Oktavia Oktavia, S. Siregar, R. Wardhani, N. Rahayu
This study aims to examine the effects of financial derivatives on earnings management and market mispricing. A cross-country analysis was applied within the scope of four ASEAN (Association of Southeast Asian Nations) countries that comply with IAS 39, consisting of the Philippines, Indonesia, Malaysia, and Singapore. A sample of 1,395 firm-years of companies using financial derivatives were engaged for study and the evidence shows that the use of financial derivatives for hedging purposes decreases the magnitude of the earnings management. In addition, this study also supports the idea that earnings expectations embedded in the stock returns of companies using financial derivatives, that meet the hedge accounting criteria, reflect the difference in the persistence of cash flow components more accurately than those using financial derivatives for speculative purposes.
{"title":"The Effects of Financial Derivatives on Earnings Management and Market Mispricing","authors":"Oktavia Oktavia, S. Siregar, R. Wardhani, N. Rahayu","doi":"10.22146/gamaijb.34112","DOIUrl":"https://doi.org/10.22146/gamaijb.34112","url":null,"abstract":"This study aims to examine the effects of financial derivatives on earnings management and market mispricing. A cross-country analysis was applied within the scope of four ASEAN (Association of Southeast Asian Nations) countries that comply with IAS 39, consisting of the Philippines, Indonesia, Malaysia, and Singapore. A sample of 1,395 firm-years of companies using financial derivatives were engaged for study and the evidence shows that the use of financial derivatives for hedging purposes decreases the magnitude of the earnings management. In addition, this study also supports the idea that earnings expectations embedded in the stock returns of companies using financial derivatives, that meet the hedge accounting criteria, reflect the difference in the persistence of cash flow components more accurately than those using financial derivatives for speculative purposes.","PeriodicalId":54086,"journal":{"name":"Gadjah Mada international journal of business","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2019-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48002074","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This research aims to investigate the impact of manufacturing flexibility on business performance. The manufacturing flexibility dimensions are mix, new product, labor, machine, material handling, routing and volume flexibility. The measures for the business performance are product market performance, customer satisfaction and profitability. The impact of manufacturing flexibility on business performance has been tested using a cross sectional study employing survey methodology, conducted within five manufacturing industries in Malaysia. Data were obtained from 137 returned questionnaires, which were analyzed using correlational and regression analyses. The results of the correlation analyses indicated that the manufacturing flexibility dimensions were positively and highly correlated among themselves, thus suggesting that the dimensions were interdependent. Meanwhile, the findings of the regression analyses provided support for the idea that manufacturing flexibility has a positive and significant impact on business performance. In other words, manufacturing flexibility improves business performance. In conclusion, this empirical research provides insights and a better understanding about the relationship between manufacturing flexibility and business performance. This research allows researchers/practitioners to gain in-depth knowledge about the concept of manufacturing flexibility and its impacts.
{"title":"Impact of Manufacturing Flexibility on Business Performance: Malaysian’s Perspective","authors":"Kong Woun Tan, K. T. Lim","doi":"10.22146/gamaijb.27402","DOIUrl":"https://doi.org/10.22146/gamaijb.27402","url":null,"abstract":"This research aims to investigate the impact of manufacturing flexibility on business performance. The manufacturing flexibility dimensions are mix, new product, labor, machine, material handling, routing and volume flexibility. The measures for the business performance are product market performance, customer satisfaction and profitability. The impact of manufacturing flexibility on business performance has been tested using a cross sectional study employing survey methodology, conducted within five manufacturing industries in Malaysia. Data were obtained from 137 returned questionnaires, which were analyzed using correlational and regression analyses. The results of the correlation analyses indicated that the manufacturing flexibility dimensions were positively and highly correlated among themselves, thus suggesting that the dimensions were interdependent. Meanwhile, the findings of the regression analyses provided support for the idea that manufacturing flexibility has a positive and significant impact on business performance. In other words, manufacturing flexibility improves business performance. In conclusion, this empirical research provides insights and a better understanding about the relationship between manufacturing flexibility and business performance. This research allows researchers/practitioners to gain in-depth knowledge about the concept of manufacturing flexibility and its impacts.","PeriodicalId":54086,"journal":{"name":"Gadjah Mada international journal of business","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2019-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49626135","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The benefits of trade liberalization are not shared equally among countries and enterprises across the globe. Small and Medium-sized Enterprises (SMEs) in developing countries are less able to participate in export markets than their larger counterparts, despite various export assistance provisions by their governments. This study aims to investigate the factors influencing Indonesian SMEs’ decisions and ability to engage in direct export activities. The evidence was collected from 271 exporting SMEs and 226 non-exporting SMEs in seven provinces in Java, Madura, and Bali. Logistic regressions were used to identify the distinct characteristics of the exporting SMEs. The findings show that the exporters differ from non-exporters in terms of their firms’ and owners’ characteristics, their perceptions toward export barriers, their participation in their national government’s export assistance program and network relationships. The academic, policy and managerial implications of the findings are discussed.
{"title":"Factors Affecting Propensity to Export: The Case of Indonesian SMEs","authors":"M. D. Revindo, C. Gan, N. Massie","doi":"10.22146/gamaijb.41022","DOIUrl":"https://doi.org/10.22146/gamaijb.41022","url":null,"abstract":"The benefits of trade liberalization are not shared equally among countries and enterprises across the globe. Small and Medium-sized Enterprises (SMEs) in developing countries are less able to participate in export markets than their larger counterparts, despite various export assistance provisions by their governments. This study aims to investigate the factors influencing Indonesian SMEs’ decisions and ability to engage in direct export activities. The evidence was collected from 271 exporting SMEs and 226 non-exporting SMEs in seven provinces in Java, Madura, and Bali. Logistic regressions were used to identify the distinct characteristics of the exporting SMEs. The findings show that the exporters differ from non-exporters in terms of their firms’ and owners’ characteristics, their perceptions toward export barriers, their participation in their national government’s export assistance program and network relationships. The academic, policy and managerial implications of the findings are discussed.","PeriodicalId":54086,"journal":{"name":"Gadjah Mada international journal of business","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2019-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47077227","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
UJU VIOLET ALOLA, Simplice A Asongu, Andrew Adewale Alola
Applying the conservation of resources theory and the self-efficacy theory, this study investigates the relationship between supervisor incivility, self-efficacy, cynicism and the job embeddedness of employees in the hotel industry. The role of self-efficacy, as an important variable that mediates the relationship between the predictor and the criterion variable, is significantly evaluated. A non-probability sampling technique was used to collect 245 questionnaires from frontline employees of five- and four-star hotels in Nigeria. The findings reveal that supervisor incivility has a negative effect on self-efficacy and a positive effect on cynicism, and that self-efficacy negatively affects cynicism. There was no significant relationship with job embeddedness in the study. Importantly, the investigation establishes that self-efficacy is a mediating variable between supervisor incivility and cynicism. The study noted the importance of adopting a policy that introduces periodic seminars and professional training for both employees and supervisors, as a means for curbing incivility and cynicism. The study concludes with theoretical and practical implications, leaving room for further investigation.
{"title":"Linking supervisor incivility with job embeddedness and cynicism: The mediating role of employee self-efficacy","authors":"UJU VIOLET ALOLA, Simplice A Asongu, Andrew Adewale Alola","doi":"10.22146/gamaijb.39647","DOIUrl":"https://doi.org/10.22146/gamaijb.39647","url":null,"abstract":"Applying the conservation of resources theory and the self-efficacy theory, this study investigates the relationship between supervisor incivility, self-efficacy, cynicism and the job embeddedness of employees in the hotel industry. The role of self-efficacy, as an important variable that mediates the relationship between the predictor and the criterion variable, is significantly evaluated. A non-probability sampling technique was used to collect 245 questionnaires from frontline employees of five- and four-star hotels in Nigeria. The findings reveal that supervisor incivility has a negative effect on self-efficacy and a positive effect on cynicism, and that self-efficacy negatively affects cynicism. There was no significant relationship with job embeddedness in the study. Importantly, the investigation establishes that self-efficacy is a mediating variable between supervisor incivility and cynicism. The study noted the importance of adopting a policy that introduces periodic seminars and professional training for both employees and supervisors, as a means for curbing incivility and cynicism. The study concludes with theoretical and practical implications, leaving room for further investigation.","PeriodicalId":54086,"journal":{"name":"Gadjah Mada international journal of business","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2019-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138504902","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The main purpose of our study is to test the mindset model explored by Mathisen and Arnulf (2013). Based on Ajzen’s theory of planned behavior, the capacity theory, and the need for achievement theory, an extension model on the entrepreneurial intentions involving implementing mindset and elaborating mindset has been proposed. These constructs were confirmed in the proposed research model, including the need for achievement, perceived educational support, perceived structural support, perceived relational support and entrepreneurial intentions. The moderating role of gender, Grade Point Average (GPA) and the type of university were also tested. Research findings prove that the need for achievement has a significant impact on the students’ mindsets and their entrepreneurial intentions. Elaborating the mindset, implementing the mindset and the perceived relational support significantly affect entrepreneurial intentions. The findings have contributed new ideas to the theoretical framework of entrepreneurship. They prove the importance of the need for achievement in the relationship between the mindset and the entrepreneurial intentions of business students.
{"title":"LINKING ENTREPRENEURIAL INTENTIONS AND MINDSET MODELS: A COMPARATIVE STUDY OF PUBLIC AND PRIVATE UNIVERSITIES IN VIETNAM","authors":"Viêt Cao, T. Ngo","doi":"10.22146/gamaijb.34753","DOIUrl":"https://doi.org/10.22146/gamaijb.34753","url":null,"abstract":"The main purpose of our study is to test the mindset model explored by Mathisen and Arnulf (2013). Based on Ajzen’s theory of planned behavior, the capacity theory, and the need for achievement theory, an extension model on the entrepreneurial intentions involving implementing mindset and elaborating mindset has been proposed. These constructs were confirmed in the proposed research model, including the need for achievement, perceived educational support, perceived structural support, perceived relational support and entrepreneurial intentions. The moderating role of gender, Grade Point Average (GPA) and the type of university were also tested. Research findings prove that the need for achievement has a significant impact on the students’ mindsets and their entrepreneurial intentions. Elaborating the mindset, implementing the mindset and the perceived relational support significantly affect entrepreneurial intentions. The findings have contributed new ideas to the theoretical framework of entrepreneurship. They prove the importance of the need for achievement in the relationship between the mindset and the entrepreneurial intentions of business students.","PeriodicalId":54086,"journal":{"name":"Gadjah Mada international journal of business","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2019-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45273769","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The importance that workplace fairness and information sharing has on employees’ performance has gained a significant attention from researchers and practitioners. However, no empirical evidence on the combined role of both workplace fairness and information sharing on employee performance has been found so far. Thus the purpose of this study is to examine the effects of workplace fairness and information sharing on employees’ performance in a budget setting. A set of direct and indirect hypotheses are tested using survey data collected from 108 sub-unit managers from various industries, randomly selected from Bursa Malaysia (the stock exchange of Malaysia). The findings indicate that both workplace fairness and information sharing are positively associated with improved employee performance in a participative budget setting. Furthermore, information sharing mediates the relationship between workplace fairness and employee performance. This suggests that when employees perceive the budgeting process as being fair, they would be more willing to share information, which will then lead to improved employee performance.
{"title":"Workplace fairness, information sharing and employee performance in a budget setting: an empirical study","authors":"Suria Zainuddin, C. Isa","doi":"10.22146/gamaijb.31133","DOIUrl":"https://doi.org/10.22146/gamaijb.31133","url":null,"abstract":"The importance that workplace fairness and information sharing has on employees’ performance has gained a significant attention from researchers and practitioners. However, no empirical evidence on the combined role of both workplace fairness and information sharing on employee performance has been found so far. Thus the purpose of this study is to examine the effects of workplace fairness and information sharing on employees’ performance in a budget setting. A set of direct and indirect hypotheses are tested using survey data collected from 108 sub-unit managers from various industries, randomly selected from Bursa Malaysia (the stock exchange of Malaysia). The findings indicate that both workplace fairness and information sharing are positively associated with improved employee performance in a participative budget setting. Furthermore, information sharing mediates the relationship between workplace fairness and employee performance. This suggests that when employees perceive the budgeting process as being fair, they would be more willing to share information, which will then lead to improved employee performance.","PeriodicalId":54086,"journal":{"name":"Gadjah Mada international journal of business","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2019-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47613324","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The purpose of this study is to examine and understand the effect of website design quality and service quality toward consumers’ repurchase intention in the Asian, European, American, and Australian e-commerce industry. This research implemented survey method, in which questionnaires were chosen as instruments for data collection. A total of 1000 questionnaires were electronically distributed to the respondents across four continents, in which a total of 869 were deemed usable. Out of 869 questionnaires, a total of 200 questionnaires collected from respondents living in the Asian continent, 189 questionnaires collected from respondents living in the American continent, 243 questionnaires collected from respondents living in the European continent, and 237 questionnaires collected from respondents living in the Australian continent. This research implemented PLS-SEM method to analyze and generate findings from the data. Based on the results generated from the analysis of the data, it could be concluded that in the Asian, Australian, and European continents, service quality played a more important and significant role in affecting consumers’ repurchase intention in the e-commerce industry compared to website design quality. In contrast, the results generated in this research also concluded that website design quality played a more important role in affecting consumers’ repurchase intention in the American e-commerce industry. Furthermore, customer satisfaction mediated the relationship between website design quality and service quality toward consumers’ repurchase intention in the Asian, Australian, European, and American e-commerce industry.
{"title":"The Effect of Website Design Quality and Service Quality toward Repurchase Intention in the E-commerce Industry: A Cross-Continental Analysis","authors":"N. Wilson, Keni Keni, P. Tan","doi":"10.22146/gamaijb.33665","DOIUrl":"https://doi.org/10.22146/gamaijb.33665","url":null,"abstract":"The purpose of this study is to examine and understand the effect of website design quality and service quality toward consumers’ repurchase intention in the Asian, European, American, and Australian e-commerce industry. This research implemented survey method, in which questionnaires were chosen as instruments for data collection. A total of 1000 questionnaires were electronically distributed to the respondents across four continents, in which a total of 869 were deemed usable. Out of 869 questionnaires, a total of 200 questionnaires collected from respondents living in the Asian continent, 189 questionnaires collected from respondents living in the American continent, 243 questionnaires collected from respondents living in the European continent, and 237 questionnaires collected from respondents living in the Australian continent. This research implemented PLS-SEM method to analyze and generate findings from the data. Based on the results generated from the analysis of the data, it could be concluded that in the Asian, Australian, and European continents, service quality played a more important and significant role in affecting consumers’ repurchase intention in the e-commerce industry compared to website design quality. In contrast, the results generated in this research also concluded that website design quality played a more important role in affecting consumers’ repurchase intention in the American e-commerce industry. Furthermore, customer satisfaction mediated the relationship between website design quality and service quality toward consumers’ repurchase intention in the Asian, Australian, European, and American e-commerce industry.","PeriodicalId":54086,"journal":{"name":"Gadjah Mada international journal of business","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2019-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48392333","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study seeks to provide a broad and thorough review of the literature on the big five traits (BFT) and its major developments through a long history of conceptual and applied studies in many areas that have been conducted on large samples of individuals, groups and countries. The BFT is the most widely accepted and most prominent model to describe the structure of personality traits, so this study sought to identify them in order to achieve a better understanding as well as for consideration by researchers in their future studies. This review focused on the eight key observations related to the BFT. These observations are as follows: meaning of the traits; the history of the BFT model; unity or hierarchy of traits; number of the traits; three perspectives on BFT; BFT questionnaires; BFT and performance; and the need for a sixth trait. The results of the study clearly confirmed that there are problems with universal models that tend to generalize a limited number of dimensions in order to interpret personality across borders and cultures. This generalization of the models is accompanied by the numerous observations and problems mentioned in the above eight points.
{"title":"Big Five Trails: A Critical Review","authors":"N. Najm","doi":"10.22146/gamaijb.34931","DOIUrl":"https://doi.org/10.22146/gamaijb.34931","url":null,"abstract":"This study seeks to provide a broad and thorough review of the literature on the big five traits (BFT) and its major developments through a long history of conceptual and applied studies in many areas that have been conducted on large samples of individuals, groups and countries. The BFT is the most widely accepted and most prominent model to describe the structure of personality traits, so this study sought to identify them in order to achieve a better understanding as well as for consideration by researchers in their future studies. This review focused on the eight key observations related to the BFT. These observations are as follows: meaning of the traits; the history of the BFT model; unity or hierarchy of traits; number of the traits; three perspectives on BFT; BFT questionnaires; BFT and performance; and the need for a sixth trait. The results of the study clearly confirmed that there are problems with universal models that tend to generalize a limited number of dimensions in order to interpret personality across borders and cultures. This generalization of the models is accompanied by the numerous observations and problems mentioned in the above eight points.","PeriodicalId":54086,"journal":{"name":"Gadjah Mada international journal of business","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2019-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45389680","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Salesperson is a part of a company who will always meet their customers. Salesperson should have the capability to respond to customers. This research aims at proving the importance of customer smart response capability in insurance industry in Indonesia. The respondents in this research are 317 salespersons in insurance industry. This research uses structural equation modeling to process its data. The results of this research show the importance of customer smart response capability in insurance industry. This customer smart response capability can improve salesperson performance. Additionally, customer smart response capability can mediate the influence of customer sensing on the salesperson performance and can mediate the influence of sales training effectiveness on salesperson performance. This research also has some contribution, both to knowledge and managerial contributions.
{"title":"How does a salesperson improve their performance? The importance role of customer smart response capability","authors":"D. Aqmala, Elia Ardyan","doi":"10.22146/gamaijb.35263","DOIUrl":"https://doi.org/10.22146/gamaijb.35263","url":null,"abstract":"Salesperson is a part of a company who will always meet their customers. Salesperson should have the capability to respond to customers. This research aims at proving the importance of customer smart response capability in insurance industry in Indonesia. The respondents in this research are 317 salespersons in insurance industry. This research uses structural equation modeling to process its data. The results of this research show the importance of customer smart response capability in insurance industry. This customer smart response capability can improve salesperson performance. Additionally, customer smart response capability can mediate the influence of customer sensing on the salesperson performance and can mediate the influence of sales training effectiveness on salesperson performance. This research also has some contribution, both to knowledge and managerial contributions.","PeriodicalId":54086,"journal":{"name":"Gadjah Mada international journal of business","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2019-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45115133","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study aims to examine the existence of excess working capital in Indonesian firms and its effect on the firms’ performance and risk. The sample includes 425 firm-year observations of Indonesian manufacturing firms for the period 2010 – 2014. To account for the potential asymmetric relation between excess Net Working Capital (NWC) and firm performance, an asymmetric regression model is employed, allowing the slope coefficient of the excess NWC to be different for positive and negative excess NWC. The results indicate (i) the existence of an optimal level of working capital, (ii) higher excess working capital leads to lower performance and risk, (iii) additional investment in working capital reduces firms’ performance for those with positive excess working capital. It is also documented that (iv) additional investment in working capital reduces firms’ risk for those that have working capital deficiencies. The findings have important implications for corporate managers in determining the optimal level of working capital.
{"title":"Working Capital Management in Indonesia: An Analysis on Over-investment and Under-investment Firms","authors":"R. H. Setianto, A. Pratiwi","doi":"10.22146/GAMAIJB.28354","DOIUrl":"https://doi.org/10.22146/GAMAIJB.28354","url":null,"abstract":"This study aims to examine the existence of excess working capital in Indonesian firms and its effect on the firms’ performance and risk. The sample includes 425 firm-year observations of Indonesian manufacturing firms for the period 2010 – 2014. To account for the potential asymmetric relation between excess Net Working Capital (NWC) and firm performance, an asymmetric regression model is employed, allowing the slope coefficient of the excess NWC to be different for positive and negative excess NWC. The results indicate (i) the existence of an optimal level of working capital, (ii) higher excess working capital leads to lower performance and risk, (iii) additional investment in working capital reduces firms’ performance for those with positive excess working capital. It is also documented that (iv) additional investment in working capital reduces firms’ risk for those that have working capital deficiencies. The findings have important implications for corporate managers in determining the optimal level of working capital.","PeriodicalId":54086,"journal":{"name":"Gadjah Mada international journal of business","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2019-04-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48328176","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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