ICAME 2022 E-Proceeding

Proceedings [e ISBN 978-629-97614-0-2]
International Conference on Accounting, Management and Economics (ICAME2022)

14-15 December 2022│Faculty of Management and Economics,
Universiti Pendidikan Sultan Idris

In the event that there are no profit management practices, the result of the equation will be as
follows:
= − = 0

In the case of assuming the existence of profit management practices, the result of the equation is
as follows:

= − ≠ 0

2. After step 1 above, the arithmetic mean was calculated to calculate the voluntary benefits
During the years 2013-2015, to disclose earnings management practices that are assured when they
are the value of the voluntary benefits for the year of study is greater than the arithmetic mean,
meaning that the banks the research sample performs profit management practices, and vice versa
if the value of the receivables is the electives are less than the arithmetic mean value, meaning that
the banks of the research sample do not practice practices Earnings management.

3. The standard deviation value was then calculated in order to detect the extent of variance in
Profit management practices in the research sample banks, which confirms (i.e. the variance) if the
value of the standard deviation is far from the arithmetic mean value, meaning that the banks of the
research sample do different profit management practices, but if the standard deviation is close to
the mean Arithmetic, the research sample banks practice earnings management practices in an
undifferentiated manner.

Table (4) shows the data that has been emptied from the financial statements in the loss allowance
form Loans (LLP) for the research sample banks listed on the Iraq Stock Exchange for the period
2013 -2015, while Table (5) shows the results of the statistical analysis of the banks research
sample for the period 2015-2013:
5. when unloading the financial statements extracted from the financial statements of the banks,

the research sample is in an equation Provision for loan losses (LLP), the calculated F value
appeared (96,1121) which is greater than its tabular value is at the significance level (05.0)
and the degree of freedom (30.5), which is (53.2), and this means that there is a significant
effect of each variable of the loan loss allowance model on (NDLLP), and the value of the
coefficient of determination has reached (97, 0 (This means that 97% of the changes in
(NDLLP) can be explained by the model variables, and it should be noted that the values of
the beta coefficient have a positive sign for some variables and negative for others, and this
means when one unit changes in the variables (LCO) And (LLR) (there will be an increase in
the variable (NDLLP) and the percentages of increase according to the values of the beta
coefficient, while the variables (NPL (∆), 1-TAt/(EBTP) and NLTA) (there will be a decrease
in the variable (NDLLP) and the percentages of decrease according to Beta values, and the
regression equation for calculating the NDLLP will be:

= 0.004 − 0.012(∆ ) + 1.034 − 0.015 ( − 1 ) − 0.0002 +
0.859 -1

It is clear from the results of the statistical analysis of the banks of the research sample that:

A. The National Bank of Iraq: The result of the statistical analysis showed that the National
Bank of Iraq. According to the profit management practices in 2013 and 2015, where the
receivables value appeared discretionary DLLP is greater than the mean value of the sum of
voluntary benefits, as the bank's profit management practices are shown in a different way, through
the deviation being Normative .Dev. Std ( 007268283,0) is far from the arithmetic mean value
(0,017005665).
B. The Commercial Bank of Iraq: The result of the statistical analysis showed that the
Commercial Bank of Iraq was established with profit management practices in 2013 and 2014 in
terms of the value of receivables Discretionary DLLP is greater than the mean value of the sum of
voluntary benefits, as it appears that the bank’s profit management practices are different, through

85

Proceedings [e ISBN 978-629-97614-0-2]
International Conference on Accounting, Management and Economics (ICAME2022)

14-15 December 2022│Faculty of Management and Economics,
Universiti Pendidikan Sultan Idris

the deviation Normative .Dev. Std (000134765.0) far from the arithmetic mean value
(0,013678321).
C. Bank of Baghdad: The results of the statistical analysis showed that the Bank of Baghdad
practiced profit management practices in 2013 and 2015 in terms of the value of the optional
benefits DLLP is greater than the arithmetic mean value of the total voluntary receivables, as
shown by the bank’s practices Profits are managed differently, through the standard deviation
being .Dev. std (005109258.0) far from the mean value (003565888.0.)
D. Ashur International Bank: The result of the statistical analysis showed that the Ashur
International Bank
The profit management practices in 2013 and 2014 in terms of the value of receivables DLLP is
greater than the arithmetic mean value of the sum of voluntary accruals Mean, it also shows that
the bank practices profit management in a different way, through the fact that Standard Deviation
.Dev. Std ( 002161293,0) is far from the arithmetic mean value Mean . (0,019159934)
E. The highest value of voluntary benefits appeared during the year 2013 (020903936,0)
recorded by the "National Bank of Iraq", as for the lowest value for optional dues (007958324.0) it
was registered by the "Bank of Baghdad", and in 2014 it was higher Amount of voluntary accruals
(020764701,0 )registered by Ashur International Bank, As for the lowest value of the optional
accruals (002041253.0) - it was recorded by the “Bank of In 2015, the highest value of voluntary
benefits was (021493187,0) Baghdad" and my brother registered by the National Bank of Iraq, and
the lowest value for optional dues (004780593.0).

It was registered by the "Bank of Baghdad". From the foregoing, it is clear that the banks, the
sample of the research, practice profit management practices using a provision loan losses to affect
the announced profits, and thus the research hypothesis has been proven and to the effect that
“there is Significant relationship between local accounting procedures for the impairment of bank
loans Applied on the basis of the guiding regulations of the Central Bank of Iraq and between
profit management in banks listed on the Iraq Stock Exchange.

5. CONCLUSIONS AND RECOMMENDATIONS

There are areas of deficiencies in the details of the indicative regulation issued by the Central Bank of
Iraq regarding accounting for the decline in the value of bank loans, including:

• Calculate provision for credit losses at 2% of total outstanding credit and that affects the value
and timing of the declared profit by recognizing unreal losses.

• Calculating the provision for credit losses at a rate of 10% of the total amounts of medium
credit up to 100% of the total amounts of credit losses without taking into account the real
guarantees represented by mortgaging the property provided by the customer, which allows
the bank management to manipulate the provision for credit losses through manipulation of
the value and timing of recognizing losses Credit and thus influence the value and timing of
the declared profit.

• The indicative regulation did not address the matters to be disclosed in the text of the financial
statements Relevancy to the credit risks that the bank's management may be exposed to.

The management of the economic unit, including the banks, can practice profit management by
manipulating the recognition of the value and timing of the decrease in the value of loans by increasing
or decreasing the provision for losses. loans and then smoothing, maximizing or reducing income and
in the way that achieves its goals and interests, and it was found from the use of the loan loss allocation
model in the research sample banks That these banks use the aforementioned provision to manage their
profits.

Through the conclusions reached, the researchers recommend urging officials in the Central Bank
of Iraq, including those who prepare laws, instructions and indicative regulations, to adopt one of the
following strategies:

• Develop the guiding regulations for accounting for the depreciation of bank loans in force It is
currently in the banks listed in the Iraq Stock Exchange and to avoid areas of shortcomings

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Proceedings [e ISBN 978-629-97614-0-2]
International Conference on Accounting, Management and Economics (ICAME2022)

14-15 December 2022│Faculty of Management and Economics,
Universiti Pendidikan Sultan Idris

Areas for recognizing impairment losses and making provision, especially with regard to the
value of guarantees related to .
• Adapting the guiding regulations currently in force in banks listed in the Iraqi Stock Exchange
to comply with the requirements of international financial reporting standards, including the
financial reporting standard. International Financial Instruments (IFRS 9), or adopting the
mentioned standard from the Central Bank of Iraq and obligating the banks listed in the Iraqi
Stock Exchange to apply it according to a pre-defined business strategy.

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Ahmed, Abubaker., Mohammed, Abdu Y. & Adisa Abdulmarooph O. (2014) “Loan loss provision and
earnings management in Nigerian deposit money banks”, Mediterranean Journal of Social
Sciences, No. 5 (17), pp 49-58.

Al-Fadl, Faris Abdul-Hussein (2015) Transparency of financial reporting and its role in limiting
financial practices Earnings management (an applied study in a sample of joint stock companies
listed on the Iraqi Stock Exchange), a study presented to obtain the degree of “legal accounting”,
the Arab Institute of Certified Public Accountants - League of Arab States.

Al-Fatlawi, Laila Naji (2011) The impact of applying corporate governance in reducing profit
management practices by applying it to a sample of joint stock companies listed on the Iraqi Stock
Exchange, a thesis submitted for the degree of “PhD in Accounting”, College of Administration and
Economics - University of Baghdad .

Al-Saadi, Hakim Hammoud (2013) The use of Benford law to detect earnings management and its
reflection on audit quality (applied to a sample of companies listed on the Iraq Stock Exchange), a
thesis submitted for obtaining the degree of “Master of Science in Accounting”, College of
Management and Economics - University of Baghdad.

Alsharairi, Malek A. R. (2012) Pre-merger earnings management: Sarbanes Oxley, leverage and non-
cash acquisition Premia. Thesis submitted to gain the degree of “Doctor of accounting philosophy”,
Durham Business School-Durham University, UK.

Al-Tamimi, Abbas Hamid, Al-Saadi, Hakim Hammoud (2014) The management of profits, their
factors of emergence, methods and ways to reduce them, 1st edition, Baghdad, Dar Al-Jazeera for
printing and publishing.

Anandarajan, Asokan., Hasan, Iftekhar & McCarthy, Cornelia (2007) “The use of loan loss provisions
for earnings, capital management and signalling by Australian banks”, Journal of accounting and
finance, No. 47 (3), pp 357-379.

Ashour, Mohammed O. (2011) Banks loan loss provisions role in earnings and capital management:
evidence from Palestine. Thesis submitted to gain the degree of “master in accounting and finance”,
accounting department-Islamic university.

Assem, Thomas van den (2011) Income smoothing across Europe the in-formativeness explored.
Thesis submitted to gain the degree of “master in accounting”, Erasmus school of economics-
Erasmus University Rotterdam.

Curcio, Domenico., Simone, Antonio De & Gallo, Angela (2012) “Discretionary provisioning and
financial crisis: evidence from the European banks”, Universi Tadegli Studi Di Napoli, Conference
on Valencia, Spain.

Healy, Paul M. & Wahlen, James M. (1999) “A review of the earnings management literature and its
implications for standard setting”, American Accounting Association Accounting Horizons, No. 13
(4), pp 365-383.

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Proceedings [e ISBN 978-629-97614-0-2]
International Conference on Accounting, Management and Economics (ICAME2022)

14-15 December 2022│Faculty of Management and Economics,
Universiti Pendidikan Sultan Idris

Healy, Paul M. (1985) “The effect of the bouns schemes on accounting decisions”, Journal of
accounting and economics, No. 7, pp 85-107.

Karimiyan, Ali., Nasserinia, Ali & Shafiee Hamed M. (2013) “Relationship between loan loss
provision and future earning, return and cash flow in commercial banks of Malaysia”, 4th Asia-
Pacific business research conference, Bayview Hotel, Singapore.

Jiao, Fanghong (2014) Real earnings management, habitually meeting/closely beating analysts
forecasts and firms long-term economic performance. Thesis submitted to gain the degree of
“Doctor of accounting philosophy”, The University of Texas at Arlington.

Kieso, Donald E., Weygandt, Jerry J., & Warfield, Terry D. (2016) Intermediate accounting, 16th
edition, Johan Wiely & Sons Inc, USA.

Leventis, Stergios., Dimitropoulos, Panagiotis E. & Anandarajan, Asokan (2011) “Loan loss
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Martins, Joana Cordeniz (2010) Impairment of tangible fixed assets in the Portuguese listed companies:
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Mulford, Charles W. and Comiskey, Eugene E. (2002). The financial number game detecting creative
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procyclicality: Does IFRS matter? Empirical evidence from Nigeria”, Mediterranean Journal of
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Rifi, N. (2010) The influence of large shareholders on earnings management in the pre- and post IFRS
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Roned, Joshua and Yarri, Varda (2008) Earnings management emerging insights in theory, practice,
and research, Springer Science+Business Media, USA.

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Scoot, William R. (2009). Financial accounting theory, 5th edition, Pearson Prentice Hall, Canada.

88

Proceedings [e ISBN 978-629-97614-0-2]
International Conference on Accounting, Management and Economics (ICAME2022)

14-15 December 2022│Faculty of Management and Economics,
Universiti Pendidikan Sultan Idris

CM012

ONLINE VS FACE-TO-FACE TEACHING METHODS: THE
PREFERENCES TOWARD STUDENTS SATISFACTION

Nor Alwani Binti Abd Wahab1

Politeknik Sultan Azlan Shah

Ruzimas Ayu Binti Razali2

Politeknik Sultan Azlan Shah

Nurul Ashikin Binti Md Taib3

Politeknik Sultan Azlan Shah

123Lecturer, Department of Commerce, Politeknik Sultan Azlan Shah
Correspondence Author: [email protected]

ABSTRACT

Teaching methods is one of the factors considered in student achievements that being implemented to have a
planned outcomes in teaching field. Background (1): there are several factors chose in this study of looking on
the student’s preferences in teaching methods to measures their satisfaction. The factors are the teaching
technique, the course offered, the facilities and the student’s expectations towards their satisfaction. Method
(2): the respondents were randomly selected by simple random sampling and using Krejci and Morgan tables
from the total population of semester 3 diploma in retail management and diploma in marketing. There were
40 responses was recorded to measures their preferences of satisfaction towards online teaching methods versus
face-to-face teaching methods. Result (3): the result shows the positive relationship between the factors of
study and the student’s preferences towards their satisfaction on the teaching methods. Some factors show
unsatisfied responses regarding the facilities and the student’s expectation. Keywords
Keywords: Teaching Technique; Course Offered; The Facilities; The Student’s Expectations; Satisfaction

1. INTRODUCTION

The teaching methods or techniques refers to the general basic, pedagogy and management strategies that
being used for classroom activities. Teaching methods also being defined as the broader techniques or
activities used as the guidance to the students to achieve proposed learning outcomes for a particular topic,
while activities conducted are the different ways to implement those methods used. Teaching methods
help students to identify what kind of the technique that suit to their understanding and abilities.
A teaching method includes the background and methods used by the lecturer to help the student in
learning and adaptation process. For a particular teaching technique to be appropriate and efficient to be
implemented it has considered the students, the background of the subject field, and the type of learning
activities it is supposed to bring about. The pillars and strategies used by the lecturers to help students to
learn the subject matters. The method of personal teaching usually used, and the learning culture also
influence teaching methods. The lecturers usually implement a combination of different types of teaching

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Proceedings [e ISBN 978-629-97614-0-2]
International Conference on Accounting, Management and Economics (ICAME2022)

14-15 December 2022│Faculty of Management and Economics,
Universiti Pendidikan Sultan Idris

methods to have a better fit of the needs of that student. These methods can be adjusted to solve problems
faced specifically by the students in reference. Besides, teaching method are also used based on different
goals that students may have from what they have learned from the courses.

2.0 THEORETICAL FRAMEWORK

1. Hypothesis development
1.1 Teaching technique and student preferences
According to Brown (2008), student-centred instruction is a method that allows for active
learning to take place, one in which students are highly engaged and the teaching methods put
a greater responsibility for the learning directly on the learner. Vygotsky (1978) however argued
that learning is most effective when students cooperate with one another in a supportive learning
environment under careful guidance of a teacher (student centred). Felder and Brent (2009)
discuss the three methods used in student-centred classrooms which are active learning,
cooperative learning and inductive teaching and learning. Felder and Henriques (1995) point
out that while some of the teachers may emphasize rote of memorization, other teachers may
emphasize individual understanding of larger concepts. According to Susan et al., 2021) online
classes were not suitable for many students, especially considering all classes were forced to
have their class online. After the COVID-19 experience, many of the students were more
appreciative of the traditional face-to-face instruction or classes due to many complexities of
online instruction in the class.
1.2 Course offered and student preferences
Fish (2016) discussed that as a student’s experience more online courses, their perceptions of
the online class environment changes compared to the face-to-face environment. Entwistle et
al., 2003; Richardson, 2005, Richardson, 2006; Cano et al., 2018. Typically, perceptions of
learning environment that have been studied as the course experiences, reactions to the several

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Proceedings [e ISBN 978-629-97614-0-2]
International Conference on Accounting, Management and Economics (ICAME2022)

14-15 December 2022│Faculty of Management and Economics,
Universiti Pendidikan Sultan Idris

different of aspects of a particular courses, such as appropriate assessments and tasks and
workload, clear goals and standards, good tutoring and preferences for lecturers’ personalities.

1.3 Facilities and student preferences
Ke and Kwak (2013) identified five (5) elements of student satisfaction which is learner
relevance, active learning, authentic learning, learner autonomy, and technology competence.
Kuo et al. (2013) determined that learner-instructor interaction and learner-content interaction
combined with the technology efficacy are valid indicators of students’ positive perceptions.
Keengwe, Diteeyont and Lawson-Body (2012) however said that students’ expectations
influence the instructor’s design of effective technology tools in the online courses and are the
key to understanding more on the satisfaction construct.

1.4 Student’s expectations and student preferences
In a previous study, Dziuban, Moskal, Kramer and Thompson (2013) used an alpha factoring
procedure (Kaiser & Caffery, 1965) to identify the underlying of dimensionality of satisfaction
under varying conditions of student ambivalence toward their online courses. Using overall
satisfaction with the course, they classified the selected students into five categories which are
negative non-ambivalent, negative ambivalent, ambivalent, positive ambivalent and positive
non-ambivalent, corresponding using the 5-item Likert scale.

1.5 Student preferences and student’s satisfaction

As students’ satisfaction reflects to the effectiveness of e-Learning quality (Alqurashi, 2019),
it has become more important to understand how the interactions impact an e-Learning quality,
especially during the pandemic when the education around the world has moved to online
teaching & learning (Kumar et al., 2021). Muilenburg and Berge (2005) identified eight
barriers that prevent students from satisfactory online education which are administrative and
technical issues, lack of academic and technical skills, interaction, motivation, time, and
support for the studies and accessibility and affordably of the internet usage.

1.6 Student preferences as a mediator

According to Dörnyei and Ushioda (2011), learner preference for the classroom activities has
been associated with several motivational factors, the which influence learners' choices,
engagement in their action, effort, and persistence. The literature from (e.g., Moore, 2001;
Nunan, 1991) discussed that it is important to take into consideration students' opinions for the
selection of an activities and that a good selection of the classroom activities that engages
students, facilitates learning, that gives the teacher and the students immediate feedback, and
raises their interests and their motivation.

3.0 METHODOLOGY

This study was conducted a descriptive research design where and analysis of primary data collected
through the questionnaires distributed online to the selected respondents on the fully online session
from September 2021 to January 2022. The sample comprises of 40 students from the population of
semester 3, Diploma in Marketing and semester 4, Diploma in Retail Management. The sampling
technique used was probability sampling where the courses selected were from Diploma in Marketing

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Proceedings [e ISBN 978-629-97614-0-2]
International Conference on Accounting, Management and Economics (ICAME2022)

14-15 December 2022│Faculty of Management and Economics,
Universiti Pendidikan Sultan Idris

and Diploma in Retailing. The members of this population were selected randomly and have an equal
opportunity to be a part of the sample in this study. For the research instruments, the online
questionnaire was designed to estimate the factors satisfy the student preferences leads to their
satisfaction, such as the teaching techniques, courses offered, the facilities and the students’
expectations towards the contribution of these factors to the student’s satisfaction and their method
preferred either run the class through online methods or through face-to-face methods. The research
instruments used are adapted from Ram Gopal et al, 2021 where the section is almost the same as
used in this study.

4.0 FINDINGS

4.1 Result
4.1.1 Gender

GENDER
Male
17%

Female
83%
Figure 1: Gender

Figure 1 refer to the category of respondent for the study which refer to male and female. It was
recorded 17% and 83% respectively.

The questions consist of four (4) variables which contribute to the student preferences towards their
satisfaction regarding factors lead to satisfaction in using online or face to face classes. Each variable
is included with several attributes of satisfaction which measures by level of strongly agree to strongly
disagree. Its measures what are the most satisfying preferences, leads to the satisfaction either online
or face to face classes methods.

4.1.2 Teaching Techniques

Item Item Strongly Disagree Moderate Agree Strongly
no. Disagree 42.5% Agree

a The satisfaction on 0% 0% 5% 52.5%
the technique used
up to the current
practice.

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Proceedings [e ISBN 978-629-97614-0-2]
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Universiti Pendidikan Sultan Idris

b The technique used 0% 0% 5% 42.5% 52.5%
was easy to access 10% 35% 55%
wherever possible 2.5%
10%
c The technique used 0% 0%
create comfortable
learning space

d The technique used

personalize

interaction between 0% 0% 47.5% 50%

students and

lecturers.

e The technique used

create excitement 0% 0% 47.5% 42.5%

during class

sessions.

Table 1: Teaching Techniques

From the survey, the percentage shows most of the student really satisfied with the current
practice of the teaching methods which refers to face to face classes. They are also comfortable
with the learning environment, help better interaction between lecturers and create excitement
during class session compared to the online classes.

4.1.3 The Course Offered

Item Item Strongly Disagree Moderate Agree Strongly
no. Disagree 37.5% Agree
55%
a The course was 40%
45% 55%
designed to allow
50%
assessment to be 0% 0% 7.5%
completed in

various learning

environments.

b The course was

designed helps

students learn 0% 0% 5%

quickly through any

teaching channel.

c The course was well 0% 0% 5%
organized

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Proceedings [e ISBN 978-629-97614-0-2]
International Conference on Accounting, Management and Economics (ICAME2022)

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Universiti Pendidikan Sultan Idris

d The instructor

facilitated the course 0% 0% 5% 35% 60%
5% 35% 60%
effectively

e The course was 0% 0%
designed to allow
me to take
responsibility for
my own learning

Table 2: The Course Offered

From the survey’s result also shows that course offered suitable with any teaching method,
allow the students learn quickly and help the lecturer to facilitate the course effectively and
delivering the course content efficiently.

4.1.4 The Facilities

Item Item Strongly Disagree Moderate Agree Strongly
no. Disagree 42.5% Agree
27.5% 37.5%
a Internet speed 0% 0% 20%
32.5% 55%
b Online access and 35%
37.5% 55%
materials 0% 0% 20% 55%
55%
downloading

c Online examination 0% 0% 12.5%

d Laboratory sessions 0% 0% 5%
7.5%
e Sources of reference 0% 0%
books

Table 4: The Facilities

The results gained from the survey also show the positive effect on the student preferences
factors of the facilities available to help them in the learning process toward their satisfaction
with the chosen teaching methods. The aspect of internet speed shows that it was the most
important things considered in effective of online teaching method. Without that facilities the
flow of the teaching methods may interrupted. However, the other facilities available such as
online access and material downloading, online examination, laboratory session and the
sources of reference book also help the students either face to face or online teaching methods.

4.1.5 Student’s Expectations

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Item Item Strongly Disagree Moderate Agree Strongly
no. Disagree 25% Agree
27.5% 57.5%
a The online classes 0% 5% 12.5% 50%
were valuable 32.5%
50%
b Taking the online 0% 5% 17.5% 30%
classes increased my 30% 47.5%
interest in education. 52.5%

c We are generally 0% 5% 12.5%
given enough time
to understand the
things we must learn

d The online classes 0% 5% 17.5%
have sharpened my
analytic skills

e Online classes really 0% 5% 12.5%

try to get the best out

of all its students

Table 5: Student’s Expectations

From the student’s expectations toward the teaching method, they preferred. Most of the
student’s choose from moderate to strongly agrees answer on some online teaching method
features which can lead to their satisfaction. This means that the students also get satisfaction
not only from online class teaching methods, but they also prefer satisfaction from face-to-face
teaching methods.

5.0 CONCLUSION

From the study, the students show their consideration on the factors leads to their satisfaction on the teaching
methods whether online teaching method or face-to-face teaching methods. The result shows that all the factors
included in this study was contribute to the students’ preferences on their satisfaction towards teaching
methods, either it can be face-to-face methods or online methods. In can be the most factor or less considered
to measure their satisfaction and it can be used as an indicator of preparing the best method for the students by
adapting the current requirements and situations.

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Proceedings [e ISBN 978-629-97614-0-2]
International Conference on Accounting, Management and Economics (ICAME2022)

14-15 December 2022│Faculty of Management and Economics,
Universiti Pendidikan Sultan Idris

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CM013

FACTORS INFLUENCING BRAND SWITCHING INTENTION
AMONG GENERATION Y SMARTPHONE USERS IN MALAYSIA

Koo Xi Min

Faculty of Business and Economics
Universiti Pendidikan Sultan Idris

Ahmad Zainal Abidin Abd Razak

Faculty of Business and Economics
Universiti Pendidikan Sultan Idris
Correspondence Author:[email protected]

ABSTRACT
With the increase advancement of the technology, smartphone has evolved to become one of the integral technology devices
in our every day’s life. In recent years, numerous brands of smartphone have mushroomed rapidly in the market. Given the
abundance of choice and the easy availability to purchase smartphone either through physical stores or online stores, it
becomes easier for the smartphone users to switch brand. Hence, brand switching of smartphone is becoming a concern for
the smartphone companies. This research aims to examine the factors that affect the brand switching intention of
smartphone among the Generation Y in Malaysia. Generation Y is chosen as the targeted profile for this study is because
this cohort of people make up the highest percentage of smartphone users in Malaysia. The push-pull-mooring model is
incorporated to investigate the factors which influence the brand switching intention among the Generation Y smartphone
users. Push factors included in this study are price and dissatisfaction. Meanwhile, variety seeking, and attractiveness of
alternatives are incorporated as the pull factors. On the other hand, social influence is included under the mooring factor in
this study. In order to carried out the hypothesis testing, primary data were collected from a questionnaire survey of 410
Generation Y smartphone users. The data is analysed using covariance based structural equation modeling (CB-SEM).

KEYWORDS
Brand Switching, Generation Y, Intention, Push Factors, Smartphone Users, Malaysia

1. INTRODUCTION

These days, the advancement of smartphones has changed individual’s life and the society as a whole.
The smartphone innovation allows numerous functions such as making call, sending texts and emails,
taking pictures, gaming and other entertainment to be effectively incorporated into one device. The
smartphone industry has grown and developed steadily in terms of the number of users. This trend can be
observed worldwide as well as in Malaysian market. Based on data revealed by Statista, 2022, the number
of smartphone users in Malaysia has grown from 3.14 millions in 2010, to 29 million in year 2021. It is
predicted that the number of users will continue to expand in the foreseeable future (Statista, 2022).
According to Malaysian Communications and Multimedia Commission survey in 2018, the Malaysian
smartphone users increased the most between 2013 and 2017, which is from 37.4% in 2013, up to 75.9%
in 2017. The penetration rates of smartphone have grown by 7.2% from 68.7% in 2016 to 75.9% in 2017.

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As in 2021, the smartphone users in Malaysia continue to grow and the penetration rate reached as high
as 94.8%. the study also found out that users from the age group of 20 to 34 are the highest group of
smartphone users in Malaysia. This age group of people falls into the Generation Y. Growing up with
technology, Generation Y are tech-savvy (Kotler & Armstrong, 2017). Therefore, Generation Y is chosen
as the study profile for this research purpose. With the variety of brands option and the convenient of
purchase, consumers these days are found to be less loyal (Llopis, 2014). Prior studies related to
smartphones only focused largely on users’ early adoption of the smartphone (Eze and Lee, 2012; Kim,
2014; Regan and Chang, 2015; Gao, Yang and Krogstie, (2015); Berenguer, Goncalves, Ferreira,
Anagnostopoulos and Kostakos, 2017).Therefore, this study aims to focus on analysing on brand
switching of smartphone instead as brand switching is considered as a post-adoption behavior. Other than
that, in terms of brand switching, most previous studies on IT switching mainly concentrated on PC-based
IT and software (Chang, Liu, and Chen, 2014; Zhou, 2014; Chang, Wong, and Li, 2017; Wu, Vassileva,
and Zhao, 2017; Cheng, Lee, and Choi, 2019). Therefore, study gap exists as not much research had been
carried out in terms of brand switching in the smartphones industry. Moreover, past study mainly
incorporated the push-pull-mooring model to understand the switching intention in service industries such
as airline service, online gaming service, restaurant, auto repair service, hotel service etc (Jung et al, 2016;
Han & Hyun, 2013; Hou et al., 2011; Hsieh et al., 2012; Sun, 2014). This study aims to extend the scope
of existing literature by applying push-pull-mooring in understanding brand switching in smartphone
product. In view of that, the objective of this paper is to shed light on the factors behind the brand
switching intention among the Generation Y smartphone users.

2. Literature Review

2.1 Brand Switching

Brand switching occurs when customers move from one brand to another and it also signifies
that the original brand become less attractive to them (Al-Kwifi & Ahmed, 2015). It is also
defined as the event whereby customers decide to switch from one product to another within
the same category. In real case scenario, brand switching could also occur even though the
customers are fine with using a product, yet still choose to switch to another brand. Other
than that, switching could also happen when customers replace or exchange current provider
to another (Bansal & Taylor, 1999; Keaveney, 1995; Njite, Kim & Kim., 2008; Afzal et al.
2013).

Brand switching indicates the opposite of customer loyalty ; while loyal customers have the
tendency to remain loyal with the brand, unloyalty will cause customers to switch
brand(Wieringa & Verhoef, 2007). In this contemporary era of twenty first century,
consumers are exposed to easy access to information and knowledge of products in the
market; therefore, it becomes easier for the customers to compare the various brands of
products available in the market while making their switching and purchasing decision. Due
to this reason, it is important for companies to provide better offerings and increased values
to the customers while at the same time build and maintain a healthy long-term relationship
with the customers (Ahmed, Gull & Rafiq, 2015).

Bassey, Ewah and Ndu (2019) pointed out that depending on the nature and type of product
and the difficulty level to switch, brand switching may be either temporary or permanent.

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According to Hou et al. (2011), users who switch brand temporarily will return to their
original choice after a period of time while users who switch brand permanently do not goo
back to their original brand option. In relation to this, permanent brand switching could lead
to imminent losses to companies as they could not manage to make their customers stay with
their brand.

On the other hand, Nimako and Winneba (2011) emphasized that brand switching could
either bring in new customers to companies through in-switching; or it could cause the loss
of customers to companies through out-switching. Therefore, understanding the concept of
switching intention is extremely important in business as it could help companies to evaluate
their own weaknesses and strength to prevent the loss of their existing customers while at
the same time assist them in attracting new customers.

2.2 Push-Pull-Mooring (PPM) Model

The theoretical model of this study is built based on the Push-Pull-Mooring(PPM)
framework. PPM is a famous theory regarding human migration. Push factors are the
negative factors that drive people away from their original location. On the other hand, pull
factors refers to positive factors that attract people to a particular destination (Bogue, 1969).
Moon (1995) expanded the Push-Pull model by incorporating “mooring” concept. This
mooring concept was proposed by Longino(1992) which represent the lifestyle, cultural and
spatial factors affecting people’s migrating decision. In marketing literature, PPM has first
been used to explain consumer switching behavior by Bansal, Taylor, and James (2005). The
finding of this research concluded that the PPM Model could be used to better understand
consumers’ switching behavior as well.

In this study, price and dissatisfaction are used as the variables under push factors while
variety seeking and social influence are incorporated as variables under the mooring factors.
On the other hand, attractiveness for alternative is considered as the pull factor of this study.

2.3 Research Model and Hypothesis Development

Building on the PPM framework, this study aims to examine the push, pull and mooring
factor that affects Generation Y smartphone users’ brand switching intention as illustrated
in the research model in Figure 1. The model is constructed to find out the various factors
that lead to brand switching among the smartphone users. The push factors include price and
dissatisfaction. The mooring factors include variety seeking and social influence. The pull
factor includes attractiveness of alternative. The review on each factors and hypothesis
development will be discussed in the following section.

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Figure 1: Research Model
2.3.1 Push factors
In marketing context, push factors can be understood as the negative factors or disadvantages
that cause people to switch to another brand (Jung et al., 2017). In the prior studies, push
factors that have been used included quality, price, low trust, low satisfaction, low enjoyment
and so on (Bansal et al. (2005); Wieringa and Verhoef (2007); Hou et al., (2011); Jung et al.,
2017). For this study, push factors are regarded as the negative effects that cause the
smartphone users to switch to another smartphone brand. Price and dissatisfaction are
included as the push factors for this research purpose.
2.3.1.1 Price
Price is the amount of money which customers need to pay in purchasing goods or services
(Kotler, 2012). Based on the findings of Jung et al. (2017), price problem is one of the
significant push factors that cause the consumers to switch brand. Colgate & Hedge (2001)
also supported that price problem has led to the switching behavior among the consumers in
the retail banking services. The same is also further supported by the research of of Wieringa
& Verhoef (2007). Uppu, Pujari & Gundala (2016) also found that price possessed
significant impact in affecting consumer brand switching behavior in wireless telecom
service. Firdaus and Budiman (2021) also found that price is an important element that cause
customers to switch brand.

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Accordingly, the following is hypothesized:

H1: Push factor of price has a significant relationship with smartphone users’ brand
switching intention

2.3.1.2 Dissatisfaction

According to Kotler and Keller (2017) , satisfaction is “a person’s feelings of pleasure or
disappointment resulting from comparing products perceived performance (or outcome) in
relation to his or her expectations”. On the other hand, according to Hew et al. (2017)
dissatisfaction happens when the brand of a product is unable to meet the consumers’ desires
and need and produces an opposite state that does not meet the expectation of the consumers.
It is also described as the users’ negative feelings when using a product (Lin & Huang, 2014).
Hou, Chern, Chen, & Chen (2011) highlighted in their study that users who are dissatisfied
are more likely to switch to another platform than satisfied users and truly unsatisfied users
have the tendency to aggressively look for another alternative. Uturestantix, Warokka, &
Gallato (2012) also found that in mobile telecommunication market, customer
dissatisfaction affect their brand switching decision. Meanwhile Jung et. (2017) carried out
research related to airline services, found that dissatisfaction also lead to switching behaviour
among the users, however their research found that it is not the strongest factor to cause the
switching behavior among users.
Accordingly, the following is hypothesized:

H2: Push factor of dissatisfaction has a significant relationship with smartphone users’ brand
switching intention

2.3.2 Mooring Factors

In marketing context, mooring factors can be understood as personal characteristics and
social elements that lead to group decisions involving a person or the environment (Jung et
al, 2017). Examples of mooring factors adopted in prior studies include need for variety,
switching cots, social relationship and so on (Hou et al., 2011; Jung et al., 2017; Hati et al.
2020). In this study, mooring factors refer to personal preferences and social element that
affects smartphone users to switch brand. The factors included as mooring factor for this
study are variety seeking and social influence which will be discussed as follows.

2.3.2.1 Variety Seeking

Variety seeking is understood as the personal preferences to look for different experiences
(Aroean, 2012). Chuang & Tai (2016) mentioned that variety seeking occurs when
consumers look for new stimulation in buying products due to variation of innovation and
product choices. Hou et al (2011), discovered that variety seeking among the online game

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users caused high switching intention among the gamers. Jung et al. (2017) also found that
high seeking variety of the users become one of the factors that cause them to switch to
another airline company. Palma (2021) found out that variety seeking have a positive effect
to brand switching among Millennial generation.
Accordingly, the following is hypothesized:

H3: Mooring factor of variety seeking has a significant relationship with smartphone users’
brand switching intention

2.3.2.2 Social Influence
Social influence include influence from family and peers, newspaper, television, radio,
internet (Hew et al. 2012). Due to the change and advancement of technology and the way
human interact these days. Social media influencer is also included as part of the social
influence. social media influencer is a third-party endorser who creates and shapes consumer
attitudes through the use of blogs, tweets or other social network media sites (Gulamali and
Persson, 2017). For this study purpose, social influence includes the influence from family
and peers, newspaper, television, radio, internet and social media influencers who have
influence over the smartphone users.
Acharya and Gupta (2014) found out that younger people prefer to form strong bond with
their peers and wish to fit in and be accepted by peers. Therefore their decision on choosing
brand is affected by their friends opinion. Shah, Husnain, & Zubairshah (2018) also revealed
that that social influence such as family, relatives and friends have positive impact towards
brand switching in telecommunication industry. According to Cheah (2017), it is noted that
the impact of social media influencers on the consumers purchasing intention is high. This
means that social influencer are able to affect consumers in making their decision.

Accordingly, the following is hypothesized:

H4: Mooring factor of social infleunce has a significant relationship with smartphone users’
brand switching intention

2.3.3 Pull Factors

In marketing context, push factors can be understood as the positive factors that attract
people to switch to another brand (Jung et al., 2017). In the prior studies, push factors that
have been used included attractiveness of alternatives, pricing benefits, enjoyment and so on
(Jung et al., 2017; Hou et al., 2011; Hsieh et al., 2012; Sun et al., 2017). For this study, pull
factors are regarded as the positive effects that cause the smartphone users to switch to
another smartphone brand. Attractiveness of alternative is included as the push factors for
this research purpose.

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2.3.3.1 Attractiveness of Alternatives

Attractiveness of alternative is defined as customers impression of the possible sense of
satisfaction that the competing brands in the market are able to provide. It is an assessment
of the alternative provider that the customers plan to switch to (Chang, Liu, and Chen 2014).
Bravo (2016) found that the expected benefits from an alternative brand positively affects
the intention to adapt. Lin and Huang(2014) concluded that the pull factor of relative
advantage of alternative positively influence consumer to switch technology products.
Wahyono (2018) in the café setting had also proven that attractiveness of alternatives has a
positive and significant direct influence on switching behavior.

Accordingly, the following is hypothesized:

H5: Pull factor of attractiveness of alternative has a significant relationship with smartphone
users’ brand switching intention

3. Research Methodology

3.1 Instrument development
For this study, a self-administered survey was conducted through a properly designed
questionnaire. A comprehensive instrument has been administered for this study after
detailed reviewing the existing literature. This section presents the instrument developed as
well as the measurement scales. The questionnaire was constructed with reference to past
research (Jung et al., 2017; Suki, 2013, Aroean 2012; Hew et al, 2012; Gulamali and Persson,
2017, & Chang et al., 2014). Items from prior studies have been adopted in this study and
suitable changes were done to better fit to the context of smartphone brand switching
intention. Six variables were incorporated in this study; whereby five are independent factors
(two variables in push fators; two variables in mooring factor; one variable in pull factor);
and one dependent variable (switching intention). In total there are 27 items based on the six
variables.

The questionnaire is made up of three sections. Section A is the demographic information,
Section B consists of questions in relation to the independent variable, and Section C which
includes the questions relevant to dependant variable. Five-point Likert scale was adopted
in the questionnaire, which range from strongly agree(5) to strongly disagree(1).

Table 1 presents the list of origins of construct while Table 2 presents the list of items in the
construct.
Table 1

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List of Origins of Construct

Variables Code Instrument Author No. of Measurement
items Scale
Price P Jung et. al (2017) 5
Suki (2013)
Dissatisfaction DS Jung et. al (2017) 5
Hew et. al. (2017)
Variety Seeking VS Peng et. al (2016) 5 Five-point
Aroean (2012) 5 Likert Scale
Social Influence SI Hew et. al (2012)
Gulamali and Persson (2017) 4
Attractiveness of AA Jung et. al (2017)
Alternatives S Hou et. al (2011) 3

Switching Chang et. al (2014)
Intention

3.2 Pilot Test

A pilot test is conducted to test on the construct reliability. For this study, 42
respondents were involved in the pilot test. The scale of reliability of the data collected were
tested using Cronbach’s alpha test, whereby variables that reach an alpha value of more than
0.7 were accepted (Field, 2005). Meanwhile, as accordance to According to Hair, Hult,
Ringle and Sarstedt (2017a), the minimum value for Cronbach’s Alpha is 0.6. As presented
in Table 3.4, alpha values of all variables range from 0.752 to 0.852. Hence, all variables
have fit the reliability test.

Table 3: Cronbach’s alpha for pilot test

Variables No. of items Cronbach’s
Alpha (>=0.7)

Price 4 0.752
0.852
Dissatisfaction 5 0.800
0.765
Variety Seeking 5 0.846
0.780
Social Influence 5

Attractiveness of Alternatives 4

Switching Intention 3

Source: Developed for the research

3.3 Sampling Design and Data Collection Procedures

For this study, the targeted population in Generation Y Smartphone users in Malaysia.
Generation Y grow up with technology and are tech-savvy compared to the previous

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generation. They are also familiar with the use of smartphone. In fact according to the finding
by MCMC, this age group of people made up the highest numbers of smartphone in
Malaysia. They also have greater readiness to spend on new technology Thus, Generation Y
is chosen as the target respondent of this study.

Since population is huge and it is impractical to reach all respondent in the population,
sampling technique is necessary. Sampling is essential in the situations where it is
impracticable to reach and survey on the whole population; and when there is a
limited budget and time for completing the research (Saunders et al., 2009, p. 212). In
this study, judgmental sampling under the non-probability technique is used due to the
absence of sampling frame and in accordance to Warren et al. (2014). Judgmental sampling
technique is a technique where researchers select the respondents from the population based
on their judgment.

The questionnaire is distributed to 410 smartphone users in Kuala Lumpur. Kuala Lumpur
is the capital city of Malaysia. Malaysians across the country, especially the younger
generation flock to the Kuala Lumpur due to better job prospect. Hence, Kuala Lumpur can
be considered as a good representation of the general Malaysia because it comprises people
from all over the countries with diverse cultures and background(Leong, 2017). The specific
locations to distribute the questionnaire is Kuala Lumpur Central. The reason is because,
Kuala Lumpur Central is an exclusive urban centre built around Malaysia’s largest transit
hub, offering global connectivity, excellent investment opportunities, business convenience
and an international lifestyle. Kuala Lumpur Sentral is a world-class city comprising Stesen
Sentral, corporate office towers and business suites, 5-star international hotels, luxury
condominiums and a shopping mall. It is a place with high density of working adults,
students and even from different parts of Malaysia. The respondents were ensured that they
fit into the age group under Generation Y and are currently using a smartphone. The
respondent were also briefed about the purpose of the study and were ensured that they were
willing to participate in the survey voluntarily. The respondents were also assisted in the
process of completing the questionnaire. At the end of the session, the questionnaire was
thoroughly checked to ensure that there is no missing data from the respondents.

3.4 Data Analysis

In this study, data analysis is done by adopting covariance-based structural equation
modeling techniques. The analysis is done by employing a number of cautious steps. First,
preliminary analysis is carried out to detect the missing data, identifying the outliers, as well
as testing the mormality and multicolinearity issues. Next the validity abd reliability of the
constructs are examined using the confimatory factor analysis (CFA). After that, it is
followed by the hypotheses testing. AMOS and SPSS statistical software to perform data
analysis of this study.

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CONCLUSION

From this conceptual paper, it is hope that the findings from this study can contribute to the understanding of
the influence of push-pull-mooring model and brand switching intention among the Generation Y smartphone
users.

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CM014

FACTORS INFLUENCING IMPULSE BUYING BEHAVIOR
AMONG WORKING LADIES IN SELANGOR, MALAYSIA

Chan Yuen Yue

Universiti Pendidikan Sultan Idris

Ahmad Zainal Abidin Abd Razak

*Correspondent author: Universiti Pendidikan Sultan Idris

ABSTRACT

The research objective is to investigate how extrinsic cues affect impulse buying behavior amongst working
ladies. The five extrinsic cues involved in this research are price, store atmosphere, brand reputation,
country of origin and social influence. The target population of this study is full-time working ladies aged
between 16 to 35 years. Purposive sampling technique is used, with sampling size of 400. Questionnaire is
the research instrument used, 400 questionnaires were distributed in One Utama shopping mall, Selangor.
The data collected was then analyzed using SPSS (Statistical Packages for the Social Science). The findings
revealed that price (β = -0.407, p < 0.05), store atmosphere (β = 0.359, p < 0.05) and social influence (β = -
0.331, p < 0.05) are significantly influence impulse buying behavior of working ladies. However, brand
reputation (β = -0.170, p > 0.05) and country of origin (β = -0.106, p > 0.05) of the product are not
significantly influence impulse buying behavior of working ladies. In conclusion, this research provides
useful information and insight to the marketers of Malaysia’s apparel industry in understanding consumers’
needs deeper to contribute to the growth of their business.
Keywords: Apparels, Extrinsic cues, Impulse Buying, Behavior, Working Ladies, Selangor

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CM015

FISCAL AND TAX POLICIES ON THE INNOVATION
PERFORMANCE OF CHINA'S TECHNOLOGY-BASED SMALL AND

MEDIUM ENTERPRISES

Peng Qiong

Faculty of Management and Economics,Universiti Pendidikan Sultan Idris

Nor Hanani Ahamad Rapani

Faculty of Management and Economics,Universiti Pendidikan Sultan Idris

Zuriadah Ismail

Faculty of Management and Economics,Universiti Pendidikan Sultan Idris

ABSTRACT
With the rapid development of social economy and the continuous deepening of urbanization, the society has entered into a
new development process. In the development process of technology-based SMEs, the application of fiscal and tax policies
can effectively promote the stable development of enterprises. At the same time, fiscal and tax policies is also a major factor
affecting enterprise’s innovation performance. Therefore, the article firstly clarifies the basic overview of fiscal and tax
policies and related theories; secondly, it analyzes the current situation and issues of the application of fiscal and tax
policies for technology-based SMEs; finally, on this basis, it proposes specific measures to improve the innovation
performance by using fiscal and tax policies.

KEYWORDS
Fiscal and tax policies;Technology-based SMEs; Innovation Performance

1. INTRODUCTION

The improvement of innovation level can promote the competitiveness of enterprises as well as the overall
economic development of the country, and the current competition among countries and enterprises is more
often based on innovation as the main competition point. Therefore, both for the country and for the enterprises

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themselves, they must pay attention to innovation if they want to truly sustain high-quality development,
realize industrial transformation and upgrading, and then improve the international competitiveness of
enterprises. The report of the 19th National Congress points out that: accelerate the construction of an
innovative country. Innovation is the first driving force to lead development, and is the strategic support to
build a modern economic system. To target the world's scientific and technological frontiers, strengthen basic
research, to achieve a major breakthrough in forward-looking basic research, leading original results. Deepen
the reform of the science and technology system, establish an innovation system with enterprises as the main
body, market-oriented, and deep integration of industry, academia and research, strengthen support for
innovation in small and medium-sized enterprises, and promote the transformation of scientific and
technological achievements. On August 20, 2018, Vice Premier Liu He emphasized in the first meeting of the
State Council Leading Group for Promoting the Development of Small and Medium Enterprises that SMEs
contribute more than 70% of the country's innovation, reaffirming the important role of SMEs in innovation.
Technology-based SMEs are the most active group in innovation, and although China's technology-based
SMEs are in the growth stage, they are still the most promising and dynamic category of enterprises.

Although major national strategies for the development of science and technology-based SMEs bring
unprecedented opportunities for development, but the innovation drive of enterprises is still insufficient. On the
one hand, the small size and weakness of such enterprises make it more difficult to obtain loans from banks and
the high cost of private borrowing; on the other hand, enterprises need a large number of professional and
technical talents to boost innovation. In order to solve the problem of market failure in the process of
innovation (Arrow, 1962), governments in various countries have generally adopted fiscal and tax policies to
regulate and control innovation activities, so as to reduce the cost of enterprises and improve the efficiency of
innovation (Kang et al., 2012). China has introduced a series of fiscal and tax policies, mainly financial
subsidies and tax incentives.To a certain extent, these policies provide financial support and human resource
support for enterprises' innovative R&D activities, enhance the level of innovative R&D and output of
enterprises, and improve their innovative vitality.

However, there is still a gap between the implementation effect of the preferential fiscal policy and the
expected goal. The development of small and medium-sized enterprises has made remarkable achievements,
but the overall innovation competitiveness is not strong. From the data published in the China Science and
Technology Statistical Yearbook, the innovation investment of smaller enterprises has grown faster but
fluctuated more during the past decade or so, and the growth rate of government funds received is lower than
that of large enterprises. In order to further improve the precision of fiscal and tax policies and promote the
synergistic evolution of fiscal and tax policies and technology-based SMEs. Therefore, it is necessary to
enhance the importance of fiscal and tax policies as a basis to steadily improve the overall innovation
performance of enterprises and lay a solid foundation for their subsequent stable development. Based on this,
this paper will sort out the current situation of the application of fiscal and tax policies for technology-based
SMEs in China, make a general evaluation of the fiscal and taxation system for promoting enterprise
innovation in China and put forward suggestions for improvement.

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2. BASIC OVERVIEW OF FISCAL AND TAX POLICIES

2.1 Fiscal and tax policies

Fiscal and tax policies are the sum total of fiscal measures taken to adopt certain fiscal theories and use various
fiscal tools to achieve certain fiscal goals. Fiscal and tax policies include various aspects such as national
income distribution policy, fiscal investment policy, fiscal subsidy policy, taxation policy, and national debt
policy (Liu, 2006). Among the public policy instruments commonly used to stimulate innovation in SMEs are
financial subsidies and tax incentives.

For the formulation of specific enterprises and enterprise-specific projects that meet the relevant conditions,
the government's exclusive and directional direct financial subsidies to enterprises are called financial
subsidies (Wang,2013).Financial subsidies are a kind of ex ante incentives developed by government
departments to guide the development of enterprises as the economy and society continue to develop to serve a
specific economic purpose. The formulation and implementation of financial subsidies are done by the
government, so they are highly controllable and time-sensitive, but may not be transparent enough(Jia and
Wang,2019).

Tax incentives are measures adopted by the state to reduce the overall tax burden for some special
enterprises and objects through the application of tax policies, which mainly involve tax exemptions, tax
deductions and accelerated depreciation. The main purpose of tax incentives is to better meet the political and
economic development goals of the country within a certain period of time, which is the main measure for
macroeconomic regulation. According to the specific way to reduce the tax burden, tax incentives can be
divided into tax base preferences, tax preferences, tax rate preferences and other content. Tax preference is a
kind of ex post incentive for enterprises, which can effectively reduce the tax burden of enterprises and thus
reduce the operating cost of enterprises by reducing taxation(Zhang,2014).

2.2 Theories related to fiscal and tax policies

2.2.1 Market failure theory

From the perspective of economic and social practice, a perfectly competitive market is the best way to allocate
resources, but such a perfectly competitive market does not exist in real life. Due to the high uncertainty of
production activities in the actual process, it is easy to produce market failure and other undesirable situations,
which makes it difficult to use the price mechanism to achieve the perfect optimization of resource
allocation(Samuelson,1954). At the same time, the innovation activities of technology-based SMEs follow a
similar mechanism in the process, and the technological innovation activities carried out by enterprises have
public goods properties in essence(Arrow, 1971). Therefore, it is necessary to analyze the market failures in the
innovation activities of enterprises in terms of public goods and externality characteristics. Public goods are
members of society goods that can be enjoyed in common, which makes them non-competitive and exclusive.
Non-competitiveness means that the consumption of a public good does not affect the supply of the good to
others, i.e., the marginal cost of providing the good to another consumer is zero at a given level of production.

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By non-excludability, it is meant that someone's consumption of a public good does not exclude others from
consuming this good, or the cost of exclusion is high(Samuelson,1954).

Since the technology used by technology-based SMEs in the R&D process has the attributes of public
goods, this will lead to the enterprises themselves not enjoying all the R&D benefits, and the frequency of their
R&D activities will gradually decrease; the situation of free-ridership will also arise in technological
innovation, which makes the motivation of technology-based SMEs to start technological innovation gradually
decrease. Therefore, government departments should formulate a more perfect tax incentive policy for the
development of innovation activities, so as to compensate for the internal losses and stimulate the innovation
motivation of enterprises(Tassey,2004).

2.2.2 Government intervention theory

In the light of the actual situation of market economy, most of the government departments will use more
flexible economic measures to intervene in the market. In the theory of government intervention, it is believed
that the market must give full play to its fundamental role in the allocation of resources, but the situation of
market failure has a high prevalence. In this case, the appropriate intervention of government departments can
help the market effectively return to normal(Neary,1998).

The power of the government can help the stable development of the market economy, but the government
must follow the basic principle of not interfering excessively in the actual process of market intervention, only
then can promote the stable development of the economy(Stiglitz,1988).

3. ISSUES IN THE APPLICATION OF FISCAL AND TAX POLICIES OF
TECHNOLOGY-BASED SMES

3.1 Issues in the application of enterprise fiscal and tax policies

Fiscal and tax policies is mainly an act of government departments to directly or indirectly subsidize
technology-based SMEs through various ways such as financial subsidies, tax deductions and R&D expense
accrual deductions. From the actual situation, China's fiscal and tax policies for technology-based SMEs are
less involved at the national legal level, and most of them are implemented by means of administrative
documents such as notices or regulations, which lack continuity and stability overall. In terms of the way of
preferences, most of them are direct preferences as the main content. In terms of policy design, the tax benefits
for technology-based SMEs in China are mainly concentrated in output and R&D, but not in the front end of
innovation, i.e. innovation preparation(Liu,2019).

3.1.1 Fiscal subsidies

Fiscal subsidies are more certain and immediate than tax incentives, which can directly reduce the investment
cost of enterprises and have the most obvious effect. Financial subsidies can visually reflect the national
strategy and can play the role of guiding the inflow of social capital and leading the direction of investment.
China currently has six special funds or fund situations established to support innovation. These funds serve
various aspects of innovation, with capital scales ranging from several hundred million to tens of billions of

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yuan, involving various aspects such as optimizing the environment for SME development, granting various
subsidies to SMEs, and supporting SMEs to go global. The largest fund is the National SME Development
Fund, and the special funds for supporting technological innovation activities of technology-based SMEs are
the Technology Innovation Fund for technology-based SMEs and the Guidance Fund for Venture Capital of
technology-based SMEs(Li,2021).

3.1.2 Value added tax (VAT)

For technology-based SMEs, the transfer tax that is closely related to their internal innovation activities is
mainly reflected in the enterprise VAT. The state hopes to promote the stable development of enterprises and
prevent the problem of double taxation due to industrial division of labor by reducing the tax burden, etc(Hu,
2014). From an overall perspective, the VAT preferential policies involved are mainly reflected in the
following aspects of work. The first one is the procurement of scientific research equipment, in which the
equipment to be purchased is mainly those used in scientific and technological development and scientific
research, so that they can better enjoy various types of preferences such as VAT on import links. Secondly, for
the transformation of various scientific and technological achievements, for technology transfer and
technology development and other related technical services, they are exempt from VAT. The third is the VAT
concessions for specific industries, such as those for self-developed computer software products, which should
be provided with a refund of the final VAT credit.

3.1.3 Income Tax

Income tax can be divided into corporate income tax and individual income tax in detail. For corporate income
tax, the tax rate is 25%, but those qualified small and medium-sized enterprises can be taxed at 20% after
approval. The following provisions further reflect the incentives for innovation activities of technology-based
SMEs. First, for those enterprises with core independent intellectual property rights, and meet the basic
requirements of high-tech conditions, these enterprises can be taxed at a rate of 15%; secondly, the proportion
of pre-tax deduction of research and development expenses for technology-based SMEs should be increased
from 50% to 75%; finally, the accelerated depreciation of fixed assets, and technology transfer income tax
Finally, there are various preferential policies such as accelerated depreciation of fixed assets and technology
transfer income tax exemptions(Chen and Jiang,2021).

In terms of personal income tax, the main incentives for researchers to engage in scientific and
technological entrepreneurship, strengthen innovation and entrepreneurship education for college students, and
actively absorb and gather innovation factors are through taxable income reduction and additional
deduction(Chen,2021).

3.2 Challenges in the application of fiscal and tax policies

3.2.1 There are relatively few incentive policies in the early stage of technology-based SMEs

The overall development stages of technology-based SMEs can be divided into seed stage, start-up stage,
growth stage, stabilization stage and the final decline stage(MasonHaire,1959). At present, most of the tax
incentives introduced in China are in the growth and stabilization stages of technology-based SMEs. These

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preferential methods mainly focus on tax exemptions and investment tax credits, which can be applied only if
the enterprise has a certain amount of capital reserves. However, in the development process of
technology-based SMEs, the seed stage and the start-up stage play a very important role, and this stage is
precisely the stage that needs to focus on solving the capital problem. The demand for equipment, personnel
and capital is relatively high in the early development stage of technology-based SMEs, and the scale of these
enterprises at this stage of development is relatively small and the internal financing channels used are
relatively difficult, which requires the state to further improve the financing support for enterprises, so as to
steadily reduce the risks incurred by financial institutions and actively encourage those financial institutions to
provide loans and financing services for those technology-based SMEs. Provide loans and financing services.
The start-up period of enterprises is a very important period for technology-based SMEs, and government
departments must gradually strengthen technical support and financial support for technology-based SMEs in
the start-up period(Liu,2019).

3.2.2 Low financial and taxation policy incentives

From the perspective of financial subsidy policy, financial subsidies can be subdivided into central direct
subsidies and central transfer payments through local government subsidies. Generally speaking, there are high
entry criteria to enjoy central direct subsidies, and the funds are biased to basic research, which has long
investment cycle, very uncertain prospect and poor liquidity, which is a big challenge for innovation of SMEs,
and very few SMEs can enjoy such incentives.

From the perspective of tax incentives, the tax incentives for R&D investment occupy most of the content,
but the tax incentives for promoting financing are relatively small. But the financing ability belongs to the main
factors to promote the development of enterprises, once the enterprise's internal capital chain is restricted,
coupled with its own financing ability is relatively weak, which will lead to problems in the development
process, which requires the necessary tax preferential policies specifically for the financing of
technology-based SMEs. At the same time, although there are some policies related to supporting enterprise
financing, the overall tax incentives are relatively low, which is difficult to achieve the main purpose of
stimulating innovation activities of technology-based SMEs（Cheng,2021).

4. MEASURES TO IMPROVE THE INNOVATION PERFORMANCE

4.1 Clarify the specific formulation dimensions of fiscal policies

4.1.1 Highlight the needs of enterprises

At present, the fiscal policies implemented by the state lack relevance and are mostly some universal policies,
which requires innovation in the decision-making process of fiscal policy formulation, carrying out a policy
formulation approach that takes the realistic problems of enterprises as the basic orientation, and improving
and optimizing the formulation of fiscal policies through various ways such as public participation(Feng,2010).
In the process of actual work, policy-making departments should be more proactive in carrying out
corresponding research activities, so that they can obtain information on the basic policy needs of enterprises,

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especially in terms of fiscal and tax policies, so as to formulate more accurate support policies by means of
grading and classification. By providing the necessary preferential support policies for those technology-based
SMEs engaged in technology research and development, the knowledge absorption capacity of
technology-based SMEs can be steadily improved, and the formation of subsequent innovation results can be
well promoted. At the same time, government departments should also take into full consideration the joint
working relationship between technology-based SMEs and other financial service institutions to further
develop more scientific and reasonable policy content. For example, commercial banks should be guided to
proactively develop diversified financial products to meet the basic needs of enterprises in terms of
financing(Zhu and Xu,2003). As for those specific policy banks, their financing activities for technology
SMEs should be appropriately relaxed in terms of policies, so that the basic needs of the innovation R&D
capital chain can be met.

4.1.2 Highlight cutting-edge science and technology

Fiscal and tax policies can play a significant role in "reducing costs and increasing efficiency" for
technology-based SMEs and enhance the enthusiasm of enterprises for innovation. Many countries have
enacted fiscal policies with cutting-edge technology to guide technology-based SMEs to actively innovate on
their own.

There are two types of tax incentives, namely tax rate incentives and tax-based incentives, which have
different effects. For example, the U.S. provides that 65% of the cost of performing basic research entrusted to
universities or other research institutions can be deducted from the corporate income tax. This tax-based
preferential policy enables enterprises to actively combine basic research with applied research, thus creating
great social value(Xu,2014). Most of the tax incentives currently adopted in China are formulated for the
results of innovation, and the support for the ontology of research activities and the research process is
relatively low, which will lead to a significant reduction in the innovation motivation of technology-based
SMEs(Feng,2010). Therefore, when formulating fiscal policies, policy makers at all levels should adopt more
tax-based preferential models, such as pre-tax deduction for investment in research and experimental
equipment, in order to better reflect the support provided by government departments for enterprises' various
innovative behaviors, so as to improve the incentive of enterprises' innovation.

4.2 Optimize the implementation dimension of fiscal and tax policies

First of all, the publicity and study of accounting should be strengthened within the enterprise. In the process of
policy application, if there is an inconsistency in the collection caliber of R&D add-on deduction, or tax
deduction, it will easily lead to confusion among enterprises. Because of the complex requirements of this part
of the policy for the collection of R&D expenses, and different types of technology-based SMEs, there are
significant differences in the collection of accounting caliber, which will lead to various problems. At the same
time, the major accounting personnel in technology-based SMEs are not the same in professional ability and
comprehensive quality, and most technology-based SMEs also ignore the training of accounting personnel,
which will make the enterprise accounting personnel in the face of those more complex R & D deduction
policy, can not smoothly carry out the relevant work, thus affecting the specific implementation of the policy

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effect(Hao, LAN and Wang,2016). Therefore, government departments in the actual process of
technology-based small and medium-sized enterprises to apply for additional deduction policy, to further
clarify the specific circumstances of the accounting department, and actively dispatch the corresponding
learning manual to carry out organizational teaching, to ensure that enterprises can be more accurate
accounting for R & D costs.

Second, a more professional audit and collaboration mechanism should be established. Those enterprises
that can enjoy the preferential tax policies can apply for the preferential qualifications through self-evaluation,
and then they can fully enjoy the policy support after being approved. However, the number of enterprises
applying each year is relatively large, which puts higher requirements on the standardization and stability of the
approval system(Liu,2019). Therefore, in order to improve the overall application efficiency, the government
department should build a cooperative mechanism of the review and approval departments to prevent the
internal situation of shirking responsibilities, and to ensure the better operation of the subsequent policy
applications on the basis of simplified application procedures.

5. CONCLUSION

To sum up, in today's economic development process, fiscal and tax policies has become the key to give full
play to the macro-control ability of the state, and it also plays a very important role in promoting the
implementation of innovation strategy. Therefore, in the development process of technology-based SMEs, it is
necessary to pay more attention to the fiscal and tax policies and steadily improve the innovation performance
of enterprises through the fiscal and tax policies.

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Chen Li, Jiang Yanqiu,(2021). Financial and tax policies, financing constraints and innovation performance--an empirical
study based on technology-based SMEs. Journal of Chongqing University of Technology (Social
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Cheng Xiaoke, Sun Qian and Gao Shenghao,(2021). Relationship tax preference and the effectiveness of tax policy: hidden
tax perspective. Accounting Research,1(06):103-119.

Chen Yunsen, Meng Qingyu and Yuan Chun,(2018). Discussion on the Characteristics of High-tech Industry and Fiscal
and Tax Support Policies. China Soft Science,1(02):41-47.

He Tao and Chen Xiaoxue,(2013). Individual income tax incentive and enterprise innovation. Science and Technology
Management Research,(11):10-13.

Li Qiong and Wang Dehua,(2021). Fiscal and tax policies to support the innovation of micro, small and medium-sized
enterprises: current situation, experience and enlightenment.Research on financial and economic issues,1(02):1-14.

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Li Xiangju and Wang Yang,(2021). Improve the tax policy research to encourage enterprises' scientific and technological
innovation in China.Tax Research,(07):39-43

Liu Xinyu,(2019). Research on the impact of tax incentives on innovation performance of technology-based SMEs: a

knowledge absorption perspective (Master's dissertation,Harbin Engineering

University).https://kns.cnki.net/KCMS/detail/detail.aspx?dbname=CMFD202101&filename=1020159157.nh

Liu Xiaochen,(2018). Research on the impact of new fiscal policy on the performance of technology-based small and
medium-sized enterprises and its counter measures--Changzhou City as an example. Journal of Economic
Research,1(29):123-124.

Tian Shengwang,(2021). Research on the impact of financial and tax policies on the innovation performance of private
technology-based enterprises in China(Master's dissertation,University of Science and Technology of
Suzhou.).https://kns.cnki.net/KCMS/detail/detail.aspx?dbname=CMFDTEMP&filename=1021851245.nh

Yue Yujun and Hu Hanhui, (2018). Game Model and Benefit Coordination Analysis of Supporting Policy Change.
Economics and Management Research, (02), 96-107.

Zeng Lulu,(2022). Suggestions for promoting high-quality development oftechnology-based SMEs in the post-epidemic
era . Science and Technology Innovation and Productivity,1(10):18-21.

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CM016

THE EFFECT OF ORGANIZATIONAL COMMITMENT AS
MEDIATOR ON RELATIONSHIP BETWEEN TRAINING

AND WORK PERFORMANCE AT COMMUNITY
HEALTH CENTERS MIDWIVES IN
BANYUMAS REGENCY CENTRAL
JAVA INDONESIA

Suyoto1, Ahmad ZA2, Hariyaty3, Hengky W4, Darmawan5

1University of Muhammadiyah Purwokerto, Indonesia
Email: [email protected] ; [email protected]
2Sultan Idris Education University, Tanjong Malim, Malaysia

Email: [email protected]
3Sultan Idris Education University, Tanjong Malim, Malaysia

Email; [email protected]
4University of Muhammadiyah Purwokerto, Indonesia

Email: [email protected]
5University of Muhammadiyah Purwokerto, Indonesia

Email: [email protected]

ABSTRACT

This study aims to identity the effect of organizational commitment as mediator onrelationship between training and work
performance at Community Health Centers midwives in Banyumas Regency, Central Java, Indonesia. A quantitative
research design was selected to answer four research questions and four hypothesis. Data collection using a questionnaire
with a five-point Likert scale. This study involved 243 midwives of Puskesmas in Banyumas Regency as sample using a
systematic random sampling method to calculate the samples size of Puskesmas. After that, proportional random sampling
was used to determine the sample size of Puskesmas midwives. Data analysis used Structural Equation Modeling method.
The findings of the study show that based on the Measurement Model test, the Loading Factor value from all dimensions
of the research construct is greater than 0.5. It means that they can be explained by each dimension of it. The results of the
Structural Model exams show the good result of absolute fit indices, incremental fit indices and parsimonious fit indices
values, which means that the measurement model and Structural Model used built fit. The results of the study show that the
construct reliability value of all study constructs is above 0.7. Estimate Regression Weight value between training and work
performance (β1) is 0.614 (Pvalue 0.000), between training and organizational commitment (β2) 0.498 (Pvalue 0.000) and
between organizational commitment and work performance (β3) 0.424 (Pvalue 0.000). Therefore, it is concluded that the
training has a significant positive effect on the work performance, training has a significant positive effect on the
organizational commitment, organizational commitment has a significant positif effect on the work performance and
organizational commitment as moderator the relationship between training and work performance. This research is so
crucial that midwives of Puskesmas can provide the best performance in providing health services, especially for mothers
and babies.
Keyword: Organizational Commitment, Training, Performance, Community Health Centers, Midwives

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CM017

THE INFLUENCE OF OWNERSHIP STRUCTURE, TAX
AMNESTY, BOARD COMPOSITION AND CORPORATE
GOVERNANCE TOWARD TAX AVOIDANCE IN INDONESIA

Ani Kusbandiyah

Lecturer at Faculty of Economics and Business, Universitas Muhammadiyah Purwokerto,
Indonesia

Email: [email protected]

Norlia Mat Norwani

Faculty of Business and Economics, Universiti Pendidikan Sultan Idris, Malaysia

Mohd. Abdullah Jusoh

Universiti Pertahanan Nasional Malaysia

ABSTRACT

This study aims to determine the effect of foreign ownership, family ownership, tax amnesty, board composition and
corporate governance on tax avoidance. Tax avoidance is measured using ETR, CETR, and BTD. The research data are
companies in Indonesia that are included in the IICD CG score index assessment in 2012-2017. The number of sample
companies that met the sampling criteria based on the purposive sampling method amounted to 28 companies, with the
study period in 2012-2017, so the number of research data was 168. Data analysis used panel data regression. Based on the
results of model testing for the three equations, the results for the first model used the Random Effect Model, the second
and third models used the Fixed Effect Model. The results show that foreign ownership has a significant positive effect on
tax avoidance using CETR and BTD but no positive effect using ETR. Family ownership has a significant negative effect
on tax avoidance using CETR, but does not have a significant negative effect using ETR and BTD. Corporate governance
has a significant negative effect on tax avoidance using ETR and CETR but has no effect on tax avoidance using BTD. Tax
amnesty has a significant positive effect on tax avoidance using ETR and CETR and no positive effect on tax avoidance
using BTD. Board composition has a significant negative effect on tax avoidance using ETR, CETR, and BTD. The results
of this study provide information about the pattern of tax avoidance, using three measurements of tax avoidance, and a
more precise measurement of tax avoidance using BTD. This study implies that companies can reduce tax avoidance by
improving corporate governance. The implementation of the tax amnesty must be clear in its implementation technique.
For the Directorate General of Taxes (DGT) this research finding provide material to determine the right tax policy,
especially for large companies related to tax avoidance patterns and to determine the concept of tax audits to improve
taxpayer compliance. This research is useful as a scientific enrichment in the field of taxation, especially the application of
the Accounting Standards Guidelines (PSAK 46) on income tax.

Keywords: ETR, CETR, BTD, Foreign and Family ownership, CG-score index, Tax amnesty, Board composition

1.INTRODUCTION

Tax is considered as one of the potential state revenues. Based on the data obtained from the website of the
Ministry of Finance in 2016, the state revenue from the tax sector has reached 74.6%, non-tax state revenue by
15%, receipts from custom and excise by 10.2%, and grants revenue by 0.1% (Kusbandiyah et al., 2020; 2021;

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Kusbandiyah & Mat Norwani, 2018). The dominant tax revenue has resulted in government which tries to
optimize the revenue by revising the taxation laws and creating a tax amnesty program for all taxpayers who
have not reported their entire wealth nor fulfilled their tax obligations. However, the government's efforts have
not been maximally achieved due to the tax avoidance practices made by the taxpayers. The tax system adheres
to a self-assessment system in tax regulations. (Wibisono, 2013). The self-assessment system provides an

opportunity for taxpayers to avoid tax. Diamastuti (2012); Wibisono (2013); Salendu (2017). The low level of
tax compliance in Indonesia is one indication of the practice of tax avoidance, evidenced by the declining tax
ratio in 2012-2017. Indonesia's tax ratio which is still low below ASEAN countries, and is ranked 8th out of 9
ASEAN countries, as in table 1:

Country 2012 Table 1 Tax Ratio ASEAN in 2012-2017
2013 2014 2015 2016 2017
Vietnam 19.00
Thailand 18.05 19.01 18.02 18.00 17.09 18.07
Filipina 15.08 19.03 18.04 18.09 18.01 17.06
Kamboja 11.03 16.02 16.07 17.00 17.00 17.05
Singapura 13.06 12.09 15.05 15.06 15.08 16.09
Malaysia 16.01 13.03 13.04 13.01 13.01 14.01
Laos 15.05 15.08 15.03 14.08 14.02 13.06
Indonesia 12.05 15.08 13.09 13.01 12.04 12.03
Myanmar 03.09 12.05 12.02 12.01 12.00 11.05
06.03 07.03 07.08 07.05 07.08
Source: www.kemenkeu.go.id (2019)

As a follow-up, the government has implemented a tax amnesty, to increase state revenue. Based on DGT's

statistical data as of March 31, 2017, the following results (Table 2) were obtained from the tax amnesty

program. From the tax amnesty revenue data, it is suspected that there has been tax avoidance in companies

listed on IDX. This study combines the tests conducted by Chen et al. (2010), with several hypotheses tested

by Desai and Dharmapala (2006) and Gregorio Sánchez-Marín (2016). With the completeness of the literature

as a reference, the new things contained in this study are: (1) Testing the level of Aggressive Tax Avoidance

of public companies in Indonesia which are grouped into ownership characteristics, namely family ownership

and foreign ownership (2) Testing the interaction between board composition and Aggressive Tax Avoidance

adppvldieuda ttoa opwayneersshoip ostruScturse (famiTlyabpolew92n.Reretsshuilptooafn(Td7a9fx%oAr)emignnesotywRneecresihpitps).

Individual taxpayers of SMEs Rp 7.81 trillion (6,8%)

Corporate SMEs p 69 b o ( , %)

Co po ate o S s p .7 t o ( ,8%)

2. LITERATURE REVIEW AND RESEARCH HYPOTHESES

Agency Theory

Hendriksen and Van Breda (2000) explained that agency theory, or principal theory is a theory that explains
the relationship between principals and agents. In agency theory, the agent does his job for the principal, and
the principal gives rewards to the agent. This agency theory is used as a whole theory in this study because the
level of tax payments made by companies can be influenced by agency problems. Agency problems arise due

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to conflicts of interest between the principal as the owner, agent (management) and shareholders of the
company because the interests of the owner and agent or shareholders do not always agree. If the owner wants
a large number of funds in his company and the company has a large profit, then the manager wants a large
profit for minimal company expenses. Whereas shareholders are usually only interested in large returns on
shares invested in the company. The manager will try to make the company's profit look bigger so that the
manager's performance in front of the shareholders is good. Thus, the compensation received will increase.

Foreign Ownership and Tax Avoidance

The agency relationship arises when the owner, as the principal, appoints management, who then works as the
company's agent, according to Anthony and Govindarajan (2009). The principal invests a particular amount of
money and establishes a governance system to optimize its value. The Management takes this opportunity as
way to channel their interest. The resulting difference in interests gives way to the agency problem. When
foreign investors happen to control a large portion of the company’s shares, they will automatically get more
power in determining the company’s policy. Therefore, if the majority of the company’s shares are owned by
foreign investors, there will be a high tendency for the company to minimize the tax obligation (Kusbandiyah
& Mat Norwani, 2018). Huizinga and Nicodeme (2006) discovered that companies with higher levels of foreign
ownership had higher tax rates. Egger, Eggert, and Winner (2010) and Demirguc- Kunt and Huizinga (2001)
discovered that the level of tax avoidance is higher in companies dominated by foreign investors. According to
Sung et al. (2016), multinational corporations (MNCs) with overseas subsidiaries are more likely to engage in
tax avoidance. The same research by Ibrahim et al. (2015) found that the more shares foreign investors own in
a company, the more likely it will be for the company to avoid taxes. So, the hypothesis regarding this aspect
is: H1: Foreign ownership positively influences tax avoidance.

Family Ownership and Tax Avoidance

In agency theory, the principal-manager relationship can cause an agency conflict between them, each of which
is egocentric (Armstrong, Blouin, & Lecker, 2012). Conflict can occur between majority and minority
shareholders. (Jusoh et al., 2014). Characteristics of family ownership that has “tighter control” so that it can
regulate the alignment of the interests of principals and agents, as well as better management control than
public ownership, including in determining tax policies. Companies owned by families are still considering the
advantages and disadvantages that can be obtained from tax avoidance because the impact will be felt more by
the family as the owner, rather than the manager ((Kusbandiyah et al., 2020; 2021; Kusbandiyah & Mat
Norwani, 2018). Families are less opportunistic and prefer to avoid risky activities such as tax evasion
(Steijvers & Niskanen, 2014). Because family ownership has wealth ties with the company, large ownership,
longer investment period, and more attention to company reputation (Suzan et al. (2013); Steijvers and
Niskanen (2014); Brune et al. (2019); Astuti et al. (2013) (2019); and Zuriadah et al. (2019). They will choose
to comply with taxes, because paying taxes is considered an important means for companies to fulfill their
responsibilities, and any action that leads to tax avoidance is considered socially irresponsible. Chen et al.
(2010); Rego and Wilson (2012) stated that the family company tends to avoid fines as well as damage to the
family reputation due to IRS checks, as compared to non-family companies. Astuti et al. (2019) use panel data
from the annual reports of manufacturing companies listed on the Indonesia Stock Exchange from 2011 to
2017 to examine the effect of family ownership on aggressive tax avoidance in Indonesia. They discovered
that family ownership structure has a negative effect on (reducing) aggressive tax avoidance, so the hypothesis
in this aspect is:
H2: Family ownership negatively influences tax avoidance.

Corporate Governance and Taxation

With good corporate governance, companies will carry out tax avoidance strategies aimed at the interests of
owners. This is in accordance with agency theory which states that the separation of functions between owners
and managers can lead to conflicts of interest, and good corporate governance is one way to reduce the conflict

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((Kusbandiyah et al., 2020; 2021). Desai and Dharmapala, using company 1993-2001 data in the S&P-
coompustate data-base, conducted research that found corporate governance has a negative influence on the
relationship between managers’ compensation and tax avoidance. Pratiwi, (2015) found evidence that GCG,
as measured by the Corporate Governance Perception Index (CGPI), has a significant negative effect on tax
aggressiveness. This is then strengthened by Schon’s research (2018) with the conclusion that governments
combat tax evasion through corporate governance. The hypothesis in this aspect is:

H3: Corporate governance negatively influences tax avoidance.

Tax Amnesty and Tax Avoidance

Tax amnesty is applied following the idea of legitimacy related to taxpayer compliance. With the issuance of
this policy, it is expected that taxpayers can follow the policy and increase taxpayer compliance which will
later help the government build a state for the welfare of the community, together with shareholders and
managers tasked with implementing it (Desai & Dharmapala, 2009; 2006). Tax amnesty is one of the
government's initiatives to combat tax evasion (Bayer et al., 2014). According to Rusmadi (2017), the existence
of Tax Amnesty raised tax revenues by 298.7 trillion in 2016 over 2015, bringing total tax revenues to 1,539.1
trillion in 2016. This implies that tax amnesty and tax sanctions have a beneficial impact on taxpayer
compliance in Indonesia. Tax amnesty, according to Rusmadi (2017) and Rahayu (2017), has a significant
positive influence on taxpayer compliance. The hypothesis in this aspect is:
Ha4: Tax amnesty has a negative significant influence on tax avoidance among public companies in
Indonesia.

Board Composition and Tax Avoidance

According to agency theory, there is information asymmetry between managers and shareholders because
managers know more about internal company conditions than shareholders. Managers have more motivation
to fulfill their own interests as well as shareholders who have an interest in increasing their prosperity. This
causes a conflict of interest. As a result of this incident, agency costs arise. Non-executive directors, according
to agency theory, can play an important role in monitoring management performance. A higher proportion of
independent non-executive directors results in better monitoring of board activities and limits managerial
opportunism (Fama, 1980; Fama & Jensen, 1983). As a result, more independent directors are expected to
improve the company’s performance. This finding emphasizes the importance of non-executive directors. Chen
et al. (2006) and Lo et al. (2010) explained that more independent directors lead to less fraudulent activity and
abuse of scarce resources. Pratiwi, (2015) found evidence that GCG, as measured by the Corporate Governance
Perception Index (CGPI), has a significant negative effect on tax aggressiveness. This is then strengthened by
Schon’s research (2018) with the conclusion that governments combat tax evasion through corporate
governance. The hypothesis in this aspect is:
H5: Board composition measured by the proportion of outside directors on the board negatively
influences tax avoidance.

3. RESEARCH

METHODOLOGY Sample Profile

The study's population consists of all businesses listed on the Indonesia stock exchange between 2012 - 2017,
as well as the top 100 corporations with a CG scorecard from the Indonesian Institute for Corporate

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Directorship. The process of selecting a sample uses the purposive sampling method in order to produce a
representative sample that meets stated criteria. The number of sample companies that met the sampling criteria
based on the purposive sampling method amounted to 28 companies, with the study period in 2012-2017. Thus,
the number of research data was 168. The data will be analyzed using Panel data regression model.

Panel Data Regression Model

The ordinary least squares (OLS) estimation method with a panel data structure is used for models that test
direct effects. To test the indirect effect, the two least squares method is used with a panel data structure. There
are three statistical models that can be used to estimate model parameters with panel data, namely common
effect, fixed effect, and random effect (Dismuke & Lindrooth, 2006). The use of this data analysis method is
because the research data is panel data, which is a combination of time series data with cross sections. To select
the appropriate model, three tests are needed as follows: Chow test, Breusch Pagan-LM test and Hausman test
(Hicks & Tingley, 2011).

4. FINDINGS

Table 3: Descriptive Statistics

Measurement of tax avoidance using the ETR, CETR and BTD proxies does not show tax avoidance.
Based on the findings in table 3, the average ETR value of 23.03 and CETR of 23.28 which exceed the
applicable tax rate, indicate that the company does not take tax avoidance. Measurement of tax avoidance using
BTD has a value of -0.022. This means that the average fiscal profit (tax-based) is greater than the commercial
profit (accounting-based). Foreign ownership has a maximum value of 96.92% and the lowest value of 0.16%.
The average value of foreign ownership is 36.46%, which means foreign ownership of shares in companies
included in the CG score index by IICD is an average of 36.46% of all outstanding shares. Family ownership
has a maximum value of 83%, and the lowest value of 2.21% The average value of family ownership is 32.46%,
which means that family ownership of shares in companies included in the CG score index by IICD is 32.46%
of all outstanding shares.

The CG score index is an average result of corporate governance performance for companies in
Indonesia which is observed based on the largest market capitalization value in 2012 - 2017 by the Indonesian
Institute for Corporate Directorship (IICD). Referring to Martani and Sari's study (2010) that classify the CG
score index category as good and poorly govern, based on the average score-card index per year, companies
classified as good govern (52.4%) tend not to take tax avoidance compared to companies classified as poorly
govern (47.6%). Board-com has a maximum value of 36.36% and the lowest value of 0%. Board-com score is

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13.28%,which means the percentage of independent directors of all board directors of companies included in
the CG score index by the IICD is an average of 13.28%. ROA is a control variable, has a maximum value of
57.71% and the lowest value of 0.14%. The average value of ROA is 10.82% The greater the value of ROA
shows the value of the company's net profit is greater and profitability is higher. DER is a control variable, has
a maximum value of 1819.24% and the lowest value of -251.68% The average value of leverage measured
from DER shows the average level of funding of companies included in the CG score index by IICD funded
by Long-term debt of 344.64% of the company's total assets. Whereas the smaller value of DER shows that
many of the company's funding sources come from the company's owner's capital.

Panel Data Regression Model Analysis

Based on the results of model testing for the three equations, the results for the first model used the Random
Effect Model, the second and third models used the Fixed Effect Model. Following are the regression results
with panel data for the three models.

Model 1

Model 2

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The summary of the panel data regression results is in the table 4.

Table 4: Multiple Regression Result

Information ETR (Y) CETR (Y) BTD (Y)

Coefficien Prob t- Conclus Coeffici Prob t- Coefficie Prob t- Conclusio
nt Stat n
t Stat ion ent Stat Conclusion

const 17.069 16,9497 0,0282239

Foreign Ownership -0,155387 0.799 Reject -0.213630 0.063 Failed to 0.000345 0.011 Reject Ha1
(X1) Ha1 reject H1

Family Ownership 0.303286 0.657 Reject 0.573563 0.027 Failed to 0.000166 0.751 Reject Ha2
(X2) Ha2 reject Ha2

0.063920 0.013 Failed to 0.1410245 0.008 Failed to 0.000343 0.142 Reject Ha3

CGScore (X3) Reject reject Ha3
Ha3

Tas Amnesty (X4) -0.901656 0.032 Reject -0.058986 0.074 Reject Ha4 0.002110 0.679 Reject Ha4
Ha4

Board Company (X5) 0.215867 0.095 Failed to 0.715285 0.022 Failed to reject Ha5 -.001610 0.021 Failed to
Reject reject Ha5
Ha5

ROA 0.019114 0.759 0.2325887 0.017 0.003336 0.067

DER 0.001214 0.647 0.0001628 0.956 6.900006 0.024

The following multiple regression equation:
ETR = 17,069 – 0,155387Foreignit + 0.303286Familyit + 0.063920CGSCOREit – 0,901656TAit + 0.215867Boardcomit +
0.019114ROAit + 0.001214DERit + Ɛi
CETR = 16,9497 - 0.213630Foreignit + 0.573563Familyit + 0.1410245CGSCOREit – 0.058986TAit + 0.715285Boardcomit
+ 0.2325887ROAit + 0.0001628DERit + Ɛi
BTD = 0,0282239 + 0.000345Foreignit - 0.000166Familyit + 0.000343CGSCOREit + 0.002110TAit - 0.001610Boardcomit
- 0.003336ROAit + 6.900006DERit + Ɛi

The Effect of Foreign Ownership on Tax Avoidance

Based on table 4, foreign ownership has no significant positive effect on tax avoidance with the ETR proxy,
(Reject Ha1); has a significant positive effect on tax avoidance with CETR and BTD proxy, (Failed to reject
H1). The results of this study are consistent with the research by Ibrahim et al. (2015) and Sung et al. (2016)
which concluded that foreign ownership has a significant positive effect on tax avoidance. In contrast (Salihu
et al., 2015) concluded that there is a negative effect of foreign ownership on tax evasion

The Effect of Family Ownership on Tax Avoidance

Based on table 4, family ownership variable has no significant negative effect on tax avoidance with the ETR
proxy (Reject Ha2); has a significant negative effect on tax avoidance with the CETR proxy, (Failed to reject
Ha2); and has no significant negative effect on tax avoidance with the BTD proxy, (Reject Ha2). Overall, the
results concluded that family ownership enhances a company’s decision to comply with tax regulations. The
results are consistent with the study by Chen et al. (2010), Landry et al. (2013) and Brune et al. (2019) which
stated that family ownership had a significant effect on tax avoidance negatively. The findings of this study
contradict Oktavia and Hananto (2018), Utami and Setyawan (2015), Hindayati and Luksito (2013), Fatharani
(2012), and Sari and Martani (2010) state that family ownership has no significant effect on tax actions
aggressive.

The Effect of Corporate Governance on Tax Avoidance

Based on table 4, the CG-Score variable has a significant negative effect on tax avoidance with ETR and CETR
proxy, (Failed to Reject Ha3); but has no significant effect on tax avoidance with the BTD proxy, (Reject Ha3).

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The results of this study support research conducted by Keasey et al., (1997); Desai and Dharmapala (2006);
and Schon (2008) which stated that corporate governance regulations have become a tool for the authorities to
fight tax avoidance by companies, but contrary to the results of research (Syeldila & Niki 2015), which
concluded that corporate governance has no effect on tax avoidance.

The Effect of Tax Amnesty on Tax Avoidance

Based on table 4, the Tax Amnesty variable has a significant positive effect on tax avoidance with ETR and
CETR proxy, (Reject Ha4); but has no significant positive effect on tax avoidance with the BTD proxy (Reject
Ha4). The results of this study are in line with the research of M. R. Santoso (2020); Rusmadi (2017) and
Rahayu (2017), which showed that tax amnesty has a significant positive effect on taxpayer compliance. Bayer
et al. (2014) also concluded that tax amnesty has a significant positive effect on American corporate tax
compliance, but contradict those of Rinaldi (2017) and Jackson (2017), who discovered that tax amnesty has a
significant negative effect on tax avoidance.

The Effect of Board Composition on Tax Avoidance

Based on table 4, the board-comp variable has a significant negative effect on tax avoidance with ETR, CETR
and BTD proxy, (Failed to Reject Ha5). The findings of this study are consistent with previous research (Lanis
& Richardson, 2011; Minnick & Noga, 2010) which found that director independence has a negative
relationship with potential tax aggressiveness. In contrast to Bouslah et al. (2018), Firth et al., (2007); Sarkar
et al., (2008) showed that the presence of a more independent external director had a positive effect on tax
aggressiveness,

5. DISCUSSION

Overall, the results of the study indicate that there is a significant positive effect of foreign ownership on
tax evasion. This result is supported by the data that the average foreign ownership is 36.46%. It was consistent
with agency theory which states that the greater the proportion of shares owned by foreigners in the company,
the greater the influence in determining company policy, including in determining policies to minimize the tax
burden, thus the level of tax avoidance is high.

Family ownership has a significant negative effect on tax avoidance with the CETR proxy. Although
family ownership has no effect on tax avoidance using ETR and BTD proxies, the regression coefficient shows
a negative direction towards tax avoidance, so it can be concluded that high family ownership can increase a
company's decision to comply with tax regulations. These results are in accordance with the agency theory
which states that the majority shareholder has the ability to control the company. Thus, companies with
majority family ownership will be more likely to comply with tax regulations. Brune et al., (2019) and Zuriadah
et al., (2019) which stated that family ownership has wealth ties with the company, larger ownership, longer
investment period, and more attention to company reputation, then they will choose to comply with taxes,
because paying taxes is considered an important means for companies to fulfill their responsibilities, and any
action that leads to tax avoidance is considered socially irresponsible.

The CG-Score has a significant negative effect on tax avoidance with ETR and CETR proxy but has no
significant effect on tax avoidance with the BTD proxy. With good corporate governance, the company will
implement a tax avoidance strategy that is in the best interests of the owner, lowering the company's risk as a
result. These findings support agency theory, which explains the asymmetric relationship between owners and
managers. To avoid this asymmetry, the concept of good corporate governance is required, which aims to
reduce conflict.

Measurements using ETR, CETR and BTD show that tax amnesty has a significant positive effect on tax
avoidance, which can be explained by Signals theory. However, taxpayers who have complied with tax

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Universiti Pendidikan Sultan Idris

regulations will perceive this as a form of injustice (Ngadiman & Huslin, 2015). In this study, taxpayers
respond to the application of tax amnesty as a negative signal of amnesty. This also happened during the
implementation of the tax amnesty, where the company made a new strategy to avoid the company's tax burden,
namely by the company or the taxpayer making a tax plan.

Board-comp has a significant negative effect on tax avoidance with ETR, CETR and BTD proxies. The
study's finding that board composition has a negative impact on tax evasion is consistent with agency theory,
which describes the separation of corporate ownership rights and decision-making authority (Jensen &
Meckling, 1976). Managers in carrying out their duties have personal goals that conflict with the principal goal
of maximizing shareholder wealth. Conflicts caused by the separation of ownership and control of a company
are called agency conflicts. Non-executive directors, according to agency theory, can play an important role in
monitoring management performance. A higher proportion of independent non-executive directors results in
better oversight of board activities and limits managerial opportunism (Fama, 1980; Fama & Jensen, 1983).

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THE DETERMINANT FACTORS THAT EFFECT ISLAMIC AND
CONVENTIONAL BANKS STABILITY: EVIDENCE IN INDONESIA

Nunung Aini Rahmah

Faculty of Economic and Business, Universitas Jenderal Achmad Yani, Indonesia
E-mail: [email protected]

Mohd Abdullah Jusoh

Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, Malaysia

Norlia Mat Norwani

Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, Malaysia

ABSTRACT

There are differences in terms of financial intermediation between Islamic and conventional banks. Islamic financial
intermediation is asset based, meanwhile the conventional intermediation is debt based. The purpose of this research is
to examine the determinant factors that effect Islamic and conventional banks stability. Bank stability that measured by
z-score can be effected by bank specific, market condition, and the macroeconomic indicators. Pooled OLS regression
analysis is used to examine the determinants factors of Islamic and conventional banks stability. The main result of this
study are factors that have a significant effect on Islamic bank stability are only size and market, while the factors that
effect conventional banks stability are Capital Adequacy Ratio, Size, Cost to Income Ratio, Loan to Deposit Ratio, Net
Performing Loan, Market, and Inflation.

KEYWORDS: Bank Stability, Bank Specific, Market Condition, Macroeconomic Indicators

1. INTRODUCTION

In Indonesia, Islamic banks operate independently of conventional banks. Each
intermediary function was held by both Islamic and conventional banks. according to
regulation, conventional banks and Islamic banks are classified as full-fledged banks and
rural banks. rural banks are generally located near people in need, whereas full-fledged
banks can operate anywhere.

Differences in conventional banks' basic operations in carrying out their functions as
intermediary banks are generally based on debt and allow the transfer of risk, whereas
Islamic banks are based on assets (asset-based) and a focus on risk sharing (Hasan & Dridi,
2010), also known as a profit and loss sharing principle. Islamic law also prohibits Islamic
banking from engaging in speculative and uncertain transactions that could potentially
harm either party (Rokhim & Gamaginta, 2011).

The primary source of capital for both Islamic and conventional banks is either deposit
or investment accounts. Essentially, a conventional banking operational system based on
interest. Conventional banks accepted deposits or investments as bank liabilities, implying

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