FINANCIAL DISTRESS
3. Results and Discussion
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Suitability Compensation (KK): The instrument used to measure the suitability of compensation (Gibson, 1997 in Wilopo, 2006) regarding the reward and consists of six items question. The response of the respondents was measured with a Likert scale 1 strongly disagree to 5 strongly agree.
Organizational Commitment (KO): The instrument used to measure organizational commitment was developed from research Pingka (2013) consists of seven items of questions. Likert scale of 1 strongly disagree to 5 strongly agree was used to measure the response of the respondents.
Leadership Style (GK): The instrument used to measure the leadership style developed by Fiedler's theory (Stoner et al, 1996 in Pramudita 2013) consists of five items the question. Likert scale, 1 strongly disagree to 5 strongly agree was used to measure the response of the respondents Organizational Ethical Culture (BEO): The instrument used to measure the ethical culture of the organization (Robbins, 2008 in Pramudita, 2013) consists of five items the question. The measurement using a Likert scale, a scale of 1 strongly disagree to 5 strongly agree
Obedience Accounting Rules (KKA): The instrument used to measure adherence to accounting rules developed from (IAI, 1998 in Wilopo (2006)) consists of seven items concerning the code of ethics questions accountant. Likert scale, 1 strongly disagree to 5 strongly agree was used to measure the response of the respondents.
Law Enforcement (FH): The instrument used to measure the law enforcement consists of five items were developed from the research questions Pramudita (2013). The response of the respondents was measured with a Likert scale, 1 strongly disagree to 5 strongly agree.
The tendency of cheating (FO): The instrument used to measure the tendency of fraud consists of five items of questions developed from (IAI, 2001 in research Pramudita, 2013). Measurement of this variable using a Likert scale, 1 strongly disagree to 5 strongly agree.
Method of Data Analysis: This study methods of data analysis using structural equation modeling (SEM) is a statistical technique that analyzes the relationship patterns and indicators of latent constructs, the latent constructs to each other, as well as measurement error directly. The analytical tool used is SmartPLS. Method of analysis undertaken include descriptive statistics, testing the model outer, inner test models, and hypothesis testing.
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which means that the asymmetry of information into categories of high information asymmetry. KK mean value of 23.45 which means that appropriate compensation entered into the appropriate category. The mean value of 26.93 KO which means that organizational commitment into committed category. GK The mean value of 19.74, which means that the leadership style into either category. BEO mean value of 19.13, which means that the ethical culture of the organization into the ethical category. KAA mean value of 27.69, which means that the accounting rules into obedience obedient category. The mean value of pH of 19.83, which means that the rule of law into an effective category. FR mean value of 9.48, which means that the tendency of fraud (fraud) into the rare category.
Model Test Banks
Convergent Validity Test: In this study there were nine variables: the effectiveness of internal control, information asymmetry, the suitability of compensation, organizational commitment, leadership styles, ethical culture of the organization and law enforcement against the tendency of cheating (fraud). Test of the validity of research using tools which SmartPLS count. Based on the PLS outputs which can be seen in Table 2, it can be concluded that of all the results are valid questions.
Tabel 2:
Original Sample
Estimate Mean of
Subsamples Standard
Deviation T-Statistic
KPI1 -> KPI 0.276 0.276 0.024 11.474
KPI2 -> KPI 0.281 0.286 0.036 7.752
KPI3 -> KPI 0.268 0.263 0.028 9.524
KPI4 -> KPI 0.204 0.200 0.031 6.618
KPI5 -> KPI 0.199 0.196 0.043 4.660
source: Output PLS, 2014
Test Composite Reliability: From a reliability test in table 3 it can be seen that all the variables in this study revealed reliable since the composite reliability of each variable is greater than the value established common standards, namely 0.70.
Tabel 3: Composite Reliability Test
Composite Reliability Effectiveness of Internal Control 0,928
Information asymmetry 0,947
suitability Compensation 0,908
Organizational Commitment 0,925
Leadership Style 0,932
Organizational Ethical Culture 0,894 Obedience Accounting Rules 0,888
Law Enforcement 0,922
The tendency of cheating 0,955
source: Output PLS, 2014
Discriminant Validity Test: Based on table 4 test results or test the discriminant validity correlations between variables indicate the value of the square root of AVE of each construct is greater than the value of the correlation between the constructs with other constructs in the model on the correlation of latent variables, the discriminant validity is said to have good value.
Uji Convergent Validity Tabel Outer Weights
140 Tabel 4: AVE & Correlation of Latent Variables
Test Inner Model: The test results show that the model's inner R-square value tendency fraud (fraud) (KK) of 0.719. R-square value of 0.719 means that the variability construct tendency fraud (fraud) can be explained by the variability of the effectiveness of internal control constructs (KPI), asimteri information (AI), the suitability of compensation (KK), organizational commitment (KO), leadership style (GK ), the ethical culture of the organization (BEO), adherence to accounting rules (KAA) and enforcement (PP) at 71.9%, while 28.1% is explained by other variables outside of research.
Hypothesis Testing: Table 5 known hypothesis testing of the path coefficients in the above table where the limit to reject and accept the proposed hypothesis is +1.96, which if the value of the t value <t table (1.96), the alternative hypothesis (Ha) will be rejected or the In other words accept the null hypothesis (H0). So it can be known variables KPIs, AI, KK, BEO, KAA, PH, whereas KO variables and GK is not accepted (rejected).
Tabel 5: Path Coefficient (Mean, STDEV,T-Values) Original Sample
Estimate Mean Of
Subsamples Standard Deviation T-
Statistic
KPI -> FR -0.220 -0.223 0.095 2.308
AI -> FR 0.133 0.130 0.058 2.297
KK -> FR -0.187 -0.178 0.085 2.187
KO -> FR 0.035 0.021 0.066 0.532
GK -> FR 0.008 0.026 0.075 0.108
BEO -> FR -0.212 -0.220 0.092 2.296
KAA -> FR -0.189 -0.184 0.096 1.971
PH -> FR -0.212 -0.217 0.105 2.015
Source: Output PLS, 2014
Discussion: The first hypothesis proposed in this study is that the effectiveness of internal control negative effect on the tendency of fraud (fraud). This means, the more effective system of internal control in an agency will be able to decrease the tendency of fraud (fraud). The results of this study indicate that the effectiveness of internal control negative effect on the tendency of fraud (fraud). Thus, the test results received the first hypothesis (H1). With meningkat¬kan effectiveness of an entity's internal control will eliminate the chances of a person to commit acts of fraud (fraud) as opportunities arise through weaknesses in the supervision of the internal control system of an agency.
The second hypothesis proposed in this study is that the positive effect of information asymmetry on the trend of fraud (fraud). This means that the higher the employee's perception of information asymmetry in a government, it can increase the occurrence of fraud (fraud) in the government sector. These results indicate that the positive effect of information asymmetry on the trend of fraud (fraud). Thus, the test results accept the second hypothesis (H2). The results of this study indicate if an agency in the case of information asymmetry between the employee (internal) and public (external), the agency will open up opportunities for employees (internal) agency to perform acts of fraud (fraud). However, if an organization diber¬lakukan transparency on matters relating to the organization and the effect on the financial statements, it is certainly not going to happen.
The third hypothesis proposed in this study is that the suitability of a negative effect on the tendency compensation fraud (fraud). This means that the higher the perception of employees regarding the
(AVE)
KPI 0,721 0,84236 AI 0,748 0,86487 KK 0,622 0,78867 KO 0,640 0,80000 GK 0,734 0,85674 BEO 0,629 0,79310 KAA 0,533 0,73007 PH 0,702 0,83785 FR 0,808 0,89889 Sumber: Output PLS, 2014
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suitability kompen¬sasi in a government, it can reduce the tendency of fraud (fraud). These results indicate that the negative effect on the suitability kompen¬sasi fraud (fraud) in the government sector.
Thus, the test results received a third hypothesis (H3). The results of this study indicate that the compensation received by the employee in accordance with the performance and fulfillment levels so as to reduce the amount of fraud (fraud). Thus, the objective of which compensation program that indivdual balance, internal, external to all employees and an increase in the success of the organization's performance can be done well. The fourth hypothesis proposed in this study is that organizational commitment negative effect on the tendency of fraud (fraud). This means that the higher the employee's perception of organizational commitment in a government, it can reduce the tendency of fraud (fraud).
The results of this study indicate that organizational commitment has no effect on the tendency of fraud (fraud). Thus, the test results reject the fourth hypothesis (H4). The reason for this finding does not support the hypothesis and opinion from various previous studies are (1) the provision of any type of job assignment can not be assumed that the employee has been fully committed to the advancement of the shelter organization, (2) the difference principle is believed by every employee who is not aligned with the system exist in the organization that was followed, and (3) lack of appropriate consideration in selecting the organization that led to a lack of a sense of pride in having the organization.
The fifth hypothesis proposed in this study is that the leadership style of a negative effect on the tendency of fraud (fraud). That means that if a leader has a leadership style that is respected by his subordinates are expected to reduce acts of fraud within the organization. The results of this study indicate that leadership style has no effect on the tendency of fraud (fraud). Thus, the test results reject the fifth hypothesis (H5). The reason for this finding does not support the research hypothesis, is (1) in a weak leader or men¬dorong guiding subordinates to define realistic goals, by way of explaining the role and task requirements, (2) the leader lacks the charisma that subordinates assume that the ability of a leader they are mediocre and do not inspire the organization that was followed, and (3) the leader is not responsive to subordinates completing the job on time so that less motivate subordinates to do so. The sixth hypothesis proposed in this research is an ethical organizational culture negative effect on the tendency of fraud (fraud). This means that the ethical culture of the organization with it will reduce the level of fraud in the organization. The results of data processing show that the ethical culture of the organization negatively affect the tendency of fraud (fraud). Thus, the test results received a sixth hypothesis (H6). Good organizational ethical culture is very influential on the performance of employees and can reduce cheating action (fraud) as a good organizational ethical culture will form the organizational actors have a sense of belonging (sense of belonging) and a sense of identity (sense of pride as a part of an organization ).
The hypothesis put forward is the seventh observance of accounting rules negatively affect the tendency of cheating (fraud). That is, the obedience of an agency to follow accounting rules issued by the government, the smaller the chances of fraud action (fraud) accounting. The results of testing the hypothesis in this study states that the observance of accounting rules negatively affect the tendency of fraud (fraud). Therefore, this test accepts the hypothesis seven (H7). Adherence to accounting rules is viewed as the degree of conformity procedures asset management organization, implementation of accounting procedures, and presentation of financial statements and all supporting evidence, the rules established by the CPC and / or SAP (PP RI No. 24/2005). So, if the financial statements are made without following the applicable accounting rules, the state is expressed as a form of failure and will cause kecenderung¬an fraud that can not be or is difficult to trace the auditor. The eighth hypothesis proposed is law enforcement negatively affect the tendency fraud (fraud). In other words, the higher the enforcement of regulations in an agency, the lower the possibility of fraud in the intansi. The results show that the enforcement of regulations negatively affect the tendency of fraud (fraud). Thus, the test accepts the hypothesis eighth (H8). Basically fraudulent practices will continue to be repeated in an entity if the employee does not adhere to the applicable laws and regulations. In an entity, rules are made so that the operations of the entity run more effectively and efficiently. Regulation here pertains to the rules governing employees as those directly involved with the operations of the entity.
4. Conclusion
Conclusion that can be drawn from this study that the effectiveness of internal control, information asymmetry, the suitability of compensation, organizational ethical culture, observance of rules of accounting, law enforcement significantly influence kecenderung¬an cheating. But this study shows that organizational commitment and leadership style has no effect on the tendency of cheating.
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Suggestions: Suggestions submitted to this study, is hoped to government agencies in Kendal for transparency of financial statements by way of loading it in the print media or local government agencies Kendal website so that people more easily gain an understanding of the financial statements of the relevant agencies. It is expected that the leaders of government agencies to more clearly Kendal in delivering the desired direction and purpose that employees understand what the objectives of the institution. Expected for employees in government agencies Kendal to be able to run the values and the ethical rules that apply in the organization.
Research Limitations and Future Research Agenda: The study has some limitations that need improvement and development in the study - the next study, the limitations of this research are:
1) Measurement of the tendency of cheating is an extremely sensitive measurement that SSR assessment seems less objective self-report. Should be measured from the auditor's assessment of which the inspectorate.
2) The study was conducted at government agencies. Research still needs to be done back in different populations, for example, banking institutions service companies, trade and manufacturing, or financial institutions other than banks.
3) Develop a questionnaire to capture in real terms over all the variables used.
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Determinant Factors of Cooperative Capital Structure in Financial Perspective Sugiyanto
Institut of Indonesia Cooperative Management [email protected]
Abstract: Research on capital structure is mostly done on the type of profit-oriented and go public companies. The same research topic also needs to be developed in cooperative organization, because there are difference in the member service orientation and the characteristics of the organization. Ability to raise capital also becomes a major problem for cooperative organization. The study was conducted to assess the financial performance as determinant factors affecting capital structure, using regression correlation analysis either partially or simultaneously. The results showed that, not all financial performance that analyzed to be determinant of cooperative capital structure, six financial performances as measured partially, only the sales stability, asset structure, and the company size that become determinant factors that effects the cooperative capital structure, while profitability, liquidity, and business risk are not be determinant factors of cooperative capital structure. But simultaneously all financial performances that analyzed by multiple correlation becomes determinant factors that effects the cooperative capital structure.
Keywords: Cooperative Organization, Financial Performance Factors and Cooperative Capital Structure 1. Introduction
A lot of researches in the field of Financial Management with capital structure topic, that applied on profit-oriented and go public companies, but not yet many research is applied in a cooperative organization that operated with special characteristics and member service but not profit oriented.
Cooperative business with its members referred to services, which can be used by members and the general public, both as consumers or businesses such as micro, small, and medium enterprises. Members who take advantage of cooperative services (as user) and the other side member have to act as an owner, both member function that called dual identity of cooperative member. As user, a member obliged to use cooperative services, while the owner is obliged to participate for sharing capital, supervise and take decisions through the member meeting forum. The classic problems of cooperative organization related to the ability to raise capital, which should have collected from members, capital resources are coming from outside of members. Cooperative capital resources nationally more than 50% are still sourced from debt, this condition is not in accordance with the principle of independence of the cooperative, cooperative was founded, managed and used by members. Cooperative as a business entity owned by the members and also services to members, capital requirements should be met by the members themselves.
Statistical data from Ministry of Cooperatives and SME’s indicates that the performance of cooperative capital in 2010 to 2012, there are 188,181 units of cooperatives with a membership approximately 31 million people, only able to finance cooperatives capital approximately 49%, and 51% cooperative capital financed by debt. The proportion of outside cooperative capital compare with its equity, that measured by debt-to-equity ratio (DER) is greater than 1 (DER> 1) illustrates the proportion of debt is greater than their equity. Capital structure can help cooperatives in the development of its business and may also be a risk for the cooperative. This condition indicates that the cooperative has been unable to fulfill the value of self-help in the development of its business. This conditions is not much different from the conditions cooperative capital in West Java, the DER value <1 in 2012. West Java was chosen as the research object.
Cooperative has a structural weakness of financing, which is characterized by variability the amount of capital required (Munkner, in Sutaryo Salim, 2000: 3). Another opinion states that “the capital function in a cooperative is handicapped, because the amount of benefits available for a member is not dependent on his capital contribution but on his patronage of the cooperative” (Röpke J. 2002). Cooperative is less attractive to members, prospective members and other investors, who wish to become a member simply because it has excess capital.
Determining the appropriate capital structure is a difficult decision that cooperatives need to consider several factors that can influence the capital structure. Factors affecting to capital structure is the stability of sales, asset structure, operating leverage, growth rates, profitability, tax, control, management attitude, the attitude of lenders and agencies ratings, market conditions, internal conditions and the company's
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financial flexibility (Brigham and Houston, 2001). Research on the factors affecting capital structure have been carried out, but from several previous studies are inconsistencies in the results, Asih Suko Nugroho (2006), Joni and Lina (2010), Ahmed et al (2010), Chen, Shun-Yu (2011) and Pahuja et al (2011). Based on the description above, the title of this research is the determinant factors of cooperative capital structure in the financial perspective. This study aimed to assess the financial performance as determinant factors that effects cooperative capital structure in West Java.
2. Literature Review
Cooperative is an economic movement based on the principle of brotherhood that has function and very important role in fostering the economic potential of the people, and to realize the prosperous society.
Cooperative is a modern economic organizations demanding conceptual and rational thinking because cooperative exist in a dynamic economic environment and continue to move forward, more and more open, globalized and create increasingly intense competition (Ramudi Ariffin 2003). Cooperative activities based on co-operative values and principles, which are guidelines for cooperative work in making any effort, cooperatives as economic organizations that are not specialized activities to create gain but rather to create the members welfare, in a form of satisfactory service, the principal task of cooperative to support the economic interest of the member. Business decision should be based on the interests of the members, in order to stimulate and increase the effective participation of members. In addition of cooperative values and principles that distinguish with other business entities, some characteristics as criteria of cooperative organizations (Hanel, A 1989):
1) The number of individuals who joint together in a group on the basis of at least one common interest or goal (Cooperative Group).
2) Members of the cooperative group individually determined to achieve the goal of improving their economic and social situation, through the efforts (actions) together and help each other (Organization of cooperative groups).
3) As an instrument (vehicle) for the purpose of a company that is owned and coached together (cooperative company).
4) The Company of cooperative assigned to support the interests of the members of the group, by way of providing or offering goods and services required by the members in their economic activities, namely in the company or each household members (Member Promotion).
The capital structure as a balance of the amount of permanent short-term debt, long-term debt, preferred stock and common stock (Agus Sartono, 2001), the same sense described by Brigham, E. F, et al (1999).
Obtaining capital structure indicates the source of capital or capital contributions from owners and creditors, financial contribution of members as equity or shares, reserves and other deposits formation, thereby cooperative capital resources can also be obtained from its own capital resources (equity) as well as the source of loan capital (Debt) (Hanel, A 1989). Difference of opinion regarding the theory of capital structure continues until now. Modigliani and Miller argue that leverage (capital structure) is independent of the value of the company, and is known to irrelevance theory, Furthermore, Modigliani and Miller concluded that leverage will increase the value of the company due to debt interest reduces the taxable income (Brigham, E. F, et al, 1999). Cooperative capital consists of principal saving, compulsory savings, other deposits which have the same characteristics as compulsory savings, capital investments, capital contributions, reserves and undistributed net income (IAI, 2004). Equity of cooperative has four general criteria are:
1) Derived from the owner and or determine ownership of the company that is in the form of reserves or retained earnings,
2) Capital as a risk taker and income is not fixed,
3) An owner claims when the company is liquidated or dissolved,
4) Embedded in the company in the long term is not limited, or also known as permanent capital Capital sources from debt or financial leverage has three important implications (Brigham, E. F, and Houston, 2001: 84):
1) Obtaining funds through debt makes shareholders can retain control of the company with limited investment.
2) Creditors look at the paid-up equity or fund owner to provide a safety margin, so if shareholders only provide a fraction of the total financing, the risk of a small part company is on the creditor.
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3) If the company gain greater returns on investment that is financed with borrowed funds compared with the interest payments on capital returns for the owner will be greater, or leveraged.
Cooperatives are also faced by the decision of selecting capital sources, the use of debt can be justified, if it can provide additional services at a better price. The theory of capital structure has been developed include: Agency theory, signaling theory, Asymmetric Information Theory, and the Pecking Order Theory.
Agency theory, proposed by Jensen and Meckling (1976) Horne and Wachowicz,(1998), a management as an agent and owner as a principal. Principal hopes the agent will act on his behalf, to be able to function properly, the management should be given incentives and adequate supervision. Signaling theory, a signal of management actions taken to give guidance to investors about how management sees the company's prospects, companies with favorable prospects will try to avoid the sale of shares and commercialize any new capital required by other means, including the use of debt that exceeds the normal target capital structure (Brigham and Houston, 2001).
Asymmetric Information Theory, is a situation where managers have different information (better) about the prospects of the company owned by investors, information asymmetry occurs because the management has more information than investors (Suad Husnan, 1996), (Myers and Majluf, 1984), so that outside investors trying to capture signal activity manager to suspect the company's prospects.
Pecking Order Theory, (1) companies like internal financing (retained earnings), (2) if funding from outside (external financing) is required, the company will publish the safest securities in advance, which began with the publication bonds or debt, followed by securities that characterized the options (such as convertible bonds), (3) finally if it is still inadequate, the new shares issued. In accordance with this theory, there is not a target of debt to equity ratio, because there are two types of capital itself, namely internal and external. Own capital from the company preferably own capital that comes from outside the company. Companies prefer to use funding from internal capital, the funds derived from cash flow, retained earnings and depreciation (Myers, 1996). The order of the use of funding sources with reference to the pecking order theory is: internal funds, debt and equity. In this study, the capital structure is a combination of various sources of funding, with the main categories of debt and equity, which used the cooperative to fund the investments of its assets with the formula:
Debt to Asset Ratio
= Total Debt Total Asset × 100% ……….1) Many factors that predicted by experts as a determinant factors of the capital structure. The determinants of the capital structure right now is a difficult decision for cooperatives organization, that need to consider several factors which can influence the capital structure. The capital structure is defined as the ability to raise funds and partially offset by an increase in organizational performance. This is to maintain business continuity, trust members and stakeholders. Risk factors of business, tax position, financial flexibility and conservatism or aggressiveness of management are factors that determine capital structure decisions; especially in the target capital structure (Brigham and Houston 2001). Research conducted on the determinants of capital structure shows that the variables of growth of assets, fixed asset ratio, R & D Expenditure significant effect on the capital structure (Ghosh et al, 2000), (Ahmed et al 2010). Further research, it turns agency cost and ownership structure significantly influence the capital structure (Moh'd et. al, 1998). Empirical research shows that the determinants of capital structure are: Return on assets (ROA) or economic profitability Chang and Rhee (1990). Company with a good reputation can gain greater debt because lenders believe that reputation will continue to be maintained, there is a positive relationship between reputation and debt (Wiwattanakantang, 1996). Determinant factors are affecting capital structure in this study, limited by factors relating to the financial performance of cooperatives, such as: (1) Sales stability, companies with relatively stable sales may be safer to obtain more loans and fixed using a higher burden in the form of interest on loans compared with companies whose sales are unstable (Brigham and Houston, 2001), (Ahmed et al 2010). Sales stability, company with sales relatively stable means having a stable cash flow as well, it can use more debt than companies with sales of unstable (Agus Sartono, 2001). Sales stability, measured by growth in sales or service, according to the formula:
Sales Growth
=
Pj,t - P j,t
- 1 ……….……….2)
P j,t - 1
PJ,t = sale at the end period