice about network
development, for example in the case of transfer of knowledge and the incubation of new industry. The new
and potentially salient role of universities in knowledge-based configurations can then be explored in terms
of different sectors, regions, countries, etc. (Godin & Gingras, 2000; Shinn, 2002). Over the past ten years,
this neo-institutional model has also been developed into a discourse about ―entrepreneurial universities‖
(Etzkowitz, 2002; Mirowski & Sent, 2007). Regions are then considered as endowed with universities that
can be optimized for a third mission, and different from higher education and internationally oriented
research. Secondly, the networks span an architecture in which each relation occupies a position. One can
thus obtain a systems perspective on knowledge-based innovation in a hypothesized space; this theoretical
construct—the knowledge-based economy—can be informed by systematic data analysis (e.g., Leydesdorff
& Fritsch, 2006).
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Figure.1 Patents of triple helix interactions (source: Department Ministry

of Trade Republic Indonesia, 2008)
Triple helix interactions play an important role for agro-tourism development in Indonesia. The successful of
agro-tourism development need to view agro-tourism not only from internal perspective (local community)
but also from external stakeholders (tourist) perspective. The innovation for successful of agro-tourism
development could not go partially, it must be collaboration between the academy, the industry/the business
and the government. So the purpose of this research is to develop a framework of triple helix interactions for
agro-tourism development in West Sumatera.
3. RESEARCH METHOD
The research adopts qualitative approach, research technique used of qualitative data in the form of primary
and secondary data. The primary data were collected through in-depth-interview with structured
questionnaire and focus group research. Secondary data was obtained by collecting journal and literature. The
data analysis technique used descriptive analysis of qualitative.
Target object for this research are experts in each party/actors. The questions were developed through expert
discussion to provide modeling concept of agro-tourism development in West Sumatera. This research ask to
6 experts.
4. RESULTS
Findings of this study are the role of triple helix models to enhancing agro-tourism development in West
Sumatera and the collaboration relationship between the academy, the industry/the business and the
government. The framework of triple helix interactions for agro-tourism development described by a diagram
as below:
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Figure.2 Triple Helix Analysis Model for Agro-Tourism Development
1. Academics (Intellectuals)
The university's primary role is as a producer of knowledge and scientific research all the time. Intellectuals
as an agent of disseminating and implementing the science, art and technology, as well as agents that form a
constructive values for the development of agro-tourism. Intellectual property as part of the scholarly
community in the institutions of higher education and research institutions, has a major role in agro-tourism
development.
The main role of University in the development of agro-tourism based on Tri Dharma Universities are:
a) The role of education system: disseminating of science, knowledge product
b) The role of research conducted: diffusion research and technology
c) The role of community service : socialization of youth and knowledge dissemination, participate in
the planning stage.
The university‘s continuous capacity to provide students with new ideas, skills and entrepreneurial talent has
become a major asset in the Knowledge Society (Ranga and Etzkowitz, 2012). The role of education is
intended to encourage the birth of creative generation with the mindset that supports the growth initiative and
work in the agro-tourism industries. The entrepreneurial university participates in agro-tourism development
of its region. Entrepreneurship as an academic mission is integrated with teaching and research. As the
university assumes an entrepreneurial role internally; it naturally also becomes more closely involved with
industry, especially since there is not such a great distance between the institutional spheres. The role of
research conducted to provide input on the development of agro-tourism policy models and instruments are
needed, and produce technologies that support the operations and the efficient use of resources and make a
competitive agro-tourism industry. Through research, university role to promote of agro-tourism by studying
the local area (Dragulanescu, 2012), research and monitoring of rural tourism activities and action to protect
and conserve the environment and tourism resources. Through community service activities, the university
can support the development of agro-tourism through the formation of local community initiatives, provide
consultation of experts and the public in the development of agro-tourism and local economy. The role of
community service carried out to form a society with institutions / social order that supports the flourishing
agro-tourism nationwide. In carrying out its role actively, scholars are required to have disciplinary and
experimental spirit high, the opinions are contrast (empathy and ethics), able to solve problems created,
running cross-sector observations, using ICT technologies fluently, a member forum of science enrichment
science and art both nationally and internationally, formal and non-formal.
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2. Business
Actor businesses are entrepreneurs, investors and creators of new technologies, as well as a agro-tourism
industrial consumers. This helix concentrates and focuses the ―economic capital‖ for example
entrepreneurship, products, technology, etc.
The role of business in the agro-tourism development are:
1) Creator:
That as a center of excellence of the creators of agro-tourism products and services, new markets
that can absorb the products and services produced, and the creator of jobs.
2) Forming communities and entrepreneur
namely as a motor that forms where the public sharing ideas, mentoring can hone creativity in doing
business in agro-tourism industries, business coaching or management training business
management in the agro-tourism industries. In carrying out its role, businesses are required to use a
high conceptual skills, able to create a new variation in the form of products and services, proficient
organization, cooperation, and the ability to master the technical context of financial planning
3) Contribute to the cost of providing economic and social infrastructure
4) Encourage the development of other industrial sectors
5) Contribute to conservation of environmental and cultural resources
3. Government
Government is responsible for providing the rules of the game but also make available venture capital to help
start new enterprises. Government's role in encouraging the growth of local initiatives in the development of
agro –tourism, empower rural communities, especially through better management of agro-tourism business.
Experts believe, the progress of the construction of the agro-tourism is strongly influenced by the location
(synonymous with autonomy), and tolerance/creative mindset (synonymous with democracy).
While the principles of good governance; participation, rule of law, transparency, responsiveness, equity
(fairness), strategic vision, effectiveness and efficiency, professionalism, accountability, and supervision
(landing), are the principles which the agro-tourism industries can grow aggressively (Herliana, 2015). The
government should have a sensitivity and appreciation of people's aspirations. Understand that in Indonesia in
building an intelligent man can‘t be executed only in the short term, because it means there is a process of
learning intelligence development, breeding and enrichment. Pursuing the final results in the short term
without a strong pillar based development will create a weak economic structure and unsustainable.
For that government actors should be able to put the bureaucracy in proportion, transparent interaction with
the spirit of achieving equal. The main role of the Government in the development of agro-tourism are:
a) Catalyst, facilitator and advocate that provide stimulation, challenge, encouragement, business ideas
in order to move to a higher level of competence. Not always support it must be financial assistance,
incentives or protection, but can also be the government's commitment to using his political power
to the proportional and by providing administrative services to the public good;
b) Regulators that generate policies relating to people, industry, institution, intermediation, resources
and technology. Governments can accelerate the development of agro-tourism if the government can
make policies that create a business climate conducive to the agro-tourism industries.
c) Consumers, investors and even entrepreneurs. Government as an investor should be able to
empower the state to become productive assets in the scope of the agro-tourism and is responsible
for infrastructure investment industry.
d) Urban planner. In order for the development of the agro-tourism is going well, it is necessary to
create rural tourism/ tourism village in Indonesia.
Collaboration between two or all three helix can be embodied in the incubator concept. Incubator concept
focused on high-tech form formation based upon academic research. Having realized that the essential
purpose of an incubator was to teach a group of person to act as an organization, as an extension of the classic
educational mission of the university as well as an expression of its new economic and social development
remit, the model was applied to a variety of purposes within and without academia. Industrial associations
entered the field, creating incubators to expand traditional clusters. Municipalities also established incubators
as a job creation strategy. An NGO, in collaboration with a university high-tech incubator, applied the model
to organize cooperatives, training poor people from the favelas to run their own organizations and create jobs
for themselves.
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The formation and development of the Consensus Space can be accelerated by strengthening the dialogue and
collaboration between national and regional innovation stakeholders and creating new platforms for
communication, promoting collaborative governance measures, such as public consultation and feedback,
collaborative leadership models and practices (Chrislip, 2002; Archer and Cameron, 2008)
Table 1: The Role of Triple Helix to Enhancing Agro-tourism Development
Triple Helix The Role
Disseminating of science
Diffusion research and technology
Socialization of youth and knowledge dissemination
Academics Participate in the planning stage
Provide consultation of experts
Creating incubator
Creator
Forming communities and entrepreneur
Contribute to the cost of providing economic and social infrastructure
Business
Encourage the development of other industrial sectors
Contribute to conservation of environmental and cultural resources
Catalyst, facilitator, and advocate

Regulators
Government
Investor
Urban planner
Source: Author, 2015
Agro-tourism is one of the many pro-poor strategies which have success stories in reducing extreme poverty
and triple helix interactions play an important role for agro-tourism development, especially in Indonesia.
The innovation for successful of agro-tourism development could not go partially, it must be collaboration
between the academy, the industry/the business and the government. The collaboration between of three
actors requires awareness of the role that is expected of each party so that mutual collaboration can support
the sustainable development of agro-tourism in West Sumatera.
The results of this study are expected to provide recommendations for the integration of many stakeholders in
building synergy and cooperation in achieving development of sustainable agro –tourism. In the future,
research agendas for possible integration of triple helix models into ―quadruple helix models‖ by add as
fourth helix the ―public‖, more specifically being defined as the ―media-based and culture-based public and
civil society.
6. ACKNOWLEDGEMENTS
This research was conducted under the research project of LPPM Universitas Andalas, funded by Kementrian
Riset, Tekhnologi dan Pendidikan Tinggi 2015.
7. REFERENCES
Mahaliyanaarachchi, R, P,. (2015). Agri Tourism as a Risk Management Strategy in Rural Agriculture Sector: With
Special Reference to Developing Countries. The Journal of Agricultural Sciences Vol. 11, No. 1, January 2016. Pp 1
- 12
Dragulanescu, I, V,. and Drutu, M. (2012). Rural Tourism For Local Economic Development. International Journal of
academic Research In Accounting, Finance and Management Science. Vol 2 (2012) 196-203
Etzkowitz, H and Leydesdorff, L (1998). Triple Helix of Innovation: Introduction, Science and Public Policy 25 (6): 358-
364
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Ranga, M., Etzkowitz, H,. (2012). A Triple Helix System for Knowledge-based Regional Development: From ―Spheres‖
to ―Spaces‖. Stanford University, US
Laydesdorff, L. (2012). The Triple Helix of University-Industry-Government Relations. University of Amsterdam,
Amsterdam School of Communication Research (ASCoR)
Godin, B. and Gingras, Y. (2000). The Place of Universities In The System of Knowledge Production. Research Policy,
29(2), 273-278
Herliana, Sri. (2015) Regional Innovation Cluster for Small and Medium Enterprises (SME): A Triple Helix Concept.
Procedia - Social and Behavioral Sciences 169 ( 2015 ) 151 – 160.
Leydesdorff, L. H. Etzkowitz. (1996). Emergence of a Triple Helix of University Industry-Government Relations,
Science and Public Policy 23 (5): 279-286
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256
ANALYSIS OF KNOWLEDGE OF ENTREPRENEURSHIP, SELF EFFICACY,

AND ATTITUDE TO INTENTION ENTREPRENEURSHIP
ENTREPRENEURIAL WOMEN
(CASE STUDY OF KOPERASI SETIA BHAKTI WANITA SURABAYA)
P. Julius F. Nagel & Ani Suhartatik

Business Faculty, Widya Mandala Catholic University Surabaya
(juliusnagel@ymail.com & Ani.suhartati@gmail.com)
ABSTRACT
This study aimed to analyze the Influence; Studies on women entrepreneurs in Koperasi Setia Bhakti Wanita
Surabaya. Data used as samples in this study were obtained from the primary data research instruments such
as questionnaires given to members of Koperasi Setia Bhakti Wanita Surabaya. Of the 250 questionnaires
distributed, the number of questionnaires returned and deserves to be treated at 239 questionnaires. Analysis
of data using software PASW Statistics 16. The selection of samples tested in this study using purposive
sampling method, selected 239 respondents. The results of this study are; (1) Knowledge of entrepreneurial
positive and not significant to the intention of entrepreneurial women entrepreneurs, (2) Self efficacy positive
and significant effect to the intention of entrepreneurial women entrepreneurs, (3) Attitude positive and
significant effect to the intention of entrepreneurial women entrepreneurs, (4) Knowledge of
entrepreneurship , self-efficacy and attitudes simultaneously significantly influence entrepreneurial intentions
of female entrepreneurs.
Keywords: Enterprise Knowledge, Self-Efficacy, Attitude, Intention Entrepreneurship
PRELIMINARY
Most of the population in Indonesia are women, and no less than 6 million are heads of poor households with
average incomes below 10,000 per day. To sustain themselves and their families, usually those working in
the informal sector, trade and services, agriculture-farm workers, and factory workers. They have little access
to resources including financial resources such as loans from existing financial institutions as being unfit,
remote location, no guarantor, which is partly the issue related to the issue of gender.
In a survival strategy for this they depend on alternative sources of finance such as poverty alleviation
program grants either by the government or social institutions and NGOs, moneylenders (mobile banks)
relatives and neighbors. As a result they become dependent, the business is not sustainable, sandwiched debt,
and remain in the cycle of poverty. (Nani Zulminarni:2004)
Empowerment is not only involved the strengthening of individual members of society, but also regulations.
Instilling values of modern culture, such as hard work (hard working), independence (self reliance), saving
(efficiency), openness (open mind), the attitude of responsibility (Responsible), is an essential part of this
empowerment.
Why women shall be empowered?
1) Because women have the same interest in development, and is also a result of the development,
which has the same rights as men.
2) Women also have a special interest in nature on women and children. Less than optimal if initiated
by men because it requires a special sensitivity in nature, related to everyday life, socio-cultural
present.
3) To empower and involve women in development, will indirectly also empower and transmit a
positive spirit to the next generation, which is generally in everyday life very closely with a mother
figure.
4) (www.pnpmmandiri.com-pemberdayaan perempuan)
In a simple sense of the entrepreneur is a spirited person who took a risk to open a business in a variety of
occasions. Brave souls take risks means independent minded and dare to start a business without fear or
anxiety overwhelmed even under conditions of uncertainty. (Kasmis, 2007 : 18)
257
Entrepreneurship is a creative and innovative capability which is used as the base, tips and resources to seek
out opportunities to success. The essence of entrepreneurship is the ability to create something new and
different through creative thinking and innovative action to create market opportunities. (Suryana : 2003)
Entrepreneurship is believed to be a factor driving the progress of a country. Entrepreneur is required at least
2% of the total population to make a developed and independent country. This is understandable because of
the small number of entrepreneurs can create jobs that will provide positive effects for the economy. When
compared with the population of Indonesia, which is about 237 million in 2010 according to the BPS, then
2% is not a large amount. However, in reality the number of entrepreneurs in Indonesia is only about 0.2% of
the total population. (Nursito, 2013)
The above conditions are compounded by unemployment rates more precisely contributed by educated
unemployment. According to BPS data, until the month of August 2012 the unemployed with educational
background D3 and S1 reaches approximately 12.12% of the total workforce. Unbalance the number of jobs
with job seekers, where graduates of higher education continues to grow not followed by the labor market's
ability to absorb the graduates, a major factor in the high rate of unemployment of the educated.
The low interest in entrepreneurship is reflected in the small number of entrepreneurs need to get serious
attention from the government. The concept of thinking of looking for a job after graduating from college
needs to be changed into creating jobs. Hence the importance of entrepreneurial education that is expected to
provide sufficient knowledge of entrepreneurship among students. Entrepreneurship education is expected to
provide a theoretical foundation of the concept of entrepreneurship, form a mindset, attitude, and behavior of
an entrepreneur. (Nursito, 2013)
Nevertheless, the question arises: whether entrepreneurship education be the only determinants of the
emergence of interest or intentions towards entrepreneurship? According to Kalla (2011), education is
important to prepare prospective entrepreneurs, however, education is not necessarily going to give birth to
an entrepreneur. This suggests that there are other factors that influence entrepreneurial intentions.
In addition to education as an external factor that comes from outside the individual, there are also internal
factors that also affect entrepreneurial intentions. One of such internal factors is self-efficacy, which is a
person's belief on her ability to complete a job. According Indarti and Rostiani (2008), the personal trust has
an important role in the development of interest, including the interest in entrepreneurship. Internal factors
other than self-efficacy, attitudes also affect entrepreneurial intentions.
There is some debate as to: whether entrepreneurship can be taught or not. One side Believes that
entrepreneurship can not be taught Because entrepreneurs are born with natural talent, while others believe
that entrepreneurship is a mental attitude that can be formed through education (Lupiyohadi, 2007; Drucker,
1996). In addition, the results of research on entrepreneurship relation to self-efficacy also showed
differences. According Indarti and Rostiani (2008), self-efficacy affects entrepreneurial intentions, while
Segal (2005) and Wijaya (2008) reported no effect to the intention of entrepreneurial self-efficacy. It became
a research gap that opened up opportunities for further research. Therefore, this study was conducted to
clarify the differences and explain what factors that influence entrepreneurial intentions.
Entrepreneurial intentions can be a predictor of entrepreneurial behavior that will bring new entrepreneurs.
Internal and external factors of the individual suspected to play an important role against the formation of
entrepreneurial intentions. It is therefore important to know how patterns of Reviews These factors influence.
Entrepreneurial intentions are Analyzed in this study is the intention of Cooperative Setia Bhakti
entrepreneurial woman who influenced the external and internal factors. External factors are entrepreneurship
education has been received and provide entrepreneurial knowledge to SMEs, while the internal factors is
self-efficacy and attitudes, the confidence or belief in individual's ability to live the entrepreneurial activity.
Based on the above, it is formulated research problems. The research problem that will be analyzed further by
this study are as follows:
1) How will the entrepreneurial knowledge to the intention of entrepreneurial women entrepreneurs?
2) What is the impact of self-efficacy to the intention of entrepreneurial women entrepreneurs?
3) How does the attitude towards women entrepreneurs entrepreneurial intentions?
4) How does the interaction of entrepreneurial knowledge, self-efficacy and attitudes towards female
entrepreneurs entrepreneurial intentions?
258
LITERATURE AND DEVELOPMENT HYPOTHESIS
Research to see aspects of entrepreneurial intentions someone has received considerable attention of many
researchers. Some studies show the result of mutual support, while other studies give contradictory results
related patterns and relationship variables studied in relation to intense entrepreneurship.
Some of these studies include: research Linan (2004), and Rosianti Indarti study (2008) found that self-
efficacy results are positive effect on entrepreneurial intentions. Meanwhile, the results of different studies
are shown in research Segal (2005) and research Wijaya (2008), which shows the results of self-efficacy does
not affect entrepreneurial intentions.
Influence attitudes (attitudes) individually on the intention of entrepreneurship has been investigated a
number of researchers using elements attitudes contained in the Theory of Planned Behavior (TPB) of Ajzen
and Fishbein (1985) in Gurbuz & Aykol (2008) which includes the autonomy / authority, economic
challenge, self realization, and perceived confidence, security and workload, avoid responsibility, and social
career. In this study some elements of attitudinal variables that have the authority and autonomy (authority
and autonomy), want a job that is challenging and high economic value (economic opportunity), like jobs that
inventive and creative (self-realization) and have beliefs about entrepreneurship skills (perceived confidence)
in accordance with the hypothesis, supported in this study. These findings support previous research
conducted by Gurbuz & Aykol (2008) and Tjahjono & Ardi (2010). Perceived confidence and authority and
autonomy are the two elements that have a strong influence on entrepreneurial intentions. This means that an
increase in student entrepreneurship intentions can be done by increasing their self-confidence through the
mastery of skills in entrepreneurship and also give complete freedom to the students to determine their own
career choices in the future as they wish. On the other hand, with regard to the attitude factors, the study
found no significant influence of the elements avoid responsibility and social environment and carieer the
entrepreneurial intentions of students, in which both elements are hypothesized air negatively influence the
entrepreneurial intention.
Intention Entrepreneurship
Literally meaning intentions. The concept of intentions can be explained by several theories. In theory
reasined action, the intention of a person against behavior shaped by two main factors, namely the attitude of
certain behavior and the subjective norm. Attitude is an evaluation or assessment of one's positive or negative
amount of confidence in the particular object. Meanwhile, subjective norms, namely the extent to which the
individual desires to meet the expectations of a number of parties that are considered pertinent to the
particular behavior (Fishbein and Ajzen, 1975). In this case the intention is a function of attitude that will be
displayed in the form of behavior or they can be understood as a subjective probability of individuals to
behave in certain ways. Intense is a mediator influences a variety of motivating factors that impact on
behavior.
Another theory that explains the intention is that planned behavior theory is an extension of the theory
reasined action by adding perceived behavioral control that the perception of the ease or kesulitasn in the
fulfillment of behavioral interests (Ajzen, 1991). This theory intension position as a major determinant of the
behavior and the psychological aspects that influence a person's behavior or actions (Elliot et al., 2003).
According to this theory, the intention is the tendency of a person to choose to do or not to do a job.
Based on the discussion of the general intentions as above, it can be concluded that the intention of
entrepreneurship is the individual's subjective factors that appear in the form of a strong desire to become an
entrepreneur. According to (Katz and Gartner, 1988), the intention of entrepreneurship can be defined as the
process of finding information that can be used to achieve the goal of establishing a business.
Intention is a state entrepreneurial thinking that has direct and guide the behavior of individuals towards the
development and implementation of a new business concept. Entrepreneurial intentions are predictions that
can be trusted to measure the behavior of entrepreneurship and entrepreneurial activity (Krueger et al. 2000).
A person with the intention to start a business will have the readiness and better progress in the effort to run
than someone without the intention to start a business. The manifestation of it is shown in the strong will to
choose entrepreneurship as choice of work and prepare to make it happen. Therefore, according to Choo and
Wong (2006), through entrepreneurial intentions can be predicted which individuals who will become
entrepreneurs.
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Entrepreneurship Education
Education is believed to develop a variety of potential human beings. With education, intellectual power,
moral power and social power can be developed. In addition, through education anyway, knowledge,
attitudes and skills can be improved. Education is a conscious effort, which aims to change a person's
behavior. The education activities should be designed, regulated, monitored and evaluated in such a way to
be able to achieve its intended purpose.
Entrepreneurship education is a discipline that studies values, skills and behaviors in facing the challenges of
life. According to Suryana (2003), entrepreneurship is taught as a discipline for entrepreneurship has a whole
body of knowledge and the real, has two concepts, namely venture start-ups and venture growth as well as
having its own objects: the ability to create anything.
Entrepreneurial education has an important role for the growth of an entrepreneurial interest can be classified
in four categories. According Alcade et al., (2002), these categories are: entrepreneurial awareness education,
where education category has the goal to increase the number of people who have sufficient knowledge about
entrepreneurship. Education is directed to an element which determines interest, eg, knowledge, desire and
possibility to conduct entrepreneurial activities. The second category is education for startup, entrepreneurial
education categories that focused on specific aspects of the practice in the early stages of business, such as
how to get venture capital, legal aspects of entrepreneurship and others. The third category is the education
for entrepreneurial Dynamism, the purpose of this category of entrepreneurship education is no longer to
generate interest but develop dynamic behavior to promote entrepreneurial activity that has did. Categories
born entrepreneurial education is continuing education for entrepreneurs. Categories entrepreneurship
education is focused on improving the ability of entrepreneurs who have been there.
As well as other education, entrepreneurial education has certain objectives. According to Alberti et al.,
(2004) the purpose of entrepreneurship education are: to acquire the knowledge that is closely related to
entrepreneurship; acquire skills in using the technique, the analysis of the business situation and work plan;
identify the motivation, potential, talent and entrepreneurial skills and improve it; eliminating the risk
contained in the analytical techniques; develop empathy and support for the unique aspects in
entrepreneurship; changing attitudes and thinking that one of the changes; encouraging the emergence of new
businesses; and stimulate affective socialization element.
Knowledge has a very important role in the aspect of human life. In general, knowledge is defined as
everything that is known to or in connection with everything. Knowledge allows people develop useful skills
for life.
Likewise with entrepreneurial knowledge, also have a very important role in entrepreneurial activities.
According Hisrich (2008), entrepreneurial knowledge is the foundation of entrepreneurial resources
contained in the individual. There are several forms of knowledge that must be owned by an entrepreneur
(Suryana, 2008), namely: knowledge of the business to be initiated and knowledge of the business
environment around it that would affect entrepreneurial activity; knowledge of the roles and responsibilities;
knowledge of the personality and responsibility; and knowledge of the latter is the knowledge of management
and business organizations.
H1: Enterprise Knowledge positive effect on women entrepreneurs entrepreneurial intentions Surabaya
Self efficacy
The classic definition of the concept of self-efficacy is a person's ability on her ability to finish the job
(Bandura, 1977). In a further development, Bandura and Wood (1989), defines self-efficacy as confidence in
one's ability to drive motivation, cognitive resources, and a series of actions required to meet the demands of
the situation. At a later stage, Bandura (in Luthans, 2007) states that self-efficacy is a personal justification or
beliefs of how well a person executing a number of actions needed to adjust to the situation.
Self-efficacy has a variety of sources in the process of formation in a person. According Luthans (2007),
there are several sources for the formation of self-efficacy. The first source is the successful experiences that
occur repeatedly. This successful experience is seen as a very effective way to develop a strong sense of self-
efficacy for success will build self-efficacy in people. Difficulties and obstacles faced will teach the belief
that success requires hard work as well as providing an opportunity to achieve success by improving the
ability to control the situation better (Bandura, 1997), this will be the source of the emergence of self-
efficacy.
260
Sources of formation of the second self-efficacy, learning through direct observation, which one would
estimate the relevant skills and behaviors to serve as an example in doing the task. By observing and
modeling did against other individuals, one can learn from the other person. According to Bandura (1997), if
someone sees another person successful with a diligent effort, then that person will believe THAT he was
also able to achieve success. Assessment of the expertise that had also done, to find out a great effort must be
spent in order to achieve the necessary skills.
A third source for the formation of self-efficacy is a social persuasion. Individual self-efficacy can be grown
through the mechanism of social persuasion through others that are considered more competence. In this case
the social persuasion allows the presentation of information relating to a person's ability to complete a task.
The fourth source of self-efficacy is the assessment of the psychological state owned. This means that a
person is supposed to improve the emotional and physical abilities and reduce stress levels.
Efficacy in the development of a person can experience. According Omrod (2009), there are several factors
that influence the development of self-efficacy. These factors are: successes and failures before. The success
of developing self-efficacy, but not necessarily vice versa if a failure occurs. The failure may also develop
efficacy origin properly managed. A further factor was the message that the other person that someone will
succeed, for example, the message delivered by a teacher or other. Another factor is the success and failures
of others. It can develop self-efficacy because of the failure of others a lesson learned for someone, while
other people's success will spur individuals to be able to also reach history of success. The last factor to the
development of self-efficacy is the success and failure of a larger group.
Efficacy has an important influence on the individual, according to Cromie (2000), self-efficacy influences
one's beliefs on whether or not achieved its intended purpose. Meanwhile, Bandura (1997) believes that the
efficacy determines whether a person will behave in a certain, how strong a person can survive in the face of
adversity and how the success or failure to carry out the task will impact on behavior in the future.
Person's beliefs ability themselves to entrepreneurship will affect the person's desire to entrepreneurship.
Similarly, the women entrepreneurs themselves. In this case, according to Linan (2004), there are a number
of indicators that can be used to detect the entrepreneurial self-efficacy of women in entrepreneurship. The
Indicators are: the probability of survival after starting a business, the probability of success after business
establishment, has the quality to become an entrepreneur, the difficulty level of being an entrepreneur, a
sufficient amount of training to become entrepreneurs.
H2: Self Efficacy positive influence on Entrepreneurial Women's Entrepreneurship Intention
Attitude
Attitude is a mental or emotional readiness in some kind of action on something right. Also, it can be
interpreted as something that is learned and how individuals react to the situation and determine what to look
for in life.
In addition to the personality traits, some other studies highlight the influence attitudes (attitudes) towards
individual entrepreneurial intentions. Gurbuz & Aykol (2008) and Tjahjono & Ardi (2010), finding some
elements contained in the attitude of the model Theory of Planned Behavior of Fishbein and Ajzen (TPB)
influence the entrepreneurial intention of students. The elements contained in the attitude of TPB include
autonomy / authority, the economic challenge, self realization, and perceived confidence, security and
workload, avoid responsibility, and social career.
H3: Attitude positive influence on Entrepreneurial Women's Entrepreneurship Intention
RESEARCH METHODS
Sample and Data

The population in this study are all members of Koperasi Setia Bhakti Wanita Surabaya. Sampling using
purposive sampling method, where researchers can select the sample members who meet certain criteria
(Cooper and Schidler, 2006). The criterion is, in consideration of the members of Koperasi Setia Bhakti
Wanita Surabaya who have business activities. The number of respondents who planned to be used as
members of the sample in this study were 250 women entrepreneurs in Surabaya and is a member Koperasai
Setia Bhakti Women Surabaya, where it has met the criteria for most studies (have now, 2006).
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Analysis of the data used in research is to test the hypothesis is multiple linear regression with interaction
approach that aims to explain that variation in the dependent is affected by the interaction between the three
independent variables.
The data is processed and analyzed using SPSS for Windows 16.0 series. Analysis of the data is a very
important part of the scientific method for the analysis of such data can be given meaning and significance
that are useful in solving problems. Therefore, the purpose of this study in order to achieve an optimal, then
the data was analyzed by multiple linear regression analysis.
Multiple Linear Regression analysis was used to measure the effect of more than one predictor variable
(independent variable) on the dependent variable.
Operational definitions and measurement Variable

The research variables measured by research instruments developed in previous studies. The varable-
variables in this study are:
1. Intention Entrepreneurship (Y)
Defined as the seriousness of one's intention to perform the act or to bring up a specific behavior, namely
entrepreneurship.
2. Knowledge Enterprise (X1)
This variable is defined as the level of knowledge as a result of learning after following the process of
entrepreneurship education needed to start and run businesses. There are several forms of knowledge that
must be owned by an entrepreneur (Suryana, 2008), namely: Knowledge of the business to be initiated and
the knowledge of the surrounding business environment that will affect entrepreneurial activity; knowledge
of the roles and responsibilities; knowledge of the personality and responsibility; and knowledge of the latter
is the knowledge of management and business organizations
3. Self Efficacy (X2)
This variable is defined as a self-assessment of the ability themselves to organize and carry out the actions
necessary to achieve the specified performance. Bandura (in Luthans, 2007) states that self-efficacy is: the
probability of survival after starting a business, the probability of success after establishing the business, has
the quality to become an entrepreneur, the difficulty level of being an entrepreneur, a sufficient amount of
training to become entrepreneurs.
4. Attitude (X3)
The operational definition of attitude. Mental or emotional readiness of individuals to react to the situation.
Individual attitude measurement uses TPB index (theory planned behavior): occupational choice status index
that aims to measure a person's attitude to entrepreneurship. This instrument contains a statement regarding
the autonomy / authority, the economic challenge, self realization, security and workload, avoid
responsibility, social career and perceived confidence (Gurbuz & Aykol, 2008). Overall this instrument
amounted to 30 statement.
Descriptive statistical analysis of the study variables are presented to assess the general response of
respondents to the variables studied
Table 1: Descriptive Statistics Research
Variable Average Standard Deviation
Knowledge Entreprise 3,97 0,73
Self Efication 4,07 0,789
Attitude 4,038 0,737
Entrepreneurship Intentions 3,84 0,785
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According to the table 1 above is known that variable entrepreneurial knowledge has an average value of
3.97. This shows respondents tend to agree with the statement filed related variables entrepreneurial
knowledge and irregularities respondents to average value of 0.73.
Self efficacy variable has an average value of 4.07. This shows respondents tend to agree with the statement
filed related self-efficacy variable and irregularities respondents to average value of 0.789.
Variable attitude has an average value of 4.038. This shows respondents tend to agree with the statement filed
related attitudes and knowledge variables deviation of respondents to the average value of 0.737.
Variable entrepreneurial intention has an average value of 3.84. This shows respondents tend to agree with
the statement filed related variables entrepreneurial intentions and irregularities respondents to average value
of 0.785
Validity and Reliability

Before using a questionnaire to collect data on the respondents, it is first tested the validity and reliability of
research instrument.
Based on the validity of the test results by using data on the correlation test. The data is considered valid if
the correlation values calculated correlation value exceeds the data table. Values count r is the values in the
column "corrected item total correlation" and a correlation table values obtained from the data processing is
at 0.1982. If r is a positive result, and r count> r table, then the questions or variable is valid. Based on the
test results the validity of the 60 items above questions, it turns out all the variables showed a number greater
than r table = 0.1982 and p value (sign) = 0.000 <0.05.
Based on the results of the reliability test, an instrument is said to be reliable if the coefficient of reliability
(alpha) ≥ 0.5. According Cordato et al (2012) An intra - class indicated resources of 0.8 Correlation of very
high reliability between raters and indicated resources of 0.5 fair reliability. Score ≥ 0.5 were acceptable, and
score> 0.8 indicated resources excelent reliability.
The instrument is said to be reliable if the instrument is used several times in different time to measure the
same object would generate the same data. In this study the reliability test used Cronbach alpha technique, an
instrument is said to be reliable if the coefficient of reliability (alpha) ≥ 0.5. According Cordato et al (2012)
An intra - class indicated resources of 0.8 Correlation of very high reliability between raters and indicated
resources of 0.5 fair reliability. Score ≥ 0.5 were acceptable, and score> 0.8 excelent reliability indicated
resources. All the indicators used to measure variables entrepreneurial knowledge, self-efficacy,
entrepreneurial attitudes and intentions can be said to be reliable because it has a Cronbach's alpha coefficient
> 0.5
Classic assumption test

Normality test
To determine the normal distribution of data or not kosmogorov-Smirnov test was used. The regression
model with normal distribution when asymp sig (2-tailed)> 0.05. The results showed the data used in this
study with normal distribution, it can be concluded that the data used in this study normal distribution. This is
reflected by the value Asymp. Sig (2tailed) amounted to 0.335 (greater than 0.05).
Multicolinearity Test
To test whether the regression model has no correlation between independent variables. A good regression
model is not happening multikol if VIF < 10 and a tolerance value of > 0.1.
The results showed tolerance value 0,646 entrepreneurial knowledge, self-efficacy and attitudes 0.658 0.749
whereas 1.547 VIF entrepreneurial knowledge. 1,520 self-efficacy and attitudes 1.334. All independent
variables have VIF < 10 and >0,1 tolerance value, so it can be concluded there was no correlation between
the independent variables means no multicollinearity between independent variables in the regression model
used in this study
Heterokedstisitas Test
Based on the results obtained by the value of the variable probability 0.885 entrepreneurial knowledge, self-
efficacy variable 0.112 and 0.306 of attitude is larger than α = 0.05 it can be concluded that the regression
model used in this study free of problems heterokedstisity.
263
Multiple Linear Regression Analysis

Table 2. Multiple Regresion Calculation
Model B Std Error t Sign
Constan 1.236 0.265 4.664 0.000
Entrepreneurship Intentions (X1) 0.072 0.055 1.307 0.193
Self Effication (X2) 0.188 0.062 3.061 0.002
Attitude (X3) 0.384 0.068 5.657 0,000
Dependent Variable: Intentions entrepreneurship

Source: Appendix processed
Based on the results out put SPSS regression equation can be formulated as follows:
Y = 1.236 + 0.072 X1 + 0.188 X2 + 0,384 X3
From the regression equation above can be seen the following results;
Constants. In the study obtained a constant value of 1.236, it is means that if without being influenced
entrepreneurship knowledge, self-efficacy and attitudes that women entrepreneurs entrepreneurial intentions
(the case study Koperasi Setia Bhakti Wanita Surabaya) has a value of 1.236.
Variable entrepreneurial knowledge. Entrepreneurial knowledge (X1) in this study had a positive influence
on women entrepreneurs entrepreneurial intentions (case studies Koperasi Setia Bhakti Wanita Surabaya).
This is demonstrated by the positive regression coefficient of 0.072. If knowledge of entrepreneurial women
entrepreneurs (case studies Koperasi Setia Bhakti Wanita Surabaya) increases, the desire of women
entrepreneurs members of Koperasi Setia Bhakti Wanita Surabaya for greater entrepreneurship.
Self efficacy variables. Self-efficacy (X2) in this study had a positive influence on women entrepreneurs
entrepreneurial intentions (the case study loyal Koperasi Setia Bhakti Wanita Surabaya). This is indicated by
a positive regression coefficient of 0.188. If the women entrepreneurs have the ability to self-organize and
carry out the necessary actions to increase the entrepreneurship intention entrepreneurial women
entrepreneurs will also increase.
Variable attitude. Attitude (X3) in this study had a positive influence on the entrepreneurial intentions of
female entrepreneurs (case studies Koperasi Setia Bhakti Wanita Surabaya). This is indicated by a positive
regression coefficient of 0.384. If the women entrepreneurs have a mental or emotional high readiness in
entrepreneurship will increase the entrepreneurial intentions of female entrepreneurs.
Table 3: Correlation Coefficient Calculation
Model R R Square Adjusted R Square Std Error of the estimate Durbin Watson
1 0.541 0.292 0.283 0.33698 1.815
Based on the tables calculating the correlation coefficient R = 0.541, this indicates that variable
entrepreneurial knowledge, self-efficacy and attitudes towards moderate simultaneously affect
entrepreneurial intentions. While variations of entrepreneurial intentions can be explained entrepreneurship
knowledge, self-efficacy and attitudes at 29.2%, the remaining 70.8% is influenced by other variables outside
variables studied
Table 4: ANOVA
Model Sum of Squares Df Mean Square F Sig
Regression 11.025 3 3.675 32.364 .000
Residual 26.686 235 0.114
Total 37.711 238
Based on Table 4 shows that the value of p (sig) = 0.000 <0.05, entrepreneurial knowledge, self-efficacy and
attitudes simultaneously have a significant influence on the entrepreneurial intentions of Entrepreneurial
Women Surabaya (Case Study Koperasi Setia Bhakti Women Surabaya).
264
To know further that the analysis is correct in the sense of being able to explain the model used, it is
necessary to explain the results of the data analysis using the F test
Hypothesis Testing
F Test
To determine the significance of the influence of entrepreneurial knowledge, self-efficacy and attitudes
simultaneously to the intention of entrepreneurship will be used by F test
Based on Table 4 are known F count = 32.364 with a significance level of 0.000. It can be concluded that
there is significant influence entrepreneurial influence, self-efficacy and attitudes simultaneously to the
intention of entrepreneurial women entrepreneurs (case studies Koperasi Setia Bhakti Wanita Surabaya)
T Test
To determine the significance of the effect partially entrepreneurial knowledge, self-efficacy and attitudes
towards entrepreneurial intentions will be used to test the T.
Table 2 shows knowledge based entrepreneurial partially not significant effect on entrepreneurial intentions
because t value of 1.307 <t table (0,05) = 1.96 and p (sign) of 0.193> α = 0.05. The results of this study do
not support the hypothesis 1 which states that entrepreneurial knowledge significant effect to the intention of
entrepreneurship and supporting research Hisrich (2008) which states that knowledge of entrepreneurship has
a very important role entrepreneurial activity, because the entrepreneurial knowledge is the basis of the
resource entrepreneurship contained within themselves individual.
Many argue that entrepreneurship analogy with the dream of a person to be able to swim. Although theories
about swimming styles have accumulated, has been controlled well and literature is complete, it is useless if
not followed by swimming into the water (swimming practice). Similarly with entrepreneurship, there is no
point theorize that are not directly involved, so experienced, and again do not be afraid of failure, because
failure is success delayed (Saiman 2009: 57). It is appropriate that there is a phenomenon Koperasi Setia
Bhakti Wanita Surabaya entrepreneurial knowledge has no significant effect on entrepreneurial intentions.
While self-efficacy partially significant effect to the intention of entrepreneurship, because it has a value of
3.061 > t table = 1.96 and p (sig) of 0.002 <α = 0.05. The results of this study support the hypothesis 2 which
states that self efficacy significantly influence entrepreneurial intentions. If the women entrepreneurs have the
ability to self-organize and carry out the necessary actions to increase the entrepreneurship intention
entrepreneurial women entrepreneurs will also increase. Person's beliefs ability themselves to
entrepreneurship will affect the person's desire to entrepreneurship. Similarly, the women entrepreneurs
themselves. The results support the research Linan (2004), and Rosianti Indarti study (2008) found that self-
efficacy results in a positive impact on entrepreneurial intentions. Meanwhile, the results of different studies
indicated in the study. Segal (2005) and research Wijaya (2008), which shows the results of self-efficacy does
not affect entrepreneurial intentions.
According Linan (2004), there are a number of indicators that can be used to detect the entrepreneurial self-
efficacy in entrepreneurship. The Indicators are: the probability of survival after starting a business, the
probability of success after business establishment, has the quality to become an entrepreneur, the difficulty
level of being an entrepreneur, a sufficient amount of training to become entrepreneurs. This shows that
women entrepreneurs have the confidence to stay afloat, the confidence to successfully become an
entrepreneur after setting up operations, as well as the quality and training to become an entrepreneur it will
further enhance the entrepreneurial intentions of female entrepreneurs Surabaya.
Attitude (X3) in this study partially significant effect to the intention of entrepreneurship, because it has a
value of 5.657 > t t table = 1.96 and p (sig) of 0.000 <α = 0.05. The results support the hypothesis 3 were
expressing significant effect on entrepreneurial intentions. Mental or emotional readiness of women
entrepreneurs in reacting to entrepreneurship will increase the entrepreneurial intentions. The results also
support the research Gurbuz & Aykol (2008) and Tjahjono & Ardi (2010), finding some elements contained
in the attitude of the model Theory of Planned Behavior of Fishbein and Ajzen (TPB) influence the
entrepreneurial intention of students. The elements contained in the attitude of TPB include autonomy /
authority, the economic challenge, self realization, and perceived confidence, security and workload, avoid
responsibility, and social career. Koperasi Setia Bhakti Wanita female entrepreneurs have a strong
willingness to work (especially economics) with an independent spirit, has the ability to make the right
decisions and take risks, and have a high desire to be creative and innovative so that it will improve the
entrepreneurial intentions. It looks very much cooperative members who attend every activity practice
265
entrepreneurial skills held Koperasi Setia Bhakti Wanita with resource persons academics and practitioners
successful.
CONCLUSION
Based on the results of research and statistical tests as outlined above, the conclusion that can be drawn from
this study are as follows: (1) Knowledge entrepreneurship not significant effect on entrepreneurial intentions
of female entrepreneurs (a case study in Koperasi Setia Bhakti Wanita Surabaya). These results indicate
female entrepreneurs in the Cooperative Setia Bhakti Surabaya Women prefer plunge (practice)
entrepreneurship rather than theory. (2)
Self efficacy and significant positive effect on entrepreneurial intentions of female entrepreneurs (a case
study in Koperasi Setia Bhakti Wanita Surabaya). These results indicate the ability of self-contained on the
entrepreneur female Koperasi Setia Bhakti Wanita Surabaya is passionately in starting a business, have a
strong determination, acting with the full calculation in taking risks and have confidence (optimistic) will be
successful in starting a business, (3) Attitude positive and significant impact on the entrepreneurial intentions
of female entrepreneurs Koperasi Setia Bhakti Wanita Surabaya. These results indicate female entrepreneur
Koperasi Setia Bhakti Wanita have a strong willingness to work (especially economics) with a spirit of self-
contained, has the ability to make the right decisions and take risks, and have a high desire to be creative and
innovative so that it will increase the intention of entrepreneurship.
SUGGESTION
While the recommendations made in this study include: (1) For Koperasi Setia Bhakti Wanita Surabaya is
expected to hold a workshop Entrepreneurship (theory, practice and troubleshooting of various cases) to
increase intentions entrepreneurial cooperative members, (2) Koperasi Setia Bhakti Wanita Surabaya
continue to implement appropriate entrepreneurial skills workshops each business field members of the
Cooperative sustainable, because it is able to improve the entrepreneurial intentions of female entrepreneurs
Koperasi Setia Bhakti Wanita Surabaya as a career woman in his life.
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ORIENTATION MARKETING PARTNERSHIP INCREASE IN OPERATING

PERFORMANCE OF THE COMPANY: A THEORETICAL DEVELOPMENT
(DEVELOPMENT MODEL AT COMPANY MULTIFINANCE IN INDONESIA)
Edy Suryawardana & Teguh Ariefiantoro

Semarang University
(edysurya6@gmail.com, teguh@usm.ac.id)
ABSTRACT
The aim of this research in general is to build a structural model of causality to explore and examine the
processes and characteristics of learning development partnership marketing orientation in finance
companies in Indonesia. In addition, this study is expected to be able to explain the differences of research
results theoretically in improving company performance through partnership marketing orientation. In detail
these objectives stated as follows: The Dynamics in the strategic partnership between the finance company
with suppliers or customers are potentially multifaceted and full of complexities and contradictions.
Therefore, the purpose of this study to examine and exploit the dynamics in the multi-company strategic
partnership with suppliers and with customers; Build a marketing partnership model of causality orientation,
quality of service and collaboration to improve corporate performance by using a tiered structure of the
equation; Describing the application of marketing orientation profile partnership in the sector of finance
companies in Indonesia; Analyze and exploit the causal relationship between the orientation of marketing
partnerships, quality service, collaboration, quality of partnership, cooperation, trust, communication and
performance of the company as well as to analyze the influence of marketing orientation in the formation of
partnerships and collaboration as well as improved quality of service to obtain improved performance
finance companies in Indonesia.
Partnership marketing paradigm used in the following studies is expected to show how unique and
interesting to discuss issues related to the provision of the highest quality level in the field of financial
services (finance). The following research is expected to contribute to a better understanding of the theories
regarding factors - factors that make the inter-company partnership be sustained and able to realize the
potential value. Besides contributing to the need for a service company (multi-) to leverage the antecedents of
customer loyalty and the quality of the partnership to retain customers and get the long-term profitability.
Keywords: Performance, marketing strategy, partnership marketing orientation, service quality, customer
orientation, adaptation, collaboration, cooperation, competitor orientation, operational flexibility, dynamism
environment.
INTRODUCTION
1. The phenomenon of Industrial Business financing

Finance industry (finance) is now nimble boost sales figures. When the purchasing power drops, they are
more incentive to channel financing. Finance company known as a business entity outside the bank and non-
bank financial institutions specially set up to carry out the activities included in the business of financial
institutions. Financing institutions perform activities including the following business areas: leasing,
factoring, business credit cards and consumer finance. Moving consumer financing in the automotive sector
ranks first with 60%. There are several types of financing cooperation that can be done finance companies
and banks, such as the joint financing and channeling. What is meant by joint financing is when the source of
funds for financing is derived from the company's own financing or other banks. While channeling is if funds
intended for financing entirely from the banks and the risks arising from this activity are the owners of the
funds.
Table 1: DEVELOPMENT FINANCE COMPANY
December 2010 - 2015 (USD million)
Information
Years Total Total liability Cash in capitali Profit/loss Company
Assets financing flow Amount
2010 20.524.816 14.803.984 18.328.554 3.834.602 982.234 -476.577 101
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2011 26.539.701 20.550.358 22.607.060 5.224.016 2.887.312 432.677 125

▲ 29,31 38,82 22,98 36,23 193,95 190,79 23,76
(%)
2012 31.167.959 24.591.338 24.905.560 7.054.472 5.475.791 1.400.125 131
▲ (%) 17,44 19,66 10,17 35,04 89,65 223,60 4,80
2013 43.157.288 31.838.666 33.926.710 7.715.827 8.640.379 2.228.567 128
▲ (%) 38,47 29,47 36,22 9,37 57,79 59,17 -2,29
2014 66.879.236 44.659.096 54.509.912 8.882.552 11.767.106 2.652.106 132
▲ (%) 54,97 40,27 60,67 15,12 36,19 19,00 3,13
2015 86.896.015 61.039.483 70.861.376 9.771.987 15.413.841 2.960.012 141
▲ (%) 29,93 36,68 30,00 10,01 30,99 11,61 6,82
Source: based on the published financial statements of the finance company incorporated in APPI
(Indonesian Financial Services Association) in 2016.
During 2015, the financing company's performance is indeed impressive growth. A total of 141 finance
companies in Indonesia (from a total of 237 companies listed in Bank Indonesia), total financing reached Rp
61 trillion, up 27.65 from 2014 is Rp 47 trillion. Although net income rose, growth tends to decline.
Likewise, total assets, from 2014 to 2015 experienced a sharp decline. On the macro economic front, there
are two things that cause a decrease in consumption financing, namely: first, the rise in prices of fuel oil
(BBM), which automatically impact on the finance industry. So that makes the weaker purchasing power to
the motor vehicle. Second, the decline in consumer finance triggered by the increase in lending rates. The
increase in the interest rate of Bank Indonesia Certificates (SBI) causes the lending rates charged finance
companies participated soaring. Each 1% increase in interest rates will lead to increase in lending rates to 2%
financing. Companies finally raise of 3% - 4% of the increase in the interest rate. 70% credit financing
sources in Indonesia came from the bank. The remaining 25% is derived from the capital market and 5%
came from own capital. The grouping of finance companies by the amount of total assets (Criterion Bank
Indonesia), namely: finance large with total assets above Rp 1 trillion, finance medium with total assets of Rp
100 billion to Rp 1 trillion and small finance companies with total assets below Rp 100 billion.
Finance industry has a macro impact on the Indonesian economy, namely, contributing to economic growth,
provide development funds, contributing to tax non-oil sector, helped control inflation and reduce
unemployment. While the impact of micro is improving corporate profits, an increase in the company's
assets, the company's capital increase and improve the performance of financial ratios, capital ratios,
efficiency ratios and profitability ratios (ROA or ROI and ROE). Based on an exploratory study of several
journals, can put forward some research gap (gap study) were used as a justification for doing this
dissertation research: There is controversy controversial opinions or theories about the failure of the
partnership. In connection with the growing realization of the potential performance benefits that can be
achieved through a collaborative partnership, it is surprising that the study to specifically examine the
performance outcomes of the partnership is rarely done (Buvik and John, 2000). Such studies are also
motivated by the weight of evidence indicates that the majority of real partnership failed to reach the high
expectations (Cross, 2000; Gulati et al. 1994). Meanwhile, Sin et al. (2005, p. 50) found in his research that a
marketing partnership orientation positively and significantly affect business performance. In addition, there
is still little understanding of the application of the company's marketing of the relationship of market
orientation, especially orientation towards performance marketing partnership in the future transition
economies (Sin et al., 2005). There is a contradiction opinions or contradictory theories about the failure of
the partnership in meeting the expectations of good performance. Partnerships may be conceived as both are
making progress towards collaboration on a number of technical and organizational fronts (Holti and
Standing, 1996; Barlow et al., 1997; Thompson and Sanders, 1998). Several studies have shown the benefits
of a survey on the performance of the partnership (Cowan et al. 1992; Weston and Gibson, 1993; Knott,
1996; Larson, 1997). Even Sin et al. (2002, p. 668) found in his research that the orientation of a marketing
partnership has a positive and significant effect on the performance of businesses that include increased sales,
customer retention, ROI, market share and the whole performance is there. But there is also evidence of the
case about the failure of the partnership to meet the performance expectations as found by Racham et al.
(1996) and Angelo (1998). In addition, an exciting discovery and can not be alleged that the trust
(confidence) has no effect in improving business performance (Sin et al., 2002, hal.671). The invention can
be special when compared with the results of several studies which emphasize that trust is a key and central
constructs in partnership exchange (Ford, 1990; Morgan and Hunt, 1994). This is inconsistent but makes an
interesting phenomenon that is rarely exploited. There is a contradiction contradiction theory or opinion
regarding the failure of supply chain collaboration in improving corporate performance. The success of
collaborative customer partnerships - suppliers confirmed has the advantage of significantly better quality,
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improved service, reduce costs, accelerate the cycle of product-to-market (product - to - market), increase
flexibility, improve responsiveness to the market demand and customer service and increase the share of the
market (Anderson and Lee, 1999; Corbett et al. 1999; Mentzer et al. 2000; McLaren et al. 2002). However
Vereecke and Muylle, (2006, p. 1193), argued about the empirical findings that the collaboration will
improve in line with improved performance, but the improvement is very small and not always significant. It
can be concluded that supply chain collaboration is not suitable for improvement in the operation and
collaboration is not a guarantee for the company's success. That the lack of research on the partnership
strategy in distribution channels as part of business performance improvement. Therefore, it is possible
addition of a variable (eg: innovation and customer satisfaction or otherwise) to examine the success of the
partnership strategy in an effort to achieve improved business performance (Ahmad Sofyan, 2006).
Confidence in the perception of the supplier in the dynamic analysis of supply chain partnerships to achieve
the company's performance is still not. It can be argued that the perception of partnerships such as the study
Fynes et al. (2006) whether the presence of the supplier side represents the views of one party and denied a
view of the customer. This limitation is implicitly suggesting a different research significance based on the
partnership of two parties (suppliers and customers). Still a little application of measurement based on
cooperation and adaptation. So for the service industry requires procedural and adaptation techniques, which
allow still less prominent (Woo and Ennew, 2004, p. 1266). The study focuses solely the quality of the buyer-
seller partnerships can lead to silting understanding of marketing. Therefore, future studies could focus on
transactional exchange (transactional quality) and partnership exchange (quality of the partnership) and its
influence on quality of service, customer satisfaction and behavior (Woo and Ennew, 2004, p. 1267).
Therefore, the formulation of the problem posed in this study is: How is the process of marketing orientation
in developing partnerships in an effort to improve company performance? The study will be conducted in a
more comprehensive manner elaborating research problem above, into some of the questions posed in the
research for empirical research as follows: What is the rationality of finance companies in implementing a
marketing partnership orientation? How the finance company to exploit the marketing orientation
partnerships to achieve better performance? The quality of the partnership which is how the company
expected to achieve better performance? and What are the forms of adaptation and collaboration that will be
built by a finance company in an effort to improve its performance?
2. The purpose and benefit Research

The aim of this research in general is to build a structural model of causality to explore and examine the
processes and characteristics of learning development partnership marketing orientation in finance companies
in Indonesia. In addition, this study is expected to be able to explain the differences of research results
theoretically in improving company performance through partnership marketing orientation. In detail these
objectives stated as follows: The Dynamics-dynamics in the strategic partnership between the finance
company with suppliers or customers is potentially multifaceted and full of complexities and contradictions.
Therefore, the purpose of this study to examine and exploit the dynamics in the multi-company strategic
partnership with suppliers and with customers; Build a marketing partnership model of causality orientation,
quality of service and collaboration to improve corporate performance by using a tiered structure of the
equation; Describing the application of marketing orientation profile partnership in the sector of finance
companies in Indonesia; Analyze and exploit the causal relationship between the orientation of marketing
partnerships, quality service, collaboration, quality of partnership, cooperation, trust, communication and
performance of the company as well as to analyze the influence of marketing orientation in the formation of
partnerships and collaboration as well as improved quality of service to obtain improved performance finance
companies in Indonesia While the benefits to be gained from this study are: To provide the motivation to
perform routine learning partnership marketing orientation in finance company and motivation to minimize
marketing myopia (silting understanding of marketing) in partnership marketing practices; With the expected
use of the following research partnership strategies in general practice, the model partnership among
practitioners and their clients from a marketing standpoint, could potentially lead to higher quality services,
more efficient use of resources and improving the performance of the company; Contribute to the
development of science and knowledge to decipher the source of disagreement about the role of partnership
marketing orientation in improving company performance and can be used as consideration in building a
partnership in marketing and the establishment of learning to improve company performance.
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ANALYSIS OF LITERATURE AND THEORETICAL FRAMEWORK FOR THINKING
State of the Art

Collaboration is the level where the partners were able to work together to achieve the objectives in question
(Frazier, 1993), and has emerged as an important construct in the supply chain partnerships. Managers are
also increasingly encouraging and sponsoring collaborative activities across organizational boundaries
(Spekman et al., 1998; Womack et al. 1990). Simchi-Levi and colleagues (1999) discusses the tension that
exists between the cooperation / integration of the supply chain with anxiety for opportunism. That contribute
to this tension is the fact that the levels of different supply chain does not function the same goal; For
example, levels of the supply chain also worried about the disintermediation.
Collaborative behaviors that are based on trust and relationship commitment contributes to achievement of
common goals as well as partners perceived compatibility (Anderson and Narus, 1990). Strong and
significant influence of collaboration on performance indicators of effectiveness relationship of partnership
supports the idea that managers will find that the supply chain partnerships to be productive and valuable
(Bucklin and Sengupta, 1993). In general, the partnership includes a commitment by both organizations to
work together to achieve shared business goals (Bennett and Jayes, 1995). Term partnerships and alliances
are often used together, although alliances may be more often used to refer to a partnership in the project
(Green, 1995). Strategic orientation is often conceived as a key antecedent for superior performance /
superior (Day, 1994; Kohli and Jaworski, 1990; Narver and Slater, 1990). The researchers also said the direct
influence between strategic orientation and performance, therefore, imply that the market-oriented fisolofi is
key to the intent / desire of companies to deal with and react to events in the market environment. The
company's approach directly affects its ability to generate profits and compete successfully (Harrison-Walker,
2001; Pelham and Wilson, 1996; Slater and Narver, 2000). Dimensions of customers and competitors of the
strategic orientation represents a substantial part of the company's strategy and drive performance. It is said
that customer orientation has a positive impact on performance due to several reasons. First, the increased
performance of the natural extension of the marketing concept, which emphasizes attention to customer
needs, therefore it is said that the company-customer-oriented company has superior performance. Second,
customer orientation positively affect performance for the customer orientation of the company is a major
determinant of whether his actions were completely satisfy the customer or not (Harrison-Walker, 2001).
Competitor orientation of manufacturing companies have a similar effect on performance. Competitor
orientation of a company focused on the competitors. By gathering information related to the competition,
manufacturing companies can react appropriately to competitor movements and make steps, for example
using the procedures and flexible operation, to ward off competitors' offerings (Harrison-Walker, 2001). In
this way, the manufacturer also emphasizes internal efficiencies through resource management more
competent. In a model of conception, strategic orientation positively affect collaboration. This hypothesis
relationship reflects a recognition that the manufacturing company its strategic approach for achieving
performance goals require the coordination of effort when working with third-party logistics providers.
Collaboration, in this study, was defined as the capability associated with coordination, combining
operational processes and procedures, as well as sharing information with partners. Using the collaborative
capabilities of manufacturing enterprise reflects the recognition that coordination and joint efforts contribute
to the achievement of individual goals and objectives of each other (Cannon and Perreault, 1999; Siguaw et
al., 1998). In fact, the use of collaborative capabilities by manufacturing companies to help create a solid
foundation for improving customer orientation and competitors through a third-party logistics. Expertise in
third party logistics providers as well as proximity to customers to help provide information and different
perspectives about the needs of customers as well as competitors step. The need to understand the market
dynamics increase the tendency toward collaboration. Therefore, it is said that the collaboration is an
extension of the strategic orientation. Spekman et al. 2001; Zaheer et al. 1998; Zaheer and Venkatraman,
1995 found that trust is a major determinant of the success of the collaboration. Systems of control and trust
are important antecedents of successful collaboration. Furthermore, the effects may not be independent. Past
research has shown that the control systems could have unintended negative consequences in terms of trust
and cooperation. In particular, a number of researchers say that the control systems show signs of distrust and
therefore reduce cooperation. This opinion is important because of the trust as a determinant of the success of
the collaborative (Das and Teng, 1998; Jarvenpaa et al. 1998; Kale et al. 2000; Kramer and Tyler, 1996;
Landry, 1998; McAllister, 1995; Spagnolo, 1999; Coletti et al . 2004, p. 7). Customer orientation is placed
between the components of the most important of the concept of market orientation (Atuahene-Gima, 1995;
Atuahene-Gima and Ko, 2001; Jaworski and Kohli, 1993; Kohli and Jaworski, 1990; Narver and Slater,
1990; Ruekert, 1992; Shapiro, 1988). Thus, customer orientation is considered as an important cause of
product innovation, customer orientation pose for behavior-behavior that focus on understanding customer
needs (Atuahene-Gima and Ko, 2001). The first viewpoint states that firms are careful to listen to its
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customers who prefer less innovative products demanded by markets that already exist to ignore the more
innovative products. In this regard, because the market orientation aims to satisfy customers and reduce risk
in the innovation process, then this produces a new product that is more suited to their needs, and may cause
a degree of novelty lower product for them. Viewing angles are both states that companies oriented market is
in a good position to anticipate the evolving needs of customers and responded by adding products more
innovative, which may be beyond the experience of their current consumption (Salavou, 2005, p. 312 ).
Based on the above, it seems that the view of the investigators are not uniform regarding the direct effect of
market orientation as a construct aggregate against keinovatifan in the form of an update (newness) products
for its customers. Research (Lukas and Ferrell, 2000) following the latest advice to decipher market
orientation into its core components separately and examine its effects on product innovation. In particular,
research Salavou, (2005) to isolate and use customer centralized component of market orientation to
empirically examine its effects on the novelty of products for customers and generate conclusions about
where a valid viewpoint. Slater and Narver, (1995) stated that customer orientation encourages and facilitates
organizational learning, which in turn produces a superior ability to tailor product offerings to the market
demand. Together with the customer-based approach, companies must develop the ability to learn if the
company wants to introduce innovations in different (and Sinkula Baker, 1999). Mengidentifikaikan
customer orientation customer needs (Berthon et al. 1999) while learning orientation needs to deliver superior
value to them (Slater and Narver, 1995). In this regard, both the orientation reflects the organizational
capabilities that are synergistic (Baker and Sinkula, 2002). This synergistic relationship formed an important
determinant of the uniqueness of the new product. Although some researchers consider customer orientation
as important as focusing on competitors and coordination antarfungsional (Narver and Slater, 1990), other
researchers consider it as the most fundamental aspect of corporate culture (Deshpande et al. 1993; Lawton
and Parasuraman, 1980). The reason behind the high customer focus is the marketing concept, which
emphasizes the interests of customers. Customer orientation and continuous proactive support the trend to
meet the needs of customers. Therefore, a focus on total customer satisfaction foster continuous innovation
(Peters, 1984). Research is important in a customer-oriented sales come from two main areas, namely:
definitional, conceptualization and measurement issues; and antecedents, consequences, and the correlation
of customer-oriented sales (Schwepker, 2003). When a customer-oriented sales increase, so does the need for
managers to use more time to promote extra-role behavior of customer-oriented (Podsakoff and MacKenzie,
1997). According to Bettencourt and Brown (2003), in such behaviors include external representation (eg,
generate goodwill for the organization), and prosocial service behaviors (eg, follow-up customers on time).
Ingram et al. has identified a number of key research areas are related to the increased focus on customer
collaboration, among others, re-specification of the potential of the skills required by the sales manager, the
impact of increased customer collaboration on organizational commitment salespeople, and how the sales
manager to do some control while empowering salespeople, To engage in customer-oriented sales and build
sustainable customer relationships, sales reps need more training in the service failure recovery and conflict
resolution. Studies evaluating the suitability of failure analysis and recovery efforts in the customer-oriented
sales are urgently needed (Menon and Dube, 2004; Widmier and Jackson, 2002). In particular, research is
needed to identify the variables that indicate the level of moderation where a company are involved in the
training of service recovery. For example, sales strategy (based relationship vs. transaction-based), the type of
product (predominantly dominant tangible vs. intangible), and the competitive environment (emerging
markets vs a saturated market) may indicate where the recovery effort needed services. Inside unify conflict
resolution into the sales process, research is needed to discuss the approaches differ (eg, avoidance,
accommodation, confrontation, compromise, and collaboration) (Thomas, 1990) and when those approaches
are most effective (Bradford et al . 2004; Weitz and Bradford, 1999).
Deshpande et al. (1993) showed a positive correlation between customer orientation with innovative
companies, but does not distinguish whether these companies innovative in administrative or technical
aspects. However, an organization committed to superior customer value, known to innovate throughout the
business system and not solely to innovate in products or services (Parsons, 1991). Although reengineering
business systems, which is one form of innovation administration, less frequent than the innovation of
products and / or services, which is a form of technical innovation, Parsons stated that the innovation of
administrative just as important as technical innovation (and perhaps even more important for companies in
the service industry) in providing superior value to customers. According to Felton, the idea of a customer-
focused culture that facilitates organizational keinovatifan in technical and administrative fields are in
accordance with the opinion of the long-term orientation proposed by the marketing concept. Since the
concept of marketing to encourage business enterprises to forward-looking, customer-oriented business then
more likely to be interested in a long-term business outlook than short-term profit. In other words, these two
types of innovation (technical and administrative) shows the long-term investment for an organization; so,
companies are more likely to be innovative in a customer-focused culture than the culture that is less focused
273
on the customer (eg, the company with the purpose of seeking short-term profits). Kitchell, (1995) found that
in general companies that oriented the future is more innovative. Han et al. (1998) showed that keinovatifan
mediate the relationship between customer orientation and performance, but not between competitor
orientation or antarfungsional coordination with the performance. Kennedy et al. (2002) states that the
development of customer orientation should be the leitmotif for the entire organization. This opinion is
supported by many studies that justify a significant relationship between the customer orientation of a
company's financial performance and its market (Doyle and Wong, 1998; Ambler, 1999; Day, 2000).
However, despite the views on the results of customer orientation has been widely studied (LaBarabra and
Mazursky, 1993; Srivastava et al., 1998; Steinman et al. 2000), the causes for the culture of customer-
oriented is relatively unexplored and often expressed need further investigation (Kelley, 1992; Deshpande et
al. 1993). The term "customer" should be understood in a broader sense that includes all parties and
individuals will affect the character, scope and nature of the products or services to be provided businesses
(Dulaimi, 2005). Study of the relevant literature in business management has identified that research Narver
and Slater (1990, 1994) as well as Jaworksi and Kohli (1990, 1993) was very influential in shaping current
thinking on customer orientation. Narver and Slater (1990) states that "market orientation is an organizational
culture that is most effective and efficient to create behaviors necessary for the creation of superior value for
buyers, and therefore, it is very important for business performance". The use of the term "market
orientation" by giving them a signal that the attempt to deliver superior value to customers should not be
limited to the marketing department but also the entire organization must participate actively in the market-
oriented behavior (Canning, 1988; Masiello, 1988). The use of the term market orientation is helpful to
explain that customer orientation is more than just determination of the needs and expectations of customers
through the process of briefing and reciprocal but included "all powers" that may affect the identification and
fulfillment effectively to the needs and expectations of such (Dulaimi, 2004 p. 5). Although few who do not
agree on the importance of the organization to focus on customers who want to serve, but the way to achieve
this is still debated (Kohli and Jaworksi, 1990). Research Dulaimi, (2005) has been interpreted as the market
orientation pemperolehan market intelligence, this intelligence deployment in departments, and power the
organization's response to it. This definition, and the measures associated with it, has been accepted and
widely used (Matsuno et al. 2000). Siguaw et al. (1998) reported a study, using the same approach as above,
the effects of market orientation of the supplier's market orientation distributors. Since the marketing concept
was first emphasized in the early 1950s, practitioners and theoreticians have supported the development and
maintenance of customer-oriented enterprise (Webster, 1981; Du Gay and Salaman, 1992; Brady and Cronin,
2001). Research Wright et al. (1995) and Hult et al. (2001) defines customer orientation in the shape of the
objectives of the organization's bottom-line competitive and stated that the ultimate goal of all companies is
to achieve customer satisfaction, a perspective that is reflected in the literature of marketing strategy. This
conclusion is supported by penenlitian Day (1994) that customer orientation is a concept that transform
marketing into a competitive weapon potential, transfer values, beliefs, assumptions and premises
oganisasional toward two-way relationship between the customer and the company.
Customer-oriented culture show that companies concentrate on providing products and services that meet
customer needs (Day and Wensley, 1983; Dean and Bowen, 1994; Noble et al. 2002). To develop a
customer-oriented culture, it is often said that the organization should gather information from customers
about their needs and desires as well as the use of information provided by a customer to design and provide
products (Schneider and Bowen, 1993). Kohli and Jaworski (1990) defines customer orientation in the
context of market orientation. This view holds customer orientation as the organization's focus on
pemperolehan and deployment of customer and market information. Strong and Harris (2004, hal.184)
defines customer orientation as aspects of the culture and the behavior of market orientation, and thus is a
strategic element as important as competitor orientation and inter-group communication.
Customer-oriented culture includes privileges in customer interaction, market and customer familiarity with
the emphasis on cooperation (Deshpande et al.1993; Noble et al. 2002) and achieve high market performance
(Bitner et al. 1990; Ambler, 1999). Deshpande and Webster (1989) states that the culture of an organization
can lead to the values and beliefs are the same that encourage individuals to understand and accept the
objectives, organizational policies and norms of behavior in the organization. Further outlook also obtained
through research results Strong and Harris (2004, p. 199) that in the multivariate analysis, each tactical
approach is significantly related to customer orientation. Evidence was found that various tactics and the
tactics have contributed to the overall level of customer orientation. Tactics - tactics that is measured, a role
for sixty percent of the variation in the company's customer orientation. In this regard, it appears that the use
of various tactics are very effective. Implications also arise from the results of tactics - tactics relational.
Strong research and Harris (2004, hal.199) got strong evidence for a significant association between
relational tactics with the level of customer-centric organization. In particular, research Strong and Harris
(2004, hal.199) indicates the centrality of the relationship for effective exchange as well as the importance of
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managing these relationships in a structured manner and consideration. Strong research results and Harris
(2004, p. 199) in accordance with the conclusions of a number of leading researchers stated that in order for
the relationship develops, the dynamics between buyers and sellers require careful monitoring and
continuous. Disclosure of a significant relationship between tactics-oriented relational internally and
externally with the customer orientation reinforces this view. That is, the positive and significant correlation
was found between customer orientation by inter-group communication management as well as external
customer satisfaction ratings. In this sense, strong support emerged for a variety of studies have supported the
use of a balanced approach to the changes that centralized customer-oriented factors into account intra and
extra-organizational. These results reinforce the opinion that shows the need to consider relational factors in
the design and implementation of customer-oriented changes. Strong research and Harris (2004, hal.199) also
provides insights about the relationship between the tactics of human resources with customer orientation.
These results have implications not only for marketing, but also the strategic management, general
management and human resource management. In particular, the tactics of human resource management
discussed in the research Strong and Harris (2004, p. 199) appears as a tactic very significant in the
implementation and management of customer orientation beyond the boundaries of traditional responsibilities
and narrower for the marketing function. Research Hartline and Ferrell (1996) emphasized the impact that
can be owned by a customer-focused evaluation procedures in a structured and well-publicized against those
who provide these services. Strong research and Harris (2004) provides empirical evidence on the
effectiveness of the tactics in controlling (manipulating) the behavior of the customer contact staff. The
necessity of controlling such behavior is also demonstrated by studies that support the relationship between
empowerment and customer orientation. In essence, these results support the provision of management
services through cultural and behavioral control (Harris, 1998). Strong research and Harris (2004, p. 200)
provides a clear illustration that the development of fundamentally important orientation (eg customer
orientation) can not happen effectively without attention to the wide range of variables and factors that are
beyond the limits of marketing functions. The results of research Strong and Harris (2004, p. 200) donated a
lot of views on procedural tactics of customer-focused strategies and customer orientation. An important
issue faced by high-tech organisasai today is how to create and continue the strategic competitive advantage
in the business environment are volatile and complex, in the face of the future is unpredictable and unstable.
Strong research and Harris (2004, p. 200) gives results which indicate that a particular focus on strategies for
customer-oriented, customer care, and tactics visiting customers are the key drivers of customer orientation.
Competitive advantage by providing superior value to customers is emphasized in the forum of academics
and professionals (Doyle and Wong, 1998). Customer focused strategy and customer care strategy provides
efficient mechanisms of response to customers, and demonstrate a high level of commitment to customers,
provide customer-supplier communication means constant. Procedural tactics superior produce powerful
customer interaction and greater profitability for the organization. Visiting customers is the point of
interaction in which representatives of the organization met with the customer, and therefore provides a
medium in which the relationship can be created and maintained, ultimately leading to customer retention in
the long term. The results of research Strong and Harris (2004, p. 200) to support and develop the evidence
recorded in the literature that shows that the tactics procedural cause the organization to get the level of
customer orientation consistently high (Narver and Slater, 1990). Tactics - tactics that observed in Strong
research and Harris (2004, p. 200) provides a framework to think of potential managers to build and develop
successful customer orientation. Indicated that the development of customer orientation is not simple.
Instead, he showed that, as a strategy difficult to implement, there are a wide variety of tactics that can be
designed on a contingency-contingency of the company's contextual. Success in customer orientation
depends on limiting conflicts between departments, exploiting the dissemination of information on the
functions, decentralized structures of governance, and respect for management based on factors eg customer
satisfaction (Bentum and Stone, 2005, p. 30), Customer orientation is the kind of organizational culture is an
essential foundation of a learning organization. This is not just a series of processes and activities (Narver et
al. 1999). If culture is "the pattern of shared values and beliefs that help individuals understand organizational
functioning and therefore provides norms for behavior within the organization" (Deshpande and Webster,
1989), then the customer orientation should be implicit assumptions organizations providing norms norms for
the behavior of each individual in the organization. Her advice Deshpande and Webster (1989) to analyze
keinovatifan or related activities-team is associated with socialization and solidarity dimensions of the model
Goffee and Jones (1996, 2003). These values explain some of the core elements of cultural values, that is
how humans relate to one another. This includes trust in each other, flexibility in the use of new behaviors,
tolerance for risk-taking and proactive behavior, empowering individuals and opposition to bureaucracy. The
important aspect of the interpretation of organizational culture is through the articulation of customer
perception of the brand value of the organization. Rust et al. (2000) describes the brand value as the
customer's perception of "brand ethics". Schein (1984) only explain things (artifacts) that is visible but not
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the values underlying it. This is dangerous as long as it does not adequately reflect the values that guide
behavior. So, given the brand experience should be developed from the values learned together and shared
conviction of everyone in the organization. Interpretation Bartlett and Ghoshal (1995) could be confirmed in
an organization with a very high customer orientation. Thinking horizontally in the form of sharing
knowledge by communicating through the process and the system is not given a high priority.
With regard to the formulation of management strategies customer partnerships, Payne et al. (2001) showed
the need to include the entire group of stakeholders in the value creation process; namely, the formulation of
the strategy is only valuable if there is a clear customer focus. This is partly achieved through communication
but also through the involvement of senior management in customer activity daily. The survey found that the
contracts with senior management as one of the contributors to the process of value creation is rated no more
than average even in the organization which is very customer oriented. Likewise, it is known that the
management activities of their customers is directly correlated to the level at which they are valued by these
activities.
In the terminology of Treacy and Wiersema (1993) can be expected that in organizations with a score very
high customer partnership management, the discipline of customer intimacy will score high, but that is found
is the more traditional view, namely: operational kindness given a high rank. This contrasts with the results of
his research and Shefter Reichheld (2000) and Crawford and Hauguel (2002). Sustainable relationships with
the best customers of the organization is rarely felt. It has an impact on how the organization or its brand
perceived in the marketplace. Dimensions solidarity in terms Goffee and Jones (1996, 2003 in Bentum and
Stone, 2005, p. 48) is associated directly, which means the greater the solidarity aspect, the higher the
customer orientation. On the other hand, tissue culture is a good foundation for customer orientation, that
cultural learning is well supported in these environments. This study also proves that learning is most
excellent in tissue culture. Innovation is also an important function of management for innovation related to
business performance, as has been shown by many studies (Damanpour and Evan, 1984; Damanpour et al.,
1989; Khan and Manopichetwattana, 1989; Zahra et al., 1988). The results of the study showed a strong
correlation, ie positive and direct relationship between innovation and performance. Innovation is becoming
increasingly important as a way to survivalitas, not just growth, in the form of increasing competition and the
uncertainty of the environment (Gronhaug and Kaufmann, 1988). The latter relationship in the chain (ie,
innovation-performance relationship) has been investigated by many research in the field of organizational
innovation, and many have found evidence of a positive and strong. For example, the strong relationship
innovation performance has been demonstrated in a wide variety of different contexts, including
manufacturing enterprises in industrial and consumer (Zahra et al. 1988), the organizations services
(Subramanian and Nilakanta, 1996), and even institutions public (Damanpour and Evan, 1984). Noble et al.
(2002) found in his research that only pesainglah orientation that significantly affect business performance.
The manager may choose to not focus on profit maximization future, because profits difficult to predict or
because of the focus on earnings may lead to short-term orientation at the expense of long-term
considerations. Because it is difficult to determine how closely a company with "maximum profit," the
manager may be concerned that the use of such size could make them or their organizations to achieve
unprecedented performance mediocrity (Armstrong and Collopy, 1996, p. 188).
The market share is often used as a relative measure of performance, and may be representative of the real
interests of size, ie long-term profits. The market share is often used as a relative measure of performance,
and may be representative of the real interests of size, ie long-term profits. Because the market share is not
directly assess what is of interest, then there is potential for other factors to influence, causing its market
share to less accurate representation of the effects on profits. Moreover, basing decisions to achieve market
share could have a detrimental effect, such a price war (Armstrong and Collopy, 1996, p. 191).
Szymanski et al. (1993) conducted a meta-analysis of studies linking market share with profitability.
Research-cross-sectional study showed a positive correlation between market share and profitability.
The results of the study (Armstrong and Collopy, 1996, p. 197) show that use of a competitor-oriented
objectives is to inhibit profitability. Because the pattern of this evidence, companies should ignore their
competitors when creating goals, and should focus directly on profit maximization.
Because the evidence to date, (Armstrong and Collopy, 1996, p. 198) believe that microeconomic theory,
with its emphasis on profit maximization, is the most reasonable action for the company; that is, managers
should focus directly on profit. Customer focus may play an important part in the strategy to create superior
customer value, but an effective strategy requires more than just methods centered on the customer.
Dependence entirely on customer orientation often lead to imperfections in the business strategy, which is an
organization vulnerable to the action of reactive, rather than proactive, in the face of competitor strategies
(Day and Wensley, 1988). However, an unbalanced focus on competitors is also undesirable because of the
attention exclusively on the competitors could lead to neglect of the interests of the customers (Deshpande et
al. 1993). Therefore, Day and Wensley (1988) stated that the mix of customer orientation and competitor
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balanced is a prerequisite for maintaining a competitive advantage in the marketplace, which is consistent
with the opinion of Narver and Slater (1990) to give equal weight to the core components of the orientation
market.
Competitors by using the target as a reference frame, enterprise-oriented competitors try to identify strengths
and weaknesses. Although the approach is so often produce a view that helped the relative position them in
the market, the assessments done by the managers usually show a bias which gives more weight to the
evidence that is visible (ie, factors that tangible and visible) (Barnes, 1984) , Bias so emphasized the role of
technical innovation than administrative innovation, for technical innovation, which is associated with the
technology, is giving keberwujudan and visibility, while the administrative innovation, associated with the
administration, not give them. Noble et al. (2002) states that companies with high performance not only
gather market intelligence but also transform this knowledge into learning and strategic actions insightful.
Grant (1996) stated that the source of competitive advantage is how knowledge is coordinated and integrated
between the functional units, rather than knowledge itself. This opinion has implications need to examine the
moderating role of coordination mechanisms in the use of knowledge of customers and competitors.
Although coordination antarfungsional an important knowledge integration mechanism (Gatignon and
Xuereb, 1997), few studies have examined how such coordination to facilitate the effects of customer
orientation and product innovation by competitors to the competence of a company.
The first component of market orientation, the orientation of customers, covering pemperolehan information
about current customers and future as well as the dissemination and use of this information in the company.
The second component, that competitor orientation, referring to pemperolehan competitor information of
current and future as well as the dissemination and use of this information in the company (Jaworski and
Kohli, 1993; Narver and Slater, 1990). Competitive advantage is not just a result of the ownership and control
of valuable scarce resource but rather resulted from internal competencies that are special in which the
company transform its resources into superior customer value (Amit and Schoemaker, 1993; Barney, 1991).
Internal competencies as a way to preserve a competitive advantage difficult to imitate its competitor (Reed
and DeFillippi, 1990). With a deeper understanding about customers and competitors now and in the future,
managers have become dissatisfied with the inadequacy of capability at this time, which led to investment in
new capabilities (Huff et al. 1992) as well as strategic change sound (Moble et al . 2002).
The study results Langerak (2003, p. 108) show that customer orientation and competitor orientation
positively affects the differentiation advantage. These results confirm that a thorough understanding of the
target customer and the company's major competitors cause behaviors necessary to use resources to get the
exact position of differentiation in comparison with competitors. The implication is that management could
encourage activities that are needed to get an edge differentiation by using customer orientation and
competitor. This is facilitated by a management emphasis on both the orientation through continuous
reminders to employees that it is very important to be sensitive and responsive to the needs of the visible and
invisible from the customer as well as the ability to plan and the company's competitors (Jaworski and Kohli,
1993). The results of this study also showed that the coordination antarfungsional had no effect on
differentiation advantage. This is remarkable, because Narver and Slater (1990) states that the orientation of
customers and competitors, which is a prerequisite to obtain a differentiation advantage, is strongly
associated with the integration of the functional activities coordinated. The explanation may be that the
approaches used to achieve continued excellence and differentiation, including imaging brands, product
features and customer service, which in principle is external to the company, while the coordination
antarfungsional is internal to the company. Langerak research results (2003, p. 109) also show that the
competitor orientation has no influence on the cost advantage. This result is contrary to the notion that a
comprehensive analysis of the current and potential competitors are required to encourage activities that are
required to use the right assets to gain a cost advantage. The explanation may be that the low cost advantage
largely rely on economies of scale, volume and economical sphere. The effects of this low cost is basically
internal to the company, while the competitor orientation is external to the company. The implication is that
to understand the strengths and weaknesses of short-term and long-term capabilities and strategies of
competitors' current and potential is not a prerequisite to obtain overall cost advantage. In accordance with
the reasoning that the low cost advantage is internal to the company, the results of research Langerak (2003,
p. 109) show that the management could promote the activities necessary to achieve a cost advantage through
the coordinated use of corporate resources. If there is no tradition antarfungsional coordination, support and
effective leadership is needed to overcome the isolation of each of the functional areas of the business
functions of other (Jaworski and Kohli, 1993). Companies that operate in a dynamic environment face
challenges and difficulties in assessing changes in their customers, competitors step, and industrial
restructuring. Two dimensions of strategic orientation (ie customers and competitors) to overcome these
issues by focusing on customers and competitors to gain market knowledge. Having adequate knowledge and
views on the market allow manufacturing companies to create alternative approaches that contribute to
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operational flexibility. Companies that have developed this capability is to operate flexibly, mencipakan
procedures that cause a reduction in response time if necessary, respond quickly to competitor actions, and
the capability to respond to the dynamics of the customer. Consequently, the strategic orientation could be
responsible directly to achieve high flexibility in the operation of strategic and daily operations of the
company (Harris et al. 1998). Operating flexibility never an attribute that is difficult to be justified. Nobody
likes considered rigid, especially in business functions such as operating functions that are commonly
acquired a reputation that is not willing to change. Flexibility allows operations to increase the scope of the
market positioning of a company (Slack, 2005, p. 1201). This is even more true in times when the market is
now considered to be more volatile, moving faster, and more competitive. That is the reason why flexibility
remains an important topic in the literature of the operation. Now diminishing attention to defining the
meaning of flexibility, and more attention to the role of flexibility as a core competency operation, which in
the long run could be observed in almost all market context. Flexibility has occupied a central position on
how operations can be made strategically to play an important role in achieving competitive advantage
(Slack, 2005, p. 1201). The argument about the importance of manufacturing and service sectors of the
developed countries has been well studied around the world. However, regardless of the arguments about the
importance of manufacturing and service sectors as drivers of economy, or as a protection against economic
turbulence the long term, the fact remains that more than eighty percent of economic activity and
employment in the company non-manufacturing (services). So, although flexibility is no different from most
other topics in operations are more inclined to the manufacturing sector, this will further benefit from the
conceptual and empirical research in the context of services (Slack, 2005, p. 1208). Research Silvestro
(1993), as well as Correa and Gianesi (1994), which examines the flexibility in the context of the services, as
they distinguish between resource use flexible defensive and offensive, but the number is still less than
research based manufacturing. Nevertheless, the way in which flexibility is defined in the context of services,
such as "the willingness on the part of service workers to change the nature of the services or products to
meet customer needs" (Johnston, 1995) and the concepts of other services which include flexibility, eg "zone
countermeasures" (Johnston and Clark, 2005), the more important the need for research on all types of
manufacturing and services operations. Grubbstrom and Olhager (1997) examines the fundamental
relationship between the flexibility and productivity of the production level. Nevertheless, the problems of
adjustment of production levels in models EPQ (Economics Production Quantity) multi-item rarely studied
(Kreng and Wu, 2000, p. 255). Ranta (1990) uses the level of decision making more explicit by defining three
levels of flexibility: (i) strategic, (ii) tactical, and (iii) operational. In addition, Chandrashekar (1994)
considers operational flexibility as the ability to respond to changes in the volume or product mix with a
predetermined period of time (short term). Operational flexibility is defined as the ability of a system to cope
with changes in volume or product mix in the short period that has been determined (Kreng and Wu, 2000, p.
257). Operational flexibility has been hailed as the most important attributes or capabilities that need to be
operated effectively in a competitive environment. Give operational flexibility to the company's ability to
respond quickly to market demand fluctuates (Sanchez, 1995). Operational flexibility increases the
effectiveness of communication, plans, and strategies that will lead to increased performance of the company
(Miles et al. 1978). For example, operational flexibility can be realized through the company's ability to
deploy assets to take advantage of opportunities and / or avoid the problems (Grewal and Tansuhaj, 2001).
Accommodations can be made to take advantage of unexpected situations and to continue to add value for
customers. Successful attempt of the company to develop operational flexibility in mind to improve company
performance (Evans, 1991). Nevertheless, the fact that manufacturing companies using operational flexibility
capabilities alone do not guarantee that the relationship will be successful. The manufacturing company
should be able to supplement its capabilities. Numerous studies have focused on how businesses realize their
unique resources to manage relationships to foster cooperation and collaboration among companies
(Anderson and Narus, 1990; Borys and Jemison, 1989; Hamel, 1991). The implication is that companies use
relationship management in order to encourage the integration of processes and organizational activity. By
doing so will increase the company's unique resources which will further improve organizational
performance (Achrol, 1997; Bello and Gilliland, 1997; Hunt 1995). Therefore, the potential value of
operational flexibility should be accompanied by collaborative behavior among the partners for the
capabilities of this show a form of interaction that is invaluable partner to ensure open communication and
information sharing. Based on this, operational flexibility and collaboration are the capabilities that uniquely
contribute to the company's competitiveness and market success. The following will explain about some
things that may indicate an increase in the company's performance.
Marketing Strategy (marketing strategy) The relationship between strategy and performance marketing has
been recorded properly in the context of domestic marketing (Buzzell and Gale, 1987; Phillips et al. 1983;
Robinson and Fornell, 1986) as well as the context of international marketing (Aaby and Slater, 1989; Bilkey,
1985; Christensen et al. 1987; Cooper and Kleinschmidt, 1985). Some empirical evidence also supports a
278
positive relationship between the performance of the product adaptation (Cooper and Kleinschmidt, 1985;
Hill and Still, 1984; Kirpalani and MacIntosh, 1980), an adaptation sale (Killough, 1978), and pricing
competitively (Christensen et al. 1987; Kirpalani and MacIntosh, 1980).
Evidence suggests that the adaptation of products (Cavusgil and Zou, 1994; Shoham 1999), distribution
(Shoham, 1996b), and promotion (Shoham, 1996a) improve performance, while the influence of adaptation
rates (Koh and Robicheauz, 1988; Shoham, 1995) is still not certainly. Effect of implementation of the
concept of marketing by a company for its performance has been studied by many researchers from many
different viewpoints, mostly relating to the role of marketing in the shaping and shaped by corporate culture
and strategy enterprise level (Hooley et al. 1999; Mooreman and Rust , 1999; Webster, 1994, 1995).
Studies of marketing as a reflection of the corporate culture has explained the relationship between the
implementation of the concept of marketing and corporate performance. However, marketing as a factor in
the corporate culture has not been approached as a direct cause of the performance of the company, but as
something that affects the performance of the company indirectly through interactions with orientation-
learning (Baker and Sinkula, 1999; Sinkula, 1994; Slater and Narver, 1995) or strategy marketing (Morgan
and Strong, 1998; Slater and Narver, 1993, 1995). The use of marketing as a strategy has been shown to have
positive implications for the performance of the company (Menon et al. 1999). With the formal planning and
resource commitments, the uncertainty will be reduced and marketing strategies can be applied (Aaby and
Slater, 1989; Christensen et al. 1987), resulting in better performance for the company (Aaker, 1988).
Studies of the effects of marketing strategies make up the majority of studies examining the determinants of
corporate performance (Menon et al. 1999; Piercy, 1998). These studies can be divided into two categories,
namely the class of rational planning, the planning of strategies and incremental groups, regarding the
implementation of the strategy (Barney, 1997; Grant, 1995; Speed, 1993). However, the latest criticism of the
approach of the two sides has led research done from a different angle, this time regarding the results of the
strategic planning and implementation of the strategy (Menon et al. 1999; Piercy, 1998).
The situation analysis consists of explanation and understanding of the opportunities and threats that are
affected by changes in the environment, helping companies in the adaptation strategic to changes in a way,
therefore, affect the company's performance positively (Bourgeois and Eisenhardt, 1988; Capon et al. 1994;
Grant, 1995). The situation analysis refers to the systematic analysis of the strengths, weaknesses,
opportunities, and threats (SWOT) of a group in the areas of marketing strategy (Bourgeois and Eisenhardt,
1988; Kohli and Jaworski, 1990). Comprehensive nature refers to the systematic manufacture and analysis /
thorough evaluation of alternative strategies in the selection process strategy (Fredrickson, 1983).
Manufacture of a wide range of alternative strategies allows the selection of the most effective strategy by
evaluating the ability of the implementation of many of these alternative strategies (Schweiger et al. 1986).
Further studies have shown that comprehensive strategies are selected through processes of this kind have a
positive impact on business performance (McKee et al. 1990). Emphasis on assets and marketing capabilities,
particularly the emphasis on a wide range of capabilities, it has been said to have a positive influence on
corporate performance (Day, 1994). Integration of cross-functional and inter-departmental considered to
affect the market performance of a company in a positive (Ayers et al., 1997; Olson et al. 1995). To be a
successful strategy implementation, the functional integration of the teams' strategy becomes imperative, as
well as functional and political alignment between these teams with the whole organization (Menon et al.
1999).
Communication quality refers to the quality and quantity of official and unofficial communication in the
strategy-making process. High-quality communication lines to prevent an exit strategy, and improve the
implementation of the strategy itself, perform a key role in the success or failure of a strategy. Many studies
have concluded that the quality of communication, if it is high, to positively influence the performance of the
enterprise market (Kohli and Jaworski, 1990; Narver and Slater, 1990). Process Marketing Strategy Making
(MSM / process marketing strategy) consists of a situational analysis, selection strategies through the creation
and analysis of alternative strategies comprehensively, STP, integration of departments and functional,
communication, consensus, commitment of resources, mix 4P, and activities regulation (Becker and
Homburg, 1998; Menon et al. 1999). The elements are known to have positive influence on business
performance through improved specificity-neighborhood of strategies by factors internal / external (Capon et
al. 1994), increasing the probability to choose the strategies most effectively through checkpoints alternative
strategies effective (McKee et al. 1990), giving directives action to mix 4P and choose the strategies most
appropriate through a better understanding of the environment and trends Psar, fault detection sewcara early
in the process of implementing the strategy (Olson et al. 1995), repair modification and capability of
adaptation in the implementation of the strategy (Moorman and Miner, 1998; Slater and Narver, 1995),
reduction of uncertainty in decision-making and increased interest (Iaguinto and Fredrickson, 1997), the
provision of human resources, time and funds needed in in the implementation of the strategy (Ramanujan et
al. 1986), to meet customer demand targets (Kotler, 1997), and an increase in goal-oriented behavior (Bartol
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and Martin, 1998). The structure of the capabilities of marketing verified by unifying the concepts of market-
oriented culture and processes of marketing strategies, as well as the influence of these two factors on the
performance of companies identified. This study suggests a market-oriented culture and marketing strategy as
the components that make up a company's marketing capabilities (Joon Yoon and Lee, 2005, p. 16). In
addition, based on a literature review and explanation of the relationship between culture-oriented market and
marketing strategy, it is evident that the process of marketing strategy gives the relationship between the
culture of market-oriented simple and application of real marketing strategies, and that its influence on the
performance of the company is increased with increasing kebergejolakan environment ( Joon Yoon and Lee,
2005, p. 16). Therefore, the underlying principles is that in the absence of market-oriented culture and
processes of marketing strategies, the fulfillment of the objectives satisfactorily is difficult. So companies
should first follow the procedure of making a marketing strategy based on the foundation of the company that
is market-oriented culture to positively affect performance through improved marketing capabilities of the
company (Joon Yoon and Lee, 2005, p. 16). Other relevant issues are related to global marketing - that
adaptation versus global standardization as well as the relationship with the marketing of the market (Cooper
and Kleinschmidt, 1985; Samiee and Roth, 1992; Shoham, 1995, 1999). The level of standardization versus
adaptation of marketing is a function of the characteristics of the product, industry, market, organizational,
and environmental (Cavusgil et al. 1993; Jain, 1989; Shoham, 1995, 1999). In terms of strategic marketing
refers to the adaptation of the company STP (Segmentation, Targeting, Positioning) on competitive strategies
in the areas of business that have been (Webster, 1995). The process of marketing strategy designed to assess
the compliance of a company against the fundamentals in the planning and implementation of the strategy,
instead of evaluating the selection of appropriate strategies by companies (joon Yoon and Lee, 2005, p. 4).
Menon et al. (1999) defines Marketing Strategy Making, which is a concept that brings together the planning
and implementation of marketing strategies, as "a series of activities, processes, and routines are complex in
design and implementation of marketing plans." Emphasis assets and marketing capability refers to the use of
effective and sustainable access to core business processes, resources, and techniques that form the
foundation of marketing strategy (Day, 1994). Assets marketing consists of the size and scope of facility
investment, assets, brands, and excellence channel - assets that can be invested and used by marketers - and
capability refers to the ability to implement pricing strategies, customer service, and product development
(Day, 1994). Environmental Dynamism (environmental dynamics) A number of researchers in organizational
theory have examined the relationship-performance environment. At the enterprise level performance,
suggesting that the environment can affect performance (Hansen and Wernerfelt, 1989). Some theorists
organization has also considered the effects of certain dimensions of the environment to the company's
performance. Hambrick (1983) found dynamism is negatively related to the three performance measures.
Keats and Hitt (1988) found that dynamism negatively related to the operating performance. On television
station industry, Stearns et al. (1987) found that fluctuations in the total market advertising spending is
negatively correlated with the performance of the television station. Some studies have also been done on the
effect of environmental uncertainty on the performance of individuals. Argote et al. (1989) found that
uncertainty has a negative effect on performance. Regarding performance, it is known that the dynamism and
environmental heterogeneity reduces the performance, either directly or indirectly. A number of studies have
found a negative relationship between environmental uncertainty and the performance level of the company.
But research Sohi (1996, p. 60) showed interesting results: that is not just the performance of the macro level,
but even individual performance was affected by the changes and differences in the environment. Unlike
companies, salespeople can not choose their operating environment. They must learn to adapt and operate in
a specific environment. Because the environment can affect their performance negatively, management must
make several mechanisms that may minimize this negative effect. Such mechanisms may include the
provision of training to deal with different situations, improve the flow of communication, or even change the
decision making structures of the organization. In certain situations, which salespeople are faced with
different customers, one way to reduce the negative effects of environmental heterogeneity is to organize by
type of customer, or use customer management structures (Sohi, 1996, p. 60). With increased competition
and advances in technology, companies are facing a very complex environment and dynamic. This is
especially true in the international arena, where products and global markets has created a challenge for
companies to manage marketing and sales operations (Sohi, 1996, p. 49). The uncertainty of the environment,
and dimensions that dynamism and heterogeneity (plurality), has gained extensive discussion in the literature
of organization theory (Bluedorn, 1993). It is also increasingly important in channel management and
marketing literature (Achrol and Stern, 1988; Gaski, 1989; Lysonski, 1985). Environmental dynamism shows
the frequency change and displacement felt within the marketing forces of the external environment / tasks
(Aldrich, 1979 Sohi, 1996, p. 50). Changes in technology, customer preferences and competitive action are
some examples of environmental dynamism. The construct is also referred to as the variability or volatility
environment (Child, 1972 Sohi, 1996, p. 50), and is regarded as a dimension of uncertainty of the
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environment (Scott, 1992). From the description above can be a proposition:

Collaboration is an effort to strengthen inter-partners to achieve the company's goals. Collaboration is
affected by the strength of customer orientation and competitor orientation. So that together - together with
operational flexibility among partners in the company's performance is expected to increase. The marketing
strategy is a strategy to win business competition. Therefore it needs a reliable formula for the creation of
high performance expectations. Internal environment and the external environment that is conducive to
provide a favorable climate for companies in order to obtain the expected performance. This is described as
the framework of theoretical concept study. The conceptual framework is useful to provide an overview or a
road map for development of the theory of writing.
Orientat Adaptat Marketi

ion ion ng
Marketi
Quality Performa
of nce
service
Collabora
tion
Custom
er
Cooperat
ion
operational Competitor environment

flexibility Orientastio al dynamics
n
Picture 1. The Framework of Theoretical Concept
RESEARCH METHOD
1. Type Research
Type of research can be broadly classified into two kinds of type of research, the first type of research applied
research which has the objective to solve specific problems that occur at the time of the study. While the
second type is referred to as fundamental research or basic research that aims to participate in the
development of science (Uma Sekaran, 1992). This study was done to improve pemikiaran how to resolve the
problem that in general a lot happening in the organization. Therefore, research will be done this type of
research include both that fundamental research. The research process begins with the type of activities
undertaken preliminary research in the study of literature to seek justification from research problems.
Justification research problems can be done by studying literature at the Library or conducted an analysis of
secondary data. The activity merupkan exploratory research process which is preliminary research activities
conducted by a researcher to limit the problems of research in order to be applicable and researchable
(Zigmund, 1994). Type the research process of this type is a literature study with looking for new issue of the
journal as well as the old ones that are still relevant to the design of the research topic. From this study will
produce information about the development of the research that has been done and some of the research gaps
that open to the researcher. So this kind of research process is used as a handle research interest in order to
obtain a better development theory (Uma Sekaran, 1992). The development of the research results will be
summarized in state of the art research. State of the art of literature study results will be classified into three
categories. The first category relates to the study of partnership marketing orientation, the second relates to
the quality of service and the third related to the collaboration. In initial studies will be done also review of
the field (Pilot Study) to obtain empirical support so that this study can obtain aplikabel findings. First field
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visit will be made, a visit to the offices of Bank Indonesia Semarang. The visit was conducted to determine
any industry to be studied and to identify the actual problem in the target population. In this pilot study will
be obtained secondary data that can be used as reference research support. Secondary data will be obtained
for example census ever conducted by Bank Indonesia or the activities of other research data collection. By
analyzing secondary data and literature study is expected there will be no reinventing the wheel in the
collection of primary data. Type the second study is a descriptive study to describe the profile, characteristics
or profile companies live time partnership that has built companies in the industry that made the object of
research. Descriptive research is important to determine a case study on some companies to explore the
various findings relating to aspects of behavior and development of the live time of the partnership within the
company sampled. Thus the type of descriptive research conducted to answer the question of who, where,
when and how a phenomenon occurs (Zigmund, 1994). The research process is expected to help in the
development of thinking characteristic of an object of interest or research which will then be decided how the
implementation of policies related to the object. In addition, descriptive study was conducted to analyze the
policies that can be applied in industry after testing the hypothesis. Type the next study to be performed is a
research tiered model of causality. This type of research will test the hypothesis that has been proposed which
has been summarized in the research model. Data research is research data that is polling data that is a
combination of time series and cross section data (time slice). Stages levels of this analysis will be described
in Path diagram to analyze the logic of linkages between research variables. Another goal of the path analysis
to determine which variables that serve as antecedent and which acts as a consequent. The main objective of
causality research is to identify the causal relationship of partnership. The relationship will be obtained from
a development of the theory in the domain of research partnerships. The analysis used in this causal models
using hierarchical regression analysis because many variables are mediating. Goodness of fit test performed
before the model is held hypothesis testing. Goodness of fit test models are most instrumental in tiered model
of 2, but because this study used a causality is tested by khai squared 2 index large enough number of
cases, the test must be accompanied by goodness of fit test to another. This type of research that will be used
is survey by the case of some companies to obtain data that is both behavioral and longitudinal (diagnostic
analysis). Confirmatory analysis is used to explain the validity of the indicators or research instruments each
construct. Before the questionnaire handed down on the field content validity test is required so that the
instrument is not biased. While testing the significance of the influence of exogenous variables indogen to
variable regression analysis using the tiered model of structural equation modeling. Moderator variable
environment will be applied by setting the intensity of competition is high and the intensity of competition is
low.
2. Research Object
Object of this study consisted of companies that do strategic partnerships with other companies for both a
supplier and distributor. Unit research of this study consisted company owner and executive manager of the
company buyers and suppliers who woke up in a network of finance companies. The industry is quite
interesting to study because the competition is sharp and has a substantial contribution in the field of
economics. The target population of the study includes some financing companies operating in Central Java
and Yogyakarta. Some of the company's representative will be used as case studies (diagnostic analysis). The
sampling method used was purposive notwithstanding any element of randomness.
3. Conceptual Definition Variable

In the design of the study will be described types of variables and definitions used in the conceptual and
operational. After operationally defined later described how measurements of these variables:
Performance
Performance is an indicator of the success and efficiency of the company's behavior. Performance indicators
measured by performance marketing and financial performance.
Quality of service
A form of behavior, relatively, but not equivalent to the satisfaction, resulting from a comparison of
expectations with perceptions of performance.
Quality Partnership
Rate all the strength of a partnership and levels to discover the needs and expectations between partners that
is based on a history of success or failure.
282
Trust
The firm belief that other companies will do the positive impact on the company and does not take
unexpected actions that negatively impact the company.
Cooperation
Complementary coordinating activities of the company or organization in a business partnership to produce
maximum results mutually beneficial.
Communication
Formal and informal sharing of meaningful and sharing information between companies in a timely manner.
Collaboration
The degree to which the partners were able to work together to achieve the objectives in question.
Orientation Marketing Partnership

The involvement of the creation, development and maintenance of a committed relationship, interact with and
benefit with our customers (partner) selected at all times.
4. SAMPLE FRAME, DATA COLLECTION AND DATA ANALYSIS TECHNIQUES
Sample plan that will be used in research are also included in the study design. Who will be a sample of this
research is something that is very critical that the data collected in accordance with the purpose of research.
The target population in this study are companies in some industries that cooperate in a long-term
partnership. Of the target population will be withdrawn sample research. The target population is a specific
object or a complete group of relevant research. There are two types of sampling methods that will be used is
probabilistic sampling and non-probabilistic sampling. But the reality is not as easy as selecting one of the
two methods of sampling because there are some obstacles in the research. The sampling method used is the
method of sampling that can promise sampling error as small as possible by taking into account the
operational feasibility, notwithstanding any element of randomness. Industry characteristics such as the
location, number and industry become the core business will be obtained from the Bank Indonesiadi regions
surveyed. Personal characteristics data will be obtained through a structured interview with the target
respondent company managers in the research area. Such information will then be drawn sample frame
matches. Sample frame is a list of elements or research units that enable samples can be withdrawn or
population research work (Zigmund, 1994). The difference between understanding the sample drawn by the
working population will cause an error (sample frame error). Symptoms of this kind of error occurs because
the sample does not reflect the population. Thus concluding the study would be biased. Total sample of
companies that will be sought amount to 100-200 companies. To search for objects of research will be
surveyed into sample unit used cluster sampling by grouping the sample by geographic area such as
Semarang or Yogyakarta. While the selection of the company as a case study will be conducted with a
purposive sampling. The analytical method used in this case study is a diagnostic analysis.
The research data that will be collected consist of primary data and secondary data. Primary data was
collected through interviews and observations were aided by a questionnaire. Secondary data was collected
from a sample of companies. The amount of data or the respondent about 100-200 which include companies
in the financial services industry sectors (finance). Data processing and data analysis used AMOS and SPSS
software.
Contributions Theory and Managerial Of Research

Partnership marketing paradigm used in the following studies are expected to show how unique and
interesting to discuss issues related to the provision of the highest quality level in the field of financial
services (finance). The following research is expected to contribute to a better understanding of the theories
regarding factors - factors that make inter-company partnership be sustained and able to realize the potential
value. Besides contributing the need for a service company (multi-) to leverage the antecedents of customer
loyalty and the quality of the partnership to retain customers and get the long-term profitability.
Theoretically, this research is expected to find a positive performance as a result of the development of
strategic marketing orientation. Strategic marketing orientation can be successfully implemented if the
quality of services provided in accordance with the company's perceived expectations. Moreover, the
discovery of positive corporate performance and significant can be achieved by building a marketing
283
partnership orientation that is essentially a strategy of creating a strong alliance between partners (buyers -
sellers).
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IMPLEMENTATION PROGRAM OF CORPORATE SOCIAL RESPONSIBILITY

AT BATIK SMES IN KAMPUNG BATIK SEMARANG
Diana Puspitasari
Semarang University
dianapuspitasari887@yahoo.com
ABSTRACT
This article describes the implementation of Corporate Social Responsibility (CSR) at Batik SMEs in
Kampung Batik Semarang period of 2010 until 2014 and outlines the suitability of implementation as well as
the expectations of the batik of the implementation of its Corporate Social Responsibility (CSR), where the
program is a strategic step in empowerment of small and medium enterprises (SMEs) in order to improve the
economy, particularly through employment.
This research uses descriptive exploratory study, which seeks to broadly explore the causes of the
phenomenon and the conditions of the problems that occurred at that time, and aims to describe the state of a
phenomenon. This study did not use a hypothesis but only clarify the picture of the existence of a variable,
symptoms or conditions. The circumstances described in this study is how the implementation of Corporate
Social Responsibility (CSR) is applied to the batik artisans in Kampung Batik Semarang is already realized
well and on target, or just the opposite.
The data collection technique using the process of interview, observation and documentation. The study
found that the implementation of Corporate Social Responsibility (CSR) in Kampung Batik Semarang
facilitated by institutions and related agencies, and has been running well, such as facilities batik exhibition,
provision of capital, counseling and training batik, relief materials and equipment batik, as well as batik
waste processing aid. But there are some less according to what is required by craftsmen, due to the lack of
communication between the giver and the recipient of the program. So we need good communication between
the giver and the recipient of its Corporate Social Responsibility (CSR) as a factor supporting the success of
the program.
Keywords: Corporate Social Responsibility (CSR), CSR Program Implementation, Kampung Batik Semarang
INTRODUCTION
Background
Corporate social responsibility (CSR) in Indonesia is basically how to manage the company in part or as a
whole to achieve a positive impact for themselves and the environment. With the Company Law number 40
of 2007, corporate social responsibility (CSR) has now been widely practiced in many companies in
Indonesia, especially on public companies. Today, Corporate Social Responsibility (CSR) is no longer a
slogan popularity for the company, will but it is the policy of the Government, especially for State-Owned
Enterprises and Regional (SOEs and enterprises) to set aside funds amounting to 5-10% to be allocated as
environmental awareness activities and social enterprise as a form of corporate social performance (Sukarno,
2008). Social responsibility of the company is reflected in the compensation of concern to the community,
one of which is the concern for the empowerment of Small and Medium Enterprises (SMEs) growing around
the corporate environment. The existence of SME employment opportunities are vast for the community so
that it can be a driver of economic growth of a country. One of the types of SMEs that had a role in the
economy in Indonesia are SMEs Batik.
Batik products produced by the batik industry in Indonesia there are 3 (three), namely, batik, printed batik
and batik printing. Batik products bring distinctiveness and cultural heritage is a legacy of the Indonesian
people who adi superb. Almost every region in Indonesia has its own art and batik motifs, not to mention the
city of Semarang. Batik Semarang is a cultural heritage that is distinctive and unique, as well as the cultural
identity of the city, with a motif inspired by the iconic city of Semarang, such as buildings in the old city of
Semarang, typical food of the city, the legend, and the flora and fauna that exist in the city of Semarang.
Batik SMEs in Kampung Batik Semarang Semarang, RW 2, Village Rejomulyo, District East Semarang.
Most of the batik industry in Kampung Batik is managed by an individual who is also the owner and manager
of the company as well as utilize the labor of the family and close relatives, thus requiring sustainable
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development through Corporate Social Responsibility (CSR) from related parties, one of which is the
government. Because it is difficult for small and medium enterprises like the batik industry if there is no
government support let alone compete with the textile industry which has a huge capital. In addition to the
support of business partners can help small industries to support the business that they do.
A fundamental problem in batik SMEs in Kampung Batik Semarang : less optimal program of Corporate
Social Responsibility (CSR), which has been running and is not in accordance with the wishes and desires of
batik artisans. Lack of good communication between craftsmen and low awareness of the artisans to take
advantage of its Corporate Social Responsibility (CSR) well, become an obstacle in the implementation of
the program berkelanjutan.Perlu improved the performance of the function of the donor program (Bank,
Department of Cooperatives and SMEs, government of city, boutique owners, designers, etc.), in order to
increase guidance and business development.
Research Question
Based on the background of the problems described above, it can be formulated the following research
questions: How is the implementation of Corporate Social Responsibility (CSR) at Batik SMEs in Kampung
Batik Semarang?
Research Purposes
In accordance with the problems and research questions above then the goals to be achieved in this study are:
To investigate the implementation of Corporate Social Responsibility (CSR) at Batik SMEs in Kampung
Batik Semarang.
Corporate Social Responsibility (CSR)

Corporate Social Responsibility (CSR) in Indonesia is basically how to manage the company in part or as a
whole to achieve a positive impact for themselves and the environment. Today, with the Company Law
number 40 of 2007, CSR has now been widely practiced in many companies in Indonesia, especially on
public companies Corporate social responsibility (CSR) and it‘s no longer a slogan popularity for the
company, but already the policy of the Government especially for State-Owned Enterprises and Regional
(SOEs and enterprises) to set aside funds amounting to 5-10% to be allocated as environmental awareness
activities and social enterprise as a form of corporate social performance (Sukarno, 2008). Social
responsibility of the company is reflected in the compensation of concern to the community, one of which is
the concern for the empowerment of Small and Medium Enterprises (SMEs) growing around the corporate
environment.
The concept of Small and Medium Enterprises (SMEs)

Micro, Small and Medium Enterprises (SMEs), according Sumodiningrat (2007) in Sukarno (2008), has the
main characteristics: (1) generally in trying not to separate managerial position with the owner; (2) using
manpower alone; (3) unbankable rely on their own capital, (4) portion is not incorporated and has a relatively
low level of entrepreneurship. Another criterion according to Bank Indonesia are: (1) ownership by
individuals or families; (2) utilize simple technology and labor-intensive; (3) the average level of education
and skills are low; (4) the majority were unregistered or not incorporated as well; (5) does not pay taxes.
Research Accomplished
Several previous studies relevant to this study include:
1. Sukarno (2008): in a study entitled "Contribution Toward Corporate Social Responsibility Corporate
Social Performance In Several Industries in Sidoarjo" find results that Corporate Social Responsibility has
significant influence and positive impact on Corporate Social Performance, and Corporate Social
Performance has significant influence and positively to the empowerment of small business craftsmen
shoes and sandals in Sidoarjo.
2. Mulyani (2011): in a study entitled "Implementation Program of Corporate Social Responsibility (CSR) in
the SME Empowerment At the Bank", it was found that the results of the Bank's CSR program has been
implemented and well dijalankandengan accordance with the Minister and the related documents were
290
there is. The weakness of the bank in carrying out CSR programs is the shortage of human resources, and
the level of congestion repayment is still very high.
RESEARCH METHOD
Types of Research
This research uses descriptive explorative , that is trying to dig broadly causes of the phenomenon and the
conditions of the problems that occurred at that time , and aims to describe the state of a phenomenon, which
in this study did not use a hypothesis but only clarify the picture of the existence of a variable, symptoms or
circumstances. The circumstances described in this study is how the implementation of Corporate Social
Responsibility ( CSR ) is applied to the batik artisans in Kampung Batik Semarang is already realized well
and on target, or just the opposite. The data collection technique using the process of interview, observation
and documentation .
Research Subject
Subjects used as a sample in this study is the batik artisans in Kampung Batik Semarang who are members of
the Society consisting of 12 artisans.
Table 1
Craftsmen group in Kampung Batik Semarang
No Name of Batik SMEs Owner
1 Ngesti Pandowo Mr. Utomo
2 Figa Collection Mrs. Siti Afifah
3 Batik Cinta Mr. Eko
4 Elly Collection Mrs. Ellyzabeth Algonda
5 Balqis Collection Mr. Fery
6 Batik Kinanthi Mrs. Siti Kholifah
7 Batik Smaradhana Mrs. Iin
8 Batik Kurnia Mrs. Tumi Welas
9 Batik Anggraini Mr. Tri Mujiono and Mrs Ida
10 Batik Temawon Mr. Agus Imam
11 Batik Handayani Mrs. Rini Sri Handayani
12 Batik Rusida Mrs. Yayuk
Source : Interview with Mr. Tri Mujiono, the Chairman of the Association in Kampung Batik Semarang
Types and Sources of Data

The type of data in this study are primary data and secondary data. The primary data obtained directly from
informants batik, primary data used in this study was obtained from interviews interviews and observations to
the batik makers. While secondary data is data obtained indirectly, either in the form of information and
literature that has to do research that are complementary or supporting the primary data, secondary data from
published sources to support the writing of research and obtained from the relevant literature on the problem
as a basis to object research and used to analyze them appropriately. Secondary data in this research is data
distribution SMEs in Kampung Batik Semarang.
Technique of Data Collection

Data collection techniques used in this research is the interview or interviews with batik artisans in Kampung
Batik Semarang who are members of the Society of batik artisans, keen observation and data collection by
conducting direct observation and documentation of the activities and conduct of the study.
Technique of Data Analysis

The data analysis is the process of organizing and sorting data into patterns, categories and basic description
so you can find the theme can be concluded that the analysis of the data is a move to simplify the research by
using a sharp analysis and systematically with the intention that the research generated can be easily
understood deeply and thoroughly. In the execution of this study , after the data is collected , the data are
analyzed by means of explorative, which were extensively on the implementation of its Corporate Social
Responsibility ( CSR ) is applied to the batik in Kampung Batik Semarang is already realized well and on
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target , or just the opposite , and outlines the suitability of implementation as well as the expectations of the
batik of the implementation of its Corporate Social Responsibility ( CSR ).
RESULTS
Implementation of Corporate Social Responsibility ( CSR ) at Batik SMEs in Kampung Batik

Semarang.
Some of the Corporate Social Responsibility ( CSR ) in Kampung Batik Semarang received by batik artisans
have not been completely worked well , because there are some programs that are not in line with
expectations craftsmen. Less than optimal program of Corporate Social Responsibility ( CSR ), which has
been running due to lack of communication between the giver and the recipient of the program. Lack of good
communication between craftsmen and low awareness of the artisans to take advantage of its Corporate
Social Responsibility ( CSR ) well become a bottleneck implementation of the program on an ongoing basis .
Here is described the implementation of Corporate Social Responsibility ( CSR ), which has been running for
batik artisans in Kampung Batik Semarang comes from an interview a couple of batik artisans in Kampung
Batik Semarang :
―Yes once given training in batik , but it was so long ago. Many come but in fact until now very few
craftsmen who still survive as batik craftsmen . His yes-it that still exist until now.‖
(Personal interview , Eko , Batik Craftsmen, May 30, 2016)
―Already had received assistance in the form of equipment from POLINES Semarang batik waste treatment
plant , but from the beginning given until now has never been used at all . Because there is no waste
treatment plant operation training of the parties concerned . Additionally in Kampung Batik , batik artisans
bit once found, the rest just a batik trader.‖
(Personal interview , Tri Mujiono , Batik Craftsmen, May 30, 2016)
―Our difficulty in filing the loan capital , because the interest on the loan offered is very high and requires
collateral that not all batik artisans have it. But more than that we need now is help to renovate Balai Batik
is already damaged and collapsed , so that the future can be used and revived the main function hall Balai
Batik as a central hub and a gathering place for batik artisans in Kampung Batik.‖
(Personal interview, Ida, Batik Craftsmen, May 30, 2016)
―Ever given financial aid but uneven , only certain craftsmen do not include all craftsmen . And that's capital
in the form of money . The hope there is support equipment in addition to capital aid.‖
(Personal interview, Siti Afifah, Batik Craftsmen , May 30, 2016)
Table 2 .
Summary of Program Implementation of Corporate Social Responsibility ( CSR )
No Company Name Assistance Program / Compliance Expectations
type of help received Implementation
1. Disperindag Training manufacture, Appropriate, but have not Is to be trained , in
Semarang drawing, coloring, shown encouraging results. order to be able to grow
dyeing natural color / Just a little craftsmen who more and produce
natural, down to the still survive as Empowering quality batik.
skills of an apprentice back batik batik artisans.
to the location of batik
industry in the city.
2. Government of Provide capital Not yet appropriate. Still needed financial
Semarang City support. Not all artisans Batik assistance in the form
Help set batik Semarang capital assistance of money for
equipment. in the form of money, additional capital and
Provide training to given assistance in the form the cost of the
make. of money that craftsmen production costs of
Provide a place for who have a great business. making batik Batik
exhibitions. While small business Semarang for
craftsmen who have just business
given help exhibition place development, so that
to market their business in the future the
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and are given assistance in business is expected
the form of a set of to be more advanced.
equipment to make. In the future is
The role of government has expected to have the
so far only hold events and same access to
promote in exhibitions both marketing
in town and out of town. opportunities for all
But not all of batik artisans producers, especially
have access to the same the small and
market opportunities. medium scale still.
3. Dekranasda Conducting a series of Not yet appropriate , because Not only batik
(National Crafts batik training that was it has not shown encouraging training course to be
Council) held with the results , can be said to not be expected , because all
Semarang participants citizens significant growth. too often do , but
who have a great rather to how to train
willingness to learn human resources are
batik, active in holding there to want to
the title of the work on continue the business.
a regular basis, actively To improve the
participate in the marketing is still
exhibition of batik or needed for expansion
textiles, as well as study by batik artisans ,
visits to several cities in such as opening new
Indonesia, training outlets in other areas
marketing of and organized an
handicrafts. exhibition in order to
increase profits
craftsmen to develop
Batik Semarang .
4. Department of Training batik activities Participation and motivation Empowering back
Cooperatives and for craftsmen of people less, so it is not craftsmen produce batik
SMEs, uncommon to many of the and batik quality needs
Department of participants have been trained to be improved so that
Labor, and not apply their knowledge the performance of the
Stated Owned due to the limitation of functions Dekranasda
Enterprises human resources batik in the Guidance to the
(SOE) industry in terms of formal enhancement and
education as well as their development of craft
knowledge and skills, Weak business.
network operations and
capabilities for marketing, the
lack of availability of raw
materials and is still at least
craftsmen who perform
activities in the village of
batik semarang
5. Department of Training marketing In practice sometimes there It is expected to be
Industry and Organize events or were numerous complaints evenly distributed
Trade, exhibitions are held from the artisans themselves marketing training is
Cooperatives and every few months yet engage them in craftsmen to not reserved only for
SMEs, appropriate . exhibit only do craftsmen's it certain craftsmen.
Department of specifically for the exhibition
Culture and out of the city, while other
Tourism, as well craftsmen sometimes do
as the marketing on their own by
Department of building a network outside
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Economic. the city and opened his own
showroom .
6. Department of Capital Assistance Not yet Appropriate. Looking ahead batik
Cooperatives and Help Tools for batik Implementation by the makers hope that
SMEs Semarang Department of given the ease to
together with Cooperatives and SMEs, in borrow capital with
State Owned cooperation with the Office loan terms are mild,
Enterprises of the designated banks and such as the loan
(SOE) partners cooperatives give very high interest rate is lower
loan interest per year than 1% so that it can
In the Capital, batik support the
craftsmen better off with improvement and
the help of partner development of better
enterprises, because the business.
interest rates are low in The hope is not only
addition to the craftsmen to provide assistance
more attention. batik equipment, but
In support cap and tools also revive the
canting also not on target, function "Balai
most producers do not get Batik" as a place for
the facility batik tools of the implementation
the government, so help of training activities.
pemeritah regarding capital
support and assistance tools
do not feel the benefits by
artisans in Kampung Batik.
7. Nuswantoro Semarang WEB Design Not yet appropriate, the In the future need to
Dian University in the Framework of the design of the system used is a use web
SMEs Performance system design dynamic applications ,
Improvement of Batik websites selling batik artisans especially in the
Semarang just for the large scale field of marketing
to promote Batik
Semarang both
national and
international levels
online. So take the
online marketing
training for all batik
artisans , especially
those still micro
scale .
Online promotion
can help make
Batik Semarang
better known in
foreign countries,
so it will lift the
indigenous culture
of Semarang
8. Polines Batik Waste Processing Batik waste treatment plant Expected to be training
Semarang Equipment in so far not been used at all. the use of waste facility
accordance yet . .
Source: Interviews with several artisans in Kampung Batik Batik Semarang
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CONCLUSION, IMPLICATION, AND LIMITATION
Conclusion
From the research results in the field can be concluded that:
1. Implementation of Corporate Social Responsibility (CSR) conducted by relevant agencies and other
companies are already well underway. With frequent provide education and training to encourage an
increase in business. Which is the limiting factor to the success of the CSR program is the
participation and motivation of people less, so it is not uncommon to many of the participants have
been trained not mengaplilasikan knowledge.
2. Implementation of Corporate Social Responsibility (CSR) is very helpful and can help batik SMEs to
flourish in the capital and marketing of products, and can cope with the number of unemployed in the
city of Semarang, but there are still some CSR programs of several companies that are found to be in
accordance with craftsman needs. Such as supporting facilities for training are inadequate, the capital
support members only craftsmen who have given great capital effort aid, precisely medium scale
down yet affordable.
3. Ignorance of SMEs on how to obtain related loan capital nominal terms and collateral, as well as the
interest rate large loans often become obstacles and perceived by the batik craftsmen. Corporate Social
Responsibility (CSR) is expected to bridge the needs of craftsmen and provide convenience for them
to raise capital in order to continue growing of funds.
4. Need on line marketing training for all batik artisans, especially those still small and medium scale.
Online promotion can help also in order Batik Semarang better known in foreign countries, so it will
lift the indigenous culture of Semarang.
5. Program CSR (Corporate Social Responsibility) in the provision of waste treatment plant is not in
accordance with the wishes and expectations of batik makers, because it was given without any
training in how to treat waste batik.
Research Implications
Implications of research that can be delivered are as follows:
1. Less than optimal program of Corporate Social Responsibility (CSR), which has been running and is
not in accordance with the wishes and desires of the batik, due to a lack of good communication
between craftsmen and low awareness of the artisans to take advantage of its Corporate Social
Responsibility (CSR) well ,
2. Program Corporate Social Responsibility (CSR) are very helpful for Batik SMEs when the program
implemented on target and in line with expectations and the desire needed craftsmen. It takes good
communication between the giver and the recipient of the CSR program.
3. Program Corporate Social Responsibility (CSR) makes it easy for a couple of batik artisans in
obtaining capital fund to encourage power producers efforts in maintaining its business acknowlege.
Research Limitations
This study has limitations, especially in terms of research subjects, is as follows:
1. The subject of the study was limited to batik craftsmen who are members of the community in
Kampung Batik Semarang, so the informant and the information obtained was limited.
2. Information that was unearthed only a limited one party, namely the recipient of batik as Corporate
Social Responsibility (CSR).
REFERENCES
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Semarang. Jurnal Semantik. ISBN: 979-26-0276-3
Nurainun, Heriyana, dan Rasyimah. (2008), Analisis Industri Batik di Indonesia. Jurnal Fokus Ekonomi. Desember. Hal.
124 - 135 Vol.7, No. 3, ISSN: 1412-3851
Sukarno, Gendut. (2006), Kontribusi Pemberdayaan Usaha Kecil Dalam Meningkatkan Kinerja Industri Sepatu dan
Sandal di Kabupaten Sidoarjo, Prociding dalam Seminar Nasional ―Pemberdayaan Usaha Kecil dalam Perspektif
Global‖
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Sukarno, Gendut. (2008), Kontribusi Corporate Social Responbility Terhadap Corporate Social Performance Pada
Beberapa Industri di Sidoarjo, Prociding dalam Seminar Nasional Teknologi VI ―Peran dan Strategi Manajemen
Teknologi Guna Meningkatkan Sustainabilitas Industri dan Bisnis dalam Menghadapi Era Globalisasi‖
Sulistyaningtyas, I. D. (2006). Tanggung Jawab Sosial Perusahaan dalam Program Kampanye Sosial. Jurnal Ilmu
Komunikasi, Vol. 3 No. 1, 63-76
T. Romi Marnelly. (2012), Corporate Social Responbility (CSR) : Tinjauan Teori dan Praktek di Indonesia, Jurnal
Aplikasi Bisnis Vol. 2 No. 2, April 2012.
Widjaja, G., & Yeremia, A. P. (2008). Risiko Hukum dan Bisnis Perusahaan Tanpa CSR. Jakarta: Forum Sahabat.
Yuliati, Dewi. (2006). Mengungkap Sejarah Dan Motif Batik Semarangan. Jurnal Paramita. Semarang : Jurusan Sejarah,
Fakultas Ilmu Sosial, Universitas Negeri Semarang.
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CAPITAL INTENCITY RATIO (CIR), FIRM SIZE (SIZE), EARNING PER

SHARE (EPS), DEBT TO EQUITY RATIO (DER), AND DIVIDEND PAYOUT
RATIO (DPR) TO FINANCIAL PERFORMANCE (ROA) WITH EARNINGS
MANAGEMENT AS VARIABLE MODERATING. (STUDY ON
MANUFACTURING COMPANY FOOD AND BEVERAGE SECTOR THAT GO
PUBLIC IN INDONESIA PERIOD 2010-2014)
Aprih Santoso, Rahmatya Widyaswati

Semarang University
(Santosoaprih@yahoo.com, rahmatya@gmail.com)
ABSTRACT
This study replicates previous research on earnings management. Financial variables used in this study and
is thought to have a direct influence on financial performance (ROA) in this study is the Capital Intencity
Ratio (CIR), firm size (SIZE), Earning Per Share (EPS), Debt to Equity Ratio (DER), and Dividend Payout
Ratio (DPR) and the indirect effect of earnings management as variable interverning. The purpose of this
study is to see the influence of Capital Intencity Ratio (CIR), firm size (SIZE), Earning Per Share (EPS), Debt
to Equity Ratio (DER), and Dividend Payout Ratio (DPR) to the Company's Performance (ROA) with
earnings management as variable moderating. The sample in this study were taken by purposive sampling,
with specific criteria that the Company manufacturing sector food beverage that go public in Indonesia is not
doing mergers and acquisitions during the period of the study, had a positive net income and present the
complete financial statements, as well as presenting the ratio of the complete suite the variables to be
studied, during the period 2010-2014. Thus obtained a sample of 10 companies. This study uses a model of
path analysis (path analysis) or path analysis, for research explaining the direct and indirect result of a set of
measurable variables (parametric), as the independent variable (dependent), the dependent variable
(independent) and intermediate variables (intervening). The results of this study indicate that Capital
Intencity Ratio (CIR), firm size (SIZE), Earning Per Share (EPS), Debt to Equity Ratio (DER), and Dividend
Payout Ratio (DPR) showed a significant effect on the Finacial Performance (ROA). While the earnings
management variables did not show any effect on the Financial performance (ROA).
Keywords : Capital Intencity Ratio (CIR), firm size (SIZE), Earning Per Share (EPS), Debt to Equity Ratio
(DER), and Dividend Payout Ratio (DPR), financial Performance (ROA), earning management
1. INTRODUCTION
The goal of establishing the company is to maximize the value of the company or increasing prosperity
stockholder (Weston and Copeland, 1992). This objective can be achieved if the company is able to operate
properly so that the share price will appreciate. So we get a relationship, where the goal will be easily
realized, if on the one hand the company always maintain the company's performance.
To assess the extent to which the level of strength or health, it should be a financial manager can assess and
analyze the financial performance of the company. Financial performance of the company during the
operation can be seen through the financial statements that contain information about financial data. By
analyzing financial statements will assist interested parties in selecting and evaluating information. To
measure the company's performance is certainly not an easy thing. Various aspects should be considered in
the assessment of this performance, among others, the expectations of the parties who invest their money and
their employees. The fund provider will certainly expect a rate of return which is great for embedded
investment, while the employees want the company's performance so that the viability of the company can be
guaranteed, which means that their welfare will also be ensured.
Management is motivated to show good performance in generating maximum value or benefit to the
company so that management tends to select and apply accounting methods that can provide a better profit.
Earnings management is interference in the management of the external financial reporting process in order
to achieve a certain level of income with the aim to benefit himself (or his own company).
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Average Capital Intencity Ratio (CIR), firm size (SIZE), Earning Per Share (EPS), Debt to Equity
Ratio (DER), Dividend Payout Ratio (DPR) and Company Performance of Manufacturing Sector Food
And Beverages Which is Go Public in Indonesia Period 2010-2014 (In percent)
Years of Observation
Average Variable Observations
2010 2011 2012 2013 2014
Capital Intencity Ratio (CIR) 3,03 3,19 3,23 3,25 3,32
Ukuran Perusahaan (SIZE) 27,32 27,93 27,96 33,88 30,05
Earning Per Share (EPS) 66,51 63,34 134,97 89,67 111,79
Debt to Equity Ratio (DER) 0,97 0,87 1,00 0,89 1,16
Dividend Payout Ratio (DPR) 35,76 22,38 35,71 39,61 30,92
Company Performance (ROA) 13,03 12,43 16,94 18,61 11,92
Earning Management 0,26 0,25 0,17 0,22 0,16
Companies with Capital Intensity Ratio (CIR) higher would have a tendency to manipulate with the aim of
earning a profit. Francis et al (1999) mentioned that the capital intensity procedures Companies sometimes
have an impact on the long-term consequences of accrual. Carolina and Juniarti (2005) in Abiprayu (2011)
that the smaller company would be inclined to do the practice of smoothing earnings compared with larger
companies, because smaller companies are less gain greater attention from analysts and investors and thus
susceptible to earnings management practices. Average Earning Per Share (EPS) shows the fluctuating
conditions tend to rise. Ratio Earning Per Share (EPS) used by companies to measure management success in
achieving profits for the owners of the company. If the ratio is higher obtained means the company can be
said to have been established (mature), so no need smoothing or earnings management (Harahap, 2007).
Companies with a debt to equity ratio is high will have difficulty in obtaining additional funds from the
creditors even companies threatened violating debt agreements and a loss, when it happens could practice
earnings management must be done to manipulate as if the company has a good performance with the
achievement of maximum profit. Dividend Payout Ratio (DPR) determine the amount of retained earnings as
a source of funds, and shows the percentage of corporate profits paid out to shareholders in the form of cash.
The larger the profits on hold then the less the amount of profit allocated to dividend payments. The higher
the Dividend Payout Ratio (DPR) will lower the Profit Management practice.
2. THEORETICAL FRAMEWORK HYPOTHESIS AND DEVELOPMENT
Agency Theory
Agency theory is the relationship or contract between the owner (principal) and the manager (agent). The
underlying problem of agency theory (agency theory) is a conflict of interest between owners and managers.
The owner called the principal and the manager called the agent, the two parties are each have a different
purpose in controlling companies mainly concerns how to maximize the satisfaction and importance of the
results achieved through business activities (Zulkarnaini, 2007). On the one hand, the agent has more
information than the principals, because management manages the company directly, while for the owners of
capital will be difficult to effectively control the actions taken by management because it has little
information exists. This raises the asimetry information. Asymmetry of information is an imbalance of
information acquisition, which is usually an internal information management has a much better (superior)
than the owners (shareholders). Earnings or profitability in agency theory illustrates that the existence of
differences of interest between principal and agent, where every individual wants to act in accordance with
the wishes of each in order to prosper itself. One technique used is the manager earning management.
Profit
According Chariri and Ghozali (2003) notion of profit accounting structure adopted today is accounting
income represents the difference between the measurement of income and expenses. The size of the increase
in income as a measure of assets is highly dependent on the accuracy of the measurement of income and
expenses. Earning profit is also known as the concept of the period. The concept of earnings period is
intended to measure the efficiency of a company. Measure of efficiency is generally done by comparing the
profit of the current period with prior periods profits or the profits of other companies in the same industry.
Which includes elements of the concept of profit earnings period are events or changes in value that can be
controlled and comes from the management decisions of the current period.
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Concept Accrual
In the Statement of Financial Accounting Concepts (SFAC) No. 6 states that the accrual accounting records
emphasis on the financial impact on the unity of the transactions and other events and circumstances that
have cash consequences for unity in a period of such transactions and events or circumstances that occur
rather than just in the period of cash received or paid by the continuum. In accounting, the technical term
accrual basis and cash basis. Accrual basis is used to determine income when earned and to acknowledge the
burden that is commensurate with the income when earned and to acknowledge the burden that is
commensurate with income in the same period, regardless of the time of cash receipts from the income
concerned. Cash basis is used to recognize revenues and expenses on a cash basis of cash received.
Accrual basis in the financial statements provide an opportunity for managers to modify financial reports to
produce the amount of income (earnings) as desired. Financial Accounting Standards also give flexibility to
the manager to choose the method of accounting in preparing the financial statements. The detection of the
possibility of earnings management in the financial statements is generally observed through the use of
accrual. Total accruals are reflected in the calculation of earnings consist of accruals discretionary and non
discretionary accruals. Non-discretionary accruals accruals are components that occur along with changes of
activities of the company and is a component of discretionary accruals accruals derived from earnings
management conducted the manager (Halim, Meiden and Tobing, 2005).
Profit Management (Earnings Management)

According Tarjo and Sulistyowati (2005) earnings management occurs when management uses certain
decisions in the financial statements and transactions to alter financial statements as a base to influence the
outcome of contractual rely on accounting numbers reported. Earnings management is one of the factors that
may affect the credibility of financial statements. Assih and Gudono (2000) in the Goddess (2011).
deciphering earnings management as a process that is done on purpose, within the limits of the General
Acceptable Accounting Principles, to lead to a desired level on reported earnings. There are two important
perspectives that can be used to explain why earnings management performed by the manager, which is the
perspective of information and opportunists. Perspective information is a view that suggests that earnings
management is a managerial policy to reveal the manager's personal expectations about future cash flow.
Opportunist perspective is the view that earnings management is the behavior of the manager to defraud
investors and maximize their well-being because it has more information than the other party (Sulistyanto
2008) in Abiprayu (2011). According to Scott (1997) in Pujiningsih (2011), there are several factors that
encourage managers perform earnings management practices, namely: Planning Bonuses and other
motivations as political motives, motives taxes, CEO turnover, IPO and the importance of information to
investors.
Capital Intencity Ratio (CIR)

Capital Intensity Ratio (CIR) or a capital intensity ratio is the investment activities of the company associated
with investments in fixed assets (capital intensity) and stock (inventory intensity). According to Kim et al.
(2003) that capital intensity is measured by the ratio between the number of fixed assets to total assets affects
the motivation of managers in reported profits. Companies with Capital Intensity Ratio (CIR) higher would
have a tendency to manipulate with the aim of earning a profit. Francis et al (1999) mentioned that the capital
intensity procedures Companies sometimes have an impact on the long-term consequences of accrual.
Company Size (SIZE)

Siregar and Main (2005) in Pujiningsih (2011) says that the bigger the company, the information generally
available to investors in making investment decisions with respect to the shares of the company more and
more. Wolk, et al (2001) found that firms with larger size tend income smoothing, as it also tends to have a
higher stock returns. Michelson, et al (2000) says that large companies have a desire to flattening than
companies with smaller size, and this is because large companies are subject addressed by both government
and society. Unlike the case with research conducted by Carolina and Juniarti (2005) in Abiprayu (2011) that
the smaller company would be inclined to do the practice of smoothing earnings compared with larger
companies, because large companies tend to get more attention from analysts and investors than companies
small.
Earning Per Share (EPS)
Lukman Syamsudin (2001) states in general corporate management, common shareholders and prospective
shareholders are keen to EPS, because it describes the amounts of money that is obtained for each share of
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common stock. The increase in EPS indicates that the company managed to increase the level of prosperity of
investors, and that it will encourage investors to increase the amount of capital invested in the company. The
higher the value of EPS will be encouraging shareholders because the greater the profit provided to
shareholders (Tjiptono Darmadji and Hendy W: 2001). This will result in increased earnings, the stock price
tends to rise, whereas when profit declines, the stock price decline also participated. Earning Per Share Ratio
is used to measure management success in achieving profits for the owners of the company. If the ratio is
obtained low means the company does not produce a good performance by taking into account income.
Revenues were lower due to the sale of non-current or high cost. If the ratio is higher obtained means the
company can be said to have been established (mature), so no need smoothing or earnings management
(Harahap, 2007).
Debt to Equity Ratio (DER)

DER illustrates the composition / structure of the company's capital is used as a source of business financing.
The higher the high DER shows the composition of the company's debt compared with equity capital that a
major impact on the burden on companies to outsiders (Ang, 1997) because it would lower the level of the
company's solvency.Companies with a debt to equity ratio is high will have difficulty in obtaining additional
funds from the creditors even companies threatened violating debt agreements and a loss, when it happens
could practice earnings management must be done to manipulate as if the company has a good performance
with the achievement of maximum profit.
Dividend Payout Ratio (DPR)

Dividend Payout Ratio (DPR) is a decision to determine how large a part of the company's earnings to be
distributed to the shareholders and that will be reinvested (reinvestment) or (retained) in the company.
According to Van Horne (1998) dividend policy is an integral part of the company's funding decisions.
Dividend Payout Ratio determines the amount of retained earnings as a source of funds, and shows the
percentage of corporate profits paid out to shareholders in the form of cash. The greater the profit, the more
resistant sedikti amount of profit allocated to dividend payments.
Financial Performance (ROA)

Understanding performance or performance is the result of work that can be achieved by a person or group of
people in a company in accordance with the authority and responsibilities of each in achieving the objectives
of the company legally, do not break the law and not contrary to morals and ethics. (Rival & Basri, 2004: 16).
Performance of Companies (Companies performance) is something that is produced by a company in a given
period with reference to the prescribed standards. Measurement of the activity of the company's performance
was designed to assess how the performance of activities and the final results are achieved. Ideally the higher
the number the better ROA assumption of the job performance of the company from the management side of
its equity. n general, there is not an information or research suggesting in any number ROA is considered
good or declare a firm would be good if ROA of so-so. hen the one that can be used to determine a company's
ROA is good or not is Comparing with other similar companies ROA Memandingkan with ROA industrti
sector companies that move. Comparing with ROA IHSG. So it is best ROA ROE is above its peers ROA,
ROA and ROA similar industry sectors IHSG.
Conceptual Framework
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Hypothesis
1) Influences of Capital Intensity Ratio (CIR) of the Financial Performance (ROA)
2) There SIZE influence on financial performance (ROA)
3) Influences of Earning Per Share (EPS) of the Financial Performance (ROA)
4) There is the influence of Debt to Equity Ratio (DER) of the Financial Performance (ROA)
5) There is the influence Dividend Payout Ratio (DPR) of the Financial Performance (ROA)
6) Profit Management can moderate the influence of Capital Intensity Ratio (CIR) of the Financial
Performance (ROA)
7) Profit Management can moderate influence of SIZE of the financial performance (ROA)
8) Profit Management can moderate the influence Earning Per Share (EPS) against Financial
Performance (ROA)
9) Profit Management can moderate Debt Equity Ratio (DER) of the Financial Performance (ROA)
10) Profit Management can moderate Dividend Payout Ratio (DPR) of the Financial Performance
(ROA)
3. RESEARCH METHOD

The data used in this research is secondary data, the annual financial statements of companies manufacturing
food and beverage sector in 2010-2014. Sources of data obtained from www.idx.co.id. As for the research
data is the pooling of data that is a combination of time series (time series) and cross section during the
period 2010 to 2014.
Population And Sample

The population used in this research is manufacturing food and beverage sector that went public and listed on
the Indonesia Stock Exchange in 2010-2014. The method used in the determination of the sample is
purposive sampling, using specific criteria (Ghozali, 2006). The criteria are: Companies manufacturing sector
food beverage that go public in Indonesia is not doing mergers and acquisitions during the period of the
study, had a positive net income and present the complete financial statements, as well as presenting the ratio
in full accordance with the variables to be studied, over a period of years 2010-2014. Thus obtained a sample
of 10 companies.
Method of collecting data

1) Study Library: from articles, journals, books, and previous research.
2) Documentary Studies: by collecting secondary data is data the company's annual financial statement
data food and beverage manufacturing sector in 2010-2014 were obtained from www.idx.co.id
Dependent variables
The dependent variable in this study is the Company's Performance. This variable is measured using the ratio
of the turnover rate on assets (ROA) for the analytical ability to assess overall company performance. This
ratio is used to determine the effectiveness and efficiency of a company to manage wealth in generating
profits.
ROA = Net Income X 100
Total Assets
Independent variables
1. Capital Intencity Ratio (CIR)
According to Kim et al (2003) found Capital Intencity Ratio (CIR) is measured based on the ratio between
the amount of fixed assets to total assets
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The amount of Fixed Assets

CIR x100%
Total Assets
2. The size of the company (SIZE)

Firm size is calculated by using the natural logarithm of total assets, (Budiasih, 2009):
Company size = Ln Total Akitva
3. Earning Per Share (EPS)
Earning Per Share (EPS) is the ratio between the revenue generated (net income) and the number of shares
outstanding.
Net Profit
EPS x100 %
The Number of Shares Outstanding
4. Debt to Equity Ratio (DER)

Debt to equity ratio shows the proportion of the use of debt to finance investment. Debt to equity ratio is the
ratio of total debt to total equity.
Total of Debt
DER x100 %
Total Of Equity
5. The dividend Payout Ratio (DPR)

Dividend payout ratio (DPR) is the percentage of the dividend per share (DPS) with earnings per share (EPS)
DPS
DPR x100%
EPS
Variable Moderation
Moderating variable in this study is the Profit Management proxy for total discretionary accruals (total
discretionary accruals). Discretionary total accruals is a way to reduce the reporting earnings that are difficult
to detect through the manipulation of accounting policies relating to accruals, for example by increasing the
cost of amortization and depreciation, recorded liabilities over the product warranty (warranty), contingency
and rebates, and record inventory obsolete (Mediastuti and Mas'ud, 2003).
Path Analysis (Path Analysis)

Path analysis is the development of multiple linear regression analysis or the use of regression analysis to
determine the causal relationships between variables. Relationships direct or indirect relationships between
variables in the model can also be measured by using path analysis.
4. RESULT
Hypothesis 1: CIR positive effect on ROA
The first proposed hypothesis states that Capital Intencity Ratio (CIR) positive effect on financial
performance (ROA). The results were obtained regression coefficient values for the variables that
transformation Capital Intencity Ratio (CIR) amounted to 0,305 with significance value of 0,003 where the
value is significant at the 0.05 level and less than 0.05. Thus the first hypothesis stating that Capital Intencity
Ratio (CIR) positive effect on financial performance (ROA) is acceptable.
Hypothesis 2: SIZE positive effect on ROA
The second hypothesis which claimed that the company size (SIZE), positive effect on financial performance
(ROA). The results were obtained regression coefficient transformation for the variable firm size (SIZE) of
0.117 with a significance value of 0.246 which is a significant value to the significance level of 0.05 and
greater than 0.05. Thus the second hypothesis which states that the size of the company (SIZE) positive effect
on financial performance is acceptable.
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Hypothesis 3: Earning Per Share (EPS) positive effect on ROA

The third hypothesis which claimed that the Earning Per Share (EPS) positive effect on financial performance
(ROA). The results were obtained regression coefficient for variable transformation Earning Per Share (EPS)
of 0.518 with a significance value of 0.000 which is a significant value to the significance level of 5%. Thus
the third hypothesis states that EPS positive effect on financial performance acceptable.
Hypothesis 4: DER negative effect on ROA

The fourth hypothesis which claimed that the debt-to-equity ratio (DER) negatively affect financial
performance (ROA). The results were obtained regression coefficient values for the variables that
transformation Debt to equity ratio (DER) of 0.276 with a significance value of 0.008 where the value is
significant at the 0.05 level and less than 0.05. Thus the fourth hypothesis which states that the debt-to-equity
ratio (DER) negatively affect Earnings Management acceptable.
Hypothesis 5: DPR positive effect on ROA
lppoThe fifth proposed hypothesis states that dividend Payout Ratio (DPR) positive effect on financial
performance (ROA). The results were obtained for the regression coefficient transform variable dividend
Payout Ratio (DPR) of 0.004 with a significance value of 0.307 which is a significant value to the
significance level of 5%. Thus the third hypothesis states that dividend Payout Ratio (DPR) positive effect on
financial performance acceptable.
Hypothesis 6: Profit Management CIR moderating influence on ROA
The results showed that moderate earnings management Capital Intencity Ratio (CIR) on the performance of
the company and supported statistically. The regression analysis model 2 obtained tcount for earnings
management is -0.071 rejected at a significance level of 5% with a p value of 0.626 (p> 0.05). This means
that earnings management policy does not moderate influence Capital Intencity Ratio (CIR) on the
performance of the company.
Hypothesis 7: Profit Management does not moderate ROA influence on SIZE
The results showed that profit management company does not moderate size (SIZE) on the performance of
the company and are not supported statistically. The results of the regression analysis obtained tcount for
earnings management is rejected at the 0.292 significance level of 5% with ap value of 0.47 (p> 0.05). This
means that earnings management policy does not moderate the effect of firm size (SIZE) on the performance
of the company.
Hypothesis 8: EPS Earnings Management moderating influence on ROA
The results showed that moderate earnings management Earning Per Share (EPS) of the company's
performance and supported statistically. Results of regression analysis to obtain tcount 0.94 earnings
management is accepted at significance level of 5% with a p value of 0.531 (p> 0.05). This means that
earnings management policies moderating influence Earning Per Share (EPS) of the company's performance.
Hypothesis 9: Profit Management can not moderate DER influence on ROA
The results showed that earnings management does not moderate debt-to-equity ratio (DER) on company
performance and is not supported statistically. The results of the regression analysis obtained tcount for
earnings management is -0137 rejected at a significance level of 5% with a p value of 0.343 (p> 0.05). This
means that earnings management policy does not moderate the influence of Debt-to-equity ratio (DER) on
the performance of the company.
Hypothesis 10: Profit Management can moderate the influence of the Parliament of ROA
Tenth hypothesis indicates that earnings management does not moderate dividend Payout Ratio (DPR) of the
Financial Performance (ROA) and not supported statistically. The results of the regression analysis obtained
tcount for earnings management amounted to 0,039 received at the significance level of 5% with a p value of
0.792 (p> 0.05). This means that earnings management policy can moderate the effect of dividend Payout
Ratio (DPR) of the Financial Performance (ROA)
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CONCLUSION
The phenomenon of earnings management has no effect on financial performance (ROA) and not supported
statistically. Path analysis results showed a direct relationship between earnings management with financial
performance (ROA) but not significantly to the value thitung -0.26 rejected at a significance level of 5% with
ap value of 0.858. That is not a moderating earnings management for financial performance (ROA).
This study shows the results that earnings management is not able to moderate the Financial Performance.
Limitation
The study was designed and implemented as well as possible, but there are still some limitations, among
others:
1) Range relatively short observation period (2010-2014), so that research results are less reflect the real
fenonema.
2) The company studied is limited to food and beverage sector alone, so that research results can not be
generalized.
3) The samples studied is limited, so that research results can not be a guideline for assessing the
performance of the entire company
4) Researchers use only the earnings management as a mediating variable, it is likely there are other
variables that affect the performance of the company.
REFERENCE
Journal Article
Abiprayu, Kris Brantas. 2011. Pengaruh Profitabilitas, Ukuran Perusahaan,Financial Leverage, Kualitas Audit, dan
Devidend Payout Ratio Terhadap Perataan Laba (Studi Kasus Pada Perusahaan Manufaktur Yang Terdaftar di Bursa
Efek Indonesia Tahun 2006-2009). Skripsi Universitas Diponegoro: Semarang.
Carolina dan Juniarti. 2005 ―Analisa Faktor-Faktor yang Berpengaruh Terhadap Perataan Laba (Income Smoothing) Pada
Perusahaan - Perusahaan Go Public‖. Jurnal Akuntansi & Keuangan. Vol. 7 No. 2. Nopember. hal: 148-162.
Francis et. Al. 1999 The Role of Big 6Auditors in the Credible Reporting of Accruals. Auditing: A Journal of Practice
and Theory, 18, 17-34.
M. Yusuf dan Soraya. 2004. Faktor-faktor yang Mempengaruhi Manajemen Laba pada Perusahaan Asing dan Non Asing
di Indonesia Jurnal Akuntansi dan Auditing Indonesia. Vol. 8, No. 1, Juni: 99-125.
Mediastuti dan Mas‘ud, 2003 Analisis Hubungan Mekanisme Corporate Governance dan Indikasi Manajemen
Laba.Artikel Simposium Nasional Akuntansi (SNA) VI, Surabaya.
Pujiningsih. 2011 Pengaruh Struktur Kepemilikan, Ukuran Perusahaan, Praktik Corporate Governance dan Kompensasi
Bonus Terhadap Manajemen Laba. Universitas Diponegoro, Semarang, 2011, p. 35
Tarjo dan Sulistyowati (2005) Pengaruh leverage dan Kepemilikan Saham terhadap Earning manajemen pada Perusahaan
Go Public di Bursa Efek Jakarta. Makalah Simposium Nasional Mahasiswa dan Alumni Pasca -sarjana Ilmu
Ekonomi,Yogyakarta, 24 September, hal 1-23
Book
Ghozali, Imam, dan Fuad. 2008. Structural Equation Modeling: Teori, Konsep, dan Aplikasi dengan Program Lisrel 8.80.
Edisi dua, Semarang: BP UNDIP.
Harahap. 2007 Analisa Kritis atas Laporan Keuangan,Jakarta :PT.Raja Grafindo Persada.
Lukman Syamsudin. 2001. Manajemen Keuangan Perusahaan. Jakarta: Bina Graha.
Machfoedz, Mas‘ud, 1974. ―Finance Ratio Analysis and The Prediction of Earnings Changes in Indonesia‖, Kelola:
Gajah Mada University Business Review, No. 7/III/1994.
Weston J. Fred dan Thomas E. Copeland. 1992. Manajemen Keuangan Jilid II. Terjemahan Yohanes Lamarto. Erlangga.
Jakarta.
304
FACTORS – ALIGNMENT OF FACTORS AFFECTING

THE PROVISION OF INCOME SMOOTHING ASSETS:
(PRACTICE MANAGEMENT INCOME ON ISLAMIC BANKING
IN INDONESIA IN 2011-2015)
Windasari Rachmawati
Semarang University
windasarirachmawati@yahoo.com
ABSTRACT
The study is purpose to determine the factors that influence income smoothing on Islamic banks in Indonesia.
In this study, Dependent variables is the Loan Loss Provisions (LLP), while the independent variables are the
amount of financing (total financing), credit risk (non-performing financing).
Object studied in this research is islamic banks which is the Sharia Commercial Banks registered in the
Central bank of Republic Indonesia year 2011-2015. The Sample was selected using purposive sampling
method and obtained nine banks being sampled. Eckel‘s koefficient was used as a tool to identify income
smoothing practice. Subsequently performed descriptive statistics and regression analysis to test each
hypothesis.
Keywords: earning management, income smoothing, islamic banks, islamic accounting,Indeks eckel‘s
1. PRELIMINARY
Islamic bank as a financial institution that is moving on the basis of principles Islam , are not supposed to
perform engineering activities in the form of any kind, including in terms of financial reporting , which is a
medium information for users and an assessment tool by the Government and the Bank Indonesia. The
activities of engineering with earnings management is often do conventional banking sector in Indonesia is
expected to not participate affect Islamic banking sector is emerging in Indonesia. Nevertheless , the rapid
development of Islamic banks which exceed the bank Conventional raises the question , does it also have
earnings management in Islamic banks.
Income statement the company is an important component that is often used as a tool to inform the
company's performance , especially profit . profit as one of the potential information contained in the
financial statements and the very important for the company's internal and external parties . information
earnings is a component of the financial statements of companies that aim to assess the performance
management , helps estimate the earnings capacity of a representative in the run long , and assess investment
risks . Besides, profit information may also be used by the owner and other parties interested in helping
predicts earning power in the future. One of the management measures on the profits that can be done is
measures income smoothing ( income smoothing ) . In this case the income smoothing In this case the
income smoothing shows a company's management efforts to reduce variation abnormal profit within the
limits permitted accounting practices and the principle of reasonable management . If income generated is not
stable or continue fluctuate , then the performance manager will be questioned and would be bad for the
company's good name . Therefore , managers can perform alignment profit. According Sulistyawan , et al . (
2011) , income smoothing is done by engineering financial to legal and accounting can be justified by the
way exploiting weaknesses in accounting standards or rules.
Management profit is the decision of the manager to choose certain accounting policies considered to achieve
the desired goal, be it to increase profits or reduce the level of losses that were reported. According to Scott
(2011) some motivation which encourages management did earnings management, among others: (1)
Motivation bonuses, the manager will try to arrange a net profit to be maximize the bonus; (2) Hypothesis
debt covenant (Debt Covenant Hypothesis),with regard to the requirements of per-pact debt that must be met,
high profit is expected to reduce the possibility's violations of terms of agreement debt; (3) Investors
Earnings Meet Expectations and Maintain Reputation, company which reported a profit greater than the share
price will be investors' expectations has increased significantly as investors predict the company will have a
better future; (4) IPO (Initial Public Offering), manager Companies going public motivated to do so profit
management reported earnings to be high in hopes of raising the price of the stock company.
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In general , both Islamic banks and conventional banks are one of the financial institutions that provide an
alternative source of funding for community, both used to finance short-term and term long. Islamic banks
use financing mechanisms and investment different from conventional banks ( Yaya , et al . , 2009) .
This is closely related the types of assets that are used for each credit / financing . The bank's assets Sharia
can be generally divided on assets funded by equity capital and / or obligations and debt ( wadi'ah , qardh ,
and the like ) , and assets funded by the accounts for the results ( profit and loss sharing investment account
or mudaraba ). The leased properties are not separated from the risks may occur. To anticipate these risks,
banks should set reserves against possible losses arising from credit losses in future front. Bank Indonesia
requires Islamic banks to establish reserves general allowance for uncollectible (PPAP) at least of 1% (one
percent) of all Earning Assets classified as current (Excluding wadiah Bank Indonesia certificates and
government bonds). Besides Islamic banks are also required to establish special reserves as stated in chapter
two verse three on PBI No. 5/9 / PBI / 2003 on Allowance for Earning Assets (PPAP) for Sharia Banks.
The initial purpose of the use of PPAP is a tool application of the principle prudence (prudential banking).
PPAP is formed as a contra account asset. PPAP shows the amount of expected losses on the loan balance or
investments that have not been resolved. In the financial statement, PPAP must included in the income
statement as a burden borne bank at each financial reporting period. That is PPAP has value significant in the
financial statements and an area that has the potential to be manipulated by managers (Tobing and Nur,
2009). The use of provisioning for income smoothing is based on the fact that changes against PPAP no
impact on cash flows that cash flow unaffected, and PPAP are pretax items, so if the value of PPAP changes,
will affect the value of the net profit generated or the amount of tax paid. Nonetheless, PPAP based on the
legislation in force (Tobing and Nur, 2009). In the case of Islamic banking, few studies examine income
smoothing hypothesis though Islamic banks have environmental characteristics unique (Boulila, et al., 2010).
First, Islamic banks governed by principles Islamic (Shari'a) that uses a risk-sharing mechanism between
investors. Second, the regulations related to accounting sharia is not restrict the use of dynamic provisioning,
so that Islamic banks have 4 the tendency to form the allowance to absorb losses in the future. Previous
research by Zoubi and Al-Khazali (2007), successfully find their earnings management practices in Islamic
banks with a mechanism income smoothing using PPAP in the Persian Gulf region. Zahara and Veronica
(2009) there was a trend indicative of earnings management practices more significant in Islamic banks than
Islamic business units, but the hypothesis has not been proven. This is in line with research Boulila, et al.
(2010), which also did not find the practice of earnings management in Islamic banks.
Econometric model that will be used in this study refers research Boulila , et al . (2010 ) and Rizki (2012),
which had previously been used by Pe'rez , et al . (2008 ) . Proxied by income smoothing Allowance Assets
(PPAP ) . This study uses the same instrumentie the amount of financing by proxy total financing ( TF ) ,
financing risksby proxy ( non- performing financing ) , as independent variables.
The practice of engineering with income smoothing using instruments PPAP is often done in several
companies listed on the stock exchanges of Indonesia and especially the conventional banking sector in
Indonesia is not expected to influence the new Islamic banking sector growing rapidly in Indonesia .
Nevertheless , the rapid development of the bank sharia exceed conventional banks raised questions about
whether too there are earnings management in Islamic banks .
Based on the research of reference used and description of the background the above problems , the
formulation of the problem in this study is whether the bank Indonesian sharia practice income smoothing
(income smoothing) , and is there any influence of factor financing amount ( total financing) , the risk
financing (non-performing financing) on income smoothing.
2. STUDY THEORY
Agency theory
Perspectives of agency theory is used to understand the basic issues of corporate governance and earnings
management. Agency theory result in asymmetric relationship between owners and managers, in order to
avoid the asymmetry of a relationship requires a concept, namely the concept of Good Corporate Governance
which aims to make the company become more healthy. Application of corporate governance based on
agency theory, the agency theory can be explained by the relationship between management and the owners,
management as morally responsible agents to optimize the benefit of the owner (principal) and in return will
receive compensation in accordance with the contract. This case there are two different interests in the
company in which each party seeks to achieve prosperity desired, so came the information asymmetry
306
between management and owners are able to provide an opportunity for managers to manage earnings in
order to mislead the owner as to the economic performance of companies ( Sefiana, 2009).
Asymmetry of information between management ( agent ) with the owner (principal ) can provide an
opportunity for managers to manage earnings ( Earnings management ) in order to mislead the owners about
the performance economic enterprise ( Ujiyanto and Scout , 2007) . But in the context this study asymmetry
of information used to carry out management earnings could mislead users of financial information in order
to determine whether Islamic banks are healthy and viable to operate . Implications of agency theory to this
research can be considered explains how the Islamic bank as the agent can not be separated from practice
profit management. Islamic banks are trying to show the public and stakeholders that Islamic banks have
been carrying out their duties and functions with right , so that Islamic banks assessed both by the principal.
Islamic Banking Accounting

Based on Law No. 21 of 2008 concerning Banking Chapter 1 Article 1 Sharia , Islamic banking is anything
that involves of Islamic banks and Islamic business units , covering institutional , activities businesses , as
well as the manner and process of carrying out its business activities . While Islamic banks are banks running
their business by Islamic principles and by type consisting of Islamic banks and bank Islamic finance .
Islamic principles in question , referring to the principles muamalah law which is based on fatwas formulated
by the majority of scholars or institutions that have authority in setting fatwa in the field of sharia . In
muamalah law , clerics have identify and menfatwakan some types of transactions that are prohibited by
Islam. The ban is generally caused by three things . That first , because it contains prohibited goods or
services ( false ) . Second, because it contains the systems and procedures to benefit the prohibited ( riba ,
maysir , gharar , tadlis) . Third , because it unlawful contract done ( Yaya , et al . , 2009) .
While characteristics of the accounting information general. The main principle which distinguishes them is
their sharia rules that must be followed in accounting sharia. To guarantee the implementation of the
principles of sharia in banking activity Sharia are either affiliated parties namely Sharia Supervisory Board (
DPS ) . Council is as responsible for the information on compliance manager will bank sharia principles (Act
21 of 2008 Article 1 paragraph 15 ) . The presence of DPS which is a special independent internal institutions
under the supervision of Islamic banks are also becoming one of the things that distinguishes Islamic banks
with conventional banks in general .
This study focuses only on smoothing income generated from PPAP backup management for the four main
types of financing that do Islamic banks, namely in the form of murabaha financing , Musharaka and
mudaraba and istishna . It is based on previous research by Zoubi and Al - Khazali (2007 ) , who found their
earnings management practices in the Persian Gulf region in the fourth such financing mechanisms .
Gain Flattening the Allowance Productive

One pattern or management measures on the profits that often do namely income smoothing (
income smoothing ) . Assih and Gudono (2000 ) states that income smoothing the way for a reduction in
income variability a particular period or in the period , which led to rate expected on reported earnings . In
line with this , Kustono (2010 ) also explained that income smoothing is a way used by management to
reduce the variability of earnings reports flow relative the desired income stream at successive periods . In
banking , the concept of income smoothing , better known as dynamic provisioning which is a buffer used in
the bank overcome the rough times to create a buffer in times good. The existence of this increases the
durability of banking , both individual or as a whole , although there is no guarantee that the banks it can
overcome the problems of credit ( Pe'rez , et al. , 2008) . Income smoothing through PPAP has been
demonstrated by Ahmed , and Thomas (1999 ) . In that study , the result that is affected by the PPAPcredit
risk , income , and economic conditions . Credit risk is one factors that affect the PPAP . Then research Lobo
and Yang (2001 ) , which proves the existence of opportunistic hypothesis , that managers use allowance for
uncollectible accounts to meet regulatory capital. While research Boulila , et al . (2010 ).
All this time accrual basis principle is often used to interest earnings management ( this is called accrual
managed accrual or accrual discretionary ) . Engineering can also profit performed by distorting income by
shifting the vesting period costs and revenue ( Tobing and Nur , 2009) . Based on these things in above , then
the hypothesis is formulated as follows :
H1 : Islamic banks do earnings management practices with using the pattern of income smoothing (income
smoothing) .
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Allowance for uncollectible accounts ( PPAP ) is one accounts in banks that have a tendency to considerable
manipulation big. The allowance for uncollectible accounts ( PPAP ) measuring the level efficiency and cost
bank in shaping the allowance for uncollectible accounts productive ( PPAP ) to cover any possible risks that
occur due uncollectible credit facility or other forms of investment assets . more and more PPAP large means
greater estimation of the onset of the credit problematic though on the other hand it reflects the ability of
banks.
This concept allows engineering accrual earnings or earnings management by the manager to increase or
decrease the numbers then against substandard The need to set aside more PPAP Great , so on so as to loans
that have been classified as bad credit , PPAP set aside for 100 % of the total debit loss ( Dunil , 2005) . Total
loans (total financing / TF ) is the number of Islamic finance against and is also a proxy for the amount of
bank financing profile . Total financing ( TF ) may indicate the implementation of dynamic provisioning
carried out by Islamic banks . Based on the above , the hypothesis iini proposed in the study are:
H2 : Total financing ( total financing) positive effect on income smoothing proxy with Provision Earning
Assets ( PPAP )
In theory the concept of non -performing financing ( NPF ) is one measurement of the bank's business risk
ratio which indicates the amount of credit risk problems that exist in a bank ( Iqbal and Abbas , 2007) . Risk
Financing proxied by non- performing financing ( NPF ) , is a ratio used to measure the ability of banks
prevent the risk of failure of loan repayment by the debtor . NPF reflecting the credit risk , the smaller the
smaller the NPF credit risk which is borne by the bank . Banks with high credit risk will increases costs ,
either reserve assets and other costs , thereby potentially against bank losses ( Mawardi , 2005) . based on this
mentioned above , the proposed hypothesis in research iini are :
H3 : Risk financing (Non performing financing ) effect positively on income smoothing proxied by
Allowance for Earning Assets ( PPAP ).
Picture 1: Framework
III. MODEL RESEARCH
Data and Research Sample

The data used in this research is secondary data obtained from the electronic media . The data used in this
study originated of the financial statements of Islamic banks ( BUS ) quarterly during the period March 2011
until September 2015 , which can be accessed directly via Bank Indonesia website ( www.bi.go.id ) or the
websites of the company's bank samples. This period was selected for the implementation of the laws of
Islamic banks in Indonesia in accordance with Act No. 21 of 2008 concerning Islamic banking began to be
implemented in 2008. Sampling was done by purposive sampling in order to get the samples according to
specified criteria .
The conditions of samples used in this study are :
1) Islamic commercial bank national scale that publishes reports quarterly results for the period March
2011 until September 2015 which stated in rupiah ( IDR ) .
2) Data provided complete financial statements as a whole and in Inside are the data required in the
study , namely Total financing ( total financing) , NPF (Non Performing Loan ) , EBTP (Earning
Before Tax and Provision ) , PPAP ( Allowance for uncollectible earning assets ) , CAR ( Capital
308
Adequacy Ratio) , total assets , and the age of Islamic banks which published the period December
2011 until September 2015 .
Variable Operational Research and Definitions In this study involving two variables, namely the dependent
variable and independent variables. In addition, the independent variables are also variables control.
dependent variables The dependent variable used in this study is a smoothing profit (income smoothing) are
proxied by possible losses productive (PPAP). PPAP value obtained directly from published financial
statements Islamic Bank. PPAP value on the quarterly financial statements of banks are progressive, in the
sense of the quarterly financial reports submitted are quarterly progress reports for one year. Therefore, the
value ofthis variable using the difference of the period by period previous. Independent variables Independent
variables used in this study refers to the research Boulila et al, (2010) which had previously been used by
Perez et al. (2008), which is the amount of financing that is proxied by total financing (TF), the financing risk
is proxied by Non Performing Financing (NPF), and the profitability of Islamic banks are proxied by
Earnings Before Taxes and Provisions (EBTP). TF value in the financial statements quarterly bank is
progressive, in the sense quarterly financial reportis delivered quarterly progress reports for one year. By
Hence the value of this variable using the difference of the period with previous period. Profitability is
proxied by Earning before tax and provision was also obtained in the same manner except for a period of
months March.
Total financing (TF) is used with the aim to showthe implementation of dynamic provisioning carried out by
Islamic banks. TF a total financing provided Islamic bank, or formulated as follows:
TL = Total + Total Financing Receivables Islamic Sharia
Murabaha Sharia receivables = receivables + receivables Istishna
Islamic financing= Musharaka financing+ mudharabah financing
NPF is used to reflect the credit risk, the smaller the NPF the smaller the credit risk borne by the bank. Banks
with NPF high will increase costs, better provisioning of productive assets and other costs, so the potential
for bank losses (Mawardi, 2005). This variable is already listed on the published financial statements of the
bank. Furthermore, to determine the smoothing Islamic banks profit , first performed an examination of the
variability of the object income smoothing , which is the ratio coefficient of variation of the change in net
income (net income) with a coefficient of variation of changes in the amount of operating income ( Total
sales) . The test is performed using coefficients Eckel as was done in previous research by Boulila , et al .
(2010 ) .Eckel coefficient is calculated by dividing the value of the standard deviation rate of change in
earnings by the average value of the net profit ( EBTP ) of Islamic Bank. In Masodah (2007 ) , also measured
by income smoothing
Eckel index which is described as follows :
Indeks Eckel = CV ϪI
CV ϪS
EBTP = amount profit before tax + number of zakat That issued by bank+ the number of backup load PPAP
Then to analyze the factors that affect the objects income smoothing used multiple linear regression analysis .
The shape of the model econometric used in this study was based on a study Pe'rez , et al . (2008 ) , and
Boulila , et al . (2010 ) . The model is formulated as follows
: PPAPit = α + β1 TFit + β2 NPFit + ε
PPAP = Earning Assets Allowance for general and special on bank i during the quarterly period t
TF = Total Islamic financing given to the bank i during quarterly period t
NPF = Ratio of Non Performin Financing ( credit crunch )
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IV . RESULTS AND DISCUSSION
Descriptive statistical analysis used to describe or a description of each of the variables involved in the study
. Of the 11 banks sharia there was only nine Islamic banks that managed meet the criteria. Furthermore, the
minimum value , maximum , average (mean ) value middle ( median ) and standard deviation ( δ ) of each
study variable can be seen in Table 4.1 below :
Table 4.1: Descriptive Variables Research
N MINIMUM MAKSIMUM RATA – NILAI STANDAR
RATA TENGAH DEVIASI
INCOME 76 18,84 27,83 24,86 24,90 1,98
SMOOTHING
The amount of 76 21,38 29.89 27.07 27,28 1,83
financing
Financing risks 76 0,00 8,89 3,47 3,64 2,05
source : secondary data that is processed2016
Based on the results of the calculations in Table 4.1 it can be seen that from 9 companies Islamic banks
where there are 76 reports , used seven variables research. Variable income smoothing by proxy PPAP its
average value ( mean) at 24.86 with a standard deviation ( SD ) of 1.98. then variable Total Financing by
proxy total financing ( TF ) has an average value and standard deviation respectively by 27.07 and 1.83.
variable risk financing by proxy of non-performing financing ( NPF ) has an average of 3.47 with a standard
deviation of 2.05 . This shows that NPF value for the year is still within the maximum limit of the NPF
required by Bank Indonesia at 5% .

1. Normality Test Data
In this study , the normality test is done with a statistical test Kolmogorov - Smirnov . Statistical tests One
Sample Kolmogorov- Smirnov ( see table one sample Kolmogorov - Smirnov in the annex) shows the
Kolmogorov - Smirnov Z value of 0.62 ; and asymp . sig . as big as 0.82. This means that the value is greater
than 0.05 . Thus it can be concluded the residual value is normally distributed or qualified test normality .
2. Test Multikoliniaritas
Multikolinearitas , one of which can be seen from the value of tolerance and opponent variance inflation
factor ( VIF ) . Cutoff values are frequently used for indicates multikolinearitas is the tolerance value < 0.10
or equal with VIF > 10 . The test results obtained showed regression model the values of tolerance and VIF
for each variable as follows :
Table 4.2: Value Tolerance and VIF
Variabel Colinierity statistic
Tolerence VIF
Income smoothing 0,45 2,47
The amount of financing 0,59 1,84
Financing risk 0,37 3,25
Source: secondery data is proceeds 2016

Table 4.2 shows the value of tolerance for all independent variables in above 0.10 and VIF for all the
independent variables are also under 10. It accordance with the terms non-occurrence of multicollinearity, so
all The independent variables eligible for use in research.
3. Test Autocorrelation
Autocorrelation in this study using a test Durbin-Watson (DW test). From the test results (see table in
appendix a model summary) obtained the value of DW (d) of 2.09. While the value du according to the table
to sample (n) 76 with six independent variables (k = 6) is 1.80, so get the value du <d <4 - du. This value is
conditional on the occurrence of autocorrelation.
4. Test Heteroskidastity
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To detect the presence or absence of heteroscedasticity in this study is to use the test glejser. Glejser test done
by regression of the absolute value of the residual value of the variable X (the independent variable) are
estimated to have a close relationship with i2 δ. test results heteroscedasticity (Glejser test) can be shown in
table 4.4 as follows:
Table 4.3: T critical - test results Glejser
Variabel T kritis Sig
Income smoothing 0,80 0,49
The amount of financing 0.08 0,97
Financing risk 0,25 0,82
Source: secondery data 2016
Based on the results shown in table 4.3 if it appears that all independent variables showed significant results ,
so it can concluded that all independent variables did not happen heteroskedastisitas the error variance .
Simultaneous Significance Test The statistical test F is basically used to indicate whether all independent or
independent variables included in the model have jointly influence on the dependent variable . Below is a
table simultaneous significance test results :
Table 4.4: Simultaneous Significance Test Results
Model Sum of squares Df Mean square F Sig
Regresion 237,89 7 39,67 54,25 0,00
Residual 51,56 79 0,75
Total 289,43 82
Source:secondery data 2016
From the calculation results obtained F value of 54.25 and a significance value $ 0.00. Due to the significant
value of less than 5 %, then the hypothesis is accepted and significant influence of the five variables together
to variable PPAP . From the test results it was concluded that the F variable number.
NO Bank name Indeks Eckel Information
1 Bank muamalat 0,180 Income smoothing
2 Mega syariah 0,657 Income smoothing
3 Syariah mandiri 0,312 Income smoothing
4 BRI syariah 0,91 Income smoothing
5 Bukopin syariah 1,557
6 Panin syariah 10,09
7 Victoria syariah 5,981
8 BNI syariah 0,5 Income smoothing
9 BCA syariah 0,692 Income smoothing
Jumlah bank income smoothing 6 (67%)
Jumlah bank non income smoothing 3 (33%)
Jumlah 9 (100%
Classification results using Eckel index showed that 9 Islamic banks surveyed by the number of financial
statements by 76 data, there are six banks that are categorized perform income smoothing (smoothing profit)
and three banks do not perform income smoothing (income smoothing). value index Eckel explains the
magnitude of the coefficient of variation of the variables are calculated based on the standard deviation of
each change in net income company. This shows that Islamic banks have to grade profits are used to reduce
the rate of change in net income in the reporting period.
Furthermore, other Hypothesis testing is done by testing partial regression equation of each independent
variable Test using t-test. The t-test is intended to determine the effect partial (individual) independent
variables (TF, NPF,) to variable income smoothing or test the significance of constant and the dependent
variable. T's statistical results of this study can be seen in table following:
Tabel 4.5 Nilai t kritis
Variabel Beta T hitung
The amount of financing 0,22 2,19
Risk of financing 0,18 1,77
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While other variables significant at significance level α = 0.05 ; ie the amount of financing ( TF ) with a value
of t Critical of 2.19 ; Then other variables at a significance level α = 0.10; ie risk financing ( NPF ) with the
critical t value of 1.77.
Table 4.6: Hypothesis Test Results Summary
H Statement Test results decision
H1 Islamic banks do practice 6 of 9 banks Be accepted
earnings management with smoothing sharia
profit identified
as grading profit
H2 Total Financing ( TF ) Positif signifikan Be accepted

positive effect on
income smoothing
H3 Risk Financing ( NPF ) Positif signifikan Be accepted

positive effect on
income smoothing

Obtaining a positive influence on the total financing on income smoothing The PPAP proxy implies that the
company is have a high amount of financing, will have a tendency to do a great income smoothing practices.
The positive influence of risk financing on income smoothing PPAP proxy also provides implication that
companies that have a high number of problem loans, will have a tendency to make huge income smoothing
practices. Two results are consistent with results of previous studies conductedBoulila, et al. (2010), Pe'rez et
al. (2008), and Kilic, et al. (2010). Kilic, et al(2010) explains that the greater the amount of financing
provided a bank has a tendency to have a backup level PPAP higher. The results of this study are consistent
with research conducted by Pe'rez, et al., (2008), and Zoubi and Al-Khazali (2007). However, research results
This differs from the results of research Boulila, et al. (2010) which states that EBTP is not one significant
factor in determining the number of PPAP. One of the possible explanations for the cause of This difference
is the absence of regulations applied in Indonesia to allow a different policy in the management of the bank's
profit. However, if further review, these regulations increase manipulation practices tendency to do the bank,
especially since measurement of risk is determined by internal party Islamic banks.
V. CONCLUSION , LIMITATIONS , AND SUGGESTIONS
Conclusion
Based on the analysis that has been done , it can be some conclusions as follows :
1) Based on test results using Eckel index , it can be concluded Islamic banks proved that the practice
of income smoothing . Index Eckel managed to identify the six of nine Islamic banks in Indonesia as
the income smoothing.
2) Based on the regression analysis, it can be concluded that the three hypotheses developed in the
research model they are accepted .
a. Total financing ( TF ) positive effect on the variable income smoothing .
b. Risk financing ( NPF ) positive to variable income smoothing.
Limitation
1) The study period is quite short, namely five years (2011-2015) so it is likely the results are less
reflect the phenomenon the real.
2) Eckel index is very vulnerable to changes in n-1 as a determinant coefficient of variation. Eckel
(1981) in Kustono (2010), did not give any limitation as to how many period instrument developed
so the results can be considered optimal. The absence of this limit give Researchers discretion to
determine the period used. The flexibility then have consequences and results Study conclusions
unreliable.
3) The variables used in this study has not been used component current and noncurrent accruals
accruals that have been be one way to detect earnings management difficult to detect through the
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manipulation of accounting policies related with accrual, for example, the value of discretionary
accruals.
Suggestion
1) Using a sample of quarterly financial periods more to obtain maximum results.
2) For further research needs to add a variable that has influence on the activity of earnings
management in Islamic banks, for example, current component also noncurrent accruals accruals so
that it can be the best indicator for the dependent variable profit management.
3) Further research is expected to develop indicators of income smoothing which is considered more
reliable than the index Eckel which has been used.
4) Future studies are expected to find more activities of manipulation and use in the research model
next.
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THE ANALYSIS OF BUSINESS PERFORMANCE OF SMES
Paulus Wardoyo 1); Endang Rusdianti 2) Sri Purwantini3)

Master of Management Program, Semarang University
(adyalk@gmail.com; endang_rusdianti@yahoo.com; ipungdosenusm@gmail.com)
ABSTRACT
Studies on the effects of entrepreneurial orientation, ability to respond to market and business strategies
toward business performance has been done and is still causing controversy. However, such studies that
discuss the business performance of SMEs are interesting.
As the object of study is the SME entrepreneurs in Desa Ujung-ujung, Kec Pabelan, Semarang regency,
where a population of as many as 48 people. The sampling technique used is the census method. The analysis
was performed by using Structural Equation Model with the help of software SmartPLs
Of the five hypotheses, only three accepted hypothesis, two were rejected, which the entrepreneurial
orientation and the ability to respond to the market was not significantly affect the business performance of
SMEs. Managerial implications of this study showed that to improve the business performance of SMEs,
needed the ability to respond to the market, entrepreneurial orientation and business strategy.
KEYWORDS: ability to respond to the market, business strategy, entrepreneurial orientation and SMEs
1. INTRODUCTION
UMKM has been required to have dynamic capabilities and strategy that enable capturing opportunities and
updating the market. Pressure and global business competition as well as globalization, technology
advancement, changes in social and demography, the power to create innovations, financial support, and
entrepreneurship have influenced small and medium enterprises (SMEs). However, in reality, the demand
from business environment is still difficult to be met (Kuncoro, 2006). Kuncoro (2006) stated that SMEs‘
quality in Indonesia is difficult to develop in the market because some of internal problems, namely the poor
quality of human resources such as lack of skillful of human resources, lack of entrepreneurial orientation,
lack of capability in technology and management, and lack of information.
Entrepreneurial orientation is a business orientation that has a principle in attempt to identify and exploit
opportunities (Lumpkin & Dess, 1996). Miller (1983) defined entrepreneurial orientation as an orientation to
be the first in innovation in the market, a risk taker, and proactively adapt to changes in the market. Miller
and Friesen (1983) stated that a firm that has strong entrepreneurial orientation will habe ability to undertake
strong innovation compared to other firms. Lumpkin and Dess (1996) stated that a firm that has strong
entrepreneurial orientation tends to be a risk taker that not only depends on the past strategies. In the dynamic
environment, entrepreneurial orientation is crucial in the firms‘ viability.
A study conducted by Hanifah (2011) mentions that the cause of the weakness in SMEs‘s performance and
productivity was allegedly due to lack of entrepreneurial character and the managerial roles that have not
optimal in managing business in the rapidly changed environment. In order to develop a high performance
business, firms depend on many capabilities. In this case there are two capabilities, namely market orientation
and entrepreneurship orientation as well as how these capabilities relate with performance. Porter (2008)
defined entrepreneurial orientation as a firms‘ beneficial strategy as for effectively competing in the same
market place. According to Gosselin (2005), there was a significant relationship between determined
entrepreneurial orientations and firms‘ performance. Entrepreneurial orientation refers to processes, practices,
and decisions making that promote to new inputs, and it has three entrepreneurship aspects namely risk
taking, proactive, and innovative (Lumpkin and Dess, 1996). Risk taking is an entrepreneur‘s approach that
involves his (her) willingness to bind resources and face the challenges by exploiting or involved in business
strategies that the results may generate uncertainties (Keh et al. 2002). Proactive reflects an entrpreneur‘s
willingness to dominate competitors through combination of aggressiveness and proactiveness, such as
introducing new products or services above the competition and activities to anticipate upcoming requests to
create changes and to establish environment. Innovative refers to an entrepreneurship attitude to creatively
engage in the process of new ideas that enables to generate new production methods as to create new
products or services for current markets or for new markets. A high entrepreneurial orientation is closely
related to profit main driver, thus an entrepreneur has opportunities to gain profits which had positive effects
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on business performance (Wiklund, 1999). As argued by Covin and Slevin (1991); Smart and Conant (1994);
Wiklund (1999), a higher entrepreneurial orientation could increase firms‘ ability in marketing its products
towards better business performance. Therefore, a more innovative and proactive firm, and willing to take
risks tend to be able to have better business performance, apart from entrepreneurial orientation that could
influence strategies.
SMEs which make an attempt to increase their firms‘ performance need to concern on two points,
entreprenueurial orientation and their business strategy. Entrepreneurial orientation is creative and innovative
ability that become as foundation, tricks, and resources to find opportunities toward success. Furthermore,
business strategy is firm‘s approach to win the competition. Lumpkin and Dess (1996) outlined that a firm
that has strong entrepreneurial orientation tend to be a risk taker that not only depends on the past strategies.
In the dynamic environment, entrepreneurial orientation is crucial in the firms‘ viability. Those two elements
are considered as a foundation in creating better firms‘ performance. Active efforts in the market are
characterized by competition and business expansion. Competition and business expansion have become
essential because they provide contribution to innovation (Harmsen, Grunert, and Bove, 2000) and
competitive capacity and firms‘ growth (Cooper and Kleinschmidt, 2004). With regard to the important roles
of entrepreneurial orientation and business strategy to SMEs, adequate understandings of those two elements
are needed in the effort to increase the performance of SMEs.
In her research, Andriyani (2005) showed that entrepreneurial orientation has a positive and significant
toward the increase of SMEs‘s competitiveness which is dominated by better business strategies. Hanifah
(2011) who took research on SMEs in West Java obtained results which show that properly maintained and
effectively carried out business strategies would increase business performance.
The outcomes from strategy implementation based on the entrepreneurial orientation enable firms
successfully adapted towards changes in environment. Entrepreneurial orientation tends to have positive
implication to firm‘s performance. Referring to previous studies, many of those showed that entrepreneurial
orientation had a positive influence toward firm‘s performance (Wiklund & Shepherd, 2003; Madsen, 2007;
Tang et al, 2007; Lukiastuti, 2010; Mahausushi, 2011; Ferriera et al, 2011; Al Swidil, 2012; Arshad et al,
2013). However, previous studies also showed that entrepreneurial orientation did not have a positive
influence to firm‘s performance (Wiklund & Shepherd,2005; Stam & Elfing, 2008; Baker & Sinkula, 2009;
Frank et al, 2010; Awang et al, 2010 serta Murniningsih, 2015).
Based on the gaps from previous studies on the entreprebeurial orientation toward business or firm‘s
performance, further research needs to be taken to examine this topic to shed the light on the efforts of SMEs
in developing their business. Research problem: how to build entrepreneurial orientation model for micro,
small and mediaum enterprises in attempt to increase their business performance. Research question is: does
entrepreneurial orientation influence business strategy?; does business strategy influence business
performance?; does entrepreneurial orientation influence business performance?. The central objenctive of
this research is to test empirical model that links from controversion of entrepreneurial orientation effect
toward business performance, incorporating business strategy variable as intervening variable. However, the
special objective of this research is to analyze the effect of business strategy toward business performance, to
analyze the effect of entrepreneurial orientation toward business performance.
Theoretical Framework and Hypothesis Development (if present) to explain the theoretical framework used
as the logical basis to develop hypothesis or research proposition and research model.
Business Performance
Business performance is an achievement of business entity and the results can be observed. Researchers have
agreed that business performance measurement is not enough with single measure (Dan & Wensley, 1998;
Jaworski & Kohli, 1993). Research by Jaworski and Kohli (1993) and Chang (1998), business performance is
measured from overall business performance to be compared with last year performance and with main
competitiors. On the other hand, Slater and Narver (2000) stated that business performance is measured from
profitability against established target. The definition of performance refers to the attainment level or firm‘s
achievement at specific period of time. Firm‘s objectives namely to survive, to make profit, and to grow can
be achieved if firm has a good performance (Suci, 2006). Firm‘s performance can be viewed from the level of
sales, profit level, return on capital, turn over level, and market share. Business strategy is always directed to
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generate excellent marketing performance such as sales volume and sales growth and financial performance.
Those various performance measurements in business has been growing with various indicators.
Entrepreneurial Orientation
Porter (2008) defined entrepreneurial orientation as firm‘s benefit strategy as to compete effectively in the
same market place. According to Gosselin (2005), there was a significant relationship between established
entrepreneurial orientation and firm‘s performance. Culhane (2003) provided result that partially
entrepreneurship spirit did not determine firm‘s performance but through interaction between strategy and
changes in economic environment in each country, entrepreneurship spirit significantly affects firm‘s
performance.
Lumpkin and Dess (1996) and Wiklund and Shepherd (2005) stated that entrepreneurial orientation and
organizational culture are closely related with strategy making process which will provide a basis in the
decision making and the implementation of organizational business. Entrepreneurial orientation has
significant role in increasing business performance (Keh et al., 2007). However, Miller and Fneseri (1982)
claimed that entrepreneurial orientation become significance that can be accepted to explain business
performance. Entrepreneurial orientation refers to the process, practices, and decision making that drive to
new inputs and has three entrepreneurship aspects, namely risk taking, proactive, and innovative (Lumpkin
and Dess, 1996). Willing to take a risk is entrepreneur‘s demeanor that involves his or her willingness to
attach resources and willing to face the challenges and perform exploitation or involve in business strategy
that the results may not uncertain (Keh et al. 2002). Proactive reflects entrepreneur‘s willingness to dominate
competitors through certain combinations and aggressive and proactive movement, such as introducing new
products or services above the competition and activities to anticipate potential requests to create changes and
form environment. Innovative refers to entrepreneur‘s demeanor as to creatively involve in the research
process of new ideas that enable new production methods so that generate new products or services for
current market or new marlet. A high entrepreneurial orientation is closely linked to main profit center so that
an entrepreneur has opportunities to make profit and those opportunities may have positive effect to business
performance (Wiklund, 1999). As argued by Covin and Slevin (1991); Smart and Conant (1994); Wilund
(1999), a high entrepreneurial orientation could increase firm‘s ability as to distribute its products toward
better business performance. Therefore, the more innovative, proactive and willingly to take risk of a firm, it
tends to have better performance, apart from entrepreneurial orientation that influence strategy.
Carson (2002) defined entrepreneurial orientation as an effort to learn values, ability and individual behavior
as means to be creative and innovative. Hence, entrepreneur study is about individual values and abilities that
are reflected in attitude. This is consistent with Day et al (2006) who stated that in principle, entrepreneurial
orientation is character, feature, and nature that have ability in creating innovative ideas into real worlds
through creativity or the ability to create new and different thing. Entrepreneurial orientation as processes
with action oriented management style is using innovation and changes as reasoning focus and attitude.
Meanwhile, Carson (2008) argued that entrepreneurial orientation is a combination of creativity, innovation,
and willingness to face the risks through hard work to build and preserve new efforts. Creativity is a new way
of thinking. Thus, based on etimology, entrepreneurship is ability to thinking creatively and doing
innovatively that set as foundation, resource, booster, goal, guideline to face life challenges.
Business Strategy
Changes that occurred in the business environment have caused SMEs adjust their strategy. An excellent
strategy is strategy that can adapt to many changes in the business environment as to achieve competitive
superiority. According to Porter (2008), competitive advantage can only be achieved through creative ideas in
continuous design and strategy to create sustainable competitive advantages. Strategy planning indicates that
a long term strategy is derived from firm‘s efforts to find competitive advantages from generic strategy
(Pearch II and Robinson, 2007), that are (1) cost leadership within industry, (2) create unique products for
specific and various customers or differentiation, and (3) serve special request in one or several group of
consumers or industries.
In line with this research, Porter (1985) provide outlines of business strategy which was developed from his
research as generic strategies namely, cost leadership, differentiation, and focus. Miller (1986, 1988)
modified Porter‘s framework and proposed two types from differentiation as a substitute for focus which
based on marketing and innovation. Three dimensions according to Miller (1986, 1988) were cost leadership,
marketing differentiation, and innovative differentiation. Several studies showed that these dimensions
correspond and were closely related (Kim and Lim 1988; Lee 1989). Cost leadership strategy is internal
orientation strategy in which a firm focuses on efficiency and cost control in attempt to achieve the lowest
production costs compared to its competitors. Cost leadership is conducted through cost efficiency that
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specifically can be attained from experienced staffs, overhead cost control, minimizing research and
development costs, service, sales people, advertisement and so forth. Cost efficiency can also be done
through minimizing innovation costs with the objective to maintain customers who are vulnerable to price of
the products (Handoyo, 2001). Marketing differentiation strategy can be conducted through design or brand
imaging, technology, special characteristic, customer service, and better distribution channel. The advantages
in using marketing differentiation strategy, apart form profit above average are customers‘ sensivity to low
prices; differentiation products create high entry barriers and high substitution products (Suci, 2006). Those
things are viewed as favourable to organization. Innovative differentiation strategy comprises firm‘s activities
including creativity in developing the products, implementation of new technology, and quality of design.
Business strategies that can win the competition are mainly in relation with product differentiation, cost
leadership, and adaptation ability, and quality advantage.
Apability to Respond to Market
According Movondo et al (1999) as the market sensing capabilities whole concept of a market orientation
because it involves a company's ability to absorb information that occurred and subsequently interpreted.
Meanwhile Slater & Navter (1995) explains that the ability to perform sensing market is very important to
achieve superior performance. Studies conducted by Olavarrieta and Friedman (2008) in conducting market
sensing capabilities, the company will use the ability to gather and interpret market information, especially
about customers, competitors and technologies. Furthermore Kholi and Jaworski (1990) defines market
orientation of persepsktif market intelligence that includes general intelligence, the dimensions of
intelligence, and responsiveness. According to Liu et al (2010) has a four-dimensional knowledge of the
market with regard to products, markets, competitors and marketing knowledge will be very helpful in
improving the process of adaptation. In harmony with what disampakan Liu et al (2010), Haou and Chien
(2010) argues that knowledge of the market will be able to make as the greatest asset in modern business and
the key to maintaining competitiveness. So in order to compete effectively, companies must provide
knowledge and create new market knowledge that is positive for their position in select markets.
Relationship among variables and hypotheses development

The Effect of Entrepreneurial Orientation toward Business Performance
Entrepreneurial orientation plays an important role in increasing business performance. Miller and Friesen
(1982) claimed that entrepreneurial orientation becomes a meaning that can explain business performance.
According to Gosselin (2005), there was a significant relationship between established entrepreneurial
orientation and firm‘s performance. Porter (2008) defined entrepreneurial orientation as firm‘s benefit
strategy as to effectively compete in the same market place. Entrepreneurial orientation refers to processes,
practices, and decision making process that drive to the new inputs and has three entrepreneur aspects,
namely always be innovative, proactive, and willing to take the risks (Lumpkin and Dess, 1996).
The real individual‘s ability is a study process which includes many aspects such as knowledge, attitude, and
skill (Nadle, 1992 and Thonthowi, 1991). Based on research taken by Purnama and Suyanto (2010), business
capability has a significant influence to business success. Innovative refers to an entrepreneur to be actively
involved in the experimental process toward new ideas that may produce new production methods as to
produce new products or services not only in the current market but also in the new market. Innovation
abilitity is related with perception and activities toward new and unique business activities (Schumpeter and
Milton, 1989 cited in Suryanita, 2006). Willing to take a risk is an attitude that courageously faces the
challenges through exploitation or involved in business strategy that may result in uncertainty. Risk barrier is
a key factor that distinguishes between entrepreneurial firm and non-entrepreneurial firm. The main function
of a high entrepreneurial orientation is how to involve optimal risk measurement and risk taking (Looy et al.
2003 cited in Suryanita, 2006). Entrepreneurial orientation that is reflected in attitude of innovative, proactive
and willing to take a risk is considered to be able to increase a firm‘s performance. This argument in line with
studies by Covin and Slevin (1991); Wiklund (1999) which argued that a high entrepreneurial orientation
could increase firm‘s capability in marketing its products toward better business performance.
Entrepreneurial orientation from an entrepreneur can stimulate performance was also argued by Covin and
Slevin (1991). Entrepreneurial orientation plays an important role in increasing business performance (Keh et
al., 2007). Based on above explanation, second hypothesis in this research is:
H1. There is an influence between entrepreneurial orientation toward business performance
The Influence of Ability to Respond to Market toward Entrepreneurial Orientation
318
Studies conducted Slater & Navter (1995) showed that the ability to perform sensing market is very important
to achieve superior performance. Meanwhile Olavarrieta and Friedman (2008) said that in conducting market
sensing capabilities, the company will use the ability to gather and interpret market information/Narver and
Slater (1990) looked market orientation as a construct that has a single dimension consists of three
components, namely the behavior of customer orientation, competitor orientation and coordination between
functions within the company. According to Liu et al (2010) has a four-dimensional knowledge of the market
with regard to products, markets, competitors and marketing knowledge will be very helpful in improving the
process of adaptation. In harmony with Liu et al (2010), Haou and Chien (2010) argues that knowledge of the
market will be able to make as the greatest asset in modern business and the key to maintaining
competitiveness. From the foregoing, it can be justified that the ability to respond to market is one of the
important aspects of entrepreneurship. Therefore, the proposed hypothesis reads as follows:
H 2. There is an influence between ability to respond to market and entrepreneurial orientation
The Effect of Entrepreneurial Orientation to Business Strategy
According to Day et al (2006), entrepreneurial orientation is characteristic, feature, and nature that have
ability in creating innovative ideas into real world or the ability to create the new and different thing. Carson
(2008) stated that entrepreneurial orientation is a combination of creativity, innovation, and the truth in
dealing with risks by hard working in order to form and to maintain new business. Creativity is a new way of
thinking; innovation is a way to do new things. As argued by Goundlund (1977), the real study results has
three domains, namely cognitive, affective, and psychomotor which is called taxonomy of education
objectives. The ability which includes four aspects, knowledge, attitude, skill, and emotional maturity will
influence SMEs‘s performance which in turn affects the firm‘s success level. Study by Purnama and Suyanto
(2010) showed that business ability has a significant influence to business success. Frestian (2014) claimed
that SMEs have obstacles in capital and human resources limitation. Hence, hypothesis in this research is:
H3. There is an influence between entrepreneurial orientation toward business strategy
The Influence of Business Strategy toward Business Performance
A good strategy is a strategy that enables to adapt to many business environment changes as to achieve
competitive advantage. According to Porter (2008), competitive advantage can only be achieved through
creating innovative effort with in design and continuous strategy to materialize sustainable competitive
advantages. Strategy planning experts believe that common philosophy that describes business or firm‘s
effort are reflected in mission that should be translated into established business strategy statement (Suci,
2006). Strategy planning explains that long term strategy is derived from firm‘s effort to find competitive
advantage from generic strategy (Pearch II and Robinson, 2007), including (1) pursuing overall cost
leadership in industry, (2) pursuing efforts to create unique products for varied and different costumers or
differentiation, (3) pursuing efforts to serve special requests in one or some specific customer(s) or industry.
Porter (1985) gave a description about business strategy from his research development that was called
generic strategy, namely cost leadership strategy, differentiation and focus. Miller (1986, 1988) modified
Porter‘s framework by proposing two types of differentiation strategy as substitutes for dimension of focus
which is based on marketing and innovation. Three strategy dimensions according to Miller (1986, 1988) are
cost leadership, marketing differentiation, and innovative differentiation. Business strategy is always directed
to generate good marketing performance (such as sales volume, and sales growth level) and financial
performance. This causes many performance measures in the business research have always been growing
with various indications.
H4. There is an influence between business strategy and business performance.
The Influence of Ability to Respond to Market toward Business Performance
Studies conducted Lengler et al (2013) found that customer orientation and competitor orientation which is a
form of action to respond to the market's ability to serve as the basis of the relationship between the ability to
respond to market with business performance. The study found an association with export sales performance.
It is known as a linear relationship. Meanwhile, studies Gong et al (2011) mentions the effects of consumer
behavior and customer participation directly influence company performance and employee performance.
Likewise, the study of Murniningsih (2015) showed that the ability to respond to market have an impact on
company performance.
H5 There is an influence between ability to respond to market and business performance
Based on the literature review and hypothesis development, theoretical frame work shown as follows
319
Figure1 Theoretical Model
Notes :
OKW= Entrepreneurial Orientation
STB = Strategic Business
KB = Business Performance
KRP = Ability to Respond to Market
3. RESEARCH METHOD
Population in this research was SMEs in Desa Ujung-Ujung, Pabelan District, Kabupaten Semarang, and
samples were taken through census as 48 SMEs. Data collection method was using questionnaires which
were filled by SMEs. The questionnaires include open-ended and closed questions which then followed by
interviews. Measurement scale is from 1 (one) to 10 (ten) as to analyze data gathered from questionnaires.
Quantitative analysis technique was taken using SmartPLS program. Operasioanl definision of variables are
as follows ::
1. Orientation reflects the degree of entrepreneurial companies tend to creativity, innovation, risk
taking, and hard work (Frishammar and Horte, 2007). Indicators of this construct four are creative,
innovative, the courage to take risks and willing to work hard.
2. Business strategy is an activity within the company that includes activities related to the cost
leadership, differentiation marketing and differentiation innovation (Miller, 1986, 1988). Indicators
of the construct of their business strategy, there are three, namely differentiation, adaptive,
efficiency
3. Ability to respond to market is the company's ability to collect, process and use information about
customers and competitors (Murniningsih, 2015). Indicators of this construct is to understand
changes in the environment, identifying customer tastes and build persnal relationships in marketing.
4. Business performance is in itself an achievement by a business organization and visible results.
Measurement performance of a company is to survive, growth and profitability (Ranchod, 2004).
4. RESULTS
Individual‘s characteristic of 48 questionnaires were as follows: education level – senior high school
were 27 respondents (56%), junior high school were 21 respondents (44%). This indicates that the
320
respondents were dominated by entrepreneurs that have formal education of senior high school.
Entrepreneurs have knowledge as to motivate in looking for ways to retain orientation application in decision
making process and good entrepreneurship management.Based on sex, 26 respondents (55%) were male and
22 respondents were female (45%). This shows that there was no different in the sex aspect in performing
entrepreneurship. Currently, not only men but also women are doing business as to obtain monthly income.
Based on the total employees, less than 5 employees were 10 SMEs, 5 to 19 employees were 30 SMEs, and
more than 20 employees were 6 SMEs. This shows that SMEs are still labour intensive, specifically in the
production process. However, in marketing and finance have not been utilizing modern technology.
According to the length of time of their business, SMEs that have been operating for five years were 8 SMEs,
5 (five) to 10 (ten) years were 23 SMEs, and more than 10 (ten) years were 15 SMEs. This indicates that the
lengths of the businesses were dominated by SMEs that have been operating for 5 (five) to 10 (ten) years
because the businesses were inherited from their family.
Validity Test
Output results which showed that loading factors for each contruct above the requirement 0,50 – 0,60 are
considered to be enough (Chin, 1998). Results of outer loading can be seen from the table below
Tabel 1 Result of Validity Test
OKW KRP STB KB
KB1 0.953
KB2 0.964
KB3 0.946
KRP1 0.959
KRP2 0.955
KRP3 0.741
OKW1 0.937
OKW2 0.968
OKW3 0.951
OKW4 0.883
STB1 0.95
STB2 0.975
STB3 0.978
Based on the table above, all indicators that are used to measure all loading factor variables were above 0,50.
Validity test for indicators used corelation between indicator score and construct score. Results show the
smallest value was 0,741 namely indicator from KRP3. However, it still above the requirement which is 0,5.
Thus, indicators that were used in this research are valid. Below is loading factor diagram from each indicator
in the research.
Figure 1 Full Model
321
Measurement model using reflective indicator is assessed based on crossloading, measurement with
construct. If correlation construct with measurement item is above other constructs, this shows that laten
construct will predict measure on their block better than other blocks. This method is conducted through
comparing the value of square root of average variance extracted (AVE) of each construct and correlation
among of other contructs in the model.
Table 2 Latent Variabel Correlations
OKW KRP STB KB

OKW 1
KRP 0.943 1
STB 0.541 0.716 1
KB 0.675 0.726 0.664 1
Tabel 3 Average Variance Extracted
Average variance extracted (AVE)
OKW 0.874
KRP 0.794
STB 0.937
KB 0.911
Assessing validity from constructs based on AVE, it is required that a good model is that AVE for each
contruct is above 0,50. Results of AVE showed that AVE value for entrepreneurial orientation, business
strategy, and business performance have AVE value more than 0,50.
Reliability Test
Reliability test of construct is measured by composite reliability criteria from indicator block that measure
contruct. Construct is reliable if composite reliability is above 0,70. The table below shows output results:
Table 4 Composite Reliability
Composite Reliability
OKW 0.965
KRP 0.919
STB 0.978
KB 0.968
The output result of composite reliability of entrepreneurial orientation (OKW) is 0,965, capability to
responding market (KRP) is 0,919; business strategy (STB) is 0,935, and business performance (KB) is
0,968; all are above 0,70. Thus, it can be argued that constructs have a good reliability.
Structural Model Test (Inner Model)
Test to structural model was conducted by reviewing R-Square value which is Goodness-fit model test.
Influence model of cability to responding market toward entrepreneurial orientation provided R Square
value as 0.888 which can be intpreted as variability of the entrepreneurial orientation was explained by
capability of responding market variability 88,8 %. Influence model of entrepreneurial orientation toward
business strategy provided R Square value as 0,293 which can be interpreted as variability of business
strategy construct was explained by entrepreneurial orientatition variability of 29,3 %, however, 70,7 % was
explained by other variables out of research‘s scope.
The influence of ability of respond market, entrepreneurial orientation and business strategy toward business
performance provided R Square value as 0,582 which can be interpreted as variability of business
performance construct was explained by ability of respond market, entrepreneurial orientation variability and
business strategy of 58,2%, however 41,8% was explanined by other variables out of research‘s scope.
Table 5 R-Square
R-square
OKW 0.888
322
KRP
STB 0.293
Regression relationship is to review regression coefficient value and significance
KB 0.582
from regression coefficient. Through analyzing outer weigh value of each
indicator, thus all indicators were significant. Relationship or influence of entrepreneurial orientation toward
business strategy and business performance are as follows:
Table 6 Results for Inner Weights
original sample mean of Standard T-
Decision
estimate subsamples deviation Statistic
KRP ->
0.943 0.944 0.017 56.464
OKW H2-Accepted
OKW ->
0.541 0.522 0.115 4.724
STB H3-Accepted
OKW -> KB 0.402 0.466 0.338 1.19 H1-Rejected
KRP -> KB 0.057 -0.034 0.477 0.12 H5-Rejected
STB -> KB 0.405 0.449 0.189 2.138 H4-Accepted
From the table above, it can be seen that three hypothesis are accepted (T statistic > 1,96) and two
hypothesis rejected (Tstatistic <1,96). The following figure shown full model after bootstrapping
Figure 3 Full model after Bootstrapping
Hypothesis Testing
The Influence of Entrepreneurial Orientation toward Business Performance
This study failed to proves that there is influence of entrepreneurial orientation toward business performance.
These findings have relevancy with a research on the influence of entrepreneurial orientation toward business
performance in which the results of the study was in line with research taken by Wiklund & Shepherd (2005);
Stam & Elfing (2008); Baker & Sinkula (2009); Frank et al (2010); Awang et al (2010_ and Murniningsih
(2015).Smart-Pls computation showed that entrepreneurial orientation has a positive (0,402) and not
significant influence to business performance.
The Influence of Ability to Respond to Market toward Entrepreneurial Orientation
323
The study proves that there is influence of ability to respond to market toward entrepreneurial orientation. It
means that the better ability to respond to market, the better entrepreneurial orientation. Smart Pls
computation showed that abilityto respond to market has a positive (0,943) and significant influence to
entrepreneurial orientation. This result support previous research conducted by Kholi and Jaworski (1990)
defines perspective of market intelligence that includes general intelligence, the dimensions of intelliginece
and responsiveness. According to Liu et al (2010), market intelligence has a four-dimensional knowledge of
the market with regard to products, markets, competitors and marketing knowledge will be very helpful in
improving the process of adaptation
In line with Liu et al (2010), Haou and Chien (2010) argues that knowledge of the market will be able to
make as the greatest asset in modern business and the key to maintaining competitiveness. So in order to
compete effectively, companies must provide knowledge and create new market knowledge that is positive
for their position in selected markets.
The influence of entrepreneurial orientation toward business strategy
The resultsi indicate that entrepreneurial orientation construct was significantly influenced business strategy
construct. It means that the better entrepreneurial orientation perception, the better business strategy.
Entrepreneurial orientation construct was measured by four indicators, creativity, innovation, risk taking and
hard working (Frishammar and Horte, 2007).
The use of internet was still perceived as expensive and difficult to be applied, creativity was still perceived
as minimum due to the low spirit of risk taking of the business operated. Therefore, this study supports
previous research by Becherer and Maurer, 1997, Frishammar and Horte, 2007.
Business strategy construct in this research was measured by four indicators, namely (a) differentiation (b)
adaptability (c) efficiency (d) superior quality. The results of index measurement showed that all of four
indicators demonstrated high scores, which confirmed by SMEs that entrepreneurial orientation drives
business strategy that can win competition especially that relates with product differentiation, efficiency or
cost leadership, and adaptability.
Smart-Pls computation showed that entrepreneurial orientation has a positive and significant toward
business strategy (0,541), which means that the better SMEs‘s entrepreneurial orientation in relation with
indicators namely creativity, innovation, risk taking, and hard working, the better business strategy.
The influence of business strategy toward business performance
This study has successfully proved that business strategy was positively and significantly influenced business
performance. Business strategy construct in this research was measured by four indicators: (a) differentiation
(b) adaptability (c) efficiency (d) superior quality. The results of index xomputation showed that all of four
indicators showed that all of four indicators showed high results, which mean that it was acknowledged by
SMEs that business strategy that can win the competition is in line with product differentiation, efficiency or
cost leadership, and the adaptability which can influence business performance.
The results of this study support previous research conducted by (Miller, 1986, 1988). Business strategy is
activities within organization which include cost leadership, marketing differentiation, and innovative
differentiation. Cost leadership is carried through cost efficiency. Marketing Differentiation Strategy can be
done through customer service and better distribution channels. Innovative Differentiation Strategy is
activities which include creativity in the application of new technology and quality design.
Smart-Pls computation showed that business strategy influenced business performance (0,405), which means
that the better SMEs‘s business strategy in line with existing indicators namely (a) differentiation (b)
adaptability (c) efficiency (d) superior quality, the better business performance. The results in this study are
in line with previous research by Andiyani (2005) who proved that entrepreneurial orientation has a positive
and significant toward the increase of SMEs‘s competitiveness which is dominated by good business
strategies. Hanifah (2011) who conducted a research on the SMEs in West Java obtained results which
showed that well-maintained and effective business strategy would increase business performance.
The influence of ability to respond to market toward business performance
This study failed to prove the influence of abilty to respond to market toward business performance. Smart
Pls computation showes that ability to respond to market has a positive (0,057) but not significant. This result
is not support previous research such as Lengler et al (2013), Gong et al (2011) and Murniningsih (2015).
324
Conclusion of research problem

This study failed to prove the effect of entrepreneurial orientation on business performance and ability to
respond to market influence on business performance. However, this study proves that the ability to respond
to market is able to influence the entrepreneurial orientation, as well as entrepreneurial orientation influence
on business strategy, business strategy further affect the business performance.
Managerial implications of this study indicate that in order to improve business performance, needed the
support of all three variables, namely the ability to respond to changing market tastes, entrepreneurial
orientation and good business strategy.
Research’s Limitations
In this study, there was no differentiation in the business size, whether it is micro, small, and middle size.
Furthermore, population in this study was limited to SMEs in Desa Ujung-Ujung, Pabelan District,
Kabupaten Semarang, so that the results cannot be generalized.
Agenda for future research
It is suggested for future research to extend the population, for example in one kabupaten, hence the sample
size can also be expanded. Furthermore, it is necessary to distinguish variation of the business size, inlcluding
micro business, small business, and middle business.
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THE IMPACT FACTORS OF DEFAULT RISK
Endang Rusdianti1) , Paulus Wardoyo2) , Sri Purwantini3)

Master of Management Program, Semarang University
(endang_rusdianti@yahoo.com, adyalk@gmail.com, ipungdosenusm@gmail.com)
ABSTRACT
Non Performing Loan of Consumer Loans PT. Bank Mandiri (Persero) Tbk Yogyakarta and Central Java, for
3 (three) years, i.e. from 2012 to 2014 fluctuated. Where seven units, PT. Bank Mandiri (Persero) Tbk DIY and
Central Java, Solo and Tegal is a business unit with the highest NPL, which i.e. more than 2 (two) percent of
maximum tolerance limits set by the NPL PT. Bank Mandiri (Persero). The phenomenon underlies the need
for a study on ― what‘s the impact factor of default risk‖ .
To answer these problems, it has developed a research model involving variable financial factors and the
character of the debtor as independent and variable default risk as dependent variables. Data regarding the
debtor's financial factors, the character of the debtor, and default risk were obtained through interviews with
respondents 110 consumer credit loans. The data obtained is then used to test the research model by using
analytical techniques Smart PLS (SEM). .
Smart PLS testing results show that the debtor's financial factors and characterising proved negative effect on
default risk, while testing the influence of the character of the debtor's indicates a positive effect on the
debtor's financial factors
KEYWORDS : the debtor’s financial factors, the debto’sr character factors, default risk
1. INTRODUCTION
The weakness of the development of the business / real sector caused by the lack of role of the banking sector
for financing. Banks feel less to give credit for the considerable problem loans (non-performing loans). PT
Bank Mandiri (Persero) Tbk area of Central Java and Yogyakarta, through business units: Consumer Loans
Business Centre (CLBC) has managed to realize his credit in the form of loans Consumer loans
(Graha independent, autonomous vehicles, credit own employees, partners work independently, multi-
purpose self, personal self) in its development (2012-2014 year) actually increased. The problem is that the
increase in the number of credits is offset by an increase in bad loans in some management units exceeded the
allowable limit. .
Table 1.1
Portofolio Consumer Loans Credit Collection PT. Bank Mandiri (Persero) Tbk DIY & Jawa Tengah 2012 – 2014
NPL (billion) 2012 NPL (billiln) 2013 NPL (billion) 2014

Business Unit
Debitors Rp % Debitors Rp % Debitors Rp %
LCR Semarang 353 27,87 1,76 555 34,20 1,94 632 37,44 2,05
LCR DIY 83 11,08 1,67 89 10,84 1,34 87 6,76 0,81

Solo 163 10,51 2,72 151 9,90 2,19 114 11,30 2,43
Tegal 110 7,90 3,04 113 8,42 2,74 130 12,38 4,03
Cilacap 21 1,04 0,77 24 1,13 0,73 41 2,51 1,38
Purwokerto 75 3,73 1,63 75 3,70 1,33 99 7,33 2,54
Magelang 10 0,35 0,75 15 0,54 1,13 17 0,75 1,71
Total 815 62,48 1,89 1.022 68,73 1,80 1.12 78,48 1,99
Source : PT. Bank Mandiri (Persero) Tbk DIY & Jawa Tengah Suporting Consumer Loans Credit Collection (CCC) 2015
Referring to the data presented in Table 1.1 above shows that the development of total loans Non-performing
loans (NPL) for 3 (three) years, constantly increased from 1.89% at the end of 2012 and then increased to
1.99% at the end year 2014. Despite the increase in non-performing loans or NPLs, still within the threshold
provisions of Bank Indonesia (BI) is 5 (five) percent, policy of management Bank Mandiri (Persero) on the
NPL, stated that the maximum limit of tolerance is 2 (two) percent where the seven units PT. Bank Mandiri
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(Persero) Tbk DIY and Central Java, Solo and Tegal is a business unit with the highest NPL. If a default is
not anticipated by the Bank, it will result in losses as well as reduce the capital of the relevant bank
The Bank is a business entity that collects funds from the public in the form of savings and channel them to
the public in the form of credit or other forms in order to improve the standard of living of the people. Along
with the passage of time after the loan is realized, there is no doubt the bank will be exposed to credit risk is
known as non-performing loans One of the common ways to minimize risk, is through the analysis of 5C
(Character, Capacity, Capital, Condition of Economy, and Collateral). 5C most dominant factor in the
analysis is Character, as it relates to the character of prospective borrowers to meet its obligations, such as
holding fast to the promise and is willing to repay the debt on time. Customers who have good character
(assuming other factors ceteris paribus C) will have a positive impact on the quality of bank bad loans.
Character determines the debtor failed to pay.
Information about the character of the debtor according to Adnan & Furywardhana (2006) that the character
can be measured in the nature or character of a person. Studies conducted by Widayanthi (2012) indicate that
the character proved to affect the level of customers' credit repayment. Another study conducted
by Ike (2011) explained that the increased risk of default caused by lifestyle factors information, especially
from marketers has touchedthe psychological aspects of consumers, this has resulted in people are driven to
make a purchase and not out of necessity but the factor of desire, prestige, price yourself, follow the style of
others, and so on. Adnan & Furywardhana (2006), found that the character proved significant negative effect
on NPL, while Hanis & Nursyamsi (2013), stating that the character proved significant positive effect on
customers' repayments
The factors causing another problem loans, according to Suhardjono (2001) of the debtor that is the financial
factor. Financial factors as the cause of the problem loans, among others: debt rose very sharply, increasing
debt is not balanced by an increase in assets, net income declined. Kashmir (2012) states that one of the
factors that affect credit ratings are capacity Capacity refers to the state of the general economy and its
influence on the ability to meet its obligations. Dendawijaya (2003) mention the financial aspect is one
reason the customer defaults in paying off credit.
Research conducted by Arinta (2014) in the variable amount of the loan and the repayment period of loans
against the risk of default showed that both the number of loans or loan repayment period proved to be
positively no significant effect on the risk of default. Muslim (2012), states that the financial management
proved a positive influence is not significant to the credit freeze. Moti, Masinde, Mugenda, Sindani (2012),
the financial condition of, customers proven significant positive effect on the performance of the loan.
Based on the above business phenomenon and some of the results of research on the causes of the risk of
default, the formulation of the problem is built is whether the factor of financial condition and character
borrowers can minimize the risk of default. The purpose of this study was to analyze the effect of factors
debtor's financial condition and character against the risk of default and to analyze the influence of individual
character of the financial condition and the risk of default
Credit
Credit comes from the Greek meaning Credere believe or derived from the Latin word meaning Creditum
belief in truth. When connected to a bank, then the notion that contained a number of banks as a creditor
trust to lend money to the customer / debtor, the debtor can be trusted because its ability to pay off its
loans over a specified period of time
Risk of default
The definition of proper risk from the perspective of banks is a credit risk or the risk of possible losses due to
debtors (individuals or companies) are not able to repay their loans at the bank. Morrison (2002) suggests this
form of credit risk can be a default on the loan, namely the failure of the debtor to repay the loan or the so-
called Credit Default Risk is the risk of default, in which the debtorcannot meet its financial obligations or
not able to repay the loan plus interest and a decrease in credit performance. The inability of the debtor may
occur as a result of goodwill, disasters (force majeure) or due to employee error in predicting the repayment
capacity resulting overcreditering.
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Principles of Lending
In doing lending to a debtor must meet the requirements known as 5C principles, the five principles are:
1. Character
Are data about the personality of the debtor aspersonality traits, habits, ways of life, circumstances and
family background and hobbies. The usefulness of the proficiency level assessment to determine the extent
of the goodwill / willingness debtor to fulfill its obligations (willingness to pay) in accordance with the
promise that has been set. The extension of credit on the basis of trust, and the underlying belief, that is the
belief of the bank that the debtor has a moral, character and personal traits are positive and cooperative.
Besides, it has a responsibility, both in private life as a man, life as a member of society, as well as in the
operations. Character is the dominant factor, because even though the debtor is capable enough to resolve its
debts, if you do not have a good faith will certainly bring difficulties for banks in the future. The purpose of
the selection of character to provide credit is to minimize the credit risk that is likely to arise when credit is
running. It can be seen from the example, if a debtor with a business smoothly and have the ability to pay, but
do not have a good faith, itwill cause problems for the bank in the future such as the emergence of non-
performing loans. Benefits of character assessment to determine the extent of honesty, sincerity, humility,
openness, responsibility, empathy and integrity and good faith is the willingness to fulfill its obligations
borrowers. Therefore, the selection of good character and the right is an indication to determine whether or
not the loan later
2.Capacity
Capacity in this case is an assessment of prospective borrowers the ability to pay off its obligations from
business activities that do that will be financed with a loan from the bank. So it was the clear intent of the
capacity assessment is to assess the extent to which the results of the acquired business will be able to pay it
off on time in accordance with an agreed arrangement. Measured capacity of prospective borrowers can be
done through various approaches include experience managing the business (business records) it, the
company's history has ever managed (never experienced hard times or not, how to overcome difficulties).
Capacity is a measure of ability to pay or the ability to pay (knowing the business development potential
borrowers, the benefits could be obtained or not, marketing strategy, sales turnover, the cost of life, the
number of children and dependents)
3.Capital
Capital is the condition of property owned by the company management. This can be seen from the balance
sheet, income statement, capital structure, financial ratio such as return on equity, return on investment. Of
the above conditions can be judged whether it is feasible potential customers withfinancing, and some large
financing ceiling it deserves.
4.Condition of economy
Giving credit should also consider the economic conditions associated with prospective borrowers' business
prospects. There is a business that is highly dependent on economic conditions, therefore it is necessary to
relate the economic conditions with business debtor
5.Collateral
Collateral is a guarantee that may be seized if it turned out to prospective borrowers actually cannotmeet its
obligations. Collateral calculated most recently, meaning that if there are some doubts in other
considerations, it can assess the property that may be used as collateral. In essence, not only in the form of
collateral material can also intangible collateral, such as personal guarantees, letters of guarantee,
recommendation
The influence of character of the debtor toward risk of default

The risk of failure to repay loans may also be influenced by psychological factors of the debtor.Theory from
Litner (1998), mentions about human behavior in responding and reacting to information in an attempt to
take a decision in order to optimize the rate of return by paying attention to the risks inherent in it (the
element of human attitudes and actions). There are three factors that underlie human decision-making in
financial terms one of which is risk attitude that humans are creatures who do not like risk, therefore, in
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making decisions in relation to ability to repay loans, people also use psychological factor them in order to
make decisions not cause great harm.
According to Sinkey (2002) determinant of Non Performing Loans (NPL) conceptually there are a number of
factors that affect the prospects of loan repayment or also called default risk models. If the quality of these
factors better, it will be reducing the probability of default or the probability of non-performing loans or
default risk. Conversely, if the quality of these factors is poor or low, it will cause the level of probability of
default or the probability of non-performing loans or default risk will be high. These factors include
Character, Cash Flow, Debt Equity Ratio and Guarantess. Character is: a) the nature of the factors that is the
most important factor in giving confidence to the customers of the bank, b) moral risk is the core of the
willingness to pay the debt of the customer, c) checking bank is the bank's ability to carry out checks
(Mahmuddin, 2001).
Studies conducted by Widayanthi (2012) showed that the characteristics of the customer prove to affect the
level of loan repayment. Another study conducted by Ike (2011) explains that the lifestyle factors, especially
information from the marketer has touched the psychological aspects of consumer. This resulted in people are
driven to make a purchase and not out of necessity, but desire factor, prestige, dignity, following the style of
others, and so on. This is done continuously and if not controlled will lead to decreasing quality of finance.
Declining financial quality leads to the risk of default. Based on these descriptions, the hypotheses developed
are as follows:
H1: Characteristics debtor affect the risk of default
H2: Characters debt or affect the financial condition of the debtor
Effect of Financial Condition debtor against Credit Default Risk

Factors that cause of the failure is the ability of borrowers to repay loans borrowed. Kashmir (2012) states
that one of the factors that affect credit ratings are conditions. Conditions refer to the state of the general
economy and its influence on the ability to meet its obligations.Dendawijaya (2003) mention the financial
aspect is one reason the customer defaults in paying off their loan.
Research conducted by Arinta (2014) in the variable amount of the loan and the repayment period of loans
against the risk of default showed that both the number of loans or loan repayment period proved to affect the
risk of default. Factors that cause the problem loans, according to Suhardjono (2001) may be caused from the
debtors, among others: debt rose very sharply, increasing debt is not balanced by an increase in assets, net
income decreasedBased on these descriptions, the hypotheses developed are as follows :
H3: The financial condition of the debtor affects the risk of default
THEORETICAL FRAMEWORK
The theoretical framework developed in this study using a model study involving three variables consist
of variable debtor's financial condition and character of the debtor and a variable risk of default. By using
these three variables, it can be developed three hypotheses studies showing linkages between the study
variables to be tested in this study by using empirical data. Referring to the logical relationships between
variables and the study results of previous studies, it can develop a theoretical framework as follow
Gambar 1: MODEL PENELITIAN
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Notes :
KAD = Characteristics Debtor
KD = Financial Conditon of Debtor
RGB : Risk of default
3. RESEARCH METHOD
This research is explanatory research with the approach of causality, the research wants to find an
explanation in the form of a causal relationship between some concept or some variable or multiple strategies
developed in management (Ferdinand, 2006). Hair, et al in Ferdinand (2005) states that the appropriate
sample size for SEM is between 100-200 samples. Referring to the opinion of the samples used in this
research was the census that the entire consumer loans at PT. Bank Mandiri (Persero) Tbk Yogyakarta and
Central Java Tegal Branch Office and Solo are experiencing NPLs were 110 customers.
Descriptive analysis was conducted to obtain a picture of the respondents' answers regarding the variables
used in this study. This analysis was done by using index analysis, to describe the respondents' perception on
the items to questions. The scoring technique used in this research is minimum 1 and maximum of 10, then
the calculation of the index of respondents conducted by the following formula (Ferdinand, 2005)
The index value = = ((%F1x1)+(%F2x2)+(%F3x3)+(%F4x4)+(%F5x5)
+(%F6x6)+(%F7x7)+(%F8x8)+(%F9x9)+(%F10x10))/10
Note:
F1 = Frequency of respondents who answered 1
F2 = Frequency of respondents who answered 2
Etc,, F10 = Frequency of respondents who answered 3
Therefore, the numbers do not answer departing from 0 (zero) but start numbers 1 to 10, then the resulting
index will depart from the 10 to 100 range by 90, without the number 0 (zero). By using the criteria of the
three cities (three box method) then the range of 90 divided by three that resulted in a range of 30 to be used
as the basis for the interpretation of the index value. The categories of the index value generated is
10,00 – 40.00 = Low; >40.00-70.00 = Medium; >70,00 – 100,00 = High
To test the model and the relationships developed in this study required an analysis technique. The analysis
technique used in this research is the method of Partial Least Square (PLS). PLS is an alternative method of
analysis with Structural Equation Modeling (SEM) based variance. The use of this method relates to the
efforts being made to overcome the abnormal condition of the distribution of research data
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Operational Difinition & Indicators

No Variable Oerational Difinition Indicators
1 Characteristic Relating to the nature of the debtor in Responsibility (KAD1), Honesty
Debtor responding and reacting to information (KAD2), Openness (KAD3),
contained in an effort to take decisions that can Goodwill (KAD4)
optimize the rate of return by paying attention
to the risks inherent in it.
2 Financial Relating to the client's ability financially to Debt rose sharply (KD1),
Condition of repay loans borrowed Increased debt is not balanced by
Debtor an increase in assets (KD2),
Net income decreased (KD3),
The ability to manage the
business (KD4)
3 Risk of default What is meant by the default risk in this study Timeliness of payments (RGB9),
is the possibility of an inability to pay Non-payment of credit (RGB10),
obligations of the borrower to the bank Overly optimistic (RGB11)
4. RESULTS
Description of Variables
The index value characteristic of the debtor produces a value of 67.0 which is in the range> from 40.00 to
70.00 in the category medium, which means a factor of character possessed by the debtor has been good.
Descriptive analysis shows that in fact the respondent has a character include responsibility, honesty,
openness and good faith
The index value of Financial Condition debtor variable yield value of 66.9 which is in the range> from 40.00
to 70.00, which means that financial factors are owned by the debtor has been good. Descriptive analysis
shows that in fact the respondent has the ability to make profits in the business, ability to manage the
business, marketing strategy, and calculation of the cost of his life, the number of children and dependents
were quite good
The result of the calculation of the index value of the variable risk of default resulted in a value of 44.1 which
is in the range> from 40.00 to 70.00, which means that the default risk experienced by banks included in the
low category. Referring to the results of the descriptive analysis provided information that turned out to be
the default risk caused by the poor timeliness of payments, low credit unsettled, too optimistic.
Evaluation of measurement (outer) models

Validity
An indicator declared invalid if it has a loading factor above 0.5 to construct the destination. Table 1 shows
that the loading factor value that is above the recommended value of 0.5. The smallest value is equal to 0,692
for 4 KAD indicators that goodwill. Means the indicators used in the study is valid or has met the convergent
validity
Table 1: RESULT FOR OUTER LOADING
KAD KD RGB
KAD1 0.779
KAD2 0.697
KAD3 0.761
KAD4 0.692
KD1 0.791
KD2 0.819
KD3 0.717
KD4 0.748
RGB1 0.798
RGB2 0.817
RGB3 0.754
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Here is a diagram loading factor of each indicator in the research model:

Figure 2: LOADING FACTOR
Furthermore, reflective indicators also need to be tested by cross loading discriminant validity as follows:
Table 2: RESULT FOR CROSS LOADING
KAD KD RGB
KAD1 0.779 0.237 -0.373
KAD2 0.697 0.295 -0.372
KAD3 0.761 0.284 -0.317
KAD4 0.692 0.180 -0.244
KD1 0.370 0.791 -0.259
KD2 0.315 0.819 -0.305
KD3 0.221 0.717 -0.262
KD4 0.289 0.748 -0.244
RGB1 -0.433 -0.291 0.798
RGB2 -0.424 -0.203 0.817
RGB3 -0.272 -0.248 0.754
An indicator declared invalid if it has the highest loading factor to construct the intended loading factor
compared to other constructs. Table 2 shows that the loading factor for KD indicators (KD1 until KD4) has a
loading factor to construct KD higher than with the other constructs. This means that the indicator on the
block KD predict them better than the indicator in the other blocks. Another method to see the discriminant
validity is to look at Roat square value of average variance. The recommended value is above 0.5. Here is the
values AVE in the research:
Table 3: AVERAGE VARIANCE EXTRACTED (AVE)
Average variance extracted (AVE)
KAD 0.538
KD 0.592
RGB 0.624
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The table above gives the AVE value above 0.5 for all constructs contained in the research model. The lowest
value AVE is equal to 0.538 in the construct of KAD (character debtor).
Reliability
Reliability testing is done by looking at the value of the block of composite reliability indicator that measures
the construct. The results will show the value of composite reliability, satisfactory if above 0.7. The following
are the composite reliability values inthe output
Table 4: COMPOSITE RELIABILITY
KAD 0.823
KD 0.853
RGB 0.833
The table shows that the composite reliability for all constructs is above 0.7 indicating that all construct the
model estimated meet the criteria of discriminant validity. The composite value of the low reliability was
0.823 in the construct of KAD (character Borrower)
Testing structural model (Inner Model)
Once the model is estimated to meet criteria outer model, the subsequent testing of structural models (inner
model). Here is the value of R square on the construct
Table 5: R-SQUARE
R-square
KAD
KD 0.141
RGB 0.252
The table gives the value of 0.141 to construct KD (debtor's financial condition) which means that KD is able
to explain the variance KAD (Character debtor) of 14.1%. Rated R is also available in RGB (Default Risk) is
affected by KAD (Character debtor) and KD (the debtor's financial condition) that is equal to 25.2%. Testing
with the following hypotheses were as follows:
Table 6: HIPOTESIS TESTING
original mean of
Standard T-
sample subsample Decision
deviation Statistic
estimate s
KAD -> KD 0.375 0.463 0.044 8.434 Accepted
KAD -> RGB -0.380 -0.374 0.120 3.158 Accepted
KD -> RGB -0.215 -0.238 0.141 1.526 Rejected
The table shows that the relationship between the RGB KAD is statistically significant with t - amounted to
3.158 (> 1.96). The original value estimate sample was negative in the amount of -0380 which indicates that
the direction of the relationship between KAD and RGB is negative. Thus the hypothesis H1 in this study that
states that the KAD
The relationship between KAD with KD is statistically significant with t - amounted to 8.434 (> 1.96). The
original value estimate sample was positive in the amount of 0.375 which indicates that the direction of the
relationship between KAD and KD are positive. Thus the hypothesis H2 in this study that states that the KAD
significant effect on KD accepted
The relationship between KD with RGB is not significant by statistical T- amounted to 1.526 (1.96). The
original value estimate sample was positive in the amount of -0.215 which indicates that the direction of the
relationship between KD and RGB is a significant negative. Thus the hypothesis H3 in this study that states
that KD significant effect on RGB rejected
Here is a diagram based on the output value of T statistics with bootstrapping is done SmartPLS
336
Figure 3: OUTPUT BOOTSTRAPPING
Conclusion
The results showed that the variable character of the debtor does indeed affect the risk of default on the loan
in the form of consumer loans, which was developed by Bank Mandiri. Characters debtor indicated through a
sense of responsibility for the credit is granted, the debtor's honesty could explain the condition of its
business, the openness of the development effort, and in good faith to repay the loan was instrumental in the
risk of default. This means that the good character of the debtor, the lower the risk of default
The debtor's financial condition variable of the study showed no effect on the risk of default. A variable
debtor's financial condition indicated by debt rose very sharply, increasing debt is not balanced by an increase
in assets, net income decreased, the ability to manage the business, does not guarantee the immediate debtor
to make payments on time.
Variable character debtor proved positive and significant effect on the financial condition variable. This
means that if a good character, then the logic of the debtor will manage finances better / be careful, so if you
have an obligation to be justified debtor will keep it.
Theoretical implications
The results of this study suggest that the hypothesis 1 supports the research of Widayanthi (2012) showed
that the characteristics of the customer prove to affect the level of loan repayment. The results of research
related to the third hypothesis reject research conducted by Suhardjono (2001) that the risk of default of the
debtor may be caused, among others: debt increased sharply, rising debt unbalanced and research. Ika (2011)
explains that the lifestyle factors, especially information from the marketer has touched the psychological
aspects of consumers, this has resulted in people are driven to make a purchase and not out of necessity but
desire factor, prestige, dignity, following the style of others, and so on. This is done continuously and if not
controlled will lead to decreasing quality of finance. Declining financial quality leads to the risk of default.
The results of the study support the hypothesis 2 Sinkey (2002) which states that the character affect the
willingness and ability of debtors to pay.
Managerial implications
In granting the credit must still consider these two factors, namely by taking into account the precautionary
principle with a lot of character into account factors debtor.
Research limitations.
Limitations found in this study is to construct the value of KD 0141 (the financial condition of the debtor),
which means that KD is able to explain the variance KAD (Character debtor) of 14.1%. Rated R is also
available in RGB (Default Risk) is affected by KAD (Character debtor) and KD (the debtor's financial
condition) that is equal to 25.2%.
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Referring to the limitations found in this study, it is recommended to be done in future research, namely the
existence of other variables, especially in implementing lending principles, referred to as "5C" e.g. collateral,
condition and capital
6, REFERENCES
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Hasan (Studi Kasus di BNI Syariah Cabang Yogyakarta), JAAI, 10 (2), 155-171.
Arinta, Dwi Yanti (2014), Pengaruh Karakteristik Individu, Karakteristik Usaha, Karakteristik Kredit terhadap
Kemampuan Debitur Membayar Kredit pada BPR Jatim Cabang Probolinggo (Studi pada Nasabahn UMKM Kota
Probolinggo), Portal Garuda.
Dendawijaya, Lukman (2003), Manajemen Perbankan, Ghalia Indonesia, Jakarta.
Ferdinand, Augusty (2005), Structural Equation Modeling dalam Penelitian Manajemen, BPFE Undip, Semarang.
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Hanis, Umar & Julius Nursyamsi (2013), Pengaruh Prasyarat Kredit terhadap Kelancaran Pembayaran Nasabah (Studi
Kasus Nasabah pada PT Bank Bukopin Kantor Cabang Pembantu Cilegon), UG Jurnal, 7 (5).
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Jurnal Pengembangan Humaniora, 11 (2), 118-126.
Ika, Luh Widayanthi (2011),Pengaruh Karakteristik Debitur UMKM Terhadap Tingkat Pengembalian Kredit Pundi Bali
Dwipa (Studi Kasus Nasabah Pada PT. Bank Pembangunan Daerah Bali Kantor Cabang Singaraja), Jurnal Ilmiah
Mahasiswa Fakultas Ekonomi dan Bisnis, Volume 1, No. 2, 1-15.
Kasmir (2012), Bank dan Lembaga Keuangan, PT Raja Grafindo Persada, Jakarta.
Litner, John (1998), The Valuation of Risk Assets and The Selection of Risky Investments in Stock Portofolios and
Capital Budget, Review of Economics and Statistics.
Mahmuddin (2001), Melacak Kredit Bermasalah, Pustaka Sinar Harapan, Jakarta.
Moti, Haron O., Justo Simiyu Masinde, Nebat Galo Mugenda, Mary Nelima Sindani (2012), Effectiveness of Credit
Management System on Loan Performance: Empirical Evidence from Micro Finance Sector in Kenya, International
Journal of Business, Humanities and Technology, 2 (6).
Muslim, Kholiq Mahfud (2012), Analisis Faktor-Faktor yang Mempengaruhi Kredit Macet (Kurang Lancar, Diragukan,
dan Macet) pada UMKM Industri Mebel di Kabupaten Jepara Tahun 2012, Diponegoro Business Review, 1 (1).
Norum, PS (2008), The Role of Time Preference and Credit Card Usage in Compulsive Buying Behavior, International
Journal of Consumer Studies, 32, 260-275.
Sekaran, Uma (2006), Metodologi Penelitian Untuk Bisnis, Salemba Empat, Jakarta.
Sinkey, Joseph F Jr (2002), Commercial Bank Financial Management In The Financial service Industry, Sixth Edition,
Prentice Hall, New Jersey
Suhardjono (2001), Manajemen Perkreditan Usaha kecil dan Menengah. Yogyakarta, UPP AMP YKPN.
Widayanthi, Luh Ikka (2012), Pengaruh Karakteristik Debitur UMKM Terhadap Tingkat Pengembalian Kredit Pundi Bali
Dwipa (Studi Kasus Nasabah Pada PT. Bank Pembangunan Daerah Bali Kantor Cabang Singaraja), Jurnal Ilmiah
Mahasiswa Fakultas Ekonomi dan Bisnis, 1 (2), hal 1-15.
338
JOB CHARACTERISTICS AND PERCEIVED ORGANIZATIONAL SUPPORT

AS DRIVING EMPLOYEE ENGAGEMENT
(A STUDY ON EMPLOYEE PT. SEMEN INDONESIA)
Paulus Wardoyo1), Endang Rusdianti 2), Isfa Maisyaroh 3)

Magister Management Program, Semarang University
(adyalk@gmail.com; endang_rusdianti@yahoo.com; isfaamaysa@ymail.com)
ABSTRACT
The background research of this study is a research gap about the effect job characteristics, perceived
organizational support and employee engagement. And there are results that engaged low at 49%. Methods
of data analysis using multiple linear regression analysis. Population and sample of this study are employees
of PT. Semen Indonesia, Tbk Gresik as many as 80 people. Sampling technique in the study using a census
The result of this study is the job characteristics and significant positive effect on perceived organizational
support; job characteristics and significant positive effect on employee engagement; perceived
organizational support characteristics and significant positive effect on employee engagement. The support
given by the employer or organization will make employees passionate in completing tasks and
responsibilities. Employees who feel engaged will be proud to tell others that they are employees of the
company, trying to give new ideas that are useful for the progress of the company.
Keywords: Job Characteristics, Perceived Organizational Support, Employee Engagement
1. INTRODUCTION
So far employee engagement known as a concept that provide information about the level of engagement
to organize. Actually employee engagement is an evolution of the previous studies related to satisfaction and
commitment to employee (Simon, 2009; Schiemann, 2011). Employee engagement is a multi dimensional,
means that employee engagement in the organization can be an emotional attachment, cognitive, or
psychological. In fact, employee engagement is considered as a major factor in measuring the strength of a
company or the company's vigor (Sardar et al., 2011). Refer to previous research, shown that result of study
is different, but there are five indicators found in research on employee engagement, namely job
characteristic, reward and recognition, perceived organizational support, perceived supervisor
support,procedural and distributive justice (Saks, 2005). Study of Saragih and Meily (2013) shown that job
characteristic is an antecedent of employee engagement. Study on perceived organizational support
conducted by Sack (2006),
Rasheed et al (2013) concludes that perceived organizational support has a positive impact ofemployee
engagement. This result is conversely with the study of Nusatria (2011), his study found that perceived
organizational support not influence to employee engagement. Research conducted by Fahrani et al (2010) in
the cement company found that employee engagement is relatively low levels, reached where 51% of
employees not engaged and the rest is engaged.
To measure employee engagement, mostly, used index of employee engagement which consist of engage to
the company and job. Study of Pertiwi (2013) found that 81,5% employees are engaged withthe company and
76,56% engage in their job.
Based on the above, the research problem in this study is how the real effect of job characteristics and
perceived organizational support to the employee engagement? While the purpose of the study was to analyze
the effects of job characteristics on the organizational support and its effect on employee engagement? As
well as to analyze the effects of job characteristic on employee engagement?
Employee Engagement
Employee engagement is a sense of emotional attachment to the work and organization, motivated and give
their best effort to help the success of the organizations and individuals, (McLeod, 2009).
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According to Schiemann (2011) a said engagement when he does three things: 1) can attract positive feelings
about the company and excitement triggers to exert more effort in working, 2) the employee's behavior can
be unpredictable, so its performance will be higher, 3) have a willingness to advocate on behalf of the
company
Khan (1990) in his study, engagement divides into two forms of personal engagement and disengagement
personal. Besides, Khan (1990) stated that the psychological condition can be a predictor of a person on the
attachment of an organization. These three predictors are: meaningfulness, safety and availability. According
to Schaufeli and Bakker (in Storm and Rothmann, 2003) to measure engagement is usually done through
three-dimensional commonly referred to as UWES - Utrecht Work Engagement Scale, consisting of vigor,
dedication and absorption. While Richards et al (2005) used in measuring engagement three elements,
namely: enjoy, belief and value
Job Characteristics
Job Characteristics is an approach in designing job, where the job is described in five core dimensions of the
diversity of skills, task identity, task significance, autonomy and feedback (Robbins and Judge, 2007).
Meanwhile, Hackman and Oldham (1980) reveal there are five working characteristics that can motivate
employees, namely: skill variety, task identity, task significance, autonomy and feedback from job.
Referring to studies Saks (2005) in measuring job characteristics used five dimensions set forth in the form of
questions: 1) how much autonomy is there in your job?; 2) to what extent does your job involve; doing a
"whole" and identifiable piece of work; 3) how much variety is there in your job?; 4) In general, how
significant or important in your job?; 5) to what extend do managers or co-workers let you know how well
you are doing on your job?
The study conducted Khan (1990) indicates that the job characteristics have a positive influence on personal
engagement. While studies conducted by Saks (2005) also reached the same conclusion as that of Khan
Perceived Organizational Support

Perceived organizational support is focused on favorable treatment and a positive mutual relation of
employees (Darmawan, 2013). According Eisenberger et al (1986) Perceived organizational support is the
assumption to increase the sense of ownership towards the organization and expectations of
employees for the company.
According to Eisenberger et al (1986) indicator of organizational support includes the award, companies
reward the achievement of employment, development, the capability of the company and promotional
opportunities for employees, working conditions, the environment in which to work and welfare of
employees, the company's concern for employees.
The influence of Job Characteristics toward Perceived Organizational Support

Job Characteristics is an approach to designing a job that shows how the work is described in five core
dimensions of the diversity of skills, task identity, task significance, autonomy and feedback (Robbins and
Judge, 2007). Noe et al (2006) reports that every organization needs their preferred occupation and able to
provide satisfaction for its employees. So it will be able to motivate the employees to work. Meanwhile,
Hackman and Oldham (1980) reveal there are five job characteristics that can motivate employees, namely:
skill variety, task identity, task significance, autonomy and feedback from a job. Referring to the above
description, it can be justified that to motivate employees to work, every job in the organization needs to have
job characteristics. Thus the first hypothesis proposed in this study reads as follows
H1. The higher the job characteristics, increasingly require a high perceived organizational support
The influence of Job Characteristic toward Employee Engagement

Studies conducted by Kahn (1990), who found that job characteristics, which is one influence on the
psychological meaningfulness positive effect on personal engagement. Further studies conducted Saks (2005)
also showed similar results, namely jobcharacteristics a positive effect on job engagement and engagement
organization.Meanwhile, Hackman and Oldham (1980) reveal there are five working characteristics that can
motivate employees, namely: skill variety, task identity, task significance, autonomy and feedback from a
job. Referring to the above description, the second hypothesis proposed in this study reads as follows :
H2. The higher the job characteristic of a job, then it will be a higher employee engagement
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The influence of Perceived Organizational Support toward Employee Engagement

Studies conducted by Eisenberger et al. (1986) shows that Perceived Organizational Support is positively
associated with a temporary change in the result of extra work. While studies conducted Sack (2006),
Rasheed, Adnan, et al (2013) mentioned that perceived organizational support positively and significantly
related to employee engagement. According Eisenberger et al. (1986) indicator of perceived organizational
support, among others,includes the award, development, promotion, the environment in which to work and
concern over the level of welfare of employees. From the description can be performed justification, if the
company has a concern for its employees, the sense of ownership of the employees of the company will
more increase. Therefore, the third hypothesis proposed in this study reads as follows
H3. The higher the perceived organizational support given by the company, the level of employee
engagement will be higher
THEORETICAL FRAMEWORK
Based on the literature review that was submitted, then the following picture presented theoretical framework
as set out in Figure 1
Figure 1: Theoretical Framework
Note:
JC = Job Characteristic
POS = Perceived Organizational Support
EE= Employee Engagement
3. RESEARCH METHOD
The population in this study is the staff of human resources, finance and marketing of PT Semen Indonesia
amounted to 80 people. The sampling technique used in this research is a census. The data were collected by
distributing questionnaires to respondents who followed up with interviews. The analysis technique used in
this study is a structural equation model. Operational Definition of Variables is as follows:
Variable Indicators Symbol

Job Characteristics (JC) a. Using a number of skills in work JC1
b. Do a variety of work JC2
c. Carry out the work from start to finish JC3
d. The success of the influential work colleagues and
companies JC4
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e. Have the authority to make decisions JC5

f. No feedback from co-workers JC6
g. The quality of work can be seen at the end JC7
Perceived Organizational Support Companies appreciate and consider the decision-making
(POS) process POS1
When there is a constraint given assistance POS2
If employment fell, the Vendor will replace them with POS3
others POS4
When sick, be given permission by the company POS5
Noting welfare POS6
Corporate profits have an impact on the amount of salary
Employee Engagement (EE) Having energy and high spirit in work EE1
Able to work longer than necessary EE2
Have a role in the job EE3
Have a high enthusiasm EE4
Proud of the work done EE5
f. When work can forget the time EE6
g. Steeped jobs EE7
4. RESULTS
From questionnaire that have been distributed and returned by respondents altogether 62 pieces, so the
response rate was 85%. Furthermore, the data that is processed by using software Smart Pls, considering the
small sample and the data are not normally distributed.
Validity & Reliability Test

Based on the evaluation outer models, it is known that the loading factor for JC2 indicator has a minus value
and should be dropped, while others will be retained. Therefore, data must be re-run, the result looks like in
table 1 below
Table 1.Result for Outer Loading
JC POS EE
EE1 0.792
EE2 0.607
EE3 0.784
EE4 0.84
EE5 0.845
EE6 0.484
EE7 0.761
JC1 0.827
JC3 0.549
JC4 0.07
JC5 0.748
JC6 0.537
JC7 0.732
JC8 0.527
POS1 0.633
POS2 0.684
POS3 0.11
POS4 0.5
POS5 0.831
POS6 0.849
Means the indicators used in this study is valid and in compliance with the convergent validity. As for image
loading factor is as follows:
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Figure 2 : Value of Loading Factor
In terms of discriminant validity, performed by seeing the square root of the average variance extracted
(AVE), where the results of the calculation are presented in the following:
Table 2 Average Variance Extracted
Average Variance Extracted (AVE)

JC 0.379
POS 0.424
EE 0.549
From the table above, it appears that the value of AVE for all constructs, except employee engagement value
is below 0.5 the lowest value of the AVE is equal to 0.379 in Variable Job Characteristics. Furthermore, the
reliability calculation of composite reliability values indicated by the results looks as follows
:
Table 3 Composit Reliability
JC 0.786
POS 0.790
EE 0.892
From the table above, looks values of composite reliability above everything 0.7 This means that all
constructs in the model meets the criterion discriminant validity
Testing Structural Model (Inner Model)
This testing is done by looking at the value of R Square on each construct, the results look as follows:
Table 4 R-Square
R-square
JC
POS 0.142
EE 0.467
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The table shows that the construct of Job Characteristic only capable of influencing construct
Organizational Perceived Support for 0,142 and Employee Engagement constructs that are affected by the
construct Job Characteristic and Perceived Organizational Support at 0,467, while the rest influenced by
factors beyond the two constructs
Hypothesis testing
To test the hypothesis, it is used for inner weight result table presented in the following table:
Table 4 Inner Weight
Original sample Mean of sub Standard T-
Conclusion
estimate samples deviation Statistic
JC ->
0.376 0.399 0.192 1.962
POS H1-Accepted
JC -> EE 0.562 0.581 0.094 5.961 H2-Accepted
POS ->
0.231 0.236 0.095 2.436
EE H3-Accepted
From the table above shows, that the job characteristic influence on perceived organizational support has
positive and significant influence (1,962 t value> 1, 96). While the job characteristic influence on employee
engagement (t value 5.962> 1.96) and the effect of perceived organizational support on employee
engagement same as having a positive effect and significant (t value 2.346> than 1.96). The effect is more
dominated by job characteristic. Because the job characteristic influence on perceived organizational support
is significant, then the variable perceived organizational support needs to be examined further whether as a
variable as an intervening variable.
Influence Analysis of Direct, Indirect and Total
The direct effect of job characteristic to employee engagement = 0.562
The indirect effect characteristic of employee job Engagement
through perceived organizational support is 0.376 x 0.231 = 0.086+
Effect of Total = 0.648
From the analysis of the effect can be seen that the direct effect of job characteristic of employee engagement
have a greater influence (0.562) than the indirect effect (0.086)
Discussion
Loading factor of the influence of job characteristic to employee engagement is at 0.562 influences job
characteristic to perceived organizational support at 0.376 while loading factor in the effect of perceived
organizational support to employee engagement value is 0.231, then generally the model scenario is proposed
to increase employee engagement can not be separated from characteristic job role and perceived
organizational support
Job characteristic formed by indicators - indicators such as skills are complex, varied work, have the ability
to carry out the work, can work independently, influential in the work, involved in decision making, have
feedback on the work that has been done and the work quality seen that the numerical value of the index has
a higher category
Likewise, the index value of the indicators that make up the variable perceived organizational support has
a higher category. This can be construed employee perceptions of job characteristic that they have been high,
so they can have a good performance, then the company needs to provide optimal support and it certainly can
motivate employees to work hard and achieve. This is certainly in line with what is presented Noe et al
((2006)
This study successfully demonstrated the role of job characteristic in improving employee engagement. The
results of this study are consistent with a study by Khan (1990) and Saks (2005). Variable job characteristic
that has an indicator; such skills is complex, varied work, have the ability to carry out the work, can work
independently, influential in the work, involved in decision making, have feedback on the work that has been
done and the work quality is seen that the numerical value of the index has categories that highest.
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While the variable employee engagement has indicators motivation to work, willingness to work beyond the
specified time, play a role in the work, enthusiasm, pride showed the index with high category. The
relationship between the two can be interpreted, if it is carried out in a professional manner and the results are
heartening, then the employee will generally have a sense of ownership of the company and were reluctant to
leave the group.
The study also showed the neighbor role of perceived organizational support in improving employee
engagement. The findings of this study are consistent with a study conducted by Sack (2006), Rasheed,
Adnan et al (2013). A variable indicator of perceived organizational support has appreciated the decision
taken, in any difficulty in performing work tasks the company continues to provide assistance / or support,
the company has a policy to transmute the employees, and the company always pays attention to the welfare
of its employees, showed a high index. Likewise with variable employee engagement. Based on these
descriptions can be perceived, that if the company can improve the life of its employees, then their sense of
ownership of the company will be higher.
After conducting surveys and research on efforts to increase employee engagement, a number of conclusions
as follows
1) Factors that cause high employee engagement is a construct of job characteristic that is equal to
0.562. This means that the characteristics of jobs that use skills of complex and varied, structured
and benefits for the company should get the attention of the company.
2) The second factor is the effect of job characteristic, obtain any perceived organizational support in
the amount of 0, 376. This means that the work that has characteristics skilled use of the complex as
well as varied, structured and benefits for the company should receive more support. With the
support of the company will be able to motivate employees to work more professionally and teases
the level of profits for the company.
3) The third factor is the effect of perceived organizational support on employee engagement that is
equal to 0.231 This means that if companies want to provide support to employees, then employees
will feel valued because they have a role to the success of the company, making it feel like working.
Therefore, in order that the level of engagement can employment level, companies must be able to
combine the two variables: the job characteristic and perceived organizational support together.
This research has several limitations, namely: a low-level Rsquare good for variables perceived
organizational support (POS) amounted to 0,142 and variable employee engagement (EE) of 0,467.
Similarly, the value of variance extracted average.
Therefore, for future research, it is advisable to add the variable career development, need for achievement,
work experience etc.
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pada 17 Januari 2016
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SOCIO-ECONOMIC IMPACT OF ISLAMIC MICROFINANCE:

AN OVERVIEW OF MALAYSIAN EXPERIENCES
Muhamad Badri Bin Othman

Faculty of Economics and Muamalat
Universiti Sains Islam Malaysia, Nilai, Negeri Sembilan
Tel: +60162239404 E-mail: muhamadbadri.othman@yahoo.com
ABSTRACT
Islamic microfinance is well-known to be an effective tool to alleviate and eradicate poverty and a tool for a
sustainable development by providing a financial inclusion for all segments of the society especially to the
less privileged or ‗unbankable‘ people . It has proven to be the most successful way to reduce the poverty
rate among the countries who adopt it. The paper aims at the very minimum to discuss and highlight the
socio-economic impact on the society in Malaysia since the Islamic microfinance was introduced in the
country since nearly 30 years ago. The objective of this research paper is to enrich the literature on the
impact of Islamic microfinance on the socio-economic development of the micro-entrepreneurs who obtain
the microfinancing from the well-known and successful microfinancing institution in Malaysia, Amanah
Ikhtiar Malaysia (AIM). The research methodology for this research paper is qualitative in nature where the
author evaluates and highlights some current issues and challenges for the countries to eradicate the poverty
level in order to widen the financial inclusion to all level of the society including the poor and less privileged
people in the society. This paper also will highlight some selected success stories among the micro-
entrepreneurs, especially women micro-entrepreneurs who obtained the financing from AIM and spread their
socio-economic well-being to others for a greater shared prosperity and hence to escape from poverty. It is
found out that the pertinent issues surrounding the Islamic microfinance industry in Malaysia are the lack of
self-sufficiency and product development and diversification. Many scholars have proposed the use of Islamic
principles of Murabahah, Musharakah, Mudharabah, Muzaraah, Qardh Hassan and even Musharakah
Mutanaqisah as the mode of financing for Islamic microfinance. This paper concludes with some suggestions
for AIM and the government future action and implementation.
Keywords: Amanah Ikhtiar Malaysia; Islamic microfinance; Micro-entrepreneur; shared prosperity; socio-
economic
1. INTRODUCTION
Socio-economic is defined as interaction between economic activity of the society with the regional economy
or global economy. It studies on how economic activity affects and is shaped by social process. Socio-
economic well-being and betterment of the people is the major concern of any government in the world. This
is extremely important for the government to ensure the sustainable socio-economic development in ensuring
continuous protection of well being of the people‘s life for future generations to come. Many efforts and
programmes have been put in place by Malaysian government to increase the level of socio-economic well
being of the people. This is in line with the government‘s aspiration to become a high income nation by the
year 2020. Table 1 below shows the key economic indicators of Malaysia from 2012 to 2015.
Table 1: Malaysian Key Economic Indicators
2012 2013 2014 2015
Population (million) 29.5 29.9 30.6 31.0
Labor Force (million) 13.1 13.6 13.9 14.1
Employment (million) 12.7 13.2 13.5 13.7
Unemployment rate (%) 3.0 3.1 2.9 3.1
Nominal GDP (RM billion) 971.3 1,018. 8 1,106.6 1,169.0
Nominal GNI (RM billion) 935.4 984.8 1,069.3 1,131.2
Real GDP growth rate (%) 5.5 4.7 6.0 5.0
Source: Economic Planning Unit, Prime Minister‘s Department, July 2015
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Form Table 1 above, it shows that the nominal GDP keeps increasing from 2012 to 2015 while the GDP
growth rate volatiles on average of 5.3 percent. Efforts and various schemes had been introduced by the
government to reduce the unemployment rate to a minimum level as possible. These include the introduction
of various entrepreneurship programmes through supporting government agencies such as SME Corporation,
Tabung Ekonomi Kumpulan Usaha Niaga (TEKUN Nasional), Amanah Ikhtiar Malaysia (AIM) and many
other financial institutions or Non-Governmental Organization (NGO).
While moving towards becoming a high income nation from upper middle income by the year 2020, the
government should not ignore and abandon the poor people in rural area or even poor people in urban area or
better known as ‗urbanization poverty‘ as well. They cannot be left out form the pie chart of economic
development agenda since they are also people who contribute to the growth of the nation if they are given
the opportunity to excel themselves for betterment in their life for future endeavor. Department of Statistics
(2016) reported that the poverty rate of Malaysian has decreased from 1.7 percent in 2012 to only 0.6 percent
in 2014. On the other note, the Asian Development Bank declared that Malaysia has recorded 55.3 percent
reduction on the percentage of population below poverty line income, which was the biggest reduction among
ASEAN countries (Idris Jala, 2015). These are figures that we would like to see every year which show the
success of our government‘s policies in eradicating poverty level and reducing the unemployment rate while
maintaining the GDP growth rate steadily at 5 to 6 percent. How is this possible?
These figures are unobtainable if the government does not take the necessary actions to combat and tackle
these issues. As such, the government has introduced and launched the Government Transformation
Programme (GTP) in 2009 and Economic Transformation Programme (ETP) in 2010 as part of Malaysia‘s
National Transformation Programme. Under GTP, there are six National Key Result Areas (NKRAs)
identified to spearhead the transformation of the government. The six NKRAs are:
1. Reducing crime
2. Fighting corruption
3. Improving student outcomes
4. Raising living standards of low-income households
5. Improving rural basic infrastructure
6. Improving urban public transport
The poverty eradication activity in Malaysia has taken place even before the launch of these two government
transformation programmes. For example, in 1970, the government had launched the New Economic Policy
(NEP) to encourage the active participation of Bumiputra in economic activities so that they could escape
from poverty line vulnerability and could live well with other races in Malaysia. With regards to the socio-
economic well being of the people, various agencies had been set up such as Tabung Haji in 1964, Majlis
Amanah Rakyat (MARA) in 1966 and Amanah Ikhtiar Malaysia (AIM) in 1987 to provide and facilitate the
mobilization of fund for financing to those entrepreneurs who which to venture into small business to sustain
a steady income for their life and thus creating more jobs for others. This is because the government has
acknowledged that entrepreneurship is the engine of economic growth in which creates wealth, innovation
and technology deployment and reduces poverty (Venkatachalam & Waqif, 2005). As such, a great emphasis
on the development of micro-enterprises has been put as a key strategy in the government‘s New Economic
Policy (NEP) in 1970 and it is still maintained to be one of the key development areas under New Economic
Model (NEM) 2010 (Tuyon & S. Mohammad, 2011). On the other hand, Soete and Stephen (2004) argued
that countries that are more focused on entrepreneurship and self-employment have witnessed higher
economic growth.
The objective of this research paper is to enrich the literature on the impact of Islamic microfinance on the
socio-economic development of the micro-entrepreneurs especially women micro-entrepreneurs who obtain
the microfinancing from the largest, well-known and successful microfinancing institution in Malaysia,
Amanah Ikhtiar Malaysia (AIM) - government‘s institutions entrusted to manage the micro-credit funds.
Microfinance has been recognized globally as an effective tool to reduce and eradicate poverty level in rural
area in many countries around the world (Othman, M.B, 2015). Microfinance refers to the provision of
financial services to low-income clients in solidarity lending groups including consumers and the self-
employed who have limited access to financing and banking related services (Zabidah, 2012). According to
348
Brooks (2013), microfinance refers to an array of financial services, including loans, savings and insurance,
available to poor entrepreneurs and small business owners who have no collateral and would not otherwise
qualify for a standard bank loan. Microfinance is very much related to achieving shared prosperity since it
enables the poor segment of the population the access to financing services to gain financial freedom with
any income generating economic activities, such as to foster small-scale entrepreneurial activities, thus
reducing the inequality in socio-economic well-being of a country. Obaidullah and Khan (2008, pp. 1) argue
that ‗access to services such as credit, venture capital, savings, insurance, remittance is provided on a micro-
scale enabling participation of those with severely limited financial means. The provision and access of
financial services to the poor help to increase household income and economic security, build assets and
reduce vulnerability; creates demand for other goods and services (especially nutrition, education, and health
care); and stimulates local economies‘. While according to Mansori, Chin and Safari (2015), they argue that
‗Islamic microfinance is a growing industry in several Muslim countries such as Bangladesh, Nigeria, and
Malaysia. Islamic microfinance is at the heart of Islamic finance as it addresses one of the fundamental roles
of financial intermediaries demanded by Shari‘ah‘.
A review of the literature has shown that microfinance is capable of being an effective tool to reduce and
alleviate poverty. Many types of research have been done on the effects of micro-financing as the effective
tool to alleviate poverty in rural areas in several countries around the world (Norma, 2012). It has strong
potential to be enhanced and promoted as the most suitable scheme to cater the need of clients in a rural area
to combat and alleviate poverty. According to Ferro (2005), funding microfinance projects has become a
priority for investors and donors including government, the private sector and non-governmental organization
(NGO). A study conducted by Afrane (2002) on the impact of two microfinance interventions in Ghana and
South Africa in 1997 and 1998 found that the microfinance interventions has shown a significant
improvement on the level of clients‘ condition such as economic, social, access to facilities, spiritual and
empowerment, particularly to women. Morduch (as cited by Norma and Jarita, 2010) studies the impact of
microfinance in Bangladesh and found that the household served by microfinance programmes are better than
controlled households.
The paper will explore, examine and investigate the contribution of the establishment of AIM as a trusted
micro-credit fund provider and distribution channel in eradicating poverty incidence in Malaysia. The
research methodology for this research paper is qualitative in nature where the author evaluates and
highlights some current issues and challenges for the countries to eradicate the poverty level in order to
widen the financial inclusion to all level of the society including the less privileged people in the society.
This research paper was prepared through analyzing and examining the past studies and related literatures by
scholars and data found from journal and articles. This paper also will highlight some success stories among
the micro-entrepreneurs, especially women micro- entrepreneurs who obtained the financing from AIM and
spread their economic well-being to others for a greater shared prosperity and hence to escape from poverty.
4. AMANAH IKHTIAR MALAYSIA (AIM) AND ISLAMIC MICROFINANCE
Amanah Ikhtiar Malaysia (AIM) was established on 17 September 1987 as the first microfinance institutions
in Malaysia as a result from a pilot study, known as the ‗Ikhtiar Project‘ done by two professors from
Universiti Sains Malaysia (USM), Professor David Gibbons and Professor Sukor Kassim in Selangor. It is a
private trust that serves as a microfinance institution (MFI) which provides micro-financing for women from
the poor and low-income household. It replicates the model of Grameen Bank of Bangladesh with close
supervision on the members, with the objective as an agent of the government for poverty eradication
programme under the National Development Policy (Nor Fazidah, 2011).
Table 2: AIM Fact Sheet
Total Financing Disbursement RM15,097,046,687
Total Sahabats 382,178
Latest Balance (as at February 2015) RM1,544,802,384
Source: Amanah Ikhtiar Malaysia
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With the main objective of its establishment in assisting the hardcore poor, poor and low-income households
to lift themselves out of poverty, primarily by means of benevolent financings to be used for financing
income generating activities and thus improve their standard of living, AIM operates as an Islamic
microfinance institution where microcredit provided by AIM is given out without profit rate or interest. Its
clients or better known as Sahabat are however required to pay a management or administrative fee of 10
percent. AIM has grown to become a household name in the global microfinance industry. AIM‘s market
share of the microfinance industry stands at 40 percent in 2013 and is expected to increase to 50 percent in
the next 5 years. At the end of 2010, AIM has been providing to nearly 84 percent of poor household in
Malaysia (Nor Fazidah, 2011). Under the helm of Dr. Zubir Harun, the Chairman of AIM, and the institution
has gained various recognitions globally. This includes The Asian Leadership Award on Rural Development
and Poverty Eradication, Best Islamic Microfinance Award (for two consecutive years in 2013 and 2014 at
the Global Islamic Finance Award), Global Excellence in Management Award on Excellence in Corporate
Governance and Global Good Governance (3G) Women Empowerment Award in 2016. By 2013, more than
22 percent of Sahabats earn more than RM3,200 and more than 49,000 of them have reached the income
threshold of RM3,500 a month and have graduated to become micro entrepreneurs. With these achievements,
AIM is confident that by 2020, all of its Sahabats will graduate to this income level (Asian Institute of
Finance, 2015).
Table 3: Number of branches and AIM Sahabats
Year No. of Branches No. of Sahabats
1990 27 3,220
1995 35 39,401
2000 61 61,839
2005 69 154,614
2010 97 253,631
2011 115 286,105
2012 123 332,059
2013 123 346,245
2014 135 347,907
Source: Asian Institute of Finance, 2015
5. ISSUES AND CHALLENGES SURROUNDING THE ISLAMIC MICROFINANCE
Despite being the best and effective tool to alleviate poverty and to widen the financial inclusion for the poor
segment of the society, the operational wise of AIM does not escape from pertinent issues and critics. Tuyon
& S. Mohammad (2011) has listed out the issues and challenges of the microfinance industry. They stated
that the issues are sustainability, which is due to lack of self-sufficiency and outreach issue. This is further
supported by Adejoke (2010) which stated that microfinance institutions (MFI) in Malaysia are not self-
sufficient in which they overdependence and rely heavily on government subsidies, grant, donors, local
financings and savings from the members. Addressing on the second issue, i.e. outreach issue, the author
does not think that AIM has a big problem with it since it has a strong network and 135 branches spread in all
over the country, it could be reached out easily to access for microfinancing schemes available for the
hardcore poor and poor in rural area. Another issue is on the management fee imposed on the AIM Sahabat
which is at 10 percent per annum, which is relatively high when AIM is using Qardh Hassan or benevolent
loan to finance its client. Some scholars argue that as an Islamic microfinance organization that provides
financing with no profit rate, imposing management, administrative or service fee (Ujrah) for a loan is
permissible. However, Norma (2012) opined that the Qardh Hassan could only be given to the hardcore poor
with a waiver on the administration fee or charged at a minimum rate as possible to reflect the true spirit and
intention of Qardh Hassan.
The other issue surrounding the microfinance industry is the product diversification or product differentiation
that could be offered to the clients to tailor their financing needs. According to Obaidullah (2008), most of
the Islamic microfinance institutions use debt- base financing such as Murabahah, Ijarah, Bai Bithaman Ajil
350
(BBA), Salam etc. Many scholars and researchers have proposed various kind of products which are suitable
to be offered by MFIs in which could attract more clients to access and finally obtain the financing for their
entrepreneurship activity. For instance, Norma (2012) argued that majority of AIM members are interested in
Islamic microfinancing products based on a survey conducted on 1,800 AIM members from the state of
Kelantan and Perak, on their view of Islamic microfinance. She further proposed that Murabahah,
Musharakah, Mudharabah, Muzaraah, Ijarah and Qardh Hassan or even Musharakah Mutanaqisah are the
suitable Islamic finance products to be used as the mode of financing to finance the various economic
activities of its Sahabats. Table 4 below describes the current list of AIM products and services available to
its existing and potential client.
Table 4: AIM product and services
Service Product Description Purpose
i. Initial financing amount is up to
Economic RM3,000; with a maximum of To finance income generating
financing RM20,000.
activities
ii. Subsequent financing is based on
existing repayment records.
Microfinance Educational For members and their family To develop skills and
financing (including children). fund educational needs
House renovations/ repairs,

Multipurpose To increase the well-being of
investments (fixed/ liquid assets),
financing the Sahabats
household consumption
To inculcate good savings
habits and generate group
Compulsory funds. The savings are made
Savings savings/group From RM1 to RM15 weekly into shares in
funds KOOPSAHABAT (AIM
Cooperative) which belongs
to the Sahabats
To compensate for
Welfare and
i. RM2 monthly unfortunate events
well-being
Security ii. 1% contribution deducted from
funds including natural disasters,
economic financing fire, hospitalization charges,
(voluntary)
chronic illnesses, death
i. Entrepreneurship training To develop 90% of active
Economic Development ii. Business development members into entrepreneurs.
programmes
Source: Asian Institute of Finance, 2015.
6. AIM SUCCESS STORIES
Besides achieving those acknowledgments and accolades globally as mentioned above, the real significant
success of AIM is the production and empowerment of micro-entrepreneurs among the poor especially
women in achieving shared-prosperity hence improving their quality of life and their families. Table 5 below
summarizes the stories of three successful women micro-entrepreneurs of AIM Sahabats.
Table 5: AIM Sahabats Successful Stories
Business/ Economic Activity Transformation
1. Kamariah Udin Started a fish farming business - Earn RM2,000 a day from only
after obtaining a microfinance RM30 previously.
- A housewife from Kg. Pulau
- Able to hire 3 more workers.
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Salak, Sarawak scheme in 2001. - Moved to a big house from

wooden village house.
2. Hasnah Abdullah Opened up a retail shop after - Earn RM18,000 a month from
receiving RM500 financing in only RM260 previously.
- A single mother with two
1994 - Own assets worth RM386,000
children from Perlis
3. Rokiah Long Bamboo baskets production by - Earn RM1,000 a month from

weaving herself together with only RM160 previously.
- A blind woman from Penang.
her blind husband after receiving
RM500 financing in 1992
Source: Asian Institute of Finance (2015) and UNDP (2008)

These are some selected success stories of AIM Sahabats which have proved that with the determination and
passion to lift up their socio-economic well-being and to escape from poverty, all is possible with the help
and assistance of the government through its distribution channel agencies like AIM and other agencies.
7. CONCLUSION
This paper reviews and studies the socio-economic impact of Islamic microfinance in Malaysia and argues
that since its inception almost three decades ago, AIM, as trusted government agency for distribution of fund,
has played a tremendous role in uplifting the socio-economic status of the hardcore poor and poor segment of
the society. This excellent track-record has been proven to be the most effective tool and mechanism to
reduce and fight poverty rate in the country and being acknowledged by various parties locally and
internationally. As such, the government should be more dynamic and proactive in channeling the fund for
financing as to attract more poor people of the society to obtain the financial services provided by AIM and
other MFIs. The fund allocated to AIM by the government through soft loan should be increased from year to
year to incorporate the current economic situation with regards to the cost of living. This is to ensure the
continuation of support for the sustainable development of micro-entrepreneurs for better financial inclusion
for future generations.
On the other hand, AIM, as the distribution channel, should develop various products diversification in order
to cater and suit the needs of its potential clients. There are various suitable Islamic financing products
available which are suitable to be used as proposed by scholars and researchers. It has to be more creative
and supportive in reaching out the poor people especially in rural area which do not have access to financial
services.
8. REFERENCES
Adejoke, A.G. (2010). Sustainable Microfinance Institutions for Poverty Reduction: Malaysia Experience. OIDA
International Journal of Sustainable Development. Vol. 2 No. 4 pp. 47-56.
Amanah Ikhtiar Malaysia. (2016).Retrieved from http://aim.gov.my/bm/
Asian Institute of Finance. (2015). Aiming for Greater Financial Inclusion Through Sustainable Development: The Story
of AIM (Amanah Ikhtiar Malaysia). Retrieved from
http://www.aif.org.my/clients/aif_d01/assets/multimediaMS/publication/Aiming_for_Greater_Financial_Inclusion_t
hrough_Sustainable_Development_1.pdf
Chad, Brooks. (2013) Business News Daily. What is Microfinance? Retrieved from
http://www.businessnewsdaily.com/4286-microfinance.html
Department of Statistics Malaysia. (2016). Report of Household Income and Basic Amenities Survey 2014. Retrieved
from
https://www.statistics.gov.my/index.php?r=column/cthemeByCat&cat=120&bul_id=aHhtTHVWNVYzTFBua2dSU
lBRL1Rjdz09&menu_id=amVoWU54UTl0a21NWmdhMjFMMWcyZz09
Ferro, Nicoletta. (2005). Value Through Diversity: Microfinance and Islamic Finance and Global Banking. FEEM
Working Paper No. 87.05. Available at SSRN: http://ssrn.com/abstract=755447 or
http://dx.doi.org/10.2139/ssrn.755447
352
Idris Jala (2015). Transformation Unplugged. Retrieved from http://etp.pemandu.gov.my/Transformation_Unplugged-@-

The_measure_of_poverty.aspx
Kadri, Nor Fazidah. (2011). The Role of Microfinance in Poverty Alleviation: AIM‘s Experience. The 2nd Working Group
on The Development of Islamic Financial Service Industry. November 2011. Jakarta
Malaysian Government Economic Planning Unit, Prime Minister‘s Department. (2016). The Malaysia Economy in
Figures 2015. Retrieved from http://www.epu.gov.my/documents/10124/a71249d3-d815-4ab6-af38-ffad2560ffd8
Mansori, S., Chin, S. K & Safari, M (2015). A Shariah Perspective Review on Islamic Microfinance. Asian Social
Science. Vol. 11, No. 9 2015
Norma Md Saad, (2012). Microfinance and Prospect for Islamic Microfinance Products: The Case of Amanah Ikhtiar
Malaysia. Advances in Social Science. Vol. 1, No. 1, March 2012.
Norma Md Saad & Jarita Duasa. (2010). Determinants of Economic Performance of Micro-Credit Clients and Prospects
for Islamic Microfinance in Malaysia. ISRA International Journal of Islamic Finance. Vol 2. Issue 1
Obaidullah, Mohammed (2008), Introduction to Islamic Microfinance, IBF Net : The Islamic business and finance
network,Retrieved from www.assaif.org/.../Introduction%20to%20Islamic%20microfinance.pdf
Obaidullah, M. & Khan, T. (2008). Islamic Microfinance Development: Challenges and Initiatives. Islamic Research &
Training Institute Policy Dialogue Paper No. 2. Available at
SSRN:http://ssrn.com/abstract=1506073 or http://dx.doi.org/10.2139/ssrn.1506073
Othman, M.B. (2015). Role of Women in Achieving Shared Prosperity: An Impact Study of Islamic Microfinance in
Malaysia. Procedia- Social and Behavioral Science, 211, pp.1043-1048.
Soete, B., & Stephan, A. (2004). Introduction: Entrepreneurship, Innovation, and Growth. Industry and
Innovation, 11(3), 161-165.
Tuyon, J. & S. Mohammad, S.J. (2011). The Role of Microfinance in Development of Micro Enterprises in Malaysia.
Business & Management Quarterly Review. 2(3), 47-57, 2011
UNDP. (2008). Malaysia Nurturing Women Entrepreneurs. Retrieved from
http://www.my.undp.org/content/dam/malaysia/docs/WomenE/UNDP_Malaysia_NurturingWomenEntrepreneurs_p
ublication.pdf
Venkatachalam, V. B., & Waqif, A. (2005). Outlook on Integrating Entrepreneurship in Management Education in
India. Decision (0304-0941), 32(2), 57-71.
Zabidah Ismail. (2012). The Role of Microfinance in Poverty Alleviation: AIM‘s Experiences. Islamic Microfinance an
Instrument for Poverty Alleviation. Retrieved from http://wief.org/wp-content/uploads/2012/04/Datuk-Hajah-
Zabidah-Ismail.pdf
9. MISCELLANEOUS
Muhamad Badri Othman, age 32, currently pursues his PhD in Economics and Muamalat Administrations at
University Sains Islam Malaysia (USIM) on a full-time basis. He holds Bachelor of Economics (Honours)
from the International Islamic University Malaysia (IIUM) before continuing the Chartered Islamic Finance
Professional (CIFP) at the International Centre for Education in Islamic Finance (INCEIF). He was a former
Assistant Manager, Regulatory Compliance at Small & Medium Enterprise Development Bank (SME Bank)
Kuala Lumpur. His research interests are in Islamic Finance, Islamic Microfinance, Economic Development
and foreign worker related issues in Malaysia. He has presented a few research papers at the international
conference such as 2nd Global Conference on Business and Social Science (GCBSS) which was held in Bali,
Indonesia in 2015 and 8th Kuala Lumpur International Business, Economics and Law Conference (KLIBEL).
He can be reached via mobile phone at +60162239404 and e-mail muhamadbadri.othman@yahoo.com. His
residential and mailing address is at: No 13, Peti Surat 14, Jalan Pahang Lama, 53100 Kuala Lumpur.
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354
EFFECT OF NON FINANCIAL FACTORS ON

THE FINANCIAL PERFORMANCE OFFARMER COOPERATIVES IN BALI
Ni Nyoman Juli Nuryani 1, Wayan Windia2, Ketut Budi Susrusa3& I Ketut Suamba4
Postgraduate, Udayana University, Denpasar Bali Indonesia
(nijuli.nuryani@gmail.com; windia@yahoo.com;budisusrusa@yahoo.com;suamba@yahoo.com)
ABSTRACT
Farmer cooperative institutions (Koptan) is a system of agricultural development, included into the
agribusiness system subsystem supporting institutions (off-farm). Control Koptan emphasized, inter-personal
interaction, the realization of alignment of action with targets and achieve effective and efficient. Research
on the influence of non finasial on financial performance Koptan include leadership, participation, culture
and TQM. The purpose of this study was to determine the effect of non finasial factors on financial
performance Koptan. The research was carried on in Bali, with a focus on business Koptan. Making a
research on Koptan Koptan because the activity is the driving force in the economic sector agribusiness. The
development of this sector would improve the economy of the people so as to create continuity Koptan. Total
Koptan in use as research samples are as many as 11 Koptan, with the number of respondents as many as 97
people. Data analysis technique used is the analysis of PLS. The results of this study indicate that, financial
performance Koptan in Bali influence on leadership, participation, budget and organizational culture
towards TQM give R-square value of 0.1535, or 15.35%, whereas the effect of leadership, participation
budget, organizational culture and TQM on performance Koptan finance the R-square value of 0.6068 or
60.68% .. From the results of this study concluded that leadership, participation budgets, positive and
significant impact on TQM Koptan in Bali and organizational culture and not significant positive effect on
TQM Koptan in Bali. While the participation of the budget, organizational culture and TQM positive and
significant impact on the financial performance and leadership Koptan in Bali a significant negative effect on
the financial performance koptan.Manfaat this study may have implications for the development of financial
performance Koptan in Bali and a study material for research to conduct research on financial performance
and results of this study would be useful to Koptan in Bali so as to control the management properly so that it
can support the sustainability Koptan in Bali
Keywords: Non-financial, Financial Performance, Koptan
1. INTRODUCTION
The problems that are still attached to the institutional sector of farmers and farmers in Indonesia is still a
lack of awareness and knowledge of farmers on management issues in production and marketing network.
Farmers have not been fully involved in agribusiness activities. Activities farmers are still focused on
production activities (on farm). Institutional role and function of farmers as the umbrella organization of
farmers has not run optimally. To overcome these problems need to make efforts to develop, empower, and
institutional strengthening farmers. Such as farmers' groups, labor institutions, institutional providers of
input, output institutional, institutional extension, and institutional capital and is expected to protect the
bargaining position of farmers.
One form of institutional capital that was formed to facilitate the farmers are Farmers Cooperative (Koptan).
Koptan formed function is to accommodate the welfare of the farming community that is one of the
alternatives in developing the potential of social economy. On the other hand, the number of members
Koptan Koptan and should be followed by the success of its management. One indicator that can be used as a
reference for assessing the success of Koptan that there is to see the achievements of its financial
performance.
According Horngren (2007), taking the measurements of performance can be grouped into non-financial
performance measurement (non financial pertormance measurement) and measurement of financial
performance (financial performance measurement). To improve the performance of the organization, we need
a system based on performance. The good performance should have a performance measurement system that
is reliable and good quality, so it requires the use of performance measures that do not rely solely on the
financial aspects, but also pay attention to aspects of non-financial (Pramadhany, 2010). Referring to the
development of the business world is increasingly complex and competitive today, an indicator of financial
355
performance or financial gain is not the only factor determining the success of a company. Financial
performance will only be good if it is supported by the non-financial aspects associated aimed at increasing
the financial performance (Gunawan, 2009).
This is due to the non-financial perspective that is hyper real (the real drivers) the company's financial
performance. Because the market value of the companies in the era of information technology today is more
driven by intangible assets (intangible assets) of the tangible fixed assets (tangible assets), (Mulyadi, 2005).
Many critics of financial performance measurement system for ignoring non-financial dimensions of
performance. The success of an organization will be achieved when implementing performance measurement
with multi-dimensional concept where both aspects change over time and between individuals or groups
within the organization (Gunawan, 2009).
There nonfinancial factors that play a role in determining financial performance. Many of the criticisms were
raised about the importance of measuring the financial performance of a company by looking at factors - non-
financial factors and weaknesses - weaknesses that arise in measuring the financial performance of the
financial aspects. Some non-financial factors in measuring the financial performance were examined in this
study is the factor of leadership, participation budget, organizational culture and total quality management
(TQM).
Referring to some of the rationale above, it can be seen that there are research gaps previous research on the
measurement of financial performance with financial ratios. Theoretical critique of the weaknesses -
weaknesses measurement of financial performance, both financial and non financial aspects. Is necessary to
develop a concept study to examine the role of non-financial factors in measuring financial performance.
From the description of the background can be formulated permaslahan as follows, 1) .Is the leadership,
participation, budget and organizational culture positive and significant impact on the Management of total
quality (TQM) Koptan in Bali ?; 2) Is the leadership, participation, budget and organizational culture positive
and significant impact on the financial performance Koptan in Bali ?; 3) Is the Management of total quality
(TQM) positive and significant impact on the financial performance Koptan in Bali ?.
The purpose of this research is to determine whether the leadership, participation and organizational culture
anggrana positive and significant impact on the Management of total quality (TQM) Koptan in Bali; also to
determine whether the leadership, participation, budget and organizational culture positive and significant
impact on the financial performance Koptan in Bali; as well as to determine whether the Management of total
quality (TQM) positive and significant impact on the financial performance Koptan in Bali.
The importance of non-financial performance measurement is because organizations are facing rapid changes
in the environment. To be competitive, organizations need information systems that is capable of capturing
information quickly and effectively. Although the analysis of financial records is important, but the
calculation is less to provide accurate information about the organizational capabilities of information
measured in the financial result from decision past, Mulyadi (2005). In the face of environmental changes and
increasing competition, non-financial measurements to be important to do because many non-financial data
that are qualitative concerning the operations of the company as well as those regarding the organization's
relationship with its external environment that have a major influence on the survival of the company.
In other words, non-financial measurements are the measurement of intangible assets and organizational
capabilities that can help organizations to achieve success. Intangible assets can not be measured in financial
measure because it is not included in the financial statements of an organization. This occurs because it is
difficult to calculate the financial value of the intangible assets. While the intangible assets that affect the
financial statements of an organization in its use. The measures can not substitute for financial non financial
measures, both of them are complementary (Kaplan & Norton, 2000). Measurement is based on non-financial
performance will be directly related to the business strategy and may change according to the changing
business environment. Financial-size that can be used by companies, among others, leadership, participation,
budget, culture. Non-financial measures of such an intellectual and intangible assets owned by a company.
Timothy, et al. (2011) states that leadership style has a positive influence on the financial performance. This
is also consistent with research Iriemi and Ugochukwu (2012) which states that leadership style has a positive
relationship with organizational performance. Satyawati and Suartana (2014) suggested that the success or
failure of a company in achieving good performance is largely determined by the leader. A company hinted
in their activities have a reliable leader who is able to anticipate the future of the organization and take
356
advantage of the changes that exist so as to direct the organization to reach its destination (Satyawati and
Suartana, 2014).
Participation in the preparation of the budget is the level of how much involvement and influence in the
budgeting process manager of a department or subdivision periodical and annual. Sumarno Research (2005),
found that there is a positive and significant relationship between participation in budget preparation and
performance manajerial.Menurut Mansor and Muhamad (2010), organizational culture is a complex set of
beliefs, assumptions, values and symbols that are used in determining the road in which the organization does
business. According Soedjono (2005), organizational culture can become an instrument of competitive
advantage and foremost, when the organizational culture can support the strategy of an organization, then the
organization is able to respond and cope with environmental challenges accurately and quickly.
Total quality of managementy (TQM) is an approach that should be done today's organizations to improve
product quality, lower production costs and increase productivity. TQM implementation is also a positive
impact on the production costs and the income (Gaspersz, 2005). Other evidence also shows that companies
are pursuing the best practices of TQM can achieve higher profits and cash flows as well as the value of its
larger shareholders (Corbett and Rastrick, 2000). Some research on the relationship between TQM
performance have been made. Kurnianingsih (2000) investigated the effect of system performance
measurement and reward system of the effectiveness of the application of TQM techniques in manufacturing
companies. Kurnianingsih managed to prove that the system of performance measurement and reward system
to strengthen ties moderating the relationship between TQM and managerial performance. In the study
Wreder, et al (2008) found that development organizations are assisted by the implementation of TQM.
While Terziovski study (2006) found that the practice of TQM simultaneously have a significant and positive
effect on productivity improvement and customer satisfaction. Research Terziovski and Samson (2000) found
the implementation of TQM has a significant and positive relationship to performance improvement.
Research from Sila (2007) found no effect of TQM on performance measures. Sila and Ebrahimpour study
(2007) found TQM and performance measurement factors contributing to the improved performance.
The hypothesis of this study are as follows. 1) Leadership, budgetary participation, and organizational culture
positive and significant impact on the Management of total quality (TQM). 2) Leadership, budgetary
participation, and organizational culture positive and significant impact on the financial performance Koptan
in Bali. 3) Management of total quality (TQM) positive and significant impact on the performance Koptan in
Bali.
Framework of thinking is based on theory or research and logical thinking, as shown in Figure 01.
TQM1
Kep1
Kep2 TQM2
Total Quality
Kep3 Kepemimpinan Management TQM3
(KEP) (TQM)
Kep4 TQM4
Kep5
TQM5
PA1
PA2
Partisipasi
PA3 Anggaran
(P.A)
PA4
PA5
Bud1 Kin1
Bud2
Kin2
Budaya Kinerja
Bud3 Organisasi Keuangan
(B.O) Koptan Kin3
Bud4 (KIN)
Kin4
Bud5 Bud9
Bud7 Kin5
Bud6 Bud8
Figure 01: Mindset Research

These frameworks describe relationships between variables accompanied by indicators. To draw up a
framework of thinking, then the review of variable dimensions and relationships between variables that have
been used by previous researchers.
357
3. RESEARCH METHOD
This research was conducted at the Farmers Cooperative (Koptan) in Bali with case studies taken by six
Koptan Buleleng, Tabanan three Koptan and Jembrana much as two Koptan, so a total of 11 Koptan. Total
population used in the study of 3,373 people, divided into 11 Koptan in three districts in Bali. Mechanical
determination of members of the sample using the formula slovin total of 97 people. To determine the sample
at each Koptan used simple random sampling. Technique Data analysis with descriptive analysis and
descriptive kuantitatif. Research is a based on gathering data. The collection of primary data and secondary
data based on documentation or research. Assessment data for selection of data categorization primary or
secondary data. Interpretation of the data is made to interpret certain amount of data found in the field.
Conclusion generated based on the generalization of statements about the problem. There is a key element in
the process of writing data on qualitative analysis, namely: (1) The collection of data; (2) Rate of data; (3)
The interpretation of the data; and (4) Interest conclusion. This study, used statistical data analysis with SEM-
PLS PLS Smart software assistance. Ghozali (2011) states that the PLS is a method of analysis that is not
based on many assumptions, data does not have a multivariate normal distribution (with a scale indicator
categories, ordinal, interval, until the ratio can be used on the same model), samples should not be large. PLS
can analyze simultaneously constructs formed with indicators reflexive and formative indicators. The reasons
for the use of PLS in this study, are as follows: PLS is a common method for estimating path models using
latent variables with multiple indicator, PLS is an analysis method that can be applied to all scales of the data,
does not require a lot of assumptions and the sample size should not be large , The sample size is
recommended ranges from 30 s / d 100 cases (Ghozali, 2011), PLS is a method of analysis for causal-
predictive analysis in situations of high complexity and support the theory that low, and PLS handle models
of reflective and formative, even construct the item ( indicators) are single. The construct reflective assumes
that constructs / latent variables affecting the indicators (the direction of causality of the construct to the
indicator). The construct assumes that the formative influence indicator constructs / latent variables (direction
of causality of indicators to construct).
4. RESULTS
Tests on the structural model is done by looking at the value of R-square is a test for goodness-fit model. The
value of R-square structural model test results are shown in Table 01
Table 01
R-square value
Variance explained and predictive relevance

Dependent Variable R square
TQM 0.1535
KIN 0.6068
Source: visual output PLS
Model test results in Table 01, shows the influence of leadership, participation, budget and organizational
culture towards TQM give R-square value of 0.1535. This means that the variability of TQM constructs that
can be explained by the variability of the construct of leadership, participation budgets, and organizational
culture 15.35%. While the rest of 100% - 15.35% = 84.65% is explained by other variables outside studied.
The model of the influence of leadership, participation budget, organizational culture and TQM on financial
performance Koptan give R-square value of 0.6068. This means that the variability construct financial
performance can be explained by the variability of the construct of leadership, participation budget,
organizational culture and TQM amounted to 60.68%. While the rest of 100% - 60.68% = 39.32% is
explained by other variables outside the studied.
Referring to the purpose of the study explained that the analysis of the variables of leadership, participation
budget, organizational culture and TQM on financial performance Koptan. The following analysis of the
results of model testing to determine the coefficient of each lane. For more details, here presented results of
testing visual models with PLS as shown in Figure 02.
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Figure 02 Output test model with a t-statistic
Based on the results in Figure 02, will be conducted testing of hypotheses and parameters of each - each track
is formed in the following model. Referring to the purpose of the study explained that the analysis of the
variables of leadership, participation budget, organizational culture and TQM on financial performance
Koptan. The following analysis of the results of model testing to determine the coefficient of each lane. For
more details, here presented results of model testing results of testing structural path coefficients in Table 02.
Table 02 Structural Path Coefficient
Entire Mean
Standard
Jalur sample of t-statistic Information
error
estimate subsamples
BUD -> KIN 0,423 0,4179 0,0685 6,1736 Positif and Signifikan.
BUD -> TQM 0,1288 0,1484 0,1185 1,0865 Positif and Tidak Signifikan.
KEP -> KIN -0,1768 -0,1574 0,083 2,1293 Negatif and Signifikan.
KEP -> TQM 0,3286 0,3153 0,1417 2,318 Positif and Signifikan.
PA -> KIN 0,4231 0,4254 0,0634 6,6714 Positif and Signifikan.
PA -> TQM 0,1974 0,1958 0,0983 2,0088 Positif and Signifikan.
TQM -> KIN 0,1979 0,1842 0,074 2,6748 Positif and Signifikan.
Source: test output model with a t-statistic
Based on the results in the table above, then be testing the hypothesis and parameters of each - each track is
formed in the model.
1. Effect of leadership, participation budgets, and organizational culture towards TQM Koptan in Bali.
The relationship between leadership and TQM shows the influence of 0.3286 or 32.86% with a value of t-
statistic of 2.3180 (> 1.65). This shows that there is a pattern of positive and significant relationship between
leadership and TQM Koptan in Bali. The relationship between budgetary participation TQM shows the
influence of 0.1974 or 19.74% with a value of t-statistic of 2.0088 (> 1.65). This shows that there is a pattern
of positive and significant relationship between budgetary participation TQM Koptan in Bali. The
relationship between organizational culture and TQM shows the influence of 0.1288 or 12.88% with a value
of t-statistic of 1.0865 (<1.65). This shows that there is a pattern of positive and no significant relationship
between organizational culture and TQM Koptan in Bali.
The above test results show that there is a pattern of positive and significant relationship as well as the
positive and not significant. The pattern of positive relationships are on the path to leadership, participation,
budget and organizational culture towards TQM. This means the meeting or the better aspects - the aspects of
the TQM level that occurs will be higher, otherwise the less fulfilling aspect - the aspect of the level of TQM
is happening will decrease.
359
While the level of significance of the path is formed, there are two pathways that have a significant influence,
as well as a path that has no significant effect. Significant influence is shown by the leadership and
participation construct budgets for TQM for the value of t-statistics above 1.65 (standard error of 10%).
While the organizational culture construct showed no significant effect on TQM for the value of t-statistic
below 1.65 (standard error of 10%).
The construct of leadership has the highest impact / dominant against TQM at 0.3286 or 32.86%, followed by
participation kosntruk budget of 0,197 a4tau 19.74% and the last construct an organizational culture that had
the most influence on TQM little by 0.1288 or 12, 88%.
The test results showed that leadership with VPLS has a positive and significant impact on TQM Koptan in
Bali. This means that a pattern or system that leadership Koptan be applicable in the organization, proven to
have contributed significantly to the quality of management Koptan. The results are consistent with Sallis
(2006), which argues that leadership is an important element in TQM. Leadership is the ability and skills
possessed to influence others, especially underling. In addition, be able to influence subordinates to think and
act, so that through positive behavior can be a real contribution in the achievement of organizational goals.
The effectiveness of a leader, can be measured in relation to the contribution of the leader on the quality of
batch processes. Thus, we can conclude that the leader's role in improving the quality of Koptan
organizational management, both from the aspect of human resources or not, has a very strong role. It seems
clear now Koptan can grow and develop in accordance with the demands of the change. This condition can
occur with the support of good quality management, and focused and organize the creation of a reliable
quality management through leadership that was applied.
Results of research on the effect of budget participation on TQM with VPLS showed positive and significant
impact. Various factors can affect the tendency of managers to create budgetary slack, this suggests that
participation in budget preparation can reduce budgetary slack. This happens because subordinates helps
provide personal information about future prospects so that the budget is prepared to be more accurate.
These findings indicate that the pattern or system implemented so far in the organization's management
policy formulation Koptan wherein each of the budget in the form of target achievement should involve all
members to participate in providing input proven to improve the quality of the resulting management. One
aspect that supports the system is the principle of kinship that has become the foundation for the cooperative.
Research findings indicate that organizational culture has a positive effect and no significant effect on TQM.
This means that organizational culture has a positive relationship patterns or the direction but not really - real
give effect to changes in the level of TQM happened.
Because the organizational culture can be in strong condition and could be in a weak condition. Cultural
organizations are said to be strong if the culture, core values held intensively and are shared widely. Culture
has a strong impact on the behavior of employees due to the high level of togetherness (shareness) and
intensity to create an internal culture of control behavior, meaning a strong culture can act as a substitute for
the formulation. Formulations high in an organization creates the ability to forecast (predictable), order and
consistency.
Strong culture can achieve the same goal without the need for written documentation. Formulation and a
strong culture can be described as two different paths to the same destination. The stronger the culture of the
organization, the less it needs to pay attention to the development of management rules and formal
arrangements to guide employee behavior. Strong culture is a culture that ideal that has held intensive
characteristics, the more widely embraced, and the clearer socialized and inherited.
2. Effect of leadership, participation budget and organizational culture on the financial performance Koptan
in Bali.
The relationship between leadership and financial performance Koptan shows the influence of -0.1768 or
17.68% with a value of t-statistic of 2.1293 (> 1.65). This shows that there is a negative and significant
correlation pattern between the leadership and financial performance Koptan in Bali.
The test results showed that leadership with VPLS has a negative and significant impact. This means that the
lower the pattern or system of leadership that is applied in the organization Koptan the level of financial
performance that will be achieved will decrease. These results are consistent with Hughes, et al (2002), which
asserts that leadership is not a certain position, but rather a complex process involving the interaction
between the leader, the external environment, and subordinates. Based on this view, leadership is defined as a
process of influencing an organized group that led to the achievement of organizational objectives.
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Several empirical studies on business and nonbusiness organizations find that leadership effectiveness
negative impact on attitudes and behavior of members of the organization. Nowack (2004) concluded that
employees who assess his boss has a bad leadership practices (poor) causes employees have a higher
tendency to get out of the organization, job satisfaction is low, and high job stress.
This research is contrary to Timothy, et al (2011) which states that the style of leadership have a positive
influence on the financial performance. It is also not in line with the research line (Iriemi and Ugochukwu,
2012) which states that leadership style has a positive relationship with organizational performance. In a
study (Satyawati and Suartana, 2014) suggests that, the success or failure of a company in achieving good
performance is largely determined by the leader. A company hinted in their activities have a reliable leader
who is able to anticipate the future of the organization, and take advantage of the changes. In the future the
organization is directed to arrive at its destination.
The relationship between budgetary participation and financial performance Koptan shows the influence of
0.4231 or 42.31% with a value of t-statistic of 6.6714 (> 1.65). This shows that there is a pattern of positive
and significant relationship between budgetary participation and financial performance Koptan in Bali.
The results showed that budget participation has a positive and significant influence. Means the better the
pattern of participation budget system is applied then the resulting financial performance will be maximized.
This finding is consistent with research Indriantoro (2000) in Sumarno (2005), found that there is a positive
and significant relationship between participation in budgeting and managerial performance. Participation in
the preparation of the budget has its advantages also disadvantages. The advantages of participation budget
one is able to improve organizational performance. There are two factors of concern in participatory budget,
namely working attitude and desire for achievement. Positive work attitude will affect the performance of the
budget in the company.
Work attitude is divided into two, namely job attitudes and organizational attitudes. Job attitudes with regard
to workers who understand the purpose of the enterprise so as to maximize the self achieve organizational
goals effectively. While organizational attitudes with regard to the attitude or culture in which the company is
able to support the attitude of people who are in it.
A study of the performance of supervisors along with participation in the budget behavior, use of
performance variables, attitudes towards work and the behavior of the company. The sample used in this
study was 88 supervisors in the company. The results obtained are the relationship between performance and
participation budget, and behavioral variables with performance.
The relationship between organizational culture and financial performance Koptan shows the influence of
0.4230 or 42.30% with a value of t-statistic of 6.1736 (> 1.65). This shows that there is a pattern of positive
and significant relationship between organizational culture and financial performance Koptan in Bali.
The influence of organizational culture on financial performance showed positive results and significant. This
means that organizational culture has become a cornerstone in the management Koptan proved to have a very
important role in improving the financial performance Koptan. According to (Mansor and Tayib, 2010),
organizational culture is an integral beliefs, assumptions, values and symbols that are used in determining the
way in which the organization does business.
Soedjono (2005), expressed the organization's culture can be an instrument of competitive advantage and
foremost, when the organizational culture can support the strategy of an organization, then the organization is
able to respond and cope with environmental challenges accurately and quickly.
3. Effect of TQM on financial performance Koptan in Bali.
The relationship between TQM and financial performance Koptan shows the influence of 0.1979 or 19.79%
with a value of t-statistic of 2.6748 (> 1.65). This shows that there is a pattern of positive and significant
relationship between TQM and financial performance Koptan in Bali.
The above test results show that there is a pattern of positive and significant relationship as well as the
negative and significant. The pattern of positive relations are on track, budgetary participation and
organizational culture and TQM on financial performance Koptan, while the leadership of the financial
performance memilii negative relationship patterns. This means the meeting or the better aspect - the aspect
of the level of financial performance Koptan that occurs will be higher, otherwise the less fulfilling aspect -
the aspect of the level of financial performance Koptan happened to be diminishing.
While the level of significance of the path that is formed, there are four lines that have a significant influence.
Significant influence is shown by the construct of leadership and participation budget, organizational culture
and TQM on financial performance Koptan because the value of t-statistics above 1.65 (standard error of
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10%). Constructs participation budget and organizational culture have highest impact / dominant on the
financial performance Koptan amounted to 0.4230 or 42.30% followed by kosntruk TQM at 0.1979 or
19.79% and the latter construct of leadership that has the smallest influence on the financial performance
amounted to 0.1768 or 17.68%.The findings of the test results with VPLS shows that TQM has a positive and
significant impact on the financial performance Koptan. This indicates that the level of quality management
applied during this time can boost financial performance Koptan.
Research Ooi, et al (2007) found that teamwork, trust organizations, organizational culture and customer
focus is positively related to employee satisfaction. Teamwork is regarded as the dominant TQM practices
and significant improvement of the level of job satisfaction. In the study Wreder, et al (2008) found that
development organizations are assisted by the implementation of TQM. TQM inspire their cooperation in
various fields, especially in the health sector, with the support of the advantage of organizational factors that
help in the formation of the environment and assist in the development of employee performance.
While Terziovski study (2006) found that the practice of TQM simultaneously have a significant and positive
effect on productivity improvement and customer satisfaction. Research (Terziovski and Samson, 2000)
found the implementation of TQM has a significant and positive relationship to the improved performance,
the size of the company influence the implementation of TQM, large companies have greater benefits.
Research from Sila (2007) found no effect of TQM on performance measures. Research (Sila and
Ebrahimpour, 2005) found TQM and performance measurement factors contributing to the improved
performance.
5. CONCLUSIONS AND RECOMMENDATIONS
a. Conclusion
Based on the research results that were outlined in the previous chapter, it can be concluded that - as follows.
1). Leadership, participation budgets, positive and significant impact on TQM Koptan in Bali and
organizational culture and not significant positive effect on TQM Koptan in Bali. 2). Participation budget and
organizational culture positive and significant impact on the financial performance and leadership Koptan in
Bali a significant negative effect on the financial performance Koptan in Bali. 3) .TQM positive and
significant effect on the financial performance Koptan in Bali..
b. Recommendations
Referring to the results of the study and the conclusions that have been described, can be submitted
suggestions - suggestions as follows. 1). A need to improve to a better direction of organizational culture on
operational activities Koptan, see the culture of the organization have a positive influence and not significant.
2). Koptan parties to give more attention to the aspects of leadership that has been used as a basis in each run
operational policies and Koptan considering these factors have a negative impact on financial performance
but significant Koptan. 3). Non-financial performance measurement is strongly recommended to determine
the level of performance of a company, in order to take a decision or policy of the company appropriately.
6. ACKNOWLEDGEMENTS
Thanks pronounced at the Department of Cooperatives and UMKM in Denpasar, Jembrana, Tabanan and
Buleleng who have helped in the completion of this study.
7. REFERENCES
Corbett dan Rastrick. 2000. Quality performance and organizational culture A New Zealand study. International
Journal of Quality & Reliability Management, Vol. 17 No. 1, 2000, pp. 14-26.
Damyati, A.,. 2007. Modernisasi Sentra Produksi Jeruk Di Indonesia. Laboratorium Data, Balai Penelitian Tanaman
Jeruk dan Buah Subtropika. Tlekung-Batu, Jawa Timur.
Gaspersz, Vincent. 2005. Total Quality Management. Gramedia Pustaka Utama : Jakarta.
Ghozali. 2011. Structural Equation Modeling Metode Alternatif Dengan Partial Least Square PLS Edisi 3. Semarang:
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Horngren, Charles, T. 2007. Akuntansi di Indonesia. Buku Satu. Jakarta: Salemba Empat
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Hughes, Richard L.,Ginnet, Robbet C., and Curphy, G.J. 2002. Leadership : Enhanching The Lesson of Experience, 4 th
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Kaplan, R.S. dan David P. N. (2000). Balanced Scorecard : Menerapkan Strategi Menjadi Aksi. Erlangga, Jakarta
Mansor, M. and Tayib,M. 2010. An Empirical Examination of Organisational Culture, Job Stress and Job Satisfaction
within the Indirect Tax Administration in Malaysia. Journal of Business and Social Science,1(1): h:81-95.
Mulyadi, 2005. Sistem Manajemen Strategik Berbasis Balanced Scourcard. UPP AMP YKPN, Yogyakarta.
Nowack. 2004. Manajemen Sumber Daya Manusia. Yogyakarta,Graha Ilmu.
Ooi, K.B., N. A. Bakar, V. Arumugam, L. Vellapan, and A. K. Y. Loke. 2007. Does TQM influence employees‟ job
satisfaction? An empirical case analysis. International Journal of Quality & Reliability Management vol. 24 No. 1,
pp. 62-77
Pramadhany, W. 2010.Penerapan Metode Balance Scorecard Sebagai Tolak Ukur Penilaian Kinerja Pada Organisasi
Nirlaba (Studi Kasus pada Rumah Sakit Bhayangkara Semarang). Fakultas Ekonomi UNDIP.
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Satyawati, R. N.M., dan Suartana, W.I. 2014. Pengaruh Gaya Kepemimpinan Dan Budaya Organisasi Terhadap
Kepuasan Kerja Yang Berdampak Pada Kinerja Keuangan. Jurnal Akuntansi Universitas Udayana, Vol. 6 (1): 17-32.
Sila, I. 2007. Examining the effects of contextual factors on TQM and performance through the lens of organizational
theories: An empirical study. Journal of Operation Management vol.25, pp. 83-107.
Terziovski, M. 2006. Quality management practices and their relationship with customer satisfaction and productivity
improvement. Management Research News, vol. 29 No. 7, pp. 414-424
Wise, et al., 2002. The Link between Corporate Social and Financial Performance: Evidance From the Banking Industry.
Journal of Business Ethics, Khaver Acaemic Publishers, Printed in the Nethereands.
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EMPLOYEE’S GREEN WORK LIFE BALANCE

(CASE STUDY ON EMPLOYEE OF BANK A AND BANK B
IN THE CITY OF SEMARANG)
Bernadeta Irmawati1, Lucia Haripatworo

Economics and Business Faculty, Soegijapranata Catholic University
(Corresponding Email: irmawati.bernadeta@gmail.com1)
ABSTRACT
Environmental factors at this moment becomes an important issue, many companies lead to green business
which includes employee behavior also leads to environmentally friendly behavior (pro-environment
behavioral). It can be assumed that the implementation of Green HRM is potentially has not been realized yet
in theory and in practice. In contemporary approaches, Human Resources Management consider the role of
HR in the work and non-work role which is developed as employee‘s work-life balance, Green HRM is still
ignoring the role of HR in non-work role (Muster, 2011). The purpose of this study to identify green business
behavior of employees at the office and also outside the office.
The study was conducted on the employees of the banking services company in Semarang using descriptive
analysis to identify environmentally friendly behavior of employees both within the workplace and outside the
workplace in terms of, among others, to save paper, turn off the electricity and computers when not in use,
separate the organic and inorganic waste.
Keywords: green business, green business activities at office, green business activities at home, green work
life balance
1. INTRODUCTION
Nowadays becoming "green" has become the norm and in the field of management appears what we called:
green marketing, green accounting, green management and green human resources management (Renwick et
al., 2013). Likewise, the growing integration between environmental management to human resources which
is later called the Green Human Resources (Green HRM).
Environmental awareness is growing so fast in every dimension of life and the workplacewhich makes the
organization respond to this challenge at the institutional level and the individual level. Several attempts of
Green HRM is to educate the employees about climate change and other environmental issues, training in
working methods that reduce the use of energy and other resources, promotions and instilling means or
transportation to workplace, because of that Green HRM covers two elements HR practices which is
environmentally friendly and the maintenance of the knowledge capital. Human Resources plays a major role
in corporate environmental responsibility (Dutta, 2012).
Human Resources Management is basically responsible for managing, developing and retaining employees.
Employees or human resources (HR) in the organization needs to consider the importance of the green
movement, green HR and Green Audit. For that we need to manage human resources toward the clean HR
with (a) applying ISO 14000, (b) the implementation of paperless office, (c) waste management (Shaikh).
Currently, there are many companies that implement green business, which means that companies in their
implementation bringing in their employees through policies and change them to follow the green business
movement. Some studies mentioned the difference between the green environmental policies applied to the
actual behavioral patterns of daily life (Antoni& Bauer, 2005 ;).It is assumed that the concept of green HRM
in theory and practice have not been realized. Green HRM policies only focus on the role of the employee in
work and has not been in a role where the employees is outside of work.
Anyhow, many companies strive to make their employees behave more environmentally. The difference
between environmental policy and actual behavior patterns in everyday life in the organization is a challenge.
It can be assumed that the implementation of Green HRM in theory and practice is potentially has not been
realized.Employees who work for "green" companies will behave in accordance with the role and rules
applied by the company, such as the application of the paperless concept, not smoking in random place, etc.
The hope in the Green HRM is that the employees behave "green" both in work and in life outside of work.
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The results of previous studies show that employees at two manufacturing companies in the city of Semarang
implement green behavior both in the company and outside the company. Based on the explanation above,
this study will see the Green Work-Life Balance for employees working in banking Services Company.
In order to achieve a sustainable environment, companies can use human resource management practices to
stimulate the human resources (Paille et al, 2013). Green human resources with regards to using the meetings
of every employee to promote sustainable practices and to increase the awareness and commitment to
sustainability issues. In other words Green HR is the implementation of HRM policies to improve the
sustainability of resources implementation of business organizations and generally promote environmental
sustainability (Satyhyapriya et al, 2013).
Green HRM is directly responsible for creating the green workforce who understand, appreciate and practice
the green movement within the company. Green HRM is also considered as a holistic approach to align the
employees with the company‘s environmental strategy. The Company considers the human resource role in
translating green HR policies into practice. (Renwick et al., 2008).Green HR policies focus on both
individual and collective capabilities in green behavior. Some policies aimed at the development of the
cultural environment of the company. It can be seen that the behaviors that are relevant to the environment
can be practiced by employees in work life and personal life. (Dutta, 2012)
The concept of Green Work-life -Balance is the reconciliation of work life and personal life which are related
to environmental values, attitudes and behavior, consisting of both encouragement and harmonization which
is oriented to environmentally friendly behavior.It is expected that the existing balance will have a positive
effect. The policy of green-work-life balance focusing on employee roles as producers and consumers, as
employees learn and practice behaviors that are relevant to the environment. (Muster, 2011).
Work-to-Life
Promoting environmentally
Friendly consumer behaviour
Environmental
Attitudes and
Working life Private life

Life- to- Work
Encouraging employees to bring
in green ideas an experiences
Figure 1. Environmental attitudes and behaviour as composition of

experiences gained in working life private life
The policy of green-work-life balance aimed at reducing imbalances environmentally friendly behavior by
promoting the positive effects of work-to-life and of the life-to-work.On one hand, the companies increase
the environmentally friendly consumer behavior in the personal lives of employees whichis called the work-
to-life intervention, on the other hand companies can encourage employees to use the ideas and experience of
the environment that they have developed in their personal lives in working life (life-to-work interventions)
as can be seen in the picture.
3. RESEARCH METHOD
Objects in this study are employees of 2 banking services company located in the city of Semarang The
sample in this study will be taken based on purposive sampling based on: working at the company for at least
three year. The number of samples in this study are 50 employees. The data used in this study are primary
data, where the data is obtained directly from the employees. Data collection methods of this research is to
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use a questionnaire distributed to employees and interview to 3 employess . Methods of data analysis used in
this study is analytic descriptive, by describing the research results in the table.
4. RESULTS
Respondents consisted of the employees banking services company located in the city of Semarang, the
following is a table showing the gender, level of education and the interior of the Company.
Table 4.1 Overview of Respondents
INFORMATION
f %
Gender
Male 20 50
Female 30 60
Education Level
D3 5 10
S1 42 84
S2 3 6
Section
Teller 10 20
Operasional 15 30
Retail Banking 5 10
Marketing 15 30
Others 5 10
Sources: Primary data processed, June 2016
Based on the table above male the gender as much as 44% and women 56%. Judging from the level of
education, employees with education level S1 is the most common (42%), while on the part of their work is
varied, the teller, operations, marketing, retail banking and others.
4.1.Hearing and Understanding the term Green Business

The beginning of someone doing the policies related to green business is because companies implement and
they must do it. The following are the responses of respondents related to whether they had heard and
understood green business.
Table 4. 2. Respondents Comprehension Related to Green Business
No Question Answers
YES NO
f % f %
1 Have you ever heard the term green business? 46 92 4 8
2 Do you understand about green business? 46 92 4 8
Based on the table above, it is known that 92% of respondents had heard of the term green business, the
respondents heard the term green business from media including newspapers, television or the other. And
92% of respondents also understand green business, the understanding that they have had already
implemented by them on their work place, especially they have work for more than 3 years.
4.2. The Application Forms of Green Business

Form of implementation of the activity or green business activity conducted by the respondent, in this case
the bank company's employees, are grouped into three activities, namely:
The activities carried out in the office, the activities carried out in the home and the activities carried out at
home and at the office.
4.2.1. Green business activities which is conducted in the office

Green business activities which is carried out in the office is a form of application of green business activity
done by respondents at the time in the office.
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Table 4.3. Green business activities which is carried out in the office
No ACTIVITY Answers
YES NO
f % f %
1 Bring own cutlery 16 32 34 68
2 Put plants in your work environment 0 0 0 0
3 Using public transportation, to save fuel 5 10 45 90
4 Trash bin is available near where you work 50 100 0 0
5 Propose eco-friendly programs in your office 4 8 46 92
Based the table above it is known there is only one activity that respondents aware that Trash bin is available
near where they work (100%) .The others is 32% of respondents did not bring their own cutlery, it could be
because they have lunch away from the office or buy food from outside and eat in the office. For the activity
of putting plants in the working environment, this is not done by the respondent because the plant
arrangements are made by the company. Only 10% of respondents who use public transport when they get to
the office, which means that 90% of respondents use private transport or escorted, this can be due to it is
more secure and comfortable. Similarly, only 8% of respondents who proposed eco-friendly programs in the
company.
4.2.2. Green Business activities which is carried out in the home

Green business activities which is carried out in the home is a form of implementation of green business
activity which is respondents do when at home.
Table 4.4. Green Business activities which is carried out in the home
No ACTIVITY Answers
YES NO
f % f %
1 Turning off the television when it is not used 40 80 10 20
2 Planting trees in home environment 35 70 15 30
3 Using the water used to wash rice, vegetables for watering the plants 15 30 35 70
4 Using glass bottled water for watering plants 10 20 40 80
5 Not burning the trash, to reduce air pollution which causes global warming 46 92 4 8
6 Using energy saving lamps 38 76 12 24
Based on the table above it is known that activities more than half of respondents is 80% of respondents
turned off the TV when not in use, 70% of respondents planting trees / plants in their home environment.
92% Not burning the trash, to reduce air pollution which causes global warming, 76% of respondents are
already using energy saving lamps. based on the answers of respondents own awareness of some green
business activities
However, there are activities that are still less attention like 30% of respondents who use the water which
isused washing rice and vegetables for watering the plants, and 20% of respondents who use excess water in
glass containers or bottles for watering plants and
4.2.3. Green business activities carried out at home and at the office.
Green business activities which is carried out in the office and at home is a form of application of green
business activity which is respondents do when in the office and at home.
Table 4.5 Green business activities carried out at home and at the office
NO ACTIVITY AT THE OFFICE AT HOME
YES NO YES NO
f % f % f % f %
1 Save Paper 50 100 0 0 40 8 10 20
2 Using email / internet / sms 50 100 0 0 50 100 0 100
3 Conserve water usage 50 100 0 0 35 70 15 15
4 Shutting the water tap in order not to let it drip 50 100 0 0 50 100 0 0
5 Use bathroom tissue 28 56 22 44 18 36 32 64
6 Turn off the power when not needed 50 100 0 0 50 50 0 0
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7 Turning off the computer when it‘s not needed 50 100 0 0 50 100 0 0
8 Turning off the air conditioner when not in use 50 100 0 0 50 100 0 0
9 Separating organic and non-organic waste 20 40 30 60 10 20 40 80
10 Not smoking in random place 50 100 0 0 40 80 10 20
11 Reducing the use of plastic, paper and styrofoam 25 50 25 50 25 50 25 50
packaging
12 Using waste paper to make report concepts or design 35 70 15 30 40 80 10 20
13 Trying to consume organic food products and reduce 10 20 40 80 15 30 35 70
foods that contain chemical additives / preservatives /
dyes or flavorings.
14 Suggest friends / family members to behave in an 15 30 35 70 15 30 35 70
environmentally friendly behavior
15 Buying environmentally friendly products 15 30 35 70 15 30 35 70
16 Discussing about eco-friendly matters 15 30 35 70 15 30 35 70
Based on the table above it is known that activity done by respondents both at work and at home which is
balanced is; Save Paper,Using email / internet / sms, Shutting the water tap in order not to let it drip, Turn off
the power when not needed, Turning off the computer when it‘snot needed, Turning off the air conditioner
when not in use, Not smoking in random place,
Reducing the use of plastic, paper and Styrofoam packaging, Using waste paper to make report concepts or
design. consume organic food products and reduce foods that contain chemical additives / preservatives /
dyes or flavorings, Suggest friends / family members to behave in an environmentally friendly behavior,
buying environmentally friendly products, Discussing about eco-friendly matters which is still rarely done by
the respondent. There are three activities that are not balanced that is that conserve water usage , use the
bathroom tissue and separating organic and non-organic waste
Among the green business activities are balanced there is not a high percentage like Reducing the use of
plastic, paper and styrofoam packaging, Using waste paper to make report concepts or design, Trying to
consume organic food products and reduce foods that contain chemical additives / preservatives / dyes or
flavorings, Suggest friends / family members to behave in an environmentally friendly behavior, Buying
environmentally friendly products, Discussing about eco-friendly matters.
5. CONCLUSION
There is a balance of activities related to green business both at work and at home, and this needs to be
improved so that employees are more aware and conscious of the importance of green activities.Companies
should conduct training or discussion on green business so that the existing human resources in companies
understand more about the green business.
Limitations of this study is that this research is still at the level of respondents identifying green business
activity, it is expected that future research can be further developed.
6. ACKNOWLEDGEMENT
Thanks to the central research and service department management that has provided opportunities and fund
the research, also to the leadership of the bank which has allowed researchers to conduct research as well as
employees who have been willing to become respondents
7. REFERENCES
Dutta, S. 2012. Greening People: A Strategic Dimension. ZENITH International Journal of Business Economics &
Management Research. Vol. 2 (2), 143-148
Muster, V. Dan Schrader, Ulf. 2011. Green Work Life Balance: A New Perspective for Green HRM, German Journal of
Research in Human Resources Management, Vol.25 (2), 140-156
Paille, P., Chen,Y., Boiral, O.,& Jin, J.2013. The Impact of Human Resources Management on Environmental
Perormance: An Employee-Level study. Journal of Business Ethics, Vo. 10.,1-16
369
Renwick, S.W.D., Redman, T., & Marguire, S. 2013. Green HRM-A Review, Process Model, and Research Agenda.
International Journal of maangement Reviews, Vol.15 , 1-14.
Sathyapriya, J., Kanimozhi.R.& Adhilaksmi, V. 2013.Green HRM-Delivering High Performance HR Systems.
International Journal of marketing and Human Resource Management, Vol. 4 (2). 19-25.
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BIOPSYCHOSOCIAL AS AN INVESTMENT DECISION

INSURANCE DETERMINANTS
(THE CASE STUDIES IN THE DISTRICTS OF SEMARANG TEMBALANG)
Tri Rinawati
Semarang University
rinaoshin@gmail.com
ABSTRACT
Economic conditions such as the current turbulent and often the risk of such uncertainty and other disasters
will be the momentum that can be utilized in order to encourage people to invest in insurance. The study aims
to analyze and examine the influence of biopsychosocial factors, income and knowledge of insurance against
investment decisions in the form of insurance.
This research uses primary and secondary data. The technique of sampling of 100 respondents is
proportional simple random sampling, where each member of a population of 49 041 families in districts of
Semarang Tembalang have the same opportunity. This study analyzes the data using Multiple Linear
Regression Analysis.
The results showed that the variables biopsychosocial factors, the ability of financial and insurance
pegetahuan positive and significant impact on the investment decisions of insurance. With empirical evidence
that it is to increase insurance investment decisions need to analyze the biopsychosocial factors, financial
ability and knowledge of insurance.
Keywords: Factor Biopsychosocial, Financial Capability, Knowledge Insurance, Insurance Investment
Decision
INTRODUCTION
Insurance growth in 2010 up to 2012, insurance is growing from year to year can be seen from the increased
assets, investments and the net premiums that the insurers believe that this industry will continue to grow.
According to Evelina Pietruscka Asean Insurance Council secretary general, judging from its potential,
insurers have a great opportunity to grow. Life insurance in Indonesia could grow by about 25 percent to 30
percent each year, here expected the public will have more confidence again against the insurance agency so
that it will increase the interest of people to invest.
The percentage of policyholders from the period of 2010 to 2012 increased, but the increase was so small that
it can be concluded that the public interest for insurance is still low. To further support the public interest, the
government should have to do a lot of socialization to better understand the importance of having insurance,
because in addition to providing protection to individuals, insurance also can improve the infrastructure and
manpower at almost all levels of the business. Turbulent economic conditions like today, it will be a
momentum that can be used to encourage public interest in the insured. In the insurance companies, the result
of the company's activities will be reflected in the acquisition premium. The greater the public confidence
(customers) to the company, the higher the premium revenue collected. Premium that is later managed by
insurance companies to invest and set up for the payment of claims.
The system is run by insurers with a view to humiliate financial loss by passing the risk of loss of a person or
institution to the insurance company intended to avoid and minimize losses from risks in the future that may
cause harm. These risks arise because of the uncertainty factor. Uncertainty is a common thing in daily life
such as disasters, fire, or death, so that some people prefer to reduce the risk of an uncertain manner insuring
both life and property (Princess, 2008).
As explained by Yakup (2007), about the need for planning or financial management to determine financial
objectives in preparing the financial future that is done by setting aside a minimum of 10% up to 30% of total
revenue. As for the sources of income and revenue allocation that will affect investment decisions, as
described in the study Samekto (2011), because of the financial strength there, then there will be a desire to
invest at least approximate the financial strength of the future will come to pass, meaning that has been
thought about preparing for future funds such as pension funds, pendidikaan, health or family investment
fund.
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Basically the family financial goals should be SMART ie Specific (special), Measurable (measurable),
Attainable (achieved), Reality-based (based on reality), and Time-bound (period), while the financial
capabilities as well as lifestyle (lifestyle) someone will distinguish each individual financial objectives
(article 2011).
Based on the above, evidenced by the study conducted by the Online Cash survey (2011) of the 250
respondents who were married a majority (69.2%) had invested funds in the following allocation of as much
as 39.6% (99 respondents) invest funds in the form of insurance and 29.6% (74 respondents) in the form of
savings; the rest of the respondents invested in gold (7.2% or 18 respondents); property (6% or 15
respondents); mutual funds (5.2% or 13 respondents); and others (31 respondents did not invest). The highest
percentage of families in financial investing is in the form of insurance, but what insurance is the most
preferred or demand by families who have not seen from the survey.
Based on Online Cash survey also found several factors that influence the decision to invest their funds in the
family, such as age and gender. The survey, by gender, showed that the gender-sex male is most insurance
program, here is because men have responsibilities towards his family in providing protection to financial,
while the survey by age, the result that someone would has an interest in insurance products whose ages
ranged between 25 to 30 years, because at this age a person aims to prepare financial future before retirement.
Age, gender and ethnicity or race is something that is related to the biopsychosocial factor that is something
inherent to the individual throughout his life (Irwin, 1993). The biopsychosocial factors according to Baron
(2004), is a scientific field that attempts to understand the characteristics and causes of the behavior and
thoughts of individuals in social situations. Another factor influencing that environmental factors, while those
related to environmental factors can be seen from the financial attributes inherent in individuals or families
such as income, wealth, home ownership, marital status, employment status (Irwin, 1993).
Mahastanti 2011 also explained that biopsychosocial factors and environmental factors actually affect an
investor's level of risk aversion. For most influential biopsychosocial factors are age and gender, while for the
most influential environmental factor levels only property owned. While other factors such as ethnicity or
race and income have no effect in determining the level of risk an investor. This is presumably because the
characteristics of participants who are in the ethnic Chinese mostly women, while the income factor does not
affect allegedly because the participants who came from the students, do not have any real income, while
income has been received from parents.
Before deciding to invest, need to understand some important points to ensure maximum return on
investment, including the ability to save, determines the financing target, find all the information, perform
calculations, determine the investment instrument (Noe, 2013).
As for designing various efforts to increase insurance awareness, we should bear in mind the factors that
influence it, especially in terms of private consumers. Related to this is research conducted to know is there
any influence of biopsychosocial factors, the ability of financial and insurance knowledge on the level of
consumer awareness of investing in insurance. As for knowing how big the influence of these factors on the
insurance investment decisions, based on the condition worth studying by reviewing and analyzing through
the research title "Biopsychosocial As One Determinants of Investment Decisions Insurance". To measure
this biopsychosocial factors researchers used variables of age, gender. As for the other variables, the
researchers used a variable financial ability and knowledge of insurance.
Exposure above shows that the public interest in the insurance is still low, they do not yet know the cause of
such insurance even further in an effort to improve their kehiduapan in the future, this condition opened the
gap further research to find out how much interest people to take insurance. Based on these descriptions, the
formulation of research problems to be raised in this research is "how the influence of biopsychosocial
factors, financial ability and knowledge of insurance against insurance investment decision".
Based on the background and the formulation of the problem, the purpose of this study was (1) to analyze and
examine the effect of age on insurance investment decisions?; (2) to analyze and examine the influence of
gender on the investment decisions of insurance?; (3) Analyze and test the ability to influence investment
decisions of insurance?; (4) to analyze and test the effect of insurance knowledge on insurance investment
decisions?
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Families are expected to have a high interest to invest in this form of investment insurance for the insured so
all the risks in financial terms of possible uncertainties can be transferred from an incident which resulted in
losses. Besides, insurance as well as a means of saving investment and invisible earnings. In essence,
insurance is a means of prevention and control of risk, so the family finances more secure and is expected to
improve the welfare of the family.
When families already know the benefits of investments in the form of insurance, the family can determine
what type of insurance that fits their needs.
Factors that may influence the investment decisions of investors (family) that behavioral motivation that can
be seen from the demographic variables, such as sex (gender), age and education. Lewellen, Lease and
Schlarbaum (1977) established that the age, gender, income and education influence the selection of investors
for profit, dividends and all the desired profit. Additionally (Warren et al, 1990) states bahwa.pilihan one's
investment is based on lifestyle and demographic characteristics. Several previous studies (Christanti and
Linda, 2011; Mahastanti 2011) obtain empirical results as follows:
Table 1: Factors affecting investment decisions
Variable Type Characteristics Relationship
Ethnicity / race Biopsychosocial Chinese Positive
gender Biopsychosocial female Positive
Age Biopsychosocial 30-44 / mature Positive
Income Environment High Positive
Wealth Environment High Positive
Education Environment Graduates S1 Positive
Employment status Environment Permanent employee Positive
Source: Results of several studies
Based on the results of several previous studies may be explained that for the race was to be viewed in two
parts, namely Java and chinese. Ethnic Chinese usually in investing more daring than the Javanese, because
of the nature of the Chinese who always unyielding, indomitable dala trying, so they have a bolder risk
preferences. In this study gender revealed that men are more willing to take risks it is associated with
psychological impression that applied from childhood that men should be brave, willing to compete, so the
level of their tolerance of risk will also be bold.
While age is stated that at the age of 30-44 years almost all not a lot of variables to consider investment
decisions in their investment activities because at this age have a lot of experiences and emotions under
control so that the investment decisions more on the logic that the variables corresponding to logic are
considered , As for the income and wealth levels can be drawn that the richer and more income is then
investors would be more willing to take risks. This is possible due to the level of income and wealth that the
higher it is the greater of invested funds and these funds are idle funds that have been reduced to their daily
needs. So the use of these funds will be more flexible. Here is a picture frame of mind will be conducted in
this study:
Figure 1: Theoretical Framework
Age( Financial
X1) H1 H3 ability (X3)
Decision(Y)
H2 H4
Gender Insurance
(X2 ) Knowledge(X
4)
Source: various research journals
Based on the above, the proposed hypothesis is:

H1 = Age influence the investment decisions of insurance
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H2 = Gender influence on the investment decisions of insurance

H3 = Ability Fiancial influence the investment decisions of insurance
H4 = Insurance Knowledge influence the investment decisions of insurance
RESEARCH METHOD
The type of data used in this study are primary data and secondary data. The primary data obtained through
interviews and / or a structured questionnaire to fill out a questionnaire that is delivered directly to the
respondent. To avoid bias in obtaining the data will combine several techniques simultaneously from
questionnaires, interviews and observation.
While secondary data is the type of data that has to do with the issues examined in this study. And secondary
data obtained from literature, journals previous studies that examine the variables in this study.
In this study population is all respondents in the districts of Semarang Tembalang totaling 49 041 inhabitants
in the head of the family. While the sample is a part of the population that has similar characteristics and is
considered to represent the population (Singaribuan, 1991). To determine the amount of a sample of 100
respondents that will be used as a source of information in this study using the approach Slovin (Supramono,
2004). The 100 respondents sampling technique used in this research is purposive sampling, where the
researcher understands that the required information can be obtained from the family in district area
Tembalang capable of providing the required information in the study. The criteria that the researchers use to
take samples are: (a) family who are married and aged from 25 years. (B) Families who have a steady
income. (C) The family of wealth is seen more.
Methods of data collection in this research was conducted by interview through a questionnaire that was
prepared, observation and library. To determine the attitude of the respondents to the question of research
used several choices for each variable, among others, (1) the variable age and gender using dummy variables;
(2) To determine the ability variable scale Financial, Insurance and Investment Decision Sciences Insurance
using Likert Scale.
Data Analysis Techniques with through roses Editing, Coding process, Scoring process; Tabulation. Data
Analysis Method: (1) Data Quality Test (Test Validity and Test Reliability); (2) Classical Assumption Test
(Normality Test, Test Multicollinearity, Test Heteroskedatistas); (3) Descriptive Analysis; (4) The Multiple
Linear Regression Analysis (KIK = α + β1.XUs β3.XKF + + + β2.XGdr β3.XPA + e); (5) Goodness of Fit
Test (F-test, t test, the coefficient of determination (R2)
RESULTS
Tabl2 2 : Participants Characteristics

Education Employment Income
Age
Gender 1 jt – >
(year) SMP SMA PT PNS SWASTA Other s/d 1 jt
5 jt 5 jt
1 1 1
25-33 17 7 5 1 2 4 1
9 1 7 1 2 7
0
Male
34-40 29 9 1 3 1 4 1
= 86
20 8 11 1 1 18 1
2 2 2
>40 40 12 2 2 8 3 7 2
26 9 11 6 1 20 5
0
25-33 5 3 3 3
2 2 2
0
Female
34-40 2 0 0 0 1 2
= 14
2 1 1 2
1 1 1
>40 7 2 2 2
4 1 1
374
Sources: Primary data are processed

The above table shows that respondents with male gender 86 people more than respondents with female
gender as many as 14 people. Based on data from Table 4.1 which shows the highest percentage of
respondents by gender is men aged 25-33 years with education levels College who worked in the private
sector with an average income of Rp 1,000,000.00 to Rp 5,000,000.00 as many as 11 people, sexed male
respondents aged 34-40 years with education levels College who worked in the private sector with the
average income of one million to five million people and as many as 10 respondents sexed men aged over 40
years with education level Higher education working in the private sector with an average income of Rp
1,000,000.00 to Rp 5,000,000.00. As for the percentage of women who sexed highest in women aged 25 to
33 years old with a high school education level who work in the private sector with an average income of Rp
1,000,000.00 to Rp 5,000,000.00. This means that the men showed behavioral decision making more than
women.
Analysis by level of education, dominated by respondents with education level of university graduates which
is fairly high level of education. At this level of education can be classified by age> 34 years, the investors
own knowledge and a better idea where to analyze and make investment decisions is good.
The analysis is based on employment and income, dominated by respondents with private jobs with the
income ranging from Rp 1,000,000.00 to Rp 5,000,000.00 which is a steady job and a steady and sufficient
income to be able to invest in accordance with their capabilities where respondents can take good investment
decisions.
Data Analysis and Discussion

Quality Test Data
Test Validity
Variable first and second are related in the factors biopsychosocial is the variable age and gender using
dummy data is the variable that is used to quantify the variables that are qualitative also a variable that is
categorical that allegedly have an influence on the variables that are continuous so that the data does not use
test validity and reliability testing. This variable is measured with two (2) indicators, namely Men (1) and
female (0).
Table 3 : Validity of the instrument Variable

No Item Questions Corrected Item – TotalCorrelation rtabel Explanation
Variable Financial Capability
1 KF_1 0.603 0,197 Valid
2 KF_2 0.794 0,197 Valid
3 KF_3 0.794 0,197 Valid
4 KF_4 0.721 0,197 Valid
5 KF_5 0.784 0,197 Valid
6 KF_6 0.663 0,197 Valid
7 KF_7 0.655 0,197 Valid
Variable Insurance Knowledge
8 PA_1 0.478 0,197 Valid
9 PA_2 0.438 0,197 Valid
10 PA_3 0.756 0,197 Valid
11 PA_4 0.716 0,197 Valid
12 PA_5 0.784 0,197 Valid
The above table shows that all items have a value statement and a positive correlation coefficient greater than
r table. This means that the data obtained are valid and can be tested further data.
Test Reliability
Table 4: Test Reliability of the Instrument Variable
N Item Cronbach’s
Cronbach’s Alpha Keterangan
o Pertanyaan Alpha If Item Deleted
Variable Financial Capability = 0,882
1 KF_1 0,6 0.865 Reliable
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Variabel Insurance Knowledge = 0,849
8 PA_1 0,6 0.869 Reliable
9 PA_2 0,6 0.868 Reliable
10 PA_3 0,6 0.860 Reliable
11 PA_4 0,6 0.861 Reliable
12 PA_5 0,6 0.862 Reliable
According to the table of data reliability test results, showing that each item has an alpha coefficient greater
than 0.6. This means every item that statement was reliable. This analysis is used to process the data obtained
from a list of statements that a questionnaire in the form of numbers and calculations with statistical methods.
Normality Test Data
Normality test used to determine whether the dependent variable, independent, or both normally distributed,
near-normal or not the distribution of data that have patterns such as normal distribution (distribution of the
data is not skewed to the left or to the right) and to ensure that the data used is already distributed normal.
Picture : 2 : Scatterplot

Test Multicolinearity
Table 5: Results of Testing Multicollinearity

Collinearity Statistics
Model Explanation
Tolerance VIF
Age 0.939 1.064 Free Multicollinearity
Gender 0.965 1.037 Free Multicollinearity
Financial Capability 0.978 1.848 Free Multicollinearity
Insurance Knowledge i 0.997 1.084 Free Multicollinearity
From the table above it can be seen that each independent variable has a value of Variance Inflation Factor
(VIF) is about 1 to 10, as well as the results of tolerance value close to 1 or above 0.1. This means that
independent antarvariabel not have a strong relationship and significant. In other words, the regression model
there are no multicollinearity problems.
Test Heteroskidastity
Picture 4.3 Testing Results Heteroskidastity
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In the graph above plots, dots are spread randomly, does not form a specific pattern is clear, and spread both
above and below the point of the number 0 on the Y axis This means not happen regeresi heteroskedastisity
on the model and the data is the data homogeneous.
Results of Multiple Linear Regression Analysis
Table 6: Summary of results of the regression
Standardi
zed
Model Unstandardized Coefficien thitung ttabel Sig.
Coefficients ts
B Std. Error Beta
1 (Constant) -0.858 0.639 -1.342 0.003
Age 0.145 0.077 0.054 2.889 1,661 0.002
Gender 0.081 0.189 0.012 2.426 1,661 0.001
KF 0.345 0.060 0.571 2.723 1,661 0.000
PA 0.233 0.051 0.284 2.527 1,661 0.000
From the above table, it is known multiple linear regression equation as follows:
KIK = 0,054.Age + 0, 012.Gender + 0,571.KF + 0,284.PA
Uji Goodness of Fit

Uji t
The t-test is intended to determine how far the influence of the independent variables (age, gender, financial
capability, knowledge of insurance) individually in explaining the dependent variable (insurance investment
decisions). T test results of this research can be seen in Table 6:
a. Variable Age: The test results obtained with SPSS t value = 2,889 bigger than t table = 1.661 with 0.002
significance level lower than 0.05 have shown that the hypothesis Ho is rejected and Ha accepted. This
shows that there is positive and significant correlation between age on insurance investment decision.
b. Variable Gender: Test results obtained by SPSS t value = 2,426 bigger than t table = 1.661 with 0.001
significance level lower than 0.05 have shown that the hypothesis Ho is rejected and Ha accepted. This
shows that there is positive and significant correlation between gender on insurance investment decision.
c. Variable Financial Capability: The test results obtained with SPSS for variable X5 (Financial Capability)
obtained t count = 2,723 bigger than t table = 1.661 with 0.000 significance level lower than 0.05 have
shown that the hypothesis Ho is rejected and Ha accepted. This shows that there is positive and significant
correlation between financial capability of the insurance investment decision.
d. Variables Knowledge of insurance: The test results obtained with SPSS t value = 2,527 bigger than t table
= 1.661 with 0.000 significance level lower than 0.05 have shown that the hypothesis Ho is rejected and
Ha accepted. This shows that there is positive and significant correlation between the knowledge of
insurance against insurance investment decision.
Test F (Feasibility Model)
377
Table 7: Results of Analysis Test F

ANOVAb
Sum of
Model Df Mean Square Fhitung Ftabel Sig.
Squares
1 Regression 197.567 7 71.081 71.445 2,11 .000a
Residual 138.143 92 1.415
Total 235.710 99
On the Analysis of Variance (ANOVA) or F test was used to test a regression model that will be used well or
not. The F test results can be seen in Table 4:17 in mind that statistic F count (71.445) greater than F table
(2.11) or the value sig (0,000) is less than 0.05 means that the regression model used otherwise well.
Coefficient of Determination (R2 )
Table 8: The coefficient of determination (R2)
Model Summaryb
Change Statistics
Adjuste Std. Error
R R
Model R dR of the Sig. F
Square Square F Change df1 df2
Square Estimate Change
Change
1 .964a .929 .923 .644 .929 71.445 7 92 .000
The result using SPSS version 16, it can be seen that the coefficient of determination (adjusted R2) obtained
0,929. This means that 92.9% of insurance investment decision can be explained by the variables of age,
gender, financial capability, knowledge of the insurance while the remaining 7.1% of the insurance
investment decisions are influenced by other variables not examined in this study namely the price,
promotion and quality of service.
Discussion:
Effect of Age with Insurance Investment Decision
Based on the results of statistical tests that have been carried out stating that the age variable positive and
significant impact on the investment decisions of the family in the form of insurance so it can be said that the
more mature age of a person, the greater a person's decision to invest in insurance.
The results also supported by theory or literature proposed by the Department of Health (2013) states that the
calculation of age obtained from the level of a person's mental ability and show the biological age is the age
calculation based on the biological maturity owned by someone.
These results are supported by previous studies conducted by Dumanovsky et al (2010), life insurance is
purchased product for anticipated losses in the event of a risk for people's incomes Indonesia is still relatively
low, the need for insurance protection is not classified as a primary need. People who buy it is still limited to
people with high incomes. This class is a young professional age group or class of people of productive age
aged 25 to 44 years, the findings stated that the age influence the purchase decision.
The results of this study do not differ from previous research conducted by Christanti and Mahastanti (2011)
states that at the ripe age, almost all not much considering the variables of investment decisions in their
investment activities because at this age experience have been many and emotions under control so that the
investment decisions more on the logic that the variables corresponding to logic alone were considered.
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Effect of Gender in Insurance Investment Decision

Based on the results of statistical tests that have been carried out stating that the gender variable positive and
significant impact on the investment decisions of the family in the form of insurance so it can be said that
respondents with different gender then their behavior towards their investment decisions are also different.
The results of this study also was supported by the theory proposed by Wilson (1989) which states that the
definition of gender distinction is more than just men and women seen on the socio-cultural construction, but
emphasizes gender as a concept analysis in which we can use to explain something.
The results of this study do not differ from previous research conducted by Christanti & Mahastanti (2011)
stated that the number of respondents male sex more compared to female respondents, this can happen
because there is still a lot of women who want or dare to invest because women are more fear of risk
compared to men.
This is supported by the opinion of Khan (in Hasanat, 1994 and in Khairani & Daughter, 2009) that a woman
has the warmth of emotionality, caution and sensitive than men. While Shields in Santrock (2003) and in
Khairani & Daughter (2009) states that for an emotional level, women are more emotional that the emotional
maturity of a low level compared with men more rational and use logic to higher levels of emotional
maturity. So viewed from the destination or investment interests between men and women are different, man
aims for the sake of earning a living, while the women for emotional fulfillment in order to give attention to
the family.
Effect of Financial Capability with Investment Decision Insurance
Based on the results of statistical tests that have been carried out stating that the financial ability variable
positive and significant impact on the investment decisions of the family in the form of insurance so it can be
said that the greater the financial ability of the respondent, the greater the respondent to take a decision to
invest in insurance.
The results of this study do not differ from the results of previous studies conducted by the PM. Ananda
Samekto (2011) that the family income and family wealth significantly influence the estimated future
expenditures of the family in the family investment decision.
The results of this study are supported by research conducted by Dan Yates and Chris Ward (2011) stated that
generally people who have high income, the better the level of literacy of financial in terms of managing its
finances, this happens because they can invest to improve welfare in the future come
Effect of Knowledge of insurance with the Insurance Investment Decision
Based on the results of statistical tests that have been carried out stating that variable insurance knowledge
will be positive and significant impact on the investment decisions of the family in the form of insurance so it
can be said that the higher the knowledge of the respondent, the greater the respondent to take a decision to
invest in insurance.
The results of this research was supported by the theory advanced by Lin and Chen (2006) measures the
knowledge of insurance products of understanding and experience in insurance. According to understand
consumer behavior, product knowledge plays an important role for consumer knowledge will determine the
product purchase decision and ultimately directly impact on purchase intent.
The results of this study do not differ from previous research conducted by Ida & Cinthia Yohana Dwinta
(2010) which states that there are significant financial knowledge on financial management behavior.
Consumers who have financial knowledge is more likely to have responsible financial management behavior.
Knowledge plays a role in changing the behavior of consumers to seek information before deciding on the
purchase. Decision making vary, depending on the type of purchase decisions are based on the degree of
involvement and the degree of difference between the types of investment as follows: (1) a complex buying
behavior. This behavior through three learning process (a) Develop confidence regarding investments. (B)
Developing attitudes about investing. (C) Making the choice to buy the thought-out. (2) The purchase
behavior that reduces mismatch. (3) The behavior of buying a habit. (4) The behavior of buying that seek
variety.
379
From the research has answered the problem of the study were significantly that age, gender, financial
capability, knowledge of insurance affect the investment decisions of insurance, namely: (1) The decision of
the insurance investment will be taken by the respondent to the ripe old age, at this age is not much
considering the variables decision-variable investment in its investment activities because at this age have a
lot of experiences and emotions under control so that the investment decisions more on the logic that the
variables corresponding to logic alone were considered. (2) Number of male respondents who decided to
invest in the insurance more compared to female respondents, this can happen because there is still a lot of
women who want or dare to invest because women are more afraid of the risk compared to men. Women
have the warmth of emotionality, caution and sensitive than men. As for the emotional level, women are
more emotional that the emotional maturity of a low level compared with men more rational and use logic to
higher levels of emotional maturity. Judging from the purpose or investment interests between men and
women are different, man aims for the sake of earning a living, while the women for emotional fulfillment in
order to give attention to the family. (3) Income positive and significant impact on the investment decision of
the family, most people who have high income, the better the level of financial literacy in terms of managing
its finances, this happens because they can invest to improve welfare in the future. Investments are a number
of specific funds are being sacrificed to obtain better results in the future that is within that time frame
contained an element of uncertainty. The element of uncertainty is often considered a risk level that
determines how large the expected rate of return investors of the investment. Therefore, in making
investment a person should consider the investment objectives, investment policy making, choosing
strategies, selecting assets / assets, measure and evaluate performance. (4) Insurance Knowledge positive and
significant impact on the investment decisions of the family in the form of insurance. Knowledge of
insurance and the provision of resources for the respondent formal will assist in determining the level of
investment and savings. Consumers who have financial knowledge is more likely to have responsible
financial management behavior.
The implication of this research is theoretically as empirical support how age, gender, ability financial,
insurance knowledge influence the investment decisions of insurance family. Based on the analysis, the
theoretical implications of this research are as follows: (1) Research on the effect of age on insurance
investment decisions in the districts of Semarang Tembalang it can be proved and has significant influence.
The results of this study support the findings of previous studies Dumanovsky et al (2010) found that people
who buy insurance is limited to people with high incomes. This class is a young professional age group or
class of people of productive age aged 25 to 44 years. Not unlike the results of research conducted by
Christanti and Mahastanti (2011) states that at the ripe age, almost all are not a lot considering the variables
of investment decisions in their investment activities because at this age experience have been many and
emotions under control so that the investment decisions more on logic so that the variables according to the
logic are considered. (2) Research on the effect of gender on the family's investment decisions in the form of
insurance in the districts of Semarang Tembalang it can be proved and has significant influence. The results
of this study are supported by previous studies conducted by Christanti & Mahastanti (2011) stated that the
number of respondents male sex more compared to female respondents, this can happen because there is still
a lot of women who want or dare to invest because women are more afraid of the risk compared to men. The
results of this study are supported by Khan (in Hasanat, 1994 and in Khairani & Daughter, 2009) that a
woman has the warmth of emotionality, caution and sensitive than men. While Shields in Santrock (2003)
and in Khairani & Daughter (2009) states that for an emotional level, women are more emotional that the
emotional maturity of a low level compared with men more rational and use logic to higher levels of
emotional maturity. So viewed from the destination or investment interests between men and women are
different, man aims for the sake of earning a living, while the women for emotional fulfillment in order to
give attention to the family. (3) Research on effects of the financial ability of the insurance investment
decisions in the districts of Semarang Tembalang it can be proved and has significant influence. The results
of this study supported previous studies conducted by the PM. Ananda Samekto (2011) that the family
income and family wealth significantly influence the future of family expenditure forecasts in making
investment decisions. The results of this study are supported by research conducted by Dan Yates and Chris
Ward (2011) stated that generally people who have high income, the better the level of literacy of financial in
terms of managing its finances, this happens because they can invest to improve welfare in the future come.
(4) Research on effects of insurance knowledge to the family's investment decisions in the form of insurance
in the districts of Semarang Tembalang it can be proved and has significant influence. The results of this
study are supported if the theory put forward by Lin and Chen (2006) measures the knowledge of insurance
products of understanding and experience in insurance. According to understand consumer behavior, product
380
knowledge plays an important role for consumer knowledge will determine the product purchase decision and
ultimately directly impact on purchase intent. The results of this study do not differ from previous research
conducted by Ida & Cinthia Yohana Dwinta (2010) which states that there are significant financial
knowledge on financial management behavior. Consumers who have financial knowledge is more likely to
have responsible financial management behavior.
The dependent variable in this study is an insurance investment decisions are influenced by independent
variables of age, gender, attitude, financial capability, knowledge of insurance. Managerial implications of
this study for the citizens of districts Tembalang Semarang: (1) The respondent is a resident of Semarang
Tembalang districts with different age and gender who then tend to have different patterns of investment
decisions as well. In their investment decisions where more men than women because women are more afraid
of the risk compared to men. At the time ripe age, has a lot of experience and emotions under control so that
the investment decisions more on logic. For the insurance company would be better if in determining the
allocation of investments of age and gender. (2) The ability of citizens financial districts of Semarang
Tembalang obtained from the results of the questionnaire had the highest weight and has a strong influence
on the investment decisions of insurance. For the insurance company would be better if more enhancing
socialization to residents of districts Tembalang Semarang. (3) Knowledge of insurance and risk tolerance
Semarang residents Tembalang districts in the can from the questionnaire have a high enough weight and has
a strong influence on the investment decisions of the family in the form of insurance. For the insurance
company would be better if more enhancing socialization to residents of districts Tembalang Semarang.
This study also has limitations, is expected to be improved for future research. The limitations in this study
include: (1) The respondent used is up to the district level just so hard to do generalizations. (2) In addition,
in this study did not mention his insurance company so it is difficult to see which insurance company is
chosen by the citizens.
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382
DECISION OF SAVING AND THE FACTORS OF BEING DETERMINATION

(STUDIES ON BANKS IN SEMARANG)
Witjaksono Eko Hartoto & Tri Rinawati

Semarang University
witjaksono.fe.usm@gmail.com
ABSTRACT
Saving money is a routine for those who save money, the thought of the needs for tomorrow. Saving money is
an alternative way to meet the needs unencumbered time would meet the needs that have to be paid, so the
reason for people to save is to invest part of their earnings, each of which has a different purpose.
Data used in this study are primary data and secondary data. While the method of data collection in this
study conducted through questionnaires prepared interview, observation, documentation and library.
The population in this study is data the number of people in the city of Semarang totaling 1,694,412 people,
consisting of 840.744 men and 853.668 women. It is the researchers took Pedurungan, Gayamsari, Semarang
Tengah districts consisting of 197.706 people because it contained His bank.
Samples were taken of 120 people using Non Probability Sampling method which means that not all the
population has an equal opportunity to become a candidate for the respondent or samples (Kuncoro, 2003:
119). In determining the prospective respondents in the sample, this survey used sampling techniques quota
means to determine a sample of the population that have certain characteristics until the desired amount of
quota (Sugiyono, 1999: 77). The sample size used in this study is 40 samples per-districts, so the sample size
is determined by the convention or the number is believed to be the right size for a sample. Methods of data
collection for the above variables using a self-administered survey, the respondents were asked to fill out his
own questionnaire given. Data processing was performed using SPSS, to conduct an analysis of the
characteristics of the respondent.
The results showed that the variables of age, education, income and significant positive effect on the decision
to save the community. With empirical evidence that it is to increase public saving decisions need to analyze
the factors of age, education, income.
Keywords: Age, Education, Income, Saving Decision
INTRODUCTION
Saving money is a routine for those who save money, the thought of the needs for tomorrow. Saving money
is an alternative way to meet the needs unencumbered time would meet the needs that have to be paid, so the
reason for people to save is to invest part of their earnings, each of which has a different purpose.
According Warnetd (1195), there are 4 motifs savings emphasize that one can save for one or more patterns
at the same time, the first is to save as a custom continuous and this condition is not linked to specific goals,
both often referred precautions associated with the uncertainty in the future, the third is the motif used
bequeath means savings after the death in the family, and the fourth is the profit motive, which means the
desire to earn extra income from owned savings. They realize that their income in the future is absolutely
essential for happiness in the future.
Decision communities in memabung can be influenced by environmental factors, while those related to
environmental factors can be seen from the financial attributes inherent in individuals or families such as
income, wealth, employment status (Irwin, 1993). Research Samekto (2011) explains that the sources of
income and allocation of revenues will affect the decision of saving me, because with the existing financial
strength, then there will be a desire to save money, at least not estimate the financial strength of the future
that will be.
From the perspective of psychology, the savings can be considered a decision-making process of saving as
routine activities can be a source for the achievement of a goal such as pension funds, to buy something, to
give a gift. (Lewis, Webley & Furnham, 1995; Warneryd, 1999). Besides, from the psychological point of
view, some have focused attention on the influence of personality, the ability of delayed gratification, self
control, feelings of dislike towards risk (hazard), locus of control and preferences over time. While from an
383
economic standpoint, the savings become an object of theoretical and empirical considerations such as those
in the theories of Keynes, Modidliani, Friedman and Duesenberry. Some have conducted an analysis of the
impact of socio-economic variables (age, education, income), habits and attitudes. This condition indicates
that the decision to save money though influenced by economic factors, there is also a process of
psychological and socio-psychological complex.
Other researchers have incorporated psychological factors in the calculation model of saving behavior. For
example in the behavioral hypotheses life cycle by Thaler and Sherin (1998) consider the psychological
factors such as mental accounting and self-control. According to this model, people do not treat their wealth
in the same way, but it depends how he views his money whether as current income, current assets or future
assets. While associated with self-control, Thaler and Sherin says that people often adopt (accept) the rules
that restrict their opportunities to spend money, either from outside or from within.
There are at least four things that the purpose of banking development that sharia (Islamic), namely (1) meet
the needs of banking services to people who can not accept the concept of interest; (2) the creation of a dual
banking system in Indonesia to accommodate both conventional banking and Islamic banking which will give
birth to healthy competition and business conduct based on moral values; (3) reduce the risk of systemic
failure of the financial system in Indonesia; (4) encourage the role of banks in the real sector and to limit
speculation or not productive because the financing is aimed at businesses based on values of morality.
(Dhani Gunawan, 2005).
View of the conventional banking system that money is a commodity that can be traded result of the
disjointed development of the real sector and monetary sector. Reality development of the monetary sector do
not always reflect the growth in the real sector. Though the dimensions of prosperity and welfare of society is
largely determined by the availability of goods and services are becoming a common requirement.
The development of the banking system as a financial institution in Indonesia is something that is
unavoidable. With the composition of the population is largely converted to Islam, Indonesia is a promising
market for the banking system which uses religious values in their business development. But there are many
Muslims who save their money in conventional banks. Based on the above, researchers will conduct
scientific assessments, entitled "Decision Saving And Factors That Being determination".
Based on the description of the background, the problems will be analyzed in this study is "Do age, education
and income affect the decision of the community savings bank in Semarang.
Based on the background and the formulation of the problem, the purpose of this study was (1) to analyze and
examine the effect of age on saving decisions. (2) to analyze and examine the effect of education on saving
decisions. (3) to analyze and test the effect of income on savings decisions.
THEORETICAL FRAMEWORK AND DEVELOPMENT HYPOTHESIS
Based on this hypothesis there are several variables that affect the decision of the community in saving the
bank in Semarang. Then the framework in this study as follows:
Figure 1: FRAMEWORK FOR THINKING
Age (X1)
Education Decision
(X2)
Saving
Income
(X3)
Source: several studies developed
384
Based on the description above, the proposed hypothesis is:

H1 = Minimum influence on the decision to save
H2 = Educational influence on decision-saving
H3 = income effect on saving decisions
RESEARCH METHODOLOGY
Data used in this study are primary data and secondary data. While the method of data collection in this study
conducted through questionnaires prepared interview, observation, documentation and library.
The population in this study is data the number of people in the city of Semarang totaling 1,694,412 people,
consisting of 840.744 men and 853.668 women. It is the researchers took Pedurungan Semarang districts
consisting of 197.706 people because it contained His bank.
The population in this study is data the number of people in the city of Semarang totaling 1,694,412 people
consisting of 840.744 men and 853.668 women. This research was conducted in the area of Semarang city is
composed of sixteen (16) districts. Of the sixteen captured three districts, namely: District Pedurungan,
Gayamsari and Central Semarang. Determination of the study area were determined purposively
(intentionally). Reason penetuan research areas: first, as representing types of districts are urban, medium and
periphery, and in three districts there are banks.
Samples were taken of 120 people using Non Probability Sampling method which means that not all the
population has an equal opportunity to become a candidate for the respondent or samples (Kuncoro, 2003:
119). In determining the prospective respondents in the sample, this survey used sampling techniques quota
means to determine a sample of the population that have certain characteristics until the desired amount of
quota (Sugiyono, 1999: 77). The sample size used in this study is 40 samples per-districts, so the sample size
is determined by the convention or the number is believed to be the right size for a sample. Methods of data
collection for the above variables using a self-administered survey, the respondents were asked to fill out his
own questionnaire given. Data processing was performed using SPSS 16, to conduct an analysis of the
characteristics of the respondent.
Criteria for selection of the sample, the respondents were male sex as many as 62 people, female sex as many
as 58 people. Respondents were aged between 20-29 years were 38 people, aged 30-39 years as many as 29
people, aged 40-49 years as many as 40 people, aged 50-59 years as many as 13 people. Respondents who
worked as a civil servant as many as 22 people, who work as private employees as many as 27 people, which
is self-employed as many as 8 people, as many as 30 students, others as many as 33 people. Respondents
were educated in Secondary Schools as many as 46 people, 36 people Diploma, Bachelor's Level 1 of 31
people, degree * 2 of 7 people. Respondents who earn between Rp 250,000-Rp2.000.000 as many as 12
people, between Rp 2.01 million-Rp3.500.000 85 persons, between Rp 3.51 million-Rp4.500.000 as many as
22 people and more than USD 4.5 million by 1 person ,
In relation to the study, the state of the method is considered as a guideline or a good grounding in terms of
data collection and the analysis of data that will give a good direction, while the dependent variable
(dependent variable) in this study is a Decision Saving Society (Y). While the independent variable
(independent variable) in this study were age variable (X1), Education (X2), and Revenue (X3).
The operational definition of variables to be used in this study are as follows (1) Independent Variables
include (a) Age (X1) according to the Ministry of Health, 2013 is the calculation of age starting from the
moment someone take insurance until the time of the calculation of the contract or productive period in
earning. Indicators used (1) age 20-29 years; (2) age 30-39 years; (3) age 40-49 years; (4) aged 50-59 years.
(B) Education (X2) according to Dwi Siswoyo et al, 2007 is the process by which a society, through
educational institutions (schools, colleges or through other institutions), deliberately transforming the cultural
heritage, namely pengatahuan, values and skills -Skills, and generation to generation. Indicators used (1)
High School; (2) Diploma; (3) S1; (4) S2. (C) Income (X3) according to PM Ananda Samekto (2011) is the
sum of all income families. The indicators used are (1) 250.000-2.000.000; (2) 2.010.000-3.500.000; (3)
3.510.000-4.500.000; (4)> 4,500,000. Dependent variables included the customer's decision Saving (Y)
according to Olson & Peter, 2000 is Decision is a stage through the perception held by the decision maker in
this case households in deciding to save. The indicators used are: (1) Bank Syariah; (2) Conventional Bank.
385
Mechanical Analysis of the data in this study include some basic stage (Santoso and Tjiptono, 2001), the
stage of the process including editing, coding process, the process of Scoring, and tabulation. The method of
data analysis include: Test Data Quality, Classical Assumption Test, Multiple Regression Analysis, Goodness
of Fit Test.
RESULTS
The general picture of respondents that will be examined are the following characteristics of respondents by
sex men and women as many as 52 people were 58 people. Characteristics of respondents based on where
saving is the saving in Islamic Banking and Conventional Banks as well as in each of as many as 50 people.
The characteristics of respondents by education are grouped into four high school respondents as many as 41
people, Diploma as many as 31 people, as many as 26 people S1, and S2 by 2 people. While the
characteristics of the respondents to the profession as follows respondents who worked as a civil servant as
many as 17 people, Private employees 22 people, Self as many as 8 people, students 25 people, and others
(Housewife, teachers, etc.) as many as 28 people.
Characteristics of respondents by income level as follows for respondents with incomes ranging between Rp
250.000,00 - Rp 2.0000.0000,00 of 7 people, ranging from Rp 2,010,000.00 - 3,500,000.00 USD 75 people,
ranging between Rp 3,510,000.00 - Rp 4,500,000.00 total 16 and income of more than US $ 4,500,000.00 as
much as 2 people.
Based on the test results of normality using the Kolmogorov-Smirnov obtained significance value of 0.069 is
greater than 0.05, so it can be concluded that the data tested normal distribution.
Based on the test results Multicolinearity that each independent variable has a value of Variance Inflation
Factor (VIF) is about 1 to 10, as well as the results of tolerance value close to 1 or above 0.1. Variable age
tolerance values obtained 0.944 and 1.060 VIF. Education variable tolerance values obtained 0,990 and 1,010
VIF. Variable Income tolerance values obtained 0.935 and 1.069 VIF This means that between the
independent variables do not have a strong relationship and significant. In other words, the regression model
there are no multicollinearity problems.
Based on the test results Heterokedastis dots are spread randomly, does not form a specific pattern is clear, as
well as the spread above and below the point number 0 on the Y axis, this means not happen
heterokedastisitas in regression models and the data is the data that is homogeneous ,
From the results of regression analysis found multiple linear regression equation is known as follows: KM =
0,413.Usia + 0, 205.Pendidikan + 0,190.Pendapatan.
On the Analysis of Variance (ANOVA) or F test was used to test a regression model that will be used well or
not. The F test results can be seen in Table 4:10 in mind that statistic F count (14 944) is greater than F table
(2.68) or the value sig (0,000) is less than 0.05 means that the regression model used either expressed or sig
value (0,000) less than 0.05 means that the regression model used otherwise well.
The result using SPSS version 16, it can be seen that the coefficient of determination (adjusted R2) obtained
at 0.279. This means that 27.9% saving decisions can be explained by the variables of age, education, income
while the remaining 72.1% saving decisions are influenced by other variables not examined in this study ie
mileage, bank services, promotions and productivity bank products.
The t-test is intended to determine how far the influence of the independent variables (age, education, and
income) individually in explaining the dependent variable (the family investment decisions). T test results in
this study: (a) Variable Age: The test results obtained with SPSS t value = 5,094 bigger than t table = 1.658
with 0.000 significance level lower than 0.05 have shown that the hypothesis Ho is rejected and Ha accepted.
This shows that there is positive and significant correlation between age on saving decisions. (B) Educational
variables: The test results obtained with SPSS t value = 2,591 bigger than t table = 1.658 with 0.001
significance level lower than 0.05 have shown that the hypothesis Ho is rejected and Ha accepted. This shows
that there is positive and significant correlation between gender on saving decisions. (C) Income variables:
The test results obtained with SPSS t value = 2,325 bigger than t table = 1.658 with 0.002 significance level
lower than 0.05 have shown that the hypothesis Ho is rejected and Ha accepted. This shows that there is
positive and significant correlation between attitudes towards saving decisions.
Based on the above analysis, while the discussion on the analysis of data, based on the results of
questionnaires to the respondents who teripilih. Based on data from the questionnaire, it is known decision of
the people in choosing a bank. To see the effect of independent variables partially to desperation savings in
386
banks, can be explained as follows: (1) Variable Age. This can be seen from the regression coefficient
(0413), this means that the direction of influence between the age of a person with decision-savings in banks.
Where the higher the level of a person's age, the decision to save in banks are increasingly high. Based on the
results of t-test for statistically can be seen that t_hitung probabiliti 5.094 greater than 0.000 (α = 5%). Mean
age affect the value probabiliti of 0000 against the decision of savings in banks. This means that a high level
of age will affect the interest of saving seseorang.Variabel Education (2) Variable Education is directly
proportional to the saving in the Bank's decision. It is visible from the regression coefficient (0.205). This
means that the direction of influence between the education a person with decision-savings in banks. Where
the higher the education level, the decision to save in banks are also higher. Based on the statistical t-test, it
can be seen that t_statitiknya 2,591 greater than the value probabiliti 0:01. Means the value of education
probabiliti effect effect of 0.01 against the decision of savings in banks. This means that the level of higher
education will affect the interest of saving money in the bank. (3) Variable Income. From the results shown
that the regression coefficient of the income factor is directly proportional to the saving in the Bank's
decision. It is visible from the regression coefficient (0.190), this means that the direction of influence
between a person's income by saving decisions in semankin bank.Dimana higher the income, the Bank's
decision in the higher saving. Based on the statistical t-test, it can be seen that t_statitiknya probabiliti 2.325
greater than 0.02. Mean value probabiliti income effect of the decision 0,02terhadap savings in banks. This
means that high levels of income that would affect the interest of saving a person in the bank.
Based on the description -Description and the results of the analysis presented in the previous chapter, then
obtained some conclusions as follows: (1) The decision to save will be taken by the respondent to the ripe old
age, at this age is not much considering the variables saving decision because at this age experience many
and emotions under control so that the decision to save it more on the logic that the variables corresponding
to logic alone were considered. (2) a high level of pendididikan that would affect the interest of saving a
person, therefore, highly educated respondents would be more likely to choose to save to the bank, because it
is considered some of the things which are in the security and profit. (3) Revenue citizens Pedurungan
districts, Gayamsari and Central Semarang Semarang obtained from the results of the questionnaire mostly
middle income so as to have influence on the decision to save. For that the bank would be better if more
enhancing socialization to residents of districts Pedurungan, Gayamsari and Semarang Semarang.
Based on the analysis, the theoretical implications of this research are as follows: (1) Research on the effect
of age on saving decisions in the districts of Pedurungan, Gayamsari, Semarang Central turned out to be
unsubstantiated and has significant influence. The results of this study support the findings of previous
studies Dumanovsky et al (2010) found that people who buy insurance is limited to people with high
incomes. This class is a young professional age group or class of people of reproductive age was 30 years old
to 39 years old. Not unlike the results of research conducted by Christanti and Mahastanti (2011) states that at
the ripe age, almost all not much considering the decision variables save in activities to save it because at this
age experience have been many and emotions under control so that the decision to save it more on logic so
that the variables according to the logic are considered. (2) Research on the effect of educational influence on
the decision to save in the district area Pedurungan, Gayamsari and Semarang, Central turned out to be
unsubstantiated and has significant influence. The results of this study are supported if the theory put forward
by Lin and Chen (2006) measures the knowledge of bank products of understanding and experience in
saving. According to understand consumer behavior, product knowledge plays an important role for
consumer knowledge will determine the product purchase decision and ultimately directly impact on
purchase intent. The results of this study do not differ from previous research conducted by Ida & Cinthia
Yohana Dwinta (2010) which states that there are significant financial knowledge on financial management
behavior. Consumers who have financial knowledge is more likely to have responsible financial management
behavior. (3) Research on the effect of income on savings decisions in the districts of Pedurungan, Gayamsari
and Semarang, Central turned out to be unsubstantiated and has significant influence. The results of this study
supported previous studies conducted by the PM. Ananda Samekto (2011) that the family income and family
wealth significantly influence the estimated future expenditures of the family in the family investment
decision. The results of this study are supported by research conducted by Dan Yates and Chris Ward (2011)
stated that generally people who have high income, the better the level of literacy of financial in terms of
managing its finances, this happens because they can invest to improve welfare in the future come.
Managerial implications of this study for the citizens Pedurungan districts, Gayamsari and Semarang,
Central: (1) The respondent is a citizen of districts Pedurungan, Gayamsari and Central Semarang Semarang
with ripe age, has a lot of experience and emotions under control so that the investment decisions more on
387
logic. For the insurance company would be better if in determining the allocation of investment attention to
the age factor. (2) Education districts Pedurungan citizens, Gayamsari and Semarang, Central in the can from
the questionnaire ranged in age from thirty years up to the age of almost four years puluhab have a strong
influence on the decision to save. For that the bank would be better if more enhancing socialization to
residents of districts Pedurungan, Gayamsari and Central Semarang Semarang. (3) Revenue citizens
Pedurungan districts, Gayamsari and Semarang, Central in the can from the questionnaire range from two
million to three million more who have a strong influence on the decision to save. For that the bank would be
better if more enhancing socialization to residents of districts Pedurungan, Gayamsari and Central Semarang
Semarang.
This study also has limitations, is expected to be improved for future research. The limitations in this study
include: (1) The respondent used is up to the district level just so hard to do generalizations. (2) In addition,
in this study did not mention the name of the bank that are hard to see which bank is chosen by the citizens.
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IDENTIFICATION THE FACTORS THAT CAUSE THE LACK OF

ABSORBTION OF REGIONAL BUDGET (APBD) IN SEMARANG CITY IN 2014
Singgih Bayu Aji1, Dian Indudewi2

Semarang University
(singgihba@gmail.com, dianidudewi@usm.ac.id)
ABSTRACT
From acquired data, budget absorption level at Government of Semarang city from 2011 until 2014 still
reducings or still under 95%. That thing as one of indicator in assess performance a deep governance on one
period. On 2014, budget absorption level at Government of Semarang city as big as 78%. Informant in this
research is civil public servant its relationship with Regional Government Budget's collation and performing
in 2014.
Based on data, all successful informant who have interviews is 5 person from side governances and 1 person
from side independent. In qualitative fenomenologic's research, the acquired data have analysed use
Creswell fenomenologic model. Its data collecting utilize unstructured interview and the result of interview is
kept as voice record used media recorder.
The result of this research got three factor that have equality from each informan which give same
information which is major factor that consisting of regulation factor, auction factor or tender and
performing instruction factor and the minor's factor that consisting of human resource factor, weather factor,
infrastructure factor, and soiled release factor.
Keywords: Budgets , Absorption , Local Government , Public Sector , LRA
1. INTRODUCTION
The principle of public is about regional financial management in Government Regulation No. 54 of 2005
article 4 paragraph (1) and (2) of the financial management Area mentioned financial area is managed in an
orderly, obedient to regulations, efficient, economical, effective, transparent and accountable by observing
the principle of fairness, propriety, and the benefits to society. Regional financial management implemented
in an integrated system that embodied in the budget revenue and Expenditure Regional (APBD) who each
year are set by local regulations.Regional financial management has large influence on the fate of an that
region because the region can be a self-contained area and are able to develop the potential of the region in
accordance with the needs of each region(Gozaliem, 2013).
As stated in government regulation Number 105 in 2000 about the management and accountability of the
head of the region stated that the budget revenue and Spending Areas are arranged based on the performance
approach. Performance budgeting is the approach of drafting that emphasise on the achievement of
performance goals and objectives, which means that the budget is used as a means of achievement of goals
with performance assessment is based on the concept of value for money.This approach encourages
Governments to use the funds in an economical and being required to be able achieve the goals that have
been set (Halim, 2007).
Measurement of absorption did by comparing the accumulated budget realization throughout the unit work
with the accumulation of ceiling budgetfrom the whole work unit is launched.Based on the report of the
realization of the Budget fiscal year 2014, arranged by the Office of financial management and Regional
Assets in accordance with the regulation of the Minister of the Interior No. 13 in 2006 about the Financial
Manager of the regional Guidelines and Government regulations No. 71 in 2010 about Government
accounting standards.The following explanation of the Government's realization of Semarang in 2011 – 2014
in the table below:
Tabel 1 : Data on the realization of Postal revenue and realization of Post Shopping
Uraian 2011 2012 2013 2014
APBD 1.617.845.238.2502.380.394.822.0002.510.300.777.0002.865.509.578.000
Realisasi 2.050.466.424.7062.539.270.286.6502.801.228.549.8673.166.013.264.065
Revenue Persentse 127% 107% 112% 110%
APBD 2.266.253.949.1002.418.386.486.0003.184.087.019.0003.737.509.710.000
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Realisasi 2.037.759.139.2752.058.962.173.7682.481.924.180.1502.957.852.895.850
Expenditure Persentse 90% 85% 78% 79%
APBD (648.845.238.250) (37.991.664.000) (673.786.242.000) (872.000.132.000)
Surplus/Defisit Realisasi 11.918.718.306 48.308.112.882 319.304.369.717 208.160.368.215
Based on table 1.1 above, the absorption of the budget by 2014 in a report on the realization of the Budget
contained in the expenses of commodity are 85,9%, grant expenditures are 75,22%, social assistance
expenditures are 80,84%, land of expenditures are 14,64%, tools and machines expenditures are 86,7%,
expenses of streets, irrigation and tissues are 83,48%, other fixed asset expenditures are 25.9% and
unexpected expenditures are7,91%.That absorption have counted that experience less than 90% absorption
and of which more than 90% are employee expenditures, interest expenditures, expenses of financial aid, as
well as buildings expenditures.
Research on absorption of budgeting has been throughout Regency/City in Aceh which did by Andalia,
Darwanis and Abdullah (2012) that examines the influence of income variant and expenditures variant.The
results showed positive results where capital expenditure is greater influence in the rest of the
budgeting.SILPA occurs due to an excess of calculations and in regional expenditures (absorption) and
SILPA come from activities that are not implemented, the remaining funds of the tender cause the project due
to a tender offer that is lower than the provided budget and an effort in saving the budget (Andalia Et Al,
2012).
Research on lack of realization of budgeting ever done by Arif and Halim (2013) in Regency/Kota in Riau
Province that result about an each Regency/City in Riau Province has different factors that cause on the lack
of absorption of budgeting income and expenditure regional (APBD) in 2011.Although there are a small part
of the factors that are almost the same but have a different factor characteristics.That are human resource
capacity factors, regulation factors, factors of tender/auction, and the slowness of a APBD of probate in 2011
is still the most factors dominate the occurrence of lack absorption of APBD in 2011.
Sulaeman, Hamzah and Priyanto (2012) is also researching on the absorption of the budgeting took place in
the Ministry of Finance of Indonesia in fiscal year (TA) 2010.The results of the study show that the
absorption of budgeting is still not best that caused by budget that accumulates at the end of the year, not
consistent between planning and realisation, not good enough planning, a lot of technical and procedural
barriers and other are delays, and there are still many factors that must be a material improvement in the
Ministry of Finance of the Republic of Indonesia (Sulaeman Et Al, 2012).
The description of researchers to interested in conducting research with the title "Identification The Factors
That Cause The Lack of Absorption of Regional Budget (APBD) in Semarang City in 2014".
Money Follow Function

The principle of allocating budget to fund an activity based on the duties and functions of each work unit
(satker) in accordance with the mandate of the Act.Furthermore the principles associated with the principle of
Function Followed by Structure, a principle which illustrates that organizational structure is formed in
accordance with the functions of the position.The duties and functions of an organization are shared out in
work units that are in the organizational structure, so that it is certain not to occur the duplication of tasks and
functions. The application of the principle is closely related to the performance that became a benchmark the
effectiveness of allocated budget (Ministry of Finance of the Republic of Indonesia, 2009).
Value For Money
Mardiasmo in his book entitled Public Sector Accounting describes the value for money is the concept of the
management in public sector organisations based on three main elements, namely: economy, efficiency, and
effectiveness.It is the main of three element of principal value for money, but some argue that the three alone
is not enough.The other two elements need to be added, namely the justice and equity. Justice refers to the
existence of the same social opportunity to get a quality public services and economic prosperity. In addition,
justice needs to be done evenly distribution.
The benefits of the implementation of the concept of value for money in public sector organizations include:
1. Enhancing the effectiveness of public services, within the meaning of the given service is right on
the target.
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2. Improve the quality of public services.

3. Lower the cost of public services because of the loss of in-efficiency and the occurrence of savings
in the use of inputs.
4. The allocation of expenditures which are more oriented to the public interest.
5. Increase the awareness of the public money as the root of the implementation of public
accountability.
Regional Goverment
Local Government is made up of local Government Representatives of the provinces and Regions of the
province and district/city governments and Representatives of the regional district/city. Each area is led by
the head of the region (section 24 para 1), the head of the provincial area called Governor, district level called
Regents and city level called Mayor (Arif and Halim, 2013). In Law Number 32 of 2004 concerning regional
Governments, explain that the conduct of the Affairs of Government by local governments and the regional
House of representatives according to the principle of autonomy and pembantuan with the principle of the
autonomy of the existence in system and the principle of the unitary State of the Republic of Indonesia as
stipulated in the Constitution of the Republic of Indonesia in 1945.
Budget Income and Expenditure Regional (APBD)
Budget income and Expenditure Regional is the financial draft of local government within a year of period
that plans consist of income plans, expenditure plans, and financing plans. In Act No. 17 of 2003 mentions
that the Budget of Income and Expenditure Regional consists in budget revenue, budget expenditure and
budget financing. Budget up to specified areas of organizational units, functions, programs, activities and
types of expenses.
The Regional Revenue is a right of local governments that recognize to increasing the value of net worth.
Income areas include all receipts of money through the General Treasury Account (KUD) that add to the
equity fund income Income that comes from the area of the original area (PAD), fund balances and other
legitimate income. The Regional Expenditure is the obligation of local governments are recognized as
deduction on the value of net worth. The Regional Expenditure is specified according to the Organization,
functions and types of expenses (Arif and Halim, 2013).
Public Sector Budgeting
Public budgeting plan contains activities that are represented in the form of acquisition plan income and
expenditures in monetary units. In its simplest form, the public budget is a document describing the financial
condition of an organization that includes information about income, expenditures, and activities. The making
of the budget in the public sector, especially Governments, is a complicated process and contains the charges
politically significant. For the Government, the budget is not only an annual plan, but also a form of
accountability over the management of public funds charged to him.
Preparation of Budget Revenue and Expenditure Regional
Mardiasmo (2002) budget cycle includes four stages which consists of; (1) the preparation phase of the
budget, (2) the stage of ratification, (3) the stage of implementation, (4) the stage of reporting and evaluation.
1. the stage of preparation of the Budgeting
At the stage of preparation of the budgeting is estimates done by the expenditure on the basis of the
available income estimates.
2. Stages of ratification of the Budgeting
The stage of ratification of the budget is a political process that involves stages are quite
complicated and heavy.
3. Stage of implementation of the Budgeting
In the stage of implementation of the budget, which must be observed by the public sector finance
manager is to have the system (information) accounting and management control systems.
4. Reporting and evaluation Phase
Stages of reporting and evaluation related to the aspect of accountability, if the implementation has
been supported by a system of accounting and management control systems are good, then the
expected stage of budget reporting and evaluation will not encounter many problems.
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Absorption of Budget Revenue and Expenditure Regional

Sulaeman, Hamzah and Priyanto (2012) explained that the budgeting absorption is the ability of
Ministries/Agencies in maximizing the use of existing financial resources. Absorption budget problems can
occur in different countries with different causes. Manasan and Mercado (2001) analyzed that there are at
least 3 sources causes the low budget absorption of sector Ministries/Government Agencies:
1. The factors that came from structural and systemic disadvantagein Ministries/Agencies.
2. Factors that are came from the system of budgeting.
3. Factors that came from faults coordination with various sectors or institutions.
3. RESEARCH METHOD
The object of research and Sampling Techniques

Research conducted in Semarang City that located in the City Hall, Pemuda Street 148, Semarang.
Respondents/Informant selected by using non probability sampling with the purposive sampling technique.
Respondents/Informant chosen with criteria as follows:
1. All Civil Servants of local Government Work Unit (SKPD) in the city Semarang.
2. Civil Servants with the level at Echelon Echelon I and II.
3. Civil Servants who know and understand the planning, implementation, and accountability for
BUDGETS or APBD.
Data types and methods of Data collection

The used data in this research is the primary data from the results of the interview or the verbal data recorded
with mobilephone as a recorder. Method of data collection used by the researcher is unstructured interview
techniques. Unstructured interview technique is a model election when the researcher does not know about
what he not know, and therefore had to be based on informants to tell on them (Ghony and Almanshur, 2012)
by using the mobile phone as a recorder if informants agree to be recorded.
Operational Definitions Of Variables Research
This study is a qualitative phenomenological research where researcher trying to understand the events and
the bearings against ordinary people in certain situations. Researcher gather the data concerning the
establishment of concepts, opinions, attitudes, judgements, and the granting of the meaning of the situation or
experience in life.
This study did not use a systematic or structured variable where variable determined researcher. This research
does not use variable structured as independent variable or dependent variable. This research is looking for a
new variable-variable from the results of interviews conducted.
Methods Of Data Analysis
Data analysis on the research of Phenomenology that is described by Cresswel (1996), are divided in several
steps of the research include:
1. Researcher start organizing all the data or thorough a picture of the phenomenon that had
experience has been gathered.
2. Read a whole data and make foot notes about data that considered important then do the coding of
data.
3. Find and classify the meaning of statement who felt by respondents with a horizonaliting, that are
each statement initially treated have the same value. Furthermore, the statement that are not relevant
to the topic and questions or statements that are repetitive or overlap must be eliminated.
4. The statement is then collected into a unit of meaning and then written a description of how that
experience occurs.
5. Next researcher develop an overall description of the phenomenon so as to find the essence of the
phenomenon.
6. The Researcher is then gave the explanation in a narrative about the essence of the phenomenon that
has examined to get the meaning of the experience of respondents about the phenomenon.
7. Create reports the experience of each participant. After that, the combination of the description are
written.
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Testing The Validity Of Data

Data triangulation was done to investigate the validity of the interpretation of the data. According to the Iexy
J. Moloeng (2010), Qualitative Research Methods in his book, the notion of triangulation is a technique
checks the validity of the data that utilizes something else in comparing the results of the interview against
the object of research. In this study, researcher used a triangulation source, where the interpretation by
comparing the informant with different objects of the same research.
4. RESULTS
In the interview found several factors lack of absorption of the Budget Revenues and Expenditures Region in
the Semarang City in fiscal year 2014 in public works agency Bina Marga, Department of Management of the
Income and Assets of the Region, the Regional Development Planning Board, and the Regional Development
Section as follows:
The factors that cause poor absorption of Semarang city government budget in 2014 according to
informants of the public works agency of Bina Marga.
1. Factor Auctions
The auction became one of the factor that causes lack of budget absorption that occurs in the city of
Semarang, the capital of the accounting section of Public Works Agency of Bina Marga, Mrs. DW
said:
―karna APBD sudah disahkan juga kita terkendala oleh lelang, karna kita sudah masuk ULP, ini
lelang ini ada yang ngenyang nggak?‖. (22062015)
The physical work and the procurement of goods through an auction process conducted by the
Procurement Services Unit (ULP). Auction process takes a long time, this is because stages a long
auction process until the signing of the contract with the third party. When there are no providers or
third-party bid, then activities have not been biased. The thing that affects the time of completion of
the work that do not fit the planning.
2. Weather/Natural Factors
The weather or nature is causing a temporary stopping of a physical work that is being done. She
says:
―begitu mau jalan hujan, jadi molor,terus ini misalkan kayak jembatan. Jembatan itu harusnya
sudah dilembur, sudah diukur misalnya kedalamannya untuk corcorannya itu misalkan 3 meter
katakanlah, udah sudah bias mentok, eee ternyata setelah pelaksanaan bisa lebih dalam lagi,jadi
harus dikaji lagi…‖ (22062015)
When a work activity is delayed, then the budget absorbed also be constrained within the settlement.
As the rainy season, construction work had to be done when it is not raining or when the land in
good condition for use. Coupled with the condition of the Semarang area known as "Semarang
kaline Banjir" meaning its Semarang flood. So also with the natural conditions are rapidly changing
and is not easily predictable.
3. Factors Means
The means is any one who is used to achieve the expected goals. In this case means being one of the
causes of the delay in the programme of work. She revealed:
―Ada juga begini, jadi jika semua lelang sudah di... apa namanya... terkabullah katakanlah, eee...
sudah payu semua tapi ini semua do kerjo, akhirnya, akhirnya alat-alat ini kan kanggo kabeh, nah
ada sedikitlah ini kurang ini kurang, nah dadi rodok molor gitu...‖ (22062015)
From the above quote tells us that there is one provider or third parties that perform several
programs at once. The tools used for other work activities are still used for other work. So it had to
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wait for other activities done recently that more be done. This is possible only on activities that do
not belong to the big budget. But the little things should still be noticed too.
4. Factors of land acquisition
Land acquisition is done to open up land for a project that will be carried out. This exemption is
related to the land of the citizens affected by the use of the land for the project. He says:
―…pergantian lahan itu juga tidak semudah apa yang kita bayangkan,kita sudah sosialisasi,
misalkan kita sudah punya rencana sosialisasi, kita sosialisasi eee sebulan harus sudah selesai.
Satu bulan selesai, setelah ini mau pembayaran mereka ―angel‖ lagi…trus itu, misalkan yang 10
mau, tapi yang 1 tidak mau kita tidak bisa melaksanakan, semua harus mau…‖ (22062015)
"angel" in the English Language means difficult, which means it is the difficulty in negotiating with
its citizens will be replaced or paid. The Government has been assessing the land with strandar
market price conditions the land so that when citizens are expecting higher prices than specified, the
City Government could not approve it because there is a regulation in land acquisition.
The factors that cause poor absorption of Semarang city government budget in 2014 according to
informants of the Regional Development Planning Board (BAPPEDA) in Semarang City.
1. Auction Factor
Mrs. IM from Field Control also explain the auction factor be the cause lack of absorbtion of
government budget in Semarang city. It is because of the constraints of the procurement of
goods/services that failed auctions in Procurement Services Unit. The occurrence of failed auctions
can vary, there is no provider or bidders, timelosing management of documents until the time of the
execution of the activities be short, lead to the provider or the bidders did not dare to carry out.
When the failed auction occurs, the goods will be used for employment be constrained also resulted
in activities that require the non physical procurement of goods so constrained. Funds not absorbed,
activity also did not go well.
There are sanctions against providers who accept work activity does not implement appropriate time
or does not work properly. The Government will conduct a blacklist against the provider and have to
find another provider and this resulted in implementation time is wasted.
2. Human resource Factors
The occurrence of excess SILPA or loan that is still minimum, according to the head of the Sub-
Field Control explained that the quality of the workers of one of the factors. The large number of
cases that occur within the scope of the internal make employees who do the work with caution.
Excessive prudence resulted in a performance that goes down, this is due to the fear for a decision.
The quality of human resources is lacking also results in less synchronization in planning activities
up to on the locus of activity, so still seen a overlap of activities at the same locus. Activity with the
same locus, which has the only workable one only.
3. Regulation Factors
Regulatory factors related to social assistance and grants is also told by her. Social assistance
recipients determined by the criteria, but that happens, the situation is different. Many of those who
received less knowing criteria in receiving social assistance. Unsynchronization lead to and
assistance not so absorbed for not so used.
She also told about the efficiency of travel undertaken by the Central Government. The Central
Government asked the local Government to perform the efficiency of travel, especially on the part of
the Secretariat for the Representatives of the areas that have a lot of members so that the given
limitation of the amount that will be travelling on duty.
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The factors that cause poor absorption of Semarang city government budget in 2014, according to the
informants from the Department of Finance and assets Management area (DPKAD) the city of
Semarang.
Regulatory factors being the cause of the lack of absorption of the budget in the Government of the
city of Semarang. Such regulations related to social assistance and or Bansos. Mrs. MF from The
accounting section of the Office of the management of the finances and assets of the region reveals:
‖Trus ini realisasi belanja, Bansos hanya terserap sekian persen, ini banyak kendala karena adanya
regulasi yang baru, permendagri nomor 32 tahun berapa saya lupa, nanti, jadi memang harus
selektif dan tidak bisa nerima terus menerus...nah! Jadi memang harus selektif karna banyak kasus
yang berkaitan dengan itu, karna dulu, apa... lebih tidak ada persyaratan yang ketat. Jadi,
disalahgunakan, jadi kita penyerapannya gak maksimal... daripada 100% tapi bermasalah di lain
hari...‖ (19082015)
In the regulation of the Minister of Home Affairs Number 32 in 2011 about the guidelines the
granting of social assistance grants and The proceeds from the income and Expenditure Budget of
the regional grain 15 article 1 describes the social assistance is the grant of the aid, in the form of
money or goods from local governments to individuals, families, groups and\/or the community
which is not continuously and selectively aimed at protecting from the possibility of social risk. If
the recipient accepts the help of a row, can cause the appearance of dependency of the recipient to
expect help without utilizing its productivity.
2. Factors of land acquisition
Land acquisition related to the procurement of land for Government work activities constrained land
ownership. She says:
―pembebasan tanah itu kan terkait dengan tanah warga, negosisasi nya mungkin belum mmm...
kesepakatan harga sehingga tidak tercapai pada tahun yang sudah dianggarkan, maka akhirnya
tidak 100%...‖ (19082015)
Work activities will not run when the land becomes for an activity that takes place there is not. The
deal didn't happen because citizens do not wishing that the price offered by the Government. The
Government also could not afford the price offered willed citizens because the value already
budgeted. Expected as well, the cost could be lower than the budgeted price.
3. The factor of delay Implementation Instructions
These factors have also been the cause of the lack of absorption of the budget. It is associated with
funds from the National income and Expenditure Budget allocated to local governments. He
revealed:
‖ada juga petunjuk program kegiatan pelaksanaan sangat tergantung dari kebijakan pusat, ini
misalnya dana dana misalnya alokasi khusus… DAK itu kan dananya kan dari APBN yang
ditrasnfer kesini yah itu... dana yang bersumber dari pusat itu otomatis juklat, petunjuk pelaksanaan
kan emang dari sana, nah! Itu kadang-kadang terlambat diawal mendekati akhir tahun...‖
(19082015)
Special Allocation Fund (DAK) could be said as aid from the Central Government to local
governments to fund an activity work and the use of these funds must be appropriate guidelines from
the Center. Timelosing of guidelines resulted in users of the budget did not dare to carry out
activities and when the guidelines came down, activity is not completed in time.
4. Auction Factors
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According to Mr. BM from the Budget and financial management Service of the regional Assets
(DPKAD) city of Semarang also revealed that failed auctions became one of the causes of the lack
of absorption of the budget. He says:
―kadang kadang karna gagal lelang mas... kemudian waktu pelaksanaan lelang itu apa ya...
terlalu... lama, sekarang itu lelang itu kan sampai beberapa hari. Jadi gitu mas, jadi waktu sudah
kadang ya mungkin karna… mas nya sering baca dikoran? karna banyak ketakutan dari SKPD
melaksanakan lelang... dan terlalu hati hati...‖ (24082015)
As explained in the previous informant, the auction is to be an obstacles that often arise. But the
head of Budget Section Section in DPKAD adds that there is also the fear of a work Unit (SKPD)
local governments are beware even afraid to carry out the auction. It is related to the activities of the
work funded by the provincial government that need guidelines, which sometimes experience a
delay.
informants from the development section in city of Semarang.
1. Auction Factors
According to the Development Part, Mrs. GL mentions that the auction be terserapnya budget
constraints in 2014. She says:
―Untuk pelaksanaan... apa, anggaran di tahun 2014 itu banyak kegiatan yang tidak terserap ya...
itu karna... apa, banyak pekerjaan yang gagal lelang. Bila gagal lelang berarti tidak bisa
dilaksanakan, banyak kegiatan yang besar-besar terutama‖. (03082015)
The failed auction occurs due to the absence of bidders or the price agreement is not reached. When
the auction process is not running, it will be auctioned again and budgeted in a APBD-P (Budget
income and Expenditure the region of changes). But it is becoming an obstacle as he acknowledged
as follows:
―Sedangkan kalau perubahan di ―dok‖ nya pada 1 September. Coba kalau kita perhitungkan,
September kita di ―dok‖, katakanla lelang dan dokumen satu bulan ya katakanlah, September,
Oktober sampai Desemberkan tidak mungkin‖. (03082015)
Limited time always become problems occurred in implementing the activities work. When work
starts from APBD-P was passed, the question is, do these work activities can be completed just in
time. The real constraints that occur should also be taken into account and it became more likely at
least a work activities will be completed on time.
independent informants.
1. Auction Factors
Independent informants or from external Government accept that the absorption of Budget income
and Expenditure in 2014 because of factors in this auction in the procurement of goods/services. He
says;
―waktu penetapan pada periode perubahan sampai akhir tahun itu cukup singkat untuk pengadaan
barang dan jasa yang sifatnya fisik, ya kan? Karna melewati proses pengadaan barang dan jasa
seperti LPSE‖ (22012016)
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Procurement of goods/services physical nature must go through an auction process so it takes a

longer time. Especially as a source of funds from the Centre or from the Special Allocation Funds
often experience delays until the determinations on the budget income and Expenditure the region
changes. As he said;
―pengadaan-pengadaan yang sifatnya berang dan jasa, utamanya yang sumber-sumber dananya
dari pusat, dana alokasi khusus, itu emang kadang terlambat, terlambatnya karna terlambat
penetapannya. Biasanya ditetapkan pada saat APBD-Perubahan‖ (22012016)
When the procurement of the goods/services are implemented at the time of a APBD-P which has a
relatively short time at the end of the year, causing work to be not completed on time due to the
auction process is done at the time of a APBD-P.
He also accept that the factor of regulation becomes one of the factors the causes of lack of
absorption of the budget in the Government of the city of semarang in 2014. Regulation of related
grants and social assistance as he delivered it;
―ada dana UP kemudian dibelanjakan kemudian dipertanggungjawabkan, nah ketika itu

dipertanggungjawabkan, apakah sesuai dengan pagu anggarannya atau tidak itu diverifikasi lagi,
nah itu butuh waktu‖ (22012016)
The verification process undertaken in order for planning with the implementation of the
synchronize well and this takes time. The purpose of this activity is for synchronization between
SKPD in order to achieve the target objectives of the areas that will be attained, other goals to
control benchmark performance each SKPD so obtained a clear linkages between the estimate
budget and target become indicators of activities and programs.
3. The factor of delay Implementation Instructions
Factors of delay implemntation instructions execution was also approved by him. He says;
―juknis juklis nya kadang sudah ada tapi tidak jelas pelaksanaannya. Akhirnya tidak berani untuk
dilaksanakan, padahal dana yang yang digunakan sudah ada‖ (22012016)
The implementation guidance associated with activities that are the source of their funds from the
APBD, namely the Special Allocations Funds. Where in the use of these funds for the procurement
of goods/services or for capital expenditures was set by the Central Government to APBD-P at a
time. most SKPD finally dare not carry out due to the limited time of a APBD-P until the end of the
short years, even though the Fund has been reliaze. As he said it;
―yang sumber dananya dari DAK, APBN ini kadang terlambat karna penetapan proses juga
terlambat. Kemudian ada yang menyebabkan sumber sumber dana dari DAK yang membuat
terlambat seperti buah simalakamang, maksudnya begini, mau diterima khawatir tidak bisa
dilaksanakan, mau tidak diterima mau gimana, ya mungkin sudah kucur dananya‖ (22012016)
RESEARCH RESULTS
The auction or tender factors have a great influence on absorption budget in Semarang City Government by
2014. The auction was a factor in been late process of the auction and a failed auction. Timelosing auction
process occurs because of a long document management processes to work activities until ready auctioned
that finally promoted to be late work activities which resulted in the activities of the work is not completed in
a timely manner or not completed in this year's budget.
Regulatory factors have influence in the budget absorption that occurs in Semarang City Government by
2014. The regulation occurs is related to the social assistance funds and grants into the causes of the lack of
absorption of the budget. New regulations regarding the criteria of social assistance recipients of funds and
grants less known by the receiving party who could not receive in a row.
399
Factor in the delay of implementation of the instructions associated with funding assistance from the
provincial government or the Central Government to local governments that are used to fund the activities of
the national scale of the work submitted by the region. The use of these funds are regulated by the provincial
government in which frequent cases terlambatnya guidelines the use of those funds which do not affect the
passage of the labor activity in time and delayed the completion of the work activities which lead to the
occurrence of the remainder of the budget at the end of the year.
Weather factors affecting the absorption of the budget in terms of physical activities outside the
establishments. Implementation of physical activity, the situation must be in good conditions in terms of field
conditions. For example, in conditions of rain, after the rain has subsided and the activities are not directly
running akantetapi still have to wait until the field conditions can really use. physical activities that require
the tools or means be one small factor in the absorption of the budget in the Government of the city of
Semarang. The tools or means by which owned a little, so that the two can not be done within a time of
having to wait for the tools that are being used. It resulted in activity spend longer periods of time.
The factor of human resources explained that the high level of caution and concern will join the entangled
cases unwanted. It affects the performance of the employees themselves and affect the performance of the
agencies as well. Factors of land acquisition of the doctors used for activity upon the city also became an
influence against the lack of absorption of the budget. When the price agreement doesn't happen, activity will
not run. Although some residents agreed and some not, the City Government could not execute because the
whole citizens associated must agree. As long as the agreement does not occur then the kegiatanpun will not
run.
The conclusion obtained from this study are as follows:

1. Research results show that in Semarang City Government, there are several factors that lead to poor
absorption of Budgetary revenue and Expenditures fiscal year 2014 Area consisting from a small
factor and dominant factor.
2. Factor in the delay of implementation instructions, regulatory factors, and tender\/auction of 2014
still represents the factors which often appears the occurrence of poor absorption of BUDGETS by
2014.
3. There are also other minor factors that influence factors such as land acquisition, weather factors,
means, and human resources.
From the summary above shows that the need for further research on the absorption of the budget. Things to
note in the next research are as follows:
1. lack of number of respondents to be the main obstacle in this research. Researchers furthermore
expected to add a number of informants to find other factors associated with absorption of the
budget, such as from a PPTK Treasurer.
2. Not doing observations also become constraints in the study, observation is done in the sphere of
internal governance and observe everything that happens in it.
3. This research uses unstructured interview sehinggakecakapan researchers in digging information or
develop spontaneously at the time of the interview to the informant.
4. In-depth interview about the logical relationship of the theory that is used with the findings that have
already found.
6. ACKNOWLEDGEMENTS
I thank the Department of Finance and assets Management areas, the public works agency Bina Marga, the
Secretariat of the Regional Development Section, the regional development planning board and the
Government of the city of Semarang. I also say thank you to Mrs. Dian Indudewi and Mr. Yohanes who has
guided me.
400
7. REFERENCES
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Expenditure Region (APBD) District/Town in Riau Province in 2011. National Symposium on Accountancy, 4514-
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California: Sage Publications, Inc.
Honga, A. F & Ilat, V. (2001). Analysis Of Realization Of Budget Income And Expenditure The Government Area Of
The City Of Bitung. Journal of EMBA, 278-288.
Hartanti, K. (2011). View Public Accountability Of Local Government In The Province Of Central Java. Skripsi.
Manasan, R. G & Mercado, R. G. (2001). An Assessment of the Absorptive Capacity of Agencies Involved in the Public
Works Sector. PIDS Discussion Paper Series No. 2001-17.
Muliastini, P. N & Yadnyana, I. K. (2013). Comparison of the performance of the Government's Financial District/City
Metropolitan area Sarbagita the fiscal year of 2007-2011. E-journal of Accountancy University of Udayana 3.1, 92-
108.
Subechan, Hanafi, I & Haryono, B. S. (2014). Analysis Of Factors Cause Delay In The Determination Of GRANT
County. Discourse-vol. 17 No. 1.
Sulaeman, A. S, Hamza, A. P & Priyanto, R. (2012). Absorption Budget in the Ministry of Finance of the Republic of
Indonesia and the factors that affected it. BPPK Journal Volume 4.
Books
Bastian, I. (2006). Public Sector Accounting: An Introduction. Jakarta: Erlangga.
Cooper, Donald R & Schindler, Pamela S. (2006). Business Research methods Volume 1. Jakarta: PT Global Media
Edukasi.
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Halim, A. (2007). Accounting and Financial Management Control area. Yogyakarta: UPP STIM YKPN.
Ikbar, Y. (2012). Qualitative Methods Of Social Research: A Guide To Make Final Assignment/Scientific Papers.
Bandung: Refika Aditama
Nordiawan, D & Hertianti, A. (2010). Public Sector Accounting. Jakarta: Salemba Empat.
Nordiawan, D, Puta, I. S & Rahmawati, M. (2012). Government Accounting. Jakarta: Salemba Empat.
Sarwono, J. (2006). Quantitative and qualitative Research methods. Yogyakarta: Graha Ilmu.
Electronic Book
Javanese News. (January 2, 2015). Semarang City Government Claims Its Budget Increased Absorption. Retrieved from
jowonews.com: http://jowonews.com/2015/01/02/pemkot-semarang-klaim-serapan-anggaran-meningkat/
Chapter in book
Ministry Of Finance Of The Republic Of Indonesia The Directorate General Budget. (2007, 25 Septembre). Money
Follow Function in performance-based Budgeting. Retrieved from the Ministry of Finance of the Republic of
Indonesia the Directorate General budget: http://www.anggaran.depkeu.go.id/web/-content-list.asp?Contentld=247
Technical report
The Ministry Of Finance Of The Republic Of Indonesia. (2009). Guidelines for the application of performance-based
Budgeting (PBK) book 2. Jakarta: BAPPENAS.
Regulation of the Minister of Internal Affairs of the Republic of Indonesia number 13 Year 2006 about Guidelines
financial management areas.
Regulation of the Minister of Internal Affairs of the Republic of Indonesia Number 27 2013 About Guidelines for
preparing the Budget income and Expenditure Area fiscal year 2014.
Government regulation of the Republic of Indonesia Number 58 in 2005 about the financial management area.
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402
CREATING COLLECTIVE INTELLIGENCE THROUGH CORPORATE SOCIAL

RESPONSIBILITY FOR SUSTAINABLE PERFORMANCE
Indarto
Semarang University
(indarto99@yahoo.co.id)
ABSTRACT
Corporate Social Responsibility is the commitment of business to operate legally and ethically that contribute
to the improvement of the quality of life of employees and their families, local communities and society at
large in terms of realizing sustainable development. CSR becomes a medium for harmonious collaboration
that creates collective intelligence. Companies that have a collective intelligence will be able to act
visionary, innovative, aspirational and ethical based on the values of togetherness and harmony.
Furthermore, companies that have a collective intelligence will be able to drive competitive advantage and
sustainable performance.
This study explores the implementation of CSR by corporations that are able to create the collective
intelligence of the organization. The data collection is done by questinaire and in-depth interview on some
well-known corporations in Indonesia. Qusetionaire and indepth interview focuses on the implementation of
social responsibility and its impact on corporate performance, good economic performance, social
performance and environmental performance. Analysis tool used is descriptive analysis. Findings from this
study indicate that the implementation of CSR that are tailored to the interests of stakeholders and done
gradually and continuously able to create a collective intelligence that allows the corporation achieve
sustainable performance.
Keywords: Corporate Social Responsibility, Collective intelligence, sustainable performance
1. INTRODUCTION
Collective intelligence refers to the capacity of the organization to adapt to the complexity of the constantly
moving and can not be predicted with emphasis on the values of togetherness and harmony. The collective
intelligence involves the values of cooperation, harmony, mutual respect and mutual empowerment. Each
element in the organization or company voluntarily cooperate multilaterally in terms of interpersonal, cross-
unit, cross-stakeholder even across the organization. Each member organization develops trust with other
members and strengthen the collective commitment to action . Organizations that promote collective
intelligence is an organization that is able to combine all the tools, methods and processes that allow the
connection and cooperation between the intelligence of the individual in order to achieve the interests of all
stakeholders. Managing collective intelligence is to dig a dynamic intellectual cooperation among
individuals, teams, customers and even competitors.
Collective intelligence means the ability to achieve common goals, solving problems together with the
interests of joint or shared sensibility. There is so much interest in the organization. Management interests,
the interests of employees, shareholders' interests, the interests of customers, and the interests of other
stakeholders. All the different interests that are potentially inviting conflict into the organization. Conflicts
are not managed and well maintained the potential risks that undermine the foundations of the organization.
If the foundation of the organization is damaged by the conflict, then the organization will be difficult to
achieve the vision championed.
In the collective intelligence, every element of the organization, functions, roles, and responsibilities within
the organization are required to resolve any conflict with the results of mutual benefit and mutual support
organizational vision. All elements of the organization must work together effectively to resolve any
differences and avoid conflicts of interest. Conflicts were left in the organization would undermine the
employment relationship, as well as generate continuous opposition which will undermine the ethics, morals,
rules, and the morale of everyone. Thus their collective intelligence to prevent, reduce or eliminate conflicts
between stakeholders, especially the agency conflict between shareholders with management. Companies
will be able to achieve a sustainable competitive advantage if it is able to make changes that benefit all
stakeholders. In other words, the company will be able to have a competitive advantage if it is able to develop
a collective intelligence. One form of collective intelligence is corporate social responsibility.
403
Corporate Social Responsibility

A lot of literature (European Comission, 2002, 2005, 2008, 2011) about the social responsibility of
companies concluse that corporate social responsibility is a company's commitment to its stakeholders. If the
company runs its corporate social responsibility, the company not only profit-oriented but also oriented
towards society and the environment. Corporate social responsibility brings the consequence that companies
must consider the interests of all stakeholders.
Corporate social responsibility should be conceived and executed as a "way of life" for the corporation, and
not regarded as a burden or cost (Fountaine, 2013). The impact of the implementation of corporate social
responsibility itself in the short term, but long term. In some literature ( explained that corporate social
responsibility is not just a grant or a caricature, but rather how the company contributed significantly to
improving the quality of life and environment. Therefore, the implementation of corporate social
responsibility should be to empower and strengthen the weak, networking with stakeholders and conduct
business ethically.
Collective Intelligence
Collective intelligence is the ability to think and act in a visionary, innovative, aspirational and ethical based
on the values of togetherness and harmony. Organizations that have a collective intelligence will be able to
drive competitive advantage and performance (Indarto, 2012). Collective intelligence refers to the ability to
think and act innovatively. Innovative means always striving to make changes in accordance with the
demands of the environment. The ability to make changes requires creativity that will bring new knowledge,
new techniques, new systems and new products. Innovative also pointed to the willingness to be different
than before or different from the others. Innovation enables organizations to be able to develop a strategic
asset in the form of best practices in the business that became the basis of the creation of durable advantages.
Collective intelligence also pointed to the ability to think and act ethically in aspirational and solve problems
and adapt based on the values of harmony. Think and act spiritual aspiration means there is value in the
business ideals lived. Aspirations about the future of a business that has become a common goal, become the
director that evokes the work, effort and enthusiasm to learn from members of the organization. Thus
aspirational means there are ambitions and ideals that guide the mind, move the productive action and a
reference work and effort to realize our goals.
Collective intelligence then becomes the capacity of communities to be able to evolve towards complexity
and harmony higher, through integration, competition and collaboration. Each individual is given the
flexibility to develop kreatitivitasnya but carries with it responsibility and discipline so that creativity really
will benefit the organization. Collective intelligence means there is also a chance to compete and excel, but
accompanied by ethical values. Thus the competition is done in an ethical manner and fair. Collective
intelligence can be an effective mechanism to help avoid interference that causes internal disequilibrium
organization. Collective intelligence can reduce the negative effects of environmental instability. Collective
intelligence is an intelligence connections and relationships. Collective intelligence refers to the harmonious
collaboration. During this time it is believed that the cooperation or collective work is a good thing and is
needed to achieve a success. The success of the organization is the result of hard work collectively. In the
collective intelligence not only cooperation, but also a moral standard for the mobilization of all members.
Collective intelligence is a form of intelligence that emerges from the collaboration and competition of many
individuals. Collective intelligence is the capacity of the organization to evolve to the level of complexity and
harmony (harmony) higher through mechanisms such as splitting and merging innovation, competition and
cooperation.
Collective intelligence contains the values of harmony. In the collective intelligence, each member enjoys the
interaction between them, and they stick together and survive for a long time. Harmony manifested in
teamwork. Harmony characterized by interdependence, stability between group members, feeling responsible
for the results of operations of the group. The values of harmony in the collective intelligence indicated the
desire member companies to cooperate inklunsif and grow together, which grew out of the belief that the
performance is exceeding expectations (synergies) can only be realized through the integration of capabilities
are diverse from those of mutual believe in the environment of an organization. The harmony will improve
efficiency, reduce waste, minimize friction, increase productivity, reduce conflicts, eliminate tension and
promote enthusiasm. The key to success for developing the productive spirit of togetherness is the belief that
404
diversity is the foundation of meaningful synergies and the high value attached premises mutual trust and
mutual respect. That condition would be beneficial for the company to achieve competitive advantage.
Corporate social responsibility should be conceived and executed as a "way of life" for the corporation, and
not regarded as a burden or cost. The impact of the implementation of corporate social responsibility itself in
the short term, but long term.
In some literature explained that corporate social responsibility is not just a grant or a caricature, but rather
how the company contributed significantly to improving the quality of life and environment. Therefore, the
implementation of corporate social responsibility should be to empower and strengthen the weak, networking
with stakeholders and conduct business ethically.
Corporate social responsibility brings together different stakeholders of mutual interests, thus the corporate
social responsibility leads to a harmonious collaboration between stakeholders that create collective
intelligence. Furthermore, this collective intelligence will become strong capital for the company to achieve
sustainable performance
3. RESEARCH METHOD
Respondents in this study is the main ranks of top management of public companies in Indonesia at the
corporate level and at the level of the division. The ranks of top management selected as respondents
represented companies Because The ranks of top management has an important role in Achieving the
company's performance. According to Katz (2004), the ranks of top management in charge of making
concepts, ideas, and ideas for the betterment of the organization. The ranks of top management has the
authority to draw up plans of the company or the management of the assets of the company. The ranks of top
management also plays an important role in the implementation of CSR since internalize CSR values to every
individual in the company to the Ensure that CSR can run properly. Questionnaires were sent to the corporate
secretary as the contact person for companies using the postal service and email. Public companies that have
the reputation of giving a quick response to the questionnaire sent by the researcher. For checking on a
respondent's answers through questionnaires, the researcher also checked the answer on questionaire by
examining the annual reports of each company and conduct indepth interview with some companies by
phone.
4. RESULTS
Questionnaires eligible analyzed are 181 questionnaires. Here is the profile of respondents; the largest
proportion of respondents are corporate secretary positions in the amount of 18.23%.The next largest
proportion of respondents positions is division manager (ie by 17.68%, amounting to 15.47% management
representative and manager affair amounted to 14.92%. The three positions is also seen to understand the
condition of the company associated with variables in this study that answers obtained representative for
analysis. Questionnaires were completed by respondents who have positions as in CSR manager by 30.39%,
amounting to 6.08% GCG manager, director of legal and corporate 4.97%, 3.87% controller manager,
marketing manager by 2.76% and HR managers of 3.31%. Positions are also the relevant positions to be able
to answer the questionnaire research in a responsible and trustworthy. Table 1 presents profile of
respondents :
Table 1 Description of respondents by job title
No The position of respondent Percentage
1 Corporate secretary 18.23%
2 GCG manager 6.08%
2 Division manager 17.68%
3 CSR manager 30,39%
4 Affair manager 14.92%
5 Management representative 15.47%
6 Director of legal and corporate 4.97%
7 Controller manager 3.87%
8 Marketing manager 2.76%
9 HRD manager 3.31%
Total 100.00%
405
Based on a public company quite successful in their social performance. This is evident from the
achievements expressed by the respondents. The public company successfully conducted development and
empowerment of employees through training, development and delivery of a clear career path that can be
seen in increased employee satisfaction index. The public company also showed a real contribution in the
economy at the local and national level in the form of employment, innovation in the use of local resources,
empowerment of small entrepreneurs. The public company also contributed significantly to the rescue and
preservation of the environment by consistently controlling pollution and the greenhouse effect by planting
trees en masse and continuous, energy savings and utilization of waste and develop a culture of recycling that
involves the community.
Here is a summary of respondents' answers regarding the implementation of CSR and its relation to the
creation of collective intelligence.
Table 2
Implementation of Corporate Social Responibility Implementation of CSR and its relationship with the
collective intelligence in the corporation
Indicator Implementation of Corporate Social Responsibility Collective Intelligence
in corporations
Companies In general, public companies have programs for the
implementing programs welfare of employees and their families as follows:
that directly impact on Provide program employee housing and
employees and their vehicle ownership Bring a sense of
families Provide health benefits belonging to the
Provide scholarships for employees company, increase
Providing retirement benefits employee morale to do
Providing sports facilities and art the best for the
Provide facilities Going Home with company,
Provide healthy working conditions and safe
Provide recreation opportunities
In general, public companies implement corporate

The company carries out programs that provide benefits to the community in a
programs that provide concrete manner:
benefits to the Posyandu revitalization The establishment of
surrounding community, providing scholarships and educational donations synergies between
both locally and contribute to natural disasters, stakeholders in solving
nationally conducting fogging, social problems
organizes blood donation,
contribute sacrificial animals,
held a mass circumcision,
provision of clean water,
provision of road infrastructure
building a public service
build a place of worship around the company
provide a revolving loan
supporting the achievement of the MDGs
provide training entreprenuership
build partnerships
conduct environmental development in the society
about the company
The company has its own foundation for
corporation corporate social responsibility
implementation
Organized scientist award
Company to maintain Public companies maintain norms, ethics and traditions

and respect the norms, of local communities by:
406
ethics and traditions Participate to the traditions and cultural

surrounding customs
communities conduct regular social communication,
especially with scholars and community
leaders around. Awakening the spirit to
Take a good value of culture and tradition and realize the value system
apply it in the company value and ethical business
Company uphold the code of conduct behavior
especially in relationships / partnerships with
surrounding communities, sensitive to the
problems experienced by the people around
the operation, economic inequality and the
balance of the ecosystem surrounding
communities and the environment.
The company helped preserve and elevate the
arts and local culture.
The company sponsors events in the
preservation of local culture.
The company carries out The company has been carrying out corporate social
environmental programs responsibility on the environment by:
The create a good sewage system
greening
using energy-efficient appliances and minimal
pollution
construction of office buildings and factories The emergence of
with the concept go green synergy between
converting liquid waste into electric energy government, business
company and society in
planting 1,000 trees environmental
stewardship
organizes one customer one tree
participated in the rescue of endangered
habitats
pioneered programs and beach cleanup time
The company pioneered environmental rescue
mission
Supports program initiated community waste
bank
Corporate social responsibility brings together different stakeholder interests of the company . Strategies to
develop social responsibility is a long-term strategy that is profitable for the company.Companies that
implement social responsibility as a long-term oriented strategy that will enjoy sustained corporate
performance. Here is a summary of respondents' answers regarding the impact of the implementation of CSR
to sustainable performance through the creation of collective intelligence
Table 3
Impact CSR Implementation on Collective Intelligence and Sustainable Performance
Impact of CSR on Collective Intelligence Impact of CSR on the company's sustainable performance
Bring a sense of belonging to the The employees to be productive and loyal to the company so
company, increase employee morale to that the company has a reliable human resources that can
work my best for the company. improve the performance of the company.
407
The establishment of synergies between Easier access to enter the market or customers
stakeholders in solving social problems
Stakeholders increasingly believe in the company, the
company's reputation increases so that companies find it easier
to develop cooperation with various parties.
Build mutual understanding and solidarity between the business

community
Awakening the spirit to realize the value

system and ethical business behavior Stakeholders recognize and appreciate the integrity of the
company's ethical values are developed by the company so that
the company has good relations with the various parties.
The emergence of synergy between Corporate environment and the natural environment is
government, business and society in maintained, sustainable, clean, beautiful and comfortable for the
environmental stewardship company and the community.
Implementation of CSR by the public company managed to achieve a balance in business performance and
social performance that are the basis for sustainable corporate performance. Message from Elkington so
companies do not only profit-oriented, but also oriented to people and the environment has been realized by
public companies in Indonesia. The following table shows the impact of CSR on business performance and
social performance.
Table 4
Impact of CSR Implementation on Sustainable Perfomnace
Business Performance Social Performance
The increase in the company's The company managed to improve the quality
profitability significantly in recent years. of human resources with a variety of training in
The Company experienced an increase both the short and long term.
in net income doubled from previous The company is able to provide a clear career
years after implementing GCG well. path and attractive to employees.
The company enjoys a tendency profits The company is able to provide on employee
increasing from year to year job satisfaction, as measured by increased
The company is able to increase its employee satisfaction index
market share by strengthening supply The company has been able to provide vast
chains of products in a particular area, employment opportunities for the community
do diversify products The company helps find innovations for the
The company has a strong customer processing of local resources.
base that is not dependent on one market The company plays a role in improving regional
alone economic activity.
The company managed to become the The company contributed to the economic
market leader in the industry. empowerment of micro management training,
The company has loyal customers and accounting with the partners of small businesses
long-term oriented and local residents
The company will increase its capacity. The company contributed in tax revenue
The company will soon expand in the The company process all production waste into
downstream sector electrical energy for the company and the
The prospect of the company in the surrounding community.
future is very good views of the The company uses raw materials that are
continuously increasing demand. environmentally friendly.
The company is optimistic in the future The company planted trees en masse
will be growing is evidenced by the continuously, controlling pollution and the
stock price continues to rise greenhouse effect
The company carries out product recycling and
use of waste products to empower communities
408
Basically , CSR means that company‘s business model should be socially responsible it means that the
company‘s activities of the company should not harm the environment. Corporate social responsibility will
lead to collective intelligence, which in turn will increase the reputation and social performance. Collective
intelligence will provide power to unify all components of the organization by eliminating all potential
conflicts. Collective intelligence among all the forces of the human resources to make the organization move
effectively and quality. All the functions, roles, and work units shall proactively total collaboration to all the
duties of job responsibilities. Collective intelligence enhances the ability to contribute towards a common
vision and directing the potential advantages of each individual to contribute to organizational goals .
Collective Intelligence will be a driving force that allows everyone to achieve the results remarkable. CSR
Implementation will creates the collective intelligence that make thr achieving a balance in the achievement
of a profit-oriented performance, people and the environment or in other words the sustainable performance
of the company.
6. REFERENCES
Fontaine,Michael. (2013).Corporate Social Responsibility and Sustainability : The Bottom Line ? International Jounal of
Business and Social Science Vol 4.No 4.
Indarto,(2012) , Peran Mekanisme Good Corporate Governance dan Budaya Organisasi Dalam Menciptakan Kecerdasan
Kolektif Untuk Meningkatkan Keunggulan Bersaing dan Kinerja Berkelanjutan. Disertasi, tidak dipublikasikan.
European Commission .(2005b). Enterprise and innovation in deprived urban areas: Sharing the European experience.
The European Learning Network Policy Bulletin Issue 3 - July 2005.
European Commission (2007). Opportunity and responsibility. How to help more small businesses to integrate social and
environmental issues into what they do. Report, Brussels.
European Commission (2011). Corporate sustainability information and training in Europe: Situation analysis on
corporate social responsibility (CSR) activities on SMEs. Poland.
European Commission (2008). Overview of the links between corporate social responsibility and competitiveness
409
ANALYSIS FINANCIAL PERFORMANCE BANK

BEFORE AND AFTER MERGER AND ACQUISITION
(STUDIES IN BANKING COMPANIES
LISTED ON THE STOCK EXCHANGE PERIOD 2009-2014 )
Dwi Widi Pratito1, Diana Puspitasari2, Totok Wibisono

Semarang University
(Corresponding email: titopratito@gmail.com1 ; dianapuspitasari887@yahoo.com2)
ABSTRACT
This article aims to analyze the differences in financial performance of banks before and after mergers and
acquisitions in the period 2009-2014 banking firm conduct merger and acquisition activity. The financial
performance is measured by using 6 (six) financial ratio is Return On Assets (ROA), Capital Adequacy Ratio
(CAR), Non Performing Loans (NPL), Loan to Deposit Ratio (LDR), Interest Rate Ratio (IRR), Assets
utilization Ratio (AUR).
Data analysis methods used in this research is quantitative descriptive can be seen from the change in value
of the company's financial ratios before and after the occurrence of mergers and acquisitions . This study
used T test samples Couples ( Paired Sample T - Test ) , which is used to determine whether two samples
were not related to have an average value that is different for the purpose of comparing the average of the
same or not significantly , which we wants to know whether there are differences in the company's financial
performance before and after the merger and acquisition activity .
The results of this study show that 6 ( six ) financial ratio is Return On Assets (ROA), Capital Adequacy Ratio
(CAR), Non Performing Loans (NPL) , Loan to Deposit Ratio (LDR) , Interest Rate Ratio (IRR) , Assets
Utilization Ratio (AUR) have a difference in the conditions before and after mergers and acquisitions .
Keywords: Return On Assets (ROA), Capital Adequacy Ratio (CAR), Non Performing Loans (NPL) , Loan to
Deposit Ratio (LDR) , Interest Rate Ratio (IRR) , Assets Utilization Ratio (AUR) , Mergers , Acquisitions.
INTRODUCTION
In the current era of free competition, the banking company is required to always develop its strategy in order
to maintain the existence of the business, can thrive, and capable of a healthy competitive. According
Koesnadi (1991), one of the strategies that can be done so that the company can survive or even thrive is to
do mergers and acquisitions. Merger and acquisition activity in Indonesia has been taking place in 1970, one
of the companies that do mergers and acquisitions is a banking company. The activity was conducted with the
hope to strengthen the capital structure and obtain tax relief for the companies concerned.
Merger is a merger of two or more companies into one force with the aim to strengthen the company's
position. Meanwhile merging with another way is by means of acquisitions. The acquisition of an
expropriation (take over) partial or total stock of another company so that the company take-over have the
right of control over the target company. This acquisition may be made to the subsidiary that originally was
going public and referred to the internal acquisition, or acquisition of other companies and referred to
external acquisitions.
By combining the business through mergers and acquisitions the company is expected to become stronger
and be able to obtain synergies, the overall value of the company after the merger and acquisitions are greater
than the sum of the value of each company prior to mergers and acquisitions. The reason companies choose
mergers and acquisitions as a strategy is that mergers and acquisitions are considered fast road to meet the
minimum requirement of capital adequacy of banks that have been set by Bank Indonesia, as well as to create
a bank with strong capital, financial strength, and high competitiveness in the running intermediation
function, increased capabilities in marketing, research, managerial skills, technology transfer, and the
efficiency of a decrease in production costs. Merger and acquisition managers should take into account the
performance of the company to be acquired. The company's performance is reflected in the financial
performance obtained from analyzing the financial statements of the company. By viewing and analyzing
financial performance, the company can assess the suitability of candidates for the company to be acquired.
Calculation of financial performance is usually done using financial ratios.
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Several studies have examined the differences after the company's performance prior to the merger and
acquisition is done, but the results are not always significant. As performed by Nurdin D (1996) who did
research on companies that make acquisitions. The results showed no differences in financial ratios wore the
ratio Liquidity, Profitability, Solvency ratio and return on total assets in a vulnerable period of 3 years.
Dyaksa (2006) conducted a study of the company merger and acquisition results showed that there are
significant differences on financial ratios EPS, NPM, ROE, and ROA for testing 1 year before and 1 year
after mergers and acquisitions; ROE financial ratios for the test one year before and 2 years after mergers and
acquisitions.
Novani Kurniawati (2014) conducted a study of the bank's performance before and after mergers and
acquisitions shows that 4 (four) ratios include current ratio, debt to total assets, Return on Assets, Return on
Equity is not a significant difference, only the ratio of Debt to Equity ratio and the Net Profit Margin which
have significant differences.
Okalesa, Efni, Zulbahridar (2014), conducted research to analyze the comparative financial performance of
the Banking Companies Go Public in the Indonesia Stock Exchange Before and After Merger and
Acquisition Period Year 2000-2012. The results showed aspects of capital (CAR) there is no difference ,.
From the aspect of productive assets (NPL) there is a difference. From the aspect of profitability (ROA) there
is a difference. From the aspect of profitability (ROA) there is a difference. From the aspect of liquidity
(LDR) there is a difference.
Marbelanty and Adityawarman (2015) conducted a study to analyze the comparative financial performance
of Islamic banking with conventional banking. In general, the results showed that there is a significant
difference in financial performance between conventional banking to Islamic banking when viewed from
LDR, CPIDR, ROA, ROE, PER, DER, and DTAR. Meanwhile, when viewed from LAR, EM, IER, OE, and
AUR, there was no significant difference in financial performance between the two.
This study wants to analyze the differences in financial performance of banks as measured by the variable
Return On Assets (ROA), Capital Adequacy Ratio, Non Performing Loans (NPL), Loan to Deposit Ratio
(LDR), Interest Rate Ratio (IRR), and Asset Utilization Ratio ( AUR), before and after mergers and
acquisitions.
Research Question
Based on the background of the problems described above , it can be formulated the following research
questions : Is there a difference in financial performance of banks as measured by the variable Return On
Assets (ROA), Capital Adequacy Ratio (CAR), Non Performing Loans (NPL) , Loan to Deposit Ratio (LDR)
, Interest Rate Ratio (IRR) , and Assets Utilization Ratio (AUR) before and after mergers and acquisitions ?
Research Purposes
In accordance with the problems and research questions above then the goals to be achieved in this study are :
To determine the differences in financial performance financial performance of banks as measured by the
variable Return On Assets (ROA), Capital Adequacy Ratio (CAR), Non Performing Loans (NPL) , Loan to
Deposit Ratio (LDR) , Interest Rate Ratio (IRR), andAssets Utilization Ratio (AUR), before and after
mergers and acquisitions .
THEORETICAL FRAMEWORK HYPOTHESIS DEVELOPMENT
Financial Performance of Banking

Financial performance is a picture of the financial condition of acertain period, in which the financial
performance in the past is often used as a basis for predicting the financial position and performance in the
future. (Febryani and Zulfadin, 2003). Achmad and Kusno (2003) explains that the bank's financial
performance assessment is intended to assess the success of the bank's management in managing its business.
Assessment of performance in this study proxy for the bank's financial ratios.
Financial ratio analysis is used as a basis for planning decisions to gain an overview of financial development
and financial position in the future. Analysis of financial ratios describe the mathematical relationship
between a certain amount by the number of others in the financial statements by developing measures of bank
performance which has been standardized to provide clues, symptoms, as well as other financial information
regarding the state of a bank, (Wahyuningsih and Hadinugroho 2004 ). The financial performance of banks in
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this study was measured by using a ratio Return On Assets (ROA), Capital Adequacy Ratio, Non Performing
Loans (NPL), Loan to Deposit Ratio (LDR), Interest Rate Ratio (IRR), and Asset Utilization Ratio (AUR).
Merger
Merger is one of the company's strategy to develop and grow the company. Merger defined the merger of two
or more companies that eventually merged into one company that has been there before, thus eliminating one
of the names of companies that have merged. In other words that the merger is an agreement of two or more
companies to join then there is only one company that lingers as a legal entity, while others suspend or
dissolve (Moin, 2003).
According to Law No. 40 Year 2007 Article 1 paragraph 9: Merger is a legal act performed by one (1) the
company or to merge with the company of others who have no resulting assets and liabilities of the company
who joined the switch because of the law to the receiving entity merger and subsequent legal status company
that combines self-expire by operation of law.
Acquisitions
According to Moin (2004: 8) acquisition is a form of expropriation of the company by the acquirer (the
acquirer) sehinggan will result in the transfer of control over the acquired entity. Usually the acquirer has a
larger size than the acquiree. What is meant by that form of control is the power of the power to: (a) Setting
the financial and operating policies of the company; (b) To appoint and dismiss management; (c) Getting a
majority vote in a board meeting. With the existence of this control, the acquirer will have the benefit of the
acquired company. Acquisitions different from the merger due to the acquisition does not cause the other
party dissolved as legal entities. The companies involved in the acquisition of juridical still standing and
operating independently but there has been a transfer of control by the acquirer.
In the Indonesian Government Regulation No.27 of 1998 on the merger, consolidation and acquisition
Limited Company defines acquisition is a legal act carried out by legal entities or individuals to take over
either all or most of the company's shares which may result in the shift of control of the company .
Research Framework
As previously described, there are differences in the results of research on the financial performance of
merger and acquisition activity . Therefore , this study wanted to compare the financial performance of banks
before and after the merger and acquisition activity during the period 2009-2014 . Based on the background
of the problems described above, it can be described in the model of the theoretical framework as follows :
Research Framework :
Financial Performance of Banks Financial Performance of Banks

Before Merger and Acquisition : After Merger and Acquisition :
Return On Assets (ROA) Return On Assets (ROA) Capital

Capital Adequacy Ratio (CAR) Adequacy Ratio
Non Performing Loans (NPL) Non Performing Loans (NPL)
Loan to Deposits Ratio (LDR) Loan to Deposits Ratio (LDR)
Interest Rate Ratio (IRR) Different Test Interest Rate Ratio (IRR)
Assets Utilization Ratio (AUR) Assets Utilization Ratio (AUR)
Source : developed for research
Based on the above research framework hypothesis can be formulated as follows :

H1 : There is a difference Return On Assets ( ROA ) before and after mergers and acquisitions .
H2 : There are differences in the Capital Adequacy Ratio ( CAR ) before and after mergers and acquisitions .
H3 : There is a difference of Non Performing Loans ( NPL ) before and after mergers and acquisitions .
H4 : There is a difference of Loan to Deposit Ratio ( LDR ) before and after mergers and acquisitions .
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H5 : There are differences in Interest Rate Ratio ( IRR ) before and after mergers and acquisitions .
H6 : There is a difference Assets Utilization Ratio ( AUR ) before and after mergers and acquisitions .
RESEARCH METHOD

The type of data in this study, is a secondary data, the banking company's annual financial statements for
2009-2014 period. Sources of data obtained from www.idx.co.id. As for the research data is the pooling of
data that is a combination of time series (time series) and cross section during the period 2009 to 2014.
Population and Sample
The population used in this study are publicly traded banking company mergers and acquisitions during the
study period. The criteria for data collection are as follows: (1) publicly traded banking company mergers and
acquisitions by foreign companies in 2009-2014; (2) Available annual financial statements published by
Bank Indonesia before and after mergers and acquisitions; (3) Presenting a complete financial ratios
according to the study. Based on the above criteria, there were 13 banks that have been doing mergers and
acquisitions during the period 2009-2014. Of the 13 banks are four banks whose financial statements are not
complete; 2 bank for mergers and acquisitions with domestic ownership; so that the final sample obtained
was seven banks which have all been merged or acquired by foreign ownership.
Table 1
The Sample of Bank did Merger and Acquisition Period 2009-2014
NO BANK
1 Bank Internasional Indonesia,Tbk
2 Bank CIMB Niaga, Tbk
3 Bank Swadesi, Tbk
4 Bank UOB Indonesia, Tbk
5 Bank Ekonomi Raharja, Tbk
6 Bank Permata, Tbk
7 Bank OCBC NISP, Tbk
Source : www.idx.co.id
Method of Collecting Data

1. Study Library: from articles, journals, books, and previous research.
2. Documentary Studies: by collecting secondary data is data the company's annual financial statement
data are publicly traded banking mergers and acquisitions during the study period were obtained from
www.idx.co.id
Operational Definition and Measurement of Variables

1. Return On Assets (ROA)
Return On Assets (ROA) is a ratio between income before tax to total assets. Use of profit before tax
to avoid the effect of the determination of different tax rates between periods analyzed (Bahtiar
Usman, 2003). The calculation of Return On Assets (ROA) is as follows (Circular Letter No. 3/30 /
DPNP dated December 14, 2001):
Return On Assets (ROA) = Earning Before Tax x100%

TotalAssets
ROA shows the effectiveness of the bank in utilizing all its assets. When a company merger or
acquisition, the composition of the company's assets will turn out to be bigger. This makes the
company the opportunity to generate huge profits through the use of a number of corporate assets. So
expect ROA to rise after company mergers and acquisitions.
2. Capital Adequecy Ratio (CAR)
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CAR is a ratio between equity capital against risk-weighted assets (RWA) (Dendawijaya, 2005).
Capital Adequacy Ratio (CAR) is as follows (Circular Letter No. 3/30 / DPNP dated December 14,
2001):
Capital Adequacy Ratio (CAR) = Owner' s Equity

x100%
Risk Weigh ted Assets
CAR ratio is used to measure the adequacy of capital to cover potential losses in the lending activities
and securities trading. When the company decided to conduct mergers and acquisitions is expected to
create synergies for the company so as to increase the working capital that can be used to meet
obligations pendeknya.Analisis term financial performance before and after the merger of the financial
ratios at the end of utilization will be used to formulate a series of strategic policy finance, so expect
the banking industry more competitive.
3. Non Performing Loan (NPL)

Non Performing Loan (NPL) is the ratio of non performing loans to total loans (Circular Letter No. 3
/ 30DNP dated December 14, 2001).
PerformingLoans
Non Performing Loan (NPL) = x100%
TotalPerformingLoans
The ratio of NPL (Non Performing Loan) can be used to measure the risk of a bank on the possibility
of no return loans to total loans. In general companies or banks that experienced mergers and
acquisitions is a big company with good corporate governance with better managerial capabilities.
Thus the expected changes for the better in the NPL ratio after mergers and acquisitions.
4. Loan to Deposit Ratio (LDR)

Loan to Deposit Ratio (LDR): the ratio between the amount of credit given to the number of third-
party funds. (Circular Letter No. 3 / 30DNP dated December 14, 2001).
Loan to Deposit Ratio (LDR) = Number of Credit x100%

Amount of Funds
LDR shows the level of bank intermediation in lending of funds received from the public. When a
company merger or acquisition, the composition of the company's equity will turn out to be bigger.
This makes the company the opportunity to make greater credit expansion and control with better
credit that can reduce LDR so that liquidity is maintained. Thereby it can be concluded that LDR
banking companies will be amended when the mergers and acquisitions, because the event is intended
to improve the performance of the banking company as a whole and maintain the viability of the
company concerned.
5. Interest Rate Ratio (IRR)

Interest Rate Ratio (IRR) that the risk to gauge the possibility of interest received by the bank is
smaller than the interest paid by the bank. The formula used to calculate the Interest Rate Risk Ratio is
as follows:
Interest Rate Ratio (IRR) = Interest Sensitivit y Assets x100%

Interest Liabilities
6. Assets Utilization Ratio (AUR)

Assets Utilization Ratio (AUR) is a ratio used to measure the efficiency and ability of banks to carry
out operations by leveraging the assets owned.
Assets Utilization Ratio (AUR) = TotalEarning x100%

TotalAssets
How effective the bank in utilizing all its assets is measured by the ratio of asset utilization. These
banks may be said to use assets effectively in generating total revenue if the ratio is higher AUR. If the
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ratio is lower AUR, the bank did not use their assets to their capacity and need to increase revenue or
dispose of some assets (Ross, Westerfield, and Jaffe, 2005). Total income of the bank in this study is
defined as net distribution before provision plus all other income.

Data analysis methods used in this research is quantitative descriptive can be seen from the change in value
of the company's financial ratios before and after the occurrence of mergers and acquisitions . This study
used T test samples Couples ( Paired Sample T - Test ) , which is used to determine whether two samples
were not related to have an average value that is different for the purpose of comparing the average of the
same or not significantly , which we wants to know whether there are differences in the company's financial
performance before and after the merger and acquisition activity . Data were analyzed using descriptive
statistics and different test paired samples , due to the small sample size ( less than 30 ) , then used a different
test that nonparametric Wilcoxon 's Signed Rank test. The significance level ( α ) , fixed at 5 % .
RESULTS
Descriptive Analysis Results
Tabel 2
Average of CAR, NPL, ROA, LDR, IRR, AUR Conducting Sample Bank did Merger and Acquisition
Period 2009-2014
CAR NPL ROA IRR AUR

N LDR
BANK
O Pos Pos Pos
Pre Post Pre t Pre t Pre Post Pre t Pre Post
Bank Internasional 10.6 13.0 1.3 5.2 58.9 75.5 6.3 8.1 60.6 76.5
1 Indonesia,Tbk 8 6 3.72 3 1.79 3 8 2 2 2 7 9
14.0 5.4 2.3 87.6 90.9 1.1 1.6 72.1 91.3
2 Bank CIMB Niaga, Tbk 9.47 5 3.97 0 2.48 2 5 8 6 2 8 1
13.6 28.8 2.0 6.1 56.1 75.9 3.9 5.9 65.6 75.3
3 Bank Swadesi, Tbk 9 3 4.05 1 2.65 1 2 4 8 1 7 6
13.1 18.7 7.3 2.3 58.9 93.1 0.1 0.9 88.1 92.0
4 Bank UOB Indonesia, Tbk 2 1 1.97 2 2.98 6 8 5 6 1 2 0
19.9 8.7 5.6 49.1 62.6 4.3 5.3 61.1 64.1
5 Bank Ekonomi Raharja, Tbk 6.58 6 1.64 1 1.78 0 2 8 8 7 5 0
14.5 15.0 7.6 - 1.4 40.9 88.4 2.1 4.8 78.6 88.6
6 Bank Permata, Tbk 6.87 7 2 5 1.51 1 2 5 7 3 0 3
11.0 15.4 5.1 5.5 60.1 72.9 3.1 5.8 70.3 74.4
7 Bank OCBC NISP, Tbk 1 9 2.89 2 1.88 3 2 2 5 5 6 8
10.2 17.8 5.3 4.0 58.8 79.9 3.0 4.6 70.9 80.3
MEAN 0 1 4.75 6 1.72 8 4 5 5 6 6 5
Source : data processed
Based on table 2 above can be concluded that the average capital adequacy ratio calculated from CAR
increased after mergers and acquisitions. That is because no capital increase as a result of the merger.
The average credit risk is calculated from the ratio of NPL increased after mergers and acquisitions. This
indicates a poor performance due to the amount of bad loans held on the two banks concerned.
Average profitability which is calculated from the ratio of ROA increased after mergers and acquisitions.
That is because there are additional advantages as a result of the merger.
The average liquidity ratio is calculated from LDR increased after mergers and acquisitions. This indicates a
good performance because banks are increasingly illiquid and stronger as a result of the merger.
The average ratio of IRR has increased after mergers and acquisitions. That is because the possibility of
interest received by banks is greater than the interest paid by the bank.
The average ability of banks to carry out operations which are calculated from the ratio of AUR increased
after mergers and acquisitions. That is because there are additional revenue to fund the company's operations
as a result of the merger.
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Table 3
Descriptive Statistic of Financial Ratios from Bank Sample did Merger an Acquisitions Period 2009-
2014
CAR NPL ROA LDR IRR AUR
NO KET
Pre Post Pre Post Pre Post Pre Post Pre Post Pre Post
1 MIN 6.58 13.06 2.89 1.33 -1.51 1.41 40.92 62.68 0.16 0.91 60.67 64.10
2 MAX 13.69 28.83 15.02 8.71 2.98 6.11 60.12 93.15 6.32 8.12 88.12 92.00
3 MEAN 10.20 17.81 4.75 5.36 1.72 4.08 58.84 79.95 3.05 4.66 70.96 80.35
4 STD DEV 2.57 5.06 4.28 2.61 1.39 1.82 13.39 10.36 1.93 2.35 9.14 9.72
Based on Table 3 shows the distribution of the data bank ats samples before and after mergers and
acquisitions . From the table above it can be concluded that the average of all financial ratios has increased or
increased after mergers and acquisitions .
Analysis Wilcoxon’s Signed Rank Test Results
Analysis Wilcoxon 's Signed Rank Test was used to test whether the average of the financial ratios used in
this study, there is a significant difference or not .
Table 4
Results of Wilcoxon's Signed Rank Test Financial Ratio from Bank Sample did Merger and
Acquisitions Period 2009-2014
MEAN
NO RATIO Z Sig
Pre Post
1 CAR 10.20 19.90 -7.71 0.002
2 NPL 7.55 5.13 -0.72 0.720
3 ROA 1.06 3.87 -2.39 0.007
4 LDR 53.29 78.59 -21.42 0.003
5 IRR 3.18 4.56 -1.63 0.001
6 AUR 73.25 78.82 -9.52 0.003
Based on Table 4 above can be explained that there are five (5 ) significant financial ratios namely CAR ,
ROA , LDR , IRR , and AUR because of its significance value below 0.05 . This indicates that there are
significant differences after mergers and acquisitions . These results support the research Dyaksa (2006 )
Okalesa , Efni ; Zulbahridar ( 2014 ) , Marbelanty and Adityawarman ( 2015) which states that the CAR ,
ROA , LDR significantly different after mergers and acquisitions .
The NPL ratio was not significant because of the significance value 0.720 above 0.05 . This indicates that the
bank 's performance is not good because the amount of bad loans held on the two banks concerned.
Conclusion
Based on the above test results can be explained that five (5 ) significant financial ratios there is a difference
after mergers and acquisitions are calculated from the CAR , ROA , LDR , IRR , and AUR . It is the bank's
financial performance is enhanced and well after the merger These results support the research Dyaksa
(2006) Okalesa , Efni ; Zulbahridar ( 2014 ) , Marbelanty and Adityawarman ( 2015) which states that the
CAR , ROA , and LDR were significantly different after mergers and acquisitions .
The NPL ratio was not significant because of the significance value 0.720 above 0.05 . This indicates that the
performance of the bank is not good because of the amount of bad loans held .
Implication
From the analysis in the previous chapter , the results of this study are consistent with previous research ,
conducted by Dyaksa (2006 ) Okalesa , Efni ; Zulbahridar ( 2014 ) , Marbelanty and Adityawarman ( 2015)
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which states that the significant financial performance calculated from the CAR , ROA , and LDR differences
after mergers and acquisitions .
Limitations
This study has limitations, particularly in terms of:
1) The study period is limited from 2009-2014 alone .
2) The research sample was relatively small ie 7 samples because only limited to the banking companies are
doing mergers and acquisitions by foreign parties .
3) This study only uses six (6 ) banking financial ratios .
REFERENCES
Hamidah. Noviani, M. (2013). Perbandingan Kinerja Keuangan Perusahaan Sebelum dan Sesudah Merger dan Akuisisi
(Pada Perusahaan Pengakuisisi yang Terdaftar di Bursa Efek Indonesia Periode 2004-2006). Jurnal Riset
Manajemen Sains Indonesia (JRMSI) Vol. 4 No. 1
Halim, Kusuma Indawati. (2013), Analisis Kinerja Keuangan dan Indikasi Earnings Mangement sebelum dan sesudah
Akuisisi Perbankan oleh Investor Asing. Jurnal Socioscientia Kopertis Wilayah XI Kalimantan Februari 2013,
Volume 5 Nomor 1.
Marbelanty, Fivtina dan Adityawarman. (2015). Analisis Perbandingan Kinerja Keuangan Antara Perbankan
Konvensional dengan Perbankan Syariah di Indonesia. Jurnal Akuntansi, Vol.4, No.4, hal.1-10.
Novaliza dan Djajanti. (2013). Analisis Pengaruh Merger dan Akuisisi Terhadap Kinerja Perusahaan Publik di
Indonesia‖. Jurnal Akuntansi dan Bisnis, Vol. 1, No, 1 hal 1-16.
Okalesa, Efni, Zulbahridar. (2014). Analisis Perbandingan Kinerja Keuangan Perusahaan Perbankan yang Go Public di
Bursa Efek Indonesia Sebelum dan Sesudah Merger dan Akuisisi periode Tahun 2000-2012. Jurnal Tepak
Manajemen Bisnis (online), Vol VI No 3.
Payamta dan Setiawan, (2004). ―Analisis Pengaruh Merger dan Akuisisi Terhadap Kinerja Perusahaan Publik di
Indonesia‖. Jurnal Riset Akuntansi Indonesia, Vol. 7, No. 3. Peraturan Pemerintah Republik Indonesia No. 27 Tahun
1998, tentang Penggabungan, Peleburan dan Pengambilalihan Perseroan Terbatas.
Restika, S M. 2013. Kinerja keuangan sebelum dan sesudah merger: Bukti Empiris dari Industry Perbankan Indonesia.
Jurnal Ilmu dan Riset Akuntansi. 1 (2): 34-42.
Wahyu, Eri, 2010. Analisis Perbandingan Kinerja Keuangan Perusahaan Sebelum dan Sesudah Merger dan Akuisisi
(Studi pada Perusahaan Pengakuisisi di BEI). Semarang.
Dendawijaya, Lukman. (2005). Manajemen Perbankan. Penerbit Ghalia Indonesia. Jakarta.
Ghozali, Imam, (2006), Aplikasi Analisis Multivariate Dengan Program SPSS, Badan penerbit Universitas Diponegoro,
Semarang.
http : //www.idx.co.id, Annual Report Bursa Efek Indonesia
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STRENGTHENING AGRICULTURAL BASED SMES THROUGH

MICROFINANCING
Chatarina Yekti Prawihatmi, Junianto Wibowo

Soegijapranata Catholic University Semarang
(yekti.prawihatmi@yahoo.com, Jun_win@yahoo.com)
ABSTRACT
Microfinance is a business financing alternative that is most easily accessed by micro, small and medium
enterprises. In reality there are many micro, small and medium enterprises are still having trouble accessing
microfinance, especially micro, small and medium enterprises which are based agriculture. This study
explores how easy micro, small and medium enterprises in Central Java in accessing various micro-finance
schemes and the supporting factors and obstacles factors in accesing microfinance .
The unit of analysis of this study are micro and small enterprises which produces food and beverages that
base agriculture. The research location is Central Java . Data collected using a questionnaire which was
delivered directly to the respondent along with indepth interview. The indepth interview focused on access
micro and small enterprises to micro finance, the supporting factors and obstacles factors in accesing
microfinance. Analysis tool used is description and qualitative analysis .The results of this study show that
micro and small enterprises not only need ease of access to capital, but also microfinance schemes are
accompanied by guidance and assistance for the development of their business.
Keywords: Microfinance, micro, small and medium enterprises, access.
INTRODUCTION
Agriculture-based SMEs have good prospects in the future in line with advances in the field of tourism in
Indonesia. Agricultural products are so many types and it enables the development of products of agriculture-
based snacks. ASEAN market opening in 2015 gives greater opportunity for SME manufacturers snacks to
enter the export market in order to expand the market and increase its production. In 2008, the export value of
processed food and beverages amounted to 2.997 billion US dollars, almost one-third is produced by SMEs.
The number of SMEs engaged in food and beverage throughout Indonesia around one million more
industries. While for medium and large industries around 6,000 to 6,500. Of that number there are at least
10,000 export-based industries (Antaranews.com).
One of the obstacles in the development of micro-enterprises is the lack of capital owned and the difficulty of
accessing capital sources. According to the Ministry of SMEs, as much as 35.10% of SMEs stated capital
difficulties, followed by a 25.9% market certainty and the difficulty of raw materials 15.4%. In such
conditions the group will be very difficult to get out of the problems that usually longstanding such, unless
there is intervention of other parties. The low penetration of financing to SMEs can be seen from the data
from Bank Indonesia (BI) as of December 2012 show the bank financing the SME sector to Rp 526.4 trillion,
or about 19 percent of the total loan portfolio of Rp 2707.86 trillion. From these figures show the penetration
of financing to SMEs, especially micro still very low.The low penetration of SME financing due to the lack
of ability to micro businesses in conducting recording and managing money. Even SMEs considered that
contact with the banks is very complicated. In addition, the SMEs also have the insecurity to develop the
business. But on the other side of the bank often see the micro sector is too risky and costly. Seeing this
condition menegmbangkan government micro-financing, ie funding programs specifically aimed at SMEs.
LITERATURE REVIEW
Based on Law No. 20 of 2008 on Micro, Small and Medium Enterprises, which is classified as SMEs are
businesses with a net worth of up to Rp 10 billion, excluding land and buildings or have a turnover of up to
Rp 50 billion per year. If a business has a wealth of over USD 10 billion or turnover over USD 50 billion,
then the business is classified as a large company or corporation.
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Challenges and Problems of SMEs

As is known from various studies, that in developing a business, SMEs face many obstacles both internal and
external, these issues include: management, capital, technology, raw materials, information and marketing,
infrastructure, bureaucracy and levies, partnerships. From the diversity of problems faced by SMEs, it
appears that the capital remains one of the critical needs in order to run their business, both working capital
and investment needs. Several factors inhibiting the development of SMEs, among others, lack of capital and
low managerial capacity. Despite the increased demand for their efforts because of constrained funding it
often did not get to meet the demand. This is due to the limited ability to obtain information about the
procedures for obtaining funds and limitation of the ability to make proposals for funding. Most small-scale
business in running business without any planning, control and evaluation are also business activities. The
problems of SMEs can be categorized as follows:
1. The problem that is both classic and fundamental to the SMEs (basic problems), among others, capital
issues, the legal entity that is generally non-formal, human resources (HR), product development and market
access;
2. Problems continued (advanced problems), among others, introduction and export market penetration is not
optimal, lack of understanding of product design in accordance with the character of the market, legal issues
concerning patents, sales contract procedures and regulations in destination countries;
3.. Problems between (intermediate problems), which issues from the relevant authorities to resolve the basic
problem to be able to face further problems better. These problems, among others in terms of financial
management, collateral and limitations in entrepreneurship. With an understanding of the issues above, will
be considered various problems in SMEs at different levels, so that solutions and handling had to be different
anyway.
Microfinance
Micro-financing can not be separated from efforts to reduce poverty. At first microcredit was born as a
breakthrough for the provision of capital to low-income people who do not have access to modern financial
system (Sabirin, 2001). Micro-financing is used as the development of small loans to entrepreneurs who are
too weak to their qualifications to be able to access credit from traditional banks. Loans provided to serve the
daily working capital, as the initial capital to start a business, or as capital investment to purchase the asset
does not move.
METHODOLOGY
Sample and Data Research

This study is explorative. The population in this study is the food and drink SMEs in export-oriented agro-
based in Central Java. The exact number is not known because the population of the difficulty of obtaining
information on the number and contribution of SMEs from media publications. The sample in this study were
taken 121 SMEs spread across 35 districts / cities in Central Java ..
Data collection technique

This study used primary data and secondary data. For primary data, data collection technique is by indepth
interview and focus group to obtain information from individuals relating to individual experiences in
business development issues of food and beverages export-oriented agro-based associated with access to
microfinance. Secondary data obtained by exploring various statistical publications and official publication of
the various relevant agencies .. There is no secondary data obtained from the Central Bureau Statitik, Board
of Investment, Industry, Cooperatives and SMEs, and other relevant agencies.
Data analysis
Analysis of the data used is descriptive analysis. The analysis includes the accessibility for SMEs to micro
financing and study various factors that hinder the penetration of micro-finance and support to SMEs.
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RESULT
Based on the results of in-depth interview is reinforced by the results of field surveys obtained information
that each district / city has a food and beverage products that are based on local wisdom respectively.
Agricultural based - SMEs in an area usually appear because of the abundance of agricultural produce in the
area. The agricultural based -SMEsin each region creating added value to agricultural products are abundant.
The abundance of the harvest usually menyebabkab prices down. Additionally harvest abundant crops need
fast post-harvest Handling da right. Here are the food and beverage products, agro-based SMEs that have the
potential of export in 35 districts / cities in Central Java
Table 1 SMEs Based Agriculture by Regency / City
No Regency/City Product of agricultural based- SMEs

1 Kota Semarang Jamu serbuk, sambal bandeng, baby fish crispy, layur crispy, obat herbal
2 Kabupaten Aneka olahan waluh, robusta gunung kelir, robusta lanang, arabica gunung
Semarang kelir, arabica gayo, arabica gayo luwak, sirup jahe
3 Kota Salatiga Minuman herbal, ting-ting gepuk, keripik dari sayur, abon gurami, enting-
enting gepuk, the rosella
4 Kabupaten Abon lele, Abon sapi, Abon ayam, gula jawa manggis, permen susu
Boyolali
5 Kabupaten Klaten Keripik belut, mie soun, aneka abon, dendeng daun pepaya
6 Kota Surakarta Serbat jahe, bandrek, abon sapi, roti kecik, klengkam, kremes, dendeng
sapi
7 Kabupaten Jamu instant, minuman herbal
Sukoharjo
8 Kabupaten Sragen Emping ganyong, kue ganyong
9 Kabupaten Gaplek, Mete, keripik jagung
Wonogiri
10 Kabupaten Pati Abon lele, Abon bandeng, Tepung tapioka
11 Kabupaten Kudus Jenang kudus, bandeng presto, kacang kudus
12 Kabupaten Sirup kawis, kerupuk ikan, kacang pres, gula semut
Rembang
13 Kabupaten Jepara Carang madu, olahan ikan, udang kering, srimph pasta, fish pasta , minyak
ikan
14 Kabupaten Blora Egg roll waluh, stik waluh, keripik tempe
15 Kabupaten Keripik jagung, nasi jagung instant
Grobogan
16 Kabupaten Demak Grubi, keripik singkong, kacang oven, sirup belimbing, tepung bakau,
madu bakau
17 Kabupaten Kendal Sirup jahe, egg roll pisang, sirup jambu biji merah, keripik jambu merah,
permen jambu merah
18 Kabupaten Batang Emping mlinjo, daging durian beku, madu lebah, abon lele
19 Kabupaten Keripik suwek, tepung suwek, manggis instant
Pekalongan
20 Kota Pekalongan Kerupuk ikan, keripik tahu, kerupuk usek
21 Kabupaten Ogel-ogel, olahan ikan, sirup nanas madu, minuman sari nanas madu,
Pemalang wajik nanas madu, manisan nanas madu, abon bandeng
22 Kabupaten Tegal makanan suplemen, kacang bogares, aneka pia
23 Kota Tegal Ceriping pisang, kacang bogares, pilus
24 Kabupaten Brebes Telur asin, bawang goreng
25 Kabupaten Gula kelapa, mie ketela, purwoceng
Purbalingga
26 Kabupaten Purwoceng, olahan salak, ceriping bekicot
Banjarnegara
27 Kabupaten Gula kelapa, Gula semut, nopia
Banyumas
28 Kabupaten Cilacap Gula Kelapa, Tepung pisang, tepung sukun
29 Kabupaten Aloe vera, gula semut, keripik bekicot, permen susu kambing etawa
Purworejo
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30 Kabupaten Gula kelapa, lanting, jipang kacang

Kebumen
31 Kabupaten Pisang aroma, keripik talas, lenteng pedas
Temanggung
32 Kabupaten Manisan carica, purwoceng, the tambi, kacang dieng, sirup carica, keripik
Wonosobo kentang, keripik jamur, stik talas balado, keripik pare, thiwul instant
33 Kabupaten Aneka keripik , keripik tahu, bumbu rempah organic,jenang papaya,
Magelang manisan papaya
34 Kota Magelang Opak, keripik kulit tahu, kue semprong mini, sirup jahe, gethuk goreng
35 Kabupaten Olahan ketela ungu, keripik sawi, cheestick bayam, cheestik wortel
Karanganyar
Sources: Primary data is processed, 2015
Indepth interviews were conducted against the perpetrators of agricultural based-SMEs are scattered
throughout the region of Central Java by visiting centers Agricultural based products in 35 districts / cities in
Central Java province. A total of 121 respondents of Agricultural based-SMEs successfully met and
interviewed both with direct and with FGD survey. As for the distribution of respondents according to the
resulting product are as follows.
A total of 71.08 percent of SMEs oriented food and beverage products exports already know and use micro-
financing to strengthen their capital. Access to information about their micro-finance facilities made available
to Agricultural based-SMEs in various ways as shown in Table 2.
Table 2 Information on microfinance
Access Microfinance information Percentage (%)
Following socialization 25.62
Information from business partners 19.83
Offered Department / Agencies 9.09
Information from groups 25.62
Information from the internet 12.40
Information from television 7.44
Microfinance institutions in Indonesia is growing rapidly. There are many preferences for SMEs to access the
micro financing. The Agricultural based SMEs can choose one of them appropriately with their need. Table 3
shows the preferences of Agricultural based-SMEs on micro financing. A total of 20.66 percent of
respondents choosing a loan in the form of Kredit Usaha Rakyat (KUR) mainly channeled through BRI
because BRI branch offices close to the centers of SMEs in the various regions. Other microfinance that an
option is BKK, Productive Business Credit and lending business groups such as rolling past UPPKS, UP2K
and others. Prefernsi shows that SMEs need a micro-finance facilities are also easily accessible without
constrained transportation. The Agricultural based-SMEs are mostly located in the countryside close to the
source of power. They need a microfinance institution that is close to their production activities.
Table 3 Type Microfinance Accessed SMEs Agriculture-based Central Java
The type of micro-financing Percentage (%)

BRI 20.66
Danamon, BNI Syariah dll 4.13
BKK 14.05
BPR 6.61
Koperasi 9.09
BMT 7.44
Pegadaian 9.09
Pinjaman kelompok (UPPKS/UP2K, dll) 12.40
Kredit Usaha produktif (KUP) 10.74
Lainnya 5.79
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Microfinance is one of the alternative financing demand by SMEs. Based on the results of in-depth interview
and group discussion showed that the greatest motivation to use microfinance is lending less, do not have to
submit collateral and easy procedure.
Table 4 Motivaton to use microfinance
Motivaton to use microfinance Percentage (%)
Low interest 19.01%
Without collateral 25.62%
Easy procedur 20.66%
Without survey 12.40%
Easy terms 22.31%
Based on the discussion in-depth interview is found that there are some difficulties in obtaining
microfinance. The most commonly faced difficulty is the absence of a business license and fears over the risk
of the loan. Part of SMEs themselves also felt uninformed clear and accurate information on various micro-
finance schemes
Table 5 Difficulty accessing microfinance
Difficulty accessing Percentage (%)
microfinance
Had to wait their turn 6.53
Small loan amounts 7.44
Information is less clear 16.74
Not free 6.61
Limited quota 6.45
Have no business legalization 19.92
Fear of risk 28.26
Long loan disbursement 10.53
Based on the aspects of ease in obtaining micro-finance facilities, the perpetrators of SMEs stated that access
to finance is the easiest and cheapest is channeled through micro-finance groups. Respondents stated that
micro financing through group simply needs trust and commitment. Even micro financing through a group
usually is accompanied by mentoring, training and various technical guidance that increase their capabilities
as entrepreneurs.
Table 6 Ease of Microfinance Access
No Easiest Microfinance Access Percentage
1 Microfinance based self help group 25.62
2 BKK 22.31
3 Pegadaian 17.36
4 BRI 12.40
5 Koperasi 14.88
6 BPR 5.79
7 Others 1.65
Microfinance is a form of encouragement for SMEs to survive and develop into a business that can compete.
The SMEs stated that micro-finance is very helpful in the development of their businesses. Micro financing
capital strengthening SMEs so that production can be increased which will further increase the turnover and
profit. Management of microfinance disciplined and prudent by SMEs will enable the development of
enterprises. The Agricultural based-SMEs need of micro finance schemes are accompanied by guidance to
improve their entrepreneurial skills, especially those related to product development, production and
marketing process.
Table 7 Benefits Of Business Performance Micro Financing For SMEs Based Agriculture
Benefits Of Business Performance Micro Financing Percentage (%)
Add capital 25.62
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Benefits Of Business Performance Micro Financing Percentage (%)

Improving the ability to produce 16.53
Enabling the development of business 12.40
Getting business partners 5.79
Getting technical assistance 12.40
Allows for larger order 27,26
CONCLUSIONS, LIMITATIONS AND IMPLICATIONS
The Agricultural SMEs in Central Java has broad market potential . Micro financing in the SMEs has an
impact on the strengthening of capital and increased production capability. Access to microfinance is large
but still there are obstacles, especially for business licensing. The Agricultural based-SMEs need the
microfinance serving which near their production site and which provides an easy procedure, low interest
and collateral-free loans .The best appropriate microfinancing for the agricultural-based –SMEs is micro
financing through the group.
Limitation
This research is too broad photographing namely Central Java, so that exploration becomes less deep and
sharp.
Suggestion
Microfinance programs are not just easy access, simple procedures, low interest and without collateral.
Micro-financing will be able to strengthen the performance of SMEs when accompanied by programs to
improve the capability of entrepreneurship. Enabling group-based micro-finance programs to improve the
capability of entrepreneurship is done in a planned and continuous. Strengthen the capital alone is not enough
if it is not accompanied by an increase in product development capability, the ability to innovate in order to
SME products more competitive and able to seize export market.
Research on micro-financing that will come out better restrict the scope so that more in-depth exploration of
information and sharp.
REFERENCES
Andang Setyobudi, 2007, Peran Serta Bank Indonesia Dalam Pengembangan Usaha Mikro, Kecil Dan Menengah
(UMKM), Buletin Hukum Perbankan Dan Kebanksentralan, Volume 5, Nomor 2, Agustus 2007
Antaranews, 23 Juni 2009, 30 Persen Makanan Olahan dari UMKM, diakses tanggal 28 April 2014.
Biro Pusat Statistik Jawa Tengah Tahun 2012, Diakses pada tanggal 20 April 2014
Dinkop-UMKM Jateng Prov.go.id/diakses pada tgl 24 April 2014
Direktorat Jasa Keuangan dan Analisis Moneter BAPPENAS, diakses pada tanggal 20 April 2014
Direktorat Jasa Keuangan dan Analisis Moneter BAPPENAS
Neuman, W. L. (2000), ―Social Research Methods: Qualitative and Quantitative Approaches,‖ 4th edition, Allyn and
Bacon, Boston.
Sabirin, S. 2001. Pemanfaatan Kredit Mikro untuk Mendorong Pertumbuhan Ekonomi Rakyat didalam Era Otonomi
Daerah. Orasi Ilmiah Lustrum IX Universitas Andalas, Padang, 13September 2001.
Srinivasan, N. 2009. Mirofinance India State.SAGE Publications, New Delhi
Undang-Undang Republik Indonesia Nomor 20 Tahun 2008 Tentang Usaha Mikro, Kecil dan Menengah.
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BRAND REPLACEMENT:
FACTORS AFFECTING CUSTOMERS' PURCHASE INTENTION
Haris Murwanto1, Dian Indriana2

Universitas Semarang
(haris.murwanto@usm.ac.id, dian_murwanto@yahoo.com)
ABSTRACT
Brand loyalty is one of company‘s purpose to their consumers. But what if the brand was rename. This
research proposes model, which analyzes purchase intension with testing the suspected factors : brand
image, fascinating advertisement and corporate image. Also analyze the influence of fascinating
advertisement to brand image and corporate image. This research uses 100 respondents who are already a
customer of Sanyo brands in Semarang.
The result of the data shows that the research model has good fits and all of the hypotheses can be proved.
The conclusions are : fascinating advertisement has positive influence to brand image and corporate image.
Thereafter, brand image, fascinating advertisement and corporate image has positive influence to purchase
intension.
Based on the results of the research could be taken the theoretical implications that this research gives more
justifications for some of variables that influencing the purchase intension in case of the changing brand. For
managerial implications, the management should take more attentions of brand impress, brand reputation,
advertisement variety and quality knowledge But since the influence was not dominant, it is necessary for the
further research other factors that can influence the purchase intension in case of the changing brands.
Keywords: Purchase Intension, brand image, fascinating advertisement, corporate image and brand
replacement
1. INTRODUCTION
To increased sales volume, one of the objectives of marketing activities is also aligned to be embedded
positive image of a product, and these products is also expected to be a Trend Setter or Leader for similar
products. Brands can assume as the spearhead of a company. From the brand that consumers will get an
overview of the product‘s quality assurance, packaging, color, flavor and all the attributes inherent in the
product (Kotler, 1990).
Consumer loyalty to a brand is one that is expected by the company. According Mowen & Minor (2002),
brand loyalty is viewed as the extent to which a customer showed positive attitudes toward a brand, has a
commitment to a particular brand, and intends to continue to buy in the future. According Aarker in Nagar
(2009) argues that brand loyalty addressing the purchasing patterns consistent with the particular brand over
time and also a pleasant attitude toward a brand. Maintaining customer loyalty is a not easy challenge for
management.
When customer loyalty to a brand already formed and then suddenly found the brand does not exist anymore
although it has been replaced by another name, there is the likelihood that consumers will be hesitant to buy
the product with the brand replacement. Replacement of this brand of the company certainly has been
through a variety of considerations, such as that brand long less embedded in the minds of consumers because
the pronunciation is not easy, logo or symbol that is not easy to remember, like with other brands that need to
be replaced with a brand that is expected to be more easily recognized by consumers. From the consumer
side, the change of the brand is not just acceptable although probably more exciting new brands.
The Sanyo brand in Indonesia already has loyal customers, replacing Sanyo brand with Aqua brand in the
category of household products namely washing machines, refrigerators, air-conditioning and television
according to the Executive Director of Haier Asia Company Ltd. Kenji Sadayuki aims to increase interest in
the market, and hope that, with this name change, the market could be interested. Brands Aqua was launched
in Japan starting in 2012.
For consumers who are loyal to the brand Sanyo, they must adjust this condition, because the consumer
image of the product with the brand Sanyo Aqua will not be equal to the product that is branded Sanyo.
425
Moreover, long before the brand Aqua has been better known as a mineral drink products. If the products
featured Sanyo changed its brand into Aqua the consumer will no longer find its branded products Sanyo that
has given satisfaction to the consumer for this.
If at any time the consumer requires new products, whether he would buy the product with the new brand or
it will move on to other brands. Customers interest to buy the same product but with Aqua brand becomes
very important, it relates to an image that is embedded in the minds of consumers. Buying interest is
influenced by many factors, among others, promotion, pricing, customer satisfaction, brand, product
usability, product durability, customer needs, access to products, services, sales, advertising and including
attitudes towards brands (Zeitlin and Mark, 1982),
Aqua is not new brand in Indonesia, then of course most of this name had been heard by the public, but as a
product brand mineral water. Srinivasan (2001) in Pratikno (2003) suggested that if consumers are aware of a
brand that means consumers will have the perception (association or image) to the brand. So the things that
become important precisely image the consumers towards the brand Aqua.
Sanyo is a brand of products made in Japan, the public does have a good perception about the quality of
products made in Japan. Because the company / manufacturer Aqua brand products in Indonesia, namely PT
Haier Electrical Appliance Indonesia, also important for consumers is the image of the company, in particular
the manufacturer of the product brands Aqua in Indonesia. It is suitable as said by Sunaryo (2002) that the
good image of the company is able to put himself in the "heart" of the customers which in turn will encourage
customers to buy the products offered.
The Company had socialized with these policies, mainly carried out by advertising both in electronic media
and print media, for advertisements deemed able to convey the purpose and concept of products that the
company offers to the target segment (consumers) to influence consumers to buy (Anggarini, 1997).
Socialization through these ads course aims to provide information and convince consumers that the product
brands Aqua has replaced the brand Sanyo with all the quality attributes that have not changed. The extent to
which the response of consumers with their advertising will be very important.
The management of PT Haier Electrical Appliance Indonesia as a subsidiary company in Indonesia feels sure
it will not interfere with the existing market share, it can even grow market share. But the consumer
perspective must be studied further, that a change of this brand does not affect consumer buying interest
towards the brand replacement.
Research questions
Replacement of the brand is surely take time to be accepted by the consumer. Darmadi Durianto in
Soelaeman (2004) admits there's still some doubts that consumers can accept changes this brand, although
changes in the brand is profitable globally but in Indonesia could be a problem for most categories of
products are better known by the brand Sanyo and brands Aqua is a brand of mineral water minimal product
category. Similarly expressed by Dharmmesta (1999) that the commitment of a strong brand there is always
the loyal customers, so that they will not easily switch brands, so if consumers are loyal to the brand Sanyo
will not be easy to simply accept brand Aqua as his successor.
See the description then the problem that arises is that consumers are still hesitant to make the brand Aqua as
a replacement for Sanyo brand position in the minds of consumers already loyal.
From the above problems, because the interest to purchase a replacement product with the brand is very
important, so in this study can be formulated research problem is: what factors are influencing consumers to
buy the products that the brand change.
Research objectives
This research was conducted in order to determine:
1. Effect of brand image on consumer purchase intention.
2. Effect of the fascinating advertising on consumer purchase intention
3. Effect of corporate image on consumer purchase intention
4. Effect of the fascinating advertising on brand image, and
5. Effect of the fascinating advertising on the corporate image
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Brand Image
Kotler (1997) states that the image is a set of beliefs, ideas and impressions of a person to an object, while the
attitudes and actions of a person against an object is determined by the image of the object (Aziz, 2001). This
means that the a person‘s image will be different from others because of beliefs, ideas and impressions will
not be the same on each person and each individual has its own characteristics and behavior in shopping. The
image of an object, in this case the product or brand, should be dealt with differently by each person
depending on how the person is developing his impression of the object.
The importance of a brand for the company to make the brand a very vital capital, or in other words a good
brand equity has become an absolute necessity for companies. There are four main elements of brand equity
(Aaker, 1996) namely; brand awareness, brand association, perceived quality and brand loyalty. As one
element of brand equity, associate brand to help consumers to recall information that is required in the
decision making process and create a positive impression in the consumers themselves, in addition to the
association / brand image is high generally owned by the brand that is positioned well in consumer‘s mind
(Aaker, 1996).
Aaker (1996) in Simamora (2002) considers the image of the brand (brand image) as "how the brand is
perceived by consumers". Thus the image to a brand on each person will be different, based on the
impression that once captured by someone and how a person perceives the brand. A good brand can only be
said by someone, but for others not, because a different impression of what is to come, perceived or expected
when using the brand is associated with a person's needs and desires.
Kottler (2000) in Simamora (2002) also found the image of the brand (brand image) is a belief that there is
someone on the brand. It shows the feeling and confidence associated with the presumption against a brand,
can be considered good, mediocre or bad. Based on experience of the use of specific brands so consumers can
assess the direct and raises on the brand image, particularly in relation to whether or not or how far a brand
can meet the needs of consumers or consumer satisfaction.
Knowledge of a brand, be it for ever and are being used or only know through the media or others, can form
the image a person towards these brands, because consumers have a habit to share information with their
friends about the products / brands that are perceived to have a high value through verbal communication
from mouth-to-mouth and personal nature (Budiman, 2003). Image formed this kind may apply to consumers
who have never used these brands or similar products from other brands, also brand it once or frequently
heard which is associated with the reputation of a brand that shows a perception of quality associated with the
name or brand that is good and trustworthy (Selnes, 1993). Image formation on the brand's quite important
given based on the research conducted, on average for every three people who are interested in
communicating their positive experiences, there are 33 other people who are interested in communicating the
opposite (Wilson, 1991 in Budiman, 2003).
Fascinating Advertisement
Advertising is a form of marketing communication that is used by many companies, this is because the
companies believe that the advertising dollars they spend will benefit the company in its efforts to influence
consumer behavior (Anggarini, 1997). Seems to have become a trend that companies, especially large
companies competing to display ads that are "weird" and different from the usual, and the fund is not a
barrier.
Advertising is divided into three main functions (Grewal, et. Al. 1997), namely: 1) Cognitive Function,
advertising to provide information and evidence intended to make consumers aware of and know about a
product, 2) Function of Affective, advertising to create a sense of likes and preferences or a favorable attitude
towards a product, and 3) Function Conative, stimulate the desire ads and encourage consumers to buy a
product.
Advertising consists of two types (Kalra and Goodstein, 1998), namely: Price Advertising and Non-Price
Advertising. At the price of advertising is certainly the main priority is the competitive price compared with
competitors' products. While in the non-price advertising is intended for the creation of a product image that
is reflected in the brand. Appearance advertising a brand as a whole will influence the perception of the
consumer / audience towards the brand, both from the design of products delivered, the plot, colors,
commercials, music or jingle and the image quality is made as attractive as possible so it can be attached
firmly in the minds of viewers.
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One of the important things for companies that sale became effective means of communication with
consumers (Kotler and Armstrong, 2001), there are three options: 1). Personal communication channel, 2).
The influence of mouth to mouth and 3) non-personal communication channel. In non-personal
communication channel, a media that carry messages without personal contact or feedback includes media,
atmosphere and important events. In this channel advertising is done through the print media (newspapers
and magazines) and electronic media (radio and television).
In this paper will be discussed on the private non channels through television advertising in accordance with
the opinion of Russel and Lane (1996) that television advertising as an advertising medium has the ability to
portray emotions, the television media is able to provide a combination of messaging, voice, music, pictures
and words sounding word, words that look and sound effects. Similarly, the opinion of Durianto and Sugiarto
(2001) despite the relatively high cost, through television advertising media most effectively to launch an
advertising strategy because it has the advantage that audio-visual nature. Advertising on television is seen as
the most effective advertising medium, because in reality more and more companies that dare to spend a lot
of fund for the cost of advertising on television (Sabardini, 1997).
Others have suggested that it is also necessary to position advertising aimed at the creation of a product
image that is reflected in the brand in the minds of consumers (Kalra and Goodstein, 1998), so they can also
establish a brand image to the consumer. Similarly, the opinion and Dekimpe Steenkamp (1997) which says
that advertising can be used to build the brand association and bring the message of improved quality. Two of
these opinions reflect that attractive advertising would lead to a positive image to a brand.
Ads also can contribute real influence on the feeling and confidence of consumers to the attributes and brand
image (Eddell and Burke, in Derbaix, 1995), when viewers considered that the ads served to provide
information he needs in a way that is very interesting, of course he would feel happy and will perceive that
the advertised brand is a good brand.
Based on the description, it can be arranged hypothesis as follows:
H1: The more interesting ads the better the image of the brand
Purchase Intention
If someone needs something to fulfill their needs then that's when incurred interest to buy the products, so
that the next action is to make a purchase. Dodds, Monroe and Grewal (1991) says buying interest is a
possibility that the consumer or a person intends to buy a product, it suggests that the interest is closely
related to consumer behavior, especially in the process of making a decision to buy a product. Buying interest
is something that is associated with the desire to carry out the purchase of goods or services but has not yet
materialized into real action, only a person's desire to buy when he was in need of a good product of goods
and services.
Purchase Intention may arise because consumers do need these products, can also because of curiosity and
want to try something new. There is also interest in buying that are planned, usually to meet his needs,
besides that there is also interest in appearing without a plan or impulsive in which the interests of the
moment after seeing these products directly and through ads.
Rogers (Rogers, 1983 in Budiman, 2003) the consumer adoption of the product or a new brand through
stages, namely: (1) Knowledge which consumers obtain information about the product, (2) Persuasion where
consumers develop an attitude like or dislike towards such products, (3) Decission where consumers decide
to adopt or reject such products, (4) Implementation where consumers decide to use the product regularly /
permanent and (5) Confirmation to reconsider its decision if it gets experience or conflicting results as
expected. In the first phase, information about products or brands may be obtained through advertising and
through other people who had already been familiar with these products. Consumer interest appears in the
second stage with a record product or brand in accordance with the needs and are expected to meet the
expectations of consumers, if consumers were happy with the product or brand, the interest will arise.
Dodds, Monroe and Grewal (1991) said that the desire to buy came after consumers are interested in, need
and want to have a product that is seen. This happens after consumers get information about the product or
brand. If consumers feel that the products are useful for himself the interest purchased or use of these
products is even greater (Taylor and Todd, 1995 in Budiman, 2003). Thus the information received by
prospective customers on a new product or brand is very important, the information provided should be able
to give a description of the product in addition must be made as attractive as possible so that consumers can
develop a positive attitude which will show interest in buying.
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Anggarini (2001) says that once consumers know a brand and feel confident / confidence in the brand based
on the acquired information will encourage consumers have the intention to buy. Similarly expressed by
Dodds, Monroe and Grewal (1991) found a significant relationship between the brand with the desire to buy,
it can illustrate that if consumers have the perception that a brand is good then in him will arise intention to
buy even if not embodied in at that moment.
Based on the discussion and literature review above it can be arranged hypothesis as follows:
H2: The better the image of the brand, the higher the Purchase Intention.
Successful advertising embedded in the memory of consumers making consumers give a positive response to
a product (Indriyanti and Ihalauw, 2002), pulling an advertising becomes very important because ads can
form a personal impression (Richins, 1991 in Pollay and Mittal, 1993), so that if an ad delivered personally
can give the impression of depth to the viewer it will affect the viewer or consumer attitudes toward the
advertised product.
Form of ad impressions are made as attractive as possible so it is expected to make the audience be interested,
minimal easily recall the product as in advertising for the product image is constructed through an ad
impression can quickly affect the consumers to encourage purchases (Durianto and Sugiarto, 2001).
Advertising techniques vary among other serial technique and split, close-up technique, technique storyline,
animation etc. (Russell and Lane, 1996).
Rossiter and Percy (1987) in Eka and Saliman (2001) said that advertising is a process of persuasion
indirectly based on the information on the advantages of a product that is structured such that cause a sense of
fun / interest that will change people's minds for action / purchase. Similarly, the opinion Sabardini (1997)
that the ad has a strong impact in changing behavior.
If an ads can attract the attention of consumers, it will seek further information about the advertised product,
it means already raised interest the consumers themselves, then hopefully one ad can cause target consumers'
desire for products that are advertised (Indriyanti and Ihalauw, 2002). Thus Advertising support their
purchase intention (purchase intent) (Golden, 1979).
Based on the above and is associated with problems in this study it can be arranged hypothesis as follows:
H3: The more attractive the higher the ad buying interest.
Company Image
Image of a company is basically concerned with reputation, in this case a company will get a good image
when his reputation during the period of the founding of the company is good. As presented by the Assael in
Aziz (2001) image as a whole perception is formed of an object based on the information and past experience
of consumers, in the overall framework can be seen that the image formed through various perceptions
contained in the mind of a person to an object, and in the end greatly affect the analysis and an action or
making a purchasing decision.
One of the important components that influence consumer behavior in shopping / purchases is a set of
psychological state, which in connection with this image is divided into 3 parts, namely basic (Aziz, 2001):
1. Consumers needs.
2. Perceptions to a brand or a company.
3. Their attitude toward the brand or the company.
Consumer needs is the determining factor in the decision to buy out the condition of impulse purchases or
purchases instantly without a plan. Consumers certainly hope needs can be fulfilled with purchased a
particular product, with the needs of the consumer, the image of both the product itself, the brand products
and the company would be positive.
Sunaryo (2002) also found the company's image involves a combination of destinations, products, services,
management style, organizational policies and overall philosophy. Consumers will behave according to what
dipersepsikannya of the product, the brand and the specific company. Consumers will be positive to continue
to buy the product if it felt such products give satisfaction in terms to meet their needs.
A good image of the company also needs to be established through attractive advertising so that consumers
can obtain a picture of the reliability of the company through ads served. Biehal and Sheinin (1998), suggests
that ads using beliefs, feelings and attitudes is the basis of the disclosure of advertising companies and instill
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an understanding in the minds of consumers who are knowledgeable about the company, of the opinion can
be disimpulakan that attractive advertising can also form a picture or image of a company.
Therefore, based on the description above and is associated with problems in this study it can be arranged
hypothesis is as follows:
H4: The more interesting ads then the better the company's image.
With a good brand image, the company will be able to put themselves in the "heart" of the customers which
in turn will encourage customers to buy the products offered (Sunaryo, 2002). From the foregoing it can be
seen that the image of a person, in this case against the company, also influence the decision on the purchase
of a product. Storey and Wood (1998) revealed that one of the factors that influence consumers to buy a
product is the company's reputation, so that if he knew the reputation of the company or the manufacturer of
the product in question is good, then one would not hesitate to make a purchase. This indicates that the image
or the image of the company also affect the incidence of interest to purchase a product.
Based on the above and is associated with problems in this study it can be arranged hypothesis is as follows:
H5: The more good corporate image, the higher buying interest.
Variables Dimension
Brand Image
Variable Brand Image are built through three indicators of brand reputation, knowledge about the quality and
image of the brand name :
X1 = Brand Reputation
X2 = Knowledge of quality
X3 = impression of the brand name
Fascinating advertisement
Variable fascinating advertisement is built through four indicators are attractive, varies, informative and
impresive :
X4 = Attractive
X5 = Varies
X6 = Informative
X7 = Impressive
Corporate Image
Corporate Image variable constructed through three indicators of a corporate reputation, knowledge-sales
service and knowledge of corporate social responsibility :
X8 = Corporate Reputation
X9 = Knowledge-sales service
X10 = Knowledge of corporate social responsibility
Purchase Intention
Variable Purchase Intention built through four indicators, namely the desire to buy, the purchase plan, the
frequency of searching for information and interest in buying :
X11 = Desire to Buy
X12 = Purchase Plan
X13 = Frequency of searching for information
X14 = interest in buying
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3. RESEARCH METHOD
Data Type
Data type of research is related to the selection of data sources and methods used to obtain research data.
Determination method of data collection is influenced by the types and sources of data (Indriantoro and
Supomo, 1999).
In this study data are grouped into two types :
1. Data subjects, such as: opinions, attitudes, experiences or characteristics of the Sanyo brand consumer
products and the management of PT. Haier Electrical Appliance Indonesia.
2. Data documentaries, such as: journals, company reports collected by the analysis of documents.
Data source
Source of research data is an important factor to be considered in determining the methods of data collection
in addition to the type of data. Research sources derived from primary data and secondary data.
Primary data
Primary data is that comes directly from the source data collected specifically and directly related to the
research materials studied (Cooper and Emory, 1995). In this study the primary data is derived from
respondents' answers to the questionnaire that was given and the expected accumulated consumer opinion
data related to all indicators of the variables studied were opinions about Brand image, Fascination
Advertising, Corporate Image and purchase intention.
Secondary Data
Secondary data is obtained directly by researchers, but derived from the existing data is then processed, and
in this study secondary data derived from the journals of previous research, the study of literature, corporate
data, literature or magazines or newspapers relating to research materials. The data collected is expected to
include the opinions and the results of previous research related to the background of the problem, problem
formulation and justification of the problems to be studied.
POPULATION AND SAMPLE
Population
Cooper and Emory (1995) argues the population is a collection of individuals or objects of research that has
the qualities and characteristics that have been determined, based on quality and these characteristics can be
understood that the population as a group of individuals or objects of observation that has at least one thing in
common characteristics.
In this study, the population of which there are all users of the product brand Sanyo in Semarang and as this
population including types of populations are not limited to (infinite), the population that had been developed
at any time either increased or decreased so that no exact figures (Suharyadi and Purwanto 2004), the total
population in this study can not be known with certainty.
Samples
Indriantoro and Supomo (1999) argues the sample are some of the elements of the population studied. The
number of samples or the respondent in question, due to be infinite or populations is uncertain then used the
opinion Hair, Anderson, Tatham and Black (1995) as an assumption, the sample was considered
representative to be used in research that uses methods SEM is five times the number of parameters to be
estimated or minimum of 100 respondents. The parameters in this study amounted to 14, so the number of
samples is: 5 x 14 = 70, and is therefore used minimum sample size of 100 respondents.
Sampling method used is probability sampling and cluster sampling method, where the population is grouped
in a smaller size and the cluster members are not homogeneous (Suharyadi and Purwanto, 2004). In this
research cluster is determined based on the work of the respondents, such as student, private / self-employed,
civil / military police, workers and housewives with the assumption that the sample is more evenly
distributed, as long as one has a Sanyo brand product and into one cluster of population then they has a
chance to be sampled in this study.
Number of subjects selected for this cluster sampling method can be determined proportionately or
disproportionately to the number of elements on the salty one sample unit (Indriantoro and Supomo, 1999).
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Because the population in this study included a population that continues to change (infinite) the
determination of sample members for each cluster can not be done proportionally so that each cluster is
determined amounted to 20 respondents. Ways of collecting data from samples used in this study was to
distribute questionnaires at random and if the first valid questionnaires collected had reached 20 for each
stratum then it means that the sample has been fulfilled.
METHOD OF COLLECTING DATA

Collecting data in this study is providing a list of questions or the questionnaire, according with the opinion
of sekaran (1992) that for the activity or scientific research, systematic data collection methods used were
"Personally Aministered Questionnaire". After the respondents were given the opportunity within a certain
period to give an assessment and opinion by filling out a questionnaire, then collected by researchers and
used as primary data.
The data collection was done using two types of questionnaires, namely:
1. The open questionnaire, which is a questionnaires consisting of several questions and used to select
customers who meet the criteria as respondents. Answers from an open questionnaire can be a choice yes / no
or choice answers that have been provided.
2. The closed questionnaire, the questionnaires used to get answers or opinions of respondents on indicators
of the variables studied. Answer in the enclosed questionnaire was made using a scale of 1 to 10 in which
opinions are not disagree rated 1 and up to strongly agree rated 10.
ANALYSIS METHOD
Data analysis is the process of simplification of data into a form that is easier to read and interpret, so
research requiring analysis and interpretation of data are used to answer research questions. The model used
in this study is a model of causality or influence and relationships. While the analytical tools used to analyze
the data that is The Srtuctural Equation Model (SEM) which is operated through a program AMOS (Analysis
of Moment Structure) is often used in marketing management research and management strategies (Bacon,
1997).
Modelling using SEM allows researchers to be able to answer questions that are regressive and dimensional
(Ferdinand, 2000), SEM is a combination of factor analysis and regression.
This study used two kinds of analysis techniques, namely:
1. Confirmatory Factor Analysis, which is used to confirm the factors most dominant in the formation of a
group of variables.
2. Regression Weight, used to determine how much influence Fascination variable rent on the image Brand
and Company Image and Brand Image variable effect, Fascination Advertising and Corporate Image of the
purchase intention.
SEM modeling process requires the sample size, the normality of the data, the absence of outliers, and there
is no problem in multicillinearity and singularity. The measures used in SEM:
1. The development of a theory-based model.
In the development of theoretical models, the thing to do is to conduct scientific exploration through
literature review in order to obtain justification for the model to be developed. SEM is used to confirm the
model through empirical data, therefore a strong theoretical justification is the basis of a model development.
2. Develop flowcharts (path diagram)
The theoretical model that has been built is depicted in a flow chart that will make it easier to see the
relationships of causality to be tested. The construct was built in the flowchart can be divided into two
groups;
a. The construct of exogenous, known also as a source independent variable or variables that are not
predicted by other variables in the model, exogenous construct is a construct that intended by the line with an
arrowhead.
b. Constructs endogenous, ie factors that predicted by one or several exogenous construct, but exogenous
constructs can only be associated causally with endogenous constructs.
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Conversion flowcharts into the equation

The equation obtained from the flowchart consisting of the structural equation (Structural Equation) and the
equation specification model measurements (measurement model). Structural equation formulated to express
the relationship of causality between various constructs were constructed as follows:
Endogenous Variable = Endogenous Variable + Exogenous Variable + error
While the measurement model must be determined variables that measure the construct and define a series of
matrices that show the correlation between the hypothesized constructs or variables proposed. The equations
are as shown in Table 3.3. the following :
Structural equation models were proposed:
Brand image β1 = Attractiveness Advertising + error
Corporate Image Advertising Attractiveness = β1 + error
Interests Buy = β1 + β2 image Brand Fascination Corporate Image Advertising + β3 + error
4. Select the matrix and estimation models
In testing the theory, the matrix is the covariance matrix input / variance, because more to meet the
assumptions and methods where the standard error is reported to be showing figures are more accurate than
using a correlation matrix (Hair, Anderson, Tatham and Black, 1995). The computer program is used as a
measurement tool in this estimation are AMOS using maximum likelihood estimation.
5. Assess the model identification.
Estimating model identification can be done with a view:
a. Standard error for one or more coefficients
b. High correlation (≥ 0.9) between the estimated coefficient.
Problems in the estimates in principle is the problem of the inability of the developed model to produce
estimates that are unique.
6. Evaluate the results of Goodness of Fit
Goodness of fit is the degree that indicates whether the true / observed input matrix (covariance or
correlation) in accordance with the estimation model predictions. The size of the goodness of fit is calculated
only for the matrix of total input to make no distinction between endogenous and exogenous constructs or
indicators. A good model is a model that is significantly based on several measures of goodness of fit among
other things:
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a. Likelihood ratio Chi-square statistics

The level of acceptance provision model is a statistical significance test. The level of acceptance of Chi-
square when the value is lower, the smaller the value X2, the better the model and will produce a significance
level of ≥ 0:05 where it indicates no significant difference between the covariance matrix of data and
covariance matrix estimated (Hair, Anderson, Tatham and Black, 1995).
b. Goodness of Fit Index (GFI)
Level acceptance threshold accuracy of the model is not made, the high value indicates the accuracy of the
model. Value range between 0 to 1, the acceptance level ≥ 0.9 GFI.
c. Adjusted Goodness of Fit Index (AGFI)
Acceptance rate recommended is when AGFI has a value of ≥ 0.9.
d. Root Mean Square Error Approximation (RMSEA)
The level of acceptance of the accuracy of the model, the average difference per degree of freedom which is
expected to occur in the population. ≤ 0:08 RMSEA value is an index of inadmissibility models.
e. Root Mean Square Residual (RMSR)
The level of acceptance of the accuracy of the model, which is set at the input matrix (covariance /
correlation) with the acceptance level is set by the analyzer.
f. The Minimum Sample Disscrepancy Function (CMIN / DF)
CMIN / DF can be said also is a Chi-square statistics were divided by degree of freedom so-called X2
relative. X2 relative value of less than 2.0 or less than 3.0 is indicative of the reception of the model with the
data (Arbuckle, 1997).
g. Tucker Lewis Index (TLI)
Is an alternative to incremental fit index which compares a model that is tested against a baseline model
(Baumgartner and Homburg, 1996 in Augusty, 2000). Values are recommended as a reference for the
adoption of a model is TLI ≥ 0.95 (Hair et. Al. 1998) and the value is closer to one indicates a very good fit
(Arbuckle, 1997).
h. The Comparative Fit Index (CFI)
CFI is approaching one indicates a high degree of fit, the recommended value is CFI ≥ 0.95.
Thus the indexes that are used to test the feasibility of a model in this study are:
X2 Chi-Square kecil
Significaned Probability ≥ 0.05
RMSEA ≥ 0.08
GFI ≥ 0.90
AGFI ≥ 0.90
CMN/DF ≥ 2.00
TLI ≥ 0.95
CFI ≥ 0.95
7. Interpretation and Modification Model

The latest step taken is to interpret a model by modifying several types of models are not memenihu
requirements. Once the model is estimated, residual be small or close to zero and the frequency distribution
of the residual covariance must be symmetric (Tabachink and Fidell, 1997).
Good models have standardized residual variance is small, the rate of 2:58 is the limit value is allowed, which
is interpreted as statistically significant at the 5% level and showed a substantial prediction error for a pair of
indicators.
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4. RESULTS
4.2. Descriptive Data

Descriptive data illustrate some of the conditions summarized research objects obtained from the collection
and responses to questionnaires by respondents.
All respondents residing in the city of Semarang, while the number of respondents for each type of work is as
much as 20 people. As for the sex of most respondents were female as many as 57 people or 57%.
The education level of the most respondents was graduated from college as many as 58 people or 58%, while
the lowest were completed primary school as much as 9 people or 9%.
Data deskripitif of respondents' answers on the questionnaires based on the respondents to the variable brand
image (X1, X2, X3), fascinating Advertising (X4, X5, X6, X7), Corporate image (X8, X9, X10), Purchase
Intention (X11, X12, X14), Number of respondents as many as 100 pieces of data. Furthermore, statistical
data descriptive overview of the results of the respondents' answers can be seen in the Table below.
N Minimum Max imum Mean Std. Deviation

X1 100 5 10 7,81 1,24
X2 100 4 10 7,51 1,34
X3 100 4 10 7,57 1,44
X4 100 5 10 7,62 1,35
X5 100 5 10 8,01 1,39
X6 100 4 10 7,92 1,49
X7 100 4 10 7,57 1,49
X8 100 4 10 7,45 1,49
X9 100 5 10 7,74 1,57
X10 100 4 10 7,27 1,47
X11 100 5 10 7,70 1,34
X12 100 4 10 7,79 1,54
X13 100 5 10 7,79 1,34
X14 100 4 10 7,66 1,37
V alid N (lis tw ise) 100
Based on the table above can be explained to what extent the respondent's perception of the variables
proposed. The maximum value of all the indicators show the number 10. The average value represents the
average of respondents to the indicator in question. Of respondents said to be less good if the average is in the
range 1.0 to 3.9, good enough if it is in the range of 4.0 to 7.0, while the well if it is in the range of 7.1 to
10.0.
From the above table also show that the average value for the variable Brand (X1 = 7.81; X2 = 7.51; X3 =
7.57) so that all the indicators of the variables that brand image brand reputation, knowledge about the quality
and impression of the brand names show a good perception of the respondents. Fascination variable rent has
an average value for the indicator X4 = 7.62; X5 = 8.01; X6 and X7 = 7.92 = 7.57, this also indicates that
respondents have a good perception of the indicators interesting, varied, informative and fun.
Indicators for Corporate Image variable has an average value = 7.45 X8, X9 and X10 = 7.74 = 7.27 so the
indicator for this variable is the company's reputation, knowledge-sales service and knowledge of corporate
social responsibility is also to get a good perception of respondents.
Indicator variable interest Buy has an average value X11 = 7.70; X12 = 7.79; X13 and X14 = 7.79 = 7.66 and
this indicates that the respondents give a good perception of the indicators of the desire to buy, the purchase
plan, the frequency of searching for information and interest in buying.
From all indicators that amounted to 14, shows that X5 is varied to have an average value of 8.01 and a high
of getting a high perception of respondents thus it is true that respondents perceive that the ad Sanyo quite
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varied. While the X10 ie knowledge of corporate social activities perceptions that terkcil is 7.27, although it
can be quite good, but it does show that the respondents are not so aware of the activities of social
enterprises.
Step 1: Development of Model Based on the Theory

The research model is based on a literature review that was developed in this study has been described in
Chapter II. The overall research model consisting of 14 indicators to examine the causality between the
variables tested. Variable buying interest that is affected by three variables either directly or indirectly that
the brand image, variable advertising appeal, and the company's image.
Step 2: Creating Flow Diagram (Path Diagram)
Once the model is developed a theory based on the first step, the next step is to develop a flow chart as has
been described in Chapter III. The flowchart was created based on the research model in Chapter II.
Step 3: Convert Flowchart into Equation
The model that has been expressed in the flow diagram, then expressed into structural equation as described
in Chapter III.
Step 4: Select Input Matrices and Estimation Techniques
The estimation technique used is the maximum likelihood estimation method is carried out gradually the
estimation of measurement models by using confirmatory factor analysis and structural equation model,
which is intended to look at the suitability of the model and causality built.
4.3.4.1. Confirmatory Factor Analysis Construct Exogenous
Confirmatory factor analysis phase aims to test the exogenous construct unidimensionalitas of dimensions
forming respective latent variables. Latent variables or konstuk eskogen consists of 13 unobserved variable
with 10 observed variable as a constituent. It can be seen the correlation between variables and variables
brand image advertising appeal is at 0.62, the correlation between the variables appeal of advertising and
corporate image variable is 0.74, the correlation between the variables of brand image and corporate image
variable is 0.46. Ferdinand (2002, P.50) states that the emergence of a very high correlation between the
estimated coefficient (eg, greater than 0.9) indicate a problem identification. Thus concluded that there is no
problem of identification in this model.
Criteria Cut of Value Result Evaluation

Chi-Square Small; 2 with 45,837 Good
df : 32 = 46,194
Probability > 0,05 0,054 Good
GFI > 0,90 0,918 Good
AGFI > 0,90 0,859 Marginal
TLI > 0,95 0.953 Good
CFI > 0,95 0,967 Good
CMIN/DF < 2,00 1,432 Good
RMSEA < 0,08 0,066 Good
There are two basic tests in the confirmatory factor analysis to construct a model of exogenous ie suitability
test and the test of significance weighting factor (Ferdinand, 2002, p. 166-169).
1. Test suitability model (goodness of fit test).

Exogenous construct has met the criteria of goodness of fit. A probability value indicates a value above the
threshold of significance that is equal to 0.054 or above 0.05. This means that the null hypothesis that there is
no difference between the sample covariance matrix with a population estimated covariance matrix is
acceptable. Indices suitability of other models such as GFI (.918), AGFI (0.859), TLI (.953), CFI (0.967),
CMIN / DF (1.432), and RMSEA (0.066) confirmed that enough to have gotten a hypothesis
unidimensionalitas that both the variables can reflect the latent variables are analyzed.
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2. Test of significance weighting factors.

Tests of significance weighting factors observed in two stages: to observe the lambda value and the weighting
factor.
a. Lambda value or Factor Loading
Lambda value is required to be reached ≥ 0.40. When the lambda value lower than 0.4 is deemed an indicator
that is not the same dimensions with other indicators to describe a latent variable. It can be seen from Figure
4.1 lambda value for the three indicators that describe the brand image variables (X1 = 0.71; X2 = 0.73; X3 =
0.80) it can be concluded that these three indicators are jointly presenting unidimensionalitas for latent
variables brand image.
While the value of lambda for the four indicators that describe the variable advertising appeal (X4 = 0.74; X5
= 0.79; X6 = 0.76; X7 = 0.77) it can be concluded that all four of these indicators together serving
unidimensionalitas appeal to latent variables ads.
Lambda value for the three indicators that describe the company's image variable (X8 = 0.76; X9 = 0.76; X10
= 0.75) it can be concluded that these three indicators are jointly presenting unidimensionalitas for latent
variables corporate image.
b. Thickness factor (Regression Weight)
How strong indicators that form the latent variables can be analyzed using Critical Ratio (CR). CR value is
synonymous with the t-test in the regression analysis.
Each indicator forming latent variables showed CR values above 1.96 with P less than 0.05. From these
results, it can be said that the indicators forming latent variable it constitutes a significant indicator of the
latent factors are formed. Thus, exogenous constructs used in this study may be accepted.
Confirmatory Factor Analysis of Endogenous Kontsruk
Confirmatory factor analysis aims to examine the endogenous constructs unidimensionalitas indicators
forming latent variables (constructs) endogenous. Variables latent or endogenous konstuk consists of 13
unobserved variable with 10 observed variable as a constituent. The test results can be seen the correlation
between brand image with the image of the company is 0.45, the correlation between the image of the brand
with the buying interest is equal to 0.80, the correlation between the image of the company by buying interest
is equal to 0.73. This indicates that the variable constructs that exist have a causal relationship which will be
further examined in this study.
There are two basic tests that will be carried out in the confirmatory factor analysis to construct endogenous.
Both the basic test is a model fit tests and tests of significance weighting factor (Ferdinand, 2002, p. 166-
169).
1. Test suitability model (goodness of fit test).
Endogenous construct has met the criteria of goodness of fit. A probability value indicates a value above the
threshold of significance that is equal to 0.637 or above 0.05. This means that the null hypothesis that there is
no difference between the sample covariance matrix with a population estimated covariance matrix is
acceptable. Indices suitability of other models such as GFI (.946), AGFI (0.907), TLI (0.1010), CFI (0.997),
CMIN / DF (1.099), and RMSEA (0.030) provide sufficient confirmation to be acceptance of the hypothesis
unidimensionalitas that these two variables can reflect the latent variables are analyzed.
2. Test of significance weighting factors.
a. Lambda value or Factor Loading
Lambda value is required to be reached ≥ 0.40. When the lambda value lower than 0.4 is deemed an indicator
that is not the same dimensions with other indicators to describe a latent variable. It can be seen from Figure
4.2 lambda value for the four indicators that describe the variable buying interest (X11 = 0.81; X12 = 0.75;
X13 = 0.76; X14 = 0.83) it can be concluded that all four of these indicators collectively each presenting
unidimensionalitas for latent variables buying interest.
b. Thickness factor (Regression Weight)
How strong indicators that form the latent variables can be analyzed using Critical Ratio (CR). CR value is
synonymous with the t-test in the regression analysis.
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Each indicator forming latent variables showed results that meet the criteria of value CR above 1.96 with P
less than 0.05 and the value of lambda or a loading factor greater than 0.4. From these results, it can be said
that the indicators forming latent variable it constitutes a significant indicator of the latent factors are formed.
Thus, exogenous constructs used in this study may be accepted.
4.3.4.3. Analysis of Structural Equation Model

Subsequent analysis after confirmatory analysis is the analysis of Structural Equation Model (SEM) in Full
Model. The results of data processing for SEM analysis shown below
Regression Weights Results for Structural Equation Model
Regression Weights
Estimate Std. Est S.E. C.R. P
Brand Image <-- Fascinating Advertisement 0.481 0.619 0.102 4.713 0.000
Corporate Image <-- Fascinating Advertisement 0.707 0.740 0.126 5.623 0.000
Purchase Intention <-- Brand Image 0.518 0.433 0.132 3.910 0.000
Purchase Intention <-- Corporate Image 0.243 0.251 0.121 2.018 0.044
Purchase Intention <-- Fascinating Advertisement 0.372 0.400 0.136 2.738 0.006
x7 <-- Fascinating Advertisement 1.000 0.767
x6 <-- Fascinating Advertisement 1.005 0.773 0.130 7.747 0.000
x1 <-- Brand Image 1.000 0.715
x2 <-- Brand Image 1.085 0.718 0.173 6.270 0.000
x3 <-- Brand Image 1.293 0.800 0.191 6.782 0.000
x10 <-- Corporate Image 1.000 0.744
x9 <-- Corporate Image 1.099 0.763 0.161 6.846 0.000
x8 <-- Corporate Image 1.026 0.755 0.151 6.782 0.000
x11 <-- Purchase Intention 1.000 0.795
x12 <-- Purchase Intention 1.106 0.763 0.135 8.196 0.000
Just as in the confirmatory factor analysis, structural equation model testing is also performed with two kinds
of testing, ie test the suitability of the model as well as the significance test of causality by testing regression
coefficient (Ferdinand, 2002, p. 170-172).
a. Model suitability test (goodness of fit test)
The indices fitness model used is the same as it did in confirmatory factor analysis. SEM model testing is
intended to look kesuaian models. The suitability of proposed hypothesis is as follows.
H0: There is no difference between the sample covariance matrix and covariance matrix estimated
population.
Ha: There is a difference between the sample covariance matrix and covariance matrix estimated population.
The results of data processing such as in Figure 4.3 and Table 4.9 shows the level of significance to test the
hypothesis of a difference (chi-square) was 73.883 with probability equal to 0.416. This indicates that the null
hypothesis that "there is no difference between the sample covariance matrix and covariance matrix estimated
population" can not be denied. Therefore, the null hypothesis is accepted.
Test the hypothesis models suggest that this model correspond (fit) with the available data as seen from a
significance level of 0.416. Other indices such as, TLI (.997), CFI (0.997), CMIN / DF (1.026), GFI (.908)
and RMSEA (0.016) are within the range of expected values and hence this model is acceptable, although
AGFI (0.867) , marginal (Ferdinand, 2002, p. 78).
b. Causality Test (Regression Weight)
Meanwhile, to test hypotheses about causality developed in this model, to be tested the null hypothesis (H0)
which states that the relationship between the regression coefficient is equal to zero. Test is used to see the
value CR which is identical with the regression t test.
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From Table 4.10 above, note that all values are above CR value of 1.96. Therefore, the null hypothesis that
the regression coefficient between the relationship is equal to zero can be rejected.
4.3.5. Step 5: Assessing Problem Identification
Tests on the model studies conducted showed no symptoms of problem identification as noted in Chapter III
of the possible problems of identification.
4.3.6. Step 6: Evaluation Criteria Goodness of Fit
At this stage the suitability of the model study evaluated levels of goodness of fit, but that needs to be done
before was to evaluate the data used in order to meet the criteria required by SEM.
4.3.6.1. Univariate evaluation Outliers
Tests on univariate outlier is done by analyzing the value Zscore whether there is a value greater than ± 3.0.
The test results as in Table 4.11 below show no outliers
4.3.6.2. Evaluation of Multivariate Outliers
Mahalanobis distance based on the chi-square on the DF by 14 (the number of independent variables) with p
results of SEM showed the largest
mahalonobis distance is 33.755 mahalanobis distance results showed values above 23,680. This means there
multivariate outlier in this study. However, in this analysis outliers were found not to be omitted from the
analysis because the data reflect the real condition and there is no particular reason from the profile of
respondents who lead must be removed from the analysis (Ferdinand, 2002, p.108).
Normality Test Data

The distribution of the data to be analyzed to see if the assumption of normality is filled so that the data can
be further processed for SEM modeling. Testing normality is done by observing the skewness of the data
used if there is a value that exceeds the CR + 1.96 at the 0.05 level.
From Table 4.12 it appears that there are values that are outside the CR +1.96 so it can be concluded that
there is no evidence that the data used has a distribution that is not normal.
4.3.6.4. Evaluation of Multicollinearity and Singularity
Indications multikolinearitas and singularity characterized by the value of the determinant of the covariance
matrix samples were really small or close to zero. The results of analysis of covariance matrix determinant of
the sample in this study is 4.9606. The results showed that the value of the determinant of the sample
covariance matrix is far from zero. Thus it can be said that there is no multicollinearity and singularity.
4.3.6.5. Conformance Test and Test Statistics
Conformance testing research models used to test how well the degree of goodness of fit of the research
model. Based on test results that have been presented in Table 4.9 above, it can be seen that the eight criteria
required, there are six of which are in good condition and one (AGFI) is still in poor condition. With this
result the whole it can be said that the model study had the goodness of fit is good (Ferdinand, 2002, p. 78).
4.3.7. Step 7: Interpretation and Modification Model
After estimating the model, researchers can still make modifications to the model, if it turns out these
estimates have predicted level is not as expected, namely when there is a large residual.
To give interpretation whether the models tested are acceptable or need further development, researchers
must set his sights on the predictive power of the model, namely the amount of residual mengemati
generated. For the standardized residual matrix will be observed to examine whether there is residual value
greater than 2.58. Standardized residual covariance matrix generated by the data presented in Table 4.13.
The interpretation of the residuals generated models is done by observing the indicators that have a standard
residual values greater than 2.58 (Ferdinand, 2002, p. 182). From Table 4.13 it is known that there are no
indicators that have a residual value greater than 2.58. Therefore this model can be accepted and no need for
modifications to the model tested.
Test Reliability and Variance Extract
439
Test Reliability
Reliability tests conducted indicate the extent to which a measuring tool that can deliver results relatively
equally, if done the re-measurement on the same object. Where a measuring instrument is used repeatedly
and the measurement results obtained are relatively consistent gauge is considered to be reliable (reliably).
The minimum reliability value of dimensional forming latent variable that was acceptable was ≥ 0.70. The
formula is used:
(∑ Standard Loading) 2
Construct Reliability = _______________________
(∑Standard Loading) 2 + ∑Ej
Information :
- Standard loading obtained from standardized loading each indicator separately obtained from the
calculation AMOS
- ∑Ej is the measurement error of each indicator. Measurement error can be obtained from 1 - standard
loading
The results of the data loading standards:
Brand = 0.72 + 0.72 + 0.80 = 2.24
Fascination Ads = 0.72 + 0.79 + 0.77 + 0.77 = 3.05
Company Image = 0.76 + 0.76 +0.74 = 2.26
Purchase Intention = 0.80 + 0.76 + 0.76 + 0.83 = 3.15
The results of error measurement of data:
Brand image = (0.49) + (0.48) + (0.36) = 1.34
Fascinating Ads = (0.48) + (0.37) + (0.40) + (0.41) = 1.66
Corporate image = (0.43) + (0.42) + (0.45) = 1.30
Purchase Intention = (0.37) + (0.42) + (0.42) + (0.31) = 1.52
Calculation of reliability of data:

(2.24) 2
Brand = ------------------ = 0.78
(2.24) 2 + 1.34
(3.06) 2
The appeal of Ad = ------------------- = 0.84
(3.06) 2 + 1.66
(2.26) 2
Company Image = -------------------- = 0.79
(2.26) 2 + 1.30
(3.15) 2
Purchase Intention = ---------------------- = 0.86
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(3.15) 2 + 1.52
This study therefore acceptable.

Variance Extract
The next test is the test of variance extract. Testing variance variance extract showed the number of indicators
are extracted by kosntruk / latent variables are developed. Value extrat acceptable variance is the minimum of
0.50.
The results of the data loading standards:
Brand = 0.722 + 0.722 + 0.802 = 1.68
Fascination Ad = 0.722 + 0.792 + 0.772 + 0.772 = 2.31
Company Image = 0.742 + 0.762 + 0.762 = 1.71
Purchase Intention = 0.802 + 0.762 + 0.762 + 0.832 = 2.48
Variance calculation Extract:

1.68
Brand = --------------- = 0.55
1,68+ 1.34
2,31
Fascination Ad = ----------------- = 0.58
2,31+ 1.66
1.71
Company Image = ---------------- = 0.56
1.71 + 1.30
2,48
Purchase Intention = ----------------- = 0,62
2.48 + 1.51
Based on the results of measurement variance extract the data obtained value> 0.5. This study therefore
acceptable.
From the above observations it appears that there are no reliability values smaller than 0.7. Similarly the
variance test extract was not found that the value is below 0.5. Thus it can be said that the data used in this
study have had this level of consistency (reliability) good (Ferdinand, 2002, p. 61-64).
Hypothesis testing
Hypothesis testing is intended to test the hypotheses proposed in Chapter II. Hypothesis testing is done by
analyzing the value of CR and a P value of the data processing as in Table 4.10, and compared to the
statistical limitations are required, namely above 1.96 to below 0.05 and the CR value for P. If the value of
the results if the data shows the value who qualify, the research hypothesis proposed is acceptable. Further
discussion of the hypothesis testing will be done in stages in accordance with the sequence of hypotheses
have been proposed.
441
Hypothesis 1
Hypothesis 1 is "increasingly attractive advertising the better the image of the brand". From the data
processing is well known that the relationship between the variables CR fascination with variable advertising
brand imageamounted to 4.713 P value of 0.000. Both of these values showed a qualified, that is above 1.96
and below 0.05 for CR to P. Thus we can say that the first hypothesis in this study may be accepted.
Hypothesis 2
Hypothesis 2 is "The better the image of the brand, the higher the interest to buy". From the data processing
is known that the relationship between the variables CR brand image with mint variable is CR amounted to
3.910 with a P value of 0.000. Both of these values shows the results qualified, that is above 1.96 and below
0.05 for CR to P. Thus we can say that the second hypothesis in this study can be accepted
Hypothesis 3
Hypothesis 3 is "increasingly attractive advertising the higher interest in buying". From the data processing is
known that the value of the variable CR relationship with the advertising appeal of buying interest is equal to
2.738 with a P value of 0.006. Both of these values shows the results qualified, that is above 1.96 and below
0.05 for CR to P. Thus we can say that the third hypothesis in this study can be accepted
Hypothesis 4
Hypothesis 4 is "increasingly attractive advertising the company's image, the better". From the data
processing is known that the value of the variable relationship CR fascination with variable advertising
company image is equal to 5.623 with a P value of 0.000. Both of these values shows the results qualified,
that is above 1.96 and below 0.05 for CR to P. Thus we can say that the hypothesis 4 in this study can be
accepted
Hypothesis 5
Hypothesis 5 in this study is "The better the image of the company, the higher the interest to buy". From the
data processing is known that the value of the variable relationship CR corporate image with variable buying
interest as indicated by Table 4.10 is equal to 2.018 with a P value of 0.044. Both of these values shows the
results qualified, that is above 1.96 and below 0.05 for CR to P. Thus we can say that the hypothesis 5 in this
study can be accepted.
The brand Sanyo replaced with a brand Aqua conducted globally by the parent company in Japan, but in fact
the turn of this brand in Indonesia has not been fully accepted by customers loyal brand Sanyo, so that the
problem that arises is consumers are still hesitant make the brand Aqua as a substitute for the brand Sanyo
brand.
Sanyo brand already has a loyal customer, so when the brand Sanyo gone and replaced with another brand,
the interest of consumers to buy the product that has changed the brand becomes very important. For these
reasons, this study focused on analyzing the factors that can affect a person's interest in buying the brand
replacement, in this case is Aqua. The image of the brand, the fascinating of advertising and corporate image
could be expected to affect the purchase intention.
The hypothesis of the study hypothesis that there are five:
H1: The more interesting ads the better the image of the brand
H2: The better the image of the brand, the higher the purchase intention.
H3: The more fascinating the advertising the higher the purchase intention.
H4: The more fascinating the advertising then the better the company's image.
H5: The better the image of the company, the higher purchase intention.
The results of the analysis carried out in this study showed a significant relationship between the image of the
brand, the fascinating of advertising and corporate image to the purchase intention, as it also shows that there
is influence between the fascinating of advertising on brand image and corporate image. Thus the fifth
hypothesis can be accepted.
442
Conclusion Hypothesis 1
The fascinating of advertising has an effect on the image of the brand, thus the first hypothesis in this study is
more interesting ad the better the image of the brand can be accepted. When associated with indicators of
each variable so if more interesting, varied, informative and fun an ad the better the brand reputation,
knowledge about the quality and image of the brand name. It reinforces the Steenkamp and Dekimpe (1997)
which says that advertising can be used to establish an association for the brand and bring the message of
quality improvement, also the opinion Kalra and Goodstein (1998) that it is also necessary to position
advertising aimed at creation of the image of the product is reflected in the brand in the minds of consumers.
The image of the brand has a significant influence on the buying interest, so the hypothesis 2 in this study
proved to be true. In connection with the indicators, the better the reputation of the brand, knowledge about
the quality and image of the brand name, the greater the desire to buy, the purchase plan, the frequency of
searching for information and interest in buying. This study supports the idea Anggarini (2001) which states
that once consumers know a brand and feel confident / confidence in the brand based on the acquired
information will encourage consumers have the intention to buy.
The appeal of advertising influence on consumer buying interest and thus a third hypothesis was proven
correct and more interesting, more varied, more informative and more fun an ad, the greater the desire to buy,
the purchase plan, the frequency of searching for information and interest in buying. So in accordance with
the opinion of Rossiter and Percy (1987) which says advertising is a process of persuasion indirectly based on
the information on the advantages of a product that is structured such that cause a sense of fun / interest that
will change people's minds for action / purchase, also in accordance with the opinion of Indriyanti and
Ihalauw, (2002) that advertising can lead to target consumers' desire for products that are advertised.
Variable advertising appeal it also affect the company's image, which is an increasingly attractive advertising
then the better the company's image is proven. The more interesting, varied, informative and fun an
advertising the better the company's reputation, knowledge-sales service and knowledge of corporate social
responsibility. Biehal and Sheinin (1998), expression matching that ads using beliefs, feelings and attitudes is
the basis of the company's advertising disclosure and instill an understanding in the minds of consumers who
are knowledgeable about the company.
From the analysis, corporate image influence the buying interest, so the better the image of the company, the
higher buying interest can be proved. The better a company's reputation, knowledge-sales service and
knowledge of the social activities of the company, the greater will be the desire to buy, the purchase plan, the
frequency of searching for information and purchase intention. A similar opinion was expressed by Storey
and Wood (1998) revealed that one of the factors that influence consumers to buy a product is the company's
reputation.
Conclusion On Research Problems
Based on the background research and the formulation of the problem is consumers are still hesitant to make
the brand Aqua as a replacement for the position of the brand Sanyo in the minds of consumers who are loyal
and research problems are factors that influence consumer buying interest, it can be concluded that it is true
that the variables the image of the brand, the appeal of advertising and corporate image has a significant
influence on the variable buying interest.
Theoretical Implications
Based on the analysis performed using SEM as well as the theoretical model developed in this study indicate
that factors suspected to affect the buying interest that is the image of the brand, the appeal of advertising and
corporate image was indeed influential. Besides, variable advertising appeal also affect the brand image
variables and variable image of the company.
Opinions Steenkamp and Dekimpe (1997) which says that advertising can be used to establish an association
for the brand and bring the message of quality improvement, then the opinion Eddell and Burke in Derbaix
(1995) that the advertisements also can contribute real influence on the feeling and confidence of consumers
to the attributes and brand image, as well as the need to reposition the advertising aimed at the creation of a
443
product image that is reflected in the brand in the minds of consumers (Kalra and Goodstein, 1998) can be
supported by the results of this study that the more attractive the ad the better the image of the brand. With a
weight of regression of 0.62 means that the appeal of the ad affect brand image by 62% while the remaining
38% are influenced by other factors.
This research is in line with the opinion of Anggarini (2001) which says that once consumers know a brand
and feel confident / confidence in the brand based on the acquired information will encourage consumers
have the intention to buy. Similarly expressed by Dodds, Monroe and Grewal (1991) found a significant
relationship between the brand with the desire to buy. It can be concluded also that the better the image of the
brand, the higher the buying interest. However, this effect is only 43%, while 57% are influenced by other
factors, so the effect is not too dominant.
Advertising support their purchase intention (purchase intent) (Golden, 1979). Opinion was also in line with
the results of the analysis in this research that the more attractive the higher the ad buying interest. The
influence is only 40% while the rest influenced by another factor of 60%, it also shows the effect is not too
dominant.
Biehal and Sheinin (1998), suggests that ads using beliefs, feelings and attitudes is the basis of the disclosure
of advertising companies and instill an understanding in the minds of consumers who are knowledgeable
about the company, which if consumers catch things positive from an interesting ad, the image of the
company concerned will also be good. Big impact was 74%, and other factors influence by 26%.
With a good brand image, the company will be able to put themselves in the "heart" of the customers which
in turn will encourage customers to buy the products offered (Sunaryo, 2002). Opinions Storey and Wood
(1998) revealed that one of the factors that influence consumers to buy a product is the company's reputation.
Those opinions in accordance with the analysis results of this analysis, the better the image of the company,
the higher buying interest. However great influence only by 25% so it is not dominant because of other
factors that influence by 75%.
Managerial Implications
Of the existing problems that consumers are still hesitant to make Aqua as a brand replacements for the brand
Sanyo, the company needs to make some adjustment measures, and on the results of the analysis of the
variables studied can be delivered a few things to be considered by the parties company.
No indicator variable for the brand image of the three with the largest loading factor is x3 is the impression of
the brand, so companies need to create a positive impression of consumers towards the brand Aqua. This can
be done by creating ads that can be memorable in the hearts of viewers, for example, with touches of
humanity. The reputation of the brand (x1) still be maintained, and knowledge about the quality (x2) also
need to be kept informed through advertising on Aqua nice quality.
In the appeal of variable ads, ads that vary indicator (x5) should be a concern because it has the highest
loading factor. Companies should create ads on television with a variation in an amount sufficient, diverse
themes and also varies through time. X6 indicator is informative also need to be considered with more to give
information as possible on each ad impression Aqua.
Indicators on the company's image relative variables have loading factor that is not too much different, so all
three need attention. The company's reputation is maintained by eliminating things that may disappoint
consumers eg to product quality is maintained, consumer knowledge about the after-sales service needs to be
improved by informing program after sales service and the official warranty from the company.
X14 indicator of consumer buying interest on the variable product with the brand Aqua has the highest
loading factor (0.83), namely buying interest for consumers against products Aqua.
Limitations of Research
In this research, there are some limitations and weaknesses include:
1. Region of residence of respondents only in the city of Semarang alone, whereas other regions that have
different characteristics, such as small urban areas or metropolitan city, has not been studied.
2. Brand studied only the Sanyo brand, the product category is limited, so for the other categories these
results can not necessarily be used.
444
By looking at some of the limitations and shortcomings, the agenda for future studies need to develop the
research object is not limited to one city and region has different characteristics eg urban and rural areas.
There should also be examined with a different product category by product category for the brand Sanyo
more familiar with household products. Besides, the brand Aqua as a replacement for Sanyo brand was
already well known by consumers, although with different product category, so it is necessary to study the
replacement brand with a completely new brand.
Based on the analysis performed, it turns out weight the regression variables that influence the buying interest
is not too dominant if it is associated with the change of the brand, so it needs to be further investigated other
factors that may also affect buying interest.
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FACTORS AFFECTING THE POSSIBILITY OF FRAUDULENCE IN

FINANCIAL STATEMENT:
EMPIRICAL STUDY ON NON- FINANCIAL COMPANIES
LISTED ON THE STOCK EXCHANGE YEAR 2010-2013
Nirsetyo Wahdi, Yulianti2, Windah Prawitasari

Semarang University
2
(Corresponding email: feusm.yulianti@gmail.com )
ABSTRACT
This research aim to examine and analyze the factors that influence the possibilty of fraudulence financial
reporting. Variables that used in this research are auditor switching, CPA firm size, bankruptcy prediction,
instability of profitability, external pressure, and financal targets. This research was done because some
previous studies showed the different results.
This research uses financial statements data of non-financial company listed in Bursa Efek Indonesia (BEI)
from year 2010-2013. Based on method purposive sampling, research sample total 60 companies. Hypothesis
in this research are tested by logistics regression. The independent variable in this research are auditor
switching, CPA Firm Size, bankruptcy prediction, instability of profitability, external pressures, financial
targets. The dependent variable is the possibility of fraudulence and company‘s growth, company‘s age,
company‘s size as a control variable.
Result of this research indicates that variables having which effect the possibility of fraudulence are CPA
Firm Size, bankruptcy prediction,instability of profitability, external pressure, and financial targets. On the
other hand, auditor switching do not have affect to the possibility of fraudulence. Variable company‘s
growth, company‘s age, company‘s size can not be used as controls to detecting the possibility of fraudulent
financial statement.
Keywords: Fraudulence, auditor swithing, CPA Firm Size, Bankruptcy Prediction, instability of Profitability,
External Pressure, Financial Target
PRELIMINARIES
A financial report is the end result of an accounting process. Financial report will lose it‘s reliability if it
contains errors in material presentation. This is caused by significant differences between the condition of the
company that is represented in the report and the real world condition. According to PSA no. 70, these
misrepresentation might happen because of an accidental mistake of the presenter (error) or because of on
purpose manipulation (fraud). Some characteristics of the company and the characterisics of the external
auditor are viewed as the factors tha might encourage foul play in financial reporting.
Many alleged corruption cases by the goverment, that involved several officers on many central and regional
levels, are examples of fraud that happened on public sector. As examples of fraudulence that is encountered
by BPK in Pemerintah Kota Padang, BPK released Wajar Dengan Pengecualian (WDP) towards Padang City
Goverment Financial Report for the year of 2011, on which several SKPD heads are found to be using Rp
421 million from the state budget for personal interests and 7 SKPD Treasurer giving 186,2 worth of invalid
report. (haluan.com daily).
Throughout 2011, Badan Pengawas Pasar Modal dan Lembaga Keuangan (Bapepam-LK) examined 178
cases of alleged violation in the field of capital market. They also investigated 12 cases of alleged criminal
offense in the field of capital market. Both investigation are initiated according to UU No 8 year 1995 about
Capital Market, especially article 100 and 101. Among the cases that are handled are cases related to issuers
openness and public company, securities trading, and investment management. Cases related to issuers
openness like violation towards terms of transaction that contains conflict of interest, material transaction,
openness of certain shareholders, informations or material facts that has to be announced immidiately
towards public, financial statement presentation, use of funds that came from public offering, and others.
Spathis (2002) in Wilopo (2006) explained that in USA accounting fraud caused massive losses in almost all
industries. Losses from accounting fraud in capital market is manifested in the decrease of management
447
accountability. Pritchard (1999) in Wilopo (2006) made the shareholders increase monitoring costs against
management. Cases of manipulations that has happened made the public and policy makers shine a light on
the accountants. The general public starts questioning why the auditor is involved in those fraud cases. As an
independent third party, an auditor should be responsible to assure the reliability of the audited financial
statement.
Fraud can be triggered by the following factors: incentive/pressure, opportunity, and attitude/rationalization.
These factors are otherwise known as The Fraud Triangle (Elder, et al., 2009 in Aulia and Fitriany, 2013).
The presence of those factors caused all companies, no mater the size, cannot escape from the risk of fraud.
Indepenent auditor has an important role in evaluating the compatibility between the financial statement
presented by the company management and the applicable regulation. To do that, they must have the required
competence and stay independent from the audited company (Elderet et al, 2009 in Aulia and Fitriany ,
2013). This ompetence and independence is related with the audit quality that is a combined probability
between the ability of an auditor to find a violation in the client‘s accounting system and the ability to report
that violation (DeAngelo, 1931 in Aulia and Fitriany, 2013). Previous researches shows that an audit with
better quality can be produced by CPA firm Big 4 auditor (Francis and Yu in Aulia and Fitriany, 2013).
From the research done by Aulia and Fitriani (2013), it can be deduced that the size of CPA firm ,
possibilities of bankruptcy, and instability of profitability contributes to the possibilities of fraud. Martantya
and Daljono (2013) in their research states that financial target that is proxied with ROA influenced the
possibilities of fraud in a financial statement and external pressures proxied by leverage is is not related to the
possibilities of fraud. Rachmawati and Marsono (2014) did the same research and the found that a change in
auditor contributes to the possibilities of fraud. Meanwhile financial targets proxied with ROA and external
pressure proxied with leverage does not contribute to the possibilities of fraud.
The same research was conducted by Sihombing and Rahardjo (2014) and they found that external pressure
proxied with leverage contributes to financial statement fraud. Meanwhile financial targets proxied with ROA
and change in auditor contribute sto financial statement fraud.
LITERATURE REVIEW
Agency Theory
The agency relationship can be defined as a contract in which the principle appoints .an agent to act on their
behalf (Jensen and Meckling, 1976 in Aulia and Fitriany, 2013)/ In the structure of the company, the
management acts as the agent that is appointed by the principal shareholders and given their trust. One of the
duty and authority of the manager is decision making in the things that may influence the condition of the
company. Because of that the manager must hold full responsibility to the shareholders.
The principals wanted high profit from the company so their investments return immidiately. On the other
hand, the agents has their own interests, which is the bonus that they will get. This difference in goals might
cause conflict of interest between these two parties. This conflict of interest might trigger infomation
assymetry between the two parties. The agent as an internal party undoubtedly has more information when
compared to the principals. This is used by the agents to conceal information from the principal. Informations
deemed not important for the principals can be easily conccealed for a certain reason. Aside from it, the high
compensation desired by an agent cause them to do everything to get that compensation. This situation will
cause a manager to commit fraudulence. Therefore, the lack of information obtained by the principal about
the performance of an agent causes instability of information between both of them. This will be the
opportunity by the agents to commit fraudulence.
Attribution Theory
Attribution Theory states that fraudulence in financial statement can happen because of 2 factors which is
internal factors and external factors. In the case of fraudulent financial statement, the internal factors came
from the company itself. Furthermore, the external factors in fraudulent financial reporting cases came from
CPA firm that helps with the auditing of the company‘s financial statement. If a company manipulates a
financial statement, there are two possibilities of action that will be taken by CPA firm : (1) CPA firm will
collaborate with the client to manipulate the financial statement by not revealing the material
misrepresentation or helps the client present the financial statement that contains misrepresentation of
materials. (2) CPA firm will act professionally by keeping independence and objectivity as an auditor.
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Fraudulent financial reporting is a behaviour that is either on purpose or not on purpose, that results in a
biased financial statement. (Effendi, 2006 in Subrotom2012). There are three things that may cause
fraudulent financial reporting (Effendi, 2006, in Subroto, 2012):
1) Manipulation, falsification, and alteration of accounting reports and supporting documents of the
presented financial statement
2) Misrepresentation or a mistake in information that is significant in a financial statement.
3) Misapplication of an accounting principle related to counting, clasiffication, presentation, and
disclosure.
Relations between Auditor Switching and the possibilites of fraud in a financial statement
Company that commited a fraud will change their auditors more frequently. The more frequent a company
changes it‘s auditor, the probability of the company committing a fraud is higher. Khrisnan and Khrisnan
(1997) and Shu (2000) in Rachmawati and Marsono (2014) found the evidence that auditor resignment has a
positive correlation with the possibilities of litigation (quoted by Lou and Wang, 2009 in Rachmawati and
Marsono, 2014). A study done by Stice(1991) and St Pierre and Anderson (1984) in Sihombing and Rahardjo
(2014) shows that a change in auditor might happen because of a legitimate reason, the risk of auditing
failure and the next litigation will be higher than the next years.
A change or replacement of public accounting office by the company can cause the company to suffer a
transition and stress pperiod. A change in public accountant in two years period can be an indication of fraud.
H1: The more frequent company changes its auditors then the easier it is to predict the possibilities of
fraud, the less a company changes its auditors then the harder it is to predict the possibilites of a fraud
occuring.
Relationship between CPA firm size and the possibilities of Fraud in a financial statement.
Auditor from a Big 4 CPA firm has a better auditing quality when compared to a non Big 4 auditor (Francis
and Yu in Aulia and Fitriany, 2013). The possibilities of fraud in a company‘s financial statement are
predicted to be lower if the company uses a Big 4 CPA firm auditor as an independent auditor. Carcello and
Nagy in Aulia & Fitriany (2013) found that the size of CPA firm has a significant negative correlation
towards fraud. This shows that a Big 4 CPA firm auditor can do better auditing, indicated by their ability to
find a misrepresentation in the material, thereby increasing the prevention of fraud.
H2: The more a company uses BIG4 CPA firm , the easier it is to predict the possibilities of fraud.
Meanwhile the less a company uses NON BIG4 CPA firm , the harder it is to predict the possibilities of
fraud.
Relationship between bankruptcy predictions and the possibilities of fraud in a financial statement
Carcello and Nagy in Aulia & Fitriany (2013) predicted a positive correlation between problematic financial
conditions and fraud. Deloitte Forensic Center in Aulia & Fitriany (2013) did a research to reveal the
correlation between bankruptcy and fraud in an American company and found that a bankrupt company has
three times higher tendency to commit a fraud when compared to a non bankrupt company.
The possibilities of fraud in a company‘s financial statement in this research is thought to be higher when the
possibility of the company‘s bankruptcy is higher. This is caused by the higher pressure faced by the
company management to keep company operations going.
H3: The higher the possibility of company bankruptcy then the easier it is to predict the possibilities of fraud
and the lower the prediction of bankruptcy the harder it is to predict the possibilities of fraud.
Relationship between instability of profitability and the possibilities of fraud in a financial statement
Bell and Carcello in Aulia & Fitriany (2013) found that inconsistent or inadequate relative profitabilityis one
of the significant factors for predicting fraud. In other words, the possibilities of a company comitting a fraud
is higher uf the company has an inconsistent or inadequate profitability. This happens because unstable
profitability shows fluctuations that is not preferable by investors, causing higher pressure to the management
to manipulate their financial statements.
H4: The higher the instability of the profitability, the easier it is to predict the possibilites of fraud. The
lower the instability of profitability, the harder it is to predict fraud.
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Relationship between external pressure and the possibilities of fraud in a financial statement
External pressures are measured from the ability of a company to fulfill its obligations (LEV) which is the
ratio between total amount of debt and total amount of assets. It can‘t be denied that the operations of a
company cannot be separated from its debt. Sometimes company management faces pressure from an
external party to fulfill its obligations. Skousen et al, (2009) in Martantya and Daljono (2013) explained that
the manager might feel that the pressure is one of the way to acquire more debt or equity payment, keeping it
competitive. The occurence of debt in a company often makes the management report a high profitability.
Not often the company make a fraudulent financial statement by increasing the profit made by the company.
Another researcher Lou and Wang (2009) in Rachmawati and Marsono (2014) stated that when a company
experiences external pressure, it can be identified that the risk of material misrepresentation from fraudulence
is higher.
H5: The smaller external pressure experienced by the company, the easier it is to predict the possibility
of fraud. The higher external pressure experienced by a company, the harder it is to predict the
possibility of fraud.
Relationship between financial targets and the possibilities of fraud in a financial statement
Every company is charged by the task of keeping good performance so they can gain profit. This is done so
company activities can take place continuously, so they can hopefully reach the intended financial target.
Subroto (2012) explained that the ratio of profitability how much success a company had in gaining
profit.This is based on the thinking that high profitability might trigger the management to express
information to the investors because the management feels that this will assure the investors about the
profitability of the company and attract new investors to their company. This encourage the management to
manipulate the profits of the company so they might look higher that it is, and the financial statement is
presented incorrectly if the real profit turns out to be lower.
H6 The higher the financial target of a company then the easier it is to predict the possibility of fraud.
Meanwhile the smaller the financial target of a company, the harder it is to predict the possibility of
fraud.
Framework of Thinking
Figure 1
RESEARCH METHODS
Variables Used In This Research

The possibilities of fraud
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The dependent variable in this research uses fraud detection model by Beneish (1999) and Beneish, Lee &
Nichols (2013) in Aulia and Fitriany (2013) that consists of ratios in a financial statement, using -1,78 as the
cutoff value. Company with higher value than the cutoff value is predicted to commit fraud and will be given
the value 1 otherwise it will be given the value 0.
M-Score = -4.84 + .920*DSRI + .528*GMI + .404*AQI + .892*SGI + .115*DEPI - .172*SGAI - .327*LEVI
+ 4.679*TATA
Definisi Variabel:
DSRI = Days Sales in Receivables Index
GMI = Gross margin Index
AQI = Asset quality Index
SGI = Sales growth Index
DEPI = Depreciation Index
SGAI = Sales General and Administrative Expenses Index
LEVI = Leverage Index
TATA = Total Accrual to Total Assets
Auditor Switching (X1)
Auditor switching is a change in auditor or CPA firm by the company. In this research if the company did an
auditor turnover it will be given the code number 1, and if it didn‘t it is given the code number 0.
Size of CPA firm (X2)
Measurement of CPA firm size uses a dummy variable where CPA firms affliated with the BIG4 are given
the code 1 and the others are given the code 0.
Bankruptcy Prediction (X3)
Measurement of bankruptcy prediction in this research uses bankruptcy model by Zmijewski (1984) in Aulia
& Fitriany (2013). The higher the resulting score, the higher the bankruptcy prediction.
The model uses this following equation:
ZFC = −4.336 − 4.513(ROA) + 5.679(FINL) + 0.004(LIQ)
ZFC = The final score used as prediction of bakruptcy
ROA = Return on Assets, ratio of net profit to total assets
FINL = Financial Leverage, ratio of total debt to total assets
LIQ = Liquidity, ratio of current assets to current liabilities
Instability of Profitability (X4)
This variable is proxied with the absolute value of the change in ROA. The higher the resulting absolute
value, the more unstable the profitability of the company. To get that value, these following equation are
used:
Un_Profit = |ROAt-ROAt-1|
Where:
ROAt = The ROA value of the current financial statement
ROAt-1 = The ROA value from the previous year‘s financial statement
External Pressures (X5)
External pressures are overwhelming pressures to the management to fulfill requirements and hopes from a
third party. This variable is proxied with leverage ratio (LEV). This ratio is the result of total debt divided
with total assets.
Financial Target (X6)
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Financial target is proxied with ROA, measured by dividing the profit after tax from the previous year (t-1_
with the total assets owned by the company in the previous year (t-1)
Control Variables
Company Growth
The Growth of the company is proxied with growth of total assets.
This growth can be measured using this equation:
GRW = (TAt-TAt-1)/ TAt-1
Where:
TA = Total Assets
Company‘s Age
This variable is measured with ―year‖ as the unit. The equation used to calculate the age of the company
registered in the BEI is:
YLISTED = DLISTED/365
Where:
YLISTED = The number of years the company has been registered in the Indonesian Stock Exchange
DLISTED = The number of days the company has been registered in the Indonesian Stock Exchange
Company Size
Measurement of this variable uses ln value of total assets
Sample and Population
The population in this research is all non financial companies registered in the Indonesian Stock Exchange
between 2010-2013. The method used for sample collecting in this research is purposive sampling using
these following criterias:
1) Non financial companies registered in the Indonesian Stock Exchange between 2010 – 2013
2) Companies that released their financial statements in the last 4 years: 2010, 2011, 2012, 2013.
3) Companies that has complete data in accordance to the variables used in this research.
According to these criterias, 60 companies are selected as sample.
Data Type and Data Collecting Method
This research uses quantitative data in the form of secondary data, and those data belongs to the time series
data category. The secondary data used in this research is taken from yearly financial statements of all non
financial company registered in the Indonesian Stock Exchange between 2010 – 2013. All those data are
collected from Indonesian Capital Market Directory (ICMD), from the site of Indonesian Stock Exchange
www.idx.co.id.
Data collecting uses documentation study as the method, which is a method to acquire data by analyzing
information documented in the form of writing or other forms. And acquired from Indonesia Capital Market
Directory and financial statement data from BEI between 2010 – 2013 in accordance to sample selection
criteria. Documentation method which is ―finding a data about things or variables in the form of notes,
transcript, books, newspaper, magazines, inscription, minutes of meeting, etc‖.
Analysis Method
Descriptive Statistics
Descriptive statistics gives an overall picture or description from the mean, standard deviation, variance,
maximum, minimum, sum, range, curtosis, and skewness of a data (Ghozali, 2012).
Logistic Binary Hypothesis Testing
Analysis tool used in this research is logistic regression. The main reason logistic regression is used
as the main tool is because the dependent variable is dichotomous (where the category 1 is given to
companies that did income smoothing and the category 0 is given to companies that didn‘t do income
452
smoothing). In the logistic regression method normality test and classic assumptions test to the free variable
is no longer needed (Imam Ghozali, 2012)
The following equation describs the logistical regression model used to test the hypothesis of this research:
Y = β1 X1 + β2 X2 + β3 X2+ β4 X4 + β5 X5 + β6 X6 + β7 X7 + β7 X8 + β7 X9 + ε
Keterangan :
Y = Possibility of fraud
ε = Error term
β1 ‐ β7 = Regression Coefficient
X1 = Auditor Turnover
X2 = Size of CPA firm
X3 = Bankruptcy prediction
X4 = Profitability Instability
X5 = External pressures
X6 = Financial target
X7 = Company Growth
X8 = Company Age
X9 = Company Size
1. Hypothesis Testing
1.1 Assessing The Adequacy of The Regression Model
The adequacy of the regression model is assessed using Hosmer and Lemeshow‘s Goodnes of Fit Test.
According to Ghozali (2012) Hosemer and Lemeshow‘s Goodnes of Fit Test tests zero hypothesis that
empirical data matches the model (no difference is found between the model and data therefore the
model is said to be fit)
Meanwhile if the value of Hosmer and Lemeshow Goodnes of Fit Test is equal or less than 0,04 then
zero hypothesis is rejected. If the statistical value of Hosmer and Lemeshow‘s Goodness of Fit is larger
than 0,05 then zer hypothesis is accepted.
1.2 Assessing Goodness of Fit
The data of this hypothesis, H0 must be accepted so that the model fits the data. Statistics used
according to likelihood function. Likelihood L from model is the probability that the model
hypothesized to describe the input data. To test the zero hypothesis and the alternative, L is transformed
into -2 logL. Output of SPSS gives two values -2logL, one for models that only uses coonstants and one
for models with constants and independent additions (Imam Ghozali, 2012)
1.3 Parameter Estimation
Parameter estimation is viewed from the regression coefficient. Regression coefficient of each
tested variables shows the relationship between variables. Hypothesis testing is done by comparing
probability value (sig) with significant level (α).
Results and Study
1. Descriptive Statistics
Tabel 1
N Minimum Maximum Mean Std. Deviation
P_Fraud 240 .00 1.00 .2500 .43392
CPA 240 .00 1.00 .2292 .42118
BIG4 240 .00 1.00 .4792 .50061
ZFC 240 -5.49 1.21 -2.3376 1.24141
UN_Profit 240 .00 .79 .0375 .07624
LEV 240 .00 .93 .4444 .18738
ROA 240 .00 .85 .1131 .10804
453
GRW 240 -.34 426.58 1.9768 27.52322

YLISTED 240 2.57 64.04 16.1826 8.81529
SIZE 240 23.54 33.00 28.5951 1.83311
Source: Secondary data treated with SPSS, 2015
According to the descriptive statistics table above, it can be seen that:
1. According to the descriptive calculations above, it can be seen that 240 data of fraud possibilities during
the period of observation has an average of 0,2500 with the standard deviation of 0,43392. The minimum
value is 0 and the maximum value is 1
2. According to that descriptive calculation, 240 data of auditor switching during the period of observation
has an average of 0,2292 with the standard deviation of 0,42118. The minimum value is 0 and the
maximum vlaue is 1
3. According to that descriptive calculation, it can be seen that 240 data of the CPA firm size during the
observation period has an average of 0,4792 with the standard deviation of 0,50061. The minimum value
is 0 and the maximum value is 1.
4. According to that descriptive calculation, it can be seen that 240 data of the bankruptcy prediction during
the observation period has an average of 2,3376 with the standard deviation of 1,24141. The minimum
value is -5,49 and the maximum value is 1,21.
5. According to that descriptive calculation, it can be seen that 240 data of profitability instability during the
is 0,00 and the maximum value is 0,79.
6. According to that descriptive calculation, it can be seen that 240 data of the external pressures during the
7. According to that descriptive calculation, it can be seen that 240 data of financial targets during the
8. According to that descriptive calculation, it can be seen that 240 data of company growth during the
is -0,34 and the maximum value is 426,58.
9. According to that descriptive calculation, it can be seen that 240 data of the company age during the
a. According to that descriptive calculation, it can be seen that 240 data of the company size during the
2. Hypothesis Testing
2.1 Assessing The Adequacy of Regression Model
Table 2
Hosmer and Lemeshow Test
Step Chi-square Df Sig.
1 5.024 8 .755
Source: Secondary data treated with SPSS 17

A table in Hosmer and Lemeshow‘s Goodness of Fit Test states that there is a significance probability of
0.755 that has value over 0.05. Therefore it can be concluded that the model can predict its observation
value or it can be said that the model is acceptable because the model fits the observation data.
2.2 Assessing Overall Model Fit
According to table historyabc, initial value of -2LL is 269,921 and after the six independent variable are
substituted there is a decrease of 230,908 in -2LL value. This decrease in -2LL value shows a good
regression model, or in another words the hypothesized model fits the data.
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2.3 Table 3
Model Summary
Step -2 Log likelihod Cox & Snell R Square Nagelkerke R Square
a
1 230.908 .150 .222
a. Estimation terminated at iteration number 10 because parameter estimates
changed by less than ,001.
The value of Nagelkerke R Square is 0,222 that means that 22,2% the variability of the dependent
variable which is the possibility of fraud can be explained by independent variable which is auditor
turnover, CPA firm size, bankruptcy prediction, profitability instability, external pressures, financial
targets, and the control variable of company growth, company age, and company size. The rest which is
77,8 % can be explained by other variables outside the research model.
2.4 Hypothesis Testing

Table 4
Variables in the Equation
B S.E. Wald df Sig. Exp(B)
a
Step 1 CPA -.787 .448 3.090 1 .079 .455
BIG4 1.239 .451 7.532 1 .006 3.450
ZFC 2.560 .774 10.946 1 .001 12.933
UN_Profit 12.569 4.046 9.650 1 .002 287460.210
FINL -14.445 4.521 10.208 1 .001 .000
ROA 10.289 3.418 9.060 1 .003 29421.540
GRW 1.372 .832 2.715 1 .099 3.941
YLISTED -.045 .026 2.939 1 .086 .956
SIZE -.174 .115 2.271 1 .132 .840
Constant 14.602 4.640 9.904 1 .002 2195199.562
a. Variable(s) entered on step 1: CPA, BIG4, ZFC, UN_Profit, FINL, ROA, GRW, YLISTED, SIZE.
Discussion
Relations between Auditor Switching and the possibilites of fraud in a financial statement
Hypothesis 1 states that auditor turnover variable does not influence the possibilities of fraud. It can be
concluded that audiotr turnover cannot be used to detect fraud. Auditor turnover may happen because the
company is not satisfied with the performance of the previous independent auditor. PA company with
positive motivation will use independent auditor that is truly independent and objective in auditing for the
purpose of improving the performance of the company. Meanwhile if a company is not satisfied with the
performance of the auditor, and the company is not able to manipulate the audit then the possibilities of fraud
is higher (Stice, 1991) in Sihombing and Rahardjo (2014)
Relationship between CPA firm size and the possibilities of Fraud in a financial statement.
Hypothesis 2 states that the CPA firm size as a variable has a negative relation with the possibilities of
fraud. This means that the possibilities of fraud in a company‘s financial statement is predicted to be lower if
the company uses a Big 4 CPA firm as its auditor because they are better in the terms of detecting fraud
supported by experience, their peers for consultation, and superior abilities when compared with non Big 4
CPA firm .
Relationship between bankruptcy predictions and the possibilities of fraud in a financial statement
Hypothesis 3 states that the variable of bankruptcy prediction has a relation with the possibilities of
fraud. The relation is a positive one that means the higher the bankruptcy prediction (ZFC) of a company the
455
higher the possibilities of fraud in its financial statement. This can be caused by higher pressure that came
with the higher value of bankruptcy prediction. The manager faces pressure to maintain the financial
condition of the company and also to maintain the continuity of company‘s operations. This positive relation
between bankruptcy prediction and the possibilities of fraud corresponds to the opinion of Carcello and Nagy
( 2004) in Aulia and Fitriany (2013)
Relationship between instability of profitability and the possibilities of fraud in a financial statement
Hypothesis 4 states that the profitability instability variable has a significant positive relation to the
possibilities of fraud in a financial statement. The more unstable the profitability of a company the higher its
tendencies to commit a fraud. This relation can happen because of high pressures from investor to the
management when the profitability is unstable. To deal with it, there is a possibility that the manager will
manipulate the financial statement. This research finding corresponds Bell and Carcello (2000) that states that
inconsistent or inadequate profitability is a significant factor in predicting fraud.
Relationship between external pressure and the possibilities of fraud in a financial statement
Hypothesis 5 states that the variable of external pressures proxied with leverage indicates a significant
negative relation with P_Fraud. This means that the smaller the leverage the higher the possibilities of
commiting fraud/ Dechow et al. (1996) states that a company with high leverage has debt requirements that
will motivates profit manipulation. High leverage ratio is also enabled as a proxy of external payment
demand motivation. The result of this research is consistent with the research of Lou and Wang (2009). That
research shows that the resulting leverage by the company has a significant influence to the possibilities of
fraud in a financial statement.
Relationship between financial targets and the possibilities of fraud in a financial statement
Hypothesis 6 states that the variables of financial targets proxied with return on asset (ROA) shows a
positive relation to the possibilities of fraud in a financial statement. It means that the higher the company‘s
financial targert the easier it is to predict the possibilities of committing fraud. This research finding matches
the research of Summers and Sweeney (1998) in Martantya and Daljono (2013). A high previous year‘s ROA
shows high company profitability and it makes the company increase its profit target in the next year
(Norbarani, 2012) in Martantya, Daljono (2013). That condition will demand the management to attain profit
target that is at least equals to the profit from the previous year that might motivates the management to
commit a fraud in financial statement.
The three control variables used which is company growth, company age, and company size does not
have a relation to the possibilities of fraud. It meeans that the three control variables cannot be used as control
variables.
CONCLUSION
According to study an result of experiment using SPSS as a tool, these following conclusions can be made:
1. These following variables: CPA firm size, bankruptcy prediction, instability of profitabilitym
external pressures, and financial target has a significant relation to the possibilities of commiting a
fraud. Meanshile auditor turnover as a variable does not have a relation to the possibilities of fraud.
2. The three control variables which is company growth, company age, and company size does not
have a relation to the possibilities of fraud.
Suggestions
a. The company is advised to use Big 4 CPA firm as independent auditor, because Big 4 CPA firm has
better abilities in detecting a fraud.
b. In decision making and policies to maximize investor‘s trust to invest their funds it is advised to increase
profit by using equity and increasing sales, and also minimizing the use of debt. Aside from that, maintain
the value of ROA. This high probability will attract the investors to invest.
c. To the investors, it is advised that in terms of investing to pay attention to the auditor used and the
financial statement
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Limitations of the Study

1. The M-Score Model (Beneish, 1999 and Beneish, Lee &Nichols, 2013) that is used to predict fraud is
not yet able to give empirical evidenct of that model with frauds that happen in Indonesia.
2. This research does not include financial and investation industries as a research sample
3. Determination Coefficient (Nagelkerke R Square) is 0,2222 that means the dependent variable variability
which is the possibilities of fraud that can be explained by independent variable which is auditor
turnover, CPA firm size, prediction of bankruptcy, profitability instability, external pressures, and
financial targets is 22.22%. The rest of it, 77.78% can be explained by other variables outside the
research model
Further Research Agenda

The next research is expected to be able to test the accuracy of M-Score Model with fraudulent companies
listed in Indonesian Stock Exchange. Aside from that the next research is expected to obtain larger sample
size an can conduct tests according to industry. The small R2 value which is only 0,2222 means that it is
expected for the next research in this field to use other variables.
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THEORETICAL FRAMEWORK OF RETAIL SERVICE QUALITY

BENCHMARKING USING COMPETITIVE ZONE OF TOLERANCE BASE IPA
(CASE STUDY CARREFOUR AND HYPERMART IN SEMARANG)
Arfan Bakhtiar, Aries Susanty & Mega Aulia Silviadara

Department of Industrial Engineering, Diponegoro University Semarang
(megaaulias@gmail.com)
ABSTRACT
Retail is something crucial for Indonesian economic sector. Foreign or domestic retail company is competing
against retailer, starts from minimarket through hypermarket. Carrefour as a foreign company has belonging
to Indonesia. On the other hand, Hypermart as a local brand also known in Indonesia. There are three
pillars that Carrefour owns. Firstly, it has competitive prices. Secondly, Carrefour guarantees complete
choices. And last, Carrefour tends to give satisfactory service. First and Second pillar benchmarked through
preliminary studies, but third pillar needs researches in case of knowing people perspective. This paper
being used to know what attributes that Carrefour or Hypermart be superior to. Later, service priority will be
shown in Competitive Zone of Tolerance based IPA (CZIPA) Matrix. CZIPA is a method which is
collaborating benchmarking and service quality in one case. CZIPA contains Zone of Tolerance and IPA so
that retailers could improve services to compete and occupy market positions. Thus, competitive
benchmarking can also give attributes that Carrefour or Hypermart yet have. Dimension according to this
research based on Retail Service Quality Scale (RSQS) which is an expansion from Service Quality Scale.
Improvements suggested on this paper basically based on the gaps among importance and performance
retailers have.
KEYWORDS: Retail, Benchmarking, CZIPA, Retail Service Quality Scale
1. INTRODUCTION
Industrial development has accompanied the growth of business with aim to fulfill the community‘s needs.
One of the efforts undertaken by the developer is a retail business. Retail is a series of business activities to
add value to the products and services sold to the customers for personal or family use (Levy, 2009). Retail is
able to emerge the economic passion among the public, or add country‘s foreign exchange. It can be seen
from the increase modern retail‘s total revenue which grew rapidly from Rp 27 trillion in 2004, rising to Rp
44.8 trillion in 2007, and to Rp 55.4 trillion in 2008 (Meshvara, 2010).The data also demonstrated by the
Ministry of Commerce‘s data showing that business capitalization retailers in Indonesia until the first quarter
of 2013 has reached Rp 5,000 trillion. The figure grew to 400 percent compared to the capitalization five
years ago in 2008 that only about Rp 1,000 trillion. Additionally, keep in mind that the total GDP (Gross
Domestic Product) of Indonesia is more supported by the activity of consumption, where the consumption
activities of course closely linked to the performance of the retail industry.
According to the data of Population and Civil Registration in 2016 Semarang, Semarang is the capital of
Central Java, which has a population of 1,694,412 inhabitants spread over various regions. With a large
population‘s density causes the emergence of retail firms to fulfill the needs of the community. Retail
companies both foreign and domestic, ranging from the type of minimarket to hypermarket, will lead to
competition between each other. Carrefour is an international supermarket group headquartered in France and
introduced the hypermarket concept for the first time. Although Carrefour is an international company, but
the shares of Carrefour Indonesia Incorporated Company has been fully taken over by PT. Trans Ritail
Indonesia. This makes the largest retailer in Indonesia belong to the nation. Focused on consumer, Carrefour
interpreted the three main pillars that are believed to be able to make Carrefour be a shopping options for
consumers in Indonesia. Those pillars are as follows; (A) competitive prices, (b) complete choices, and (c) a
satisfactory service.
On the other hand Hypermart emergence as a local supermarket that has been established since 1986 also
become a concern. A company that is under the name of Matahari Putra Prima has a motto of "low price and
more ..." which means that "low prices and many other advantages". According to the Forbes website,
Matahari Putra Prima as a local company that is able to occupy the position of the 1913 largest companies in
the world with total revenue of $ 934 million. This proves that Hypermart has been able to become a
company that can be recognized internationally. On the other hand Carrefour as an international company
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occupies position 279 largest companies in the world with revenues over $ 21.9 billion. Behind the strategy
undertaken Carrefour in creating the first pillar (competitive prices), Carrefour is considered able to provide a
lower price when compared to Hypermart. Carrefour‘s positioning strategy is a hypermarket with the lowest
price which translated into the tagline "There are Cheaper, We Change The difference". To find out the price
of which is more competitive between the two self-service, conducted a survey into 12 samples of items and
products based on the TOP Brand Awards 2015. Of the twelve items compared, eight of them Hypermart has
a lower price. On the other hand, Carrefour which located in Semarang has a strategic location compared to
Hypermart. This is proven by a survey conducted on 75 respondents with 80% of women and 20% men. A
total of 65.8% claimed to choose Carrefour because of its strategic location is the reason from the respondent
in making a purchase. In determining the second pillar (complete choice) as much as 58.5% of respondents
chose Hypermart when compared to Carrefour.
Of the three pillars that have been created by Carrefour, the first pillar was overrun by Hypermart. On the
other hand, the second pillar of the complete selection of Hypermart is considered capable of exceeding the
capacity of Carrefour in providing a complete choice for consumers. But in the third pillar, namely the better
services, more research is needed regarding the attributes that can give satisfaction to the customer in the
shop. It is necessary to assess the attributes are most influential in customer satisfaction. In consideration of
the supermarket which is most in demand by consumers, as many as 68.9% prefer to shop at Carrefour
compared to Hypermart, 18.9% choose to shop at Hypermart and the rest choose to shop elsewhere.
According to (Atmawati, 2004) a quality company is a company that has the strength to compete and
dominate the market. For that conducted a study that can be used to identify quality attributes that can
enhance customer‘s satisfaction and improve the competitive ability among retailers that use dimension to the
Retail Service Quality Scale (RSQS) and using CZIPA (Competitive Zone of Tolerance based Importance-
Performance analysis). CZIPA is a method that is able to know the attributes of the service based on the
wishes of customers and competitors to make a minimum limit of service provided. So to determine the
comparison of the third pillar on both self-service, the first pillar (competitive prices) with the second pillar
(complete choice) are not included in the study. So that existing problems are organized into three main
goals; determine the attributes that are superior quality services that is owned by Carrefour, know the
attributes of services quality that is superior to that owned by Hypermart, and make it a servive priority that
will be improved on both self-service using dimensions Retail Service Quality Scale (RSQS).
According to (Lupiyoadi, 2006) marketing service is an action offered by a party against other parties
which have principles that are intangible and can not be moved ownership. According to (Lovelock &
Gummesson, 2004) in (Tjiptono & Chandra, Manajemen Kualitas Jasa, 2005) characteristics of the service
formulated into IHIP paradigm that are; Intangibility, heterogeneity / Variability / Inconsistency,
Insperability, and Perishability.
According to (Kotler, 2000) satisfaction is the level of one's feelings after comparing the performance or
results that he felt compared with expectations. Customer satisfaction contributed to numbers of important
aspects, such as the establishment of customer loyalty, greater reputation of the company, reduced price
elasticity, reduced transaction costs for the future, increased efficiency and productivity of employees, as well
as one of the best indicator for future earnings (Tjiptono, Pemasaran Jasa, 2005).
SERVICE QUALITY
According to (Wisnalmawati, 2005) service quality is the level of expected benefits and control over the
level of excellence to meet the customer‘s desires. When the services received as expected, the service is
perceived as good and satisfactory. However, if the services received exceed customer‘s expectations, the
quality of service is perceived as ideal. Conversely, if the service received is lower than expected, the service
quality is considered poor (Tjiptono, Pemasaran Jasa, 2005). In SERVQUAL (Dabholkar, Dayle, & Joseph,
1996) to conduct further development of the scale SERVQUAL where this scale has more valid measurement
scales of service quality for retail that is RSQS (Retail Service Quality Scale) that is used to include
dimensions that were previously inaccessible by the scale SERVQUAL by retail customers. The five
dimension of services revealed by the study including: Physical Aspects, Reliability, Personal Interaction,
Problem Solving and Policy. Physical Aspects baccording to (Dabholkar, Dayle, & Joseph, 1996) in (Kaul,
2005) is the physical aspect of retail that includes a variety of equipment or facilities that are tangible and
affect the quality of services provided to customers. Reliability is the consistency from retailers in providing
services to customers in connection with the promise given to the customer. Personal Interaction is a
dimension that refers to the ability of employees to increase customer‘s trust and politeness/helpfulness
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behaviour. Problem Solving is the ability of retail management to solve various problems faced by customers.
Policy is a set of policies to provide ease and convenience for customers.
BENCHMARKING
Benchmarking is a learning process that takes place systematically and continously, where every part of a
company are compared to the best company or most superior competitor (Sutisna & Pawitra, 2001). Whereas
in the opinion of (Goetsch & Davis, 1994) interpreted that benchmarking is used as a point of reference and
measurement process or the operation of the internal processes of the organization against the best in class
companies, both from inside and outside the industry. In practice, according to (Hiam & Schewe, 1992), there
are four types of benchmarking: internal benchmarking, competitive benchmarking, functional benchmarking
and generic benchmarking.
ZONE OF TOLERANCE
Zone of Tolerance is an area between adequate service and desired service, that is the area where variation
of the service can still be accepted by consumers. Zone of Tolerance can expand and redece, and is different
for every individual, company, situations and aspects of services. When customer service is under adequate
service then the consumer will be disappointed. However, if the service received more than desired service,
the customer will be very satisfied. As for fluctuation of ZOT is giving more influence on adequate service
compared with the desired service. Adequate service can be increased or decreased according to the
situational environment, where the desired service gradually moved by the accumulation of experiences
obtained previously (Zeithaml & Bitner, 2009). Adequate Service is the minimum level of service
performance that is acceptable based on an estimated services that may be received and depended on the
alternatives available. Desired Service is the performance level of service expected to be received by
consumers, which is a combination of consumer trust about what can and should be received.
COMPETITIVE ZONE OF TOLERANCE BASED IPA (CZIPA)
Competitive Zone of Tolerance based Importance-Performance Analysis (CZIPA) method is a
development of a method introduced by the IPA (Chen, 2014). In this CZIPA method towards tolerance zone
concept and benchmarking against competitors. By combining these concepts, this method will reduces the
calculation error, error matrix placement, and define better market position. In CZIPA matrix, there is a little
difference in the IPA matrix, namely the horizontal axis represents the value CZSQ (competitive service
quality ratio) and the vertical axis represents the difference in importance (DI). While the understanding of
each quadrant has the same meaning as the matrix of IPA in general. A quadrant is a priority for repair,
quadrant B is a performance that should be maintained, quadrant C is at a low priority, and quadrant D in the
category of excess performance.
Importance Difference (DI)
A B
C D
DI = CZSQ
CZSQ
Figure 1: CZIPA Matrix
3. RESEARCH METHOD
This paper uses literature review to establish the theoretical framework of research related to Retail Service
Quality Benchmarking. Based on the theoretical framework of the research, a quantitative study will be
conducted with survey method. Similar studies had already been done in the Chen study entitled "Improving
importance-performance analysis: The role of the zone of tolerance and competitor performance. The case of
Taiwan's hot spring hotels" where in the study compared the performance of a hotel which is located in
Taiwan with its competitors, namely hotels that located around the hotel. The study leads to further research
on self-service retail customer satisfaction that soon known that retail dimensions are different from the
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dimensions of other service companies. After doing a literature review, the next step is to collect data through
the distribution of questionnaires with a minimum number of 100 respondents. Distribution data using
purposive sampling technique in which every member of the population who have certain criteria are eligible
to be sampled or to represent the population (Sugiyono, 2001). Questionnaires distributed through four
sessions, the first session based on the demographics of respondents, the second session was the level of
interest, session three is the level of satisfaction, and the final session was desired service expected by the
respondent. The samples were obtained in the study were required to have criteria; have shopped at Carrefour
and Hypermart located in Semarang. Instruments used in the questionnaire are based on the dimensions
contained in RSQS (Physical Aspects, Reliability, Personal Interaction, Problem Solving, and Policy). Then
the data were processed using the statistical software, using four quadrants on CZIPA and analyze the gaps
between the instrument.
4. RESULTS
Based on previous research, the growth of retailers in Indonesia has a considerately large number, with the
result of increase in the State's foreign exchange. However, when viewed from the other side, the growth
increasingly tightened the competition among the retail industry itself. Tight competition requires retail
owners to always maintain the quality of its services to gain people‘s trust and give satisfaction to the public.
Satisfaction towards a service would cause consumers to repurchases and will provide positive word of
mouth. With so customers tend to be loyal and would invite more potential customers to shop at these places.
Carrefour as an international company, which has been wholly owned by Indonesia has three main pillars that
are believed to be able to give shopping satisfaction to the consumer. But in the first pillar and the second
pillar, Hypermart is considered able to occupy these pillars better than Carrefour. This is proven by sampling
their product prices traded and a conducted preliminary survey of 75 respondents which mostly chosen
Hypermart because Hypermart sold more complete product than Carrefour. It is what encouraged this study
to find out the third pillar of the outstanding service that has been promised by Carrefour. Through 21 item
questions in the five dimensions in RSQS, a questionnaire distributed to 100 respondents to identify which
attribute that is important to consumers and how satisfied consumers towards these attributes. To be able to
compare the methods of science and CZIPA method, calculation and manufacture of IPA matrix in advance
by calculating interest and satisfaction of each self-service customer which then mapped into IPA matrix.
CZIPA matrix was made after, with a slightly different way. In CZIPA a shared value among companies use
other companies as a comparison and then between the interest (the interest of Carrefour and interests of
Hypermart) sought the difference to be found DI (Difference in Importance) and between satisfaction
(satisfaction Carrefour and Hypermart) found DP (Difference in Performance) which then DP was assessed
together with the CSA. After that the value of Focal Desired Service will serve as the maximum limit of
service. The steps of the calculation are done as following:
1. Calculate the value of Difference in Importance (DI)
2. Calculate the value of Competitive Service Adequacy (CSA = DP)
3. Calculate the value of CZOT (Competitive Zone of Tolerance):
CZOT = FDS – CPS (1)
Where FDS (Focal Desired Service) is desired customer service and CPS (Competitive Performance
Service) is the value of competitor‘s performance
4. Then find the value of CZSQ by comparing the value of CSA with CZOT as follows:
CZSQ = (2)
5. Include the value of CZSQ and DI to create a CZIPA matrix. At CZIPA matrix, Vertical line represents
the value of DI and the horizontal is the value of CZSQ.
6. Calculate the value that determine the priority repairs (d) using the formula:
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d = CZSQ – DI (3)
7. Lastly is to analyze the results of four quadrants based on CZIPA matrix

If CZSQ <0, then the company‘s performance (FPS) is lower than the performance of competitors (CPS).
Under these conditions, the customer perceives dissatisfaction on the services provided by the company.
So the lower the value of CZSQ indicates that the higher placement priority repairs needed. Whereas if
CZSQ is at a value of 0 <CZSQ <1, then the performance of the company (FPS) is equal to or greater
than the performance of competitors (CPS). Means in this case, the customer is satisfied and the
company has advantages on a competitive basis. But if CZSQ> 1, then it is certain that the company's
performance exceeds the performance desired by the customer. Then the company will gain the loyalty
of its customers because the customer was very satisfied with the performance given by the company.
This research has come into a conclusion which is improvements on service refers to increasing customer‘s
loyalty in a company. The higher the importance value of an attribute indicates that the higher it is to be
considered by the company. It should be supported by the company's ability to improve its performance in
order to avoid a gap between the performance as well as interest. To be able to assess whether an attribute has
been considered properly, supermarkets can see quadrant of the matrix which if these attributes are in
quadrant A, the priority repairs need to be improved. The greater the gap between CZSQ and DI then these
improvements will be more needed.
Satisfaction with the level of service provided is not merely to fulfill Carrefour‘s third pillar on satisfactory
service, it is required by all companies primarily a service company that requires the role of customer. To that
end, Hypermart as local companies are now able to spread its wings in Indonesia was also a consideration.
The service levels that were performed on both self-service are good to be learned from one another. So that
what is owned by Carrefour could be learn by Hypermart and vice versa.
Criteria for priority repairs need to be done by each self-service based on: located in quadrant A, has the
smallest ―d‖ values, and has a worse performance than competitors. It is the basis of reference to be
conducted in this study. If the value of d has many negative value, then the improvement will be based on
three values ―d‖ with the largest negative. This principle is used for the two self-service to be easier to focus
on the major repairs that must be done.
As this study is limited to only the scope of the supermarket located in Semarang, so further research is
expected to renew the method and may enlarge the scope of this study
6. ACKNOWLEDGEMENTS
Researchers express gratitude largely to all parties that support the entire course of this research, especially
to the journal published by Chen (2014) as a main source for this paper until the study can be completed on
time.
7. REFERENCES
Chen, K. Y. (2014). Improving Importance-Performance Analysis: The Role of the Zone of Tolerance and Competitor
Performance; The case of Taiwan Hot Spring Hotels. Tourism Management, 40(6), 260-272.
Dabholkar, P., Dayle, T., & Joseph, R. (1996). A Measure of Service Quality for Retail Stores: Scale Development and
Validation. Journal of the academy of Marketing Science, 24, 3-16.
Goetsch, D. L., & Davis, S. (1994). Introduction to Total Quality, Quality, Productivity, Competitiveness. Englewood
Cliffs, NJ: Pretince Hall International, Inc.
Hiam, A., & Schewe, C. D. (1992). The Portable, MBA in Marketing. New York: John Wiley & Sons, Inc.
Kaul, S. (2005). Measuring Retail Service Quality: Examining Applicability of International Research Perspectives in
India . Indian Institure of Management Research and Publications.
Kotler, P. (2000). Manajemen Pemasaran. Jakarta: PT. Prenhallindo.
Levy, M. &. (2009). Retailing Management. New York: McGraw-Hill/Irwin.
Lovelock, C., & Gummesson, E. (2004). Whither Services Marketing?: In Search of a New Paradigm and Fresh
Perspective. Journal of Service Research, 1(7), 20-41.
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Lupiyoadi, H. (2006). Manajemen Pemasaran Jasa (2nd ed.). Jakarta: Penerbit Salemba Empat.
Meshvara, K. a. (2010). Retail Rules. Jakarta: Esensi Erlangga Group.
Sugiyono. (2001). Metode Penelitian Administrasi. Bandung: Alfabeta.
Sutisna, & Pawitra, T. (2001). Perilaku Konsumen dan Komunikasi Pemasaran. Bandung: PT. Remaja Rosdakarya.
Tjiptono, F. (2005). Pemasaran Jasa. Malang: Bayumedia Publishing.
Tjiptono, F., & Chandra, G. (2005). Manajemen Kualitas Jasa. Yogyakarta: ANDI.
Wisnalmawati. (2005). Pengaruh Persepsi Dimensi Kualitas Layanan Terhadap Niat Pembelian Ulang. Jurnal Ekonomi
dan Bisnis, 10(3).
Zeithaml, V. A., & Bitner, M. J. (2009). Service Marketing: Integrating Customer Focus Across the Firm. New York:
McGraww Hill.
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THE EFFECT OF PROFITABILITY, LEVERAGE AND COMPANY SIZE TO

INCOME SMOOTHING PRACTICE
Ganjar Pambudi Taruno, Havid Sularso, Eliada Herwiyanti

Jenderal Soedirman University
(ganjar_mu@yahoo.com, hvd1208@gmail.com, elly_idc@yahoo.com)
ABSTRACT
This study aimed to analyze and examine empirically the factors that affect the actions of income smoothing
practice in manufacturing companies listed in LQ 45 Index. Three variables used in the analysis of income
smoothing practice were Profitability, Leverage, and Company Size.
The study was conducted at the companies listed in LQ 45 Index for the period 2010-2015. The sampling
technique used purposive sampling technique, and gained total of 42 data observation samples. The three
hypotheses were tested using a multiple regression analysis calculated in SPSS 16, to examine the influence
of profitability, leverage, and company size toward income smoothing practice.
Based on the result of this study shows that profitability, leverage and company size simultaneously affect
income smoothing practice. Profitability partially have positive significant effect to income smoothing
practice, leverage partially have negative significant effect to income smoothing practice, while company size
has not partially significant effect to income smoothing practice.
Keywords: Income Smoothing, Profitability, Leverage, Company Size.
1. INTRODUCTION
Decision making made by parties that have an interest in the company is determined by the quality of
financial statements which presented by management. The financial statements of company is a reflection of
management's performance during the accounting period and as a tool to giving information of financial
condition of the company to external parties. Based on so crucial a company's financial statements, the
financial information contained in the financial statements to be presented adequately and does not mislead
any external parties in the decision-making process.
The internal and external parties have different interests in terms of using financial statements, conflict of
interest that occurs between the internal and external parties is one reason for cheating by internal parties as
preparers of financial statements in its financial reporting. Managers as internal parties tend to choose to re-
investing the profit earned, while the shareholders as external party wants the profits distributed as dividends.
Jin and Machfoedz (1998) states that there is a conflict of interest between the internal and the external that
may spark conflict detrimental to the parties of such inconsistency.
According to Kirschenheiter and Melumad (2002) revealed that the income information is a component of the
financial statements of companies that aim to assess the performance of management, helps estimate the
ability of representative profit in the long term, and assessed the risk of investment or lending some money.
From the viewpoint of the investor, financial statement analysis is used to predict the future, while from the
standpoint of management, financial statement analysis used to help anticipate future conditions and, more
importantly, as a starting point for planning actions that will influence future events, Brigham and Houston
(1999).
There is risky habits of users of financial statements in observing the financial statements presented by the
company. As stated by Beattie, et al (1984), investors only focused on income and does not pay attention to
the procedures used to generate the income information. As stated by Kustono and Sari (2012) that the
financial statements are fragile to manipulation, such as income smoothing, income maximization and
income minimization, as well as other earnings management practices. The manager will always motivated to
make earning management because managers realized that income information is a important component in
the financial statements in order to get a good assessment of external parties.
Income smoothing practice was encouraged many factors. Factors encourage income smoothing can be
distinguished on the economic consequences of the choice of accounting method and income factors.
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Consequences Factors of the choice of accounting method is the condition of the selection methods that can
affect the accounting numbers, so that the accounting numbers affected by the condition. While income
factors are the influence of periodic income numbers which automatically encourages income smoothing
behavior.
Below is the table that will show sales and earning after tax in 5 companies listed in the LQ 45 that indicated
performed income smoothing practice on the period August 2015 - January 2016.
Table 1: 5 Companies Data Indicated Perform Income Smoothing Practice

(in billion rupiah)
Years
Company Code
2011 2012 2013 2014 2015
NET SALES 162.564 188.053 193.880 201.701 92.505
ASII
EAT 21.077 22.742 22.297 22.125 9.578
NET SALES 17.958 21.311 25.663 29.15 15.254
CPIN
EAT 2.362 2.681 2.529 1.747 959
NET SALES 41.884 49.029 55.437 65.186 33.226
GGRM
EAT 4.958 4.069 4.384 5.395 2.409
NET SALES 19.367 21.575 25.095 30.022 16.551
ICBP
EAT 2.066 2.282 2.235 2.532 1.672
NET SALES 45.332 50.059 57.732 63.594 32.635
INDF
EAT 4.892 4.779 3.417 5.146 2.121
Based on the data of 5 companies listed in the LQ 45 index on period August 2015 - January 2016 above,
shows inconsistency in relationship between sales and income, and it is contradict to the result of Wulandari
(2013) which states that the greater the sales, then the income of the sales obtained will be more greater
because sales is determining factor of income. The data above prove that there was a fluctuation or
inconsistency between income and sales of the company during the period 2012 to 2014. The data using the
manufactures company because in previous research conducted by Salno and Baridwan (2000) and Samlawi
and Sudibyo (2000) manufacturing companies were proven do the income smoothing.
Based on background description above, the problem can be formulated are as follows:
1. Is Profitability affect to income smoothing practice?
2. Is Leverage affect to income smoothing practice?
3. Is company size affect to income smoothing practice?
The objectives of this research are as follows:

1. To Analyze the effect of profitability that proxied by the ROA (Return on Assets) with the possibility
of income smoothing practices on manufacturing companies listed in LQ 45 index.
2. To Analyze the effect of Leverage that proxied by the DER (Debt to Equity Ratio) with the possibility
of income smoothing practices on manufacturing companies listed in LQ 45 index.
3. To Analyze the effect of company size that proxied by total assets with the possibility of income
smoothing practices on manufacturing companies listed in LQ 45 index.

Agency Theory
This theory is a model developed in 1976 proposed by Jensen and Meckling, which discusses the contractual
relationship among the members of the company that originated from the form of corporates that separates
clearly between business owners with management. Management considered as an agent and owner of the
company is considered as the principal. Principal normally delegated their authority to the management
(agent) of the company.
The imbalance of information between agent and principal will lead the management (agent) tend to act in
accordance with their interests to maximize its utility. And sometimes cause a specific policies are only
known to the management (agent) without consent of the owner of the company (principal).
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Positive Accounting Theory

Positive Accounting Theory explained process, by using ability, understanding, and accounting knowledge
and also appropriate accounting policy to face certain conditions in the future. Three hypotheses positive
accounting theory, which can be used as a basis for understanding income smoothing practice was formulated
by Watts and Zimmerman (1986), are as follows:
1. The bonus plan hypothesis

―Ceteris paribus, managers of firms with bonus plans are more likely to choose accounting
procedures that shifts reported earnings from future periods to the current period‖.
The management of the company that has a bonus plan, tend to choose accounting procedures to
shifting income from future periods to the current period. This is accordance with the principle Time
Value of money.
2. Debt Convenant Hypothesis

―Ceteris Paribus, the larger a firm‘s debt/equity ratio, the more likely the firm‘s manager is to select
accounting procedures that shifts reported earnings from future periods to the current periods‖.
In companies that have high level of Debt to Equity Ratio, the management at these companies tends
to use accounting methods that can increase revenue and profits.
3. Political Cost Hypothesis.

―Ceteris paribus the larger firms, the more likely the manager is to choose accounting procedure that
defer reported earnings from current period to future periods‖.
This hypothesis is based on the assumption that large companies are more sensitive to political
interest. Big companies have a large amount of tax, so, they try to avoid paying the higher taxes by
transferring income in the current period to the next period.
Profit
Accounting Principal Board (APB) statement defines net income (loss) as an excess (deficit) of revenue over
expenses during the accounting period. While, based on Financial Accounting Standard Board (FASB)
defines accounting income as the change in equity (net assets) of an entity during a given period, resulting
from transactions and events or events that derived not from the owners (Syafriont, 2008).
Income Smoothing
Income Smoothing can be seen as an intentionally efforts to normalize income to achieve the desired income
level. Ratnasari (2012) stated that income smoothing practice intentionally did by management have purpose
to give good perception to investor related to the success of the company to make the income stable.
Research Model
This research will analyze the effect of profitability, leverage, and company size to income smoothing
practice on manufactures companies listed in LQ 45 Index in the period of 2010 – 2015. The independent
variables in this research are profitability, leverage, and company size. While, the dependent variable in this
research is income smoothing practice.
Profitability toward Income Smoothing
According to Weston and Copeland (1995) Profitability was defined as a ratio in measuring the effectiveness
of management based on reported earnings. Profitability is a component of company financial statement that
aim to assess management performance, estimate representative earning capacity in the long term and assess
risks in investment (Dwiatmini and Nurkholis, 2001).
Based on Bonus Plan Hypothesis, manager in a company that has bonus plan will be motivated to perform
income smoothing practice, manager will seek to achieve results between bogey (minimum income level for
bonuses) and cap (maximum level for bonuses). Company that has bonus plan, is a company that has a good
level of profitability. Managers at company that have a good level of profitability will be more flexible to
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perform income smoothing, because management knows the company‘s ability to generate income in the
future.
Thus hypothesis can be formulated:
H1 : Profitability has a positive effect to income smoothing practice.
Leverage toward Income Smoothing
According to Riyanto (1995) stated that leverage is the use of funds with a fixed expense. Based on Debt
Convenant Hypothesis, Company that have high level of leverage indicated perform income smoothing
practice because company threatened default. Debt Convenant Hypothesis just stated the condition when the
company have high level of leverage. In this research, the researcher have own perspective when the
company have low level of leverage. When the company have low level of leverage, means that the company
using less debt compared to equity, then fixed expense of the company will be low and will increase
company‘s income.
H2 : Leverage has a negative effect to income smoothing practice
Company Size toward Income Smoothing
According to Moses (1987) larger companies have a greater encouragement to perform income smoothing
practice than smaller companies because the larger companies became the object of inspection. This is similar
to Madura (2007) which stated that the larger company has a more encouragement to perform income
smoothing practices rather than smaller company. Based on Political Cost Hypothesis, managers at large
company will try to choose accounting procedures or accounting method that can be shift profit from current
period to future period, in order to avoid pay more taxes.
H3 : Company size has a positive effect to income smoothing practice.
3. RESEARCH METHOD
Research Type
This research is descriptive quantitative research. Quantitative research is research on data collection and
expressed in the form of numbers. Quantitative data is data in the form of numbers or could be qualitative
data that changed into numbers.
Source of Data
This research use secondary data, which the data obtained from written sources that are already available and
have been collected and reported to other parties.
Population
The population in this research is manufacturing companies listed in the LQ 45 index during the research
period from 2010 to 2015, consist of 45 data observation.
Sample
The sample in this research were selected based on purposive sampling. Consideration used in this research
to get sample, involve:
1. Manufacturing Companies listed in LQ 45 Index and publish the financial Statements during the
period 2010 – 2015.
2. Manufacturing companies that do not conduct mergers and acquisitions in the period 2010-2015.
3. Manufacturing companies that did not have a loss during the period 2010 - 2015.
Data Collection Method

The data in this research were obtained by using documentation method.
Operational Variable Definition
The dependent variable and the independent variables in this research are as follows:
1. Dependent Variable
The dependent variable in this research is the practice of income smoothing measured by Eckel Index.
468
2. Independent Variables
The Independent variables in this research are the profitability measured by ROA , Leverage, and
Company size measured by the natural logarithm of total assets.
Income Smoothing
Income smoothing is a fluctuations reduction intentionally around a certain earning level that is considered
normal for a firm. The formula used is as follow:
Eckel Index = (1)
CV : Coefficient variation variable, which is standard deviation divided by

the expected value of the profit for the year of 2012 – 2015.
ΔI : Profit changes in one period
ΔS : sales changes in one period
Value of CV ΔI and CV ΔS could be calculated by the formula:
CV ΔI or CV ΔS = (2)
Explanation:
Δx : Profit changes (I) or sales changes (S) between the year of n
with n-1
: Average of profit changes or sales changes (I or S between the
year of n with n-1).
N : Number of years observed.
Profitability
Profitability is company‘s ability to generate income in particular period. The company‘s profitability in this
research was measured by ROA. ROA is measured by divide earning after tax to total assets (Prastowo and
Julianti, 2005), so it can be formulated as follows:
ROA = X 100% (3)
Leverage
Leverage shows the proportion of debt used to fund investment. Leverage in this reaserch measured by DER
(Debt To Equity Ratio). DER is measured by devide total liabilities and equities (Prastowo and Julianty,
2005), so it can be formulated as follows:
DER = (4)
Company Size
Company size is a scale to determine the size of the company. In this research, company size is calculated by
using natural logarithm of total assets (Arfan and Wahyuni, 2010), so it can be formulated as follows:
Company Size = Ln Total Asset (5)
Analysis Method
This test is used to describe the sampe data profiles that include mean, median, maximum, minimum and
standard deviation.
Classical Assumption Test
Multicollinearity Test
According to Ghozali (2006), Multicolinearity test aims to test whether there is a correlation between
independent variable in the regression model. Multicolinearity can be seen from (1) tolerance value and its
opposite, (2) Variance Inflation Factor (VIF). The common cut off value that generally used to show the
multicolinearity is tolerance value 0, 10 or equal to VIF value < 10. Every researcher has to determine the
level of multicolinearity that can be tolerated.
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Autocorrelation Test
According to Ghozali (2006), autocorrelation test aims to test the existence of correlation in the linear
regression between intruder‘s mistake in t period and intruder‘s mistake in t-1 period.
Heteroscedasticity Test
According to Ghozali (2006), heteroscedasticity test aims to test the existence of different variance in
regression model from a residual research to others.
Normality Test
According to Ghozali (2006), normality test aims to test whether the residual variable (intruder) has a normal
distribution in the model regression.
Multiple Regression Analysis
According to Ghozali (2006), multiple regression analysis aims to measure whether the relation of two or
more variables is strong or not.
The general form of multiple regression analysis is:
Y = β0 + β1X1 - β2X2 + β3X3 + e (6)
Explanation:
Y : Income Smoothing Practice
β0 : Intercept model
β1,β2,β3 : Regression Coefficient
X1,X2,X3 : Profitability, Leverage, Company Size
e : error
Hypotheses Test
The basic of taking decision in multiple regression analysis is by using Simultaneous Significance Test (F
Statistic Test) and Individual Parameter Significance Test (t Statistic Test). If F test > F table, or significance
of t is lower than level of confidence (Sig. t < 0,05) then, independent variable affect dependent variable. If T
test > T table, or significance of t is lower than level of confidence (Sig. t < 0,05) then, independent variable
individually affect to dependent variable.
4. RESULTS
General Description
Population that used in this research sample is a manufactured company that registered in index LQ 45 for
2010-2015. Manufacture Companies that registered in Index LQ 45 since 2010 until 2015 are seven
companies that selected by purposive sampling method. From these seven manufacture companies that
includes in the LQ 45 index during six periods, there are 42 data observed of company data that fulfill the
requirement.
Based on the criterion that has been set, there are 42 Data Observed of company data. It can be seen in the
Table 2:
Table 2: Data Observation
No. Criteria Total
1. Manufacture Company listed continually in LQ 45 Index in the period of 2010-2015 42
2. Company did merger and acquisition in the period of 2010-2015 (0)
3. Manufacture Company that have loss in the period of 2010-2015 (0)
Numbers of Company Observed 42
Technique of Data Analysis

Descriptive Statistic
The result of descriptive statistic test is showed in the Table 3.
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Table 3: Descriptive Statistic

N Minimum Maximum Mean Std. Deviation
Perata Laba 42 -34 6 -3,54 13,35
ROA 42 3,09 71,51 18,25 12,83
DER 42 0,15 2,28 0,78 0,60
LnSIZE 42 29,58 33,13 3,11 0,99
Source : Data processing from SPSS 16
From the result of descriptive statistic in Table 3 is known that in Return On Asset is obtained the minimum
value 3,09; the maximum value 71,51; the average 18,25; and standard deviation 12,83. Besides, in income
smoothing ratio is obtained the minimum value -34, the maximum value 6, the average -3,54; and standard
deviation 13,35.
In Debt to Equity Ratio is obtained the minimum value 0,15; the maximum value 2,28; the average 0,78; and
standard deviation 0,60. While, in company size is obtained the minimum value 29,58; the maximum value
33,13; the average 3,11 and standard deviation 0,99.
Classical Assumption Test

Multicollinearity Test
The result of multicollinearity indication is shown in the Table 4
Table 4: Multicollinearity Test
Tolerance VIF
ROA 0,26 3,83
DER 0,44 2,25
LnSIZE 0,36 2,80
Based on the result that showed in the table 4, it can be seen that all of the research variable produce
tolerance value more than 0,10 that means there is no correlation between independent variable. The result of
VIF value also shows the same. There no single independent variable that has VIF value more than 10. In
conclusion, there is no multicollinearity between independent variable in the regression model.
Autocorrelation Test
Based on the result of research that has done, it can be seen the Durbin-Watson value that appears in the
Table 5 below.
Table 5: Autocorrelation Test
R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
0,87 0,76 0,73 7,04 1,62
From Table 5 can be seen that the value of Durbin Watson Test for every variable shows a value of 1,62. The
value of DW is placed between dL < DW < dU. Therefore, it can be conclude that there is no positive
autocorrelation and the decision cannot be taken to reject the regression model that has been used.
From Table 4.4 also can be seen that the value of Adjusted R Square was 0,73; means that 3 of variables use
in this research have 73% effect to income smoothing practice, while another variable that have 27% effect to
income smoothing practice was unidentified.
Heteroscedasticity Test
The results of heteroscedasticity test are:
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Figure 4.1 Result of Heteroscedasticity Test
According to the test result of heteroscedasticity indication, it can be seen that there is no specific term to the
formed graphic. With this result, it can be concluded that there is no heteroscedasticity in the regression
model that has been used.
Normality Test
The results of normality test are:
Figure 4.2 Result of Normality Test
Based on the normality test in the Table 4.2 above, it can be seen that the distributive data values are around
the diagonal line. With this result, it can be concluded that the data in the normal regression has been
distributed normally.
Multiple Regression Analysis
The result of multiple regression analysis in this research can be seen in this Table 6:
Table 6: Multiple Regression Analysis

B Std. Error t Sig.
(Constant) -68,80 83,76 -0,82 0,42
ROA 0,91 0,24 3,80 0,001
DER -16,06 3,94 -4,07 0,000
LnSIZE 1,96 2,64 0,74 0,462
According to Table 6, it can be seen that there is a regression similarity as follows:

Y = -68,80 + 0,91 X1 – 16,06 X2 + 1,96 X3 + e
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Constanta (β0)
From the multiple regression analysis tests, it can be seen that the Constanta value is 68,80. It shows that
there is an effect from independent profitability variable (X1), leverage (X2), and company size (X3).
Therefore, the income smoothing practice will be decreased for 68,80.
Regression Coefficient (β1) X1
Profitability variable (X2) has a positive regression coefficient for 0,91. It means that if the company size
variable increased for one unit, the income smoothing practice (Y) will be increased for 0,91 with the opinion
that the rest of independent variables are stable.
The leverage variable (X2) has negative regression coefficient for 16,06. It means if the leverage variable
increased for one unit, the income smoothing practice (Y) will be decreased for 16,06 with the opinion that
the rest of independent variables are stable.
Company size variable (X3) has regression coefficient for 1,96. It means if the company size variable
increased for one unit, the income smoothing practice (Y) will be increased for 1,96 with the opinion that the
rest of independent variables are stable.
Hypotheses Test
Hypotheses test on multiple regression analysis was conducted with two phase, first through simultaneous
significance test (F statistic test) and individual parameter significance test (t statistic test). The result of
simultaneous significance test is showed in the Table 7 below.
Table 7: Anova
Sum of Squares df Mean Square F Sig.
Regression 3440,04 3 1146,68 11,28 0,00
Residual 3863,74 38 101,68
Total 7303,78 41
Simultaneous Hypotheses Test Results

The results of simultaneously multiple regression analysis testing in Table 4.6 showed that significance value
is lower than level of confidence (0,00 < 0,005) and the value of F test is higher than F table (11,28 > 2,85).
Then, independent variables affect simultaneously dependent variable.
The Effect of Profitability to Income Smoothing Practice
Profitability variable has positive beta value and significant value lower than level of confidence (0,001 <
0,05) then the value of T test is higher than T table (3,80 > 1,685). It means the first hypothesis is profitability
has positive effect to the income smoothing practice has been accepted.
The Effect Of Leverage to Income Smoothing Practice
Leverage variable has negative beta value and significant value lower than level of confidence (0,000 < 0,05)
then the value of T test is higher than T table (4,07 > 1,685). It means the second hypothesis is leverage has
negative effect to income smoothing practice has been accepted.
The Effect of Company Size to Income Smoothing Practice
Company size variable has positive beta value and significant value higher than level of confidence (0,462 <
0,05) then the value of T test is lower than T table (0,74 < 1,685). It means the third hypothesis is company
size has positive effect to income smoothing practice has been rejected.
Below is Table 8 that show hypotheses acceptance.
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Table 8: Hypotheses Test

Hypotheses β Sig Decision
Profitability has a positive affect to income
H1 0,913 0,001 Accepted
smoothing practice
Leverage has a negative affect to income
H2 -16,063 0,000 Accepted
smoothing practice
Company Size has a positive affect to income
H3 1,963 0,462 Rejected
smoothing practice
5. CONCLUSION, IMPLICATION AND SUGGESTION

Conclusion
Based on the result of this research and the discussion that has been discussed, it can be concluded as follows:
1. Profitability, leverage and company size affect simultaneously affect the income smoothing practice.
2. Profitability that is represented on Return on Asset (ROA) gives significant positive effect to income
smoothing practice partially.
3. Leverage that is represented on Debt to Equity Ratio (DER) gives significant negative effect to
income smoothing practice partially.
Company size that is represented on Total Assets do not give significant positive effect to income smoothing
practice partially.
Implication
There are some implication based on this research and the discussion that has been discussed before as
follows:
1. Practically, to the accountants, work in company that has been proven did income smoothing practice,
better if the accountant can increase their professionalism in conducting accounting practices by not
making bias in financial statements. Moreover, for the accountants work in company that has not been
proven did income smoothing practice are expected to keep and maintain their professionalism in
conducting accounting practices. To Financial Statement User expected to be more carefully in doing
business analysis. Through this research, we already knew that there are 2 company proven did
income smoothing practice. Based on that, the researcher expected to the financial statement user to
not only focusing on income information in doing business analysis to avoid errors in decision making
process.
2. Theoretically, based on the result of this research, profitability have positive significant to income
smoothing practice, leverage have negative significant to income smoothing practice, while company
size does not have positive significant to income smoothing practice. Then, this research prove there
are 2 manufactures company listed in LQ 45 did income smoothing practice, this give additional
information for researcher and add some references to reader, although company listed in LQ 45 has
more than 70% of market capitalization and tightly watched by inspector but still have chance to do
income smoothing practice.
Suggestion
The next researchers are suggested to analyze the same topic with reveal another variables that does not
revealed yet in this research such as Net Profit Margin (NPM), Ownership structure of company, the age of
company, dividend payout ratio, and auditor reputation. The next researchers are suggested to use another
index in classifying income smoothing such as Michelson index. On the other hand, the observation period
can be extended, so there will be a better result.
6. REFERENCES
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pada Perusahaan yang Terdaftar di BEJ‖. Telaah Ekonomi, Manajemen, dan Akuntansi Vol.III No.1
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Terdaftar Di Bursa Efek Jakarta‖. Journal.
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Penghasilan pada Bank-Bank di Indonesia‖. Media Riset Akuntansi. Vol. 2 No. 2.
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Moses, O.D. 1987. ―Income Smoothing and Incentives: Empirical Test Using Accounting Changes‖. The Accounting
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Ratnasari, Dhiar. 2012. ―Analisis Faktor-Faktor yang Mempengaruhi Perataan Laba pada Perusahaan Manufaktur yang
Tercatat di Bursa Efek Indonesia Periode Tahun 2007-2010‖. Skripsi Universitas Diponegoro:Semarang.
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Mempengaruhi dan Kaitannya dengan Kinerja Saham Perusahaan Publik di Indonesia‖. Jurnal Riset Akuntansi
Indonesia,3 (1):17-34.
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di Pasar‖. Simposium Nasional Akuntansi III, September, Yogyakarta.
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Weston dan Copeland. 1989. Financial Management, 8th edition USA:The Dryden Press.
Wulandari. 2013. Analisis Faktor-Faktor yang mempengaruhi Income Smoothing & Pengaruhnya Terhadap Nilai
Perusahaan. Semarang. Universitas Diponegoro.
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ANALYSIS OF COMMUNICATION BETWEEN TRADERS AND

MONEYLENDERS IN THE STUDY COORDINATED MANAGEMENT OF
MEANING
Ida Ri’aeni1 & Uun Machsunah2

Muhammadiyah Cirebon University
Ida.iswahyudi@yahoo.com, uun.machsunah@umc.ac.id
ABSTRACT
The interaction between the merchant-buyer or consumer-services provider in the traditional markets in
communication studies involving the role both as a communicant-communicator. In most traditional markets
in indonesia, there are moneylenders as service providers and traders as consumers. Interaction of the two
parties gave birth to a communication process that special and unique. One way moneylenders in visiting
customers is directly by interpersonal contact. This type of communication is considered to be the most
effective for both face facilitate closer relationships / intimate. In the context of moneylenders and traders,
meaning communication that exists can be traced through coordinated management of meaning (coordinated
management of meaning/ CMM). The theory of coordinated management of meaning trying to make life
better through communication life arrangement. This research was conducted using qualitative descriptive
method. The technique of collecting primary data through observation and interviews. While the secondary
data obtained from books, journals, and newspapers. The purpose of the study was to determine the
meanings of communication in the interactions between traders and moneylenders in the traditional market.
Keyword: social interaction, interpersonal communication, moneylenders, muslim merchants, coordinated
management of meaning.
PRELIMINARY
Exchange and trading activity is an activity which constructs the market. In other words, there would be no
trade without market and the market will not be formed if there is no trade. The most fundamental thing in
the process of trading is the social interaction. Such interactions childbirth norms and sanctions as well as the
initial formation of the society, the role of all actors is essential. The interaction between the merchant-buyer
or consumer-services provider in the traditional markets in communication studies involving the role both as
a communicant-communicator. There will be no traders without a buyer, and vice versa, and there is no
market without the two sides. However, not only the two actors, there are still others who are called as loan
sharks.
In the general population, moneylenders have a bad image as a moneylender who take interest in a very large
number of loan customers, but moneylenders still exist in society. They remain a viable alternative in the
current financial needs are on the rise. For the little people, the credit from moneylenders is a profitable,
because when they borrow in the bank as a financial institution formal conditions required are considered
very complicated. In the view of the economy, the market is a meeting place for buyers and sellers to
determine the price of the deal in order to exchange goods or services. The market is also a social
construction because of economic resources, ie goods and services are allocated there. (nugroho, 2001: 30).
Chairman of the board of commissioners of OTORITAS JASA KEUANGAN (OJK) MULIAMAN D. Hadad
said that the phenomenon of moneylenders or "leeches" arises because during this difficult banking services
to reach out and reach people in rural areas. Moneylenders can walk for easy access, although not cheap but
convenient access that keeps them there. (kompas.com 04/07/2015).
Ugliness moneylenders do not affect the tendency for people to borrow money / capital from moneylenders.
This is because the process of borrowing capital quickly so that small communities divert much borrowing
from banks to loan sharks. In practice, the moneylenders always lent facilitate the public in the capital, but
the interest charged to the borrower very large bank exceeded. So for people who can not pay within a period
of time, then the interest will grow even exceed borrowed.
Moneylenders derived from the term classic dutch: rentenier. According to THE INTERNATIONAL
DICTIONARY (Raliby, 1982) means "eater of usury or interest money." all divine religions, especially
islam, forbids usury, denounced and threatened eater of usury which is a form of injustice against our fellow
477
human beings. (surah al-baqarah [2]: 278-279) .praktik moneylenders in the world never die because the
applicable law is economics, the law of demand and supply. Moneylenders and practices in our country has
not been touched by the rule of law and financial services supervisory authorities.
Until now it is not uncommon for muslims who claim the state borrowed money from moneylenders to meet
urgent financing needs, such as for venture capital, the cost of education, medicine for the sick, and so forth.
The traders in the market palimanan mention rentiers "wong hobo" because on average they are from the tribe
of batak, medan, north sumatra.
The advantages can be seen from the loan shark lending process. Loans issued by moneylenders easier, faster
and do not need collateral, based on mutual trust. The new borrower usually treated very well, as adjusted by
the behavior of each borrower. A large number and size of the loan is not restricted, depending on the ability
of lenders as well as borrowers' needs. Borrowers do not have to bother to go to the lender for the loan
repayment or simply lending, because usually pinjamanlah giver who visited the borrower money even to
stall or to their homes.
In the context of moneylenders and traders, meaning communication that exists can be traced through
coordinated management of meaning (CMM). Many people consider their conversation as something for
granted. When people talk to each other, they often follow predictable patterns, and they depend on social
norms. To understand what happens in a conversation, barnett pearce & vernon cronen forming theory
coordinated management of meaning (CMM). For pearce and cronen, people communicate based on the
rules. The rules play an important role in this theory; the founders brpendapat that rules not only helps us to
communicate with others, but also in interpreting what is communicated to otHER PEOPLE TELL US
(TRENHOLM & Jensen, 2004: 91-94).
In conversation and through the messages we send and receive, each person creates meaning. When we create
our social world, we use different rules to construct and coordinate meaning. That is, the rules guiding the
communication that occurs between people. Cmm focuses on the relationship between the individual with
society. Through a hierarchical structure, people organize the meaning of hundreds of messages received in a
day.
THEORETICAL STUDY
Individuals creatively through the process of thinking; subtract, add, and generate meaning through the
perceptual process of the object meaning that it faces. In trying to understand the meaning accordING TO
JOSEPH De Vito (1998: 141), "look for meaning in people, not in words. Meaning change but words are are
relatively static, and shared meanings, not only words, through communication. "
By the very nature of meaning exist in individuals, then it is all social action by individuals led to the
formation of meaning and meaning-making is constructed by each individual. Perhaps it was the same
formation, cheek by jowl, even contradictory. Largely determined by the capacity and interests of each party
to make up the meaning of it. The problem is when a meaning that is owned and used to control others even
accumulated for menananamkan meaning to another person, an individual must be careful with the
construction of its meaning.
Essentially all taken for granted. Social contract between the two parties should not be resolved by formal
law, interpersonal rationalization enough. Differences of meaning in interpersonal communication behavior
that is coordinated management of meaning theory. This theory dikembang-kan by w. Barnett pearce and
vernon cronen in 1980 (in the west and turner 2007: 110-113) with the assumption that: human beings live in
communication, human beings co-create a social reality, and information transactions depend on personal and
interpersonal meaning.
Theory of coordinated management of meaning (cmm) or coordinated meaning management theory,
according to pearce and cronen, people communicate by rules. The rules not only helps us to communicate,
but also in interpreting what dikomunika-sikan others on us. Therefore they both theorize CMM(coordinated
management of meaning) that this theory can help explain how people create meaning in a mutual
conversation.
According to this theory, the meaning is personal and interpersional. Personal meaning is the meaning that
has been obtained when a person brings a unique experience to the interaction. While the meaning of
interpersonal interaction results when two people agree on the interpretation of each on an interaction.
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Meaning of personal and interpersonal obtained in a conversation and is often based on the meaning of it
without much thought.
If you look at the assumptions of these theories, the individual in order to establish harmonization or also
solve the conflict it faces, then be careful with personal meaning to be given to someone else. On the other
hand too much to learn to build interpersonal meanings are implanted and the results of social agreement.
CMM describes when a person commits interpersonal communication, the two individuals involved in it will
build the social reality of each by obtaining a linkage particular (coherence), co-ordinated action
(coordinating action), as well as the experience of the secret (experiencing mystery), (http :
//www.cw.utwente.nl/). Words have different meaninGS IN DIFFERENT CONTEXTS (TRENHOLM &
Jensen, 2004: 92).
Basically, the transaction information depends on the meaning of personal and interpersonal, as stated by
donald gordon cushman and whiting (1972). Personal meaning (personal meaning) is defined as meaning that
achieved when a person interacts with others while bringing a unique experience into the interaction.
Personal meaning mem-help people in the invention; that is, it not only makes us able to find information
about ourselves, but also help us in our discoveries about others.
When two people agree on the interpretation of each other, they are said to have reached the meaning of
interpersonal (interpersonal meaning). To achieve this will probably take some time, because the relationship
is complex and confronted with various issues of communication, depending on the per-masalahan which is
being discussed. Personal and interpersonal meaning-kan obtained in conversation and often without thought
out in advance.
Six elements of meaning in CMM (trenholm & jensen, 2004: 93):
1) content (content), is the first step in which the raw data is converted into meaning.
2) follow speech (speech act), refers to the actions that we do by way of speaking, including praise, insulting,
promised, threatened, and asks states.
3) episode (episode), refers to the communication routine has a beginning, middle and end are clear.
4) the relationship (relationship), can be defined as a contract agreement and understanding between two
people in which there is guidance in the act.
5) the text of life (life scripts), referring to the groups of episodes of the past or the present that creates a
system of meaning that can be managed together with others.
6) patterns of culture (cultural pattern), refer to the description of the world and how people relate to it.
Levels higher help us understand the levels are lower. That is, each type of roots of another type. In addition,
pearce and cronen choose to use the hierarchy as a model rather than a sequencing system that is for sure.
They believe that no sorting is certain because the people have the interpretation of the meaning that is in a
different level.
Coordination is an attempt to interpret the messages sequentially. Coordination exists when two people are
trying to interpret the messages sequentially in their conversation. According to pearce, the best way to
understand the coordination is to observe people interacting in everyday life. There are three possible
outcomes emerge, when two people are talking: they achieve coordination, they do not achieve coordination,
or they reach a certain level of coordination in (philipsen, 1995; griffin, 1997). Gerry philipsen clicking
reminded that social reality is not fully coordinated perfectly, so that the most likely outcome is achieved is
coordination achieved in part.
RESEARCH METHODS
This study uses qualitative qualitative methods. Miller (2002: 69) states that "qualitative methods of research
are valuables when we wish not to count or measure phenomena but to understand the caracter of experience.
Particularly how people perceive and make sense of reviews their experience. This involves interpreting
meaning and other unobservable dimensions of communication. Collecting data in this study was conducted
through interviews, observation and document analysis.
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In-depth interviews were conducted semi-structured interviews, in which the researcher has a specific list of
questions or topics to be discussed are often called "interview guide" but informants have the freedom to
answer questions. Observation, before and when the interview was conducted, namely appreciation of the
author's travels, and the local environmental conditions stay. Documents used are books, newspapers,
journals, koran and other sources.
Results of research and discussion the authors formulate according to the research questions that the authors
pointed out earlier, the characteristics of the informer selected are: muslim merchants, have settled kiosk, use
the services of moneylenders in the operations, as well as to cooperate in this research. From these criteria,
research informants in the can from the trader is:
Subjects of this study were 3 people pedagangdengan the data describing the research subjects are:
1. Name: Marni, Female, Status: widow, Education: SMP (Junior High School), Age: 20 years,
Profession: Vegetable merchants, Address: Blok Desa, Palimanan, Kabupaten Cirebon.
2. Name: Zaitun, Female, Status: widow, Education: elementary school, Age: 34 years, Profession:
Trader OF nasi uduk / nasi kuning, Address: Blok Jengkol Palimanan, Kabupaten Cirebon.
3. Name: Arifin, Male, Education: elementary school, Status: widower, Age: 42 years, Profession:
fruits traders, Address: BLOK Tedo Palimanan, Kabupaten Cirebon.
In many cases the services of moneylenders have flaws that could allow a borrower to complain, even
running away from his responsibilities. The flowers are large, usually money lenders set rates at intervals of
20% up to 50% per month. Meanwhile, if compared to loans from mortgage, credit unions, bpr and bank
umun, which range interest of not more than 10% to 15% per year or 0.83% up to 1.5% per month (based on
the reference rate bank indonesia). Of course this is very advantageous for the moneylender with the interest
rate. Such loan sharks to borrow money in the bank amounting to IDR 10.000.000,00-, with bank interest rate
of 10% per year, he will pay interest amounting to IDR 1.000.000,00- in a year or IDR 84.000.00 per month
to the bank. When he got in his hands, in a single month, for example, moneylenders had 20 customers with
credit IDR 500,000.00 / person, with a 20% interest she has been able to get an interest rate of IDR
2.000.000,00.
From the information that the author can be of some market traders in cirebon palimanan market there is
always a merchant who took credit on moneylenders. Many friends of the colonies (where berjualannya
adjacent) borrowed on loan sharks. Preliminary research conducted by the author on january 1, 2015. This
study was conducted in cirebon palimanan market. Formerly market is located west of the city of cirebon is
called pasar minggu palimanan because at the sunday market is more crowded than usual. Market enlivened
by clothing merchants, traders household appliances, as well as on sundays other buyers were more than
usual. In addition to the commodities mentioned above, there are many other traders are present seasonal
weekly basis, such as florists, ornamental fish traders, merchants household furniture, and so forth. But this
study was primarily focused on traders who open a stall not only sunday but almost every trading day. And
this research is focused look at the interaction between the moneylender with merchants in the market
palimanan in the perspective of interpersonal communication. Due to the attraction between moneylenders
and traders which causes the trader owed to moneylenders.
The results obtained are as follows: first, the social characteristics of borrowers to moneylenders in terms of
age, is in the range of productive age. Typically the average borrowing money is the people who are married
to old age. Second, the social characteristics of the sexes. In the context of muslim traders who borrow to
moneylenders are men and women who have and never married. Even a few of them are borrowed not only
for merchant capital but also for household needs. As disclosed in advance, among them there were borrowed
for school children, go for treatment, or other needs. Therefore, either directly or indirectly they depend on
moneylenders in running their business as well as the fulfillment of everyday family life.
Third, the social characteristics in terms of education. When viewed from the profile and character of the
subject of the above it appears that education adopted by the respondents on average only up to primary
school (sd), even Zaituns (45 years) did not complete primary school. The reason they do not continue their
education to a higher level of economic factors. Parents no longer able to send. Although the respondents
give a reason for economic factors, but overall indicate parents are less concerned about education. With an
educational background as described resulted in their thinking later when married "not too bothered" when
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sandwiched financial problems. Moneylenders a solution to their financial problems. Social characteristics in
terms of education is likely to significantly affect their livelihood in the future, namely trade. After feeling
"comfortable" working as a merchant they were not interested in finding another job. This trade context
orientation is not to get rich but the extent of their basic needs can be met (for food, clothing, and food).
Therefore if they are difficult financial problems rests are moneylenders.
Fourth, the social characteristics of the marital status of respondents were married, widows and widowers.
Marni (20 years old) young widow with one child was 2 years old, Zaitun (48 years old) with two young
children in elementary and junior high schools, and arifin (42 years) a widower with three children, was a
toddler, elementary and junior high students. When i asked about the ease or difficulty experienced anything
when interacting with moneylenders:
―baka arep nyili duwit maning biasae tek sms dikit batake. Ngko teka dewek ning umah, yu. Uwonge
baik, nakoni butue pira, kadang-kadang malah nawari nambah utangan. Melas jeh kitae soale janda,
kudu ngupai mangan mimi karo nok cilik,‖, "said Marni.
If going to borrow money again normally the first step is sms moneylender (batak people), sis. He is a
good man, asked the quickness of how, sometimes even offering additional debt. Pity he said, because
i am a widow, should give my mother and my little daughter. (interview with Marni, january 20,
2016).
Judging from the way marni tells the relationship with moneylenders seems to be very good. Wong batak
after-sms immediately drove to his home and grew an intimate interpersonal communication, even the money
lenders offering debt.
"―Kita baka ditawari utang luwih gede emong, yu. Wedi angel bayare, ngko bungae tambah duwur.
Sapa weru baka berbunga-bunga batak kah dadi galak kaya sering tek rungu.‖
If i was offered a larger debt not want, sist. Fear difficulty of pay, the interest of high added later.
Who knew that flowery hobo so fierce as Ioften hear.
When examined the statement of Marni, although the interpersonal communication that exists with
moneylenders is quite good, but he still felt to be vigilant. The moneylenders good to him because he is
disciplined to pay the debt. Marni but still underestimate the salvation it. The moneylenders either because no
wants. He said the debt to moneylenders IDR 200.000, -, IDR 500.000, - and at most IDR.1.000.000, -.
Flowers are given a loan shark is 20%. And almost all traders pay the debt on a daily or per day depending
upon the agreement with the moneylenders and the amount of debt provided. If a day trader can not pay the
next day the merchant pays double. And so on. Although there is a close relationship with the moneylenders
so that there are times when debt payments professionalism impressed pliable but still put forward by
moneylenders. It is also recognized ZAITUN.
Zaitun divorcee with two children as it is very close to the moneylenders who lent him money, if given
moment bayarnya late of maturity, he argued: ―wis sih bang, aja rewel gah lah. Wong wis langganan seng
bengen jeh. Kitae kih butuh maning. Rongatus bae. Engko sekalian bayare minggu arep karo kang wingi.
Sekien duwite nggo kacung kang masih sekola,‖ (" come on, brother, do not fuss. Already a subscriber used
to be. I'm needed again ya. Two hundred (thousand) more time. I'll pay it all next week. Now the money for
my son who is still in school ").
Zaitun said this shows the laughter crunchy fried tempeh or handing out the contents of his merchandise,
―serpis, nggo juragan duwit. Gratis"(" servis, to skipper money. Free! ").
Moneylender called "brother" by zaitun grumbled while eating fried foods in the language of cirebon broken.
"―aja mengkononlaah, tuuun... Awak bisa bangkrutlah kalau tun bayare ora disiplin.‖ (don‘t like it, tuuun ....
I could go broke if you not discipline in payment). After that they will be involved in a small debate. But
usually zaitun win.
―si abang lah nok, baik pisan ning kita kuh. Kita wis suwe sering nyili duwit ning deweke. Sering
telat bayare. Tapi deweke teka maning-teka maning. Mbuh ning uwong kepriben, tapi baka bayar gan kita
sering njaluk diskon.....haha..‖ (mr.moneylenders very good to me. I've been often borrowed money from
him. Often late pay. But she's dating again dating again. Do not know if we go to the how, but if you pay me
frequently requested pieces. Haha ...) " Zaitun said in an interview on january 21, 2015. Interpersonal
communication between them seems to be very good.
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Even moneylenders sometimes came to her just to say hello or buy coffè and fried banana. But when i kidded
that maybe si abang like her face a moment of zaitun changed.
―mbuh ya nok, deweke seneng bli ning kita. Kadang nggoda gen tek anggap guyone wong ngawur.
Terus batak rentenir luh langka kang ganteng nok, tek deleng-deleng kah blesak kabeh! Tapi diiih....amit-
amitlah. Aja sampe kita kawin karo rentenir. Ora kena mambue suarga. Apamaning deweke dudu wong
islam.‖ "(" i do not know ya, neng, he's happy baseball with me. Sometimes (he) teases also i consider
kidding around people inconsequential. Keep batak moneylenders tuh neng baseball is handsome, i noticed
the ugly all. But diiih .... God forbid. Do not let me marry him. Nah going to get the smell of paradise.
Moreover, he is not a muslim. "). Zaitun attitude is the same substance with Marni statement. Interpersonal
communication built by moneylenders still considered a professional relationship because they need each
other. Moneylenders approached proactively to target an attempt to capture customers. But for marni and
Zaituns, only to the extent that, no more.
This is confirmed also by Arifin (42 years old). Widower with three children is no different with marni and
Zaituns in terms of dealing with loan sharks. Interpersonal communication is established and running well.
Even as familiar arifin can joke a bit wild.
―Bang sekali-kali kita aja nyili siiih. Dipailah! Ning kono kan duite kaya banyu, ngalir
terus....itung-itung bonus nggo langgganan." (" Broth, once in a while i do not borrow (money) siiih.
Diberilah! Your money is right like water, flow continues ..... It was counted as a bonus for subscriptions.
"Arifin, interview january 21, 2015).
According to arifin he was not given money, but the money lenders is easy to give a cigarette or sometimes
treat meatballs, eat together at the roadside. But this close relationship does not necessarily make Arifin
sympathetic to moneylenders customers.
―Wah hubungan karo rentenir sih, Yu....Cuma nganggo urusan nyili duwit bae. Bagen
deweke baik tetep bae deweke batak rentenir....‖. ( "The relationships with moneylenders anyway,
sister... Just to borrow money matters alone. Let him well nonetheless hobo moneylenders.")
When examined overall interpersonal communication built by moneylenders against traffickers in palimanan
market is indeed unique. Because almost all of its customers only consider it as a professional relationship
and mutual symbiotic (mutually beneficial) in business affairs. Not until deep and touching personal lives
among them. These traders only consider socioeconomic moneylenders have benefits when they need them.
In their view any moneylender was good and always approached as well as making physical contact
personally because no wants, as economic targets (owed by the count of rents).
Unique again is like a loan shark know if the target experiencing financial problems. For example, when they
took charge of the school when the new school year. As told arifin.
―Hee, anake arep sunat yaa. Butuuh duit beli?‖ (Hi, Your children will circumcision, right? Need
money, is not it?) "asked moneylender called abang. And arifin was not so indebted to his brother because of
the offer provided the loan sharks.
Humanist attitude in interpersonal communication is also experienced by the average customer. When Zaitun
circumcise her son she was also given a loan by loan sharks with a payback period of somewhat "soft" and
there is a discount on the grounds of the moneylenders to donate to the circumcision at the same invitation.
Likewise marni, when his son was hospitalized given a loan by loan sharks. When marni can not pay on time
moneylenders understand but still came marni routine and bill nicely. The attitude shown by moneylenders
resulted in customers trying to keep up with as much as possible to pay with discipline. Style of interpersonal
interaction is done by the moneylenders seems to follow and adjust your customers or prospective customers.
Interaction and debt repayments are carried out in the market that is already prevalent if customers deposit
money deposit to his friend in the market (benthic) if the trader who owe no need. People who do not owe
will be marked by the moneylenders so that if there is an indication for the moneylenders diprospek will
perform interpersonal approach to give a positive signal to potential victims (traders).
In a review of the six levels of meaning in the CMM, the content (content), the speech act (speech act),
episodes (episodes), relationships (relationship), manuscript kehidupaan (life script), and patterns of culture
(cultural pattern). Levels higher help us understand the levels are lower. Communication between traders
with moneylenders could be reviewed in six levels of meanings.
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Table. Level Meaning Communications Merchants With Moneylenders

No Level Informan
Marni Zaitun Arifin
1 cultural traders extremely wary Keep in touch well, joking Traders consider the loan
pattern of loan sharks stigma and familiar with certain shark has a different culture
batak-stern, think better principles. Traders consider with him, moneylenders-
when mutual respect the loan shark has a different batak-java with muslim
and responsibly about culture, in religion / beliefs. merchants. In the same
loan commitments. purpose, the needs of
business and economic
principles run through the
deal.
2 life script "I don‘t dare to borrow " i do not know, neng, he's " The relations with
a lot. If flowery hobo happy joking with me. moneylenders anyway,
become fierce Sometimes (he) also tempt ma'am ... Just to borrow
"Moreover, he is not a kidding around people i money matters only. Let
muslim " consider inconsequential. Do him well nonetheless batak
not let me marry him. moneylenders. "
Baseball is going to get the
smell of paradise.
3 Relationship located calculations, Close by within, Intimate, close, keep your
professional. professional. distance.
4 episodes moneylenders offered It has long been on loan Moneylenders offered

through the media sharks to borrow money. initially to trade, then the
(sms), came to the Party hobo moneylenders family needs such as
house of the merchant, offer first. For the purposes circumcision celebration.
offered additional of trade, education, and Loans continued until now
borrowing as much as continues until now.
possible but only as
needed..
5 speech act friendly, alert. Laugh, joke (handing fried joking, friendly, open to
wares) physical contact such as
patting his shoulder, sat
down with (accept gifts or
treats meatballs smoking,
eating together in a side
street)
6 content moneylenders batak- Moneylenders batak remain Batak loan sharks to borrow
well, interaction only calculations, just to borrow money only affair
for business purposes.. money
The six elements meaning composed of high fatigue level to lower levels: cultural patterns, script of life,
relationships, episodes, speech acts and content. Each type is rooted in another type. Additionally, perce and
cronen choose to use the hierarchy as a model rather than a sequencing system that is for sure. They believe
that no sorting is certain because the people have the interpretation of the meaning that is within the level
berbedaketika circuit runs consistently through measures that exist in a hierarchy so-called balanced circuit
(charmed loop). And one day, some episodes may be inconsistent with levels higher in the hierarchy that
exists then it is named after the circuit is not balanced (strange loop).
In communications between traders with moneylenders, found some circumstances where both parties try to
maintain a balance relations for the creation of coordination or communication that reaches them achieve
some level of coordination. Many of the problems around us are endless strife, discord, divorce between
spouses, quarrels between members of society, and so often blame the communication is not smooth as the
principal cause of their problems. Communication between traders and moneylenders in the market
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palimanan realized with both sides trying to achieve a coordinated meanings according to the purpose of their
interactions, namely the need to run a business (trading). The theory of coordinated management of meaning
trying to make life better through communication life arrangement.
CONCLUSION
The results showed that the moneylenders in Pasar Palimanan, Cirebon have confidence that traders are still
very interested in their credit. How that is done to attract traders do naturally, which maintains all the
flexibility of late terms of the payment process and still interact intensely with the patterns of interpersonal
communication with merchants. Moneylenders also remain oriented economy, so the calculation of the effort
does. Muslim traders chose moneylender as a solution to their financial problems, as well as their propensity
to apply for credit rather than to other parties. Traders feel disadvantaged due to pay their debts to loan sharks
is by installments daily, so even though the interest charged to them, do not experience severe high. In
communications between traders with moneylenders, found some circumstances where both parties try to
maintain a balance relations for the creation of coordination or communication that reaches them achieve
some level of coordination. Both sides establish close interaction-within-a professional, trying to establish a
close relationship while still keeping within the scope of mutual economic benefit.
BIBLIOGRAPHY
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Littlejohn, SW (2005). Theories of Human Communication. Eight Edition. Belmont California: Wadsworth Publishing
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Nugroho, Heru (2001). Uang, Rentenir, dan Hutang Piutang di Jawa. Yogyakarta : Pustaka Pelajar.
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Singapure: Thomson Wadsworth.
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Natalia Damayanti Maer. Jakarta: Salemba Humanika.
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%20interpersonal%20kontekstual.pdf
http://en.wikipedia.org/wiki/Coordinated_Management_of_Meaning
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484
COMMUNITY PARTICIPATION IN DEVELOPING DESTINATION BRANDING:

TOWARDSUSTAINABILITY OF GREEN URBAN KAMPUNG
Ima Hidayati Utami*

Communication Science Department, Faculty of Social and Political Sciences, Brawijaya University
imadayati.u@ub.ac.id; utami_ima@yahoo.com,
ABSTRACT
Kampung Glintung‘s face used to be similar to that of other urban kampung‘s : prone to flooding, gloomy
under high rise building, and densely housings. In 2012, the residents started a movement called ‗Glintung
Go Green (3Gs)‘ to change their environment into a green and agreeable space to live in. The success of this
movement then inspired the community to develop Kampung Glintung into a green tourism destination.
This study aims : firstly, to investigate the underlying concept in developing brand destination; secondly, to
investigate the community participation in building brand destination. Employing a qualitative approach,
empirical data were collected by using secondary and primary data sources. The primary data was collected
through observation, in-depth interviews and FGD with Community Unit (RW) managements,
Neighborhood Unit (RT) managements, and 3Gs management. While the secondary data was collected from
related documents.
The first finding reveals that brand destination concept rooted from the solution to classical problems faced
by Kampung Glintung such as : routine flood, muddy alley, mossy walls in rainy season, and hot
temperature as well as lack of clean water in dry season. Pioneered by the head of RW 23, the residents hand
in hand took two principal actions to save their home environment : firstly, under the guidance of
Engineering Faculty – Brawijaya University, they built biopore holes and absorption wells to counter
flooding and maintain sustainable water supply. Secondly, for the sustainability of environment, they
implemented green urban practices such as : creating vertical garden and hydroponic system, producing
diverse planting medias, implementing 3R (reduce, reuse, recycle), developing rubbish bank, creating recycle
product, producing healthy food from home garden, and developing children environment cadres. Those two
principle actions has become the foundation of 3Gs brand destination as well as the major attraction of
Glintung tourism object.
The second finding reveals that residents has actively participated in developing 3Gs brand destination. The
first step, under the coordination of 3Gs management, representatives of residents took part in developing
roadmap of Kampung Glintung as tourism destination. Second step, to develop brand identity, 3 Gs
management and representative residents were assisted by Agency for the Assesment and Application of
Technology (BPPT) to design logo, and formulating vision and mission. Third step, the publication of brand
was still limited to publication which were incidentally happened on special events, such as when Glintung
winning award or getting official visits.
Keywords: Community participation, urban kampung, destination branding, sustainability, Glintung Go
Green.
1. INTRODUCTION
Kampung Glintung is a settlement stretches out behind Letjend S. Parman road, which is one of main roads in
a business district, Malang. Administratively located under RW (Community Unit) 23, Kelurahan
Purwantoro Kecamatan Blimbing, the area of RW 23 is devided into 4 RTs (Neighborhood Unit). Inhabited
by 1.088 people, consisted of 861 adults and 277 children, Kampung Glintung‘s physical characteristic used
to be similar to the other urban kampung in Indonesia, i.e.: densely population and housings, gloomy under
high rise building, and prone to flooding. A green movement mobilized by RW 23 head in the end of 2012
has changed Kampung Glintung into green, healthy, and beautiful environment. The residents named a
movement to make their kampung into green environment as Glintung Go Green (3Gs). Despite its narrow
land, the residents have planted many kind of fruits, vegetables, flowers and medicine-plants in pots, vertical
gardens, hydroponic systems, as well green houses. Furthermore, to counter routine flooding in rainy seasons
and water scarcity in dry season, residents have developed a water saving movement called Gerakan
Menabung Air (GEMAR) by building biopore infiltration holes and absorption wells.
485
Since the green movement was released in 2013, Kampung Glintung has achieved several awards, such as :
winning green kampung award coducted by Decofresh Malang in 2014, winning shining kampung awards
conducted by Malang Government in 2014 and 2015, and winning farmer group award conducted by
Departmen of Agriculture Malang in 2016. The achievements made by Kampung Glintung in turn made it to
be the role model of green kampung in the middle of city. According to RW23 head, winning awards was not
the main purpose of Glintung green movement, the most important thing was to build residents‘ awareness in
creating and maintaining a clean and green living environment. In attempt to push residents‘ participation in
the green movement, he then published a kampung regulation : ―Residents requesting letter from Head of
RW or RT should grow plant‖ (interview with Bambang Irianto, September 8, 2015). This strategy resulted
positive impact to Glintung home environment. Today, if we visit Kampung Glintung we can see that all
houses have been decorated by many kinds of plants.
The succes of Glintung green movement has attracted many interests from public. The enthusiasm of visitors
who came to watch or learn the practice of green urban village on the site inspired RW 23 head to develop
his kampung into green tourism destination. In 2014, he organized Glintung residents to develop a team
called 3Gs management to develop Kampung Glintung into a tourism object. 3Gs management personnels
composed of RW 23 head and representatives from four RTs on the area. Based on the discussion between
3Gs management and the residents, Glintung Go Green (3Gs) was finally chosen to be the brand name of
Glintung tourism object. In two years, 3Gs brand name has been quite familiar for public, especially whom
interested in green movement in urban area. The number of visitors is now reaching 5,000 domestic and
international tourists gaining 8 million rupiahs per year. The number of visitors also gain financial support for
the residents by selling green products and souvenirs as well as healthy food (FGD. September 22, 2016).
Morgan, et al. (2010, p. 69) suggest five phases in destination brand building : phase one, market
investigation, analysis and strategic recommendation; phase two brand identity development; phase three
branch launch and introduction, communicating the vision; phase four brand implementation; phase five
monitoring, evaluation and review.
Botes &Van Rensburg, 2000; Cole, 2006; Porritt, 1998; Okazaki, 2008; Towner, 2016 (in Cole 2006, p. 360)
states that community participation is a vital element of sustainable tourism development. Local participation
is required to gain the support of the community and their approval for tourism development, ensuring that
any benefits reflect the needs of the local population (Cole, 2006, p. 630).
The fact that community participation is not only crucial for managing and running tourism program but also
for developing brand destination provoked the researcher to conduct a study based on the following problem
formulations:
1. How does Kampung Glintung comunity develop the underlying concept of brand destination?
2. How does Kampung Glintung community participate in brand destination building
Referring to the problem formulations, this study aims : firstly, to investigate the underlying concept in
developing brand destination; secondly, to investigate the community participation in building brand
destination.
2.1. Destination Branding
Destination branding is a process used to develop a unique identity and personality that is different from all
competitive destinations (Morrison & Anderson, 2002, p.17). This definition outlines important actions need
to be done, like the right communication or advertisement, to establish a unique destination brand. A need to
differentiate a tourism object from its competitor makes a destination need to be branded. From the
perspective of formulation and implementation of branding strategy, Gnoth (2002) sees destination branding
as a management process that leads to a strategic plan to build a brand identity based upon destination
attributes selected on the basis of competitiveness, uniqueness and desired identity. Hall (1999) defines the
core objective of destination branding as the production of a consistent, focused communication strategy,
based upon the selection of a collection of core intangible values existing in the mind of the consumer.
Contrasting, Pride (2002) combines a communicator perspective with a relationship perspective in which
486
tangible attributes play a key supporting role within the communication framework, providing reasons for the
consumer to believe.
Destination brand building is a complex issue, including several phases and steps to be done. Morgan et al.
(2010) divide the destination brand building process in five phases. The first phase involves market
investigation, analysis and strategic recommendations. During this phase the core values of the destination
and its brand must be established, and they should be relevant, durable, communicable and salient (Morgan et
al, 2010, p.68). The second phase is brand identity. According to the authors, ―once the brand‘s core values
have been established, they should underpin and imbue every component of the brand identity, from
photography, colour, typography and tone of voice to the brand marquee, so that the brand values are
cohesively communicated‖ (Morgan et al, 2010, p. 68). Phase three is brand launch and introduction:
communicating the vision (Morgan et al, 2010, p. 69). The fourth phase is brand implementation where every
step taken through any form of media contributes to maintaining the brand presence, and the fifth phase is
monitoring, evaluation and review. The branding process is vital and should always be controlled to be able
to adapt the strategy if the demands, external or internal situations are changing (Morgan et al, 2010, p. 70).
2.1 Community Participation
Community refers to a group of individuals living or working within the same geographic area with some
shared cultures or common interests (Aref et al. (2010). Numbers of studies have examined the involvement
of community participation in the tourism development process. The process of tourism development as
pointed out in the works of Doxey (1976); Butler (1976); Butler (1980); Keller (1984) as cited in Tosun
(2000), appears to suggest that there is a high degree of dependence on residents for their acceptance of the
industry before it starts in a particular destination. The above findings indicate that that community
participation in developing an area into a tourism destination is very crucial in order to avoid uncertainties
and misunderstandings and for the sustainability of tourism destination.
Sustainable tourism may be thought of as ―tourism in a form which can maintain its viability in an area for an
indefinite period of time‖ (Butler, 1993, in Zouganeli, 2012). The concept of sustainability is based on the
premise that the inhabitants of a destination are the ones that should be involved in the way this destination is
being managed and promoted (Zouganeli, et al, 2012). The role of community in the concept of sustainable
tourism development is crucial and it refers to the dynamics of stakeholder participation: On one hand
regarding their involvement in the decision making process, in the planning and implementation of the
tourism policy, and in the establishment of a fair distribution of the costs and benefits emerging from tourism
development and on the other hand, regarding their involvement in the formation of the tourism product of a
destination and of the visitors‘ experience (Tsartas, 1996, in Zouganeli, 2012). The attitude of the residents
towards tourists also constitutes an important factor regarding the quality of tourism experience and the
attractiveness of a destination (Bachleitner & Zins, 1999; Ryan & Montgomery, 1994, p. 359 as cited in
Zouganeli, 2012). People tend to avoid places where they do not feel welcome, Belisle and Hoy (1980) go as
far as to argue that of all the factors determining travel pleasure, there is none more important than the
behaviour of locals towards tourists.
Accordingly, destination branding can only be sustainable when hosts, policy objectives and tourists‘
demands are in harmony. By comparison to branded products and services, however, destinations face
peculiar promotion and branding challenges since they have many stakeholders and there is little or no
management control (Morgan & Pritchard, 2005). To this end, an increasing number of tourism scholars and
destination managers suggest that residents‘ input is a prerequisite and should be integrated in the
development of a destination brand (Morgan, Pritchard & Piggott, 2003).
3. METHODS
Employing a qualitative approach, this study is enriched by the use of primary and secondary data. Primary
data are collected from the representatives of 3Gs management, Community Unit (RW) representatives, and
Neighborhood Unit (RT) representatives, while secondary data are collected from related references and
documents. The data are collected through observation, in-depth interview, and Focus Group Discussion
(FGD). They are then analyzed based on Miles and Huberman analysis method.
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4.1. Green Concept in Kampung Glintung Brand Destination.

Green concept in Glintung brand destination was inspired from a community movement called Glintung Go
Green (3Gs) which was initiated by the head of RW 23 Purwantoro Malang, Mr. Bambang Irianto, in
December 30, 2012. That green movement initially aimed to answer two problems rooted from lack of
residents‘ awareness to their environment: firstly, routine flood in rainy season and water scarcity in dry
season; secondly, slum and unhealthy environment. A big flood happened in 2012 has been starting point for
Mr. Irianto to encourage all residents to pay more awareness to their home environment. To answer the first
problem, in 2013 Kampung Glintung got scientific support from Faculty of Engineering – Brawijaya
University (UB) to develop water management system to counter routine flooding as well to sustain water
supply. Academicians and students hand in hand with residents successfully built biopore infiltration holes
and absorption wells which the residents later called it as Water Saving Movement (Gerakan Menabung Air -
GEMAR). Today, kampung Glintung has 421 biopore infiltration holes and 4 absorption wells of 10 meters
depth and 1 meter width (FGD, September 22, 2015). To answer the second problem, under the guidance of
BPTP Jatim (Agency for Agricultural Research and Development, East Java), in 2013 residents started to
develop agro innovation, such as : vertical gardens, hydroponics, and greenhouses (FGD, September 22,
2015). They planted vegetables, fruits, and medicine-plants, such as kale, beans, cabbage, celery, chili, onion,
garlic, potato, tomato, cucumber, orange, star fruit, curcuma, etc. They also grew some rare plants, such as :
Majapahit chili, Dayak onion, Korean onion, and creeping potato. In addition, they also developed waste
bank and waste handling 3 R (Reduce, Reuse, and Recycle), produce healthy food from home garden, and
develop children environment cadres.
The implementation of Water Saving Movement integrated with a green movement and waste management to
provide sustainable green, healthy, and beautiful environment in urban kampung became the uniqueness of
Kampung Glintung invite visitors coming. As it was stated by Morrison & Anderson (2002) destination
branding is a way to communicate a destination‘s unique identity by differentiating a destination from its
competitors. Furthermore, some achievements of Kampung Glintung in winning several green kampung
awards and being the role model of green kampung in the middle of a big city have created a positive image
attracting students, researchers, government officers, or other kampung residents came to watch and learn the
practice of green kampung. Ryan and Gu (2008) stated that image of a place is also an important asset. Ryan
and Gu (2008) emphasize that the image itself is the beginning point of tourist‘s expectation, which is
eventually a determinant of tourist behaviors.
4.2. Community Participation in Developing 3Gs destination branding
Referring to five stages in developing brand destination suggested by Morgan & Pritchard (2007, p. 69),
community participation in developing 3Gs destination branding in this study can be described as follows :
1). Stage 1 : Market investigation, analysis and strategic recommendations:

After winning green kampung award in 2013, on a routine meeting of four RTs under RW23, Mr.
Bambang Irianto who is RW head presented his initiative to develop Kampung Glintung into a tourism
object. Reaction from the attendees was generally positive. To follow up his initiative, he conducted
meetings with representative RTs and residents to introduce the goals of the project and to collect
aspiration on what kind of tourism programs the residents could envision for their kampung. On the first
meeting, the attendees agreed to use water saving movement, agro innovations, rubbish bank, community
role and participation they have already started to be icons of Kampung Glintung. Therefore, these icons
need to be improved and reinforced. To take action, all attendees agreed to develop a team called 3Gs
management who was headed by RW23 head and supported by 4 area managers and four area
supervisors. In the end of meetings, the team completed the following strategic plan:
- Designing a short term plan to develop Kampung Glintung into green tourism object based on the
following roadmap.
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3rd year (2016): developing

suprastructur (HRD to manage
Glintung tourism object)
2nd year (2015): Developing Glintung icons (water

saving movement, agro innovations, rubbish bank)
1st year (2014) : developing infrastructure and reinforcing community

involvement
Figure 1 : Glintung Go Green Roadmap on the 1st three years

Source : Researcher‘s Documentation
- Visiting BPTP East Java to watch and learn agro innovation as well as to propose mentoring
program for greening Kampung Glintung narrow land.
- Conducting comparative study to green kampung role models and green tourism objects, such as
Kampung Sukun, Kampung Tlogomas, and Eco Green Park Batu, to watch and learn green system
and management.
- Proposing mentoring program to local administration governments, and universities to support their
program.
- Developing networks.
2) Stage 2 : Brand Identity Development

3Gs management and representative residents, under the guidance of BPTP East Java, created tagline,
mission, and logo of Kampung Glintung tourism object as follows:
- Tagline : Glintung Go Green (3G)
- Mission : Being harmonious, prestigious, and prosperous urban village.
- Logo :
Figure 2 : Logo of Kampung Glintung Tourism Object

Source : 3Gs Management
3). Stage 3 : Brand launch and Introduction.
In this stage, 3Gs management launched 3Gs brand destination to all Glintung residents and society at
large. Due to the limitation of budget, initially it only used banner, name board, wall magazine, social
media, relation with travel agents, and word of mouth to communicate 3Gs brand (FGD, September 22,
2015). Even though it didn‘t own media relation program, but media releases published by local and
national mass media when Kampung Glintung winning competitions or when it got official visits form
government officers or minister helped it to increase public knowledge on Kampung Glintung brand
name.
4). Stage 4 : Brand implementation.

In this stage, 3Gs management started to actively communicate its program to stakeholders such as local
government and institutions, school and universities, travel agents, and private enterprises in Malang.
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The positive response and support from stakeholders made 3Gs brand increase steeply. For example : in
2015 the residents got several trainings to increase their knowledge and skills, such as : training on
hospitality by University Ma Chung, training on guiding technique by Bali Trade Development Center,
training on children environment cadres by UB, training on social communication by Faculty of
Economy and Business UB collaborated with Sampurna Training Center. These trainings were very
useful for residents to improve their skills, attitudes and behavior in welcoming tourist. As it is stated by
(Bachleitner & Zins, 1999; Ryan & Montgomery, 1994 as cited in Zouganeli, 2012) The attitude of the
residents towards tourists constitutes an important factor regarding the quality of tourism experience and
the attractiveness of a destination, training on processing agricultural product by Faculty of Agricultural
Technology UB, etc. These trainings were very useful for residents to improve attitudes, skills, in
welcoming tourist as well as training in producing tofu from State Polytechnic Malang. In 2015, 3Gs
management also gained MOUs and collaborations with some private enterprises some private enterprises
such as hotels and restaurants, travel agents, green tourism groups, and a businessman develop a website
www.glintunggogreen.com for Kampung Glintung. Unfortunately, due to the limit of residents‘ skills in
operating communication technology, this website wasn‘t well managed until a training on website
management held by Polytechnic of Malang City at May 2016.
5) Stage 5 : Monitoring, evaluation, and review.

Since 3Gs brand name was launched in 2014, the brand name (band identity included) haven‘t been
evaluated and reviewed yet (FGD, September 2015). However, based on researcher‘s online observation,
since 3Gs website is actively operated in May 2016, it has been one of key instrument for communicating
destination brand and marketing tool for 3Gs product and service. Another online instruments such as:
3Gs social media, visitors‘ online testimonial, stakeholders‘websites, youtube (published by visitors and
TV online) also becoming tools for communicating 3Gs brand name and brand image to public. In
addition, some publication on Kampung Glintung achievements in greening and conserving home
environment through local and national media, printed and electronic, such as : detik; Kompas; Jawa Pos,
JTV, Malang TV, ATV, TV One, and Metro TV have increased public knowledge on 3Gs brand name
and brand image. The more interesting finding is that all publications on printed and electronic media are
also provided on online media. Thus, it can be said that online medias have played an important role to
drive the delivery of 3Gs brand message to public.
CONCLUSION AND SUGGESTION
Conclusion :
1. Green concept underlying the development of 3Gs destination brand was chosen by Glintung
community as an attempt to overcome classical environment problem faced by Kampung Glintung
residents, such as : routine flood, muddy alley, mossy walls in rainy season, and hot temperature as
well as lack of clean water in dry season. A movement made by urban kampung residents to change
their home environent into green and agreeable living environment become the foundation of 3Gs
destination brand as well as the major attraction of Glintung tourism object.
2. Community participation, community leader‘s role, as well as stakeholders support and guidance
play an important role on the success of 3Gs brand destination building and the sustainibility of
green movement in Kampung Glintung.
3. Online communication medias have played an important role to drive the delivery of 3Gs brand
message to public.
Suggestion :
1. Community skills and knowledge in managing and providing tourism product and service need to be
improved for the sustainability of 3Gs tourism object.
2. Future researcher continue this study by evaluating destination brand to see the strength and the
weakness of 3Gs brand name for further review.
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ACKNOWLEDGEMENT
I would like to express my great thanks to Faculty of Social and Political Sciences, University of
Brawijaya; Communication Department of Faculty of Social and Political Sciences, University of
Brawijaya and my informants.
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AN EFFECTIVENESS OF CREDIT FINANCING MODEL AND A POTENTIAL

OF REGIONAL ECONOMIC FOR MICRO AND SMALL BUSINESS
ENTREPRISES IN SOUTH SUMATERA-INDONESIA
Abdul Basyith, Fatimah &Muhammad Idris

Faculty of Economics and Business, The University of Muhammadiyah Palembang-Indonesia
(Corresponding email: basyith_feump@yahoo.com)
ABSTRACT
This research is aimed at investigating (1) an effective model of credit financing; and (2) the regional
economic potentiality for micro and small business entreprises in South Sumatera-Indonesia. Using 748
respondents from 14 regions in South Sumatera, this study employs a matrix analysis and ordinary least
square. First, according to matrix analysis of statistic descriptive, the results reveal that there are three
industries that potentially having higher productivity in supporting the regional economic in South Sumatera-
Indonesia. Those three potential industries are Food, Beverages and Tobaccos Industry, Other Processing
Industry, and Textile, Clothes and Leather Industry. OKU Timur Regency, MUBA Regency and OKU Selatan
Regency are the regions having higher productivity and higher potential in the sector of Food, Beverages
and Tobacos Industry. Palembang City, Banyuasin Regency and Muara Enim Regency are the regions
having higher productivity and higher potential in the sector of Other Processing Industry. Ogan Ilir
Regency, Pagaralam City and OKU Induk Regency are the three regions having higher productivity and
higher potential in the sector of Textile, Clothes and Leather Industry. Hence, the local and regional
government should be more responsive to stimulate all those regions in those three industries. Second, the
result also reveals that raw material, local products which have characteristics of local area, the guarantee
of raw material availability and economically profitable have a significant impact on micro and small
business entreprises‘ productivity. Furthermore, the result is inline with the notion that a potential product of
one region is determined by the local contents of raw material as the more local contents of one product the
higher potentialilty of that product.
Keywords: Micro and Small Business Entreprises, Productivity, Credit Financing, Potential Sector.
1. INTRODUCTION
Small business sector has a very significant role in the growth of the Indonesian economy. Not only that, the
small business sector has an important role in creating jobs, improving the quality of human resources,
improving the entrepreneurial culture, the development of creativity and the creation of other business
opportunities. Not only that, the small business sector also proved able to survive in difficult economic
conditions. Yet the main problem often faced by the small business sector is the lack of access to market
information and technology, the quality of human resources is low and lack of access to capital.
Although various attempts have been made by financial institutions and government agencies to minimize the
gaps that exist, the small business sector continue to face difficulties in obtaining loans. Loans small business
sector is relatively small and is not attractive to financial institutions. Guarantees are needed than the amount
of the proposed loan and obtained. This may be due to the lack of understanding on the small business sector
institution-based businesses (small and medium knowledge-based business). A lack of flexibility on the terms
and conditions of the loan to the small business sector is a source of problems for the small business sector.
To overcome this, the government through the ministry there has issued various policies aimed at helping the
sector access to capital for small businesses, one of which is the banks are required to allocate 20% of funds
for the capitalization of the small business sector.
Microfinance institutions in Indonesia are categorized into two: the formal (banks and non-banks) and non-
formal (BMT, Cooperative etc.). Microfinance institutions will be hereinafter referred MFI and the small
business sector will be called MSE. MSEs and MFIs have linkage and attachment to one another, where
MFIs are the main tools that can be used MSEs in meeting their capital requirements. However in the
distribution, MFIs provide a condition known as 5C (Character, capital, collateral, capacity and condition of
economic). On the other hand, capital and collateral is often a bottleneck in obtaining funds from the MFI.
493
The gap (the gap) is what makes the ineffectiveness of MFI credit delivery system. It would not be right for
loans disbursed to MSEs that in fact most have limitations in terms of capital and guarantees. Therefore, the
MFI would need to make measurements of other criteria that are specifically made for lending to MSEs. As a
first step, the MFI must have criteria that need to be added in the assessment of lending to MSEs, such as in
terms of the criteria of product, sector and of other criteria.
In terms of product criteria, MFIs can add that the MSEs are included in SME producing excellent products
have a greater opportunity in obtaining funds. In terms of the company's criteria, that the MSE is entering the
featured companies have a greater opportunity to obtain additional funds. superior companies are companies
that have the potential in terms of market access (both local market and international market). So that needs
silakukan exploration of the product and the criteria MSE itself needs to be explored in order to obtain
information that is more complete, which in turn can be mapped to the superior products of SMEs and small
business sectors were superior.
Some MFIs lending measure success with the return of loans. However, this measure is not a measure of
success of the social which MFIs should also have a sense of responsibility towards the success of MSE on
the capital provided. During this time, some MFIs provide guidance to UMK- gets credit from the MFI, but
coaching is only limited action taken MFIs to ensure the return of their money. So the coaching model also
needs to be revised.
In terms of capital and guarantees, most SMEs have limitations, thus lending UMK granted unevenly and
balanced. Most SMEs that have the potential of side products or businesses sometimes do not have the
collateral that can be used to obtain credit. Surely the government has taken various measures to solve this
problem, one of which the issued regulations granting credit to SMEs without collateral (collateral).
However, the policy on lending without collateral (1) is not performed entirely by some MFIs, where in some
areas in South Sumatra, SMEs still have to provide guarantees (collateral) for credit is equal to or less than
Rp 50,000,000, -, (2 ) even adds to the list of bad debts MFIs, so that it impacts the financial position of the
MFI itself (Basyith, Idris, and Fitriya, 2014). Furthermore, the position of the MFI determines the
competitiveness. MSE also has its own preferences in choosing MFIs. Preferences can be derived from MFI
location, ease of lending by MFIs, MFI lending rates, sales force MFIs to make a bid. Therefore, this study
attempts to investigate an effective model of credit financing and the regional economic potentiality for micro
and small business entreprises in South Sumatera-Indonesia.
UMK has several advantages, among others able to absorb a significant amount of labor non-formal, but the
advantages of the UMK is still not coupled with access to effective financing, so it is not uncommon UMK
stagnated growth even do not grow and eventually abandoned by the employer small -pengusaha who prefer
working on land (wage labor) of others which may be more promising than an attempt lived (Basyith, Idris
and Fitriya, 2014).
Much research has been done not only to find out the factors that affect the ability to pay of creditors (gine
and Karlan, 2008; Karlan, 2007) but also to find out whether the loan had an impact on the profitability and
viability of MSEs (Basyith, Idris and Fitriya, 2014, Banerjee, Duflo, Glennerester, and Kinnan, 2009). The
study found that the loans provide short-term impact on the profitability of MSEs but not for the long term.
This is caused by the lack of guidance provided by the MFI. Although coaching is given, only limited
guidance aims to ensure MSEs able to repay the loan on time and be completed by the end of the loan
repayment.
Pettit and Singer (1985), Keasey and Watson (1987) has identified the main cause of the decline in small
business growth that financial problems. Financing to micro and small businesses is difficult because of the
problem of information asymmetry. The high cost of collecting information by the candidate (creditors) to
determine whether the MSE is a business that has good prospects. An innovative way to solve this problem is
by increasing the credit available to MSEs through increased use of technology and the introduction of credit
scoring deeper towards financing institutions (Brewer, 2007).
It senanda also expressed by Ang (1991) and Berger and Udell (1998) that in addition to having different
characteristics from large businesses, small and micro businesses also have problems of financial
management and financial access are different. Further Carpenter and Petersen (2002) and Beck and
Demirguc-Kunt (2006) also states that small business growth is often limited by financial constraints internal
and found that access to capital is a major constraint to the growth of micro and small businesses, which legal
494
institutions and finance plays an important role in solving this problem. Then, the innovative financial
instrument to facilitate micro and small businesses in accessing financing is important.
Furthermore, several studies have also shown that financing has a positive impact on the growth of SMEs,
especially businesses that are most in need of financing (Demirguc-Kunt and Maksimovic, 1998; Rajan and
Zingales, 1998; Beck, Demirguc-Kunt and Maksimovic, 2005; Beck, Demirguc- Kunt, and Maksimovic
Laeven, 2006; Beck Demirguc-Kunt, Laeven and Levine, 2008). Not only that, the financing overcome
likuidtias kesulitas effort and also can improve business production activities that ultimately have a positive
impact on the profitability of the business (Wurgler, 2000; Love, 2003; Banerjee and Duflo, 2004). Access to
finance to stimulate SMEs to become more dynamic and innovative (Klapper, Laeven and Rajan, 2006),
economies of scale that larger by the likelihood of greater investment (Beck, et al., 2006), provides many
options for MSEs choose a portfolio that is more efficient (Claessens and Laeven, 2004), providing
opportunities for SMEs to diversify business risk (Beck et al., 2006).
On the other hand, financial institutions in developing countries have limited access to information on the
feasibility and the ability of borrowers to repay the loan. The tools used by developed countries to detect it
(such as credit scoring) can not simply be used and applied in developing countries. When the information
available is not formally, then the feasibility of such information is attached to the local social networks
(Portes, 1998; Smith-Doerr and Powell, 2005). In the end, the main obstacles faced by MFIs is how to
overcome information asymmetry or in other words how to tell prospective lenders decent and not. Although
more than half the world's population has limited access to financial institutions (Beck, Demirguc-Kunt and
Peria, 2008; Chaia, Dalal, Goland, Gonzalez, Morduch, and Schiff, 2009), but the potential market for MFIs
is very substantial.
3. METHODOLOGY
Data
The data used in this research is data related to MSEs and MFIs. The primary data obtained by survey method
using a questionnaire structured and semi-structured focus group discussion (FGD) and interviews.
Classification of the UMK will be based on the classification by the Ministry of Cooperatives and SMEs and
Bank Indonesia in 2008. The MFI is divided into two: formal and non-formal. This study will use formal
MFIs, namely banks and non-bank.
The population in this study is all MSEs and MFIs in the province of South Sumatra. South Sumatra province
and consists of four autonomous cities and 12 counties. MSE in South Sumatra UMK consists of formal
(registered) and non-formal UMK (not registered). Formal MSE can be obtained from the Ministry of
Cooperatives and SMEs as well as the relevant ministry, but to the number of MSEs, non-formal, can not
precisely known about the number following the number of MFIs in South Sumatra at the time this proposal
is made. Total population in this study is a population that is not limited (there are no exact data of how the
number of micro and small enterprises processing industry in South Sumatra because most micro and small
enterprises processing industry are not registered legally in Departermen of Commerce and the Department of
Cooperatives and Micro and Small).
Sampling design used was multistage sampling design, where a design sample is done through several stages
(Levy & Lemeshow, 2008). Multistage sampling design is a complex form of cluster sampling. Cluster
sampling is a form of sampling which divide the population into groups (clusters), then one or more of the
groups (clusters) will be selected at random (random) and each unit (element) in each cluster are selected will
be selected randomly as the sample , The steps to be taken in the design of the sample; (1) Selection of cities
and counties in South Sumatra by using cluster sampling, (2) Selection of the location of each city and county
in South Sumatra by using jugdemental sampling criteria (a) is the capital of the cities and counties in South
Sumatra, (b) has a number of MSEs and most MFIs. (3) Selection of units (elements) of each location of
cities and counties selected using random sampling
The samples used in this study is as much as 748 respondents (micro and small enterprises), who came from
12 cities and regencies in South Sumatra which Banyuasin (50 respondents), OKU District Parent (50
respondents), Lubuk Linggau ( 50 respondents), Pagaralam (50 respondents), Palembang (100 respondents),
Lahat (50 respondents), District MUBA (50 respondents), OKI (48 respondents), Regency of East OKU (50
respondents), District PALI ( 50 respondents), District of South OKU (50 respondents), Muara Enim (47
respondents), Musi Rawas (53 respondents), and Ogan Ilir (50 respondents).
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Variable
The variables employed in this study for matrix analysis is derived from previous studies such as
productivity, the local contents of raw material and product for exports. The variables for an ordinary least
square method (OLS) are the local contents of raw material (X1), the competitive advantage (X2), the
product reflecting local characteristics (X3), the guaranteed of raw material availability (X4), the economic
value added (X5), economically profitable (X6), environment conservation (X7) and productivity (Y).
Method of Analysis
The method analysis employed is matrix analysis and an ordinary least square (OLS). For matrix analysis, the
statistic descriptive of the data is derived. The ordinary least suare (OLS) for this study is as follows;
Notes; the local contents of raw material (X1), the competitive advantage (X2), the product reflecting local
characteristics (X3), the guaranteed of raw material availability (X4), the economic value added (X5),
economically profitable (X6), environment conservation (X7), productivity (Y), and error terms (e)
4. FINDINGS AND DISCUSSIONS
This sections is divided into two parts; (a) an effective credit financing model, and (b) the potential industry
sectors in supporting the regional economic.
An Effective Credit Financing Model
According to the data obtained from in depth interview with some experts in this field and the survey using
questionnaire, the result reveals that an effective credit financing model should include outside parties to
control and to foster the success and the survival of micro and small business entreprises. The initial model
proposed for an effective credit financing is depicted in Figure 1.
Figure 1. An effective of credit financing model
The figure 1 is explained as follows;

1) MFI lend the fund to the MSEs
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2) MFI conduct an assessment of the criteria for assessment of 5C, and then forward the assestment result
to the Credit Guarantee Institution to assess other aspects (aspects of potential products and potential
aspects featured MSEs).
3) Having obtained the results of the assessment of MFIs and credit guarantee institutions, then it can be
decided whether UMK deserve financing.
4) UMK-eligible MSEs financed will be supervised by an independent agency / private. The coaching
institutions can be established as an independent who cooperate with the government and be supervised
by relevant State agencies.
5) The Institute will foster development UMK UMK-financed by the MFI. The source of income of coaching
institutions can come from MFIs. MFIs can pay the fees for the use of coaching services by the private
coaching institutions, so that the private coaching institutions can be professional work. It would be
different if the coaching institute is a nonprofit institution, because most likely the nonprofit coaching
institutions will not work optimally, as well as steward COOP. Mechanism service fee to coaching
institutions by the MFI to do with the system or the tariff system pernasabah monthly / yearly.
6) Institute for independent development have complete responsibility for MSEs financed by MFIs.
Benchmark not only of unpaid loans, but also the size of the business UMK after financed MFIs.
7) MSE should report to the MFI business development and coaching institutions. So that MFIs and
coaching institutions can perform the data equation if there are problems.
8) Tasks credit guarantee institutions, in addition to providing feasibility assessment, credit guarantee
institutions also provide assurance to the UMK-MSE does not have reserves (collateral). So credit
guarantees not only to debtors who died but also to borrowers who do not have the ability to pay for
other causes.
The Potential Industry Sectors in Supporting the Regional Economic

According to the Matrix analysis result, the result reveals that there are three industries that potentially
having higher productivity in supporting the regional economic in South Sumatera-Indonesia. Those three
potential industries are Food, Beverages and Tobaccos Industry, Other Processing Industry, and Textile,
Clothes and Leather Industry. OKU Timur Regency, MUBA Regency and OKU Selatan Regency are the
regions having higher productivity and higher potential in the sector of Food, Beverages and Tobacos
Industry. Palembang City, Banyuasin Regency and Muara Enim Regency are the regions having higher
productivity and higher potential in the sector of Other Processing Industry. Ogan Ilir Regency, Pagaralam
City and OKU Induk Regency are the three regions having higher productivity and higher potential in the
sector of Textile, Clothes and Leather Industry. The matrix analysis is shown in Table 1.
Table 1. Matrix Analysis of Potential Sector for Micro and Small Business Entreprises in South Sumatera
Indonesia
Food, Beverages and Other Processing Textile, Clothes and Leather
Industry Tobacos Industry Industry Industry
Regency/City OKUT Palembang Ogan Ilir
Regency/City MUBA Banyuasin Pagaralam
Regency/City OKUS Muara Enim OKU Induk
From the ordinary least square (OLS) analysis, the result reveals that raw material (X1), local products which
have characteristics of local area (X3), the guarantee of raw material availability (X4) and economically
profitable (X6) have a significant impact on micro and small business entreprises‘ productivity. The result is
inline with the notion that a potential product of one region is determined by the local contents of raw
material as the more local contents of one product the higher potentialilty of that product. The OLS results is
shown in Tabel 2.
Table 2. The OLS Results
Unstandardized Coefficients Standardized Coefficients
1 (Constant) 3.658 .502 7.285 .000
X1 .254 .132 .095 1.927 .054
X2 -.037 .121 -.014 -.309 .758
X3 -.104 .051 -.078 -2.036 .042
497
X4 -.272 .122 -.108 -2.230 .026

X5 .045 .090 .022 .499 .618
X6 -.346 .075 -.186 -4.605 .000
X7 .124 .087 .055 1.426 .154
a. Dependent Variable: PRODUCTIVITY
5. CONCLUSIONS
It can be concluded that (1) there are three industries that potentially having higher productivity in supporting
the regional economic in South Sumatera-Indonesia. Those three potential industries are Food, Beverages and
Tobaccos Industry, Other Processing Industry, and Textile, Clothes and Leather Industry. OKU Timur
Regency, MUBA Regency and OKU Selatan Regency are the regions having higher productivity and higher
potential in the sector of Food, Beverages and Tobacos Industry. Palembang City, Banyuasin Regency and
Muara Enim Regency are the regions having higher productivity and higher potential in the sector of Other
Processing Industry. Ogan Ilir Regency, Pagaralam City and OKU Induk Regency are the three regions
having higher productivity and higher potential in the sector of Textile, Clothes and Leather Industry. Hence,
the local and regional government should be more responsive to stimulate all those regions in those three
industries. (2) The result also reveals that raw material, local products which have characteristics of local
area, the guarantee of raw material availability and economically profitable have a significant impact on
micro and small business entreprises‘ productivity. furthermore, the result is inline with the notion that a
potential product of one region is determined by the local contents of raw material as the more local contents
of one product the higher potentialilty of that product
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500
DEMOGRAPHIC CHANGES AND STRUCTURAL TRANSFORMATION OF THE

INTER-REGIONAL WORKFORCE IN CENTRAL JAVA
Wyati Saddewisasi
Semarang University
(wyatis@yahoo.com)
ABSTRACT
This research generally aims to analyze the demographic characteristics, analyze the number working
population, unemployment, quality of employment, the number of people who work in the formal and
informal sectors. It is also to formulate policies to impede population growth and to minimize unemployment.
The location of this research is in five districts/cities in Central Java which was the former capitals of the
residency. This research uses secondary data. The analysis of data uses descriptive analysis, comparative
analysis and impact analysis.
The results of the research are viewed from the demographic characteristics of the population growth in the
five research locations in Central Java that have the tendency to rise, the percentage of birth rate increased
in growth, and child mortality rate also has the tendency to rise. The growth of the working population
experiences a decrease, the number of unemployed is likely to increase, due to the low-quality of workforce.
The number of people working in the informal sector in general has been decreasing. There has been a
transformation of structure of workers from agriculture to manufacturing. In addition, there is also a change
from the informal sector to the formal sector. The research recommends: Boost the family planning program,
increase the basic education of 9 years to 12 years, create worker-intensive jobs and increase worker
competencies according to the need of occupations.
KEYWORDS: demographic characteristics, the working population, unemployment, family planning
programs, worker structure transformation
1. INTRODUCTION
According Hatmadji et al. (1993), the demographic change has a reciprocal relationship with the
socioeconomic changes. Demographic change involves two main points, namely the birth and mortality rates.
In line with the ongoing demographic processes, the number of population in Indonesia is changing. The
population of indonesia according to the Population Census 2010 has reached 237,641,326 inhabitants, with a
growth rate (LPP) of 1.49 percent. Of these, the majority of the population are still to be of low quality. This
is reflected in Indonesia's HDI 2011, which was released by the United Nations Development Program
(UNDP) on 2 November 2011 which showed, 0.617 and ranked 124 from 187 countries. When viewed from
the population world rank, Indonesia still ranks fourth after China, india and America.
Viewing from the aspect of quantity, Central Java has a decreased population growth rate, however, in terms
of numbers, the population is still absolutely high. Based on the results of the 2010 population census,
Central Java has a population of 32,382,657 inhabitants. This number increased when compared to 2000 there
were 30,775,846 inhabitants. When viewed from the growth rate, the size of the population grew by 0.37% in
Central Java, the condition is lower than the growth rate of indonesia which amounted to 1.49%.
Based on the National Labor Force Survey August 2011 (SAKERNAS August 2011) the number of working
age population (population aged 15 years and above) in Indonesia wass as many as 171.756.077 people. This
total consisted of 117.370.485 labor force and 54.385.592 non-labor force. The total employed labor force
was of 109.670.399 people while palpable unemployment amounted to 7,700,086 people. Non-labor force
consisted of population in school which amounted to 13,104,294 people, households amounted to 32,890,423
and others amounting to 8,390,875 people.
in Central Java, the number of working-age population, according to SAKERNAS in August 2011 were as
many as 23,905,331 people. From the number, it consists of 16,918,797 work force and 6,986,534 people
were not in work force. The total number of worker force was 15,916,135 working people and the
unemployed amounted to 1,002,662 people. While not in worker force consisted of 1,580,283 people in
schools, 4,018,153 managing their households and others amounted to 1,388,098 people.
501
Based on the descriptions lie the problem that the population of indonesia and Central Java in absolute have
increased although growth is relatively decreasing. Judging from its workforce both in indonesia and in
central Java have a significant number of worker force that are unemployed. Hence the formulation of the
problem is how to inhibit the population growth and reduce unemployment.
The questions that arise are:
1) How are the demographic characteristics of the population of Central Java which include population
growth rate per District/City, the fertility rate, and infant mortality rate?
2) What is the number of the working population, the number of unemployed and job seekers, the quality of
workers, and the working population in the formal and informal sector?
3) What are the policies to inhibit the population growth and minimize unemployment?
This research aims to:
1) Analyze the demographic characteristics of the population of Central Java which include population
growth rate per District/City, the fertility rate, and infant mortality rate.
2) Analyze the working population, the number of unemployed and job seekers, the quality of workers, the
working population in the formal and informal sectors.
3) Formulate policies to inhibit the population growth and minimizing unemployment.
1. THEORY OF STRUCTURAL GROWTH

One of the most well-known theoretical models of developments, which focuses on structural transformation
of an economy was initially formulated by W. Arthur Lewis. The framework of thought and the analytical
system were based on a simple model of the so-called Lewis' two sector models.
According to Lewis, there are many workers in unlimited quantities and with wages just enough to live
(subsistence). The development of economy takes place if capital accumulates as a result of the transition of
workers from the subsistence sector to the capitalist sector. The capitalist sector is part of the economy that
uses capitals that can be reproduced and pay the owner of capital on the use of such capital. Subsistence
sector is part of the economy that does not use capital that can be reproduced. In this sector, the output is
lower than in the capitalist sector.
According to Lewis, underdeveloped economy consists of two sectors, namely:
First, the rural subsistence sector is overpopulated. According to Lewis, a fraction of the workforce is drawn
from agriculture and this sector will not lose its output at all. Second, workers of the subsistence sector,
transferred little by little will have shelter in the modern urban industrial sector which has high productivity
levels. The distinction benchmark of the two sectors is that the traditional sectors of economic activity
revolves around the fulfillment of consumption (subsistence economy). The industrial sector (modern) is
commercial and production is based on consideration and with a view to earning a return (profit motive). In
the traditional sector, worker productivity is much lower than in the modern sector of worker productivity.
The modern sector needs to attract workers from the traditional sector.
With the increasing population, the supply of worker is as if there are no limitations. This means employers
may obtain workers in the desired amount by paying at the rate equal to the applicable wages. Employers do
not need to raise the level of wages to attract workforce in greater numbers and business activities can be
enhanced and extended with a constant wage for unskilled workers.
The main concern of this model is aimed at the transfer of worker, an increase in output and an increase in
employment in the modern sector. The transfer of workers and employment growth arise due to the
expansion of output in the modern sector, which is determined by the level of investment in industry and the
overall capital accumulation of the modern sector.
There are some criticisms of Lewis' models.
The first assumption, the model implicitly assumes that the transfer rate of workers and employment creation
in the modern sector is certainly comparable to the modern sector capital accumulation. The faster the rate of
capital accumulation, the higher the rate of growth in the modern sector and the faster creation of new jobs.
But if the profits of the capitalists are reinvested in the form of more sophisticated capital goods, less
workforce would be needed.
The second assumption assumes that rural areas have surplus workers, while in urban areas optimally absorb
the production factors. some of the research actually shows the opposite situation, namely the quite large
unemployment in urban areas and only little surplus workers in the rural areas.
502
The third assumption claims that a competitive worker market in the modern sector would guarantee the
existence of real constant wages at a point where employment worker surplus would be used up. One
impressive characteristic from the determination of the market wage level of urban workers in almost all
developing countries is likely to highly increase over time.
A famous model of structural change is the model developed by Hollis B. Chenery. According to Chenery,
the important factors are the smooth transition from the agrarian economic pattern to industrial economy,
sustainability in accumulation of physical and human capital, changes in the types of consumer demands, the
development of urban areas due to migration of job seekers and agriculture in rural areas and small towns. In
her opinion, the structural transformation process brings positive and negative impacts. One downside is the
increasing urbanization in line with the degree of industrialization being performed. Industrialization and
urbanization at some points will hamper the process of equitable development.
The structural transformation will only work well if followed by an equal opportunity to learn, decrease in the
rate of population growth, and a decline in the degree of economic dualism between towns and villages.
According to Chenery, the process of accumulation, allocation, and distribution is the main characteristics in
the development of a structural change. The process of accumulation is defined as the process of coaching of
resources for the increase of production capabilities in the arrangement of the local economy. The allocation
process concerns the usage patterns of production resources that can bring changes to the structure of
production (the role and contribution of sectors in national products). The distribution of income is assessed
and measured quantitatively with two concepts, namely absolute poverty and relative inequality or
dissimilarity.
Allocation process involves systematic changes in the arrangement of the economy with increased production
and income. Systematic changes in question concerns structural shifts at the sectoral composition in the
structure of production. The development of this pattern is the result of interaction between the impact of
supply (supply effect) from the changes on the combination of means of production and technology with the
impact on the demand (demand effect) which is associated with increased revenue.
An important characteristic of the role of worker is the allocation issue and their livelihood by sector and
economic activity. Changes in worker demand are affected by the changes in the composition of production
and technology used. On the other hand, the supply of workers is influenced by demographic factors
(population growth), level of education, and population distribution between rural and urban areas. The
interaction of demand and supply of workers is affected by allocations or patterns of the use of workers
according to the economic sector that shows the difference in worker productivity between sectors of the
economy.
The process of accumulation concerns the addition of physical capital or improving the quality of human
capital. With the passing of time the change of balance between production factors (proportion factors)
involved in the production process also occurs. It brings about changes in the sectoral composition in the
structure of production. Thus it appears that the development of the structure revolves around the shift in
production and in consumption.
The main hypothesis of Chenery's theory is that the model of structural changes occurring in each country
can actually be identified and the general change process of each country basically has the same pattern. Yet
this theory tolerant of small variations that occur in the process of structural change that may differ between
countries. Differences in the endowment factor, government policies, and accessibility to capital and
technology is an important explanatory factor for differences of varied structural transformation that occurs.
In general, countries that have a high population level describes the level of high potential demand and tends
to establish import substitution industries. This means that these countries produce their own goods which
was previously imported to then be sold in the market in the country. Conversely a country with a relatively
small population tends to develop international-oriented industries. The theory of structural transformation
explains that the acceleration and the pattern of the transformations occurring in a country are affected by
internal and external factors that are interrelated to one another.
2. RESEARCH METHODS
This research is a literary research because it is done by researching library materials. The results of literature
review will serve as the framework or the basic theory in the operationalization of this research.
In terms of objectives, this research tends to be more descriptive and analytical, which will describe the
characteristic of the population demographics of Central Java which include population growth rate per
503
District/City, the fertility rate, infant mortality rate, the number of persons employed, the number of
unemployed and job seekers, the quality of workers, and the number of people working in the formal and
informal sectors. While what is being analyzed is the demographic changes and the transformation of the
worker structure between regions in Central Java. Thus the policy to inhibit the population growth in Central
Java and to minimize the number of unemployed could be formulated.
In accordance with the purpose of this research, the variables used are as follows:
1) The demographic characteristics of the population in Central Java which include population growth rate
per District/City, the fertility rate, infant mortality rate.
2) The transformation of the worker structure between regions in Central Java, which includes the number of
working population, the number of unemployed and job seekers, the quality of workers, the working
population in the formal and informal sectors.
The analytical method used is descriptive analysis, to illustrate the magnitude of each component of the
demographic characteristics of the population and the worker structure and its changes. Apart from that, it
also uses the comparative analysis method, namely to compare the year-to-year condition which is very
useful for a development plan. An impact analysis is also used to view the development results in the field of
population and employment. The population of this research consists of 35 districts/cities (29 districts and 6
cities). Samples are taken by using purposive sampling method. The determination of which sample to select
is based on the consideration that the sampled districts/city were once the former capital of residency and
specified 5 districts/city.
3. RESULTS
The characteristics of the population demographics in the research sites cover the population growth rate per
District/City, the fertility rate and infant mortality rate, which can be seen in Table 1 below.
Table 1: The Number and Growth of Population according to the District/City of the Research
Locations in Central Java
District/ City Number of Population Growth (%)
2010 2011 2012 2010-2011 2011-2012
Magelang City 118.316 118.397 117.919 0,07 -0,40
Pati District 1.191.258 1.192.653 1.193.593 0,12 0,08
Pekalongan City 282.416 281.817 284.068 -0,21 0,80
Semarang City
1.557.103 1.558.149 1.599.702 0,07 2,67
Surakarta City
500.699 500.028 498.563 -0,13 -0,29
Total 3.649.792 3.651.044 3.693.845 0,03 1,17

Source: Social and Demographic Statistics of Central Java
The National Socioeconomic Surveys of 2010, 2011, 2012
The increase of population may be caused by the increase in the number of born alive children. In detail, the
number of born alive children and their growth can be seen in table 2 below.
Table 2: The Average Number and Growth of Children Ever Born according to the District/City
of the Research Locations in Central Java
District/ City Children Ever Born Growth (%)
2010 2011 2012 2010-2011 2011-2012
Magelang City 1,95 1,94 2,06 -0,51 6,19
Pati District 1,80 1,75 1,80 -2,78 2,86
Pekalongan City 2,39 2,24 2,36 -6,28 5,36
Semarang City 1,95 1,98 1,94 1,54 -2,02
Surakarta City 1,88 2,09 1,97 11,17 -5,74
Average 1,99 2 2,03 0,63 1,33
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Source: Results of the Social and Demographic Statistics of Central Java

Table 3: The Average Number of Child Mortality and Growth according to the District/City
District/ City Average Number of Child Mortality Growth (%)
2010 2011 2012 2010-2011 2011-2012
Magelang City 0,03 0,03 0,06 0,00 100
Pati District 0,05 0,04 0,04 -20,00 0
Pekalongan City 0,1 0,07 0,14 -30,00 100
Semarang City 0,03 0,05 0,06 66,67 20
Surakarta City 0,04 0,05 0,07 25,00 40
0,05 0,048 0,074 8,33 260
Average
Source: Adapted from the Social and Demographic Statistics of Central Java
(Average children ever born deducted with the average children still alive)
Table 4: he Number and Growth of Working Population according to the District/City

District/ City Working Population Growth (%)
2010 2011 2012 2010-2011 2011-2012
Magelang City
53.719 58.919 57.669 9,68 -2,12
Pati District 581.998 603.103 562.487 3,63 -6,73
Pekalongan City
401.931 131.158 131.826 -67,37 0,51
Semarang City
724.687 770.886 756.906 6,38 -1,81
Surakarta City
235.998 249.368 255.621 5,67 2,51
Total 1.998.333 1.813.434 1.764.509 -9,25 -2,69

Source: Adapted from BPS data of Central Java Province
The growth of open unemployment can be seen in Table 5 below.

Table 5:The Number and Growth of Open Unemployment according to the District/City
District/ City Open Unemployment Growth (%)
2010 2011 2012 2010-2011 2011-2012
Magelang City 8.226 5.319 5.501 -35,34 3,42
Pati District 38.604 47.992 78.177 24,32 62,90
Pekalongan City 10.165 10.308 10.596 1,41 2,79
Semarang City 71.499 57.349 46.801 -19,79 -18,39
Surakarta City 22.575 16.940 16.523 -24,96 -2,46
Total 151.069 137.908 157.598 -8,71 14,27

Table 6: The Percentage of Population Over 15 Years Working According to the Level
of Education and Research Locations
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Junior High/Islamic Associate Degree

Below Elementary
Research Junior High (%) Senior High (%) I/II/II/ Bachelor
Graduates (%)
Locations (%)
2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012
Magelang 58.0 22.4 21.4 18.4 17.8 4.25 20.8 43.0 4.25 5.11 16.6
55.57
8 4 7 7 4 5 9 3
Pati 57.5 21.4 18.4 21.4 4.84 21.3 16.0 4.84 7.48 4.84
57.6 51.96
1 7 7 7 6 8
Pekalonga 28.1 46.3 19.4 17.8 22.3 5.57 12.6 23.5 5.57 4.12 7.75
65.44
n 9 1 8 1 5 2 9
Semarang 47.6 22.6 22.6 20.3 19.7 6.71 21.5 38.5 6.71 4.82 19.0
53.34
9 9 6 2 2 2 9 0
Surakarta 20.7 24.6 19.5 19.3 19.0 16.7 40.1 38.7 16.7 14.3 17.5
26.67
5 7 7 5 9 8 2 1 8 6 3
Average 42.4 59.49 34.7 20.9 18.8 20.0 7.63 23.2 32.0 7.63 7.18 13.1
6 6 2 3 8 9 9 1 5
Table 7: The Number and Growth of Population Over 15 Years Working in the informal Sector
according to the District/City of Research Locations in Central Java
District/ City Number of Population 15 Years Above Working in the Growth (%)
Informal Sector
2010 2011 2012 2010- 2011-
2011 2012
Magelang City
24.709 26.126 26.227 5,73 0,39
Pati District 437.430 418.061 384.067 -4,43 -8,13
Pekalongan
City 229.526 239.475 200.631 4,33 -16,22
Semarang City
256.979 293.295 221.672 14,13 -24,42
Surakarta City
106.970 98.062 97.282 -8,33 -0,80
Total 1.055.614 1.075.019 929.879 1,84 -13,50

Table 8: The Number and Growth of Population according to the Main Employment of Agriculture,
Forestry, Hunting and Fishing in the District/City of the Research Locations in Central Java
District/ City Agriculture, Forestry, Hunting and Fishing Growth (%)
2010 2011 2012 2010-2011 2011-2012
Magelang City
493 565 106 14,60 -81,24
Pati District 252,812 219,159 183,798 -13,31 -16,13
Pekalongan City
91,145 80,153 74,443 -12,06 -7,12
Semarang City
171,931 24,369 27,415 -85,83 12,50
Surakarta City
1,366 2,034 2,015 48,90 -0,93
Total 517.747 326.280 287.777 -36,98 -11,80
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Table 9: The Number and Growth of Population according to the Main Employment of Manufacturing
industry in the District/City of the Research Location in Central Java
District/ City Manufacturing industry Growth (%)
2010 2011 2012 2010-2011 2011-2012
Magelang City
8.050 7.098 9.003 -13,41 26,84
Pati District 93.075 86.044 86.086 -8,17 0,05
Pekalongan City
142.369 146.094 156.277 2,55 6,97
Semarang City
128.091 151.878 172.594 15,66 13,64
Surakarta City
46.789 49.748 59.626 5,95 19,86
Total 418.374 440.862 483.586 5,37 9,69
Table 10: The Number and Growth of Population according to the Main Employment of Wholesale
Retail, Restaurants, Hotels in the District/City of the Research Locations in Central Java
District/ City Wholesale, Retail, Restaurants, Hotels Growth (%)
2010 2011 2012 2010-2011 2011-2012
Magelang City
20.033 23.754 22.259 18,57 -6,29
Pati District 113.078 130.350 122.901 15,27 -5,71
Pekalongan City
79.854 76.221 76.220 -4,55 0,00
Semarang City
90.332 262.603 248.502 190,71 -5,37
Surakarta City
99.300 84.608 95.302 -14,80 12,64
Total 402.597 577.536 565.184 43,45 -2,13
Table 11: The Number and Growth of Population according to the Main Employment of Community
Services in the District/City of Research Locations in Central Java
District/ City Community Services Growth (%)
2010 2011 2012 2010-2011 2011-2012
Magelang City
16.319 16.572 17.884 1,55 7,92
Pati District 51.842 95.238 92.098 83,71 -3,30
Pekalongan City
55.458 44.730 45.962 -19,34 2,75
Semarang City
49.776 194.417 164.072 290,58 -15,61
Surakarta City
53.916 65.865 61.225 22,16 -7,04
Total 227.311 416.822 381.241 83,37 -8,54
Table 12: The Number and Growth of Population according to the Other Main Employments
in the District/City of the Research Locations in Central Java
District/ City Other Main Employments Growth (%)
2010 2011 2012 2010-2011 2011-2012
Magelang City 23,87 -22,99
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8,824 10,930 8,417

Pati District 71,191 72,312 77,604 1,57 7,32
Pekalongan City
33,105 46,585 52,871 40,72 13,49
Semarang City
62,575 137,619 144,323 119,93 4,87
Surakarta City
35,227 47,113 37,453 33,74 -20,50
Total 210,922 314,559 320,668 49,13 1,94
5. CONCLUSIONS, IMPLICATIONS AND LIMITATIONS
A. Conclusions
1) Demographic Characteristics
a. In general, the population growth in the five research sites in Central Java has the tendency to
increase either relatively or absolutely. The donation of the increased growth is due to the positive
population growth in the Districts of Magelang, Semarang, Pati within the period of 2010-2011 and
the Districts of Pati, Semarang and Pekalongan in 2011-2012.
b. The birth rate is marked with the number of live births with the number and percentage of increased
growth. This increase was fueled by the growth of increased births in Semarang and Surakarta in
2010-2011 and the City of Magelang, Pati Regency and Pekalongan in 2011-2012.
c. The mortality rate has a tendency to rise, characterized by an average growth in the number of child
deaths which affirmatively increased. This was triggered by the growth of child deaths in the cities
of Semarang and Surakarta in 2010-2011 and Cities of Magelang, Pekalongan, Semarang and
Surakarta in 2011-2012.
2) Structure of Workers
a. Overall, the growth of the working population in the five research sites has declined. It's likely they
did not get the job according to their wishes, so they felt better to be unemployed or look for other
work. Other possibilities may be caused by their education that are not in accordance with the jobs
available.
b. The number of unemployment in five research sites on average declined in 2010-2011, but in 2011-
2012 experienced an increase. This may be caused by the available employment field cannot
accommodate low educated people (the palpable number of unemployed are below junior high. In
this case those having the education of below Junior High are more than those having the education
of above Junior High).
c. Judging from the quality of the workforce, in general they are of low quality. It is characterized by
the education of the working population which are mostly below elementary graduates.
d. The number of people working in the informal sector in general has the tendency to decline in 2011-
2012 despite of an increase in the previous year of 2010-2011.
e. Based on the results of this research, it can be concluded that in general there has been a
transformation of the worker structure from agriculture to manufacturing. This is shown by the
declining trend of workers in agriculture and an increase in workers in the manufacturing sector. In
addition, there is also a change from the informal sector to the formal sector. This is shown by the
declining growth of workers in the informal sector and a growth increase of workers in the sector.
B. Implications
Demographic changes that occurred in five research locations have caused changes in population size,
population quality, and a number of unemployment. The high number of population will be a capital for
development if having quality. On the contrary, they will be a burden to the development if the high number
of people are of low quality.
The quality of population can be seen from the level of education. The results of this research revealed that
the level of education of the working population is still very low. Low levels of education will have an impact
on the uptake of jobs available. From the number of available job vacancies, it appears that in the agricultural
sector is showing a declination while there is an increase in the manufacturing industrial sector. Aside from
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that, the informal sector also showed a decrease and the formal sector, especially workers and employees
experienced an increase.
Based on these results the suggested recommendations are:
1) To suppress the increasing number and rate of population growth, a control program is highly required.
Programs that can be implemented to reduce the number and rate of population growth is the family
planning program (KB). Therefore, the socialization of this program should always be intensified and
ongoing at all times.
2) To improve the quality of the population, a policy is required for the compulsory education of nine to
twelve years.
3) To accommodate the people who are still unemployed, concrete steps are needed to provide employment
in accordance with the level of education. Therefore, the appropriate employments are needed that
correspond to the increase in number and the quality of the existing level of education, namely in the
sector of manufacturing industry. In addition, other employment fields can also be created that are
worker intensive in nature. The worker absorption in the formal sector needs to be improved as well with
the provisions that worker productivity must also be intensified. Productivity increase for the workforce
can be enhanced through education and training.
6. ACKNOWLEDGMENTS
I thank the BKKBN Representative Office of Central Java which has given financial support for the
realization of this research. I would also like to thank a team of researchers: Ir. Sudjatinah MSi, Dr. Endang
Rusdianti MM, Teguh Ariefiantoro SE, MM and Najib, SE, MM who has supported the implementation of
this research.
7. REFERENCES
Center for The Central Bureau of Statistics Central Java Province. 2010. The state of Labor Force in Central Java
province.
................ 2011. The state of Labor Force in Central Java province.
Central Java in Numbers: White Book PPSP. 2012/2013. [online]. Central Bureau of Statistics.
(Http://www.bps.org/agents2/ch3.1-2.htm)
Central Java in Numbers. 2012. Bali Ndeso Mbangun Deso.
Komaruddin. 1980. Persoalan Pembangunan Ekonomi indonesia. Bandung: Alumni. Publisher
Manning, C and Effendi, T. N. 1985. Urbanisasi, Pengangguran, dan Sektor informal di City. Jakarta: PT. Gramedia.
Rush, S. 1983. Kepadatan Penduduk dan Peledakannya. Jakarta: PN Balai Pustaka. Papanek.
Social and Demographic Statistics of Central Java of 2010 National Socioeconomic Survey. Center for Statistics of
Central Java Province.
509
THE EFFECT OF LEADERSHIP, MOTIVATION AND WORKING

ENVIRONMENT ON EMPLOYEES'PERFORMANCE IN DEPARTMENT OF
REGIONAL FINANCE AND ASSET MANAGEMENT SEMARANG
Maria Astried Susanto, Sri Yuni Widowati

Semarang University
ABSTRACT
The purpose of this study is to determine the effect of leadership, motivation, and working environment on
employees‘ performance in DPKAD Semarang. Population of this research is 227 employees, it is all
employees of DPKAD Semarang. The samples are 70 respondents, while the sampling technique used is
proportionate startified random sampling. The data analysis technique used is multiple linear regression
analysis.
This study used questionnaires method, by giving a questionnaire containing questions to the respondents
and then processed the data using SPSS 17.0 to obtain valid research results.
From the results of multiple linear regression analysis is Y = 0,301 X1 + 0,391 X2 + 0,246 X3, which means
that the leadership, motivation, and working environment have a positive influence on employees‘
performance. From the results obtained 0.626 as determination coefficient value. It means that 62.6% of
employees‘ performance can be explained by the variables of leadership, motivation, and work environment.
From the statistical test t indicate that leadership partially has a positive and significant effect on employees‘
performance, motivation has positive and significant effect on the employees‘ performance, and the last,
working environment has a positive effect and significant effect on employees‘ performance.
Keywords : Leadership, Motivation, Working Environment and Employees‘ Performance.
INTRODUCTION
Every governmental organizations is required to be able to optimize human resources and how human
resources are managed. Human resources management can not be separated from the employees factors that
are expected to be able to perform their best in order to achieve the goals of the governmental organization.
"Discussions regarding the portraits of governmental officials in Indonesia often revolve around the lack of
professionalism, the level of welfare organization which is still inadequate, the distribution and composition
which have not been ideal, the placements in positions that have not been based on competence, the
performance assessment which has not been objective, promotion that has not been based on job
performance, working culture and working ethos which are still low and the application of disciplinary rules
which are not implemented consistently" (Effendi, 2006).
Some of the things are the problems that are quite interesting and important, because they give benefit to the
interests of individuals, communities, nations and countries. The performance of governmental officials aims
to provide public services that put the interests of the public, simplify public affairs, streamline services and
provide satisfaction to the public.
The improvement of employees‘ performance in governmental agencies can be done in several ways, for
example through the provision of adequate compensation, the provision of motivation, creating positive work
environment, as well as education and training. Therefore, employees are expected to maximize their
responsibilities after being provided with education and training related to the implementation of their works.
In addition, comfortable working environment as well as providing motivation are basically the rights of
employees and obligations of the company to support the contributions of its employees in order to achieve
predetermined goals.
To create high-performance, it needs an increase in the optimal working and to be able to leverage the
potential of Human Resources owned by the employees in order to create organizational goals, so it will give
positive contribution for the development of the organization. Moreover, the governmental institutions need
to consider various factors that can affect the employees‘ performance, in this case the organization's role in
increasing motivation and creating conducive working environment is required to encourage the creation of
professional attitude and actions in completing the work in accordance with the field and respective
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responsibilities. The performance of governmental officials is also fundamentally influenced by certain

factors such as the factor of leadership, motivation and working environment.
Factor of leadership is the activities of influencing people to get them to work together to achieve the desired
objectives (Kartini Kartono, 2011). Leadership style is seen as one of the important predictors that influences
performance. The success of the organization in achieving its objectives and targets depends on the leaders
and the leadership styles. Leadership is required by the company to achieve the objectives of an organization.
Working motivation is one of the factors that determines the individual's performance. The large or small
motivation effect on someone's performance depends on how much the intensity of motivation given. Low
working motivation may affect the performance of employees that is not maximum (Siagian, 2011). For the
achievement of organizational goals, employees require motivation to work more diligently. Seeing the
importance of employees in the organization, then the employees require more serious attention to the task at
hand to achieve organizational goals.
According to Sedarmayati (2009) working environment is the whole tools and materials encountered, the
surrounding environment in which one is working, working methods, as well as the working arrangement
both as individuals and as groups. Working environment in an agency is one of the important things to note.
Although the working environment does not carry out the work in an agency, but the working environment
has direct impact on the employees who are working.
Human resources plays role in processing and exploiting the resources and materials so that become good
products or services. Therefore, to improve performance, keep in mind that human resources can work
efficiently and display performance that can contribute to productivity is the fundamental problem of the
various concepts of management and leadership. Performance refers to the work performance of employees
measured by standard or criteria established by organization. Management is to achieve very high employees‘
performance especially to improve overall organizational performance.
DPKAD Semarang is one of the governmental agencies in charge of managing Semarang regional finance. In
accordance with Law No. 22, Year 1999 amended by Law No. 32 of 2004 on Regional Government, Law
No. 25 of 1999 amended by Law No. 33 of 2004 on Financial Balance between the Central - Regional
Government in implementing the regional autonomy then it is established Dinas Pengelolaan Keuangan
Daerah Kota Semarang or known as DPKAD Kota Semarang, which is a new organization, the result of the
merger of Dinas Pendapatan Daerah Kota Semarang (Dipenda) with the Finance Division of Regional
Secretary of Semarang. Rules that underlie the formation of the organization is Regional Regulation No. 2 of
2001 on the Establishment of organization and administration of the Regional Office of Semarang which
were followed by the implementation rules in the form of Semarang Mayor Decree Number: 061.1 /
188/2001 dated April 25, 2001 jo. Semarang Mayor Regulation No. 42 of 2008 dated 24 December 2008 on
translation tasks and functions of the Department of Regional Finance and Asset Management Semarang.
However, the advent of time and the changes in the new regulations on Regional Financial Management
demand DPKAD Semarang to exist in running its mission to become the motor in professional regional
financial management in order to improve regional financial capacity and the implementation of the orderly
administration of regional asset management so that can improve and develop more fair and rational system
of regional financial management, then DPKAD Semarang is required to improve the performance of
employees in order to be better in performing their jobs. But in reality it is still less optimal of the employees
performance resulting in the number of works which are not resolved in accordance with the targets that have
been planned by the previous leaders.
In the effort to create employees‘ performance of DPKAD Semarang, it seems there are still many obstacles
faced so that it is difficult to achieve organizational goals. Conditions which have not been ideal still exists in
DPKAD Semarang, where there are still obstacles in DPKAD Semarang such as coming late to work, taking
break earlier and late for work, lack of adequate infrastructure, leaving work earlier. Thus resulting in
employees‘ performance decrease caused by low employees‘ motivation in doing the work and supported by
the less comfortable working environment so that the employees' job can not be completed as planned. It can
be seen on the table below:
Table 1: The Performance of DPKAD in Semarang based Goal Work
No Targets Realisation
(%)
1 Increase professional apparatus 99,55
2 Implementation of the duty based on honesty, accuracy, and good morality 98,85
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3 Implementation of promotion and regular salary timely 100

4 The availability of accurate personnel data 100
5 Implementation of employee welfare improvement 93,80
6 Implementation of personnel arragement accordance with competence, need, and 86,75
regulation.
7 Implementation of BKPP activity accordance with the program 100
Source: DPKAD in Semarang, 2015.
Table 2: Employee Performance based on Key Performance Targets

No Ukuran Kinerja Pegawai Target Realisation
1 Administrative Service Office 100% 82%
2 Apparatus facility and infrastructure improvement 100% 68%
3 Administrative promotion autometically on Government Employees 100% 90%
4 Facilitation to move / retirement on Government Employees timely 100% 51%
5 The improvement of human resource capacity 100% 57%
Source: DPKAD in Semarang, 2015.
Accordence to the table above, it can be seen that employees‘ performance in Department of Regional
Finance and Asset Management (DPKAD) Semarang was not optimal yet. It can be seen from the objectives
achievement based on programs in DPKAD Semarang, a few programs didn‘t achieve 100% of the targets
required. Another result can be seen on performance target table that have been defined by the leader , it less
from target 100% and some performances were far from targets required. Accordance to the result, it shows
the importance of government to give more attention to the employees seriously to create good governance
from government apparatus that is effective, efficient, clean, and professional.
Based on the description above, researcher interested in conducting this study entitled ―The Effect of
Leadership, Motivation and Working Environment on Employees’ Performance In Department Of
Regional Finance And Asset Management Semarang”
Problem Formulation
According to the background of this problem above, so the question of this study as follow:
1) How does leadership influence employees‘ performance in Department of Regional Finance and Asset
Management Semarang?
2) How does motivation influence employees‘ performance in Department of Regional Finance and Asset
Management Semarang?
3) How does working environment influence employees‘ performance in Department of Regional Finance
and Asset Management Semarang?
LITERATURE REVIEW
Leadership
In book The Art of Leadership, Tead Ordway states that leadership is activities to influence people so that
they would work together to achieve the desired goals (Kartini Kartono, 2011). George R. Terry conveys
leadership as activities to influence people to be taken to achieve organizational goals (Miftah Thoha, 2012).
Meanwhile, according to Viethzal Rival (2010) leadership is activities of influencing each other and actuating
their subordinates to achieve the goals.
So if inferred from some of the above opinions, leadership is activities to influence others to achieve
organizational goals.
Motivation
Motivation comes from the Latin word movere which means boost, driving power or force that causes an
action or deed. The word movere, in English is often equated with motivation that means giving motive, or
impetus.
According to Stephen P. Robbins and Mary Counter in Suwatno and Donni Juni Priansa (2011), "willingness
to implement high effort to achieve organizational objectives which are conditioned by the effort's ability to
meet the needs of particular individual."
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According to Hamzah B. Uno (2012), "working motivation is one of the factors that determines someone's
performance. Large or small effect of motivation on someone's performance depends on how much the
intensity of motivation given".
Working environment
The working environment is one of the important factors in creating employees‘ performance. According to
Lewa and Subowo (2005), the working environment is designed such that to be able to create employment
relationship which binds the workers to their environment. According to Sedarmayanti (2009), the definition
of working environment is as follow: "The working environment is whole tools and materials encountered,
the surrounding environment in which one is working, working methods, as well as the arrangement of works
both as individuals and as group".
Of some opinions above, it is concluded that working environment is everything that is around employees at
work, which may affect himself and his work while he is working.
Performance
According to A.A. Anwar Prabu Mangkunegara (2010), performance is job performance or working result
(output) of both quality and quantity achieved by human resources in the unity of the period of time in
implementing its tasks in accordance with the responsibilities given to him. Faustino Cardosa Gomes argued
employees‘ performance as: "Phrases such as output, efficiency, and effectiveness which is often associated
with productivity." (A.A. Anwar Prabu Mangkunegara, 2010).
If concluded, the performance is the result of the activities performed by the employees once constrained by
time and objectives. The working activities should be limited in order to be able to be finished according to
the targets set, and do not deviate from the objectives of the company. In addition, that working activities are
carried out in accordance with the standards and procedures, so that it runs effectively and efficiently.
Previous Researches
Research from Aan Hardiyana and Farina Helwiyan (2011), with the research results showed that leadership,
motivation, and the working environment partially give significant effect on employees‘ performance.
Another research conducted by Hardino Febriansyah Putra (2012), with the research results showed that
leadership, motivation, and the working environment partially give significant effect on employees‘
performance.
Subsequent research by Nazma Amalia (2014), with the research results showed that leadership, motivation,
and the working environment partially give significant effect on employees‘ performance. Recent research by
Fitriani (2015), with the research results showed that leadership, motivation, and the working environment
partially give significant effect on employees‘ performance.
Framework
In this research, analysis will be conducted to determine the effect of leadership, motivation, and working
environment on employees‘ performance. To give an idea that the variables of leadership, motivation, and
working environment affect the employees‘ performance, so the Theoretical Framework of this research as
follow:
Picture 1. Theoretical Framework
Leadership (X1)
H1
Motivation (X2) H2 Employee

Performance (Y)
Working H3
Environment(X3)
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HYPOTESIS :
H1 : There is a positive influence on leadership and employee s‘ performance.
H2 : There is a positive influence on motivation and employees‘ performance.
H3 : There is a positive influence on working environment and employees‘ performance.
RESEARCH METHODS
Population and Sampling

According Sugiyono (2009) ―Population is the generalization region consist of: objects / subjects that have
certain qualities and characteristics defined by the researchers to learn and then get the conclusions‖. In this
study, the population is 227 employees (all employees) in Department of Regional Finance and Asset
Management (DPKAD) Semarang.
The number of sample in this study is 70 respondents using proportionate startified random sampling, this
technique used if the population has elements that are not homogeneous and proportionally stratified
(Sugiyono, 2009).
Types of data used is quantitative data . Quantitative data is the research method which is based on the
philosophy of positivism, is used to examine the population or a particular sample, data collection using
research instruments, data analysis is statistical in order to test the hypothesis (Sugiyono, 2009). Source Data
used is Primary Data. Primary data is obtain the data by getting it directly from the field (Sugiyono, 2009).
Primary Data which is found in this study was the answers from some questions in the questionnaire which is
given to respondens, it consist of leadership, motivation, working environment, and employees‘ performance.
Method of Collecting Data
Method of Collecting data in this study is questionnaires. Likert scale is used to measure attitudes, one's
opinion about social phenomena. All variables used in this study were measured using a Likert scale of 1 to 5
for the responses . The score criteria are as follow:
1 = Completely Disagree (Sangat Tidak Setuju (STS)) :1
2 = Disagree (Tidak Setuju (TS) ) :2
3 = Neutral (Netral (N) ) :3
4 = Agree (Setuju (S) ) :4
5 = Completely Agree (Sangat Setuju (SS) ) :5
Multiple Linear Regression
Multiple Linear Regression is used to predict the relationship between one continuous dependent variable
from two or more independet variable. Multiple Linear Regression Analysis is written as:
Y = a + b1X1 + b2X2 + b3X3 + e
Note :
Y : Employees‘ Performance
a : Constants
b1, b2, dan b3 : Coefficient of Linear Regression
X1 : Leadership
X2 : Motivation
X3 : Working Environment
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e : Standard Error
Coefficient of Determination
Coefficient of Determination (R2) is statistical measure the ability of the model to explain variations in the
dependent variable. The coefficient of determination is between null (0) and one (1). Low R2 value means
independent variable is very lack to explain dependent variable and vice versa.
Hypothesis Test (Test Statistic t)
Hyphotesis test in this study is using test statistic t. Basically, this test shows the influence of the independent
variables individually in explaining the variation of the independent variables.
RESULT AND DISCUSSION
In this study, Hypotesis test is testing use multi linier regresion and SPSS program. The testing result as
follow:
Table 3.
Coefficientsa
Unstandardized Standardized Collinearity
Coefficients Coefficients Statistics
Model B Std. Error Beta t Sig. Tolerance VIF
1 (Constant) 2.580 1.249 2.066 .043
Leadership .282 .106 .301 2.670 .010 .426 2.347
Motivation .355 .084 .391 4.233 .000 .635 1.574
Work Environment .244 .103 .246 2.365 .021 .503 1.989
a. Dependent Variable: Employee Performance
Source: Primary data are processed.
Based on the table above, the result of multiple linear regression equation as follow:
Y = 0,301 X1 + 0,391 X2 + 0,246 X3 + e
Hypothesis Test Results (Test Statistic t)
Test Statistic t The Effect of Leadership on Employee Performance
According to the test, t values is bigger than t table (2,670 > 1,996), and significance level 0,010 < 0,05. The
result is reject Hypotesis null (Ho) and accept Alternative Hypothesis (Ha). Based on that result, it indicate
that first hypothesis is accepted , because the result is supporting the statement of first hypotesis. It means
that good leadership improve employees‘ performance.
Test Statistic t The Effect of Motivation on Employees’ Performance
result is reject Hypotesis null (Ho) and accept Alternative Hypothesis (Ha). Based on the result, it indicate
that second hyphotesis is accepted, because the result is supporting the statement of second hypothesis, it
states that motivation has positive effect on employees‘ performance. It means that if the motivation
increased, the employees‘ performance will also improve.
3. Test Statistic t The Effect of Working Environment on Employees’ Performance
result is reject Hypotesis null (Ho) and accept Alternative Hypothesis (Ha). Based on the result, it indicate
that third hyphotesis is accepted, because the result is supporting the statement of third hypothesis, it states
that working environment has positive effect on employees‘ performance. It means that if the work
environment improved, the employees‘ performance will also increase.
Coefficient of Linear Regression
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The coefficient of determination (R2) is basically to measure the capability of leadership, motivation, and
working environment in explaining the variable variation of employees‘ performance. The result of
coefficient of determination was showed in Adjusted R Square:
Table 4 The Result of Coefficient of Determination
Model Summaryb
Adjusted R Std. Error of the
Model R R Square Square Estimate
1 .801a .642 .626 1.35380
a. Predictors: (Constant), Work Environtment, Motivation, Leadership
b. Dependent Variable: Employee Performance
Source : Primer Data in 2015.
According on the result from coefficient of determination (adjusted R square) was 0,626. It means 62,6%
employee performance can be explained by leadership, motivation, and working environment variables, while
the rest was 37,4 % , employees‘ performance explained by unexamined variables.
Discussion
The first hypothesis is acceptable, the results indicate that good leader can influence employees to work
better to achieve optimal results. Leaders with good leadership style can create high motivation within each
subordinates, so the motivation will arise morale which can improve the performance of the subordinates.
Participatory leadership is able to increase the role of employees to be more optimal so that the tasks or
targets that have been set can be achieved well. Thus, the ways the leaders behavior in directing employees
will affect the employees‘ performance who become their subordinates. The research results support the
research results conducted by Aan Hardiyana and Farina Helwiyan (2011) stated that leadership has positive
and significant influence on employees‘ performance.
The second hypothesis is acceptable, these results suggest that motivation affects the employees‘
performance or effectivity. Without motivation from the employees, it is likely that the work will not be done
well and smoothly. The efforts of creating motivation on employees may affect the achievement of the
employees‘ performance, because with that motivation the employees have their own impulse and passion to
work better. The research results support the research results conducted by Aan Hardiyana and Farina
Helwiyan (2011) states that motivation has positive and significant influence on employees‘ performance.
The third hypothesis is acceptable, these results suggest that the working environment is also an important
factor for the improvement of the good performance and the neglect of the working environment will result in
losses. The good working environment is very influential on the employees‘ performance when they are
working. Likewise, the bad working environment causes employees to feel discomfort in the works that may
affect the performance generated. The research results support the research results conducted by Aan
Hardiyana and Farina Helwiyan (2011) states that the working environment has positive and significant
influence on employees‘ performance.
CLOSING
Conclusion
Based on the data analysis results that have been made to all the data obtained, it can be concluded as follow:
1) Hypothesis one is accepted, it means that the leadership variable gives positive effects on
employees‘ performance. It can be concluded that if the leadership within the agency is getting
better, then the employees‘ performance at the Department of Regional Finance and Asset
Management of Semarang City will also improve.
2) Hypothesis two is accepted, it means that the motivation variable gives positive effect on
employees‘ performance. It can be concluded that if the employees‘ motivation improves, then the
employees‘ performance at the Department of Regional Finance and Asset Management of
Semarang City will also improve.
3) Hypothesis three is accepted, it means that the working environment variable gives positive effect
on employees‘ performance. It can be concluded that if the working environment within the agency
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is getting better, then the employees‘ performance at the Department of Regional Finance and Asset
Management of Semarang City will also improve.
Suggestion
Based on the conclusion above, some suggestions can be given as the research complement as follow:
1) Leadership must be improved, this can be done by the leaders through having communication more
often with their subordinates. For example the leaders should always consult with their subordinates,
and can mingle with subordinates in both the formal and informal environment, leaders can unite
more freely with their subordinates.
2) Motivation should be improved, for example by giving more appreciation for the employees of the
most outstanding on their performance by giving gifts or bonuses, as well as providing motivation
for employees to get promotion or raising their positions, so that the employees‘ performance in the
agency will improve.
3) The working environment needs to be improved, for example by checking the lights installed in the
room and checking the function of AC in the working room, so that employees will be more
convenient to do their job.
REFERENCES
A.A. Anwar Prabu Mangkunegara. 2010. Evaluasi Kerja SDM, Bandung: PT. Refika Aditama.
Aan Hardiyana dan Farina Helwiyan. 2011. Pengaruh Kepemimpinan, Motivasi, dan Lingkungan Kerja terhadap Kinerja
Pegawai Badan Kepegawaian Pendidikan Dan Pelatihan Kabupaten Bandung. Jurnal Ekonomi, Bisnis &
Entrepreneurship Vol. 5, No. 2, Oktober 2011, 86-96. ISSN 2443-0633
Fitriani. 2015. Pengaruh Gaya Kepemimpinan, Motivasi dan Lingkungan Kerja terhadap Kinerja Pegawai dan
Dampaknya pada Kinerja Dinas Kesehatan Kabupaten Bireuen. Jurnal Manajemen Pascasarjana Universitas Syiah
Kuala pp. 92- 100 ISSN 2302-0199.
Ghozali, Imam. 2009. Aplikasi Analisis Multivariate Dengan Program SPSS. Cetakan Keempat. Semarang: Badan
Penerbit Universitas Diponegoro.
Hamzah B. Uno. 2012. Teori Motivasi & Pengukurannya, Jakarta: PT. Bumi Aksara.
Hardino Febriansyah Putra. 2012. Analisis Pengaruh Kepemimpinan, Motivasi dan Lingkungan Kerja terhadap Kinerja
Pegawai Badan Diklat Provinsi Jawa Tengah. DIPONEGORO JOURNAL OF MANAGEMENT Volume 1, Nomor
1, Tahun 2012, Halaman 1-9.
Kartini Kartono. 2011. Pemimpin dan Kepemimpinan, Jakarta: PT. Rajawali grafindo Persada.
Lewa, K., Iip, Idham, Eka dan Subowo, 2005. ―Pengaruh Kepemimpinan, Lingkungan Kerja Fisik dan Kompensasi
Terhadap Kinerja Karyawan di PT. Pertamina (Persero) Daerah Operasi Hulu Jawa Bagian Barat Cirebon.‖
Jurnal SINERGI: Kajian Bisnis dan Manajemen Edisi Khusus on Human Resources.
Nazma Amalia. 2014. Pengaruh Kepemimpinan, Motivasi, serta Lingkungan Kerja terhadap Kinerja Pegawai Dinas
Pendapatan, Pengelolaan Keuangan dan Aset Kabupaten Barito Timur. Jurnal Administrasi Publik dan Birokrasi
Vol. 1 No. 3, 2014, artikel 1.
Robbins, Stephen P., Coulter, Mary. 2012. Management, England: PT. Pearson Education Limited.
Sedarmayanti.2009. Sumber Daya Manusia dan Produktivitas Kerj, Edisi Ketiga. Bandung: CV.
Mandar Maju.
Sondang P. Siagian. 2011. Manajemen Sumber Daya Manusia, Jakarta: PT. Bumi Aksara.
Sugiyono. 2009. Metode Penelitian Kuantitatif, Kualitatif dan R&D, cetakan ke delapan, Penerbit Alfabeta, Bandung
Suwatno, Donni Juni Priansa. 2011. Manajemen SDM dalam Organisasi Publik dan Bisinis, Bandung: Alfabeta.
Thoha, Miftah. 2012. Kepemimpinan dalam Manajemen. Jakarta: Rajawali Pers.
Veithzal Rivai. 2010. Kepemimpinan dan Perilaku Organisasi. PT. Raja Grafindo Persada. Jakarta
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THE EFFECT OF JOB SATISFACTION, JOB STRESS, ORGANIZATIONAL

COMMITMENT, AND TURNOVER INTENTION ON PYP COMPANY IN
UNGARAN, SEMARANG REGENCY
Silvi Alvionita Efendi, Rr. Lulus Prapti Nugroho Setiasih Surjanti, Dian Triyani
Semarang University
ABSTRACT
The purpose of this research is to analyze the effect of job satisfaction, job stress, and organizational
commitment on turnover intention. This research was conduced on employees in production department of
PYP company in Ungaran.
The sample unit in this study is permanent employees. The research population is all employess of PYP
company in Ungaran. The sampling technique using census method. The samples used were 97 permanent
employees of PYP company Ungaran. The analysis used is multiple linier regression analysis, SPSS 20
software.
The result shows that job satisfaction and organizational commitment variables have significant negative
effect on turnover intention, meanwhile, job stress variable has significant positive effect on turnover
intention. The coefficient of determination (R2) obtained was 62,2%, it means that turnover intention can be
explained by the variable of job satisfaction, job stress, and organizational commitment variables while the
remaining 37,8% is explained by other factors.
Keywords : Job Satisfaction, Job Stress, Orgazational Commitmen, and Turnover Intention
INTRODUCTION
Human resources are one important factor that determines whether or not a company runs. A person‘s
performance success or failure is determined by the competence, professionalism, and commitment on the job
(Sidharta,Margaretha 2011). But, the phenomenon that occurs is the behavior of employees who are not
disciplined in executing regulations set by the company.
Issues on human resources will hamper the company's performance as well as the achievement of the
company's production targets. Thus the company must immediately fix it to avoid loss. Good employee
management will provide a positive contribution to the progress of the organization. Otherwise, if there is no
good management, the employee will be less motivated to work and eventually be stepped down or out of the
workplace (turnover).
Harnoto (2002: 2) states turnover is the level or intensity of the desire to leave the company. There are many
reasons that cause this turnover and one of them is the desire to get a better job.
According to Panggabean (2004), turnover caused by job satisfaction and organizational commitment factors.
These factors are supported by research conducted by Sidharta and Margaretha (2011) which suggests that
general variables that are consistently found to be associated with an employee turnover intention are
organizational commitment and job satisfaction. Meanwhile, according to Caesary (2012) in Nazenin and
Palupiningdyah (2014), the causes of turnover are work stress, job satisfaction, and organizational
commitment. The study conducted by Waspodo, Handayani, and Paramita (2013) states that job satisfaction
and job stress can significantly affect turnover intention.
Furthermore, psychological factors, such as excessive workload, can cause job stress, as defined by Handoko
(2010) stress is a tensional condition that affects emotion, the process of thinking and a person's condition. A
heavy stress can endanger a person's ability to cope with environmental conditions. Besides stress,
organizational commitment factor can also cause the employee turnover.
PYP company, a company engaged in the manufacture of plastics located in Ungaran, Semarang regency.
Based on the data obtained, the number of employees getting reduced every year since so many employees
decided to leave the company. If converted in percentage, in 2011 employees turnover reached 9.86%, in
2012 (5.79%), in 2013 (6.81%), and 2014 (6.45%). It shows that the turnover was fluctuate, so it caussed the
delays of production process. The fluctuate on employees turnover indicates that the management of human
resources is less effective. This must be fixed soon to avoid the company prolonged loss.
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Based on the above data, it can be said that PYP company has turnover problems in production department.
Thus, this study was conducted to determine the cause of the problems in the company.
REVIEW OF THE LITERATURE
Job Satisfaction
According to Koesmono (2005) in Waspodo and Handayani and Paramita, job satisfaction is an assessment, a
feeling or attitude of a person or employee to his/her work and the relationship among friends, social
relationships in the workplace, etc. Mangkunagara (2004) states that satisfaction will arise when needs are
met. The needs are multilevel, ranging from the lowest to the highest.
Smith et.all (1994) in Handoko (2008) revealed five dimensions or indicators that reflect the essential
characteristics of job satisfaction that employees responded effectively, those are job, salary, promotion,
supervision, co-workers.
Job Stress
According to Mangkunagara (2005), stress is a pressure feeling or distress experienced an employee had in
the workplace. Everyone is bound to experience stress, either outside or inside the organization. In other
words, every person cannot avoid stress, so both the employees and the leader have to manage it well.
The indicators of job stress, according to Robbins (2001, 566-567), are the physical environment (job stress
caused by the environment), individual stressors (caused by an individual), group stressors (caused by the
organization).
Organizational Commitment
According to Martin and Nichols (1991) in Soekidjan (2009), three pillars to represent the necessary
components for creating commitment. These are: a sense of belonging to the organisation, a sense of
excitement in the job and confidence in management. three commitement pillars which need to build are a
sense of belonging , passionate towards work , ownership of the organization.
The indicators of organizational commitment by Mowday, et al (1982) in Luthas (2006), are a strong desire
to stay as members, the desire to strive for the success of the organization, organizational values equality,
equality of the organization goals.
Turnover Intention
Rus and McNeily, (1995) in Panggabean, (2004) stated that turnover intention is the desire to look for other
jobs, if they get a better chance they will change the job. But if the opportunity is not available or not better
than the recent one, emotionally and mentally the employees will do negative things, namely by being late,
absenteeism, lack of enthusiasm, or lack the desire to strive well.
Previous Studies
Previous studies conducted by Nazenin, Palupiningdyah (2014) concluded that there are effects of job
satisfaction and job stress to the turnover intention. It is also supported by Waspodo, Handayani, Paramita
(2013) research which stated that job satisfaction has negative effect and significant to turnover intention, and
work stress has positive effect and significant to turnover intention.
Research conducted by Sidharta, Margaretha (2011) states that there are effects of job satisfaction and
organizational commitment to turnover intention. This also supported by Kadiman, Indriana (2012) found a
significant effect on job satisfaction and organizational commitment to turnover intention.
Research conducted by Cipta Dharma (2013) states that there is a negative influence of organization
commitments to turnover intention. It means the higher the organization commitment toward its employee,
the lower the turnover intention will occur.
Framework
The relationship of direct and indirect variables can be seen on the picture below:
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Picture1: Framework
HYPOTHESIS
H1 : Job satisfaction has significant influence on turnover intention
H2 : Job stress has significant influence on turnover intention
H3 : Organizational commitment has significant influence on turnover intention
RESEARCH METHOD
Population and Sampling

Population is the generalization field consisting the objects / subjects that have certain qualities and
characteristics defined by the researchers to learn and then drawn conclusions (Sugiyono, 2005). In this
study, the population is 97 permanent employees of production department in PYP company.
Considering the total population is only 97 people, all of them will be served as the sample, so this study is a
census research. The sampling method is census because (in terms of its territory) this study only includes
very small areas or subjects. Thus the researchers need to examine overall without having to take samples in
certain number (Arikunto, 2005).
If the subject is less than 100 people, it is better to take them all (as sample) (Arikunto, in Cipta Dharma,
2013). So the sample is 97 employees of PYP company in Ungaran.
Analysis method
Multiple Linear Regression
This analysis is primarily used to find the regression equation or the effect of independent variables on the
dependent variable . The formula used is (Sugiono, 2005) :
Y = a + b1X2 + b2X2 + b3X3 + e
Note :
Y = Turnover Intention
a = Constant / intersept
b1,2,3= Multiple regression coefficient between x and y
X1 = Job satisfaction
X2 = Job stress
X3 = Organizational commitment
E = error of term
Determination Coefficient Test or R2 Adjusted Test
Testing for the determination coefficient or R2 Adjusted test was conducted to determine the ability to explain
the X variable to Y variable. So the greater its value means the effect is greater, and vice versa.
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Hypothesis Test (t Test)

T test was used to test the regression coefficients of the independent variables on the dependent variable
partially, to determine the test, then the decision-making criteria are as follows:
1. If t count ≥ t table or -t count ≤ -t table and the significance value < 0.05 then Ho is rejected and Ha is accepted, it
means that there is effect of independent variables on dependent variables. Thus the hypothesis is accepted.
2. If t count < t table or t count > t table and the significance value > 0.05 then Ho is accepted and Ha is rejected, it
means there is not effect of independent variables on dependent variables partially. Thus the hypothesis is
rejected.
In this research the hypothesis testing was conducted by using multiple linear regression analysis using the
aid of SPSS program. The result as follows :
Table 1 Multiple Linear Regression Test
Coefficientsa
Model Unstandardized Standardized T Sig.
Coefficients Coefficients
B Std. Error Beta
(Constant) 12,184 1,742 6,993 ,000
Job Satisfaction -,132 ,048 -,188 -2,753 ,007
1
Job Stress ,630 ,083 ,505 7,598 ,000
Organizational commitment -,356 ,061 -,390 -5,826 ,000
a. Dependent Variable: TURNOVER_INTENTION
Source : Primary Data in 2016
Multiple linear regression equation obtained as follows:

Y = – 0,188X1 + 0,505 X2 – 0,390 X3
Note :
Y = Turnover Intention
X1 = Job Satisfaction
X2 = Job Stress
X3 = Organizational commitment
The First Hypothesis Testing
Testing of job satisfaction on turnover intention obtained t count value of -2.753 with significance of results
0.007. Thus the t count value = -2.753 < t table value = -1.985. This shows there is negative effect of job
satisfaction on employees‘ turnover intention on the production department of PYP Company. The
explanation can be interpreted that the higher the levels of employees‘ working satisfaction on production
department of PYP company, it will reduce the turnover intention. The test results show that the test is able to
accept H1, so that assesment can be accepted.
The Second Hypothesis Testing
Testing of working stress on turnover intention obtained t count value of 7.598 with the significance results
of 0.000. Thus the t count value = 7.598 > t table value = 1.985. This shows there is positive effect of job
stress on employees‘ turnover intention on the production department of PT. Polidayaguna Perkasa. The
explanation can be interpreted that anytime there is increment factors that can affect employees‘ job stress on
production department of PT. PYP, it will increase the turnover intention. The test results show that the test
can accept H2, so that the assesment can be accepted.
The Third Hypothesis Testing
Organization commitment testing on turnover intention obtained t count value of -5.826 with significance
results of 0.000. Thus the t count value = -5.826 < t table value = -1.985. This shows there is negative effect
of organization commitment on employees‘ turnover intention on production departmen of PT. Polidayaguna
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Perkasa. The explanation can be interpreted that the higher the employees‘ commitment on production
department to the company, it will reduce the turnover intention. The test results show that the test is able to
accept H3, so that assesment can be accepted.
Testing Results of Determination Coefficient
The determination coefficient was used to see the extent of job satisfaction, job stress, organizational
commitment affects turnover intention. The result of determination coefficient as follows:
Table 2 Multiple Determination Coefficient (R2)
Model Summaryb
Model R R Square Adjusted R Square Std. Error of the
Estimate
1 ,796a ,633 ,622 1,522
a. Predictors: (Constant), Organizational commitment , Job stress, Job
Satisfaction
b. Dependent Variable: TURNOVER_INTENTION
Source: Primary Data in 2016
The magnitude of the determination coefficient can be seen from the value of Adjusted R square showing the
figure of 0,622. These results indicate that job satisfaction, job stress, organizational commitment can affect
turnover intention amounted to 62.2%, while for 37.8% (100% - 62.2%) turnover intention is affected by
variables outside the working satisfaction, working stress, organization commitment.
Discussion
The discussion is about the research results on the effect of job satisfaction, job stress, organizational
commitment on the employees‘ turnover intention on production department of PYP company.
1. The Effect of Job Satisfaction on Turnover Intention
Mangkunegara (2004) states that satisfaction will arise when the needs are fulfilled. The needs are multilevel
ranging from the lowest to the highest level. Someone with high degree of satisfaction shows positive attitude
towards the job. Conversely, if someone is not satisfied with his work, showing negative attitudes towards the
job. The results of the hypothesis testing (H1) has proved that there is effect of working satisfaction on
turnover intention. Through calculations results that have been done, it obtained t count value of -2.753 with
results significance level of 0.007 is less than 0.05, which means that the hypothesis in this research accepts
Ha and rejects Ho. This test statistically proved that working satisfaction gives negative and significant effect
on turnover intention. This means that there is effect of employees‘ job satisfaction variables on production
department on turnover intention.
2. The Effect of Job Stress on Turnover Intention
According to Robbins (in Noviansyah and Zunaidah 2008) Stress is a dynamic condition where individual is
faced with obstacles opportunity and desire with the results obtained are very important and can not be made
sure. The results of hypothesis testing (H2) has proved that there is effect of working stress on turnover
intention. Through calculations results that have been done, it obtained t count value of 7.598 with results
significance level of 0.000 is less than 0.05, which means that the hypothesis in this research accepts Ha and
rejects Ho. This test statistically proved that working stress gives positive and significant effects on turnover
intention. This means that there is effect of employees‘ working stress variables on production department on
turnover intention.
3. The Effect of Organizational Commitment on Turnover Intention
Grant et.al, (2001) show that the higher the working satisfaction and organization commitment is expected to
decrease the intent and objectives of the employees to leave the organization. More over, the employees who
are not satisfied with their working aspects and do not have commitment towards the organization will look
for job in another organization. Thus, Grant found the negative relationship between organization
commitment and turnover intention.
The results of the hypothesis testing (H3) has proved that there is effect of organization commitment on
turnover intention. Through calculations results that have been done, it obtained t count value of -5.826 with
the result significance level of 0.000 is less than 0.05, which means that the hypothesis in this research
accepts Ha and rejects Ho. This test statistically proved that organization commitment gives negative and
523
significant effect on turnover intention. This means that there is effect of employees‘ organizational
commitment variables on production department on turnover intention.
CLOSING
Conclusion
From the analysis and testing obtained from field research, the writer concludes that job satisfaction, job
stress and organizational commitment on turnover intention, as follows:
1. There is negative effects of job satisfaction on turnover intention. This means that the higher the
levels of the employees‘ job satisfaction will minimize turnover intention.
2. There is positive effects of job stress on turnover intention. This means that everytime there are
increment factors that can affect employees‘ stress, it will increase the turnover intention.
3. There is negative effects of organizational commitment on turnover intention. This means that the
higher the employees' commitment on the company will decrease the turnover intention.
Suggestion
Suggestions that can be delivered based on the research results obtained for the company are as follows:
1. In an effort to increase job satisfaction, the management of PYP company should provide support from
the leaders to the employees, for instance the existance of fair attitude given by the leaders (supervisors)
in giving attention to subordinates.
2. In an effort to cope with the job stress, the management of PYP company should create the atmosphere
of the working environment as comfortable as possible, so that employees feel comfortable in
performing their work. It can minimize the employees' desire to find another job.
3. In an effort to increase the organizational commitment, the management of PYP company should
provide good stimulus, so that the employees have high significance in advancing the company. With
the attention of the management, it will make the employees feel proud to continue working at the
company.
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Dharma, Cipta. 2013. Hubungan Antara Turnover Intention Dengan Komitmen Organisasional Di PT. X. Medan. Jurnal
EKSIS. 1(2), h:1 – 9.
Ghozali, Imam. 2001. Aplikasi Analisis Multivariate Dengan Program SPSS. Semarang: Badan Penerbit Universitas
Diponegoro.
Grant, K, D.W. Cravens, G.S. Low dan W.C Moncrief (2001). The Role of Satisfaction with Territory Design on the
Motivation, Attitudes and Work Outcomes on Sales. Journal of the Academy of Marketing Science, vol 29 no 2
pp.165-178
Handoko, T Hani. 2008. Manajemen Personalia & Sumberdaya Manusia, Edisi Kedua. BPFE UGM: Yogyakarta.
Handoko, T Hani. 2010. Manajemen Personalia & Sumberdaya Manusia, Edisi Kedua. BPFE UGM: Yogyakarta.
Harnoto. 2002. Manajemen Sumber Daya Manusia. Prehallindo: Jakarta.
Indriantoro, dan Supomo. 2002. Metodologi Penelitian Bisnis untuk Akuntansi dan Manajemen, Edisi Pertama. BPFE-
Yogyakarta: Yogyakarta.
Koesmono H, Teman. 2005. Pengaruh Budaya Organisasi Terhadap Motivasi dan Kepuasan Kerja serta Kinerja
Karyawan Pada Sub Sektor Industri Pengolahan Kayu Ekspor di Jawa Timur. Jurnal Manajemen dan
Kewirausahaan. 7(2), h: 171 – 188.
Luthans, Fred. 2006. Perilaku Organisasi. Penerbit Andi: Yogyakarta.
Mangkunegara Anwar Prabu . 2004. Sumber Daya Manusia Perusahaan. Remaja Rosdakarya: Bandung.
Mangkunegara Anwar Prabu. 2005. Sumber Daya Manusia Perusahaan. Remaja Rosdakarya: Bandung.
Nazenin, Syarifah dan Palupiningdyah. 2014. Peran Stres Kerja dan Kepuasan Kerja Untuk Mengurangi Turnover
Intention. Jurnal Dinamika Manajemen. 5(2), h:220 – 227.
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Noviansyah dan Zunaidah. 2011. Pengaruh Stress Kerja dan Motivasi Kerja terhadap Kinerja Karyawan PT. Perkebunan
Minanga Ogan Baturaja. Jurnal Manajemen dan Bisnis Sriwijaya
Panggabean, S., Mutiara. 2004. Manajemen Sumber Daya Manusia. Ghalia: Bogor.
Rivai, Harif A 2005, 'Pengaruh Kompensasi, komitmen Organisasional, dan Kompe¬tensi terhadap Kinerja Individual‘,
Kajian Bisnis, Vol. 3, September- Desember 2005, 272-286.
Sidharta, Novita dan Margaretha, Meily. 2011. Dampak Komitmen Organisasi dan Kepuasan Kerja Terhadap Turnover
Intention: Studi Empiris Pada Karyawan Bagian Operator di Salah Satu Perusahaan Garment di Cimahi. Jurnal
Manajemen. 10(2), h:129 – 141.
Soekidjan. 2009. Manajemen Sumber Daya Manusia. Bumi Aksara.Jakarta
Sugiyono. 2005. Metode Penelitian Kualitatif. Alfabeta: Bandung.
Sugiyono. 2010. Metode Penelitian Kuantitatif, Kualitatif, dan R&D). Alfabeta: Bandung.
Sutrisno, Edi. 2009. Manajemen Sumber Daya Manusia, Edisi Pertama. Kencana Prenada Media Group: Jakarta.
Umar, Husein. 2008. Desain Penelitian MSDM dan Perilaku Karyawan: Paradigma Positivistik dan Berbasis
Pemecahan Masalah, Edisi I, Cetakan Pertama. Raja Grafindo Persada: Jakarta.
Waspodo, Handayani dan Widya Paramita. 2013. Pengaruh Kepuasan Kerja Dan Stres Kerja Terhadap Turnover
Intention Pada Karyawan PT. Unitex di Bogor. Jurnal Riset Manajemen Sains Indonesia. 4(1), h:97 – 115.
Wijaya, M.K. 2002. Menggagas Bisnis. Gema Insani Press: Jakarta.
Yulianto, W. 2001. Pengaruh Kepuasan Kerja, Loyalitas karyawan, Komitmen Organisasional dan LMX pada Turnover
Intention di Lingkungan Asuransi. Skripsi Program Sarjana Jurusan Manajemen Fakultas Ekonomi Universitas
Gadjah Mada Yogyakarta. Tidak dipublikasikan.
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POPULATION GROWTH, EDUCATION

AND LABOR MARKET IN CENTRAL JAVA
Wyati Saddewisasi
Semarang University
(wyatis@yahoo.com)
ABSTRACT
This research generally aims to analyze the birth and mortality rate in relation to population growth. In
addition, to analyze the link between level of education and labor market needs in Central Java. The location
of this research is in Central Java. This research uses secondary data. The data analysis uses descriptive
analysis, comparative analysis and impact analysis. The results of this research will indicate: 1) decrease
and increase in birth rates have not affected the population growth rate, however, they affect the absolute
increase in the total population. Judging from the number of mortality, the number has decreased. This
shows that the health status in Central Java has increased. 2) The illiterate population has decreased
although the decline is relatively small, 3) there are still people who have not experienced education in
Central Java, especially those aged 12 years and over, 4) Most of the population aged 15 years and over who
worked are primarily have elementary school education. The highest main work status is as
workers/employees. The main employment that can absorb the most labors are agriculture, plantation,
forestry and fisheries. However, growth is likely to be negative. The policy implication of this research: the
socialization of the family planning program (KB) needs to be done aggressively; the policy program to
eradicate illiteracy is still required; the need to increase compulsory education from nine years to 12 years;
agriculture, plantation, forestry and fisheries are still in need of support to increase their appeal.
Keywords: labor market, education, population growth, family planning program
1. INTRODUCTION
The population growth of Central Java is experiencing a decrease, however, the numbers are still high. Based
on the census result of the 2010 population census, Central Java has a population of 32,382,657 inhabitants.
This number increased when compared to the year 2000, which were 30,775,846 inhabitants. When viewed
from the growth rate, the size of the population growth rate is 0.37% of Central Java, the condition is lower
than the growth rate of Indonesia which is by 1.49%. Although growth slowed, the absolute numbers are
steadily increasing. In the implementation of sustainable development, population growth needs to be
managed in a planned manner, both quantity and quality as efficiently and effectively as possible.
The absolute growth of population has implications for development. Therefore, efforts to control the growth
must be done, so that problems that arise as a result of the increase of population can be reduced.
Furthermore, efforts to improve the quality of the population also needs to be done so that the population will
not only be as the object but also as the subject of development. Thus the pace of socio-economic
development can be increased and ultimately the welfare of the population will also increase.
To improve the quality of the population, one of the efforts that can be done is through education. Education
is an important agenda for the country and is the key to successful development of a country. Given the
importance and strategic role of education, it should be a top priority in the development in either the central,
provincial or local levels.
Today unemployment is declining, however, vast numbers can still be seen. Based on the work force data of
Central Java, it showed that palpable unemployment in 2012 compared to 2011, has decreased. However,
there is an increase in unemployment of elementary graduates (lower level). This indicates that if the public
does not want to increase their education, it will increase the number of unemployment.
Based on the description of the background, we can identify the key problems, which are the continued
increase of population growth in Central Java, learning opportunities that are not utilized properly will result
the increase of less educated unemployment. Hence the formulation of the problem is how to reduce the rate
of population growth and how to improve education to match labor market needs. Therefore, the research
questions are:
1) Is the number of births and mortality affect the population growth?
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2) Are there still illiterates in the population of Central Java?

3) What is the school enrollment ratio, the gross enrollment and net enrollment ratio for population of
Central Java?
4) How are the population of Central Javanese aged 15 years and over being employed according to their
education, main work status and field of work?
The purpose of this research is to generally analyze not only the birth rate and infant mortality rate
in relation to population growth, but also to analyze the link between the level of education and labor market
needs in Central Java. In particular, this research aims to:
1) Analyze the influence of birth and mortality rates in population growth.
2) Analyze the illiterate population of Central Java.
3) Analyze school enrollment rates, gross enrollment and nett enrollment rates for population of Central
Java.
4) Analyze Central Javanese population aged 15 years and over who worked according to their educational
level, main employment status and employment field.
2. THEORIES OF POPULATION
The high rate of population growth in some parts of the world have led to a population increase rapidly. In
some parts of the world there have been poverty and food shortages. This phenomenon has raised concerns of
the experts and each of them has tried to find the factors that cause poverty.
Generally, experts are divided into three groups. The first group consists of adherents of Malthusianism.
Malthusianism was pioneered by Thomas Robert Malthus, and the Neo Malthusianism was pioneered by
Garreth Hardin and Paul Ehrlich. The second group consists of adherents of Marxism, which were pioneered
by Karl Marx and Friedrich Engels. The third group consists of cutting-edge experts of the population theory
which is a reformulation of the existing population theories.
1) Malthuanism
This group was pioneered by Thomas Robert Malthus, an English clergyman, lived from 1766 until 1834. At
the beginning of 1798, through his essay entitled: ―Essay on the Principle of Population as It Affects the
Future Improvement of Society, with Remarks on the Speculations of Mr. Godwin, M. Condorcet, and Other
Writers‖, stated that the population (as well as plants and animals) if there is no restriction, will multiply
rapidly and quickly fill up some parts of the earth. High population growth is due to unprotected sex between
men - men and women cannot be stopped. Malthus also argued that in order to live, humans require food,
while the growth rate of food is much slower than the rate of the population growth. If not there is no
restrictions to the growth of the population, people will experience food shortages. This is the source of
human misery and poverty. To be able to get out of the problem of food shortages, population growth
should be limited. According to Malthus such restrictions can be implemented in two ways: Preventive
Checks and Positive Checks. Preventive Checks is the reduction of the population through births. Positive
Checks is the reduction of population through the process of mortality. If in an area the population is more
than the amount of food supply, mortality rate will increase due to famine, pestilence and so forth. This
process will continue until the number of population is balanced with the food supply.
2) Neo-Malthusianism
At the end of the 19th century and the beginning of the 20th century, Malthus' theory began to be debated. A
more radical group that supported Malthusianism is called the Neo-Malthusianism. According to this group
(pioneered by Garrett Hardin and Paul Ehrlich), in the 20th century (in 1950), a new world which in the time
of Malthus, population was still small, now the number of people are immense. The new world is no longer
able to accommodate the ever-increasing number of population. Paul Ehrlich in his book ―The Population
Bomb‖ in 1971, described the population and the environment that exist in the world today as follows: First,
the world has too many people; second, the food situation is very limited; Third, too many people in this
world have severely polluted and damaged the environment.
3) Marxism
This group was pioneered by Karl Marx and Friedrich Engels. When Thomas Robert Malthus died in
England in 1834, they were teens. Both were born in Germany and then they moved to England individually.
At that time the Malthusian theory was very influential in the UK and Germany. Marx and Engels did not
agree with Malthus that stated that if there is a restriction on the growth of population, people will experience
food shortages. According to Marx, the pressure of population that exists in a country is not the population
pressure on food, but the population pressure on employment. Poverty does not occur due to the fast growing
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population, but it is the fault of society itself as well as on the state - capitalist state. The capitalists will take a
portion of the income of workers, causing poverty of the workers. Furthermore, Marx said, the capitalists buy
machines to replace the workers. Therefore, destitute population was not caused by shortage of food, but due
to a portion of their income were taken by the capitalists. So according to Marx and Engels capitalization
system is the cause of such poverty. To overcome these things, the structure of society should be changed
from a capitalist system to a socialist system.
4) The theory of John Stuart Mill
John Stuart Mill, a philosopher and economist British was able to accept the opinion of Thomas Malthus on
population growth exceeding the growth rate of food as an axiom. However, he argued that in certain
circumstances humans can affect demographic behavior. Furthermore, he said that if a person has high
productivity, he is likely to want to have a small family. In such a situation, fertility will be low. It is not true
that poverty cannot be avoided or poverty was caused by the capitalist system. If at a time in a region food
shortage occurs, the situation will only be temporary. There are two possible solutions, namely: import
foodstuffs, or move some of the region's population to other areas.
Noting that the level of birth rate is determined by the person himself, Mill suggested to increase the level of
incapable class. With the increase in population education, rationally they would consider whether or not to
increase the number of children in accordance with the career and business development. In addition, Mill
argued that most women do not want many children, and when their wishes are taken into consideration, birth
rate will be low.
3. RESEARCH METHOD
This research is a literary research, because it is done by researching library materials. In terms of the
objectives, this research tends to be descriptive, analytical. Description of the population growth in Central
Java will include the population growth rate, birth rate, infant mortality, illiteracy, population aged 15 years
and over who went to school according to the highest education attained, the number of school-age
population enrollment, the population of Central Java aged 15 years and over who worked according to the
level of education and business sectors. While the analysis will be on the population growth, education and
the labor market in Central Java. Thus policies to inhibit the growth of population in Central Java and provide
labor in accordance with the needs of the labor market could be formulated.
This research uses secondary data. Secondary data was collected from literatures, books, publications,
documentations, websites and others that have been issued by the relevant agencies, bureaus or mass media
that is linked with population growth, education and the labor market in Central Java.
In accordance with the purpose of this research, the variables used are as follows:
1) Growth of Central Javanese population includes the population growth rate, birth rate, infant mortality
rate.
2) Education includes, population aged 15 years and over who have attended school according to their
highest educational attainment, the number of enrollment of school-aged population.
3) The labor market includes Central Javanese population aged 15 years and over who worked according to
their educational level, main employment status and business sectors.
The data to be analyzed will be presented in two or more dimensional cross frequency tables. These tables are
used for descriptive analysis that describes the magnitude of each component of population growth, education
and the labor market in Central Java. In addition, comparative analysis method will also be used, namely to
compare the condition from year to year which is very useful for a development plan. An impact analysis is
also used to view the development of the field of population, education and the labor market.
4. RESULTS
A. Population Growth
Based on the results of the 2010 population census, the population growth in Central Java declined from
0.94% in 2000 to 0.37% in 2010. Although the growth rate slowed down, the number continued to increase.
In 2000 the population of Central Java were as many as 31,228,940 people and increased to 32,382,657
people in 2010. The total of population and population growth, according to the District/City in Central Java
can be seen in the following table:
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Table 1: Total, Growth, Birth Rate, Mortality Rate of

Population of Central Java in 1990, 2000, 2010
Description Census
1990 2000 2010
Total of Population 28.520. 643 31.228. 940 32. 382.657
Population Growth 1,18 0,94 0,37
Birth Rate 3,05 2,14 2,20
Mortality Rate 65,00 43,69 21,00
Source: Population Census 1990, 2000, 2010
Table 1 shows that population growth of Central Java from 1990 to 2000 decreased similarly from 2000 to
2010 also decreased. Thus it can be said that the population of Central Java has a negative growth. There are
several components that can affect the growth of the population, namely the number of births, mortality, in-
migration and out-migration. According to table 5.1 birth rate from 1990 to 2000 decreased, while 2000 to
2010 shows an increase. This suggests that the decrease and increase of the birth rate has no effect on the
relative population growth in Central Java. Although birth rate has decreased, the number of people in
continued to grow especially when the birth rate has increased, then the number of the population will also
show an absolute increase. Due to this fact, the number of births remains to be lowered. One way to reduce
the birth rate is to intensify the family planning program (KB). Another possibility may be that the population
growth rate is also affected by mortality and migration. When viewed from mortality, the figure has
decreased. This shows that the health status in Central Java has increased. The decline in the mortality rate
will also result in population growth. When viewed from the structure of the population of Central Java, it
appears that Central Java is almost enjoying a Demographic Bonus, in which the number of the productive
age of 15-64 years almost doubled than that of the non-productive age group (0-14 years and 65 years or
more). The age group of adolescents and adults is almost balanced, and quite a lot of elderly people.
This research results also showed that the number of population dependence of 50.31 per 100 inhabitants are
productive. The figure shows the ratio of productive population (15-64 years) and nonproductive population
(old age: 65 years and older and children: 1-14 years). Thus the population of productive age 15-64 years is
almost doubled than that of the non-productive age group (0-14 years and 65 years or more).
B. Quality of Population
Qualified population will be a resource for development, conversely unqualified people are a burden of
development. Better quality is apparent from the small amount of illiterate population, increased school
enrollment rate (APS), net enrollment ratio (APM) and the Gross Enrollment Ratio (APK). In addition, the
population who utilize school facilities can be known from the APS, APM and APK.
Illiterate people can be an indicator of the inability to read/write. In general, from 2010 to 2011, illiterate
population has decreased for all age groups, only in the age group of 15-45 years increased. Based on the
information from BPS-RI, the number of Illiterate increased compared to 2010 and 2011 due to:
1) The difference of estimate calculation methodology. In 2010, the inflate calculation was not based on a 5-
year age groups (0-4, 5-9, 10-14,..), while in 2011, the inflate calculation was by 5-year age group.
2) Data collection in 2010 was conducted 1 (one) time in a year, namely in July, while in 2011 the data
collection was conducted quarterly. This affects the calculation of the education indicators.
When viewed from the change in 2011 to 2012, the illiterate population has also decreased although the
decline was relatively small. This indicates that the quality of the population has slightly improved.
Judging from the age group, the percentage of the highest illiterate population is the age group greater than
45 years old, which was then followed by the age group of 15 and under and the last one is the age group of
15-45 years. This indicates that not all population were able to take advantage of the educational facilities. To
find out how many people takes advantage of the educational facilities can be seen from the percentage of the
population by education. Some of the indicators are used to assess the school enrollment in the region, among
others known as: School Enrollment Rate (APS), the Gross Enrollment Ratio (APK) and net enrollment ratio
(APM).
School Enrollment Rate (http://duniadinu.blogspot.com/2012/10) is a measurement educational institutions
absorption to the school age population. APS is a basic indicator that is used to look at the population access
to educational facilities, especially for school-age population. The higher the School Enrollment Rate the
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greater the number of people to have the opportunity to get an education. However, the increasing APS
cannot always be interpreted as the increasing equal opportunities for the community to pursue education.
In general, the school enrollment rate has increased. The decline in the school enrollment rate is due to
several matters (BPS-RI):
1) The difference of estimate calculation methodology. In 2010, the inflate calculation was not based on a 5-
year age groups (0-4, 5-9, 10-14,..), while in 2011, the inflate calculation was by 5-year age group.
2) Data collection in 2010 was conducted 1 (one) time in a year, namely in July, while in 2011 the data
collection was conducted quarterly. This affects the calculation of the education indicators for the school
year that begins in July and ended in June the following year.
Although school enrollment rate has increased, it can be said that there are still some people who have not
had the privilege of experiencing the existing educational facilities in Central Java. School Enrollment Rate
consecutively ordered from the highest to the lowest for population age groups are 7-12 years, 13-15 years,
16-18 years and 19-24 years. Thus it can be said that the population having the most likely chance to obtain
an education is in the age group of 7-12 years.
Net Enrollment Ratio (APM) shows the school participation of school-aged population at a certain level of
education. APM indicates the percentage of the number of children at certain school age group who are
attending school at a level of education according to their age to the total number of children at school age
group concerned. Results of the research showed that the group of elementary school/Islamic elementary
school percentage is more than the Junior High/Islamic Junior High and Senior High/Islamic Senior High.
Thus it can be said that the percentage of age group of 7-12 years being in school is more than the age group
of 13-15 years and 16-18. The higher percentage of the level of education the lower of those who attended
school. This is possibly due to the increasing age that they decide not to attend school or choose to work for a
living or help their parents to work in order to increase the family income.
If viewed from the changes, generally the net enrollment ratio has shifted into a positive direction, which
means that from 2010 up to 2012 the percentage of people who attend continued to increase. While the
negative sign or decrease is due to the differences in age estimation calculation methodology and the
difference of data collection period similar to the calculation of school enrollment rates.
If APM is used to determine how many of the population in a specific school age group who are attending
school in the level of education according to their age to the total number of children in the school age group
in question, therefore APK can be used to determine how many school-age populations who are able to take
advantage of educational facilities at a certain level of education regardless of the age. Gross Enrollment
Ratio (APK) indicates the participation of people who are obtaining education in accordance with the
education levels. Gross Enrollment Ratio (APK) is the percentage of population attending school on a given
education level (regardless of age) of the school-age population that is in accordance with the level of
education. BPS-RI explained that APK is used to measure the success of the educational development
program held in order to expand opportunities for people to obtain education. APK is the simplest indicator to
measure the absorption of the school age population at each level of education.
The APK value of Elementary School/Islamic Elementary School/Package A is greater than 100. This
indicates that the student population attending Elementary/Islamic Elementary/Package A schools are
children beyond the age limit of 7-12 years. For example, many children aged above 12 years, but still at the
elementary school level or too many children who are not yet 7 years old has already entered elementary
school. The presence of students older than the age of 7-12 years showed the cases of some failing the grades
or delayed in entering school. On the contrary, students aged less than 7 years showed that these students
entered school at a younger age.
Based on data from Net Enrollment Ratio, the percentage of group aged 16-18 years has the least percentage.
It shows that there are still few people within the age group 16-18 who attend school, it's likely they do not
want to attend school or they choose to work. From the analysis of net enrollment ration, it is also known that
the higher the level of education the smaller the percentage of those who attend school. This is in line with
the conditions of the number and percentage of the population aged 15 years and above, which indicates that
the higher the education level, the lesser the percentage.
The highest population having elementary education or lower are those aged 15 years and over. Followed by
those having junior high education, senior high, Associate‘s Degree I/II/III/Bachelor+. This shows that the
educational level of the population is still very low.
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C. Working Age Population and Not Working Age

According to the Central Bureau of Statistics (Sakernas, 2012), the concept of population is divided into two
groups: the working age population and the non-working age population. The working age population is
divided into two groups: the work force and non-work force. This distinction is based on the main activities
they do. The working age population is the population aged 15 years and over. Population included as work
force is the working age population (15 years and over) who work, or have a job but temporarily unemployed
and unemployment.
Labor Force Participation Rate (TPAK) from 2010 to 2012 experience an increase, which in 2010 was by
70.60 TPAK and rose to 70.77 TPAK in 2011 and 71.43 TPAK in 2012. This is due to the working age
population is also increasing. The percentage of the palpable unemployment rate is decreasing. In 2010 the
unemployment rate was by 6.21% down to 5.93% in 2011 and dropped again in 2012 to 5.63%. It is
interesting to note that there is an increase in people working part-time. In 2010 there were as many as
2,618,422 people and rose to 2,882,532 people in 2011 and became 3,088,982 people in 2012. This shows
that they are working under normal working hours (less than 35 hours a week), not looking for work and not
willing to accept the increasing number of work. This is likely due to several things:
1) Education of the workers is very low, hence the available jobs cannot absorb them and merely perform
what
needed to be done.
2) Workers felt enough with the current work they do.
3) Possibility of working as temporary workers and unpaid workers.
The highest number of population aged 15 years and over who are working, have elementary school
education. Thus it can be said that the labor force in Central Java is mostly very low. However, from year to
year, the very low educated have decreased and on the contrary, those having higher education is increasing.
Those having high school education+ from 2010 to 2011 have increased in number, namely from 3,642,296
people in 2010 to 3,732,053 people in 2011 and increased again to 4,056,892 people in 2012. Thus it can be
said that the working population is beginning to pay attention to higher level of education.
The growth of population in Central Java aged 15 years and over who worked from 2010 to 2013 have risen
0.67% from 2010 to 2011 and 1.36% from 2011 to 2012. It shows that along with the population growth, in
Central Java the population that are working are also showing growth. The status of the main employment
most performed by the population are laborers/employees. It shows that most of the population of Central
Java work in the formal sector work. The numbers also increased from 2010 to 2012. However, when seen
from the percentage of growth in 2011/2012 than in 2010/2011, it slightly decreased to 10.15% growth in
2011 to 2012, whereby from 2010 to 2011 was 10.49%. The next order of the main employment status is
assisted by non-temporary workers, which has the second considerable percentage after the
workers/employees, nevertheless it was experiencing negative growth. This may be a shift from assisted non-
temporary workers to own account workers or assisted by permanent workers. This is shown by the data of
the year 2011 to the year 2012 the population delving into own account workers has increased. As for the
assisted by permanent workers from 2010 to 2011 increased 8.28% and in 2011 to the year 2012 increased by
10.31%.
Population working in the agricultural sector experienced negative growth. It shows that the population of
Central Java began to leave the agricultural sector and to work in non-agricultural sectors. This is shown in
Table 5:10 that the agricultural sector from 2010 to 2011 experienced a negative growth that is by -13.21%
and in 2011 to 2012 the growth was -5.03%. Whereas Non Agriculture Free Time Worker shows a positive
growth of 2.49% from 2010 to 2011 and 10.24% from 2011 to 2012. For family workers also experiencing a
negative growth. Based on the number and growth of the population in Central Java, aged 15 years and over
who worked according to the main employment status, in general it can be said that the formal sector in
Central Java is still much in demand by the population compared to the informal sectors. In this case main
employment status of the formal sector is workers/employees. The formal sector if linked with the main
employment work are in the sectors of industry, construction, trade, restaurants and hotels, financial
institutions, real estate, and rental.
The growth of employment absorption is in accordance with the main employment. This is reflected in the
percentage of growth calculated from the change in the total population of Central Java Aged 15 Years and
Over Who Worked According to the Main job from 2010 to 2011 and from 2011 to 2012. If viewed from the
growth, it consists of a positive and a negative growth. Of the positive and negative growth, it can also be
seen that the growth increased and decreased. The Main employment that have the positive growth in labor
absorption and increasing every year are in the Industry sector, construction, trade, restaurant and hotel,
Public, Social and Personal Services. While industries having a positive growth yet declining absorption are
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financial institutions, real estate, and rentals. Employments in which the growth of the labor absorption is
negative, are agriculture, plantation, forestry, and fisheries and transport, storage and communication.
Employments in which the growth of labor absorption is negative and then turned positive, are mining and
quarrying, electricity, gas and water supply.
The main employment that absorb the most labors are agriculture, plantation, forestry, and fisheries. It shows
that the population of Central Java is still largely in agriculture, plantation, forestry, and fisheries. However,
the growth is negative and declining. This means that working in agriculture sector, plantation, forestry, and
fisheries are dwindling.
The second main employment that absorbs the most labors are trade, restaurant and hotel. These sectors have
increased every year. The growth from 2010 to 2011 was by 0.40%, and from 2010 to 2011 they continued to
grow
5. CONCLUSIONS, AND IMPLICATIONS
A. Conclusions
From the results of the research, it can be concluded that:
1) The decrease and increase in the birth rate have not affected the population growth rate, however, they
affect the absolute increase in the number of people Thus the number of population will also experience a
rapid rate increase. The decline in mortality rate will result in an increase in the number of population.
With the decline of the mortality rate, this indicates that the health status in Central Java has increased.
2) In general illiterate population has decreased although the decline was relatively small. This indicates that
the quality of the population has improved. However, in the group of age > 45 years the percentage of
illiterate population is the highest.
3) School Enrollment (APS) has increased, however, there are still people who have not experienced
education in Central Java, especially those aged 12 years and over. The most Gross Enrollment Ratio
(APK) in the group are Elementary School/Islamic Elementary School/Package A. When viewed from
Net Enrollment Ration(APM), the percentage of the group aged 7-12 years who are attending school, are
more than the age group 13-15 years and 16-18 years.
4) Population aged 15 years and over who are working, having the highest number of elementary education.
It showed that the labor force in Central Java: is mostly very low. The highest main job status is as a
worker/employee. It showed that the formal sector is still in great demand by population compared to the
informal sector. The main sectors that can absorb the most labors are agriculture, plantation, forestry and
fisheries. However, the growth of those sectors are likely to be negative.
B. Policy Implications
From the conclusion of the research, the policy implications presented are:
1) The suppression of the population increase rate, which can be done through vigorous socialization of the
family planning program (KB).
2) The necessity of illiteracy eradication programs policy, especially for the population aged >45 years.
3) Improvement to the quality of the population, which still needs to be increased in regards to the education
compulsory 9 years to 12 years.
4) The sectors of agriculture, plantation, forestry and fisheries still need support to increase its appeal, in
order to absorb more people for these sectors. The appeal on these sectors can be done through activities
and management of the sectors which are aimed at increasing the number of production and export
oriented.
6. ACKNOWLEDGEMENTS
I thank the BKKBN Representative Office of Central Java which has given financial support for the
realization of this research. I would also like to thank a team of researchers: Ir. Sudjatinah MSI, Dr. Endang
Rusdianti MM, Teguh Ariefiantoro SE, MM and Najib, SE, MM who has supported the implementation of
this research.
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7. REFERENCES
School Enrollment, the number of Gross Enrollment Ratio (APK), Net Enrollment Rate (APM). 2012. Just Share.
(Http://duniadinu.blogspot.com /2012/10/angka-partisipasi-sekolah-angka_5676.htm/
The Central Bureau of Statistics of Central Java Province. 2010. The state of Labor Force in Central Java province.
Jawa Tengah Dalam Angka.2012. Bali Ndeso Mbangun Deso.
Lucas, david, 1995, Pengantar Kependudukan, Gajah Mada University Press, Yogyakarta.
Malthus, et al, 2007, Kependudukan Dilema dan Solusi, Nuansa, Bandung.
Munir, Rozy, 1986, Teori-Teori Kependudukan, Bina Aksara, Jakarta.
Rusli, Said,1985, Pengantar Ilmu Kependudukan, LP3S, Jakarta.
Simanjuntak, Payaman J, 1998, Pengantar Ekonomi Sumber Daya Manusia, FEUI,Jakarta.
Subri, Mulyadi, 2003, Ekonomi Sumber Daya Manusia, RajaGrafindo Persada, Jakarta
Sukirno, Sadono. 2004. Makro Ekonomi Teori Pengantar, PT Raja Grafindo Perkasa, Jakarta.
Sumarsono, Sony, 2003, Ekonomi Manajemen Sumber Daya Manusia dan Ketenagakerjaan , Graha Ilmu, Yogyakarta.
Tambunan, Tulus, 1997, Perekonomian Indonesia, Ghalia Indonesia, Jakarta.
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EFFECT ON INTERNAL CONTROL SYSTEMS NON PERFORMING ON

FINANCING AKAD MUDHARABAH MICROFINANCE INSTITUTIONS OF
ISLAMIC IN SEMARANG CITY:
AN AGENCY THEORY APPROACH
Abdul Manan & Abdul Karim

Semarang University
(ham11smg@gmail.com & abdulkarim.akt@gmail.com)
ABSTRACT
Akad / Financing mudharobah have unique specifications Compared with the contract / other financing, the
which the fund manager and the owner of the funds in this case Islamic sharia cooperative microfinance
institutions or have limited financial information and business activities conducted by the fund manager.
Here, the potential for moral hazard and asymmetric information. In the review of the capital side, the
Theory of the agency as a possible explanation of variation observed in the capital structure of a business.
Akad mudharobah for high-risk characteristics, it has the inherent potential to the risk of financing problems
(non-performing financing). The impact that non-performing financing on mudharobah financing in Islamic
microfinance institutions, it is predominantly influenced by the internal control system of financial lending
institutions. Internal controls one way and coordinated tools used in the company for the purpose of
maintaining the security of property companies / Cooperatives, checking the accuracy and correctness of
accounting of data, maintain compliance with the management's discretion. Control systems are used to
reduce the possibility of fraud or error in the application of the provision of financing mudharobah control
system that needs to be unavoidable. System control is good, can be expected to be one way to control
potential inability of members making repayments of financing so that Non Performing Financing (NPF) can
be suppressed.
Keywords: Internal Control Systems, NPF, Akad Mudharobah
I. INTRODUCTION
Resilience against crises that occurred in the range of 1998 and 2009 on the business world is no exception
micro, small and micro enterprises menenggah.akan but small and menenggah more resistant to crises. Not
that micro, small and medium enterprises do not have problems of various problems remain faithful to all
levels of the business, both in the real sector and the sector of micro-finance institutions or what we call
cooperative. On the other hand, we should be grateful that the current development of the microfinance
industry based both conventional and Sharia-compliant has started to grow and develop in Indonesia.
Informally its own development has commenced prior to the issuance of a formal legal framework as an
operational basis for Islamic banking in Indonesia. 1991, was the beginning of the growth of Islamic financial
institutions with the establishment of its capital, although long before that enterprises of non-bank financing
that has implemented the concept for the results of the operations. It shows the community needs the presence
of financial institutions to provide financial services in accordance with sharia.
One cooperative activities Sharia / Islamic microfinance Institutions (LKMS) is providing financing / Loans
are based on trust. Funding will only be granted if it really believed that candidates in finance can restore the
funding has been entrusted to him in a timely manner and under the terms agreed upon between the members
of the cooperative Sharia / Islamic microfinance Institutions (LKMS). capital aspect practicing sharia
cooperative savings and loan / financing member has three sources of capital ie own capital, loan capital and
capital investments (Law No.19 / Per / MM.KUKM / 2008). Members as the owner and the service user
(user-oriented firm owner) is often called the dual identity of the member, the member must obtain optimal
service.
Mudharobah is one of the products or services Islamic microfinance institutions. Or a financing agreement
which is run by the Islamic financial institutions both Islamic banking institutions and non-bank financial
institutions sharia. Technically mudaraba is a contract of business cooperation between the owner of the
funds and fund managers to conduct business, profits are divided on the basis of revenue sharing by
agreement of both parties, while in case of the loss will be borne by the owner of the funds unless caused by
misconduct, Negligence or violation by the fund manager. SFAS 105 par 18 gives some examples of
535
negligence fund managers, namely: the requirements specified in the contract are not met, there are no
conditions beyond the capabilities (force majeure) are prevalent and / or that have been specified in the
contract, or is the result of a decision of the the competent institution. Mudharabah is a funding transaction or
investment that is based on trust.
Trust is the most important element in mudharabah, that is the belief of the owner of the funds to the fund
manager. Therefore, trust is an important element, then it can be termed mudaraba trust financing. Own funds
are investor-called beneficial ownership or sleeping partner, called the fund manager managing trustee or
partner labor. (Syahdeini, 1999)
Financing mudharobah have unique specifications which the fund manager and co-operative or Islamic
microfinance institutions called the owner of the funds have limited financial information and business
activities conducted by the fund manager. Here, the potential for moral hazard and asymmetric information.
In the review of the capital side, the Theory of agency as a possible explanation of variation observed in the
capital structure of companies / cooperatives. Jensen and Meckling (1976) suggest that the capital structure
decisions of managers alike to balance the cost of agency debt by the agency cost of capital to reduce the
impact on the value of the company. Conflicts between managers of companies with shareholders has been a
study that attracted the peneliti.Ketika shareholders difficulty monitoring the company's management, the
company's assets may be used for the benefit of managers on maximizing shareholder wealth. This suggests
that one way to overcome this problem is by providing partial ownership to the manager. This will also
contribute to help solve the moral hazard problem by performing alignment between the interests of
managers with the interests of shareholders. In Theory agency stated that there is a natural conflict between
the interests of outside shareholders and company managers, and lead to the possibility that managers might
make suboptimal decisions that improve their own welfare at the expense of shareholders.
According to the theory of agency (Jansen and Meckling, 1976) stated that the company separate the
functions of management of the ownership function would be vulnerable to an agency conflict. The cause of
the conflict between managers and shareholders of which are related to the decision-making 1;) fund-raising
activities (financing decision) and 2;) decision making with regard to how the funds raised are invested.
To reduce the possibility of fraud or error in the application of the provision of financing mudharobah control
system that needs to be unavoidable. System control is good, can be expected to be one way to control
potential inability to finance member making repayments (principal and margin) so that Non Performing
Financing (NPF) bias is pressed.
II. LITERATURE STUDY AND DEVELOPMENT MODEL
2.1. Agency Theory

This theory emerged after the phenomenon of separation of corporate ownership between stakeholders with a
manager of capital, so that the classical theory of the firm could no longer be used as a basis of analysis. In
the classical theory of the firm, company owners are entrepreneurial, take control of the company, make
decisions in the life of the company. Agency theory to answer by describing what things are likely to happen,
when penggelolaan the company submitted to the agent by the shareholder (principal), and whenever the
agent using borrowed funds to run its activities, conflicts of interests will occur either between the agent
(manager) with principal (shareholders) as well as between the principal (shareholders) with the principal
(lender).
Jensen and Meckling (1976) describes an agency relationship in agency theory (agency theory) that the
company is a collection of contract (nexusof contract) between the owner of the resource costs (principal) and
the manager (agent) who took care of the use and control of these resources. According Meisser, et al., (2006:
7) the agency relationship has resulted in two problems: (a) the occurrence of asymmetric information
(information asymmetry), where management generally has more information about the financial position
sebenarya and the position of the operating entity of the owner ; and (b) conflicts of interest (conflict of
interest) as a result of inequalities of interest, where management does not always act in the interests of the
owners.
In an effort to overcome or minimize agency problems this raises the cost of agency (agency cost) will be
borne by both the principal and the agent. Jensen and Meckling (1976) share the costs of this agency be
monitoring costs, bonding costs and residual loss. Monitoring costs are costs incurred and borne by the
principal to monitor the agent's behavior, which is to measure, observe, and control the behavior of the agent.
Bonding costs are costs borne by the agent to set danmematuhi mechanisms to ensure that the agent will act
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untukkepentingan principal. Furthermore, residual loss is reduced prosperity yangberupa sacrifice principal
as a result of perbedaankeputusan agent and principal decisions. According Schoeck (2002: 81) the
application of risk management can reduce agency costs and enhance shareholder value. Risikoperusahaan
management can also be a monitoring mechanism and lower asymmetric information and contribute to avoid
opportunistic behavior of managers (Kajuter et al., 2005).
2.2. Internal Control System

Mulyadi & Kanaka P (1998) argue that internal control is a process that is run by a board of directors,
management and other personnel, designed to provide reasonable assurance of achieving the following three
categories of interest:
1) Reliability of financial reporting
2) Compliance with laws and regulations
3) Effectiveness and efficiency of operations
According to Theodore M.Tuanakotta (1982), internal control is included plans and all methods coordinated
policy in an enterprise to secure their wealth, test accuracy and the extent to which accounting data can be
trusted, manggalakkan business efficiency and encourage compliance with policies outlined.
According to AICPA translated by Zaki Baridwan (1990), internal control includes organizational structure
and all the ways and means of coordinated used in the company for the purpose of maintaining the security of
company property, checking the accuracy and correctness of accounting data, maintain compliance with
wisdom management that has been preset. The elements of the Internal Control system according to Mulyadi
(1993)
1. The structure that separates the functional responsibilities explicitly.
The organizational structure is a framework of shared responsibility to a functional organizational units
established to carry out the main activities of the company. The division of functional responsibilities
within the organization based on the principles as follows:
a. Must be separated operating functions and storage of operating functions.
b. Not a duplicate departemenpun given responsibility to carry out all stages of a transaction.
The separation of the operating functions, storage and accounting are held may reflect not be held liable
sesungguhnya.Jika separation between the functions of the accounting data generated can not be
credible, and as a result the organization wealth for their safety.
2. The system of authority and recording procedures that provide adequate protection against wealth,
income and debt costs.
In organizations, each transaction occurs only on the basis of the authorization of the official who has
the authority to approve the transactions tersebut.Oleh for the division of authority to authorize the
implementation of the transaction is a need to be made. Good procedures will guarantee that the data
will be recorded in the form recorded in the accounting records with the level of precision and high
reability. This will generate information that accurately and reliably about wealth, liabilities, revenues
and expenses.
3. Practice healthy in performing their duties and functions of each organizational unit. The division of
responsibility and authority systems and recording procedures that have been set will not be performing
well if not created a way to menjanmin healthy practices in the implementation, the way in which are:
a. The use of numbered printed form that its use should be accounted for by the authorities.
b. Spot inspections, carried out without prior notice to examined, with irregular schedules.
c. Every transaction should not be executed from start to finish by a single function or organizational
unit, without any interference from people or other organizational units.
d. Turnover of routine office will be able to maintain independent officials in performing their duties,
so that conspiracy between them can be avoided.
e. Retrieval must leave for eligible employees.
f. Periodically matching of physical wealth to his notes.
g. Establishment of an organization unit to check the effectiveness of the elements of the internal
control system to another.
4. Employees whose quality is in accordance with the responsibilities jawabnya.Karyawan honest and
expert or competent in their area of responsibility will be able to perform the job efficiently and
effectively. Although only a few elements that support the internal control system. It shows the
elements of qualified employees is an element of the control system is crucial.For get the element
competent and trustworthy, can be done in various ways including:
537
a. Selection of candidates is based on the requirements demanded by the work required. A good
program in the selection of candidates will menjamindiperolehnya employees who have the
competencies required by the office which shall be occupied.
b. Development of employee education during employment companies sesuaidengan demands of the
job. Ramdhani and Sucipto (2009) states, Credit also have a strategy that can lead to credit
management becomes very important. The purpose of credit management is that banks can
improve the health and performance, with an increase in the quantity and quality of credit. The
quantity of credit assessed on the amount and rate of growth in lending. Loan quality, in a simple
and concise and can be measured from the number of non-performing loans (non perfoming
loans).
2.3. Akad Mudharobah

Technically mudaraba is a contract of business cooperation between the owner of the funds and fund
managers to conduct business, profits are divided on the basis of revenue sharing by agreement of both
parties, while in case of the loss will be borne by the owner of the funds unless caused by misconduct,
Negligence or violation by the fund manager.
Mudharabah a financing transaction or investment that is based on trust. Trust is the most important element
in mudharabah, that is the belief of the owner of the funds to the fund manager. Therefore, trust is an
important element in terms of the mudaraba English called trust financing. Own funds are investor-called
beneficial ownership or sleeping partner and fund managers called the managing trustee or partner labor.
(Syahdeini, 1999). While financing (financing) that the financing provided by one party to another to support
the planned investment, either by themselves or institution or in other words is the financing of funding
incurred to support the planned investment. (Muhammad, 2005: 17). Whereas in (Arthesa, 2006: 102)
Financing is the provision of cash or the equivalent, based on agreements between the bank and other parties
who require the financed party to return the money or the charges after a certain period of time in exchange
or for the results , Financing is one of the main tasks of financial institutions, namely providing facilities for
provision of funds to meet the needs of the parties who are deficit units. (Arthesa, 2006: 113). Meanwhile,
according to banking law number 10 of 1998, financing is the provision of cash or the equivalent, based on
agreements between the bank and its customers that require clients to return the money or the charges after a
certain period of time in exchange or for the results
In mudharabah, owner of the funds should not require a specific number to bagiannnya because it can be
equated with usury that is requesting the advantages or rewards without balancing factor (iwad) allowed
syariah.Hikmah of mudaraba system is able to provide relief to manusia.Terkadang there are some people
who have possessions, but were unable to make it productive. Sometimes, too, there are people who do not
own property, but he has the ability to memproduktifkannya. So with mudharabah both parties can benefit
from the cooperation formed.
2.4. Non Performing Financing

Non Performing Financing or NPF in Islamic financial institutions, as well as non-performing loans / NPL
conventional banks, arising because of problems that occurred in the internal approval process in bank
financing, or after the financing was provided. However, NPF and NPL occurred on a different system.
Islamic banking system has a fundamental factor that can withstand timbulya NPF order does not extend,
however, the conventional banking system to provide greater opportunities for the NPL.
Fundamental factors underlying the transaction are as berikut.Dari assets side of the balance sheet, Islamic
banks only know the word "financing" as the main activity, and do not lend money as the bank loan
konvensional.Pemberian money in Islamic banks are social, and not flowering. Commercial transactions
carried out through the sale to the murabaha contract, tenancy by the Ijara contract, and work together to run
an establishment / business with mudaraba or Musharaka.
Funding should not contain usury. Riba or interest, which is determined in advance whether profitable or
loss-making businesses, clearly manambah business risk. Greater risk will encourage NPF / NPL. In
mudharabah, banks as shahibul mall provides capital to finance the business carried on by the customer as
mudharib. In contract musharakah, banks and customers to finance and run a business together. In this
contract, the gain is a common interest for financial institutions and customers, which will then be divided
based on a ratio determined at the beginning wanted to cooperate. This common interest can boost
transparency information that is more open, and reduce the incidence of moral hazard, to every party in the
538
transaction, thus reducing business risk or risk financing / credit for the pihak.Setiap the contract contains an
element of justice, which is lawful and shared benefits are compensating business risk is shared.
At the macro level, the concept of fractional banking in the conventional banking encourage the creation of
"liquidity accounting" or higher credit or credit besar. Likuiditas this, if not controlled its use, can cause
failure of the bank or banking crisis / keuangan.Banyak financial crisis in the world starting with financial
liberalization in order to create greater liquidity, to increase economic growth; however, leads to a lending
boom and large NPL pula.Pada finally, every crisis that reduce economic growth and cause unemployment,
debt overhang, as well as a huge financial burden for taxpayers pajak.Oleh therefore, can be said to increase
the growth of the tap credit growth tends to create false.
Cause NPF / NPL in terms of internal financial institutions are the same, which is associated with factors of
knowledge / expertise finance / credit, professionalism and integrity, and the levels of spirituality from
officials of his, corporate culture, credit / financing culture in the institution, morality leaders ( moral
leadership), as well as reward and penalty system right. In terms of process, it is necessary to check the
reputation of the potential consumers, due diligence and care, and supervision of finance / internal credit.
Cause of the NPF / NPL after financing / loans granted are at the customer level, which deals with issues of
honesty and trustworthiness, expertise in business, commitment to businesses followed, and moral
commitment to keep janji.Semua must be observed from the outset, either by the institution conventional
financial or islamic financial institutions, with the use of internal factors and external factors.
III. RESEARCH METHODS
3.1. Population and Sampling

In connection with this study, the population to be observed is a cooperative Sharia / Islamic microfinance
Institutions (LKMS) in Semarang. The sampling technique used was purposive sampling with criteria: (1)
cooperative syariah / BMT / Institute for Islamic microfinance (LKMS) serving the financial statements
during the period of observation; (2) cooperative syariah / BMT / Institute for Islamic microfinance (LKMS)
which has been operating at least 1 year. The data used in this study are primary and secondary data. The data
obtained from questionnaires were entered and the financial statements reported to the authorities.
3.2. Variable Definition Operasiuonal

1. Internal Control System
Internal control is a system that includes organizational structure, all coordinated methods and provisions
adopted in the company to protect the assets, check the accuracy and extent of accounting data can be trusted,
improve business efficiency and encourage compliance with company policies that have been set. Internal
control consists of the following components: control environment, Risk assessment, information and
communication, control activities and monitoring (Committee of Sponsoring Organizations of the Tread way
Commission (COSO) in Sawyer (2005: 144)).
2. Non-performing financing
Measuring the level of financing issues faced by banks. The higher this ratio, indicating the quality of
financing of Islamic banks is getting worse. As for how to count from NPF (non-performing financing) yiatu
(Circular Letter No. 9/24 / DPbS dated October 30, 2007 Appendix 1b):
Financing (KL, D, M)
NPF= x100%
Total Financing
Where :
Financing (KL): Financing Substandard
Financing (D): Financing Doubtful
Financing (M): Funding Loss
Total financing: the amount of financing, receivables and Ijarah
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3.3. Research Accomplished
No Name Title Research Variables Research result

Research
1 Munawaroh The Role of Control effectiveness, His research proves Role
(2011) Internal to Support internal Internal control in supporting the
effectiveness System control, effectiveness of
Lending micro credit Credit can not be ignored. It is supported by
Small and Medium Enterprises system the results of the questionnaire answers
(Case Study in Cooperative relating
Employees BRI Branch the role of internal control in supporting
Kediri) effectiveness loans of 93.65%.
2 Andirusman Influence Effectiveness of Internal From the results we concluded that the
(2011) Internal Control on the Quality Control, hypothesis testing
Management of Credit Credit, Quality effectiveness of internal control
Credit In Rural Bank Credit Credit credit management has influence
Institutions the credit quality with value determination
Subdistrict (BPR LPK): coefficient of 37.58%, which
Survey On Bpr meaning 37.58%
credit quality
influenced by the effectiveness of
internal control management of credit and
the remaining 62.42% influenced by other
factors Factors such as compliance,
the good faith of the debtor and
macroeconomic developments affecting
the stability of the banking credit activity.
3 Ruzanna Evaluation of the internal control system The research proves

Amanina control system internal control of the internal control system in the
(2011) The loan process procedures process
micro "(study at Bank Mandiri crediting provision of credit in the bank branch by
(Persero) Tbk branch of using the Majapahit Semarang
Majapahit Attribute Sampling methods fixed sample
Semarang) size models showed that the control
the credit granting process
is effective because it limits the number of
precision yangdicapai
(Achieved precission Upper Limit
/ AUPL) at 3% less than or equal to Desired
Precision Upper Limit
(DUPL) 5%, at a confidence level of 95%,
And the rate ofoccurrence
1%.
Source: Data processed
3.4. Hypothesis
With a variety of empirical findings and models developed, it can be hypothesized, as follows:
H1: Employees who are qualified to have significant impact and negatively related to the Non Performing
Financing.
H2: Practice healthy and reliability of the financial statements has a significant influence and negatively
related to the Non Performing Financing.
H3: The organizational structure of healthy have a significant influence and related negatiff against Non
Performing Financing.
3.5. Mechanical Analysis

The analysis technique used in this study using multiple regression technique with the help of SPSS computer
program to test the effect of variable.
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Y = α + + β2X2 β1X1 β3X3 + e

Information :
Y : NPL
α : constant coefficient.
β1… β3: coefficient of variable effectiveness of the internal control system
X1: Employees who are qualified
X2: Practice healthy and reliability of financial statements
X3: good organizational structure
e: confounders
Multiple regression analysis is either partially or simultaneously / together performed after multiple linear
regression model free of Classical assumption violations.
Validity and Reliability
Test Validity
Validity test used to measure the validity of a questionnaire. Test the validity of this is done by comparing the
count r and r table. If r count> r table then declared valid questionnaires. The analysis showed that all
variables valid questionnaires, as each item qualifies value is corrected item total correlation or r count> r
table = 0.361 (N = 30, = 0.05).
Test Reliability
Reliability test is used to measure the reliability of an answer to a question or in other words to determine the
degree of stability of the measuring instrument. Based on computer print out in Table 4.1 can also be seen
below:
Table 4.1 Reliability Testing Results Questionnaire
Variable r count > R standard

(Cronbach /
Alpha) <
Quality Employees (X1) 0,748 > 0,70
Practices and Financial Statements (X2) 0,752 > 0,70
Working Environment (X3) 0,734 > 0,70
The above table shows that the value of Cronbach alpha or r count to four variables: the quality of employees
(X1), practice and financial reports (X2) and organizational structure (X3) are all greater than 0.70 (r
standard) it can be concluded that the results testing the questionnaire is reliable.
Feasibility Model
Test the feasibility of the model used to measure the accuracy of the regression function in assessing the
actual value. Test the feasibility of the model in this study can be explained as follows:
a. Coefficient of Determination
The coefficient of determination is based on the following table:
Table 4.5.Coefficient of Determination

Adjusted R Std. Error of the
Model R R Square Square Estimate
1 .743a .552 .541 .35965
Source: Secondary data are processed
541
The above table shows that the value of Adjusted R Square = 0.541, which means that the contribution of the
effect of three independent variables (the quality of employees, practices and organizational structure of
financial statements Setra) against Non Performing Financing (NPF) amounted to 54.1% while 45.9% are
influenced other factors.
b. Simultaneous Test (Test F)
According to the table below can be seen that the value of F count.
Table 4.6. Test F
1 Regression .972 3 .324 32.505 .000a
Residual 3.363 26 .129
Total 4.335 29
The above table shows that the value of F count = 32.505> F table = 2.99 (DF1 = k = 3, df2 = nk-1 = 30-3-1
= 26, α = 0.05) and the number of significance = 0.000 < α = 0.05 resulting in significant.
Based on the test results and test coefficient F can be concluded that the model used in this study fit for use.
Hypothesis Testing Impact Quality employees, practices and financial reporting and organizational structure
Against Non Performing Financing (NPF)
Testing the hypothesis in research can be explained by the table below.
Table 4.7. Coefficients Regression

Unstandardized Standardized
Coefficients Coefficients
Std.
Model B Error Beta t Sig.
1 (Constant) 9.238 3.660 4.983 .000
Kualitas Karyawan (X1) -.311 .041 -.298 -2.864 .004
Praktek & Lap. Keu (X2) -.217 .069 -.206 -2.681 .008
Struktur Org. (X3) .133 .072 .098 1.439 .087
The analysis showed that the quality of the employees a significant negative effect on the non-performing
financing so hypothesis 1 (H1) that affect the quality of the employees of non-performing financing proven or
acceptable.
The analysis showed that the practices and the financial statements of a significant negative effect on the non-
performing financing, so the hypothesis 2 (H2) that the practice and effect on the financial statements of non
performing financing proven or acceptable.
The analysis showed that the organizational structure and no significant positive effect on the NON
PERFORMING FINANCING so hypothesis 3 (H3) that affect the organizational structure NON
PERFORMING FINANCING not proven or unacceptable.
5. CONCLUSION
Based on the analysis and discussion before it can be concluded as follows:

Quality of employees a significant negative effect on the NON PERFORMING FINANCING so hypothesis 1
(H1) that affect the quality of employees NON PERFORMING FINANCING proven. Thus the increase in
employee quality or can reduce the negative impact NON PERFORMING FINANCING on Islamic
microfinance institutions as the city of Semarang.
Practice and financial statements not significant effect on NON PERFORMING FINANCING so hypothesis
2 (H2) that the practice and effect on the financial statements NON PERFORMING FINANCING proven.
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Thus the change in practice and negative impact on the financial statements NON PERFORMING
FINANCING on Islamic microfinance institutions as the city of Semarang.
The organizational structure and no significant positive effect on the NON PERFORMING FINANCING so
hypothesis 3 (H3) that affect the organizational structure NON PERFORMING FINANCING unproven.
Thus the increase in the level of the organizational structure had a positive impact or no effect on NON
PERFORMING FINANCING on microfinance institutions as the city of Semarang.
Limitation
This study uses primary and secondary data, primary data gathered by the researchers did not examine factors
that affect the Parties provided in the financing. Factors or variables are limited to the variable quality of the
employees, practices and financial statements and organizational structure.
Suggestion
There are limitations described above, the research will be encouraged to add other relevant variables eg
income levels and the level of kepercayaa against Islamic microfinance institutions and people's
understanding of Islamic financing mechanism.
6. BIBLIOGRAPHY
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Erlangga.
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Baridwan, Zaki. 1990. Sistem Akuntansi Penyusunan Prosedur dan Metode. Yogyakarta: Akademi Akuntansi YKPN.
Boockholdt, James L. 1993. Accounting Information System. Edisi 4. USA: Richard D. Irwin.Chen, Jhony P.2003, Non-
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Djarwanto PS dan Pangestu S. 1985. Statistik Induktif. Yogyakarta: Penerbit BPFE.
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Jansen,M.and W. meckling (1976), ―Theory of the Firm : Managerial Behavior Agency Cost, and Ownership Struture‖,
Journal of Finance Economics 3, 350-360.
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Mulyadi &Kanaka Puradireja. 2002. Auditing, Edisi Kelima, Jakarta: Penerbit Salemba Empat.
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Mulyadi. 2001. Sistem Akuntansi. Jakarta: Salemba Empat.
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IMPLEMENTATION OF EFI BASED ENTEPRENEURHSIP IN MATARAM
Meiyanti Widyaningrum1, Didin Hadi Saputra2

The University of Nahdlatul Wathan Mataram
(meiyanti.widya@unwmataram.ac.id didinhs@unwmataram.ac.id)
ABSTRACT
Today‘s business competition, which is highly dependent on digital technology, requires high mobility in
each movement, particulary by business doers. This has led to the failure of a large number of businessmen,
including young entrepreneurs in Indonesia, in achieving their business objectives. The current study aimed
at identifying the implementation of EFI based business by young entrepreneurs in Mataram. An explorative
inductive research method was used to conduct the study. The findings of this study showed that
enterpreneruship activities in Mataram was dynamic and grew positively. This could be seen from the
increase of young entrepreneurs in this city each year. We also found that EFI based business in Mataram
has yet to optimally grow in particularly to encourage the birth of enterpreneurhsip which has been national
agenda. The results of this study revealed that these the implementation of EFI based business give prositive
experiences to young businessmen in this city as these principles supported all their business process. Future
study is needed to explore this issue indepth.
Keywords: entrepreneurship, education, finance and innovation
1. BACKGROUND
Today‘s business competition, which is highly dependent on digital technology, requires high mobility in
each movement, particulary by business doers. Such dynamic situation demands the acquisition of accurate,
quick and balanced information. All information which we have gained would affect our business activities.
Business process which is resulted from government program has been one of the factors in the
implementation of corporate operation. Such a situation would give positive contribution to enterprises and
consumers. As a good system to be used to increase incomes would come from selling, hence, having a good
control on selling would affect the performance of a company.
A large body of studies (Gerard, 2009) revealed that the intention to start new business was influenced by self
confidence gained from educational experiences. These studies showed that education plays a critical role to
encourage one to begin his own business. Another reason for running a new business would be the need for
achievement or self actualization. Such a need also affects the level of interest to do business (Fuad & Bohari,
2011; Rahman, 2011; Setyawan, 2009). Further, discussions on motivation in doing business have been an
interesting topic as it is a dynamic matter. An array of studies have been conducted to link this issue with
level of education and personal motivation (Zaki, Fadzely & Ahmed, 2006). Many investigations also
focused on identifying why motivation and braveness to start a brand new businesses are still low (Linan,
2008; Linan & Santos, 2007). Scholars in globally also attempted to invesigaed how these issues could be
resolved.
One of the methods to ensure the implementation of EFI based business, it is critical to maintain sustainable
bussines practices which are associated with business doers‘ education, good financial administration and
continuous innovation within this city. Taking some factors such as business trend and managerial skill into
consideration, then it is important to note that optimizing the roles of young entrepreneurs plays as an
unseparated triggering factor to achieve social prosperity. Their central roles are mainly related to conducting
business process and developing products. This has been encouraged in Mataram by local authority, which is
based on EFI (Education, Finance and Innovation) concept. In this context, researchers intended to desrcribe
the EFI based business activities which has been implemented in this city.
The development of business activities in Mataram would influence the growing birth of young entrepreneurs
in this city. However, the facts suggest that not all of these young businessmen could reach their business
objectives as expected. There is a need to testify the truth by doing investigation. This study aimed at
identifying new empirical facts about the implementation of business activities on the basis of EFI concept.
Further, this study attempted to extend facts that business implementation in Mataram has not been optimally
developed, particularly in the employment of EFI as their business basis.
545
2. THEORETICAL FRAMEWORKS
In order to build and implement business intention on the basis of EFI principles, one needs to have strong
mentality which he could attain from formal education. The lesson learn from education would enable him to
cope with challenges encountered when running his/ her business (Alfiyah, 2012; Wijaya, 2007). Further,
facts suggest that a large number of businessmen have to experience difficulties throughout their business
process, for instance to face uncertainties. Such a situation requires him to be emotionally stable and mentally
ready in order to survive and sustain his business. Hence, attending enterpreneurship education would enable
him to learn attitude and to gain business insight in order to be able to innovate his product which in turn
could affect his entrepreneurship mentality.
Another factor which is believed to influence business implementation is one‘s ability to manage his or her
finance. To survive in business competition or to sustain in difficulties, he could make his own financial
planning in order to ensure that his business is financially healthy. It is generally accepted that when an
individual has a high ability to plan an accurate bussines financial plan, he would feel more encouraged to
start a new business. Put it in other words, good implementation and business financial planning become a
major reference for business men and leads to creation of a new business.
Beside the factors above, individual level of innovation also has a significant influence to someone‘s
bussiness. When one has a strong desire to keep innovating, his business performance would be influenced as
well. Consistent effort to innovate has positive contribution to raise one‘s motivation and leads to business
best practices.
Thus, drawing on from the discussion above, we used a theoretical framework adopted from Asep (2010: 17)
to investigate the proposed question in this study.
Enterpreneurship Education Finance Innovation
3. RESEARCH METHOD
The current study employed explorative inductive approach, a research method which allows the researcher
to define or explain the concepts or patterns by which he can gain deeper understanding about causes and
effects of why things behave the way they are (Arikunto, 2006:7). This method was used particularly in
context where researchers have insufficient knowledge to confidently opine about it. Further point out that
the term ―population‖ is not used for this qualitative type of study, Instead, the term used is social situation
(Spradley as cited in Sugiyono 2007). Hence, this method enabled the researchers to observe events,
behavior and activities occurring in a social situation. To be specific, with this method, researchers were able
to identify the factors which affected the successful implementation of EFI business/ enterpreneurhip in
Mataram. We also attempt to gain deeper understanding about the implementation of busissness which were
based on EFI in Mataram..
4. FINDINGS AND DISCUSSION
Business activities are integrated parts of economic growth in Mataram. This can be clearly seen in the
increase of infrastructure and business trends in Mataram Bussiness District. Process of running business
encompasses information searching, excecution of information or using information for business purposes.
Further, it is an integrated part in an ecosystem cycle of economic activities. Therefore, business owners are
encouraged to pay attention at planning their business strategies toward quality services and customers
maintainance. To foster such actitivities, business owners should anticipate customers‘ need and adjust their
products features relevant to their needs. In this context, the implementation of business strategies should be
oriented in making use of EFI method in order to gain attraction, maintain customers‘ satisfaction as well as
to increase and manage relation between principal and customers.
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The aim of EFI based business impelemtantion is to attain quality business process from three aspects,
Education, Finance and Innovation. Such implementation becomes the foundation to focus business activities
on EFI basis in order to make their business sustainable and survive. Be relying on this basis implies the
importance of formal and non formal education for young business owners, which is linked with the ability to
set business plan in particular financial plan. This also means that these young entrepreneurs are in need to
sharpen their understanding, run and practice the knowledge gained. It further indicates the urgency to keep
breeding new innovation into their business irrespective the condition they experience.
The reality of business in Mataram which is fast and highly competitive has made the businessmen in this
city to be mentally ready to face any business situation and to respond promptly to the massive flow of
business related information. In fact, managing a business is not an easy thing to do as it requires ―perfect
qualities‖. However, having strong motivation, one can get through the challenges occurring throughout
business activities. Thus, we are affirmed that strong motivation and mentality should be possessed by
anyone who intend to start a new business and to sustain and and survive within the difficult business
situation.
Many people have yet to start their business due to some ―excuses‖ such as having no money, or no stable
job. Unfortunately, they keep staying in that state without doing any real action. They keep thinking about
their lives, days and nights, and there is no change happens. This is due to the absence of their action. Action
or implementing what has been intended and planned is the character of a businessman. He tries to find
opportunities or even creates his own. He hates status quo or does nothing. He loves visualizing his thoughs
and imagination in the form of movement although he would fail one day, yet he would fight again to
manifest his motivation. Often times, challenges experienced in their business activities becomes an
encouragement to survive and and sustain within a tough business competition and difficult situation. Further,
the major capital to start a business is not ultimately money or fund (finance. The other two major capitals are
education and innovation. Each of these three core business potions, Education, Finance and Innovation, is
exaplained as follows:
Education
In running a business, an entrepreneur should have formal education background in order to be able to sustain
their business. Education is a prerequisite for them to be able to immerse in business competition and to be
able to survive in business activities. In the education process, both theories and practices should be given to
these enterprenerus. Thus, their business practices would represent their educational background.
The current educational programs, in particular in our society, only focus at enabling learners (school and
university students) with knowledge (cognition) and it is lack of nurturing them with entrepreneurship
insights and values. This practice is against what proposed where education should not be prepared only to be
employed, yet they have to be able to live their lives, posses thinking skills and their thoughts should be
useful in their daily lives. In tune with John Dewey, Siswoyo (2007:19) argues that education should include
process of transforming cultural heritage such as knowledge, values and skills from genereation to
generation, which is done on purpose.
To face unemployment number in Indonesia, promoting Educaiton based business should be conducted by
govermen, either from formal and informal institutions. High attention should be paid at such a program in
order to increase the capacity of new young entrepreneurs in this city. This program cannot stop at only
providing materials and skills without giving mental support and self improvement to the business owners.
Thus, encouraging young entrepreneurs to keep learning from their senior counterparts is worth doing in
order avoid ―falling to the same trap‖. A beginner can learn attitude, promotion stretegies, establishing and
maintaining networks and many more business related matter from them. Further benefits of such a way of
learning is that a young entrepreneur can keep being motivated, a critical energy to survive and sustain in
business.
Finance
United nation (as cited in Buchari Alma, 2013:4) states that a nation will be able to develop if it has 2%
entrepreneurs of the total population. So, if Indonesian population today (2013) is less than 250 million, thus
the entrepreneurs are more or less 5 million people. According to Deputy of reconstruction and development
of Coperation and Small middle enterprises, Chairul Djamhari mentions that the current amount of
Indonesian businessmen has just reached 1,26%. Such a number is far from being ideal in a developing
country.
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Ministry coordinator of economic, Hatta Rajasa (Yudho Winarto, 2012) also has similar argument. He
advocated that a country might not develop if the amount of businessmen has not reached 2%. For this
reason, Indonesia has to educate its young generation to be entrepreneurs since their early ages. He further
argued that there is not age boundary to start a business as anyone can start a business at any age with any
amount of budget. Also, Hatta Rajasa proposed that big enterprises should take part to empower small
middle business like what has been done in countries such as South Korea or Singapore.
One of the most vital steps to launch a business is by making a well planned business financial. A new
entrepreneur should study their financial plan before starting their business. Such a plan will allow them to
manage their business effectively, to direct and avoid stumbling blocks which could lead to business failure.
Business doers who neglect this aspect will add the number of failed businessmen (Soeharto Prawirokusumo,
2010: 243). Also, it is important to note that each new starting business has both bright and bad future. They
can gain glory or collapse and one of the major causes is the failure to manage their bussines finance.
Effective financial strategy includes managing, controlling financial records, planning and managing budget
to reach optimum benefits. The main predictor to reach effectiveness is the business orientation of new
entrepreneurs, which has been clearly stated in their business documents. If they aim at establishing gigantic
business, increase market share and amount of customers, then stating high profit margin, using their own
capital and possessing more assets may not be appropriate (Kasali et al, 2010: 165).
To support the attainment of business objective, it is important to make rational profit margin into account as
such a strategy would lead to competitive prices. Also, loans can be be used when having limited self funding
along with the use of rented assets to reduce operational cost (Modul Shell Live Wire, 2007). Another
consideration is related to effective financial management by using cash flow report which enables business
men to assess their business progress. However, as a business starter, with limite one is encouraged to sell
his own asset and invest his money in his new business. He can also apply for loans to banks as most
business men begin their business with loans.
Inovation
Today‘s business competition encourages business owners and new entrepreneurs to make a quick move, and
to be creative and anticipative. This was due to the birth of fundamental change in business competition
system which relies on innovation to gain better business activities. For instance, the global business
agreement such as AFTA, APEC, and AEC, has led to the free flow of goods without protection and
obstacles. The coming of Chinese products cannot be prevented by Indonesian trade authority. This has
affected to how products are introduced to customers, for instance by the employment of direct marketing
which is supported by shopisticated information technology. As a result, products can be offered and
marketed to prospective buyers quickly to their own homes. If this keeps happening, without doing any
innovation, our local entrepreneurs may not be able to penetrate international markets and they would find it
challenging to compete with similar products coming from other countries.
Innovation appropriateness with market need and prospect plays a central role in penetrating markets, both in
local markets, acquiring competitors‘ customers and in new markets. Quality services also become the major
player to avoid customers‘ retention. So, product strategy without the support of servicing strategy may make
business looks like having a good market penetration, yet its overall performance does not make benefits
(Tjiptono, 2005:61). Conversely, a good servicing strategy without being supported by quality product would
lead to low market growth. Innovation can create market segmentation, form good corporate position and
increase enterprises growth (Keeh, 2007).
Entrepreneurship is spirit, behavior, and risk taking skills, creativity, innovation and managerial skills
(Siagian, 1999). To be an entrepreneur, one should have an ability to innovate (Larsen, 2007), and other
qualities such as self knowledge, imagination, practical knowledge, search skill, and commitment (Suryana,
2003). An ability to innovate is of a great importance to survive and sustain in a sharper competition era.
Innovation is ability to impelement creativity in solving problems and opportunity to enrich and increase life
(Suryana, 2003). Creative thinkgin should have creative thinking base which would help solving problems.
Creative thinking pattern enables one to invent ideas, chances, new inspirations and innovative solutions
(Hendro, 2011).Creativity is the major foudntion of being innovative (Mubarok, 2013). Product innovation
and innovation products can boost performance while market innovation is not able to increase performance
(Rosli, 2013).
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5. SUMMARY, IMPLICATION AND LIMITATION
Positive development of Asian countries such as japan, Korea or Singapore was mainly caused by the amount
of entrepreneurs these countries already have. Two percents of their population have been the major player in
these countries economic growth. Hence, Indonesia government should take this fact into account in order to
build this nation. One of the methods to create generation with entrepreneurship skills is by immersing them
into business world. However, as engaging into business world means experiencing challenges and difficult
situation which lead many businessmen to fail reaching their objectives, hence it is important to bear in mind
the employment of of EFI (education, Finance and Innovation) concept as. These three principle would allow
young enterprneurs to sustain their bussines and survive within difficult situations
To increase enterpreneurs‘ creativity and innovation can done by establishing a good cooperation among
intellectuals, governments, business and civil society and each of them should do their own parts.
Enterpreneurship activities have competitive advantage if business doers are able to innovate, manage their
finance, and possess basic education in business. Such innovation can be in the forms of products, services,
markets and technology relevant to the need of customers. Also, optimal performance can be attained if
creating brand new products with differentiating power to other competitors and providing satisfactory
services to customers.
Innovation can be improved through simulaneous cooperation and sthrengthening business on the basis of
education, finance and innovation in order to invent new ideas which lead to the creation of competitive
advantage and the increase of performance. Innovation can also be fostered through training, guidance,
networking based on the business doers‘ needs.
The result of this study may not represent the whole picture of Mataram business reality as the sample of this
study was taken from a few young business persons. Thus, future research can be focused on other cities as
each city has its own policy regarding enterpreneurship development and each communicaty has diverse
cultural practices. Thus, this study was limited to businessman who have implementing EFI model which
allowed them to sustain and survive.
6. ACKOWLEDGMENT
We would like to convey our gratitude to all parties for making this research possible, so that the results of
this study can be desiminated and presented in International Conference on Business, Economcs, Socio-
Culture & Tourism 2016 (ICBEST2016).
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Gerald. S. (2009). The Concept of Open Creativity: Collaborative Creative Problem Solving for Innovation Generation –
a Systems Approach. Journal of Business and Management, 15(1), 5-33
Hendro (2011). Dasar-dasar Kewirausahaan : Panduan Bagi Mahasiawa untuk Mengenal, memahami dan memasuki
Dunia Bisnis, Jakarta, Penerbit Erlangga, ISBN : 978-979-075-851-3.
Iis, P., (2009). Membangun Karakter Wirausaha Melalui Pendidikan Berbasis Nilai dalam Program Pendidikan Non
Formal. Jurnal Pendidikan Formal dan Informal, 1, pp.1–12.
Kasali, R. (2010) , Strategi Membangun Bisnis, Jurnal Bisnis dan Manajemen, pp. 165-177.
Kasali, R dll (2010). Modul Kewirausahaan. Jakarta: PT. Mizan Publika
Keeh, Hean Tat, Mei Nguyen & Ping. (2007). The Effects ot Entrepreneurial Or e i n t a t i o n a n d Ma r k e t i n g
Information the Performance of SMEs, Journal of Business Venturing, 592-611.
Kotler, P. (2008). Prinsip-Prinsip Pemasaran Edisi Keduabelas. Jakarta: Erlangga
Larsen, P. & A. Lewis. (2007). Haw Award Winning SMEs The Barriers to Innovation. Journal Creativity and Innovation
Management, 141-151
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Rosli, M., & Syamsuriana, S. (2013). The Impact of Innovation on the Performance of Small and Medium Manufacturing
Enterprises. Journal of Innovation Management in Small & Medium Enterprise,2(3),1-16.
Siswoyo, D.dkk (2007), Ilmu Pendidikan, Fakultas Ilmu Pendidikan, Universitas Negeri Yogyakarta, Yogyakarta : UNY
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Susanto, A.B. dan Wijanarko, H. (2004). Power Branding; Membangun Merek Unggul dan Organisasi Pendukungnya.
Jakarta: Penerbit Quantum Bisnis dan Manajemen
Siagian, S., & Asfahani (1995). Kewirausahaan Indonesia dengan Semangat 17.8.45. Kloang
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Suryana. (2003). Kewirausahaan, Pedoman Praktis,Kiat dan Proses Menuju Sukses, Jakarta,
Penerbit Salemba Empat,ISBN : 979-691-166-3.
Prawirokusumo, S. (2010). Kewirausahaan dan Manajemen Usaha Kecil. Yogyakarta: BPFE.
Tjiptono, F. (2005). Brand Management & Strategy. Yogyakarta: Penerbit Andi
Yulia, D.I.,(2014). Mengelola Keuangan. ….4 (tahun 2013), pp.11–27.
Winarto, Y. (2012) Indonesia Maju Jika 2% Penduduk Jadi Wirausahawan. Diakses dari
http://nasional.kontan.co.id/news/indonesia-maju-jika-2-penduduk-jadi-wirausahawan
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ENVIRONMENTAL UNCERTAINTY, ORGANIZATIONAL STRUCTURE AND

INTERNAL CONTROL IN QUALITY OF MANAGEMENT ACCOUNTING
INFORMATION SYSTEMS
Rima Rachmawati
Departement of Economics, Widyatama University. Bandung, Indonesia
(rima.rachmawati@widyatama.ac.id)
ABSTRACT
Quality of management accounting information needed by management to implement that decision-making

management functions. Quality of management accounting information generated from the system of quality
management accounting information. The ability of managers in predicting the environment, the
organizational structure and internal control can improve the quality of accounting information systems
management. This research was carried out at universities in Bandung with the verification method of data
analysis using regression. The results of the research organization structure influence the improvement of the
quality improvement of the quality of accounting information system management.
Keywords— environment uncertainty; organizational structure; internal control; management accounting
systems.
INTRODUCTION
Management accounting information is useful or quality of accounting information that meets the
requirements for decision makers (O'Brien & Marakas,2010:353). Therefore, quality management accounting
information can be interpreted as accounting information fit (fit) with the management needs as consumers of
information (Heidman, 2008:06), or management accounting information management can lead to actions
expected (Hall, 2013:06).
The quality management system of accounting information can be viewed from three levels, technical,
semantic and effectiveness level. At the technical level, the quality of information systems related to the
ability to generate management accounting information. At the level of semantics, the quality of information
systems related to the ability to produce accounting information management is able to convey the
information contained in the management accounting. Whereas the level of effectiveness, the quality of
information systems related to the ability to influence the user information update. Overall the quality of
information systems at all levels can be measured using dimensions: use, user satisfaction, individual impact
dan organizational impact (DeLone & McLean, 2003).
In fact, management accounting information system used in an institution still has issues, especially at the
college where research, among other issues in the:
1) The difference in the type of software used on each piece resulting data can not be working in
harmony and the resulting reports are not reliable.
2) Some parts still do not have a fixed software, still changing, sometimes using accurate but given
moment using System Application and Products
3) There incomplete documentation of systems and procedures for financial.
Based on the above background, made formulation of the problem as follows:
1) How big is the influence of environmental uncertainty on the quality of accounting information
system management.
2) How much influence the organizational structure of the quality of accounting information system
management.
3) How much influence on the quality of the internal control system of management accounting
information.
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LITERATURE REVIEW
Environment Uncertainty
Robbins & Coulter (2014:74) said
―Environmental uncertainty is the degree of change and complexity in an organization‘s environment. If the
components in an organization‘s environment change frequently, it‘s dynamic environment, if change is
minimal, it‘s stabel one. Environmental complexity, the number of components in an organization‘s
environment and the extent of the organization‘s knowledge about those components‖.
In line with the above opinion, Griffin (2011:79) argued that:
―Environmental uncertainty is environment can be described along two dimension: its degree of change and
its degree of homogeneity. The degree of change is the extent to which the environment is relatively stabel or
relatively dynamic. The degree of homogeneity is the extent to which the environment is relatively simple (few
element, little segmentation) or relatively complex (many elements, much segmentation).
Davila & Foster (2005) define the management accounting system ―as a subset of management control
systems (MCS) –interpreted as formal, informational-based routines and procedures managers use to
maintain or alter patterns in organizational activities‖. The same opinion of Moores & Yuen (2001)
―management accounting systems is conceptualized as formality of routines and procedures with greater use
of computers, technical staff, and financial modeling‖. Next Agbejule & Burrowes (2007) define
―management accounting systems is as a formal system designed for providing managers with requisite
information to facilitate decision and evaluation of managerial activity‖. According to Barata & Cunha
(2013) that the information system ―…an integrated man /machine system for providing information to
support the operations, management and decision making functions in an organization‖.
Elbanna & Gherib, (2012) environmental uncertainties differentiate into two perspectives: 1) focus on
politics, government policy and economic uncertainty, 2) focus on strategies that look at the industry as a
relevant analysis consists of; process technology, raw material availability, demand for finished products and
competitors. Opinion Xue, Majid & Foo (2012) environmental uncertainty is measured through two
dimensions of environmental uncertainty has a direct impac (task environment) and environmental
uncertainty has an indirect impact (remote environment). Task environment consists of customers, resources
(supplier dan investors) dan competitors. While, remote environment terdiri dari political, economic, social
cultural, technological, natural environment dan legal/ developments.
One way the organization adapt to the environment is through information management, information
manjemen important especially when you want to form an initial understanding of the environment and when
you want to monitor for signs of changes in the environmen (Griffin, 2002:85). Effective management of
information asked for a commitment from the organization's resources to establish, maintain and update the
system information along with the emergence of new technologies. In organizations that are large and
complex, information systems must also be integrated. This integration may be the formation of connections
between the various information systems within the same organization or between organizations differ. In an
organization, for example, it may be necessary to make the marketing system and the operating system can
communicate with each other (Griffin, 2002:240).
Research by Agbejule & Burrowes (2007), using environmental uncertainty dimensions: ―action of
competitors, changes in marketing practices, products and services outdated, changes in tastes and
preferences, changes in technology‖, by respondent companies manufacturing in North-Western Finland with
a total of 78 organizations. The study states there are significant environmental uncertainty on the use of
management accounting system.
Research result Gul & Chia (1994) state that ―Management accounting information system can help to
reduce environment uncertainty and improve managerial decision-making‖. Supported by the results of
research conducted by Han-Min & Linh (2013), which found that the relationship between environmental
uncertainty and accounting system is statistically significant. Based on the above, the hypothesis made
environmental uncertainty affects the quality of accounting information systems management.
Organizational Structure
The main ingredient in managing a business is the creation of an organizational structure to connect the
various elements that make up the organization (Griffin, 2002:352). The organizational structure contributes
to explain and predict behavior, meaning that in addition to factors of individual and group, the link structure
552
where work has relevance with the attitude and behavior of karyawam so that the organizational structure is
able to answer questions like: "what should I do?", "to whom I am responsible?", "I have to see if anyone has
any?". (Robbins & Judge, 2007:246).
Furthermore, according to Galbraith (2009) that the organizational structure is:
―The term organizational structure refers to the formal configuration between individuals and groups
regarding the allocation of tasks, responsibilities, and authority within the organization‖.
The organizational structure in the context of this research is aimed at the concept of the information system,
the organizational structure is a pattern / picture of responsibility and authority over the operational activities
undertaken and coordinated by the organization's members, both individually and in groups to organize
activities of input, processing and storage of data in order to produce management accounting information.
According to Ivancevich et al. (2011) to measure the organizational structure can be used the following
characteristics: "the division of labor, delegation of authority, departmentalization, and span of control.
Romney & Steinbart (2012:210) add a dimension of organizational structure, among others:
―centralization or decentralization of authority; a direct or matrix reporting relationship: organization by
industri, product line, location, or marketing network; how allocation of responsibility affects information
requirements; organization of and lines of authority for accounting, auditing and information system
function; size and nature of company activities‖.
The organizational structure depends on the objectives and management approach, and may affect how it
perceives and uses the information system (Stair & Reynolds, 2010:48). Stair & Reynolds adding that the use
of information systems can add value to the organization that is affected by the organizational structure,
culture, and change.
Based on the above, in the hypothesis create an organizational structure affects the quality of accounting
information systems management.
Internal Control
Control is like steering a ship, holding the organization to move in the right direction. Effective control helps
managers determine where they need to take their companies and drive the organization to it, and create
systems that will keep the company on track. But ineffective control could cause the company to become
unfocused, have a weak goal, and overall poor performance (Griffin, 2002:162).
Internal controls according Hall (2013:108), as follows:
―Internal control is comprises policies, practices and procedures employed by the organization to achieve
four broad objectives: to safeguard assets, to ensure accuracy and reliability of accounting records and
information, to promote efficiency in the firm‘s operations, and to measure compliance with management‘s
prescribed policies and procedures‖.
A similar sentiment was expressed by Bagranoff et al. (2010: 348): ―internal control is the policies, plans
and procedures implemented by management of an organization to protect its assets‖. Next Blocher et al.
(2010: 76) declare: ‖internal controls is a set of policies and procedures that restrict and guide activities in
the processing of preventing or detecting errors and fraudulent acts‖. Bagranoff et al. (2010: 348) also added
that internal controls have four objectives include:‖ safeguard assets, chech the accuracy and reliability of
accounting data, promote operational efficiency, enforce prescribed managerial policies‖.
The concept of internal control is the purpose of this research is the methods, policies and procedures
designed by the board of directors and management to guarantee the achievement of efficiency and
effectiveness of the activities of management accounting information system.
According to Bodnar & Hopwood (2012:124) internal controls are grouped into general controls and
application control. Both types of control are separated into general controls and application controls /
special / transaction. Known general controls for controlling mechanism and the rules applicable in the
control of common (to all parties in an organization), while the control is called special because it applies
only to a particular application in accordance with the technical considerations of analysis and design
applications.
Based on the above, made the hypothesis of internal control affects the quality of accounting information
systems management.
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Quality of Management Accounting Information Systems

Hansen & Mowen (2015:5) define ―management accounting system is primarily concered with producing
outputs for internal information users, using inputs and process needed to satisfy management objective‖.
Nelson, Todd & Wixom (2005) confirmed that there are significant management accounting information
system on accounting information management through the following statement:
―When considering information and system quality together, it is useful to think of information as the product
of a system and the system as the information processing system that produces the in format. ―
Quality is an indicator of how well the results of the activities fulfill the goals set by management (Laudon &
Laudon, 2012:530). Meanwhile, according to Heidman (2008:80) accounting information system of quality
management is a reflection of the results of the processing system of quality management accounting
information. Furthermore Hoque (2013:04) certify the quality management accounting information system is
a statement of a condition in which a system of management accounting information generates management
accounting information useful to managers in carrying out its functions.
EU
OS QMAIS
IC
Figure 1. Chart Framework
RESEARCH METHODOLOGY
This study is basically an attempt to reveal the phenomenon of a symptom (symptoms) experienced physical
concerns an incident to be analyzed empirically, systematic, controlled and tested, discussed and concluded
(Sekaran & Bougie, 2013). Types of research studies are verifikatif and explanatory research. The unit of
analysis in this research is the organization that educational institutions. Technical determination of the
sample using a probability sampling with simple random sampling technique This study determines the
minimum sample size by using power analysis method, at a significance level of 5%, the highest number of
direction of the arrow pointing towards the dependent constructs numbered 2 and the statistical power of 0.80
as well as to produce R2 minimal 0:25, then the required minimum sample size in this study is 52 samples
(Hair et al.,; 2014:21). Data analysis using analysis regress. Exogenous variables consist of Environmental
Uncertainty (EU), Organizational Structure (OS), Internal Control (IC) and endogenous variable Quality of
Management Accounting Information System (QMAIS).
RESEARCH RESULT
Table 1
Coefficient Path
Variable Coefficient Path
Exogen Endogen Loading Standard error Statistics-t Value-p significance
KTPL KSIAM 0.34 0.11 2.97 0.97 Not significant
SO KSIAM 0.30 0.10 2.93 0.01 significant
PI KSIAM 0.36 0.10 3.66 0.85 Not significant
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Relationships between constructs can be said to be significant if it has a p-value less than the significance
level (0.05). In table 1 above can be interpreted that estimate relationships between constructs using p-values.
According to the table 1 indicates the organizational structure affects the quality of accounting information
systems management at significance level of 0.05. Another variable is the uncertainty of the environment and
internal control has no effect on the quality of accounting information system management.
The amount of variability QMAIS can be explained by the uncertainty of the environment, the organizational
structure and internal control of 0, 38 (R2) in the category of substantial (Hair et al, 2014:186).
The results of this study support the hypothesis that has been built up and provides empirical evidence that
effective organizational structure can improve the quality of accounting information systems management.
The organizational structure of the company is built by job specialization and departmentalization, it is
important to put people not only according to their competencies but also specialized for particular field is
not to work on other fields. Similarly, departmentalization is necessary to ensure that the job is within a
certain control, for example the accounting department under the department / director of accounting. Aspects
of the chain of command in companies that were encountered during the observations found empirical
evidence is still unclear given command superiors and subordinates like your boss giving orders outside of
the job description. Many commands superiors related to the issue of personal interests boss, this led to a job
based on job description becomes dormant subordinates cannot be completed in accordance with the targets
should be. Other empirical evidence found during the observation also often subordinate received orders of
more than one boss it is also a result of specialization does not work.
The impact because subordinates receive orders more than one employer sometimes will do the work of
subordinate priority to a boss who can give you tips / bonus large in other words subordinates can choose
promiscuous job. During the observations on the company some empirical evidence can be found that a lack
of clear delegation of authority, material transactions do not require validation superiors. Examples of petty
cash management are not controlled / supervised use by superiors. Subordinates as if given full trust to
manage petty cash, but the specific time when the audit turns cash inventory does not match the record. The
organizational structure of a company should reflect coordination among all units / sections and levels to
achieve the same goal. Each organization plans should be flexible (Wilson & Campbell, 1981) plans can be
modified to meet the changing needs of the environment in accordance manager / company. An effective
organization is a collection of individuals acting together to achieve a goal. Observation and observation in
order to achieve effective organization do the following:
1) Develop an organizational structure with a view to a reasonable grouping of functions to be able to
carry out tasks effectively.
2) The delegation of responsibilities and authority reasonable to every level of the organization and the
individual units.
3) Selection of individuals is right for every job.
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ISSN: 977 2528581002

ISSN: 977 2528581002

Semarang, 24 August 2016

Preface ......................................................................................................................................................... iii

Analysis of Knowledge of Entrepreneurship, Self Efficacy, and Attitude to Intention Entrepreneurship

STEPWISE STRATEGIES FOR TAIWAN'S SEMICONDUCTOR INDUSTRY

Jen-Der Day1& Muhammad Farid2

2. IDENTIFYNG CORE TECHNOLOGY

SEMICONDUCTOR INDUSTRY DEVELOPMENT

Figure 1. Taiwan Export

Source: ITA (2015)

Lingkage Between Industries

Figure 2. Stepwise Strategies of Taiwan to develop Semiconductor Technology

4.1. Fast-Follower Approach

4.2. Industrial Technology Research Institute (ITRI)

4.3. Hsinchu Science Park (HSP)

Figure 3. Firms in HSP

Combined Sales in HSP

Figure 4: Combined Sales in HSP

4.4. Linkage Between Universities and Industry Resources

Table 3: Piloting Cooperation Project Between Industries and Academia

5. FUTURE TECHNOLOGICAL CHALLENGES

TSIA (2015).Overview on Taiwan Semiconductor Industry, http://www.tsia.org.tw/Uploads/2015%20Overview-Final.pdf

ORGANIZATIONAL SIGNIFICANCE AND

1.1 Why do companies have an EVP?

2.1 Pillars of Employee Value Proposition

Figure 1: Attributes of Employee Value Proposition

4. RESULTS AND TRENDS

4.1 Employee Engagement Trends

0% 10% 20% 30% 40% 50% 60%

Figure 2: Employee Engagement Trends in Asia

4.2 Effectiveness of Employee Value Proposition

U.S. Organizations 25%

Global Organizations 34%

Low-Performing Organizations 28%

Average-Performing Organizations 32%

High-Performing Organizations 42%

0% 10% 20% 30% 40% 50%

Figure 3: Classifying Percentage of Organizations with Formalized EVPs

WILLINGNESS TO PAY AS AN INDICATION OF PUBLIC SHARING IN THE

Ninin Gusdini1), M.Yanuar J Purwanto2),

The Analysis of Public Willingness to Pay

4) The Fourth Step: Aggregating the Bids Curve

RESULTS AND DISCUSSIONS

No Socio-economic Condition Category Total (%)

Public Perception on Clean Water Service

All Type of Service

Figure 1. The Proportion of Satisfaction Level on Clean Water Quantity

The Clean Water Service Value Willing to be Paid

Not Agreeto Switch

0,00% 20,00% 40,00% 60,00% 80,00% 100,00%

Series 1: Respondents’ Preference

Table 3. The WTP Value per Family based on Income

Kuantitas Air 10%

0% 10% 20% 30% 40%

Series 1: Factors to Chose the type of water service

Alayla. 1998. Water Supply Engineering .US: Mc Graw Hill.

MODELLING OF TIMELY SUBMISSION OF

Meitryna Pangestu1, Saifudin2

THEORETICAL FRAMEWORK AND HYPOTHESIS DEVELOPMENT

Figure 1-Theoritical Models

= β + β1SIZE + β2PROF +β3LK + β4LEV + β5BSIZE+ β6AGE+e

=2,079 + 0,288(SIZE) + 7.233(PROF) – 0,056(LK) – 4.293(LEV) -0.555(BSIZE) - 100(AGE)