available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 2 number 1 (2022): 63-67 corresponding author syarief fauzie, syarief_fauzie@usu.ac.id doi: 10.31098/jgrcs.v2i1.910 research synergy foundation the influence of efficiency on interest rate loan in indonesia banking in regards to the implementation of expected credit losses syarief fauzie1, wahyu sugeng imam soeparno1, wahyu ario pratomo1 1 fakultas ekonomi dan bisnis ,universitas sumatera utara, indonesia abstract the purpose of this study is to determine the effect of efficiency on loan interest rates at banks listed on the indonesia stock exchange and their impact before and after the implementation of expected credit losses in indonesia. the analysis method of this research uses panel data regression with a random effect model to see the effect of efficiency on loan interest rates. the sample of this study uses 22 banks listed on the indonesia stock exchange where the source of research data is from the bloomberg finance lab, diponegoro university. efficiency has more influence on loan interest rates before the implementation of expected credit losses than after the implementation. in determining loan interest rates, banks tend to prefer to use credit risk compared to efficiency by looking at the potential profit obtained from looking at the comparison of interbank loan interest rates. these results show that loan interest rates are not easily lowered as a consequence of monetary policy. the results of this study also show that expected credit loss can reduce loan interest rates so that banks are more likely to increase credit risk by increasing loan supply. keywords: efficiency; loan interest rate; expected credit losses this is an open access article under the cc–by-nc license introduction the implementation of international financial reporting standard (ifrs) 9 which began in early 2020 in indonesia has caused concern for the banking industry to increase the required loss reserve. this increase was due to a change in the basic estimation of the assessment in accounting from the incurred credit losses (icl) model to expected credit losses (ecl). this change requires the preparation of an estimated value of future loan losses since the loan was granted. ecl has an impact on bank efficiency through overhead costs in maintaining the profit it wants to achieve. therefore, banks need to offer competitive loan interest rates through reduced overhead costs in line with the increase in loan loss provisions since the implementation of ecl. as it is known that the determination of the loan interest rate consists of the cost of funds, overhead costs, profit margins, and risk premium estimates. therefore, banks with good efficiency are expected to reduce loan interest rates through the overhead cost component. shamshur and weill (2019) in their paper modeling the cost of credit as an efficiency function using the cost of credit data at the level of companies that get bank loans. this study uses data for 6 years from 2016 to 2019 which is the period that still uses the icl model and 2020 is the period of implementing ecl in indonesia. the results of the study show that efficiency has a positive effect on loan interest rates, but when adding ecl variables it gives different results where efficiency hurts loan interest rates. these results show that there is an opportunity for banks to earn income with a good level of efficiency so that low overhead costs will provide a potential difference in the margin between revenues and costs. these results also show that interest rates are more likely to be http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 63-67 the influence of efficiency on interest rate loan in indonesia banking in regards to the implementation of expected credit losses syarief fauzie, wahyu sugeng imam soeparno, wahyu ario pratomo issn 2776-9658 (online) 64 │ determined from market prices by looking at profit opportunities from low costs in setting interest rates. furthermore, when ecl is applied, banks are more likely to maintain profit by considering loan loss provisions. this paper is described in sections consisting of 1) introduction which explains the background of the research; 2) a literature review that explains the theory and previous research that is used as a reference; 3) research methods that discuss the sample and the analytical tools used; 4) finding and discussion explaining the results found from the analysis that has been done; 5) a conclusion that gives a conclusion from the findings and discussions that have been discussed previously; and limitations and further research which explains the limitations of research data and further research developed from this research. literature review there have been many studies that examine banking efficiency using either the stochastic frontier model or by using data envelopment analysis, but not many papers have been done to explore the impact of banking efficiency. some examples of papers to examine the effect of efficiency on other variables such as its effect on finance (berger and deyoung, 1997). in addition, there are also studies to examine the impact of efficiency on economic growth (lucchetti, papi and b, 2001) and on the transmission of monetary policy (havranek, irsova and lesanovska, 2016). furthermore, the paper focuses more on the effect of efficiency on the cost of credit borne by companies that get bank credit (shamshur and weill, 2019). this study departs from the existence of four hypotheses from berger and young (1997), namely 1) bad luck hypothesis explains that higher costs arise after non-performing loans occur; 2) bad management hypothesis explains that low efficiency measures indicate a signal of inexperienced management practice; 3) skimping hypothesis explains the level of assurance and control affect cost efficiency and; 4) moral hazard explains the increase in risk behavior because there are other parties who bear it. four hypotheses from berger and young (1997) explain that management makes efforts to cover low efficiency and high asset risk by increasing loan interest rates. however, management still considers the conditions of bank competition. so the market power hypothesis explains that high competition leads to low loan interest rates (cetorelli, 2004; claessens and laeven, 2004; fungáčová, shamshur and weill, 2017). offer lower loan interest rates to offer larger loans. in contrast, the information hypothesis states that competition causes high loan interest rates to suppress supply (fungáčová, shamshur and weill, 2017). banks with high capital and efficiency tend to limit loan allocations to avoid increasing credit risk, whereas banks with low capital and efficiency tend to increase lending to increase credit risk. the reason for banks that have high capital and efficiency is to limit the allocation of funds due to reserves of future profits. on the other hand, banks that have low capital and efficiency will try to maximize their income by increasing loans (ozili, 2019). in addition, banks have the opportunity to overestimate the loan loss provision when credit risk is low and vice versa, banks try to lower the loan loss provision when credit risk is high (laeven and majnoni, 2003; el sood, 2012; agénor and zilberman, 2015; ozili and outa , 2017). furthermore, banks that always have low capital usually have debtor risk information so that they have a loan loss provision and low loan interest rates (zheng et al., 2019). based on this, this paper uses the application of ecl as a dummy variable to see if its effect can strengthen or weaken the effect of efficiency on bank loan interest rates. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 63-67 the influence of efficiency on interest rate loan in indonesia banking in regards to the implementation of expected credit losses syarief fauzie, wahyu sugeng imam soeparno, wahyu ario pratomo issn 2776-9658 (online) │ 65 this study takes a study similar to that of shamsur and will (2019) but uses the independent variable of bank loan interest rates where shamsur and weill (2017) uses the company's cost of credit. this study uses expected credit losses to see the impact on the relationship between efficiency and bank loan interest rates in indonesia. research method the study used a sample of 23 banks whose research data was taken from the bloomberg finance lab at diponegoro university. the sample selection used the purposive sample method from the criteria for the use of data in this study. this study uses panel data regression analysis with a random effect model. the selection of the model is based on the results of the hausman test carried out. the variables used in this study are loan interest rates as the dependent variable, cost efficiency as an independent variable and credit risk, capital adequacy ratio, private credit, and size as a control variable. besides aiming to analyze the effect of efficiency on loan interest rates, this study also analyzes how efficiency affects loan interest rates in the period before and after the implementation of ecl. the ecl variable used in this study uses a dummy variable which shows the difference between periods before the application of ecl with a value of 0 and after the application of ecl with a value of 1. therefore, this study uses 3 regression models to answer this hypothesis. the regression model was used to analyze the effect of efficiency and control variables on credit interest rates. in analyzing the effect of efficiency and control variables on loan interest rates, it is formulated as follows: 𝐼𝑛𝑡_𝐿𝑜𝑎𝑛𝑖,𝑡 = ∝ + 𝛽1𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦𝑖,𝑡 + 𝛽2𝐶𝑟𝑒𝑑𝑖𝑡_𝑅𝑖𝑠𝑘𝑖,𝑡 + 𝛽3𝑃𝑟𝑖𝑣𝑎𝑡𝑒_𝐶𝑟𝑒𝑑𝑖𝑡𝑖,𝑡 + 𝛽4𝐶𝐴𝑅𝑖,𝑡 + 𝛽5𝑆𝑖𝑧𝑒𝑖,𝑡 + 𝑒𝑖,𝑡 (1) further regression analysis to see the effect of efficiency and control variables on credit interest rates by including ecl in the regression model is formulated as follows: 𝐼𝑛𝑡_𝐿𝑜𝑎𝑛𝑖,𝑡 = ∝ + 𝛽1𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦𝑖,𝑡 + 𝛽2𝐶𝑟𝑒𝑑𝑖𝑡_𝑅𝑖𝑠𝑘𝑖,𝑡 + 𝛽3𝑃𝑟𝑖𝑣𝑎𝑡𝑒_𝐶𝑟𝑒𝑑𝑖𝑡𝑖,𝑡 + 𝛽4 𝐶𝐴𝑅𝑖,𝑡 + 𝛽5𝑆𝑖𝑧𝑒𝑖,𝑡 + 𝛽6𝐸𝐶𝐿𝑖,𝑡 + 𝑒𝑖,𝑡 (2) in looking at the effect of ecl in moderating the relationship between efficiency and loan interest rates, it is formulated as follows :𝐼𝑛𝑡_𝐿𝑜𝑎𝑛𝑖,𝑡 = ∝ + 𝛽1 𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦𝑖,𝑡 + 𝛽2𝐶𝑟𝑒𝑑𝑖𝑡_𝑅𝑖𝑠𝑘𝑖,𝑡 + 𝛽3𝑃𝑟𝑖𝑣𝑎𝑡𝑒_𝐶𝑟𝑒𝑑𝑖𝑡𝑖,𝑡 + 𝛽4𝐶𝐴𝑅𝑖,𝑡 + 𝛽5𝑆𝑖𝑧𝑒𝑖,𝑡 + 𝛽6𝐸𝐶𝐿𝑖,𝑡 + 𝛽7(𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 ∗ 𝐸𝐶𝐿) + 𝛽8(𝐶𝑟𝑒𝑑𝑖𝑡_𝑅𝑖𝑠𝑘 ∗ 𝐸𝐶𝐿) + 𝛽9(𝐶𝐴𝑅 ∗ 𝐸𝐶𝐿) + 𝑒𝑖,𝑡 (3) operational definitions for the variables used in the regression model above are as follows: table 1. variable operational definition variable acronym definition loan interest rate int_loan interest income to the total loan. source: bloomberg cost efficiency efficiency cost efficiency score from the stochastic frontier analysis. source: own computation journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 63-67 the influence of efficiency on interest rate loan in indonesia banking in regards to the implementation of expected credit losses syarief fauzie, wahyu sugeng imam soeparno, wahyu ario pratomo issn 2776-9658 (online) 66 │ credit risk credit_risk loan loss reserve to total loan. source: bloomberg capital adequacy ratio car total tier 1 and tier 2 capital to risk-weight assets. source: bloomberg private credit private_credit total loan to other banks to total assets. source: bloomberg size size log (total asset). source: own computation findings and discussion this study uses panel data regression analysis with a random effect model. the determination of the random effect model is based on the hausman test, where the results of the hausman test show the chi-square statistics value of 3.2298 with a probability of 0.6646. table 2. result dependent variable: loan interest the impact efficiency the impact ecl the impact efficiency*ecl efficiency 0.041927*** 0.028518** 0.027197* credit_risk 0.000583*** 0.001100*** 0.001542*** car -0.068805*** -0.056190*** -0.058011*** private_credit 0.008159 0.003884 0.007888 size -0.007552*** -0.007423*** -0.007197*** ecl -0.00410*** -0,008094 efficiency x ecl 0.006615 credit_risk x ecl -0.001340*** car x ecl 0.017476 *, **, *** show significance at the 10%, 5% and 1% levels the results in the table above have a significant effect on the efficiency of loan interest rates but the significant effect is reduced when the dummy variable, namely ecl, is included in the regression model. the results of this study are not consistent with the results of the research of shamshur and weill (2019) which states that high efficiency provides lower credit costs. the results of this study show high efficiency in increasing loan interest rates. these results indicate that banks maintain interest rates or increase interest rates based on the potential benefits of competitive interbank lending rates. according to the hypothesis of berger and young that credit risk increases loan interest rates. however, low efficiency does not increase loan interest rates. these results indicate that low efficiency does not reduce lending rates, but banks maintain high lending rates. banks maintain high loan interest rates because other banks also offer the same loan interest rates. so that the bank can have higher profit potential. therefore, the bank journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 63-67 the influence of efficiency on interest rate loan in indonesia banking in regards to the implementation of expected credit losses syarief fauzie, wahyu sugeng imam soeparno, wahyu ario pratomo issn 2776-9658 (online) │ 67 still has a high net interest income. the application of ecl has a negative effect on loan interest rates which causes banks to lower loan interest rates to increase loan supply, thereby increasing credit risk. these results indicate that banks increase their loan loss provision when credit risk increases. conclusion efficiency has more influence on loan interest rates before the implementation of ecl compared to after the implementation of ecl, while credit risk is more likely to affect loan interest rates, especially when ecl comes into effect. correspondingly, the implementation of ecl causes a decrease in loan interest rates in order to increase loan supply and in turn will increase credit risk. these results indicate that banks have the opportunity to increase the loan loss provision when credit risk is low and conversely lower the loan loss provision when credit risk is high. limitation & further research this study only uses a period of one year in the application of expected credit losses because its implementation has only begun in the 2020 period, so it is hoped that further research can use a longer application period than this study. acknowledment this research was fully funded by the university of north sumatra through the talenta program no contract 221/un5.2.3.1/ppm/spp-talenta usu/2021. thanks to the bloomberg finance lab in the faculty of economics and business, diponegoro university for the availability of the data used in this research. references berger, a. n. and deyoung, r. (1997) ‘problem loans and cost efficiency in commercial banks’, finance and economics discussion series, 1997(08), pp. 1–29. doi: 10.17016/feds.1997.08. cetorelli, n. (2004) ‘real effects of bank competition’, journal of money, credit, and banking, 36(3b), pp. 543–558. doi: 10.1353/mcb.2004.0043. claessens, s. and laeven, l. (2004) ‘what drives bank competition? some international evidence’, journal of money, credit, and banking, 36(3b), pp. 563–583. doi: 10.1353/mcb.2004.0044. fungáčová, z., shamshur, a. and weill, l. (2017) ‘does bank competition reduce cost of credit? cross-country evidence from europe’, journal of banking and finance, 83, pp. 104–120. doi: 10.1016/j.jbankfin.2017.06.014. havranek, t., irsova, z. and lesanovska, j. (2016) ‘bank efficiency and interest rate pass-through: evidence from czech loan products’, economic modelling. elsevier b.v., 54, pp. 153–169. doi: 10.1016/j.econmod.2016.01.004. lucchetti, r., papi, l. and b, a. z. (2001) ‘banks’ inefficiency and economic growt’, 48(4), pp. 400– 424. shamshur, a. and weill, l. (2019) ‘does bank efficiency influence the cost of credit?’, journal of banking and finance. elsevier b.v., 105, pp. 62–73. doi: 10.1016/j.jbankfin.2019.05.002. available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 1 number 1 (2021): 01-06 corresponding author susan tee suan chin, tschin@mmu.edu.my; rosman md yusoff, rosmany@uthm.edu.my doi: 10.31098/jgrcs.v1i1.491 research synergy foundation the mediating effect of emotional intelligence on sustainability and future business performance susan tee suan chin1, rosman md yusoff2 1 faculty of business, multimedia university, melaka. malaysia 2 universiti tun hussesin onn malaysia, johor darul takzim. malaysia abstract the covid-19 pandemic has engulfed numerous parts of the world, crippling economies. many countries’ government has issued lockdown orders to curb the spread of the covid-19 virus. this lockdown has created a new norm for society. unfortunately, businesses have been badly affected by the lockdown. thus, business leaders needed to dig deep and think of ways to sustain their organisation and move forward. this study selected a successful manufacturing company and examined the mediating effects of emotional intelligence against two other variables, namely organisational citizenship behaviour and job satisfaction of the company’s executives during the challenging situation. the questionnaires were adapted from palmer and stough (to determine emotional intelligence) and podsakoff et al. (to examine organisational citizenship behaviour) and were emailed to the executives via the human resource manager. the survey was participated by 110 executives. results revealed that emotional intelligence played a mediating role in enhancing organisational performance. keywords: performance; productivity; environment this is an open access article under the cc –by-nc license introduction the year 2020 has not been a typical business year, whereby some business sectors have almost gone to a total standstill due to the covid-19 pandemic. to date, certain industries are still lagging, especially the tourism and aviation industries. organisations need to stay resilient to sustain and steer themselves out of the turbulence (deloitte development llc, 2020). the disruption faced by the organisations has put to the test their emotional and social operating system and functioning, i.e. emotional intelligence (stokes, 2020). the covid-19 pandemic has jolted many organisations, forcing them to shift platforms and change their strategies. one of the business strategies adopted from the resource-based view model is to focus on the people to sustain. while technical skills are vital, soft skills have now gained much importance (dean, 2017). moreover, with the uncertainty due to the pandemic, employees’ level of job satisfaction has also been tested. the pandemic has made the business environment even more complex and complicated. as companies encounter a changing competitive field, the employee skill set needs are shifting to match this new field. the new world comprises workgroups that can interact with people from different nations and with varying cultural backgrounds. it is crucial for workers to have interpersonal communication skills to work with and comprehend their team members. the employee mixture is undergoing change. ‘in some ways, business mirrors biology. as darwin surmised, those who survive “are not the strongest or the most intelligent, but the most adaptable to change” (stokes, 2020). this study’s purpose is to examine the influence of emotional intelligence skills during the covid-19 situation, which has proven to be very http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-06 the mediating effect of emotional intelligence on sustainability and future business performance susan tee suan chin, rosman md yusoff issn 2776-9658 (online) 2 │ challenging. in addition, the study also focuses on the employees’ job satisfaction level and organisational citizenship behaviour. literature review emotional intelligence emotional intelligence is a soft skill, which affects employees and business productivity. soft skills are abilities or qualities that can be categorised as a personality trait or habit and include interpersonal skills such as emotional intelligence and organisational citizenship behaviour (feffer, 2016). it has been said that soft skills, which drive the business, signify core values. meanwhile, emotional intelligence is the ability of people to successfully handle extreme emotions that affect not only them but others around them. extreme emotions are such as anger, sadness, fear, and happiness. highly emotionally intelligent people are said to be highly productive and will substantially influence the organisation’s performance. it has been argued that workers with higher emotional intelligence will stay and work with the organisation during challenging situations (hahn & pedersen, 2020). this is needed, especially during the current covid-19 pandemic. according to danquah (2014) and hashem (2010), high emotional intelligence leads to enhanced performance. based on the construct developed by palmer and stough (2001), five emotional competencies are displayed at the workplace, i.e. emotional recognition and expression, understanding others’ emotions, emotions direct cognition, emotional management, and emotional control. employees with higher emotional intelligence tend to be aware of the situations their colleagues are experiencing. these employees tend to recognise the level of emotions in their surroundings and can show their empathy and concern toward their colleagues. such behaviour improves the working environment. furthermore, it strengthens the bond among the employees, and this then becomes an asset to the organisation. organisational citizenship behaviour displaying support to the organisation and being conscientious in the workplace are examples of organisational citizenship behaviour. as listed by podsakoff et al. (1990), it comprises five elements i.e. conscientiousness, sportsmanship, civic virtue, courtesy, and altruism. organisational citizenship behaviour positively affects the workers and is anticipated to increase productivity (hall et al. 2009). moreover, farooqui (2012) said it supports workers to function better and perform job roles effectively. these behaviours or skills are important, especially during challenging situations such as the covid-19 pandemic. it gives the flexibility necessary to work through various unexpected circumstances, such as assisting workmates needing urgent help. additionally, its positive inclusion is shown when workers propose enhancements in and around the company, care for the company’s assets, and possess commendable attendance attitudes beyond enforceable levels (organ, 1990). job satisfaction hoppock (1935) has suggested that job satisfaction is any combination of psychological, physiological, or environmental conditions causing an individual to express that he is honestly content with his job. an individual’s satisfaction is said to be an affective reaction and attitude to his or her job (zaman & rahman, 2013). therefore, the attitude of workers demonstrates their job satisfaction level. lee, lee and lin (2014) have stated that satisfied workers are more committed to their job. these employees are more productive. scholars like zaman and rahman (2013), taboli (2013), and sahdat and sajjad (2011) have concurred with this claim. they have suggested that a content worker will enhance the journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-06 the mediating effect of emotional intelligence on sustainability and future business performance susan tee suan chin, rosman md yusoff issn 2776-9658 (online) │ 3 organisation’s performance. the year 2020 has been very turbulent. organisations need employees who are not only satisfied but willing to go further. a worker satisfied with his employer may plan to work longer, but his productivity level is indirectly related to organisational performance (rahman & hoque, 2014). satisfied employees are only pleased with their present condition and are in their comfort zone, but they do not have intentions to work harder for the organisation. research method for this study, a successful manufacturing company was chosen. the company is situated in selangor, malaysia. successful organisations can effectively and efficiently utilise their limited resources. the chosen manufacturing organisation has been in operation for more than 50 years. this company started with two staff and now have around 1,000 workers. furthermore, the company has been named as one of the top 10 producers by the malaysian plastics manufacturers association. the researcher was not allowed to enter the organisation during the recovery movement control order (rmco). thus, the questionnaire was distributed by the company's human resource officers, and all the executives participated. the study focused on four variables, i.e. emotional intelligence, job satisfaction, organisational citizenship behaviour, and organisational performance. the research objectives are: 1. to investigate the relationships among emotional intelligence, organisational citizenship behaviour, job satisfaction, and organisational performance. 2. to determine the mediating effect of emotional intelligence in the relationships among organisational citizenship behaviour, job satisfaction, and organisational performance. the study used three different questionnaires. for emotional intelligence, the study used the construct of palmer & stough (2001). for organisational citizenship behaviour, the study used the framework by podsakoff et al. (1990). the study used the construct by brayfield & rothe (1951) to analyse the level of job satisfaction. data validity was tested using cronbach's alpha. findings and discussion table 1 shows the regression analysis results of the three independent variables (emotional intelligence, organisational citizenship behaviour, and job satisfaction). it was noted that these three variables accounted for 92.2% of the variations. the high percentage indicated that these three variables had a strong influence during the challenging covid-19 situation. since their p values were lower than 0.05, emotional intelligence and job satisfaction were significant. meanwhile, the p-value for organisational citizenship behaviour was more than 0.05, hence, insignificant. organisational performance during covid-19 was the dependent variable. table 1. regression analysis and model summary model unstd coeff std coeff t sig. b se beta ei .215 .060 .160 3.559 .001 ocb .015 .050 .011 .297 .767 js .878 .048 .823 18.206 .000 r r square adjusted r square .960a .922 .920 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-06 the mediating effect of emotional intelligence on sustainability and future business performance susan tee suan chin, rosman md yusoff issn 2776-9658 (online) 4 │ note: ei – emotional intelligence; ocb – organisational citizenship behaviour; js–job satisfaction table 2 presents the analysis results of the five emotional intelligence dimensions. four dimensions, i.e. emotional recognition and expression (ere), emotions direct cognition (edc), emotional management (em), and emotional control (ec), had a significant relationship with organisational performance. using the t values as a guide, we found that ere and edc had a significant influence on the employees. this indicates that workers with higher emotional intelligence tend to be better at recognising and expressing their emotions. also, they have better skills in decision making, which is an important responsibility of the executives. table 2. regression analysis – dimensions of emotional intelligence coefficients model unstd coeff std coeff t sig. b std. error beta 1 (constant) .023 .331 .069 .945 ere .320 .070 .325 4.565 .000 uoe .158 .082 .149 1.931 .056 edc .250 .072 .263 3.477 .001 em .164 .076 .168 2.155 .033 ec .178 .069 .167 2.596 .011 notes: a – dependent variable (op); ere – emotional recognition and expression; uoe – understanding others’ emotions; edc – emotions direct cognition; em – emotional management; ec – emotional control based on the direct effect (0.0629) and indirect effect (0.1112) values (table 3), emotional intelligence impacted the relationships among job satisfaction, organisational citizenship behaviour, and organisational performance. this shows that for organisations to sustain during turbulent times, they need employees who are emotionally intelligent. such employees can manage their emotions during hard times, and they will have good interpersonal skills to communicate with their colleagues. this then creates a good workplace environment. table 3. the indirect and direct effect of emotional intelligence on organisational performance the direct effect of organisational citizenship behaviour and job satisfaction on organisational performance effect se t p 0.0629 0.0191 3.3012 0.0013 the indirect effect of emotional intelligence on organisational performance se boot total 0.1112 0.0169 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-06 the mediating effect of emotional intelligence on sustainability and future business performance susan tee suan chin, rosman md yusoff issn 2776-9658 (online) │ 5 for organisations to sustain themselves, they need good employees who will be a strong backbone to them. the indirect effect of emotional intelligence amplified both organisational citizenship behaviour and job satisfaction’s influence. emotionally intelligent employees can handle their emotions and comprehend the situation the organisation is in. for example, the covid-19 pandemic has pushed the world economy to a new low, and many industries are finding it challenging to handle the situation. the indirect effect of emotional intelligence highlights the importance of its role to manage the emotions of the employees. in the examined organisation, there were no pay cuts as they did have overseas contract orders. nevertheless, the work-life balance has been disrupted due to the movement restriction orders. the restriction and the pandemic have made life unpredictable. this uncertainty has created anxiety and doubt among many people. conclusion & further research this research, which took place during the movement restriction period, emphasised the mediating role of emotional intelligence in sustaining organisational performance. a successful company was used to investigate the importance of emotional intelligence that influenced the other variables in this study, i.e. organisational citizenship behaviour and job satisfaction. emotional intelligence refers more to the interpersonal skills of the employees, such as communication skills and level of cooperation and collaboration. future studies can determine the other soft skills needed in an organisation. this research has a few limitations. the study was conducted during the pandemic, and there were movement restrictions. the present researchers were not able to have a face to face interview with the respondents. the questionnaires were distributed through the human resource personnel. the authorities did not allow the workforce to be working at full capacity. the sample size was reduced by 50%. findings might be restrictive due to the sample size. as the study was conducted during the pandemic, some of the respondents may be emotionally upset, especially if one of their family members was impacted by the effects. the study only used three independent variables; they are emotional intelligence, organisational citizenship behaviour and job satisfaction. findings are restrictive to these variables. there could be other variables that could be analysed. the study was conducted on a single successful organisation in the plastic manufacturing industry. hence, findings would be restrictive to organisations with a similar background. it would be beneficial to conduct the same research in other organisations. the results of this study relate to other organisations with similar characteristics. however, each organisation may have some differences, and these differences would be added knowledge and advantage for the other organisations. there could be other variables that could be used in the study, for example, culture in the organisation. references danquah, e 2014, ‘analysis of the impact of emotional intelligence on organisational performance: a banking perspective’, british journal of marketing studies, vol. 6, no. 3, pp. 34-50. dean, sa 2017, soft skills needed for the 21st century workforce, doctoral dissertation, walden university. deloitte development llc 2020, covid-19 future of remote work, viewed september 2020, https://www2.deloitte.com/content/dam/deloitte/mt/documents/about-deloitte/dtmt-covid-19future-of-remote-work.pdf farooqui, mr 2012, ‘measuring organisational citizenship behaviour (ocb) as a consequence of organisational climate (oc)’, asian journal of business management, vol. 4, no. 3, pp. 294-302. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-06 the mediating effect of emotional intelligence on sustainability and future business performance susan tee suan chin, rosman md yusoff issn 2776-9658 (online) 6 │ feffer, m 2016, hr’s hard challenge: when employees lack soft skills, viewed 6 march 2020, https://www.shrm.org/hr-today/news/hr-magazine/0416/pages/hrs-hard-challenge-whenemployees-lack-soft-skills.aspx hahn, se & pedersen, j 2020, ‘employers needs versus student skillsets’, practical academic librarianship: the international journal of the sla academic division, vol. 10, no. 1, pp. 38-53. hall, at, zinko, rp, alexia, af & gerald, r 2009, 'organisational citizenship behaviour and reputation mediators in the relationship between accountability and job performance and satisfaction’, journal of leadership & organisational studies, vol. 15, no. 4, pp. 391-392. hashem, tn, 2010, ‘the impact of managers' emotional intelligence on marketing creativity in jordan commercial bank’, innovative marketing, vol. 6, no. 3, pp. 78-86. hoppock, r 1935. job satisfaction, harper, new york. lee, yj, lee, ic & lin cl 2014, ‘the effects of employees' satisfaction and leadership styles on organisational performance: organisational commitment as a dual mediator’, asian journal of empirical research, vol. 4, no. 2, pp. 104-124. organ, dw 1990, ‘the motivational basis of organisational citizenship behaviour', in bm shaw & ll cummings (eds), research in organisational behaviour, jai press, greenwich ct. palmer, b & stough, c 2001, swinburne university emotional intelligence test interim technical manual, swinburne university, melbourne. podsakoff, pm, mackenzie, sb, moorman, rh & fetter, r 1990, 'transformational leader behaviors and their effects on followers' trust in leader, satisfaction, and organisational citizenship behaviors', the leadership quarterly, vol. 1, no. 2, pp. 107-142. rahman, mm & hoque, mm 2014, ‘an analysis of job satisfaction: a study on united commercial bank limited’, international journal of ethics in social sciences, vol. 2, no. 2, pp. 117-131. sahdat, m & sajjad, si 2011, ‘emotional intelligence and organisational productivity: a conceptual study’, world applied sciences journal, vol. 15, no. 6, pp. 821-825. stokes, c 2020, techtank: workplace emotional intelligence during the global coronavirus outbreak, viewed september 2020, https://www.brookings.edu/blog/techtank/2020/03/11/workplace-emotional-intelligence-duringthe-global-coronavirus-outbreak/ taboli, h 2013, ‘job satisfaction as a mediator in relationship between emotional intelligence, organisational commitment in employees' kerman universities’, life science journal, vol. 10, no. 1, pp. 18. zaman, fb & rahman, ms 2013, ‘job satisfaction of women in the corporate world’, interdisciplinary journal of contemporary research in business, vol. 5, no. 8, pp. 9-22. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-06 the mediating effect of emotional intelligence on sustainability and future business performance susan tee suan chin, rosman md yusoff issn 2776-9658 (online) │ 7 available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 1 number 2 (2021): 53-60 corresponding author supitriyani, vitriql@gmail.com doi: 10.31098/jgrcs.v1i2.719 research synergy foundation analysis of financial distress in measuring bankruptcy before and after the covid-19 pandemic supitriyani1, yansen siahaan1, astuti1, juan anastasya putri1, elly susanti1 1 accounting departement, sekolah tinggi ilmu ekonomi sultan agung, indonesia abstract the increasing spread of the covid-19 virus at this time has forced several company sectors to experience setbacks in their operations. this epidemic has had a major impact, especially on the transportation subsector companies because they have to make some adjustments to government regulations such as implementing health protocols and physical restrictions on travel to break the chain of virus spread. the regulation has an impact on the company's revenue decline and the potency to suffer losses that can result in bankruptcy. this study aims to determine the bankruptcy prediction of the transportation sub-sector companies listed on the idx before and after the covid-19 pandemic and to find out the most accurate method. the sampling technique used was non-probability sampling with the purposive sampling technique. the method used is descriptive with a quantitative approach. the results of the hypothesis test show that there are differences in predictions between the altman and springate models in predicting bankruptcy before and after the covid-19 pandemic. the altman model is the most accurate prediction with an accuracy rate of 85.75%, while the springate model has an accuracy rate of 73%. the study focused on companies listed on the idx and used two bankruptcy measurement models, so researchers are next expected to use the entire company and other existing bankruptcy prediction, models. in addition, some factors beyond the control of researchers, such as economic conditions that cannot be measured. the renewal of previous research is to use two methods of prediction of bankruptcy, different objects, and research time (before and after the covid-19 pandemic). keywords: financial distress, altman, springate this is an open access article under the cc –by-nc license introduction the increasing spread of the covid-19 virus is currently making some sectors of the company have to experience setbacks and limitations in operating. this is very impactful, especially for companies that are directly involved in the community. one company that directly interacts with consumers is the transportation sub-sector company. companies in the transportation sub-sector must make some adjustments to government regulations in carrying out their operational activities during pandemics, such as implementing health protocols and physical and travel restrictions to break the chain of the spread of the virus. the regulation will certainly have an impact on people's interest in using transportation services. the decline in public interest caused gdp growth in the transportation sector to experience very deep pressure. in the second quarter of 2020, there was a decrease of -30.84%, while in the third quarter of 2020, there was a decrease of -16.70%, which actually increased from the previous quarter. the contraction of growth in the third quarter of 2020 was not as deep as in the second quarter of 2020 due to the adaptation of new habits or the easing of psbb that improved the performance of transportation http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 53-60 analysis of financial distress in measuring bankruptcy before and after the covid-19 pandemic supitriyani, yansen siahaan, astuti, juan anastasya putri, elly susanti issn 2776-9658 (online) 54 │ business fields (jonathan, 2020). the following presented a graph of the movement of people in using transportation services that have an impact on gdp in transportation sector companies. figure 1. community movement in the centers of transportation and gdp growth in the transportation and trade sector source : (jonathan, 2020) the graph above shows that the movement of people after march continues to decline to its lowest point in may 2020. after may 2020, the movement of people began to increase but still did not return to normal due to various restrictions on social activities. the decrease in public interest in using transportation certainly makes the company's revenue decrease so that it has the potential to experience losses that can result in bankruptcy. this is also supported by a statistical report published on the indonesia stock exchange; some of the company's shares that experienced turmoil after the covid 19 pandemic were highest in infrastructure, utilities, and transportation companies, which decreased by 28.55% which was followed by trade, service and investment companies which decreased by 17.32%. therefore, the authors are interested in conducting in-depth research on transportation sub-sector companies to find out the prediction of bankruptcy before and after the covid-19 pandemic and find out the most accurate methods to measure bankruptcy between altman and springate models. previous research (sudrajat & wijayanti, 2019) conducted research entitled "analysis of bankruptcy prediction (financial distress) by comparison of altman, zmijewski and grover models". the results of his research showed that there is a difference in predictions between the altman (z-score), zmijewski (x-score), and grover (g-score) models in predicting the bankruptcy (financial distress) of basic industrial and chemical sector manufacturing companies listed on the indonesia stock exchange for the period 2015-2018. grover journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 53-60 analysis of financial distress in measuring bankruptcy before and after the covid-19 pandemic supitriyani, yansen siahaan, astuti, juan anastasya putri, elly susanti issn 2776-9658 (online) │ 55 model (g-score) became the most accurate prediction model with an accuracy rate of 85.14%. the altman (z-score) model has an accuracy rate of 77.70% and the zmijewski model (x-score) at 79.73%. (purnomo & hendratno, 2019) conducted research entitled "the analysis of the bankrtuptcy with altman zscore model, grover, and zmijewski at oils companies listed in indonesia stock exchange period 2013-2017". the results of his research showed that there was a difference in the analysis of the revival between the altman z-score, grover, and zmijewski methods in oil and gas subsector companies in the period 2013 and 2017. judging from the accuracy, zmijewski's method became the most accurate method, with an accuracy rate of 82.5% and a type error of 17.5%. furthermore, the most accurate method after that is grover, who is with an accuracy rate of 80% and type error of 20%. and the last method with the lowest accuracy is altman z-score which is 37.5% with a type error of 62.5%. (sumarna et al., 2020) conducted research entitled "analysis of altman, zmijewski, springate and grover bankruptcy prediction models on chemical sub-sector manufacturing industry listed in idx 2013 2018". the results of his research showed that zmijewski and grover's prediction model is the most accurate prediction model according to accuracy level testing using two approaches, namely the comparison approach of calculation scores of the 2013 2018 research period with the period calculation score (t +1) after the research period (2019) and the prediction model score comparison approach that is associated with the auditor's opinion results contained in each company's financial statements. (saputri & krisnawati, 2020) conducted research entitled "comparative analysis of modified altman z-score, springate, zmijewski, bankometer, grover, and rgec models for financial distress prediction". the comparison of the results of the analysis of all models showed that the modified altman z-score, springate, and zmijewski models have the same analytical results that all the analyzed samples were included in the distressed category. in addition, the bankometer, grover, and rgec models also have similarities in the results of their analysis, which overall the models analyzed the samples into the non distress category; therefore, these results contradicted the results of the analysis of the 3 previous models. literature review financial distress financial distress is a way that companies can use in detecting bankruptcy early. financial distress is also a condition where the company's finances are in an unhealthy state or a crisis that will lead to bankruptcy if not immediately addressed. (sidabalok lisnawati et al., 2019). menurut (hanafi, 2016) financial distress is a continuum condition ranging from mild financial difficulties (such as liquidity problems) to more serious financial difficulties, namely not solvable (greater debt compared to assets). one form of failure that occurs in a company that causes bankruptcy is a financial failure. therefore, financial distress can be interpreted as a situation where the company is experiencing financial difficulties, so that financial distress is defined as a condition when the company can no longer meet obligations to third parties. (maimunah & ali kesuma, 2020). some of the things that can lead to a company's bankruptcy are (dewi utari et al., 2016) poor managerial ability, inability to manage the market, inability to manage production processes, inability to manage finances, inability to provide retained earnings, and companies unable to meet working capital needs and unable to hold business expansion. (syahyunan, 2015), assessing the level of financial difficulty and predicting the potential for bankruptcy in a company, there are four models, namely the altman zscore model, grover model, springate model, and zmijewski model. in this study, the bankruptcy analysis model used is the altman and springate models. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 53-60 analysis of financial distress in measuring bankruptcy before and after the covid-19 pandemic supitriyani, yansen siahaan, astuti, juan anastasya putri, elly susanti issn 2776-9658 (online) 56 │ altman model (z-score) (rudianto, 2013) the z-score analysis is a method of predicting the survival of a company by combining several common financial ratios and giving different weights to each other. that means that the z-score method can predict the possibility of bankruptcy of a company. financial distress parameters in this model are networking capital and total assets (x1), retained earnings and total assets (x2), ebit and total assets (x3), share acquisition value and total liability book value (x4), as well as sales and total assets (x5). the standard z-score scoring standard is z > 2.6 = safe zone, 1.1 < z < 2.6= gray zone and z < 1.1 = dangerous zone with the following formula: az = 0,717x1 + 0,087x2 + 3,107x3 + 0,420x4 + 0,998x5 springate model (springate score) (rudianto, 2013) springate score is a method of predicting the survival of a company by combining several common financial ratios with different weights from each other. the financial distress parameters in this model are networking capital and total assets (x1), ebit and total assets (x2), ebit and total current liabilities (x3), as well as sales and total assets (x4). the rating standard in the springate score formula is z > 0.862= healthy company and z < 0.862 = potentially bankrupt company. the springate score formula for different types of companies, is as follows: z = 1,03x1 + 3,07x2 + 0,66x3 + 0,4x4 accuracy level to find out the level of accuracy and type error in all three methods (rizkyansyah & laily, 2018), then use the formula as follows: 1. accuracy rate = number of correct predictions x 100% number of samples 2. type error = number of wrong predictions x 100% number of samples research method data collection techniques the data collection technique used is a documentation technique. this documentation technique is done by searching for data through books, financial statements, journals, previous research, electronic media such as stock exchange websites, and research object websites. population and sample the population in this study is all companies listed on the indonesia stock exchange as companies engaged in the transportation sub-sector before and after covid-19 period 2019-2020. the number of companies that became the population in this study there were as many as 46 companies. the sampling technique is done using non-probability sampling with purposive sampling techniques so that 28 companies are obtained. data analysis techniques the data analysis techniques used are qualitative descriptive analysis techniques and comparative analysis techniques. qualitative descriptive analysis was conducted to look at the picture of financial distress in the transportation sub-sector before and after covid-19 period 2019-2020, while comparative analysis was conducted to find out the right method to measure the level of financial distress in the journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 53-60 analysis of financial distress in measuring bankruptcy before and after the covid-19 pandemic supitriyani, yansen siahaan, astuti, juan anastasya putri, elly susanti issn 2776-9658 (online) │ 57 transportation sub-sector before and after covid-19 period 2019-2020 as measured using the altman and springate models. findings and discussion descriptive statistical results the results of this descriptive statistical test of the researcher can be presented in table 1. table 1. descriptive statistics n min max mean altman 56 -13,956 3,775 -0,588 springate 56 -0,898 3,206 0,709 n 56 source: processed data, microsoft excel, 2021 based on descriptive statistical tests conducted, the minimum value of the altman model is -13,956 in blta companies in 2020. this indicates the company is in a dangerous zone because the value is smaller than 1.1. the maximum value of the altman model is 3.775 in rigs companies in 2020, while the average value of the altman model is -0.588, which indicates that the company is in a dangerous zone because the value is smaller than 1.1. for the springate model, the minimum value obtained is -0.898 in taxi companies in 2020, which indicates that the company is potentially bankrupt because the value is smaller than 0.862. for the maximum value of the springate model, the value of 3,206 was obtained by zbra in 2019. this indicates that the company is healthy because the value of the springate score is greater than 0.862. the average value of the springate model obtained a value of 0.709. it states that the company experienced a potential bankruptcy because the value of the springate score is smaller than 0.862. accuracy calculation in the calculation of accuracy, it is necessary to know in full the data related to the calculation of financial distress by using the altman and springate models in transportation sub-sector companies that can be seen in table 2. table 2. altman and springate model calculation results altman (z-score) springate (s-score) kode z score 2019 ket. z score 2020 ket. s score 2019 ket. s score 2020 ket. assa 0.739 b 0.792 b 0.677 b 0.738 b bbrm -0.226 b 0.027 b -0.221 b 0.282 b bird 1.055 b 0.567 b 0.839 b 0.062 b blta -13.443 b -13.956 b 0.376 b 0.384 b bull 0.760 b 0.904 b 0.652 b 0.608 b cani -1.304 b -2.365 b 1.215 tb 1.731 tb cmpp 2.757 ga -2.896 b 1.798 tb 0.537 b giaa 0.804 b -0.446 b 1.275 tb 0.109 b hits 1.083 b 0.857 b 0.914 tb 0.798 b journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 53-60 analysis of financial distress in measuring bankruptcy before and after the covid-19 pandemic supitriyani, yansen siahaan, astuti, juan anastasya putri, elly susanti issn 2776-9658 (online) 58 │ altman (z-score) springate (s-score) kode z score 2019 ket. z score 2020 ket. s score 2019 ket. s score 2020 ket. iata 0.585 b -0.350 b 0.355 b 0.468 b indx 1.830 ga 1.473 b 0.374 b 0.195 b karw -4.151 b -3.947 b 2.672 tb 2.702 tb lead -0.046 b 0.029 b -0.261 b -0.217 b lrna 2.364 ga 1.186 b 0.271 b -0.522 b mbss 1.401 b 1.124 b 0.553 b 0.151 b mira 2.301 ga 2.269 ga 0.343 b 0.084 b nely 2.558 ga 2.274 ga 2.109 tb 1.888 tb ptis 0.945 b 0.884 b 0.727 b 0.619 b rigs 1.291 b 3.775 tb 0.669 b 0.519 b sdmu 0.398 b -0.279 b 0.568 b 0.895 tb smdr 1.281 b 1.287 b 1.250 tb 1.006 tb soci 0.749 b 1.124 b 0.542 b 0.812 b taxi -4.372 b -7.070 b -0.210 b -0.898 b tmas 0.666 b 1.051 b 0.716 b 0.571 b tpma 1.515 b 1.427 b 1.033 tb 0.846 b weha 0.961 b -0.034 b 0.629 b -0.484 b wins 0.204 b 0.289 b -0.001 b -0.209 b zbra -13.324 b -12.324 b 3.206 tb 2.954 tb source: processed data, 2021 based on the results of calculations from the altman model during the year period studied there were 48 companies with z-score values categorized as bankrupt, 1 company with a z-score categorized as not bankrupt and 7 companies with z-score values categorized as grey areas, from the results obtained can be calculated the accuracy level of the altman model used is: accuracy = 48/56 x 100% = 85.7% the calculation results of the springate model there are 41 s-score values categorized as bankrupt and 15 s-score values that are categorized as not bankrupt, then from the results can be calculated the accuracy rate of the springate model used: accuracy = 41/56 x 100% = 73% a comparative percentage in such methods for measuring bankruptcy rates in the transportation sub-sector companies can be presented in table 3. table 3. percentage rate comparison of altman z-score and springate score category percentage of two methods altman z-score springate score safe zone 1,80 % 27,00 % gray zone 12,50% dangerous zone 85,70% 73,00% journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 53-60 analysis of financial distress in measuring bankruptcy before and after the covid-19 pandemic supitriyani, yansen siahaan, astuti, juan anastasya putri, elly susanti issn 2776-9658 (online) │ 59 source: processed data, 2021 from table 3 it can be known that both methods provide varying percentage rates. the difference in calculation results of each method is due to the cut-off value and the variable calculation components that vary between the methods. the average comparison of the two methods, the altman z-score and springate score methods, shows that the company is experiencing a dangerous zone, and if this continues, it does not rule out the possibility that this company will potentially go bankrupt. this should be a concern for all stakeholders from both company management and investors to find good solutions to improve the company's operational performance. the altman z-score method provides a bankruptcy measurement rate of 85.70%, while the springate score method is 73%. overall it can be concluded that the springate z-score method results in a fairly low percentage of bankruptcy measurements when compared to the altman score method. it can be concluded that the right method for measuring the bankruptcy rate in the transportation sub-sector company is the altman score method because the percentage rate in the safe zone is lower and in the dangerous zone is higher than other methods. the results of this study are different from the results of the study (sudrajat & wijayanti, 2019), (purnomo & hendratno, 2019), (sumarna et al., 2020), and (saputri & krisnawati, 2020) grover and zmijewski's model is more accurate at predicting bankruptcy. conclusion the results of the hypothesis test showed that there was a difference in predictions between altman and springate models in predicting the bankruptcy (financial distress) of transportation sub-sector companies listed on the indonesia stock exchange before and after the covid-19 pandemic. the altman model became the most accurate prediction model with an accuracy rate of 85.75%, while the springate model had an accuracy rate of 73%. thus it can be stated that the altman model is more accurate in analyzing financial distress before and after the covid-19 pandemic in transportation sub-sector companies listed on the indonesia stock exchange. the study focused only on companies listed on the idx and used two bankruptcy, measurement models. therefore, researchers are then expected to use all existing companies, both overseas companies, and compare companies that are still listing with delisting companies and can use other bankruptcy prediction models such as ohlson, fulmar, shirata, zavgren, and taffler models. in addition, there are several factors beyond financial ratios that are beyond the control of researchers, such as economic conditions (inflation, unemployment rate, economic growth, technology, culture, and others) that cannot be measured. the update of previous researchers is that this study uses two methods of bankruptcy prediction, different research objects, and research time conducted before and after the covid-19 pandemic that is still relevant today, so it is very beneficial for investors in making decisions when to make investments in the future. acknowledgment the research team thanked either the research funder, the support of the facility, or the help of manuscript reviews. the researcher thanked the accounting lecturers and the ministry of ristekdikti, who had financed this research from start to finish, to lppm sultan agung college of economics, who had facilitated the team in conducting the research. this research is the result of the research grant of beginner lecturer kemenristek dikti. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 53-60 analysis of financial distress in measuring bankruptcy before and after the covid-19 pandemic supitriyani, yansen siahaan, astuti, juan anastasya putri, elly susanti issn 2776-9658 (online) 60 │ references dewi utari, purwanti, a., & prawironegoro, d. 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(2020). analysis of bankruptcy prediction models altman, zmijewski, springate and grover on industrial manufacturing sub-chemical sub-sector listed in idx year 2013 2018. 4(2), 109–122. syahyunan. (2015). financial management planning, analysis, and financial control (2nd ed.). usu press. microsoft word jgrcs template_685 available online at: https://journals.researchsynergypress.com/index.php/jgrcs journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 2 number 2 (2022): 67-74 corresponding author fershie d. yap, fershie_yap@yahoo.com doi: https://doi.org/10.31098/jgrcs.v2i2.685 research synergy foundation organizational practices of income-generating projects: basis for igp model development fershie d. yap1 1 college of accountancy and business administration, president ramon magsaysay state university, zambales, philippines abstract this research attempted to develop a proposed model for income-generating projects (igps) through their organizational practices to ensure their performance as expected. the study determined the level of performance of the igps operated; the status of organizational practices in terms of unit/organization structure, internal control, financial management, strategic planning, human resource management, and the marketing mix; the differences between means when grouped according to igps categories; and the predictor variables of igp performance. the descriptive and causal design was assisted by the validated and reliability-tested researcher-made survey questionnaire. data gathered from the 320 respondents participated by the igp employees of the 13 state universities and colleges in central luzon were statistically interpreted using descriptive analysis, one-way analysis of variance, and multinomial logistic regression. the results show that in terms of individual igps, the non-agri-based projects are performing well compared with agri-based projects; however, both of them are not performing excellently. the igps were not practicing the organizational practices in their operation at all times but occasionally. the test of difference of the organizational practices between igps operated shows that formalization, risk assessment, information & communication system, financial reporting & analysis, vision and mission, business plan/planning, motivation, price, and promotion are statistically significant in operating agribased igps; while all of the organizational practices are statistically significant in operating non-agribased igps. multinomial logistic regression indicated that there was a combination of organizational practices fit in operating agri-based and non-agri-based igps to achieve a low, average, and high performance. keywords: income-generating projects; performance; organizational practices; sucs; descriptive and causal design this is an open access article under the cc–by-nc license. introduction income-generating projects (igps) consist of projects that are a means for gaining or increasing income; they are likewise considered as the source of revenue in organizations. igp is not only a means of livelihood in an organization but is also a means of livelihood in the development of society (tsuma & mugambi, 2014). on the other hand, igps were also undertaken by public organizations such as schools to raise revenue and enhance the project or enhance school finances (nyamwega, 2016). likewise, establishing an active igps empowered the government higher education institutions, which promoted the institutions’ economic resources managed successfully (miranda et al., 2016). the study of (murage & onyuma, 2015) also states that income-generating activities in public universities were created to alleviate financial difficulties in these institutions. the income generated by journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 67-74 organizational practices of income-generating projects: basis for igp model development fershie d. yap issn 2776-9658 (online) 68 │ these igps is of utmost importance to the development and sustainability of the universities (ahmad et al., 2015). however, engaging in igps also needs to be well-managed to ensure that the operation will continue, as well as, its performance. hence, to ensure igps performance, there should be a growing concern to embrace the idea of organizational practices in all igps undertaken. therefore, the study develops a proposed model for igps through their organizational practices to ensure their performance as expected. the study determined the level of performance of the igps operated, the status of organizational practices in terms of unit/organization structure, internal control, financial management, strategic planning, human resource management, and the marketing mix, the differences between means when grouped according to igps categories; and the predictor variables of igp performance. literature review the government could not fully subsidize all the needs of state universities and colleges (sucs), hence the need to do its share to strengthen fiscal capability. the government encourages sucs to venture into igps to generate more income, enhance limited resources, and to somehow augment the declining resources of the government, even before the creation of republic act 10931, which is an act providing free tuition and other school fees in sucs and state-owned tertiary-level institutions that took effect in the school year 2018. the igps of philippine higher education institutions depend on their land area, location, mandate, and thrusts. according to (manasan et al., 2015), igps in higher education institutions typically involve agricultural-based and non-agricultural-based projects. the revenue from these lgps is constituted into the revolving fund which is treated as a self-liquidating fund and the collections are being used for the operation of the lgps, respectively. on the contrary, (manasan et al., 2015) averred in their research on the assessment of sources and utilization of funding of sucs in the philippines that the expectations that igps will make a significant contribution towards making sucs more self-reliant financially, the contribution of igps in total sucs receipts have remained modest and dropped in 2003-2012. it is stated that on the average, close to 23% was contributed by income from the income-generating projects and other self-sustaining activities. moreover, the share of sucs receipts from their igps and other self-sustaining activities was decreasing from 24% in 2003 and 20% in 2012. even though the igps of some sucs are not extensive and have no significant earnings, the igps are still considered to be very important sources of income by many of the sucs (manasan et al., 2015). furthermore, (manasan et al., 2015) also noted that mismanagement such as weak financial management and lack of internal control which are evident and hampers the monitoring and analysis of the results of operations of each igps which is important in evaluating whether said igps are making a positive net contribution to the sucs’ coffers. the same authors likewise found out that in the 2012 coa audit reports for sucs, the igps of some sucs in the philippines who suffered from mismanagement have incurred net losses. this was confirmed on the coa annual audit report of the igps in central luzon in the last five years covering the period 2014-2018, which shows that the common findings in the igps operated is the improper implementation of internal control, financial management, strategic planning, and marketing, which are evident. the deficiency of these practices allowed the opportunities for possible errors and irregularities in the operations, raised doubts on the accuracy of the reported results of operations, which further resulted in losses. journal of governance risk management compliance and sustainability (jgrcs),, vol. 2 (2), 67-74 organizational practices of income-generating projects: basis for igp model development fershie d. yap issn 2776-9658 (online) │ 69 there is a compelling argument that creating an entrepreneurial climate where all kinds of entrepreneurs can succeed lays the foundation of the groundwork for sucs’ igps. this was supported by [6, 3] stating that igp operation should be treated in the same manner of an economic enterprise; for profitable management of their available economic tangible and intangible resources within their premises, together with the innovation and creation of new opportunities and ventures within their scope. it is therefore, the ability of the igp unit to use its resources and perform excellently where agents act and make decisions in the principal’s interest, to generate revenue in excess of its expenditures to have a positive contribution to the sucs’ funds. this study comes up with a framework to test, whether or not, the organizational practices and its combination are factors in driving igps performance. figure 1. conceptual framework it was assumed that the combination of the 20 organizational practices variables are determinants and will have a significant effect on the performance. research method this study is a descriptive and causal research that determined the effect of the organizational practices on igps performance. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 67-74 organizational practices of income-generating projects: basis for igp model development fershie d. yap issn 2776-9658 (online) 70 │ the respondents were taken from the total population of the igp employees operated by the 13 sucs in central luzon containing 320 igps employees, composed of igp director, project manager, project supervisor, and project staff with a response rate of 88.88%. a survey questionnaire method was conducted in collecting the data using a validated and reliability-tested researcher-made questionnaire with closed-ended questions. cronbach’s α coefficient at 0.939 for agri-based projects and 0.866 for non-agri-based projects. the status of the organizational practices cronbach’s α coefficient are: (1) unit/organization structure – formalization 0.784, centralization 0.867, complexity 0.811. (2) internal control – control environment 0.738, risk assessment 0.736, information and communication system 0.872, monitoring 0.776. (3) financial management – accounts receivable management 0.908, inventory management 0.726, financial reporting and analysis 0.960. (4) human resource management – leadership 0.867, training 0.972, motivation 0.942. (5 strategic planning – vision and mission 0.960, business plan/planning 0.945, human resource plan/planning 0.814. (6) marketing mix containing – product 0.801, price 0.803, promotion 0.822, place 0.934. descriptive analysis was performed to measure the level of performance of the individual igps and the status of their organizational practices, with summated scale of the 5-point likert was used as base scores. the mean scores of the agri-based were summed to come up with the average mean, the same was done to non-agri-based. one-way analysis of variance, also known as one-way anova was used to test the equality of the population means of the organizational practices, significant at 0.05 level, where: reject the null hypothesis if p<0.05. multinomial logistic regression analysis was done to test whether or not status of formalization, centralization, complexity, control environment, risk assessment, information and communication system, monitoring, accounts receivable and inventory management, financial reporting and analysis, vision and mission, business and human resource plan/planning, leadership, training, motivation, product, price, promotion, and place are predictors of igps performance. the agri-based igps (wald test x2 = 174.92, p=value 0.000 < 0.05) and non-agri-based igps (wald test x2 = 24177.05, p=value 0.000< 0.05) shows that the model containing the full set of organizational practices represents a significant improvement in the fit of the model. furthermore, agri-based igps (mcfadden's pseudo-r2 = 0.4322) and non-agri-based igps (mcfadden's pseudo-r2 = 0.5671) indicates predictive ability in which 43% and 57% of the variability is explained by these variables used in the model. the response variable, level of performance, was treated as categorical under the assumption that the levels of performance have no natural ordering. after obtaining the frequency of performance, it was categorized and coded as low=1, average=2, and high=3. these variables were used as the dependent variable, while the average means of the organizational practices were used as independent variables. using stata, by default, sets average performance as the baseline category and estimates a model for low performance relative to average performance, and a model for high performance relative to average performance. findings and discussion determine the level of performance of the agri-based and non-agri-based income-generating projects operated results show that among the individual agri-based projects operated, the following have a satisfactory performance are fruit farms (μ=3.24), poultry (μ=3.12), rice farms (μ=3.10), seed production journal of governance risk management compliance and sustainability (jgrcs),, vol. 2 (2), 67-74 organizational practices of income-generating projects: basis for igp model development fershie d. yap issn 2776-9658 (online) │ 71 (μ=3.00), piggery (μ=3.03), food processing (μ=2.96), small ruminants (μ=2.73), and fishery (μ=2.60); while, the agri-based projects with poor performance are large ruminants (μ=2.31), ornamentals (μ=2.43), and vegetables (μ=2.49). on the contrary, the performances of the individual non-agri-based projects operated with very satisfactory performance includes cafeterias/canteen rentals (μ=3.93), souvenir shops (μ=3.92), hostels/dorms rentals (μ=3.90), avr/gymnasium rentals (μ=3.84), and processed goods (μ=3.41); while others have satisfactory performance such as internet shops rental (μ=3.24), catering services (μ=3.01), printing shops (μ=2.88), review centers (μ=2.82), and wellness and spa (μ=2.72). the results indicate that the level of performance of the two groups of igps were more concentrated on satisfactory performance. determine the status of the organizational practices of participating income-generating projects results show that in terms of unit/organization structure, the igps operation always practiced centralization (μ=4.21) while often practiced complexity (μ=4.14) and formalization (μ=4.11). in terms of internal control, they always practiced control environment (μ=4.45), information & communication system (μ=4.44), risk assessment (μ=4.38), and monitoring (μ=4.32). when it comes to financial management, they likewise always practiced financial reporting and analysis (μ=4.48) and inventory management (μ=4.32), while, often practiced accounts receivable management (μ=4.18). in practicing strategic planning, they likewise always practiced formulating the vision and mission (μ=4.54), business plan/planning (μ=4.36), human resource plan/planning (μ=4.34). in terms of human resource management, they likewise always practiced leadership (μ=4.51) and motivation (μ=4.45), while, often practiced training (μ=4.18). marketing mix practices, likewise always practiced pricing strategy (μ=4.38), product development (μ=4.29), and place (μ=4.27), while often practiced promotion (μ=3.83). determine the differences in the status of organizational practices between the incomegenerating projects operated the test values of the agri-based igps at a confidence level of 95% show significant difference on the following organizational practices: formalization (p-value=0.018), risk assessment (p-value=0.000), information & communication system (p-value=0.002), financial reporting & analysis (p-value=0.002), vision and mission (p-value=0.000), business plan/planning (p-value=0.003), motivation (pvalue=0.009), price (p-value=0.008), and promotion (p-value=0.001); suggesting that agi-based igps were not incorporating all the organizational practices in their operation. on the other hand, the values of organizational practices in non-agri-based igps, at a confidence level of 95% show a p-value of 0.000 which indicates that the population means of all the organizational practices are not equal and therefore statistically different, which shows that all the organizational practices were incorporated in the operation of non-agri-based projects across sucs. determining the effect of organizational practices on the performance of income-generating projects low performance relative to average performance (agri-based projects) the predictive ability of the variable in agri-based projects. negative and significant predictors information & communication system (β=-1.605; p=0.039), inventory management (β=-1.306; p=0.028), price (β=-1.324; p=0.014), promotion (β=-1.074; p=0.000) collectively can predict performance which journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 67-74 organizational practices of income-generating projects: basis for igp model development fershie d. yap issn 2776-9658 (online) 72 │ states that these practices are significant predictors of average performance relative to low performance when sometimes practice. on the other hand, positive and significant predictors complexity (β=1.079; p=0.018), risk assessment (β=2.897; p=0.000), human resource plan/planning (β=0.769; p=0.036), motivation (β=1.432; p=0.046) collectively can predict performance of agri-based projects which shows that these practices are significant predictors of low performance relative to average performance when sometimes practice. high performance relative to average performance (agri-based projects) the predictive ability of the variables in agri-based projects. negative and significant predictors complexity (β=-4.859; p=0.0020), risk assessment (β=-17.149; p=0.000), inventory management (β=5.214; p=0.002), leadership (β=-20.199; p=0.001), product (β=-4.513; p=0.000), place (β=-27.781, p=0.004) collectively can predict performance which shows that these practices are significant predictors of average performance relative to high performance when always practice. on the other hand, positive and significant predictors centralization (β= 9.047; p=0.006), information & communication system (β=13.502; p=0.000), monitoring (β=10.410; p=0.005), financial reporting & analysis (β=5.739; p=0.022), training (β=8.892; p=0.036), price (β=29.050; p=0.000), promotion (β=8.296; p=0.003) collectively can predict performance of agri-based projects which shows that these practices are significant predictors of high performance relative to average performance when always practice. low performance relative to average performance (non-agri-based projects) the predictive ability of the variables in non-agri-based projects. negative and significant predictors formalization (β=-72.480; p=0.000), centralization (β=-83.023; p=0.000), information & communication system (β=-135.344; p=0.000), inventory management (β=-156.737, p=0.000), financial reporting and analysis (β=-14.574; p=0.000), leadership (β=-27.979; p=0.000), training (β=-55.840; p=0.000), motivation (β=-5.918; p=0.002), price (β=-88.861; p=0.000), promotion (β=-54.781; p=0.000), place (β=-7.935; p=0.007) collectively can predict performance which shows that these practices are significant predictors of average performance relative to low performance when sometimes practice. on the other hand, positive and significant predictors complexity (β=133.010; p=0.000), risk assessment (β=35.306; p=0.000), monitoring (β=57.872; p=0.000), accounts receivable management (β=103.195; p=0.000), vision & mission (β=15.461; p=0.000), business plan/planning (β=73.721; p=0.000), human resource plan/planning (β=25.061; p=0.000), product (β=155.315; p=0.000) collectively can predict performance of non-agri-based projects which shows that these practices are significant predictors of low performance relative to average performance when sometimes practice. high performance relative to average performance (non-agri-based projects) the predictive ability of the variables in non-agri-based projects. negative and significant predictors centralization (β=-0.881; p=0.046), control environment (β=-2.519; p=0.006), financial reporting and analysis (β=-1.786; p=0.001), promotion (β=-1.107; p=0.001) collectively can predict performance which shows that these practices are significant predictors of average performance when always practice. on the other hand, positive and significant predictors complexity (β= 1.492; p=0.006), monitoring (β=0.811; p=0.000), accounts receivable management (β=2.936; p=0.000), place (β=2.609, p=0.001) journal of governance risk management compliance and sustainability (jgrcs),, vol. 2 (2), 67-74 organizational practices of income-generating projects: basis for igp model development fershie d. yap issn 2776-9658 (online) │ 73 collectively can predict performance of non-agri-based projects which shows that these practices are significant predictors of high performance relative to average performance when always practice. conclusion based on the foregoing findings, a model was developed to assess the operation and performance of the igps to ensure that it generates viable revenue streams to the sucs’ funds. igps are operated in the same manner as an economic enterprise for profitable management of their tangible and intangible economic resources [6, 3], except for profit sharing and as per the coa rules and regulations. figure 2 shows the organizational practices-performance model for agri-based igps, suggesting that (1) to achieve high-performance agri-based projects, always practice and properly implement centralization, information & communication system, monitoring, financial reporting & analysis, training, price, and promotion practices; on the contrary, low performance is probable when sometimes practice complexity, risk assessment, human resource plan/planning, and motivation practices; (2) to achieve average performance, always practiced complexity, risk assessment, inventory management, leadership, product, and place practices; and sometimes practice information & communication system, inventory management, price, and promotion practices. figure 2. organizational practices-performance model for agri-based igps (yap, 2020) figure 3 shows the organizational practices-performance model for non-agri-based igps, suggesting that (1) to achieve high-performance, always practice and properly implement complexity, monitoring, accounts receivable management, place practices; on the contrary, low performance is probable when sometimes practice complexity, risk assessment, monitoring, accounts receivable management, vision & mission, business plan/planning, human resource plan/planning, and product practices; (2) to achieve average performance, always practice centralization, control environment, financial reporting and analysis, and promotion practices; and sometimes practice formalization, journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 67-74 organizational practices of income-generating projects: basis for igp model development fershie d. yap issn 2776-9658 (online) 74 │ centralization, information & communication system, inventory management, financial reporting and analysis, leadership, training, motivation, price, promotion, and place. figure 3. organizational practices-performance model for non-agri-based igps (yap, 2020) limitation & further research the limitations of the study are those characteristics of design or methodology that impacted or influenced the interpretation of the findings. further research should suggest the number of gaps in our knowledge that follow from our findings or to extend and further test the research. references ahmad, a. r., soon, n. k., & ting, n. p. (2015). income generation activities among academic staff at malaysian public universities. international education studies, 8(6), 203–294. manasan, r. g., revilla, m., & laarni, d. (2015). assessment of sources and utilization of funding of state universities and colleges. pids discussion paper series. miranda, a. t., tenedero, l. e., fiel-miranda, j. l., & celestino, e. r. (2016). the income-generating projects of a government academic institution in the philippines. asia pacific journal of innovation and entrepreneurship, 10(1), 5–16. https://doi.org/10.1108/apjie-12-2016-006 murage, s. m., & onyuma, s. o. (2015). analysis of financial performance of income generating activities in public higher learning institutions: experience from egerton university, kenya. research journal of finance and accounting, 6(7), 247–254. nyamwega, h. n. (2016). an evaluation of income generating projects in public secondary schools in nairobi county. international journal of african and asian studies, 21(6). tsuma, a. n., & mugambi, f. (2014). factors influencing performance of income generating units in public universities. european journal of business and management, 6(10), 87–92. available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 2 number 1 (2022): 01-09 corresponding author indra kusumawardhani, indra.kusumawardhani@upnyk.ac.id; sri luna murdianingrum, sriluna@upnyk.ac.id doi: 10.31098/jgrcs.v2i1.801 research synergy foundation the effect of institutional ownership, managerial ownership, and deferred tax expense on earnings management indra kusumawardhani1, sri luna murdianingrum1 1department of accounting, faculty of economics and business, universitas pembangunan nasional “veteran” yogyakarta abstract earnings are commonly used as one of the measuring instruments to determine firms’ performance. earnings numbers indicated firms' ability to manage resources and earnings information will be used by users to make decisions related to firms' performance and tax collection. earnings management practices are mostly influenced by the conflict of interest between principals and agents, but they can be minimized with good corporate governance. the objective of this research is to determine the effect of institutional ownership, managerial ownership, and deferred tax expense on earnings management. research samples were taken from 383 nonfinancial firms listed on the indonesia stock exchange from 2017 to 2019 by using the purposive sampling technique. the independent variables used in this research were institutional ownership, managerial ownership, and deferred tax expense, while the dependent variable was earnings management. research results suggested that institutional ownership and managerial ownership affected earnings management, while deferred tax expenses have no effect on earnings management keywords: institutional ownership, managerial ownership, deferred tax expense, earnings management this is an open access article under the cc–by-nc license introduction the company must have a competitive advantage in order to maintain its business continuity (going concern). kamran & shah (2014) stated that financial statements are one way to provide information about a company's financial performance and how the company's management is responsible for its owner. information concerning a company is contained in the financial statements so that financial statements become a medium of communication for the company manager and other stakeholders. earnings are one of the measuring instruments used to determine the company's performance. the greater the profit figures earned, indicating the better the company's ability to manage resources to earn profit. earnings information from financial statements will be used by external parties as well as internally to make decisions related to compensation, bonuses, measures of achievement, management performance, and tax collection (suputra, 2017). earnings management practices are influenced by conflicts of interest between principals and agents. agency conflicts arise when both parties want to achieve prosperity (scott, 2015). management seeks to minimize the tax expense in accordance with the corridors of applicable rules by conducting tax planning and deferred tax expense. earnings management is not a detrimental thing as long as it is done in the corridors of opportunity. it is not always interpreted by the process of manipulation of financial http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 01-09 the effect of institutional ownership, managerial ownership, and deferred tax expense on earnings management indra kusumawardhani, sri luna murdianingrum issn 2776-9658 (online) 2 │ statements because there are several options of methods that can be used and not as a prohibition (kusumawardhani, 2012). the phenomenal case regarding financial statements engineering conducted by pt asuransi jiwasraya (ajs) was revealed by the audit board of finance (bpk) through the assessment of preliminary investigations. earnings manipulation of rp 360,3 billion was found in 2006. as one of the state-owned enterprises, jiwasraya submitted a request for bailout funds to the government due to financial difficulties amounting to rp 32.29 billion in september 2019. at the time of the audit by bpk, it was found that jiwasraya misplaced investments and defaulted on customers rp 802 billion which resulted in state losses and criminal acts of window dressing (setiawan, 2020). information asymmetry between principal and agent can be reduced by good corporate governance. earnings management practices can be minimized by supervisory mechanisms to align the interests of principals and agents. it could be conducted by adding a share of institutional and managerial ownership, and supervision by independent commissioners and audit committees. there are many studies conducted to examine issues related to earnings management, especially regarding corporate governance and deferred tax expense, wang & siyu (2012); suputra (2017); mudjiyanti (2018); achyani & lestari (2019); bunaca & nurdyadi (2019) showed inconsistent results. based on the background of the problem, the research objective was to determine the effect of institutional ownership, managerial ownership, and deferred tax expense on profit management in indonesia. literature review agency theory the owner and the manager have an agency connection, which produces an agency conflict because the mutualism symbiosis is not related to differences in interests. profit management is explained using the agency theory method, which claims that conflicts of interest have an impact on profit management (suputra, 2017). the principal and the agent have a contractual relationship in which the agent has the power to act on behalf of the principal and is compensated for doing so. the relationship between investors and management might be described as agency relations. when the principal is a shareholder or investor, and the agent is management, agency theory helps explain management behavior (suwardjono, 2014). the importance of transferring over the company's operationality from the owner (principal) to a party who can better manage the organization is emphasized by agency theory (agent) (sulistyanto, 2008). earnings management earnings management is a managerial endeavor to make use of the freedom to employ accounting methods and judge the worth of accounting in dealing with financial statement information (sulistyanto, 2008). scott (2015) explained that earnings management is a management accounting policy that focuses on the process of generating external financial statements for the purpose of personal gain. earnings management can influence financial data by employing accounting methods, accounting estimation values, or both at the same time (sulistyanto, 2008). earnings management practices are carried out by management due to several motivations, namely: (1) motivation of bonus programs; (2) tax motivation; (3) political motivation; (4) ceo switching motivation; (5) initial public offering (ipo) (6) motivation of debt agreement. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 01-09 the effect of institutional ownership, managerial ownership, and deferred tax expense on earnings management indra kusumawardhani, sri luna murdianingrum issn 2776-9658 (online) │ 3 good corporate governance corporate governance is a set of integrated systems for managing, guiding, and leading a company or a corporation to improve the firm's and the community's value. according to the oecd (the organization for economic cooperation and development) (2003) good corporate governance is a structure where stakeholders, shareholders, commissioners, and managers draft the company's objectives in an integrated manner and contain the means to achieve these goals and oversee the performance of the company's management. research conducted by chhaochharia & grinstein (2007) shows that corporate governance influences the information reported by companies indirectly. institutional ownership institutional ownership is regarded to be capable of providing similar internal surveillance systems. the shares of corporations controlled by institutions or institutions are referred to as institutional ownership (insurance companies, banks, investment companies, and other institutional holdings). in order to achieve earning purposes, the management will probably be involved in earnings manipulation. the larger institutional ownership can reduce profit management practices, but a significant amount of ownership is required to oversee management, which has the effect of lowering managers' willingness to undertake earnings management. (latif and abdullah, 2015; cornett et al, 2006; hartzell and starks, 2003; balsam et al, 2002). h1: institutional ownership affects earnings management managerial ownership because management owns such a large percentage of the company's stock, their mindset is that of someone who is invested in the company. as a result, management will be motivated to present accurate financial data since the contracting parties will scrutinize the management who owns the company's stock. this will lead to a better contract (ball and shivakumar, 2005). therefore, it is likely that the managerial ownership level will be in the same direction to suppress the utilization of discretionary accruals (earnings management) by management. h2: managerial ownership affects earnings management. deferred tax expense expenses resulting from transient disparities between accounting profit (profit reported in financial statements for the benefit of third parties) and fiscal profit (profit used to calculate taxes) when accounting profit tends to be higher than fiscal profit (suputra, 2017). statement of financial accounting standards/psak 46 (iai, 2010) related to tax accounting states that company management has the discretion to determine accounting policies to determine how much deferred tax assets or deferred tax expenses are because they are used differently. deferred taxes are caused by the higher taxable income than pre-tax financial income due to the positive impact due to temporary changes. phillips et al (2003) in suputra (2017) said that management discretion will be greater when the difference in fiscal profit with accounting profit. yulianti (2005) mentioned the amount of management discretion contained in deferred tax expenses that can detect profit management practices in the company. suputra (2017) showed that the deferred tax burden affects earnings management. h3: deferred tax expense affects earnings management. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 01-09 the effect of institutional ownership, managerial ownership, and deferred tax expense on earnings management indra kusumawardhani, sri luna murdianingrum issn 2776-9658 (online) 4 │ research method population and samples this study was conducted by using 811 observations from 383 samples of all nonfinancial listed firms in 2017-2019. the purposive sampling was used with criteria as follows: (1) companies that have complete earnings management data; (2) have institutional ownership, managerial ownership, and deferred tax expense data. research variables independent variables institutional ownership the ownership percentage held by other institutions from the total number of outstanding firm shares is used to calculate the institutional ownership variable in this study. managerial ownership the percentage of share ownership owned by the management of the total number of outstanding firm shares is used to proxy the managerial ownership variable. deferred tax expense in this study, the deferred tax expense can be calculated by weighting the deferred tax expense by total assets (phillips and rego, 2003) as follows: 𝐷𝑇𝐸 = 𝐷𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝑇𝑎𝑥 𝐸𝑥𝑝𝑒𝑛𝑠𝑒 𝑖𝑡 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑒𝑡 𝑖𝑡 − 1 dependent variable earnings management earnings management in this study is measured by discretionary accruals (da) using the modified jones model (dechow et al, 1995) and calculated by total accrual (ta). total accrual (ta) is comprised of discretionary accrual (da) and nondiscretionary accrual (nda). earnings management used modification jones model, which is as follows: tac = niit – cfoit the total accrual value (tac) can be estimated using ordinary least squares (ols) to obtain the regression coefficient, as follows: 𝑻𝑨𝒊𝒕 𝑨𝒊(𝒕−𝟏) = α𝟏 ( 𝟏 𝑨𝒊(𝒕−𝟏) ) + α𝟐 ( ∆𝑹𝑬𝑽𝒊𝒕 𝑨𝒊(𝒕−𝟏) ) + α𝟑 ( 𝑷𝑷𝑬𝒊𝒕 𝑨𝒊(𝒕−𝟏) ) + å the value of non-discretionary accruals can be calculated by the formula: 𝑵𝑫𝑨𝒊𝒕 = α𝟏 ( 𝟏 𝑨𝒊(𝒕−𝟏) ) + α𝟏 ( ∆𝑹𝑬𝑽𝒊𝒕 𝑨𝒊(𝒕−𝟏) − ∆𝑹𝑬𝑪𝒊𝒕 𝑨𝒊(𝒕−𝟏) ) + α𝟏 ( 𝑷𝑷𝑬𝒊𝒕 𝑨𝒊(𝒕−𝟏) ) furthermore, discretionary accruals can be calculated by the formula: 𝑫𝑨𝒊𝒕 = 𝑻𝑨𝒊𝒕 𝑨𝒊(𝒕−𝟏) − 𝑵𝑫𝑨𝒊𝒕 journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 01-09 the effect of institutional ownership, managerial ownership, and deferred tax expense on earnings management indra kusumawardhani, sri luna murdianingrum issn 2776-9658 (online) │ 5 data analysis this research relied on secondary data. multiple linear regression approaches were used to examine the data to see if institutional ownership, managerial ownership, and deferred tax expense had an impact on earnings management. multiple regression analysis was used to evaluate hypotheses using the following model : em = α + βinsown + β2mown + β3dte + ε information : y = earnings management α = intercept x1 = institutional ownership x2 = managerial ownership x3 = deferred tax expense prior to testing the regression, the classical assumptions were conducted (normality, multicollinearity, autocorrelation, and heteroscedasticity tests). findings and discussion table 1. descriptive statistics n min max mean std. dev em 811 -.00108 .00381 .0003993 .00109686 insown 811 .48041 .91862 .7173367 .12066546 mown 811 .00000 .25683 .0295646 .05481500 dte 811 .00000 .03905 .0047983 .00873216 valid n (listwise) 811 source: 2021 data processing results the assumptions that must be met when using multiple linear regression models are met in this investigation. the kolmogorov-smirnov test was used to test sample normality, the durbin watson coefficient test was used to test autocorrelation, and the variance inflation factor was used to test multicollinearity, and the spearman rho test was used to test heteroscedasticity. table 2. multiple regression analysis result summary coefficients constant 0.001 insown -0.001 mown 0.001 dte -0.003 f 5.908 r2 0.021 adj r2 0.018 source: 2021 data processing results journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 01-09 the effect of institutional ownership, managerial ownership, and deferred tax expense on earnings management indra kusumawardhani, sri luna murdianingrum issn 2776-9658 (online) 6 │ table 3. result test effect of factors on earnings management coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 0.001 0.000 4.963 0.000 insown -0.001 0.000 -0.127 -3.568 0.000 mown 0.001 0.001 0.070 2.000 0.046 dte -0.003 0.004 -0.028 -0.786 0.432 a. dependent variable: em source: 2021 data processing results results shown in table 2 indicated that the institutional ownership and managerial ownership have an impact on earnings management, while the deferred tax expense variable has no effect. the r2 and adjusted r2 coefficients of determination are 0.021 and 0.018, respectively. this value indicates that the independent variables used in the model (institutional ownership, managerial ownership, and deferred tax expense) could only explain 1.8 percent of the variation in the value of the dependent variable (earnings management), with the remaining 98.2% influenced by factors not studied. it can be concluded that the study's independent variable has a limited ability to explain the study's dependent variable. the significance of the f test results in the research model is less than the set threshold (0.05). these findings show that the model (model fit) utilized in this investigation is appropriate. based on table 4.3, only institutional ownership and managerial ownership significantly affect earnings management. deferred tax expenses did not affect significantly. discussion institutional ownership and earnings management institutional shareholders with a high ownership value will encourage more optimal information enhancement and management supervision, potentially reducing managers' opportunistic behavior and allowing institutional owners to receive information comparable to managers and reduce earnings management (cornett et al., 2006; sari and nur, 2013; latif and abdullah, 2015). the first hypothesis test result indicated that institutional ownership has a negative impact on earnings management. this study is consistent with astari & suryanawa (2017) who showed the importance of institutional ownership in monitoring management because increased oversight will be encouraged as a result of institutional ownership. the welfare of shareholders will undoubtedly be improved as a result of this supervision. the impact of institutional ownership as a supervisory agent will be reduced due to their substantial capital market investment. managerial ownership and earnings management offering managers stock options, often known as stock-based pay, is one strategy used to try to decrease friction generated by the separation of ownership and control between managers and stakeholders. there are cases where the manager owns a portion of the firm, the manager will naturally behave as an external shareholder. the manager will ensure the financial statements are presented properly and accurately reflect the company's current state purnama (2017). journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 01-09 the effect of institutional ownership, managerial ownership, and deferred tax expense on earnings management indra kusumawardhani, sri luna murdianingrum issn 2776-9658 (online) │ 7 the second hypothesis test result showed that managerial ownership positively affected earnings management. this research is consistent with aryanti & kristanti (2017) which shows the results that managerial ownership affects earnings management due to institutional ownership. management oversight will be better controlled, resulting in more accurate information, and reducing the information asymmetry caused by control. the power of institutional owners will have an impact on how profits are reported. deferred tax expense and earnings management the third hypothesis is rejected with a significant value of 0.432 (above 0.05). results showed that deferred tax expense has no effect on earnings management. using deferred tax expense to identify earnings management in the company is ineffective because it cannot demonstrate that the company is undertaking earnings management. our result did not support philip et al (2003); yulianti (2005); fitriany (2016). this research is in line with those of satwika and damayanti (2005), timuriana and muhamad (2015) which demonstrates the existence of taxation legislation in indonesia that places severe limitations on tax computations. the research stated that the basis for calculating fiscal profit or loss is to acknowledge the amount of income and costs when they are received or issued. in other words, tax computations solely account for current-period tax expenses and ignore expenses and deferred tax. the company has complied with applicable regulations relating to published financial statements. enforcement of regulations regarding financial reporting by the financial services authority (ojk) has restricted management to manage earnings. financial statement users also have extensive knowledge in analyzing the financial statements of the issuer's company and easier to detect the existence of earnings management. conclusion & further research based on the result discussion, it can be concluded that institutional ownership and managerial ownership affected earnings management, whereas deferred tax expense did not affect earnings management. institutional ownership negatively affects earnings management. the existence of institutional ownership will induce managers to engage in earnings management to avoid negative earnings and deliver higher and consistent earnings. managerial ownership positively affects earnings management. management ownership creates a controllable oversight, more accurate information, and reduces information asymmetry. deferred tax expense has no significant effect on earnings management practices. if the firms conducted deferred tax expenses to manipulate earnings, it would be easily detected by the firms' internal auditors and corrections will be made by management. this research suggestion for future research could include other corporate governance mechanisms other than institutional ownership and managerial ownership, namely independent commissioners, audit committees, and frequency of board meetings. in addition, current tax expenses and deferred tax assets could potentially affect earnings management. earnings management could be tested using different models. adding the longer and the most recent observation year is supposed to be used to characterize the current state of the observed company. references achyani, f. and lestari, s. 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(2005) 'kemampuan pajak tangguhan dalam mendeteksi manajemen laba', jurnal akuntansi dan keuangan indonesia vol 2 no.1 2005 pp 107-129. available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 1 number 2 (2021): 18-27 corresponding author ahmad sugiono, ahmadsugiono@upi.edu doi: 10.31098/jgrcs.v1i2.687 research synergy foundation applying errc of blue ocean strategy: a value innovation for contracting carrier company study case in indonesia ahmad sugiono1, agus rahayu1, lili adi wibowo1 1 indonesian education university, bandung, west java, indonesia abstract this study aims to determine the strategy's ability to make price competition irrelevant and optimize the company's operating costs. this type of research uses descriptive qualitative research with the subject of this research is one of the freight forwarding companies in jakarta, namely igl. the results obtained in this study, among others, by creating partners abroad (key partnership), which focus on having freehand shipments import and nominee shipments export, can make a condition where price competition becomes irrelevant. the results also show that focusing on being a contractual carrier and procurement of warehouses is also proven to positively impact operational costs and company performance, provide added value to customers, and support the company's main business. keywords: blue ocean strategy, contractual carrier, logistic this is an open access article under the cc –by-nc license introduction competition in the freight forwarding market in indonesia has been increasingly severe because many new companies entered indonesia. an increasingly dynamic and complex competition has occurred in the business world and is increasingly being accelerated by covid-19. garry, hamel and c.k. prahalad. (1994) observe that competition is getting more challenging, and business commoditization increases. the national logistics industry continued to grow during the global crisis in 2008 even though many industry players stopped production, resulting in a decrease in demand for logistics needs, including delivery (utaminingsih, 2011). the indonesian logistics association (2020) revealed that it turned out that only the e-commerce logistics sector achieved 18.1% growth during the covid 19 pandemic. however, in total, the industry was still below 10%, so that as of the end of the third quarter of 2020, the logistics sector was still minus value (dinda, 2020). the indonesian freight and logistics market was valued at usd 81.30 billion in 2020, and it is expected to reach more than usd 135 billion by 2026, registering a growth rate of more than 7% during the forecast period. indonesia has been severely affected by the covid-19 crisis. the lack of a centralized and adequate government response has led to uncoordinated responses, including a lockdown on jakarta and business-as-usual in mines and the agricultural sector. according to the indonesian logistics association (ali), logistics companies have experienced an approximately 50% decline in overall business performance since the covid-19 outbreak hit indonesia in early march 2020. it is reported that logistics volume has been down by 60-70% across the board due to emergency measures taken by the government to prevent covid-19 transmission. after covid-19, as the industry positions itself to recover and grow, technology will increasingly play an important role, enabling all stakeholders, including shippers, operators, warehouse owners, and http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 18-27 applying errc of blue ocean strategy: a value innovation for contracting carrier company study case in indonesia ahmad sugiono, agus rahayu, lili adi wibowo issn 2776-9658 (online) │ 19 suppliers, to effectively respond to changing market realities. at the core of domestic and international trade, uncertainty remains a significant problem in indonesia's supply chain. the uniqueness of the archipelago of 17,000 islands exacerbates tension, meaning that who cannot truck it well inland. logistics using land transportation services are still the mainstay of the transportation service industry. road transportation accounts for 70-80% of the total transportation handled in indonesia each year. regarding value, the land transportation market share still accounts for 40-50% of the overall logistics market. the shipping industry plays a vital role in indonesia's trade because 90% of indonesia's exports are transported by water. shipping companies face operational problems, such as low port efficiency, which results in increased waiting and settlement times, and the risk of labor disputes. this condition makes logistics companies need a concept that can make the company out of the competitive map. one of these concepts is the blue ocean strategy concept, which creates a market space with no competitors. the word competition becomes irrelevant because the company focuses on growing demand and moving away from competition (kim and mauborgne, 2017). previous research has researched and produced a blue ocean strategy, whereby doing work steps that are principled on the blue ocean, they can generate ideas and value innovation and greatly assist companies in marketing strategies and company strategic steps (fauzan & jayanti, 2015; hamijaya & indriyani, 2014; melinda, 2018; susanto, 2018; utaminingsih, 2017). the research results by utaminingsih (2011), whose research uses a sample of integrated logistics companies, show that increasing networks and creating vendor management, and increasing safety can create a new value curve and provide suggestions for automation to increase the value curve to customers. other logistics companies have not carried out technology applications such as rfid. they have also proven to increase the company's competitive advantage when transitioning to the blue ocean so that competition becomes irrelevant (changsu kim, kyung hoonyang, jaekyung kim 2008). the combination of lean manufacturing with blue ocean strategy by mapping the value flow and the framework of the four blue ocean actions and the framework implemented in the selected case studies were able to provide a reduction in waiting time and value-added time of 26% and 39%, respectively (sadiq, amjad, et al. rafiq et al. 2019). however, research related to the blue ocean strategy in logistics companies that focus on a contractual carrier has not been carried out by previous researchers, so it is interesting to do research. the purpose of this study is to find out whether the strategy used can make price competition irrelevant and whether the strategy used by the company can optimize operational costs? the expected contributions from the results of this research include: (1) can be used as a reference when conducting studies or research that is strategic, (2) knowing that there are new and innovative alternative strategies in the forwarding industry can create companies that continue to grow and have high performance and ability to provide a strong brand image in the minds of buyers. literature review kim and maurbogne (1997) argue that a focus on benchmarking and winning the competition will lead to an imitative, not innovative, approach to markets that often results in price pressures and further commoditization. so companies should try to make competition irrelevant by offering a jump in value to buyers, namely the company's ability to avoid competition and re-conceptualize the existing industry model (garry hamel, 1998). not against the competition. competitive strategy is divided into cost leadership, differentiation (differentiation), and focus strategy (porter, 1980). journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 18-27 applying errc of blue ocean strategy: a value innovation for contracting carrier company study case in indonesia ahmad sugiono, agus rahayu, lili adi wibowo issn 2776-9658 (online) 20 │ in the field of business strategy, an overcrowded market is often referred to as the "red sea," and business here is full of the blood of competitive warfare (kim & mauborgone (2005). according to kim and mauborgone (2005), the key to moving away from overcrowded spaces relates to what they call "strategic initiatives." critical to this is the concept of "value innovation, " emphasizing the importance of the same two words value and innovation. kim and mauborgone (2005) observe that simply emphasizing innovation without delivering appropriate value is unhelpful. if customers don't understand the value they provide, technology-centric products often confuse customers—technology goes beyond what buyers are willing to pay. or, creating value without innovation will only cut costs while providing little or no meaningful value to customers. the price war is one sign for the red ocean was the current situation. according to kim and mauborgne (2005), a blue ocean strategy is a company strategy to get out of the red ocean by creating a blue ocean, namely by value innovation that combines innovation with benefits, prices, and cost positions. value innovation rejects one of the most common dogmas used in competitionbased strategies: the dilemma or value-cost trade-off. so that blue ocean strategy can help achieve excellence in a fast and efficient way. this strategy is not limited to executive orders only, and managerial staff can also implement and reap its rewards (loh et al., 2018). so the blue ocean strategy also helps in practical implementations such as improving logistics processes (kim et al., 2008). the profile of a strategy that has high potential will have complementary qualities (kim and mauborgne, 2005), as follows: 1. focus, the company, does not spread its efforts to all the main factors in the competition. 2. divergence, away from other players, a result of looking and looking for alternatives and not from comparing from competitors. 3. attractive motto, a good motto should not only be able to convey a clear message but also advertise the offer or product honestly. research method type research this research is company strategy content research conducted descriptive qualitatively to explore the meaning of a social problem (creswell, 2012). the study was conducted based on the blue ocean strategy in 2020 at one of the logistics companies in jakarta, namely igl. the company was chosen because its business disclosure authority is one of the most accessible for researchers in disclosing business facts during the study. method of collecting data primary data are interviews conducted in this study, namely to key parties or experts in igl itself (internal), key parties or experts outside the company (external), along parties from alfi (indonesian logistics and forwarder association). the results of the interviews are used as identification of competitive factors as the basis for making strategy canvases. in addition, supporting data for secondary data are company-internal data and various literature such as articles and books. data analysis and presentation method the stages in the qualitative data analysis used were adapted from the opinions of miles, huberman, and saldana (2014), namely data collection, data condensation, data presentation, and verification and conclusions. all data will be analysed and interpreted to obtain facts that occurred and conclusions that answer the objectives of this study. the framework for making strategic blue ocean is as follows: journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 18-27 applying errc of blue ocean strategy: a value innovation for contracting carrier company study case in indonesia ahmad sugiono, agus rahayu, lili adi wibowo issn 2776-9658 (online) │ 21 1. identify alternative industries at this stage, identify company opportunities in other lines or alternative industries. 2. identify alternative strategic groups at this stage, it is done by observing the strategic group. this term refers to companies in an industry pursuing a common strategy. strategic groups, in general, can be ranked in a rough hierarchical order built on two dimensions, namely price and performance. 3. identify alternative buyer groups at this stage, the chain of buyers (purchasers and users) of the company's services is examined. 4. identification of alternative products and services this stage will look at the core offerings for the company's products and services. then identify alternative products and services that the company can do. 5. identify alternative industry attractive orientations at this stage, the industry's attractiveness from a functional and emotional point of view is examined. approach and education by human resources 6. identify industry trends this stage looks at the industry trends that occur. the steps for the blue ocean strategy (kim and mauborgne, 2005) used are as follows: 1. formulation of the strategy canvas the strategy canvas will show a visual analysis of how an organization forms its offer to buyers, compared to competitors' offerings, where essential elements of the strategy will be shown, which includes what factors are up for grabs, the level of offers that buyers receive, strategy profiles and cost structures. the current strategy canvas is a self-assessment from the team's point of view, which will then be made in two dimensions, represented by a horizontal axis (a range of factors that are used as a competition and industry investment) and a vertical axis (the level of supply received by buyers as the main competency factor). 2. formulation of the four-step framework and errc scheme there are several steps, namely: a. eliminate (eliminate), factors that are considered standard and taken for granted by the industry will be eliminated because they no longer have value or even reduce value. b. reduce; investment in factors that do not provide increased benefits to buyers to industry standards. c. raise investment in competitive factors that provide a significant increase in benefits for buyers to industry standards will be increased d. create (create), by creating new factors that have never been offered in the industry, the company provides unique value benefits for consumers or nonconsumers to achieve new demand. research analysis and framework the analysis stage (figure 1) is adapted from miles. et al. (2014) and kim and mauborgne (2005) will start from the reconstruction process of existing market boundaries until finally getting a series of blue ocean strategies. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 18-27 applying errc of blue ocean strategy: a value innovation for contracting carrier company study case in indonesia ahmad sugiono, agus rahayu, lili adi wibowo issn 2776-9658 (online) 22 │ figure 1. research framework findings and discussion six strategic blue ocean frameworks identify alternative industries igl is a freight forwarding company whose scope of business is the management and delivery of export and import goods and focuses on services for the category of small goods that are consolidated into one container or to a unit device and simultaneously sent when space is filled. logistics service business activities are essentially inclusive from the starting point to the endpoint and are adapted to the resources owned by each company. igl, with its limited financial resources, chooses to collaborate with other license holders (under name) as an alternative business so that it takes a different form but has the same goal, namely the delivery of goods with complete export and import documents. another alternative is to invest in the indonesia stock exchange in transportation and warehousing issuers. although they are different in form and function, they have the same goal of making money flow through the logistics sector. look at alternative industries. path 1 path 6 always participate in involve the trend outside in line with the time path 2 look at the strategic group new value and cost path 5 date function orientation path 3 define buyer group see complementary services path 4 strategy formulation 1. canvas strategy 2. four-step framework 3. formulate blue ocean strategy 4. execute blue ocean strategy generate value innovation conclusion journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 18-27 applying errc of blue ocean strategy: a value innovation for contracting carrier company study case in indonesia ahmad sugiono, agus rahayu, lili adi wibowo issn 2776-9658 (online) │ 23 identification of alternative strategic groups igl, which focuses on activities as a contractual carrier, can be classified as a partial service with minor integrated service. the main focus for targeting customers is to make the best use of selecting the right incoterm group from the transporter side for both export and import activities. identification of alternative buyer groups at this stage, the chain of buyers (purchaser and user) of igl is a freight forwarding company that focuses on purchasers and users as a chain of buyers. both concerning services have a role that is not much different. the purchaser here is positioned as part of the export-import company as the base customer. in contrast, the user is set as a company engaged in the same field but entrusts part of the goods to be sent to a particular destination point. identification of alternative products and services at this stage, it can be observed that the complementary product and service offerings of igl as a player in the freight forwarding industry. in the delivery of export and import goods to ensure that the goods can be received in good condition, insurance is essential. on the other hand, importers are reluctant to take care of their administration to insurance companies. utilizes this opportunity—igl in providing alternative services to its customers. in addition, under name services for exporters and importers who do not have permits are also another alternative that can be provided. identification of alternative industry attractive orientations approach and education by human resources at igl, with experience and international certification in logistics, is consistently able to provide convenience in transactions and become a loyal customer. steps for blue ocean strategy activities strategy canvas formulation no competency factor igl competitor 1. price 0.72 0.54 2. information and technology 0.48 0.64 3. safety 0.60 0.80 4. customs broker 0.45 0.45 5. human resource 0.48 0.64 6. overbrengen speed 0.60 0.45 table 1. comparison of competition factors of igl with competitors in table 1 can be described the condition of the competence of igl with current competitors. we can explain the value curve that forms the basis of the strategy canvas that explains its situation related to its competencies (figure 2). journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 18-27 applying errc of blue ocean strategy: a value innovation for contracting carrier company study case in indonesia ahmad sugiono, agus rahayu, lili adi wibowo issn 2776-9658 (online) 24 │ figure 2. canvas strategy from figure 2, it can describe that the two value curves of igl and competitors tend to have the same basic form. it shows that the strategies they are currently pursuing grow to be homogeneous but with different offering levels. it can describe an exchange between the costs incurred and the value obtained by the customer (trade-off). igl with lower tariffs offers advantages on other factors, while the opposite happens to other companies, namely applying higher prices but having key factors below igl. formulation of the four-step framework and errc scheme the four-step framework at igl consists of: 1. factors that must eliminate: customs brokers. 2. factors to reduce: price and speed overbrengen. 3. factors that must be improved: information technology, security, and competence of human resources. 4. factors that must create: agency and warehousing. the steps above can describe in the strategy canvas (picture 3), which has a new value and is the blue ocean. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 18-27 applying errc of blue ocean strategy: a value innovation for contracting carrier company study case in indonesia ahmad sugiono, agus rahayu, lili adi wibowo issn 2776-9658 (online) │ 25 figure 3. canvas strategy based on figure 3, it can see that there is a difference with figure 2; this is due to the addition and reduction of activities in the company. blue ocean strategy adopts a unique thing because value and cost can go hand in hand to optimize existing resources and focus on their primary business, namely as a contractual carrier. errc scheme at igl can be briefly described in the following table. eliminate • customs brokers service raise • ict • safety • human resources reduce • price • speed of overbrengen create • agency • warehousing table 2. errc scheme at igl strategy formulation identify a series of strategies igl are as follows: 1. eliminate and reduce at this strategic stage, igl abolished customs brokers service because their activities required a high cost and risk but only provided insignificant benefits. by focusing on becoming a contractual carrier, the cost allocation can be optimized and capture other more prospective opportunities with more controlled risks. in addition, prices also need attention because customer profiling is relatively insensitive to price changes as long as the services provided are good and the security of the goods is maintained. 2. improve and create at this strategic stage, igl improves information technology, human resources, and goods security. along with technological developments in the current 4.0 era wherein the logistics sector uses blockchain and platform-based has stated before, it is necessary to develop human resources. currently, the national logistics ecosystem will be launched and requires logistics sector players to participate in the platform. investments in information technology are made so that they not only follow trends but are also able to journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 18-27 applying errc of blue ocean strategy: a value innovation for contracting carrier company study case in indonesia ahmad sugiono, agus rahayu, lili adi wibowo issn 2776-9658 (online) 26 │ create independent platforms that are integrated with government platforms. in addition, investment in technology and information will increase the level of security of goods. in contrast, in the warehouse, and until the goods are sent through tracing and tracking activities. from the blue ocean strategy theory, that focus is one thing that has high blue ocean potential for this igl focuses on services as a contractual carrier and leaves the customs service business. this issue is possible because the customs service business requires high operational costs for bailouts for importers, extended payment terms, and increased risk. by focusing on becoming a contractual carrier, it will be able to reduce costs and be allocated to strengthen other sectors, namely warehousing. warehousing is significant in supporting activities as a contractual carrier and being able to reduce costs incurred. another thing that creates was the agency's collaboration with partners abroad, especially those with their cargo (freehand shipment import and nominated shipment export). with the incoterm clause, it is possible to get the order from an attractive and aggressive agent in the market to increase market expansion and reduce existing price competition. conclusion & further research conclusion results of the analysis and discussion that have been carried out, can be concluded as follows: focus in this focus strategy, not all logistics services are carried out but focus on the core business, namely as a contractual carrier. divergence divergence is a movement away from competitors. it offers things that competitors do not offer. in this case, the company carries out various activities that add a competitive advantage, such as: 1. creating agents abroad who have their cargo (increasing the number of freehand shipments imported and increasing export nominations from partners abroad. 2. concentrate on warehousing to support the main business as a contractual carrier to reduce other costs that arise. motto a good strategy has a clear and compelling motto. igl is committed to becoming the largest professional international freight forwarding and consolidator known for its friendly, fast, safe and flexible service with a network spread throughout the world. igl has a motto that is the right partner for your business. research limitations this study only applies to one company. further research is recommended to conduct research on other companies. this study can be used to help companies find ways to compete and avoid red oceans. it also contributes scientifically to the blue ocean strategy. suggestions based on the conclusions that have been stated above, then on this occasion, the author tries to provide suggestions as follows: 1. with a focus on the core business, namely as a contractual carrier, it can improve services and add new customers, both cargo owned by itself and owned by partners from abroad. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 18-27 applying errc of blue ocean strategy: a value innovation for contracting carrier company study case in indonesia ahmad sugiono, agus rahayu, lili adi wibowo issn 2776-9658 (online) │ 27 2. so that igl can offer contractual carrier services to non-customers so far, namely other freight forwarding companies, to become master consolidators with a larger market share. 3. with the motto "the right partner for your business," igl can continue to improve the services provided to customers through the values approach developed through the errc process. acknowledgment the researcher would like to thank the leaders and staff of igl for the opportunity and willingness to help during this research. references asosiasi logistik indonesia (ali). arah pengembangan teknologi logistik. materi seminar. jakarta, 2010. c.k. 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(1994). strategic management journal. wiley online library. dinda, sanya. (2020). tiki cetak pertumbuhan 15%, industri logistik bangkit 2021.https://investor.id///business/industri-logistik-bangkit-2021. fauzan, jayanti. (2015). strategi pemasaran untuk meningkatkan volume penjualan dengan menggunakan blue ocean strategy model pada usaha sanjai nitta bukittinggi. garry, hamel, c.k. prahalad. (1994). strategy as a field of study: why search for a new paradigm ? prahalad, c. k., & hamel, g. (2007). strategy as a field of study: why search for a new paradigm? strategic management journal, 15(s2), 5–16. hamijaya, indriyani. (2014). perumusan blue ocean strategy sebagai strategi bersaing pada perusahaan keluarga pt. belirang kalisari. https://www.mordorintelligence.com/industryreports/indonesia-freight-logistics-market-study. kim, changsu yang, kyung hoon kim, jaekyung. (2008). a strategy for third-party logistics systems: a case analysis using the blue ocean strategy kim, w.c., mauborgne, r. (2017), blue ocean shift (indonesian edition: pergeseran samudra biru). indonesia, gramedia pustaka utama. melinda, sarah, a., abdillah, yusri. (2018). penerapan blue.ocean strategy (bos)dalam usaha memasuki pasar internasional (studi pada umkm pricilla jilbab bolak balik). prita suci nurcandrani, ade tuti turistiati, sefy andhriany, dinda intan nurulina. (2020). blue ocean strategy (bos) public relations of kampung wisata baluwarti surakarta in developing village branding. sadiq, saba amjad, muhammad saad rafique, muhammad zeeshan hussain, shafqat yasmeen, uzma khan, mohammad aamir. (2021). an integrated framework for lean manufacturing in relation with blue ocean manufacturing a case study. utaminingsih, i.a. (2011). rancangan strategi samudra biru pt. silkargo indonesia, journal of management and business review,8(1), pp. 15-33 utaminingsih, ina astari. (2017). rancangan strategi samudera biru pt. silkargo indonesia samudera indonesia group (2010 2014) available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 2 number 1 (2022): 54-62 corresponding author swesti mahardini, swestimahardini@gmail.com doi: 10.31098/jgrcs.v2i1.904 research synergy foundation an analysis of the effect of online banking on bank performance in indonesia swesti mahardini1, santi kurnia1, yusuf maura1, pandu haryanto1, yohn piter barus1 1 management department, sekolah tinggi ilmu ekonomi yai, indonesia abstract technology has become a necessity, including in financial institutions which are the backbone of economy, it can help to improve service delivery, simplify investigations, improve banking performance, and save transaction time. it is expected that the bank can expand its services not only limited to receiving and sending cash. as a result, it is very important to assess the performance of banks as they are in a critical position of the globalization period. the study aims to analyze the effects of internet banking, mobile banking, and automated teller machines on bank performance as measured by asset returns, from commercially listed banks in indonesia. the study uses quantitative methods and panel data analysis. the study used secondary data in the form of company annual reports. the samples used purposive sampling methods from the banking industry that met the criteria and were listed on the indonesia stock exchange. data analysis uses multiple regression methods. the tool used is eviews 10 statistics program. the results showed internet banking had a significant negative effect, mobile banking and atm have a significant positive effect on bank performance. overall internet banking, mobile banking, and atm simultaneously have a significant effect on banking performance. the study limits 36 samples of commercial banks registered in 2016-2020 and there are 3 independent variables and 1 dependent variable in analyzing bank performance. the study explains that not all banks implement a comprehensive internet banking in alternate of mobile banking. keywords: bank performance, asset return, internet banking, mobile banking, atm this is an open access article under the cc–by-nc license introduction a bank is a company that gathers money from the public in the form of savings and then distributes it to the public in the form of credit and/or other forms so as to raise people's living standards. in today's financial environment, using technology has become a must. because of the demand for quick information, banks must develop technologies that can help them enhance their banking performance. with the rise in online banking customers, banks are expected to expand their services beyond just receiving and delivering cash. consequently, banks' financial performance is critical to assess, given their critical position in the period of globalization. performance is defined as the achievement of a goal from a specific activity or task in order to achieve corporate goals as measured by standards. financial performance is an important aspect of overall performance (sartorno, 2011). according to rudianto (2013) financial performance refers to the outcome or success of corporate management in efficiently managing firm assets through time. the firm requires financial performance in order to identify and evaluate the company's level of success based on its financial operations. as the number of online banking customers per bank rises, as seen by the decline in the number of branch locations at commercial banks, banking performance will improve. good banking performance indicates that the amount of assets in the bank will grow, as will the profits have earned. http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 54-62 an analysis of the effect of online banking on bank performance in indonesia swesti mahardini, santi kurnia, yusuf maura, pandu haryanto, yohn piter barus issn 2776-9658 (online) │ 55 technological developments are incredibly powerful in today's society, and financial institutions are the economy's backbone. it is hard to ignore the fact that technology developments are affecting the banking industry. banks use cutting-edge technology and methods to learn about their clients' preferences so that they can deliver tailored goods and services. technology helps financial institutions because it simplifies investigations, saves time, and enhances service delivery. technology also helps firms meet the needs of urban people in areas such as health care, library resources, education, and networking networks, among other things. calculating the impact of automation in the banking business is difficult. with the rising importance of technology, the developed world will gain in several ways. referring from the study of ogutu (2019), the use of telephone networks and the internet to deliver a wide range of value-added services to commercial bank clients is known as online banking. sadr (2013) has defined online banking as a rapidly growing service that allows customers to utilize a device to access account-specific data and perhaps make transactions from a remote location, such as their home or place of business. according to abaenewe (2013), online banking is the practice of electronic banking, which entails the use of information and communication technology to help banks achieve their current and long term goals. hawke (2003) has also reaffirmed that providing retail and low-value banking goods and services over electronic networks, as well as providing high-value electronic payments and other electronically distributed wholesale banking services, falls under the definition of online banking. the author concluded after reviewing several previous studies that online banking is essentially the application of technological advancements to banking products and services via electronic channels, which can potentially assist customers in conducting transactions at a more convenient time and location. in this study, the definition of online banking according to abaenewe (2013) and sadr (2013) are more applicable and match with the research. indonesian banks, like those in other countries, have recently adopted online banking systems to keep up with technological advancements. according to fatimah (2018), indonesian banks have been compelled to incorporate digital into their business strategies as a result of digital transformation. banks belonging to the bank pembangunan daerah (bpd), joint venture banks, central banks, state-owned banks, and sariah banks are among the banks in indonesia that have incorporated digital initiatives into their business strategies. as is the case globally, indonesian bankers are focusing their digital efforts on consumer banking products and/or services and the mass customer market. any of the banking products currently available in indonesia demonstrates how indonesian banks have succeeded in focusing on customer service enhancement throughout the customer lifecycle. according to sugiarto (2012), only about 20% of indonesia's approximately 130 national private commercial banks have truly invested in modern payment traffic service and administration. serious and modern workers design their services in such a way that users can access them quickly, independently, and securely, from any location and at any time. as a result, the banking industry has embraced the use of information technology, specifically the internet, to provide services to its customers, dubbed online banking or e-banking. technological advancements have had a profound effect on every aspect of daily life in indonesia, including the banking industry. internet banking is a relatively common application of information technology in today's banking business. three factors influence the decision to use internet banking, according to fatimah's (2018) research. when multiple variables were added or subtracted, the predictor was updated by newly generated factors. three new variables have been added: a desire for quality, a sense of security, and a concern for social impact. numerous studies have been conducted on electronic banking and bank performance, for example, kwateng, osei-wusu, and amanor (2020), which examined the results of internet banking on bank journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 54-62 an analysis of the effect of online banking on bank performance in indonesia swesti mahardini, santi kurnia, yusuf maura, pandu haryanto, yohn piter barus issn 2776-9658 (online) 56 │ performance. their conclusion is to focus on integrated banking practices, in which online banking services are integrated into traditional banking methods not as a strategy to build a reputation, but rather as a marketing tool to increase the institution's territorial reach while maintaining service quality. sidhu (2018) also conducted research. the internet banking services offered by sample banks contribute to the banks' financial performance (return on assets and return on equity), and banks must make every effort to assist their customers in using internet banking, thereby increasing their loyalty and confidence and keeping them informed about the products and services available through internet banking. according to a study conducted by el chaarani (2018), investment in internet banking and automated teller machines has a positive effect on bank performance in lebanon. in lebanon, the decision to become a new bank customer is contingent upon the availability of an innovative internet banking system and the presence of automated teller machines in the customer's neighborhood. instead of visiting branches, lebanese customers rely on automated teller machines and internet banking. numerous studies conducted in indonesia have examined e-banking in the country. for example, according to a study conducted by sinambela (2017), providing online banking services has no significant impact on a bank's financial performance as measured by return on assets and return on equity. fatimah (2018) conducted an analysis of the factors influencing the decision to use internet banking in indonesia and discovered that three factors influence the decision to use internet banking: performance expectancy, trust, and social influence. margaretha (2015) also conducted an analysis of the effect of banking services on bank profitability. the banking sector is one of the most vital sectors in the industry, contributing significantly to indonesia's economic growth, which is why this study is critical. literature review return on assets return on assets is a measure of profitability. this ratio is frequently highlighted in financial statement analysis because it demonstrates a company's profitability. according to brigham (2001), the ratio of net income to total assets indicates the after-tax return on total assets. according to van horne (2005), return on assets is a metric that indicates an organization's overall effectiveness in generating profits from its available assets, or its capacity to generate profits from invested capital. riyanto (2001) defined return on assets as the capacity of total assets to generate net profits. he meant net profit after taxes. mobile banking according to barnes (2003), mobile banking is a portal that connects a customer to a bank via a mobile computer, such as a mobile phone, tablet, or personal digital assistant. mobile banking is one of the more recent additions to a growing list of popular mobile banking services. finland was the first country to implement m-banking; clients were able to pay bills and check account balances using a cell phone (based on the gsm-global standard for mobile-networks). according to shaikh (2015), the demand for mobile banking services has increased as a result of increased mobile use, prompting an increase in the number of banks, microfinance institutions, technology firms, and service providers to offer this revolutionary service, as well as new lines of goods and apps designed to broaden their consumers' reach. internet banking customers can use internet banking to conduct a variety of banking transactions remotely via the bank's website. when internet banking was first introduced, it was primarily used to display data on journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 54-62 an analysis of the effect of online banking on bank performance in indonesia swesti mahardini, santi kurnia, yusuf maura, pandu haryanto, yohn piter barus issn 2776-9658 (online) │ 57 banks' websites in order to sell their products and services (tan, 2000). in december 2005, global internet connectivity surpassed 1,018 million users, owing to the growth of new markets for internet-based services such as online banking. since the turn of the twenty-first century, internet banking has grown exponentially in a number of countries, transforming traditional banking practices. by offering internet banking services, traditional financial institutions hope to reduce operational costs, improve consumer banking services, attract consumers, and increase customer share (lichtenstein, 2006). after the internet bubble burst in early 2001, many people speculated that internet service provider opportunities had vanished. internet banking is distinct from electronic banking (e-banking) in that it is a higher level of activity that encompasses not only internet banking but also telephone banking, automated teller machines, wireless application programming interface (wap) banking, and other non-internet electronic payment facilities (cheng, 2006). several factors influenced the development of internet banking. automated teller machine adeoti (2011) defined an automated teller machine as a cash dispenser that enables customers to interact with a bank teller without physically approaching one (cashiers). as a result, the automated teller machine takes on the role of bank cashiers and other counter personnel. it is remotely controlled and immediately responds to a customer's query. banks and depositors may both benefit significantly from automated teller machines. depositors can use computers to authorize cash withdrawals outside of normal banking hours and locations. meanwhile, automated teller machines would reduce the cost of services such as depositor requirements by automating previously manual processes. banks exchanging automated teller machines in order to enable other bank depositors to access their accounts via the automated teller machine of another bank double potential earnings (mcandrews, 2003). according to numerous authors, automated teller machine systems have a beneficial effect on bank performance and customer service (el chaarani, 2018). it is regarded as an important technique for achieving high levels of efficiency and operation at a low cost. due to advancements in automated teller machines, kenya's banking sector now has an incredible opportunity to increase efficiency and customer satisfaction. research method quantitative research is the term used to describe this sort of study. the population for this study consisted banking industries listed on the indonesia stock exchange, with a total of 180 firms, and the research period was from 2016 to 2018. the research will be undertaken on a number of indonesian banks that have been listed on the indonesia stock exchange between 2016 and 2020, have employed online banking, and have included the amount of internet banking, mobile banking, and automated teller machine services on their financial statements. the data criteria needed in this study are as follows, namely, banking industries that are consistently listed on the indonesia stock exchange during 2016 to 2020, banking industries that have been audited from 2016 to 2020 and have book closure dates that expire on december 31 for one accounting cycle, a banking industry that publishes financial statements with a value of idr in 2016 to 2020. this study employed secondary data from secondary research. the information originates from yearly financial reports of banks registered on the indonesia stock exchange, which may be found at www.idx.co.id and the company's website. the data analysis method utilized in this study will be carry out thorough analysis given in number, the calculations performed with statistical methods using the program eviews 10. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 54-62 an analysis of the effect of online banking on bank performance in indonesia swesti mahardini, santi kurnia, yusuf maura, pandu haryanto, yohn piter barus issn 2776-9658 (online) 58 │ findings and discussion findings in testing the hypothesis, the regression coefficient significance will be tested individually partial test (t test), fit model test (f test), and the coefficient of determination analysis will be carried out. the statistical values of the t test, f test, and the coefficient of determination can be seen in table 1. table 1. t test, f test, and coefficient of determination source: data processed with eviews 10, 2021 partial test (t test) 1st hypothesis: internet banking has an effect on return on assets according to the t-test table above, the probability of internet banking having an effect on the return on assets variable is 0.010.05, while the t-count value is 2.59 > t table (1.97), indicating that h0 is rejected but h1 is not, indicating that internet banking has an effect on return on assets. 2nd hypothesis: mobile banking has an effect on return on assets according to the t-test table above, the effect of mobile banking on return on assets is 0.00750.05, while the t-count value is 2.70> t table (1.97), where h0 is rejected but h1 is not, indicating that mobile banking has an effect on return on assets. variable coefficient std. error t-statistic prob. ibi_x1 -0.814668 0.313573 -2.598017 0.0102 mbi_x2 0.845069 0.312438 2.704762 0.0075 atm_x3 0.106947 0.050564 2.115076 0.0358 c 0.435998 0.208804 2.088079 0.0382 effects specification s.d. rho cross-section random 0.499614 0.2351 idiosyncratic random 0.901271 0.7649 weighted statistics r-squared 0.427485 mean dependent var 0.126808 adjusted r-squared 0.269423 s.d. dependent var 0.937660 s.e. of regression 0.910573 sum squared resid 145.9292 f-statistic 4.602716 durbin-watson stat 1.832398 prob(f-statistic) 0.039703 unweighted statistics r-squared 0.564324 mean dependent var 0.201959 sum squared resid 190.8541 durbin-watson stat 1.401071 journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 54-62 an analysis of the effect of online banking on bank performance in indonesia swesti mahardini, santi kurnia, yusuf maura, pandu haryanto, yohn piter barus issn 2776-9658 (online) │ 59 3rd hypothesis: automated teller machine has an effect on return on assets according to the t-test table above, the effect of automated teller machines on return on assets is 0.030.05, while the t-count value is 2.11 > t-table (1.97), indicating that h0 is rejected but h1 is not, indicating that automated teller machines do have an effect on return on assets. fit model examination (f test) according to the table above, the calculated f value exceeds the table f value (4.6 > 2.66), with a significance level of 0.039 0.05. thus, h0 is rejected, but h1 is accepted, indicating that internet banking, mobile banking, and automated teller machines all have an effect on return on assets when tested concurrently or in combination. coefficient of determination test the coefficient of determination (r2) is used to determine how well the independent variable can affect the dependent variable. 0 and one are the coefficients of determination. the capacity of the independent variables to explain the variance of the dependent variable is severely reduced when the r2 value is low. the r squared value of the random effect technique is 0.42 or 42.8%, as seen in the table of findings above. this graph demonstrates how online banking, mobile banking, and automated teller machines all have a significant impact on return on assets, with the remaining 57.2% impacted by variables outside of this research or the error value. apart from online banking, there are several other factors that might affecting bank performance. study from al shaher (2011) shows that in middle eastern countries, there are several variables that may influence bank performance, including bank characteristics, competitive climate, economic indicator, regulatory and legal environment, country risk. there is also study from jaouad (2018) that examines the effect of return on assets on the performance of moroccan banks. the analytical findings revealed that, with the exception of operational management efficacy, defined by the cost-toincome ratio, and bank size, all the independent variables are statistically negligible. discussion in relation with the hypothesis testing, the following is an explanation of the research on internet banking, mobile banking, automated teller machine on return on assets of banking industries listed on the indonesia stock exchange from 2016 to 2020. internet banking to return on assets based on table 1, the results of the test showed a mobile banking regression coefficient of -0.81 and has a significance value of 0.01 smaller than sig. 0.05, that means it has significant effect. so, can be concluded that internet banking has a negative significant effect on return on assets in banking industries listed on the indonesia stock exchange (idx) of 2016-2020 period. this means that any advancement in internet banking services will have a no impact on return on assets. the reason for this might be because not all banks have implemented a comprehensive internet banking system in place of mobile banking. in addition, the author also analyzes that internet banking has many weaknesses, one of which is that it must be accessed through a third party application namely a web browser, so that few customers access it due to the weakness of the security system when browsing directly through the internet on internet banking. this is in line with the research from (sinambela, 2017) journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 54-62 an analysis of the effect of online banking on bank performance in indonesia swesti mahardini, santi kurnia, yusuf maura, pandu haryanto, yohn piter barus issn 2776-9658 (online) 60 │ mobile banking to return on assets according to table 1, the test resulted in a mobile banking regression coefficient of 0.84 and a significance value of 0.007 less than sig. 0.05, indicating that the effect is significant. as a result, it can be concluded that mobile banking has a significant impact on the return on assets in banking industries listed on the indonesian stock exchange (idx) between 2016 and 2020. inferring that any advancement in mobile banking will result in an increase in return on assets. this is consistent with research by el chaarani (2018) and sidhu (2018), both of which found a positive significant relationship between internet banking and bank performance in jordan and india. this could be because mobile banking is a component of banks' assets; consequently, any advancement in mobile banking results in an increase in return on assets. automated teller machines to return on assets according to table 1, the test resulted in a mobile banking regression coefficient of 0.10 and a significance value of 0.03 less than sig. 0.05, indicating that the effect is significant. as a result, it can be concluded that automated teller machines have a significant impact on the return on assets in banking industries listed on the indonesian stock exchange (idx) between 2016 and 2020. these findings are comparable to those of el chaarani (2018), who examines how lebanese banks, and in this case, indonesian banks, are attempting to improve their e-banking systems in order to stay current with technological advancements. in this context, the more automated teller machines a bank owns, the better its performance. this also supports ogutu's (2019) conclusion that automated teller machines have a significant impact on banks' return on assets. return on assets through internet banking, mobile banking, and automated teller machines according to the table 1, the f-statistic value is 4.6 and the f-statistic probability value is less than the alpha (0.05) value of 0.03 0.05, indicating that internet banking, mobile banking, and automated teller machines all have an effect on the return on assets of banking companies listed on the indonesian stock exchange (idx) between 2016 and 2020. the r-square determination coefficient is equal to 0.42. this indicates that 42.8 percent of return on assets is influenced by internet banking, mobile banking, and automated teller machines, while the remaining 57.2 percent is influenced by variables not included in the regression model. according to a study conducted by jaouad (2018), operational management efficacy, as measured by the cost-to-income ratio, and bank size may be additional variables affecting bank performance despite the presence of online banking. conclusion based on the analysis and discussion in the preceding chapter, the researcher concludes that internet banking has a significant negative effect on return on assets with a coefficient of -0.81 and a significance value of 0.01. with a coefficient of 0.84 and a significance level of 0.007, mobile banking has a significant effect on return on assets. with a coefficient of 0.10 and a significance value of 0.03 on return on assets, automated teller machines have a significant effect on return on assets. internet banking, mobile banking, and automated teller machines all have a significant effect on return on assets, with an f-statistic of 4.6 and a probability of 0.03 for the f-statistic. it can be concluded that online banking has a significant impact on bank performance, indonesian banks are expected to enhance their e-banking systems to keep up with technological advancements. in this context, the more internet banking, mobile banking, and automated teller machines a bank has, the better. additionally, the findings indicated that internet banking, journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 54-62 an analysis of the effect of online banking on bank performance in indonesia swesti mahardini, santi kurnia, yusuf maura, pandu haryanto, yohn piter barus issn 2776-9658 (online) │ 61 mobile banking, and automated teller machines all have an effect on asset returns, which is consistent with previous research. limitation & further research this study has limitations that should be taken into account for future research in order to obtain more accurate results. this study has limitations, in this investigation the determination coefficient (r2) appears to be moderate. then, for additional research, variables relating to bank performance should be included. this study included only 36 companies that met the criteria for 2016-2020, but it is expected that additional studies will include the year of observation to provide a more complete picture of the impact of each variable. this study examines three independent variables, but there are numerous others that can affect bank performance. additionally, this study uses only one dependent variable to measure bank performance, whereas there are numerous variables that can be used to measure bank performance. after conducting this research, the author wishes to make some recommendations to various parties for future research. for banks to increase internet banking promotion in order to increase profit, as well as to significantly improve the mobile banking system because it has the potential to improve bank performance in the future, and to promote mobile banking use so that customers have a better understanding of the service. for current and prospective investors to ascertain whether banks have implemented an e-banking system, as banks must keep up with technological advancements, particularly in the financial sector, and to obtain additional information from banks in order to determine whether to continue investing or to begin investing. for government to pay closer attention to technological advancements and to keep the rules governing the electronic banking system current. references abaenewe, z. c. (2013). electronic banking and bank performance in nigeria. west african journal of industrial and academic research, 171-187. adeoti, j. o. (2011). automated teller machine (atm) frauds in nigeria: the way out. journal of social sciences, 27(1), 53-58. al shaher, t. k. (2011). the major factors that affect banks’ performance in middle eastern countries. journal of money, investment and banking, 20, 101-109. barnes, s. c. (2003). mobile banking: concept and potential. international journal of mobile communications, 1, 273-288. brigham, e. f., & houston, j. f. (2001). manajemen keuangan. buku 1 edisi 8. jakarta: erlangga. cheng, t. e. (2006). adoption of internet banking: an empirical study in hong kong. decision support systems, 42(3), 1558-1572. el chaarani, h. &. (2018). the impact of technological innovation on bank performance. journal of internet banking and commerce, 23(3), 133. fatimah, e. o. (2018). analysis factors of using internet banking in indonesia. in 3. management and organizational studies, pwc survey: digital banking in indonesia. (pp. 10-15). jakarta: pricewaterhouse coopers. hawke, j. (2003). risk management: principles for eletronic banking. united states: basel committee. jaouad, e. &. (2018). factors affecting bank performance: empirical evidence from morocco. morocco: european scientific journal, 14(34). journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 54-62 an analysis of the effect of online banking on bank performance in indonesia swesti mahardini, santi kurnia, yusuf maura, pandu haryanto, yohn piter barus issn 2776-9658 (online) 62 │ kwateng, k. o., osei-wusu, e. e., & amanor, k. (2020). exploring the effect of online banking on bank performance using data envelopment analysis. benchmarking: an international journal, 137-165. lichtenstein, s. &. (2006). understanding consumer adoption of internet banking: an interpretive study in the australian banking context. journal of electronic commerce research, 7(2), 50. margaretha, f. (2015). dampak electronic banking terhadap kinerja perbankan indonesia. jurnal keuangan dan perbankan, 19(3). mcandrews, j. j. (2003). automated teller machine network pricing-a review of the literature. review of network economics, 2(2). ogutu, m. &. (2019). effect of e-banking on financial performance of listed commercial banks in kenya. global scientific journal, 7(11). riyanto, b. (2001). dasar dasar pembelanjaan perusahaan. rudianto. (2013). akuntansi manajemen informasi untuk pengambilan keputusan strategis. jakarta: erlangga. sadr, s. m. (2013). consideration the effect of e-banking on bank profitability; case study selected asian countries. journal of economics and sustainable development, 4(11), 112-117. sartorno, a. (2011). manajemen keuangan teori dan aplikasi. yogyakarta: bpfe. shaikh, a. a. (2015). mobile banking adoption: a literature review. telematics and informatics, 32(1), 129-142. sidhu, m. k. (2018). the impact of internet banking on bank performance: empirical evidence from indian bank. journal of commerce & accounting research. sinambela, e. &. (2017). pengaruh penyediaan layanan internet banking. forum keuangan dan bisnis indonesia (fkbi), 87-94. sugiarto, a. (2012). adopsi internet banking bagi keunggulan performa perbankan: sebuah studi pada sektor perbankan di indonesia. jurnal dinamika akuntansi, 4(1). tan, m. &. (2000). factors influencing the adoption of internet banking. journal of the association for information systems, 1(1), 5. van horne, j. c., & wachowicz, j. m. (2005). fundamentals of financial management. pearson education. microsoft word 1161 supitriyani available online at: https://journals.researchsynergypress.com/index.php/jgrcs journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 2 number 2 (2022): 56-66 corresponding author supitriyani supitriyani, vitriql@gmail.com doi: https://doi.org/10.31098/jgrcs.v2i2.1161 research synergy foundation determining factors for sharia stock investment decisions that have an impact on value recovery companies during a pandemic supitriyani supitriyani1, musa fernando silaen2, marto silalahi3 1 accounting departement, sekolah tinggi ilmu ekonomi sultan agung, indonesia 2 management departement, sekolah tinggi ilmu ekonomi sultan agung, indonesia abstract due to the company's ongoing global expansion, numerous investors are competing to invest their money in it. the purpose of this is to get ready for the future. the stock prices of numerous companies have fallen as a result of the covid-19 pandemic. but this actually causes islamic stocks to rise gradually until they finally experience an increase in investors each year. in order to help investors who are considering investing in sharia-based companies, this study aims to test the effects of the determinants of the determinants of sharia stock investment decisions on company value. purposive sampling with nonprobability sampling was used for the sampling technique. the method used for quantitative descriptive analysis in this study is multiple linear regression analysis. the conclusions in this study show that investment opportunities, profitability, debt policy and dividend policy have a significant effect on the value of the company simultaneously and partially the investment opportunity, profitability and debt policy have a significant effect on the value of the company while the dividend policy does not have a significant effect on the value of the company in the jakarta islamic index. keywords: investment opportunity; profitability; dividend policy; debt policy; company value this is an open access article under the cc–by-nc license. introduction the company's growth globally continues to increase every year both in terms of increasing the population and economic growth. with this development, many investors are competing to invest their funds into companies that are considered competent. despite being affected by covid-19, islamic stocks are slowly able to bounce back until the number of investors increases every year. based on ksei data (fathony, 2020), the number of investors in november 2020 reached 3.5 million investors, an increase of 47 percent compared to 2019 of 2.4 million investors. based on data from the ojk (intan and hidayat, 2021), the number of sharia stocks listed on the indonesia stock exchange (idx) has continued to increase every year for 10 years from 2011 to november 2020. the number of sharia shares increased by 85% to 469 shares when compared to the number of shares in 2011 of 253 shares. meanwhile, indonesia's sharia stock investors reached 102,426 investors or an increase of 734% in the last five years with an activeness rate of 30.7%. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 56-66 determining factors for sharia stock investment decisions that have an impact on value recovery companies during a pandemic supitriyani supitriyani, musa fernando silaen, marto silalahi issn 2776-9658 (online) │ 57 source : (fathony, 2020) figure 1. sharia stock index in 2020 the increase in the number of investors in sharia stocks is also inseparable from the role of regulators and educators in providing literacy and education related to the islamic stock market. even though in the midst of the covid-19 pandemic, the number of investors in islamic stocks continues to increase. in addition, technological developments are also one of the factors in the development of the capital market industry, especially in terms of simplifying account opening (fathony, 2020). investors increasingly need to understand what determining factors can be taken into account when making investment decisions, including in terms of investment opportunities, profitability, debt policies, and dividend policies adopted by the islamic stock company. this is the problem with this research. as a result, once it is known that the primary factor influencing investment choices is the expectation of an increase in the company's value, the market price of the company's shares on the indonesia stock exchange can be seen as reflecting this expectation. the form of share price can be realized in the form of company value. the value of an enterprise is a measure given to a company whether it is in good condition or not. a company that is getting better is a company that has higher corporate value (supitriyani et al., 2020). the results of this study are in line with rajagukguk et al (2019), ahmad et al (2020), tambunan et al (2019), ayu yuniastri et al (2021), kurniawan (2020), and amaliyah and herwiyanti (2020), research statements of "investment opportunities, profitability and debt policy have a significant effect on the value of the company while dividend policy has no significant effect. but the update of the previous researcher is that this study uses all investment decision factors as free variables, different research objects and the time of the research carried out is during the covid-19 pandemic which is still relevant today so that it is very useful for investors in making decisions when making investments in the future, especially in sharia companies, namely the jakarta islamic index company. literature review investment decisions investment decisions are an alternative to improve welfare in the future by placing and allocating a certain amount of funds owned for an activity in order to make a profit. the selection of the right investment will bring a person in better future planning (prasetyo and manongga, 2019). the investment made by the company aims to make a profit in the long term, so the decisions made must consider risk factors. careful investment decision making by the company will be able to increase the journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 56-66 determining factors for sharia stock investment decisions that have an impact on value recovery companies during a pandemic supitriyani supitriyani, musa fernando silaen, marto silalahi issn 2776-9658 (online) 58 │ assets of the company owned and will also have an impact on optimal company performance (kurniawan, 2020). investment opportunities investment opportunities have one of the main aspects, namely capital investment. the decision on the allocation of capital into an investment proposal must be evaluated and linked to the risks and expected results. investment decisions will affect the company's wealth structure, namely the comparison between current and fixed assets (amaliyah and herwiyanti, 2020). profitability profitability is the company's ability to make a profit by using its resources (supitriyani et al., 2020). in addition, from profitability, it can be known whether the company's operational activities have been running smoothly or not. shares issued by companies with a high level of profitability tend to be more in demand by investors, so the company's stock price will rise (yuniastri et al., 2021). dividend policy dividend policy has its own influence on a company, because it concerns the distribution of operating returns on investments invested in the company, the distribution of dividends that are high and as expected, is actually able to increase the value of the company. dividends are the reason for investors when investing in their investments. investors have the main purpose of dividends, which is to improve their welfare by expecting dividends from a company (kurniawan, 2020). the greater the dividend distributed indicates the profit of a large company and investors will be interested in making investments indicated by buying shares of the company and in the end a company that has good managerial performance including planning, supervision, coordination, evaluation and investigation is considered profitable and of course the assessment of the company will be better as well, this indicates that the value of the company is high in the eyes of investors (yuniastri et al., 2021). debt policy debt policy is the company's policy in determining the proportion of debt funding to finance the company's needs (rajagukguk et al., 2019). the financial structure of the company is a composition of the level of debt and equity owned by the company (ahmad et al., 2020). debt policy is a funding policy that comes from external (tambunan et al., 2019). debt policy must be managed appropriately because if the proper use of debt will increase the value of the company. company values company value is used to measure the success of the company because with the increase in the value of the company, the prosperity of the company owner and shareholders will also increase (simanjuntak et al., 2019). the value of the company can be a consideration for potential investors who want to invest funds in the company (amaliyah and herwiyanti, 2020). a company that is getting better is a company that has a higher and higher corporate value (supitriyani et al., 2020). the value of the company can also be determined by investment decisions. internal factors affecting the value of the company are: investment decisions, funding decisions, asset management decisions and value creators (horne and wachowiccz, 2012). journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 56-66 determining factors for sharia stock investment decisions that have an impact on value recovery companies during a pandemic supitriyani supitriyani, musa fernando silaen, marto silalahi issn 2776-9658 (online) │ 59 hypothesis based on theoretical explanations and the results of empirical studies that have been previously described, hypotheses can be stated in this study as follows: h0 = investment opportunities, profitability, debt policy and dividend policy does not have a significant effect on the value of the company simultaneously and partially. ha = investment opportunities, profitability, debt policy and dividend policy have a significant effect on the value of the company simultaneously and partially. previous research some of the previous studies that are the basis for conducting this research can be described as follows: rajagukguk et al (2019) shows results of his research that t profitability, company size, and debt policy significantly influence the value of the company, while investment decisions do not affect the value of the company; and (gatot nazir ahmad et al., 2020) the results of his research showed that a decision on investment with a per proxy has a significant positive effect on company value, a settlement decision with a der proxy does not have a significant negative effect on company value, dividend policy with dpr proxies does not have a significant negative effect on company value, and the size of the board of commissioners has a significant positive effect on company value (pbv). moreover, tambunan et al (2019) findings of his study indicated that the investment decision has a significant positive impact on firm value, indicating a partial positive relationship between capital structure variable and firm value. policy debt does increase the value of construction company stock listed on the bei from 2014 to 2018.; and ayu yuniastri et al (2021) results of his research showed that profitability has no effect on the value of the company, the dividend policy has no effect on the value of the company, the investment policy positively affects the value of the company, the capital structure has no effect on the value of the company, and the size of the company negatively affects the value of the company. to add, kurniawan (2020) research showed that investment decisions have a significant effect on firm ve. funding decisions and dividend policies do not significantly influence the value of the company. together these independent variables have a significant effect on the dependent variable; whereas amaliyah and herwiyanti (2020) results of their research showed that t investment decision, company size, funding decision, and dividen policy are not significant to the value of the company. research method data collection techniques the data sources used in this study are secondary data, namely data sourced from the company's financial statements on the official website of the indonesia stock exchange and other sources. the data collection technique used is the documentation technique. this documentation technique is carried out by searching for data through books, financial reports, journals, previous research, electronic media such as stock exchange websites and research object websites. population and sample the population in this study is all companies listed on the indonesia stock exchange as companies listed in the jakarta islamic index (jii) for the 2018-2020 period. the number of companies that became the population in this study was as many as 30 companies. the sampling technique carried out is to use non-probability sampling with purposive sampling technique so that 10 companies are obtained. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 56-66 determining factors for sharia stock investment decisions that have an impact on value recovery companies during a pandemic supitriyani supitriyani, musa fernando silaen, marto silalahi issn 2776-9658 (online) 60 │ data analysis techniques the data analysis technique used are examining classical assumptions, multiple linear regression analysis, correlation coefficients and determinations and testing hypotheses. the classical assumption tests used include: normality test using kolmogorov-smirnov, multicollinearity test using tolerance (tol) and variance inflation factor (vif) values, autocorrelation test using durbin watson test and heteroskedasticity test using scatterplot test. the hypothesis test used is simultaneously test and partially test. findings and discussion test of classical assumptions in this study the authors used the kolmogrov-smirnov normality test using statistical nonparametric calculations. in this normality test, the data is said to be normally distributed if the value of asymp.sig.2 tailed at the output of one sample kolmogrov-smirnov test is above 0.05. tabel 1. residual normality test results unstandardized residual n 30 normal parametersa,b mean 0e-7 std. deviation 4,46597541 most extreme differences absolute ,184 positive ,184 negative -,140 kolmogorov-smirnov z 1,010 asymp. sig. (2-tailed) ,260 source: data processing results (spss 21), 2022 based on the normality test of the kolmogorov-smirnov test one-sample above, it can be seen that the value of asymp. sig. (2-tailed) residual unstandardized variable of 0.260 which means that the residual unstandardized value is greater than 0.05. thus, it can be concluded that the data is standardized with normal distributionbased on the normality test of the kolmogorov-smirnov test onesample above, it can be seen that the value of asymp. sig. (2-tailed) residual unstandardized variable of 0.260 which means that the residual unstandardized value is greater than 0.05. thus, it can be concluded that the data is standardized with normal distribution. the multicholinearity test is used to check that models in regression have a high correlation between free variables. if the regression model produces a high correlation between free variables, the regression model is said to contain symptoms of multicholinearity with tolerance (tol) and variance inflation factor (vif) coefficients. the value used to see multicholinearity is the tolerance value > 0.10. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 56-66 determining factors for sharia stock investment decisions that have an impact on value recovery companies during a pandemic supitriyani supitriyani, musa fernando silaen, marto silalahi issn 2776-9658 (online) │ 61 table 2. multicholinearity test results model collinearity statistics tolerance vif 1 (constant) per ,370 2,702 roa ,334 2,998 dpr ,320 3,125 dar ,971 1,030 source: data processing results (spss 21) it can be known that the toll values of the four variables are above 0.1, namely 0.370, 0.334, 0.320, 0.971 > 0.1 while the vif values of the four variables are less than 10, namely 2.702, 2.998, 3.125, 1.030 < 10. thus the conclusion can be drawn that the regression model has no symptoms of multicolonierity. the heteroskedasticity test that the author used in this study was to use a graph analysis method that observed scatterplot where the horizontal axis describes the standardized predicated value with the vertical axis describing the studentized residual value. if the scatterplot spreads randomly, then it shows that there is no heteroskedasticity problem in the regression method formed. when the scatterplot forms a certain pattern, it indicates a heteroskedasticity problem. source : data processing results (spss 21) figure 2. heteroskedasticity test results in the figure above, it can be seen that the dots are spreading randomly, above or below the zero on the y axis. the autocorrelation test is used to determine the correlation between members of a series of observational data that is deciphered by time (times series) or space (cross section). in this study, the autocorrelation test conducted by the author used the durbin-waston method. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 56-66 determining factors for sharia stock investment decisions that have an impact on value recovery companies during a pandemic supitriyani supitriyani, musa fernando silaen, marto silalahi issn 2776-9658 (online) 62 │ table 3 autocorrelation test results model r r square adjusted r square std. error of the estimate durbin-watson 1 ,949a ,901 ,885 4,81000272 1,983 source : data processing results (spss 21) it is known that the value of durbin – watson amounted to 1,983. based on the durbin – watson table for data of 30 as well as free variables k=4, obtained dl=1.4443, 4-dl=2.557, du=1.7274 and 4du=2.2726. then the durbin-watson test value is in "du<d<4-du" can be decomposed at 1.7274< 1.983< 2.2726. that way it can be known that the results of the autocorrelation test do not have negative positive autocorrelations with the decision not being rejected. quantitative descriptive analysis multiple linear regression the method used for quantitative descriptive analysis in this study is multiple linear regression analysis. multiple linear regression analysis aims to determine whether or not there is an effect of liquidity, profitability, debt policy and dividend policy on the value of the quantitative descriptive analysis company. table 4 multiple linear regression results model unstandardized coefficients standardized coefficients b std. error beta 1 (constant) -25,075 3,062 per ,401 ,131 ,317 roa 76,178 14,522 ,573 dpr 2,853 5,397 ,059 dar 29,147 5,106 ,365 source : data processing results (spss 21) ŷ = -25,075 + 0,401 x1 + 76,178 x2 + 2,853 x3 + 29,147 x4 the regression equation can be interpreted to mean that investment opportunities, profitability, dividend policies and debt policies have a positive influence on the company's value in the jakarta islamic index. correlation coefficient and coefficient of determination analysis of the correlation coefficient is used to determine whether or not the relationship of the value of the company (y) is strong with investment opportunities, profitability, dividend policy and debt policy (x). while the coefficient of determination is useful to know how much the ability of a free variable to explain a bound variable. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 56-66 determining factors for sharia stock investment decisions that have an impact on value recovery companies during a pandemic supitriyani supitriyani, musa fernando silaen, marto silalahi issn 2776-9658 (online) │ 63 table 5 results of analysis of correlation coefficients and coefficients of determination model r r square adjusted r square std. error of the estimate 1 ,949a ,901 ,885 4,81000272 source : data processing results (spss 21) it is known that the value of the correlation coefficient is 0.901. this shows that the relationship between investment opportunities, profitability, dividend policy and debt policy with company value is at a very strong level in the jakarta islamic index. while the determination value shows a figure of 0.885 or 88.50%, meaning that the high low value of the company can be explained by investment opportunities, profitability, dividend policy and debt policy of 88.50% and the remaining 11.50% is explained by other variables or other factors that were not studied in this study. hypothesis test simultaneous test (f-test) this test is performed to test the magnitude of the influence of independent variables and dependent variables together (simultaneously). by using the limit of the significant level of α = 0.05, the decision-making criteria used are as follows: 1) if fcount> ftable or significant value ≤ 0.05 then h0 is rejected 2) if the fcount < fable or significant value > 0.05 then h0 is accepted 3) table 6 test results fcount model sum of squares df mean square f sig. 1 regression 5243,544 4 1310,886 56,660 ,000b residual 578,403 25 23,136 total 5821,947 29 source : data processing results (spss 21) obtained the f-value of 56.660 and using the table f obtained ftable (n)=30, (k)=4 means n-k-1 (30–4–1 = 25) amounting to 2.54. means fcount > ftable or 29,966 > 2.54. the value of sig. = 0.000 < 0.05, then h0 is rejected, the result is investment opportunities, profitability, dividend policy and debt policy have a significant effect on the value of the company in the jakarta islamic index simultaneously. partial test (t-test) this test is performed to test the magnitude of the influence of independent variables and dependent variables respectively (partial). by using the limit of the significant level of α = 0.05, the decision-making criteria used are as follows: 1) if t-count> t-table or significant value ≤ 0.05 then h0 is rejected 2) if the t-count < t-able or significant value > 0.05 then h0 is accepted journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 56-66 determining factors for sharia stock investment decisions that have an impact on value recovery companies during a pandemic supitriyani supitriyani, musa fernando silaen, marto silalahi issn 2776-9658 (online) 64 │ table 7 test results tcount model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) -25,075 3,062 8,189 ,000 per ,401 ,131 ,317 3,055 ,005 roa 76,178 14,522 ,573 5,246 ,000 dpr 2,853 5,397 ,059 ,529 ,602 dar 29,147 5,106 ,365 5,708 ,000 source : data processing results (spss 21) obtained the value of the significance of the investment opportunity variable of 0.000 < 0.05, then h0 is rejected, the result is that the investment opportunity has a significant effect on the value of the company. the value of the significance of the profitability variable is 0.005 < 0.05, then h0 is rejected, the result is that profitability has a significant effect on the value of the company. the value of the significance of the dividend policy variable is 0.602 < 0.05, then h0 receives, the result of the dividend policy has an insignificant effect on the value of the company. while the significance value of the debt policy variable is 0.000 < 0.05, then h0 is rejected, the result of the dividend policy has a significant effect on the value of the company in the jakarta islamic index partially. thus, it can be seen that the results of multiple linear regressions show that investment opportunities, profitability, dividend policies and debt policies have a positive effect on the value of the company in the jakarta islamic index. the results of the coefficient of correlation and determination are obtained that the relationship between investment opportunity, profitability, dividend policy and debt policy with company value is at a very strong level in the jakarta islamic index. hypothesis test with simultaneous test (test f), the results were obtained that investment opportunities, profitability, debt policy and dividend policy have a significant effect on the company's value in the jakarta islamic index company. hypothesis test with partial test (test t), it was obtained that investment opportunities, profitability and debt policy have a significant effect on the value of the company while the dividend policy has an insignificant effect on the value of the company in the jakarta islamic index. conclusion the results of the hypothesis test show that investment opportunities, profitability, debt policy and dividend policy have a significant effect on the company's value in the jakarta islamic index simultaneously. hypothesis test with partial test (test t), it was obtained that investment opportunities, profitability and debt policy have a significant effect on the value of the company while the dividend policy has an insignificant effect on the value of the company in the jakarta islamic index. companies should be able to pay attention to the opportunities created by the market to invest in potential markets in the future, pay attention to the company's ability to generate profits and optimize the use of external financing (third parties) so that it can still pay interest and the company is more optimal in distributing profits to shareholders in the form of dividend distribution in a timely manner. in addition, the company is also expected to understand market conditions such as the company's strengths and opportunities to make a profit and be able to increase the value of the company in the future more optimally. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 56-66 determining factors for sharia stock investment decisions that have an impact on value recovery companies during a pandemic supitriyani supitriyani, musa fernando silaen, marto silalahi issn 2776-9658 (online) │ 65 limitation & further research due to the limitations of the authors, this study still has some weaknesses and has not used all the existing population data. therefore, the authors expect for future research to add or use other factors in restoring company value such as liquidity ratio models, activity and leverage and examine other factors that are beyond the author's control. in addition, researchers can then change variables or increase the year, so that it is hoped that they will get maximum research results in the future. acknowledgments researchers thank the funders of research, supporters of facilities, and manuscript reviewers. researchers thanked the ministry of ristekdikti who had financed this research from start to finish, to lppm sultan agung college of economics which had facilitated the team in conducting research. this research is the result of a national competitive research grant for the master's thesis research scheme of the kemenristek dikti. references amaliyah, f., and herwiyanti, e. (2020). effect of investment decisions, company size, funding decisions and dividend policies on the value of mining sector companies. jurnal penelitan ekonomi dan bisnis, 5(1), 39–51. https://doi.org/10.33633/jpeb.v5i1.2783 ayu yuniastri, n. p., endiana, i. d. m., and kumalasari, p. d. (2021). effect of profitability, dividend policy, investment decision, capital structure and company size on company value in manufacturing companies listed on the indonesia stock exchange for the period 2017-2019. karma: karya riset mahasiswa akuntansi, 1(1), 69–79. fathony, f. (2020). development of sharia stock market in indonesia. prodi (s2) ekonomi syari’ah. http://s2es.uin.ar-raniry.ac.id/index.php/id/posts/perkembangan-pasar-saham-syariah-diindonesia gatot nazir ahmad, rizal lullah, and m. edo s. siregar. (2020). effect of investment decisions, funding decisions, dividend policies, and the size of the board of commissioners on the value of companies in manufacturing companies listed on the indonesia stock exchange for the period 2016-2018. jrmsi jurnal riset manajemen sains indonesia, 11(1), 169–184. https://doi.org/10.21009/jrmsi.011.1.09 horne, james c. van dan john m. wachowiccz, j. (2012). principles of financial management (thirteenth). salemba empat. intan, k., and hidayat, k. (2021). continuing to grow, this is the achievement of the indonesian islamic capital market. investasi, 1. https://investasi.kontan.co.id/news/terus-bertumbuh-ini-capaianpasar-modal-syariah-indonesia kurniawan, m. z. (2020). analysis of investment decisions, funding decisions, and dividend policies on the value of index companies lq-45. ekonika : jurnal ekonomi universitas kadiri, 5(1), 113. https://doi.org/10.30737/ekonika.v5i1.847 prasetyo, t. d., and manongga, a. (2019). analysis of the influence of demographic factors and subjective norms on stock investment decisions. jurnal magisma, vii(2), 71–77. rajagukguk, l., ariesta, v., and pakpahan, y. (2019). analysis of the effect of profitability, company size, investment decisions, and debt policy on company value. jurnal inspirasi bisnis dan manajemen, 3(1), 77. https://doi.org/10.33603/jibm.v3i1.2079 journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 56-66 determining factors for sharia stock investment decisions that have an impact on value recovery companies during a pandemic supitriyani supitriyani, musa fernando silaen, marto silalahi issn 2776-9658 (online) 66 │ supitriyani, febrianty, susanti, e., and sudirman, a. (2020). financial performance factors against firm value with stock prices as moderating. probank : jurnal ekonomi dan perbankan, 5(1), 13–23. https://www.e-journal.stie-aub.ac.id/index.php/probank/article/view/564 tambunan, e. h., sabijono, h., lambey, r., keputusan, p., dan, i., hutang, k., nilai, t., tambunan, e. h., lambey, r., bisnis, e., and akuntansi, j. (2019). the effect of investment decisions and debt policies on the value of the company on construction companies in idx. jurnal emba: jurnal riset ekonomi, manajemen, bisnis dan akuntansi, 7(3), 4445–4454. https://doi.org/10.35794/emba.v7i3.25144 tio friska simanjuntak, siahaan, y., inrawan, a., and supitriyani. (2019). the effect of leverage and profitability on company value with dividend policy as a moderating variable in property and real estate sub-sector companies listed on the indonesia stock exchange. financial: jurnal akuntansi, 5(1). https://www.financial.ac.id/index.php/financial/article/view/92 available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 1 number 2 (2021): 28-36 corresponding author mujennah, mujennah@stiei-kayutangi-bjm.ac.id doi: 10.31098/jgrcs.v1i2.701 research synergy foundation the influence of incentives and non-incentives tax on profit management mujennah1, safriansyah1, kevin tanu1 1 stiei banjarmasin, indonesia abstract disclosure of financial statement information for companies in indonesia is very important, especially for stakeholders who do not have access to company information, especially in profit management, so that stakeholders are able to make the right decisions. profit management is a managerial activity for management in influencing and interfering with financial statements. public companies have benefited greatly because the effective tax rate of the company will become smaller so that the company is able to manage profits. effective tax planning methods through tax incentives and non-tax incentives can help and provide convenience for companies in their profit management. researchers want to find out how incentive taxes and non-incentive taxes affect profit management. the first results of the study showed that two variables of projected tax incentives with tax planning and deferred tax expense, as well as one variable non-incentive tax projected through leverage, had no effect on profit management. the second results of these studies showed that two other tax incentive variables were projected with the current tax expense and the number of shares paid, and the projection of one non-incentive variable of tax through variable capital intensity ratio had an effect on profit management. researchers found difficulties when analyzing profit management since not all companies have positive test results against profit management values; there was a company with negative profit management values. the differences between this study to other researchers were the object and variable of research. keywords: tax incentives, non-tax incentives, profit management this is an open access article under the cc –by-nc license introduction corporate profits were the most important information in the financial statements that often used as manipulation targets carried out by management to minimize and maximize profits. profit management is a managerial activity for management in influencing and interfering with financial statements; the phenomenon of profit management practices in indonesia often occurs because the management has confidence that stakeholders do not have access to company information, so stakeholders will consider the financial statements as true reports (negara & suputra, 2017). financial statements are prone to be played first is the freedom to choose and use these accounting methods and procedures indirectly make accounting standards as if accommodating or facilitating this profit management actions. taxes must be paid to the government, but the company does not comply due to the opportunistic behaviour of the company. this caused the company's wealth to be improperly relocated, thus impacting the government due to the incorrect amount of the tax received by the government. high profits will cause the company's high tax expense so that it will motivate the company to do profit management. this also encourages the company to carry out tax management. this tax incentive is one of the first steps in tax management. tax incentives in the form of reduced tax rates http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 28-36 influence of incentives and non-incentives tax on profit management mujennah, safriansyah, kevin tanu issn 2776-9658 (online) │ 29 regulated the minister of finance indonesia (number 77, 2013) issued by the government through the enactment of this tax rate; public companies will benefit greatly because the effective tax rate of the company will become smaller profits become more manageable. the existence of market failures that occur from asymmetric information makes small-scale companies (msmes) difficult to develop and profit, so this is where tax incentives aim to reduce tax dystrophy to the investment climate for both small, medium, and large companies (oecd, 2013). the existence of tax incentive policies is more to prevent than encourage investment so that it has an impact on project costs and investment risks. moreover, on the one hand, the country wants to get revenue from taxes, but on the other hand, the country also wants to create a large investment climate with low tax rates. tax incentive schemes give the impression of an unstable tax system in a country because the low tax burden can encourage foreign investors to invest and improve the investment climate in the country (oecd, 2013). based on the background description and problem phenomenon above, the research wants to build the following problem formulation: 1. how did tax planning affect profit management? 2. how did the deferred tax expense affect profit management? 3. how did the current tax expense affect profit management? 4. how did the number of shares paid affect profit management? 5. how did leverage affect profit management? 6. how did the capital intensity ratio affect profit management? 7. how did profitability affect profit management? literature review positive accounting theory the theory of positive accounting explains and predicts accounting practices (watts & zimmerman, 1990) consider that positive theory has provided clear confusion related to the choice of accounting techniques. tax planning aims to minimize the burden of taxes owed, maximize the burden of taxes and meet tax obligations properly, efficiently, and effectively in accordance with the applicable tax provisions. the higher the tax planning, the greater the opportunity to do profit management; the practice of profit management is one of the accounting techniques allowed in positive accounting theory. companies certainly want to reduce the burden of taxes to increase investment (oecd, 2013). big bath theory profit management of the big bath model is carried out with the aim of avoiding future burdens so that in the coming period, the company can earn greater profits. the profit management of the big bath model in the study was analyzed by looking at how low operating profit was, which was projected by return on asset (roa) and return on sales (ros) (sevin & schroeder, 2005). through the big bath, being able to adjust the report to the economic value of the company, through the way that removes assets when the carrying value of the company's assets is less than the market price this can reduce the information asymmetry, but also has an impact on investor confidence in investing on shares in the company (kristian hope & wang, 2018). journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 28-36 influence of incentives and non-incentives tax on profit management mujennah, safriansyah, kevin tanu issn 2776-9658 (online) 30 │ profit management profit management is managerial activity to "influence" and intervene in financial statements. profit management is a deliberate step to regulate profit (davidson, stickney, & weil), interference in the composition of financial statements (schipper), deliberate errors or omissions in making financial statements (national association of fraud examiners), actions to regulate profit (fisher & rosenzweig, 1995), flexibility that encourages profit abuse (levitt, 1998) and use certain decisions to change financial statements (healy & wahlen, 1999). the empirical model for detecting management was first developed by healy in 1985. in general, this model is no different from other models used to detect profit management in calculating the total value of accruals (tac), i.e., reducing the accounting profit it earns over a certain period with the operating cash flow of the corresponding period. the accrual model involves the calculation of total accruals. profit management is a selection of accounting policies conducted by managers to influence the company's profits, whose purpose is to achieve profits in profit reporting (scott, 2015). profit management measurements are done by calculating discretionary accrual using the modified jones model (jones, 1991) by (dechow & sweeney, 1995). the formula for finding total value of accruals (tac), i.e., net income of year t minus operating cash flow of year t with modified jones models (dechow & sweeney, 1995) as follows: 〖tac〗_it = 〖ni〗_it 〖cfo〗_it hypothesis development influence of incentive tax consisting of: influence of tax planning on profit management according to (agnes & yin, 2004) stated companies that have good tax planning will benefit in the form of tax shields and will minimize tax payments. tax planning can also increase net profit, with effective tax planning will streamline the company's tax credit so as to increase the company's profit. tax planning related to profit reporting, high profit will cause the corporate tax expense is also high, so it will motivate the company to do profit management which the researcher formulated with hypotheses 1: tax planning (x1) effect on profit management (y): influence of deferred tax expense on profit management taxation can be a motivation for managers to do profit management, namely by reducing taxable income using accounting methods in calculating inventory values, depreciation, and allowed reserves. the method of freedom provided by financial accounting standards (ifrs) for companies to choose accounting methods in compiling financial statements had little difference with fiscal financial statements compiled by companies based on tax rules that do not give management the freedom to choose accounting models and accounting methods, this is what causes fiscal reconciliation. temporary differences between the amount of tax recorded assets or liabilities with the basis of taxation on such assets or liabilities. timing differences occur due to differences in recognition of the amount of time in commercial accounting (ias 12 on psak 46) compared to fiscally (tax regulation number 36, 2008). the differences between commercial accounting profit and fiscal accounting will result in a correction in the form of a positive correction that will result in deferred tax assets, and a negative correction will result in deferred tax expense. tax regulation on income tax (tax regulation number 36, 2008) "fiscal profit or taxable income is a profit calculated based on applicable taxation". journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 28-36 influence of incentives and non-incentives tax on profit management mujennah, safriansyah, kevin tanu issn 2776-9658 (online) │ 31 therefore the company can manage a small number of accounting profits through deferred tax expense (arias & rodriguez, 2012). (pincus, p.k, john d, rego, & o, 2002) states: "the company's actions acknowledge early earnings and delay costs indicating that management conducts profit management on commercial, financial statements." the higher the profit management practices, the higher the deferred tax liabilities recognized by the company as a deferred tax expense", which the the researcher formulated with hypotheses 2 : tax planning (x2) effect on profit management (y) influence of current tax expense on profit management current tax expense is the amount to be paid by the taxpayer based on taxable income multiplied by the tax rate, then paid by himself and reported in the notification letter (spt) in accordance with the prevailing (tax regulation number 36, 2008). the causes of the differences (fiscal correction) between income tax expense and taxes to be paid are categorized into two groups first, a) permanent differences b) temporary differences (tax regulation number 36, 2008) researcher formulated with hypotheses 3 : current tax (x3) effect on profit management (y): influence of number of shares paid on profit management companies’ regulation 33 chapter states that the shares put in idx are paid in full by the owner. the number of shares paid had positive and significant across both measures of profit management, implied that the higher the number of shares paid, the more likely firms engage in all types of profit management (doung & evans, 2016). the number of shares paid is assessed based on government regulation (number 77, 2013), if the shares paid by the company traded in the idx < 40% then 0 and if the company's paid-up shares are ≥ 40%, then 1. the researcher formulated with hypotheses 4: number of shares paid (x4) effect on profit management (y) influence of non-incentives tax on profit management consist of: influence of leverage on profit management highly leveraged companies are expected to make profit management increase reported profits and avoid breaches of debt covenants and the possibility to obtain additional funds from creditors. leverage had a positive effect on earnings management (lazzem & jilani, 2017), and the other studies found a negative relationship (rodriguez & van hemman, 2010). the researcher formulated hypotheses with leverage (x5) affects on profit management (y): influence of capital intensity ratio on profit management depreciation costs can be used by the company's management to reduce profits so that later it will be able to affect the amount of tax to be paid. the greater the number of fixed assets of the company, the lower the amount of tax paid annually than the company having a lower amount of fixed assets (arias & rodriguez, 2012). the researcher formulated this with hypotheses 6: leverage (x6) affects on profit management (y): influence of profitability on profit management (kothari, a.j, & wasley, 2005) and (ayu, 2019) was founded negative impact. the result showed that the higher or lower profitability obtained in companies had no effect on profit management. the researcher formulated this with hypotheses 7: leverage (x7) affects on profit management (y): journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 28-36 influence of incentives and non-incentives tax on profit management mujennah, safriansyah, kevin tanu issn 2776-9658 (online) 32 │ research method this research aims to develop previous research and can be classified into causal research types; researcher had to test independent variables between incentives tax consist of (tax planning, deferred tax expense, current tax expense, number of shares paid) and non-incentives tax consist of (leverage, capital intensity ratio and profitability) on company dependent variables (profit management) on lq45 in the period 2017-2019. based on the research approach, the type of research was quantitative research with secondary data to prove the existing theory through multiple linear regression analysis, with the spss 25.0 as the test tool (ghozali, 2016). the research population was obtained using purposive sampling techniques in lq 45 companies listed in the period 2017-2019. population targets was determined by criteria: (1) companies listed on lq 45 during period 2017-2019, (2) lq45 companies that report full financial statements for the period 2017-2019, and (3) company that didn't have negative profit value for three consecutive years. multiple linear regression equations used by researchers as follows: tac=𝜶+𝜷𝟏𝑻𝑹𝑹𝒊𝒕 + 𝜷𝟐𝑫𝑻𝑬𝒊𝒕 + 𝜷𝟑𝑪𝑻𝑬𝒊𝒕 + 𝜷𝟒𝑺𝑻𝑶𝑪𝑲𝒊𝒕 + 𝜷𝟓𝑳𝑬𝑽𝒊𝒕 + 𝜷𝟔𝑪𝑰𝑹𝒊𝒕 + 𝜷𝟖𝟕𝑹𝑶𝑨𝒊𝒕 + 𝜺𝒊𝒕(𝟏) findings and discussion point 1 regression test result recapitulation of multiple regression test results is showed in the following table: variable coefficient regression coefficient beta t count prob (sig.) tax planning (x1) -0.226 0.271 -0.835 0.413 deferred tax expense (x2) 0.716 0.121 1.451 0.161 current tax expense (x3) -0.431 0.202 -2.134 0.044 number of share paid (x4) 7,170 1,465 4,895 0,000 leverage (x5) 0,928 0,177 5,227 0,000 profitability (x6) 0,592 1,297 0,456 0,653 capital intensity ratio (x7) 10,833 2,720 3,983 0,001 cons 0.023 f count 674.11 r 0.998 r2 0.995 adjusted r2 0,994 sig. f 0 see 6.324 table 1. the result of multiple regression analysis with spss 25.0 (processed data, 2021) the results of multiple regression tests as follows: tac= 0.023 + (-0.226)trr + 0.716dte +(-0.431)cte + 7.170stock + 0.928 der + 0.59roa +10.833cir this study used profit management as a dependent variable and tax planning, deferred tax expense, current tax expense, number of shares paid, leverage, profitability, and capital intensity ratio as an independent variables. the other variable from deferred tax expense, number of shares paid, leverage, profitability, capital intensity ratio had coefficient positive, and this value explains that there is a positive influence between journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 28-36 influence of incentives and non-incentives tax on profit management mujennah, safriansyah, kevin tanu issn 2776-9658 (online) │ 33 variable deferred tax expense, number of shares paid, leverage, capital intensity ratio, and profitability to profit management. this research model shows that tax planning, deferred tax expense, current tax expense, leverage, number of shares paid, profitability, capital intensity ratio simultaneously have significant effects on the dependent variable of profit management. point 2 f test result if the test significance value f < 0.05, then the model used in the study is feasible and can be used for subsequent analysis, and vice versa (ghozali, 2016). the table 1 result test showed that f-statistics probability is below 1%, which 0,000, so the researcher concluded that variables of tax planning, deferred tax expense, current tax expense, number of shares paid, leverage, capital intensity ratio, and profitability together had a significant effect on the profit management at the level of 1%. point 3 t-test result impact of tax planning on profit management the results of this study are different from (agnes & yin, 2004) study, which states that tax planning can also increase net profit, with effective tax planning will streamline the company's tax credit so as to increase the company's profit. statistically evidenced found by the value of t-count (1.755) < t-table 2.042 and significance value of 0.413 > 0.05, thus indicating that tax planning had no influence and was insignificant. the resulting test showed that there had no effect on profit management, so h1 was rejected. researchers concluded that good tax planning will be inversely proportional to profit management; these results were in line with the results of research conducted by (ayu, 2019). impact of deferred tax expense on profit management the company managed a small number of accounting profits through deferred tax expenses (arias & rodriguez, 2012). (pincus, p.k, john d, rego, & o, 2002) states: "the company's actions acknowledge early earnings and delay costs indicating that management conducts profit management on commercial, financial statements." the higher the profit management practices, the higher the deferred tax liabilities recognized by the company as a deferred tax expense." the test results stated that the deferred tax expense had no effect on profit management, so h2 was rejected. this is statistically evidenced by the value of tcount (1.451) < ttable 1.7139 and the significance value of 0.161>0.05. deferred tax expenses had a negative influence on profit management. higher deferred tax expense so that likelihood of the company doing profit management will decrease, and vice versa. this is inversely proportional to research (negara & suputra, 2017) that stated the positive and significant relationship between deferred tax expense and profit management. impact of current tax expense on profit management test results showed the current tax expense had an influence on profit management with the comparison of tccount with ttable, obtained the value of tcount -2.134 statistically> ttable 1.7139 and the significance value of 0.04<0.05 so that h3 was accepted. the result means that the current tax expense had a significant effect on profit management; it was concluded that the higher the tax burden now, it can improve profit management even though the effect is negative (weak), and this result is in line with government tax regulations (tax regulation number 36, 2008). journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 28-36 influence of incentives and non-incentives tax on profit management mujennah, safriansyah, kevin tanu issn 2776-9658 (online) 34 │ impact of number of shares paid on profit management a number of shares paid shows a significant value of 0.000 < 0.05 with a comparison of taccount and ttable, obtained the value of tccount (4.895) statistically> ttable 1.7139 and significance value of 0.00 < 0.05. the authors found out that a number of shares paid have a positive and significant influence on profit management, so that h4 was accepted. the results test line with (doung & evans, 2016), which states the results that the higher the number of shares paid, the more likely firms engage in all types of profit management. impact of leverage on profit management higher corporate leverage can trigger improved profit management. leverage got significant value of 0.000 < 0.05. it can be concluded leverage has a significant effect on profit management so that h4 was accepted. highly leveraged companies are expected to make profit management increase reported profits. these results wasn't in line with previous research conducted by (lazzem & jilani, 2017) but in line with research conducted by (rodriguez & van hemman, 2010). impact of capital intensity ratio on profit management capital intensity ratio obtained t count of 3,983 and table t 1.7139. the researcher found out that the capital intensity ratio has an effect on profit management so that h6 is accepted. the results of this study conducted by (rodriguez & van hemman, 2010) stated that the greater the capital intensity ratio so the more likely the company to carry out profit management is higher. impact of profitability on profit management profitability has no effect on profit management because management in developing businesses prioritizes its own capital over loans. from the results of the comparison of tcount with ttable, obtained the value of tcount 0.456 < ttable 1.7139 and the significance value of 0.653 > 0.05 statistically. the researcher found that profitability has no effect on profit management, so h5 is rejected. this means that the more profit levels, the probability of the company carrying out profit management are slight (small). researchers have similar results with previous researchers, namely (kothari, a.j, & wasley, 2005) and (ayu, 2019). they were founded that the higher or lower profitability obtained in companies had no effect on profit management. conclusion partially based on the result, the researcher found out that the projected tax incentives with tax planning and deferred tax expense had no significant impact on profit management. the current tax expense and number of shares paid have significant effects on profit management. partially based on results, the researcher found out that the projected non-tax incentives with leverage and capital intensity ratio have a significant impact on profit management. profitability had no significant effect on profit management. the results of the analysis showed the current tax expense, the number of shares paid, leverage, profitability, and capital intensity ratio affect profit management. meanwhile, tax planning, deferred tax expense, and leverage had no significant effect on profit management. limitation & further research journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 28-36 influence of incentives and non-incentives tax on profit management mujennah, safriansyah, kevin tanu issn 2776-9658 (online) │ 35 researchers found difficulties when analyzing profit management because not all companies had positive profit management values; 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(1990). positive accounting theory. the accounting review: : a ten year perspective, 65(1), 131-56. available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 2 number 1 (2022): 25-35 corresponding author hamilah, hamilahtiyan@gmail.com; lydia, lydiakurniawanstieyai@gmail.com doi: 10.31098/jgrcs.v2i1.881 research synergy foundation the influence of tax system perception, tax justice, tax rate, tax audit, discrimination on tax embroidery behaviour hamilah1, lydia1, henni1, gusmiarni1,reschiwati1 1program studi akutansi, sekolah tinggi ilmu ekonomi y.a.i, jakarta, indonesia abstract this study intends to define and analyze the perceived effects of the tax system, tax justice, tax rates, tax audits, and discrimination on tax evasion behavior. tax evasion is the dependent variable here. in contrast, the independent variables are the perception of the taxation system, tax justice, tax rates, tax audit, and discrimination. the study has a population consisting of individual taxpayers enlisted at the depok sawangan tax office. the convenience sampling technique is used to select respondents. this research uses a quantitative method to obtain data from questionnaire instruments. the results of data analysis have been done by utilizing structural equation modeling (sem). tax justice and tax audit had a significant effect on tax evasion behavior, while tax rates, taxation systems, and tax discrimination had no significant effect on tax evasion behavior, according to the study's findings. keywords: perceptions of tax evasion, taxation system, tax justice, tax rates, tax audit and discrimination this is an open access article under the cc–by-nc license introduction the act of tax evasion is manipulating the subject (perpetrator) and object (transaction) of tax to obtain tax savings in a way that is against the applicable law. the impact of tax evasion scopes from harming the state in terms of state revenues to affecting national development. the influence factors to tax evasion are the perceptions of the tax system, tax justice, tax rates, tax audits, and discrimination. one factor not achieving the target of tax revenue is the taxpayers’ low awareness because the results of the taxes that taxpayers have paid have not been felt in real terms. then there are still taxpayers who pay the tax burden that is not following what is charged. so many cases of tax evasion were found in indonesia, for example, one case on august 7, 2021, according to kontan.co.id jakarta. the directorate general of taxes has again won a tax criminal case against rogue taxpayers. this time, the dgt accused the suspect of fraudulent value-added tax payment (vat) using an invalid tax invoice. in an online trial on wednesday (5/8), the panel of judges at the south jakarta district court sentenced the defendant rw, the director of operations of pt dc, for criminal cases on taxation and money laundering. the sentence handed down was 5 years and 6 months in prison and a fine of idr. 20.5 billion, which is twice the amount of state losses, subsidiary of 6 months in jail for the defendant. (nasional kontan.co.id, 2020) another effort to reduce tax evasion is a tax audit where the government must be more routine and fix the system in tax audits. the higher the tax audit, the better the ethics of the taxpayer regarding tax evasion. according to research (felicia & erawati, 2017), through this tax audit, the possibility of detecting fraud committed by taxpayers is getting bigger. in addition, tax understanding also an essential role in reducing tax evasion that occurs. tax compliance itself is interpreted as a set of personal knowledge http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 25-35 the influence of tax system perception, tax justice, tax rate, tax audit, discrimination on tax embroidery behaviour hamilah, lydia, henni, gusmiarni,reschiwati issn 2776-9658 (online) 26 │ about taxation that allows individuals to act properly and correctly (ardi & suhendro, 2016). research (rachmadi, 2016) revealed that understanding taxation significantly affects taxpayers' perception of tax evasion behavior. at the same time, research (marlina, 2018) stated that tax understanding positively affects tax evasion. as explained above, other factors that affect the act of tax evasion, justice in taxation also affects a person to commit tax evasion. the judge in question is that taxpayers require fair treatment in imposing and collecting taxes. if the lower level of justice is implemented pursuant to a taxpayer perception, then the compliance level decreases. this means a higher tendency to commit tax evasion (sariani, wahyuni, & sulindawati, 2016). one of the essential principles of taxation is fairness. fair is that every taxpayer who donates money to government spending is proportionate to his interest and the benefits demanded. income in taxation also affects someone to commit tax evasion (tax evasion). (waluyo, 2018). the next factor is the tax rate. determining the tax rate itself must be based on justice because tax collections carried out in indonesia use tax rates. high tax rates will affect the ethics of taxpayers regarding tax evasion. a study (tobing, 2019) shows that tax rates do not affect tax evasion. while research conducted by utami and helmy (2016) found tax rates significantly and positively affect tax evasion practices. in taxation, the discrimination term can be a cause that affects taxpayers regarding the tax evasion ethics. this happens due to the different treatment of a specific person or group. discrimination in taxation occurs because of differences in taxpayers' treatment and the existence of unfair rules. the presence of discrimination can create judgments that support tax evasion itself. research by rahman (2019) and fitriani, fauzi, and armeliza (2017) stated that discrimination positively and significantly affects tax evasion. meanwhile, research by suminarsasi and supriyadi (2017) states that discrimination negatively and significantly affects tax evasion. from the various descriptions above, researchers are motivated to conduct this research because of the rampant acts of tax evasion that have been revealed recently, which are mostly carried out by taxpayers. in addition, this research is expected to measure the success of a country in optimizing the distribution of tax funds fairly and equitably and to find out how much influence the related variables have on the perception of taxpayers on tax evasion. literature review theory of planned behaviour theory of planned behaviour (tpb), or planned behaviour, means an attitude that affects behaviour where the decision-making process is careful and has reasons as an intermediary and can impact certain things. (ajzen, 2016)this theory also argues that individuals will do anything that can benefit themselves, or in other words, this theory explains a person's behaviour based on intentions or plans. the theory of planned behaviour (tpb) explains that the intention to behave can lead to the behaviour displayed by individuals. individuals are also based on past experiences with behaviour and factors or things that support or hinder their perception of behaviour. so, the existence of someone's intention to behave in tax evasion can lead to behaviour regarding tax evasion by someone. it is also based on the experience of a person's behaviour and factors or things that support or hinder a person's perception of tax evasion behaviour. perception theory according to hanurawan (2019: 22), "perception is a kind of information management activity that connects a person with his environment" (fattah, 2019) journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 25-35 the influence of tax system perception, tax justice, tax rate, tax audit, discrimination on tax embroidery behaviour hamilah, lydia, henni, gusmiarni,reschiwati issn 2776-9658 (online) │ 27 1. according to walgito (2017), perception is a process of sense, which is to receive a stimulus by the individual or acknowledged as the sensory process. perception is also an integrated activity within the individual (bimo, 2017). 2. according to krech (in thoha, 2017: 142), perception means "a complex cognitive process and to generate a unique reality picture that may be very different from the actual reality." (thoha, perilaku organisasi konsep dasar dan aplikasinya, 2017) in addition, that perception generally occurs because there are two internal and external (thoha, perilaku organisasi konsep dasar dan aplikasinya, 2017). internal factors come from within the individual, such as attitudes, habits, and will. at the same time, external factors come from outside the individual, including the stimulus itself, both social and physical. it can be concluded from the description above that perception is an assumption or information from a person obtained from attention, mental readiness, needs, assessment system, personality type, someone's desire in making decisions, and information provided by others. in this case, it is usually said that the perception of tax evasion arises from the taxpayer's experience himself, from the desire of the taxpayer to commit tax evasion on indonesian taxation, which makes the perception of tax evasion considered a natural thing. tax theory taxes are required contributions gathered by the public authority from the general society (citizens) to cover routine state spending and advancement costs without compensation that can be shown straightforwardly. according to law no. 16 of 2009, tax is an obligatory tax contribution to the state-owned by an individual or entity that is coercive based on the law without receiving direct compensation and is used by the state for the greatest prosperity of the people. according to prof. dr. rochmat soemitro, sh, taxes are people's contributions to the state treasury (cash transfer to the government sector based on the law) that can be enforced without receiving a lead service (achievement transfer) that takes place and can be shown and used to finance public expenditures. (soemitro, 2016) tax evasion theory to carry out tax activities, taxpayers can do tax planning. the government legalized this tax planning as long as it is still in the tax regulations. the benefits of tax planning are: (mangoting, 2019) a. savings in cash out because taxes are an element of cost that can be reduced. b. manage cash flow because, with careful tax planning, it can estimate cash needs for taxes and determine the time of payment so that the company can prepare a more accurate cash budget. tax evasion is an effort made by taxpayers to ease the tax burden by violating the law. (mardiasmo, perpajakan edisi revisi 2018, 2018). due to violating the law, this tax evasion is carried out using illegal methods. taxpayers completely ignore the formal provisions of taxation that are their obligations, falsify documents, or fill in incomplete and incorrect data. psychologically and legally aware, taxpayers who commit tax evasion generally aim to avoid the amount owed tax that must be deposited into the state treasury. socialization of the taxation law and the sanctions imposed for violating tax provisions are expected to be a solution to tax evasion (resmi, 2017). coupled with a simple and easy-to-understand tax system, it will make it easier for taxpayers to calculate the tax burden that must be financed. it will positively impact taxpayers to increase their understanding of taxation and awareness of paying taxes. conversely, if the tax collection system is complicated, people will be increasingly reluctant to pay taxes. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 25-35 the influence of tax system perception, tax justice, tax rate, tax audit, discrimination on tax embroidery behaviour hamilah, lydia, henni, gusmiarni,reschiwati issn 2776-9658 (online) 28 │ tax system perception the tax collection system is divided into 3 (three) namely official assessment system, self assessment system, with holding system (mardiasmo, perpajakan edisi revisi 2018, 2018). the system used by indonesia in its taxation system uses a self-assessment system, where taxpayers play an active role in calculating, reporting, and paying their taxes. in reporting and paying taxes, the government, in this case, is only a supervisor of the course of taxation activities. this is reinforced that tax planning is also inseparable from the levy system adopted in indonesia after tax reform, namely the self-assessment system. (zain, manajemen perpajakan, 2016) tax justice according to adam smith, the most important principle in the context of tax collection is fairness in taxation, which is stated by a statement that every citizen should participate in government financing, as far as possible proportionally according to their respective abilities, namely by comparing the income they get with the protection it enjoys from the state (zain, manajemen perpajakan, 2016). tax rate the tax rate is the amount of calculation that taxpayers must pay. tax rates are classified as material provisions subject to tax to taxpayers and tax objects. tax rates must be based on the understanding that everyone has the same rights so that proportional or comparable tax rates are achieved (rahayu, 2017:86). according to mardiasmo (2018:9), taxes are collected based on tariffs. there are four kinds of tax rates: proportional, fixed, progressive, and degressive rates. the proportional rate is a fixed percentage rate for whatever amount is taxed. so that the amount of tax payable is proportional to the amount that is taxed. the fixed-rate is a fixed amount (the same) regardless of the taxed amount, so the amount of tax payable remains the same. in the form of a percentage of the rate used, progressive rates are greater when the amount subject to tax is greater. the degressive rate in the form of a percentage of the rate used is smaller as the tax increases. tax audits the definition of tax audit according to law number 28 of 2007 concerning general provisions and tax procedures is a series of activities that collect and manage data, information, and audit evidence carried out objectively and professionally based on an audit standard to test compliance with tax obligations and for others in the context of implementing the provisions of laws and regulations. one of the government's efforts in dealing with fraud in taxation is to carry out tax audits. nowadays, many frauds are committed by taxpayers, including manipulating income or misappropriation of tax funds. (widjaja p.n.k. lambey l & walandouw, 2017) tax discrimination based on law no. 39 of 1999 concerning human rights article 1 paragraph (3), the law states that discrimination is any restriction, harassment, or exclusion directly or indirectly based on human differences based on religion, ethnicity, race, ethnicity, group, class. , social status, economic status, gender, language, and political beliefs, which result in unemployment, deviation or elimination of recognition, implementation or use of human rights and basic freedoms in life, both individually and collectively in the political, economic, legal, social fields, culture, and other aspects of life. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 25-35 the influence of tax system perception, tax justice, tax rate, tax audit, discrimination on tax embroidery behaviour hamilah, lydia, henni, gusmiarni,reschiwati issn 2776-9658 (online) │ 29 framework the influence of the perception of the taxation system on tax evasion behaviour the tax system adopted by indonesia is a self-assessment system, where taxpayers are expected to carry out their tax obligations consciously. according to darmayanti (2017) in mutikasari (2016), the self assessment system requires active participation from the community and more supervision from the government so that the tax collection process is carried out properly. this system will be actively implemented in a country if the conditions of voluntary compliance in the community have been formed. the research of supriyadi and suminarsasi (2018) shows that the tax system has a positive effect on taxpayers' perceptions of tax evasion behaviour (the alternative hypothesis is accepted). this means that taxpayers consider that the better the tax system, the more tax evasion behaviour is considered unethical behaviour. however, if the tax system is getting worse, then tax evasion is considered behaviour that tends to be ethical. this study supports the research conducted by nickerson et al. (2019), which found dimensions of the ethical scale in tax evasion, one of which is the dimension of the tax system. researchers argue that the management of tax money that can be accounted for, competent and not corrupt tax officials and uncomplicated tax procedures will make taxpayers reluctant to evade taxes. however, if the management of tax money is not clear, plus the tax officer corrupts the tax money, then taxpayers are reluctant to report their obligations honestly, they will tend to evade taxes. the influence of tax justice on tax evasion behaviour according to mardiasmo (2019) in suminarsasi and supriyadi (2018:6), by the purpose of the law, namely achieving justice, the law and the implementation of the collection must be fair. fair in the law, among others, impose taxes in general and evenly, and adjusted to the ability. while fair in its implementation, namely by giving the right to the taxpayer to file an objection, delay in payment, and submit an appeal to the tax advisory council. suminarsasi and supriyadi (2018) research show a positive influence of justice on tax evasion behaviour. from the description above, it can be concluded that there is an effect of tax justice in making tax payments. the effect of tax rates on tax evasion behaviour (ayu and hastuti, 2016) the tax rate is the percentage calculation that has to be paid by the taxpayer. if it is associated with motivation theory, taxpayers will make their motivational assessment of the applicable tax rates. if they feel that the applicable tax rate is too high, it will be directly proportional to the level of tax evasion. research conducted (utami and helmy, 2016) shows that tax rates affect the practice of tax evasion. at the same time, research (sasmito, 2017) shows that tax rates do not affect tax evasion. the influence of tax audits on tax evasion behaviour an audit is a series of activities to seek, collect, process data and other information to test compliance with the fulfillment of tax obligations and other purposes in implementing the provisions of tax laws and regulations. the existence of a tax audit can improve the ethics of taxpayers regarding tax evasion. there is a correlation between the intensity of tax audits and tax evasion. when tax audits are carried out intensively or regularly, the tax evasion will be smaller. research (dharmayanti, 2017) shows that tax audits do not affect tax evasion, but previous research conducted by lambey and walandow, journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 25-35 the influence of tax system perception, tax justice, tax rate, tax audit, discrimination on tax embroidery behaviour hamilah, lydia, henni, gusmiarni,reschiwati issn 2776-9658 (online) 30 │ the effect of discrimination on tax evasion behaviour when tax officials carry out discrimination, a bad mindset will appear so that taxpayers are moved to carry out tax evasion activities and consider it ethical to do so. in a study conducted by suminarsasi (2017), it is proven that discrimination has a positive effect on perceptions of tax evasion behaviour. where the discrimination variable shows the regression coefficient value of 0.966, t count = 8.222 with pvalue = 0.000; while the t table at the 5% significance level is = 1.6517. according to t count > t table (8.222 > 1.6517), with p < 0.05; discrimination variable has an effect on tax evasion behaviour. in addition, the value of the regression coefficient is positive by the expected sign for the third hypothesis, which is positive. the null hypothesis is successfully rejected, the third hypothesis is supported. this study is also in line with that conducted by nickerson, et al., (2019), which indicates that discrimination has a positive effect on tax evasion behaviour. research conducted by mcgee, et al., (2018) also results that discrimination affects tax evasion behaviour. so, if the higher the level of discrimination in taxation, tax evasion tends to be considered ethical. research conducted by mcgee, et al., (2016) also results that discrimination affects tax evasion behaviour. so, if the higher the level of discrimination in taxation, tax evasion tends to be considered an ethical behaviour to do. research conducted by mcgee, et al., (2018) also results that discrimination affects tax evasion behaviour. so, if the higher the level of discrimination in taxation, tax evasion tends to be considered an ethical behaviour to do. the model framework in question is as shown in figure 1 below: figure 1. thinking framework source: processed by researchers (2021) hypothesis based on the theoretical basis and framework above, the research hypotheses are: h1: there is an influence and significant effect between the perception of the tax system on tax evasion behaviour at kpp depok sawangan. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 25-35 the influence of tax system perception, tax justice, tax rate, tax audit, discrimination on tax embroidery behaviour hamilah, lydia, henni, gusmiarni,reschiwati issn 2776-9658 (online) │ 31 h2: there is an influence and significant effect between tax justice on tax evasion behaviour at kpp depok sawangan. h3: there is an influence and significant effect between tax rates on tax evasion behaviour at kpp depok sawangan. h4: there is an influence and significant effect between tax audits on tax evasion behaviour at kpp depok sawangan. h5: there is an influence and significant effect between tax discrimination and tax evasion behaviour at kpp depok sawangan. h6: there is an influence and significant effect between the perception of the tax system, tax justice, tax audit, and discrimination against tax evasion behaviour at kpp depok sawangan. research method this type of research is causality research. in this study, four variables consist of one dependent variable and four independent variables. the dependent variable in this study is tax evasion behaviour (y), while the perception of the taxation system (x1), tax justice (x2), tax rates (x3), tax audit (x4), and discrimination (x5). the population in this study is individual taxpayers in the pratama depok sawangan tax service area. the population of individual taxpayers of the jatinegara pratama tax service office in 2021 around taxes. sampling was done by convenience sampling method. this sample selection technique was chosen because the location is easy to reach so it can facilitate researchers in collecting samples that will be used in this study. the data used in this study is primary data obtained directly through the questionnaire method. for this research to obtain valid and reliable data, the data collection technique used in this study is a questionnaire technique (questionaire). in analyzing the data, the authors used the structural equation modeling (sem) method using the smartpls application. findings and discussion data validity test results convergence data validity test results the results of the validity testing and measurement model are presented below: table 1. validity test results journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 25-35 the influence of tax system perception, tax justice, tax rate, tax audit, discrimination on tax embroidery behaviour hamilah, lydia, henni, gusmiarni,reschiwati issn 2776-9658 (online) 32 │ based on the loading factor above, the results have met the convergent validity because the loading factor is above 0.50 or shows that the indicator is valid. the loading factor shows the correlation built between these indicators and their constructs. the better the validity level is represented the higher correlation between them. (ghozali and latan (2018 ;38)). discriminant data validity test results discriminant validity is presented in cross-loading value between the indicators and their constructs. when the correlation value of a construct and the measurement item is larger than other construct values, it indicates the latent construct predicts the constructed value better than other constructs (ghozali and latan (2017; 38-39)) table 2. discriminant data validity test results cross loading discrimina tion (x3) tax justice (x1) tax audit (x4) tax evasion (y) tax system (x2) tax rate (x5) x1.1 0.395 0.973 0.231 0.345 0.096 0.020 x1.2 0.416 0.938 0.192 0.313 0.073 -0.028 x1.3 0.376 0.961 0.198 0.359 0.066 0.033 x1.5 0.358 0.963 0.190 0.329 0.112 0.036 x2.1 0.138 0.055 0.278 0.194 0.925 0.328 x2.4 0.231 0.110 0.212 0.216 0.940 0.436 x3.2 0.968 0.366 0.197 0.133 0.178 0.137 x3.4 0.839 0.388 0.353 0.061 0.203 0.189 x4.1 0.211 0.248 0.744 0.261 0.301 0.355 x4.2 0.221 0.119 0.872 0.356 0.149 0.044 x5.1 0.236 0.059 0.167 0.125 0.395 0.924 x5.2 0.158 0.043 0.164 0.082 0.406 0.907 x5.3 0.095 -0.013 0.223 0.154 0.348 0.936 x5.4 0.144 -0.007 0.230 0.137 0.409 0.965 y1 0.132 0.344 0.327 0.955 0.213 0.169 y2 0.101 0.326 0.428 0.963 0.251 0.150 y3 0.086 0.320 0.397 0.972 0.215 0.117 y4 0.144 0.365 0.322 0.949 0.160 0.096 reliability test results an indicator can be reliable or reliable in explaining a construct if it constructs a reliability value of at least 0.70. construct reliability calculation can be seen in the table below. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 25-35 the influence of tax system perception, tax justice, tax rate, tax audit, discrimination on tax embroidery behaviour hamilah, lydia, henni, gusmiarni,reschiwati issn 2776-9658 (online) │ 33 table 3. reliability test results testing the reliability of the questionnaire for discrimination variables, tax justice, tax embezzlement, taxation systems, and tax rates resulted in cronbach's alpha numbers that are higher than 0.7. meanwhile, the tax audit variable cannot be continued because it results in a cronbach's alpha number less than 0.7 hypothesis test din assessing the significance of the effect between variables, it is necessary to carry out a bootstrapping procedure. the bootstrap procedure uses the entire original sample for resampling. according to noor (2016; 150), the test is carried out by looking at the path coefficient and the test value. if a p-value <0.05 is obtained, it can be said that the construct is strong or has a significant effect. table 4. hypothesis test the table presents the results of hypothesis testing: the tax system variable has a probability (p) of 0.251 which is greater than the specified significance figure of 0.05. it shows that the taxation system variable has not significantly affected tax evasion. it is said to be insignificant because the tax system applicable in indonesia will allow taxpayers journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 25-35 the influence of tax system perception, tax justice, tax rate, tax audit, discrimination on tax embroidery behaviour hamilah, lydia, henni, gusmiarni,reschiwati issn 2776-9658 (online) 34 │ to commit tax evasion. thus hypothesis 1: there is a significant and insignificant effect between the perception of the taxation system and tax evasion behaviour at kpp depok sawangan. so it can be concluded that hypothesis 1, as said "there is a significant influence between the perception of the taxation system and tax evasion behaviour at kpp depok sawangan" is rejected. the variable of taxation justice significantly affects tax evasion. it is seen from the path coefficient, which is positive at 0.096 and has a probability (p) of 0.001 (< 0.05). this shows a significant influence between the tax justice and tax evasion variables. we can see this from the planned behavior theory, which explains that the surrounding environment influences behavioral tendencies. if taxpayers receive prejudicial actions, they will obtain social pressure and inspire other individuals to commit tax evasion. thus hypothesis 2 that said: there is a significant effect between tax justice and tax evasion behaviour at kpp depok sawangan. so for hypothesis 2: "the influence and significant effect between tax justice and tax evasion behaviour is acceptable. the probability tax rate variable (p) is 0.762 (>0.05), which shows that the tax rate has an effect and is not significant with tax evasion. taxpayers have seen to have their respective assessments regarding the existing tax rates. the higher state revenue is sourced from the increase in tax rates by the government. however, the facts on the ground are the best. because a high tax rate can provide opportunities for taxpayers to commit tax evasion. thus hypothesis 3 presented: there is an influence and significant effect between tax rates and tax evasion behaviour at kpp depok sawangan. so for hypothesis 3: "there is an influence and significant effect between tax rates and tax evasion behaviour can be rejected." the tax audit variable significantly affects tax evasion with the probability (p) of 0.002 (<0.05). this shows that tax audit has a significant effect on tax evasion. this tax audit is carried out to be able to see the detection of possible fraudulent actions by taxpayers, thus affecting tax evasion. thus hypothesis 4 as said: there is a significant effect between tax audits and tax evasion behaviour at kpp depok sawangan. so hypothesis 3: "there is an influence and significant effect between tax audits on tax evasion behaviour is acceptable. the tax discrimination variable affects tax evasion, with a probability (p) of 0.393, (> 0.05). this shows that the tax discrimination variable does not significantly affect tax evasion. usually not significant because the taxpayer can accept the difference in treatment. the taxpayer does not feel the need to perform his tax obligations due to his discriminated feeling. thus, hypothesis 5: there is a significant effect of tax discrimination on tax evasion behaviour at kpp depok sawangan. so for hypothesis 3 as cited: "there is significant influence and effect between tax discrimination and tax evasion behaviour can be rejected." there is an influence and significant effect between justice and tax audit on tax evasion behaviour. in contrast, the variables of discrimination, tax understanding, and tax rates do not positively and significantly affect tax evasion. thus, hypothesis 6: there is an influence and significant effect on the perception of the tax system, tax justice, tax audit, and discrimination on tax evasion behaviour at kpp depok sawangan, is rejected. conclusion & further research tax justice and tax audit had a significant effect on tax evasion behavior, while tax rates, taxation systems, and tax discrimination had no significant effect on tax evasion behavior, according to the study's findings. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 25-35 the influence of tax system perception, tax justice, tax rate, tax audit, discrimination on tax embroidery behaviour hamilah, lydia, henni, gusmiarni,reschiwati issn 2776-9658 (online) │ 35 there is a simultaneous influence on the perception of the tax system, justice, tax audit, discrimination, and tax rates contributing 25.1% to tax evasion behaviour, and other factors influence 74.9%. implication based on the hypothesis stated before, a conclusion may be inferred that the perception of tax audit and tax justice together affects tax evasion. this shows that the government performs better actions in doing the supervision, accommodating, distributing, and proceeding with the prevailing tax funds to create a harmonious and stable situation in realizing fair and equitable development. on the other hand, the public/taxpayers as the party who pays taxes and as the highest mandatory, the government needs to cope with the existing tax funds in order to be able to improve their performance, quality, quality, and efficiency. discipline and high integrity related to morals are required of the directorate general of taxes apparatus. they had to be honest and clean from scandalous actions to always prioritize the state's interests. so as the public/ taxpayers are feeling happy and reach the awareness level to have the tax compliance voluntarily. therefore, the target of state tax revenue can be increased to create equitable national development. references ghozali. 2018. application of multivariate analysis with the spss program, semarang: diponegoro university publishing agency. http://tedhykoenala.blogspot.com/2016/01/theory-dan-concept-dasar taxation.html https://national.tempo.co/read/1054384/kejaksaan-agung-tangkap-buron-penggelapan-pajakrp-1068-miliar/full&view=ok mardiasmo. 2018. "revised taxation edition 2018". yogyakarta, andi publisher. mardiasmo. 2018. indonesian taxation. yogyakarta: andi. mcgee. 2016. "a comparative study on perceived ethics of tax evasion: hong kong vs. the united states," journal of business ethics 2016, pp. 147-158 rahman. (2019). the effect of justice, taxation system, discrimination, and the possibility of detecting fraud on taxpayers' perceptions regarding tax evasion ethics. syarif hidayatullah state islamic university jakarta: accounting thesis. soemitro. 2016. "fundamentals of tax law and income tax 2016". bandung, eresco. suminarsasi, supriyadi. 2017. "the influence of justice, taxation system and discrimination against taxpayer perceptions regarding tax embezzlement." yogyakarta, ppjk 15 gajah mada university microsoft word 1111 marisi butarbutar (29-39) available online at: https://journals.researchsynergypress.com/index.php/jgrcs journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 2 number 2 (2022): 29-39 corresponding author supitriyani supitriyani, vitriql@gmail.com doi: https://doi.org/10.31098/jgrcs.v2i2.1111 research synergy foundation implementation of work-life balance and work stress for job satisfaction during the covid-19 pandemic marisi butarbutar1, abdi kurnia lubis2, robert tua siregar3, supitriyani supitriyani3 1,2,3 program studi ilmu manajemen, stie sultan agung, pematangsiantar, sumatera utara, indonesia 4 program studi akuntansi, stie sultan agung, pematangsiantar, sumatera utara, indonesia abstract in order to maximize work-life balance, minimize work stress, and utilize teachers as human resources, flexible work arrangements must be implemented. it is intended that the adoption of online learning platforms will lessen stress and boost job satisfaction by requiring teachers to practice work-life balance and flexible scheduling. but in practice, a lot of teachers do not even feel satisfied in their positions. this study aims to examine the relationship between work-life balance, stress at work, and job satisfaction as well as the impact of these factors on job satisfaction. this study focuses on the 168 state high school civil servants teachers in pematang siantar city who received their certifications using a proportional random sample technique and normality-based data analysis. the spss statistic version 20 program was used to run the test. the findings demonstrated that the answers met the criteria for job satisfaction, work-life balance, and work stress. the analysis of the correlation coefficient produced strong and favorable results. the results of the hypothesis testing revealed that, during the covid 19 pandemic, senior high school teachers in pematang siantar city's work-life balance and work stress have a favorable and significant impact on job satisfaction. keywords: job satisfaction; work-life balance; work stress this is an open access article under the cc–by-nc license. introduction in the current situation, starting in 2020 countries around the world are fighting a deadly virus called coronavirus 19 (covid-19) (bbc 2020). with the declaration of covid-19 as a global outbreak, the ministry of education and culture has implemented a policy to implement learning with distance or online learning methods (kementerian and kebudayaan 2020). schools are required to introduce learning with new measures to support social distancing to prevent the spread of covid-19 indonesia's educational system is today of very poor quality. indonesia's human development index is falling, according to studies by the united nations educational, scientific and organizations (unesco). in asia, indonesia is rated 12th out of 12 countries (bbc 2020). indonesia ranks just 37th out of 57 nations in the world in terms of its level of competitiveness. according to this information, indonesia's educational system remains in threat (martinus 2020). in order to identify answers that can be used to a variety of problems that occur and can generate creative and inventive chances to improve the living sector, this condition demands cooperation between people and information technology (andriyana and supriansyah 2021). teachers must be able to balance work and life in order to handle situations like these (gusvita 2020). journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 29-39 implementation of work-life balance and work stress for job satisfaction during the covid-19 pandemic marisi butarbutar, abdi kurnia lubis, robert tua siregar, supitriyani supitriyani issn 2776-9658 (online) 30 │ although teachers must be capable of working hard, they also have lives outside of the classroom that must be taken into account. one of the elements that affects job satisfaction is work-life balance (rondonuwu, rumawas, and asaloei 2018). therefore, work-life balance is correlated with employee job satisfaction (arif and farooqi 2014). it is envisaged that the occurrence of a healthy work-life balance would strengthen the teacher's resilience, enabling him to make decisions more quickly and effectively and to stay away from mentally taxing circumstances like stress. because stressful mental circumstances can negatively affect activities and health. numerous factors, including those from both within and outside of the workplace, such as family issues and demanding professional assignments, can cause stress (saleh, russeng, and tadjuddin 2020). the tremendous demands of the job prevent workers from taking breaks and relaxing. pressures from an excessive workload and lack of free time, such as pressing deadlines, are connected to job expectations (sutapa 2017). this may result in stress and despair, which will ultimately have a negative influence on the job itself and may prevent the organization from attaining long-term objectives (safitri and astutik 2019). the purpose of this study is to analyze the picture of work-life balance, work stress, and job satisfaction and to analyze the effect of work-life balance and work stress on job satisfaction. thus, it can be clearly known what things cause work-life balance and work stress can affect job satisfaction in teachers of state high school in pematang siantar city during the covid-19 pandemic. literature review the foundation for theoretical descriptions pertaining to research topics is a literature review. the literature review represents the theoretical core of an article. the purpose of a literature review is to “look again” what other researchers have done regarding a specific topic. a literature review is a means to an end, namely to provide background to and serve as motivation for the objectives and hypotheses that guide one’s own research. a good literature review should not merely provide a summary of previous relevant research, the researcher is also expected to critically evaluate, re-organize and synthesize the work of others. the discussion about work stress, work-life balance, and job satisfaction is explained in the paragraphs follow. job satisfaction in the world of work, job satisfaction is the result of an employee's or workforce's perception of how well their job provides things that are considered important by the employee (ganapathi 2016). the job satisfaction dimension (parimita and widyastuti 2015) is the work itself, payment (pay), promotion opportunity, supervisor, co-workers (work group), and working conditions. (chandra putra et al., 2020) states that work-life balance has a major influence on employee job satisfaction. therefore, the organization or company must pay attention to some of these aspects. work life balance work-life balance is a balance of life, namely free time, family, religion and work, namely career and ambition in an individual should be equally balanced, namely to reduce tension between work and employee life (rahmawati 2014). the dimensions of the work-life balance (andriyana and supriansyah 2021) variables are wipl (work interfence with personal life), pliw (personal life interference with work), plew (personal life enhancement of work), wepl (work enhancement of personal life). journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 29-39 implementation of work-life balance and work stress for job satisfaction during the covid-19 pandemic marisi butarbutar, abdi kurnia lubis, robert tua siregar, supitriyani supitriyani issn 2776-9658 (online) │ 31 work stress work stress is a condition of tension that creates a physical and psychological imbalance, which affects the emotions, thought processes, and conditions of an employee (safitri and astutik 2019). job stress does not come by itself, but there are many factors that can cause work stress in employees. in this study, the measurement of work stress used the dimensions of workload, job position, relationships at work, career development to measure the work stress variable (yasa and dewi 2019). work-life balance on job satisfaction work-life balance has a relationship and influence on job satisfaction. according to ganapathi (2016) there are certain emphasizes to examine the elements of work-life balance that have an influence on the welfare, attitudes and outputs produced by workers in the workplace. this shows that a good work-life balance can lead to healthy activities that will satisfy employees. chandra putra et al (2020) states that work-life balance has a major influence on employee job satisfaction. the greater the level of balance in the work and personal life of an employee, the greater the employee's commitment and also the level of employee satisfaction with his work. in companies where employees carry out work-life balance policies such as flexibility, family-friendly benefits, programs and initiatives about work and personal life, it shows benefits such as increased job satisfaction at the level towards loyalty and commitment to the company's goals and mission. work stress on job satisfaction stress is a condition of tension that affects a person's emotions, thinking processes, and condition. meanwhile, job satisfaction is a pleasant emotional state in which employees look at their work. the two are interconnected as stated (parimita and widyastuti 2015) that one of the impacts of psychological stress can reduce employee job satisfaction. high work stress causes a decrease in job satisfaction, so that more stress is experienced and the lower their job satisfaction (safitri and astutik 2019). for many people the quantity of stress that is low to moderate, allows them to do their job better, since it makes them able to increase work intensity, alertness and the ability to react. but high levels of stress, or even prolonged moderate levels, will eventually lead to job satisfaction. research method field research and library research are the research designs used in writing about and debating issues related to this research. the study's focus is on civil servant teachers, who are licensed to teach in as many as 296 public senior high schools in pematang siantar city. these schools are overseen by the siantar branch of the north sumatra provincial education office, which is located on jalan sisingamangaraja no. 73 in the east nagahuta district of siantar marimbun district, pematang siantar city. based on proportional random sample technique and data analysis through normality, the sample size was 168 respondents. in this study, the data sources used by the authors are primary data and secondary data. the data collection techniques used are interviews, questionnaires, and documentation. the data analysis technique used is a quantitative descriptive analysis technique namely linear regression analysis, correlation and determination analysis and hypothesis testing. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 29-39 implementation of work-life balance and work stress for job satisfaction during the covid-19 pandemic marisi butarbutar, abdi kurnia lubis, robert tua siregar, supitriyani supitriyani issn 2776-9658 (online) 32 │ multiple linear regression analysis the equation that states the form of the relationship between the independent variable (x) and the dependent variable (y) is called the regression equation. the regression model used is: ŷ = b0 + b1 x1 + b2 x2 ..........(sugiyono 2017) correlation coefficient analysis and determination the coefficient of determination (r) is the coefficient of determining the magnitude of the contribution of the variable x to the rise and fall of the value of the variable y. this coefficient indicates the proportion of total variability in the corresponding variable described by the regression model. the value of r is at intervals of 0 ≤ r ≤ 1. test the hypothesis simultaneous test (f-test) the f test is a test that is carried out to find out whether between the independent variable, namely work-life balance, work stress and the dependent variable, namely job satisfaction, has a significant effect or not simultaneously. the calculated value is compared with the f-table value for the 5% error of the two-party test and dk = n-2, then the value of the f-tabel is obtained. partial test (t test) the t test is a test that is carried out to find out whether between the independent variable, namely work-life balance, work stress and the dependent variable, namely job satisfaction, has a significant effect or not partially. the calculated value is compared with the ttable value for the 5% error of the two-party test and dk = n-2, then the value of the ttabel is obtained. findings and discussion overview of job satisfaction in teachers of pematang siantar city state high school overall, it can be seen that job satisfaction at the teachers of state high school in pematang siantar city got a total answer score of 3,023, total weighted answers of 11,927, the average score was at an average level of 3,94 with satisfied answers, standard deviations of 0,70, a range of values ranging from 3,24 to 4,64 and with a fairly satisfied to very satisfied category. the highest level of average job satisfaction is in the dimension of colleagues with indicators of colleagues' support with questions of family atmosphere in work that are well-built with an average level of 4,33 which is very satisfied. the lowest average level of job satisfaction is in the dimension of promotional opportunities on the indicator of career development opportunities with work environment questions that support getting an increase in positions that have an average level of 3,55 which is contrary to satisfaction, this is a weakness of job satisfaction. overview of work-life balance in teachers of pematang siantar city state high school overall, it can be seen that the work-life balance for teachers of state high school in pematang siantar city got a total answer score of 2,182, total weighted answers of 8,541, the average score was at an average level of 3,91 with good answers, a standard deviation of 0,69, a range of values ranging from 3,22 to 4,60 and with a fairly good to very good category. the highest average work-life balance level is in the wepl (work enchencement of personal life) dimension with personal life indicators with work tasks with an average level of 4,28 which is very goodly measured. the lowest average work-life balance journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 29-39 implementation of work-life balance and work stress for job satisfaction during the covid-19 pandemic marisi butarbutar, abdi kurnia lubis, robert tua siregar, supitriyani supitriyani issn 2776-9658 (online) │ 33 level is in the wipl (work interfence with personal life) dimension on the personal life time indicator which has an average level of 2,76 which is quite good, this is a weakness of the work-life balance. overview of work stress in teachers of pematang siantar city state high school overall, it can be seen that the work stress of the teachers of the state high school in pematang siantar city received a total score of 2,016 answers, the total weighted answers were 6,613, the average score was at an average level of 3,28 with quite high answers, a standard deviation of 0,80, a range of values ranging from 2,48 to 4,08 and with high to low categories. the highest average level of work stress is in the dimension of relationships in the workplace with an average level of 4,22 which is a very low benchmark. the lowest average level of work stress is in the dimension of workload which has an average level of 1,54 which is a very high benchmark, this is the weakness of work stress. quantitative descriptive analysis the effect of work-life balance on job satisfaction at this stage, linear regression test is carried out to analyze the magnitude of the effect of work-life balance on job satisfaction. the following table is the result of a simple regression of work-life balance against job satisfaction, as follows: table 1. work-life balance against job satisfaction model unstandardized coefficients standardized coefficients b std. error beta 1 (constant) 18,192 3,026 work-life balance 1,039 ,059 ,807 source: results of questionnaire processing using spss (2022) the regression equation was obtained, namely ý = 18,192 + 1,039x, meaning that there is a positive influence between work-life balance on job satisfaction in state high school teachers in pematang siantar city. the effect of work stress on job satisfaction at this stage, a linear regression test is carried out to analyze the magnitude of the effect of work stress on job satisfaction. the following table is the result of a simple regression of work stress on job satisfaction, as follows: table 2. work stress against job satisfaction model unstandardized coefficients standardized coefficients b std.error beta 1 (constant) 51,907 3,924 stres_kerja ,485 ,098 ,357 source: results of questionnaire processing using spss (2022) the regression equation was obtained, namely ý = 51,907 + 0,485x, meaning that there is a positive influence between work stress on job satisfaction in state high school teachers in pematang siantar city. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 29-39 implementation of work-life balance and work stress for job satisfaction during the covid-19 pandemic marisi butarbutar, abdi kurnia lubis, robert tua siregar, supitriyani supitriyani issn 2776-9658 (online) 34 │ correlation coefficient and coefficient of determination to calculate the strength of the work-life balance relationship and work stress on job satisfaction in state high school teachers in pematang siantar city, it is stated by a correlation coefficient that is often symbolized by r. the calculated value of r can be calculated with the spss program. the relationship of work stress to job satisfaction at this stage, correlation analysis testing is carried out to calculate the strength of the relationship between work stress and job satisfaction. the following table is the result of the analysis of the correlation of work stress to job satisfaction, as follows: table 3. work stress to job satisfaction model r r square adjusted r square std. error of the estimate 1 ,357a ,127 ,122 8,06951 source: results of questionnaire processing using spss (2022) the level of r = 0,357 has been obtained, which means that a low relationship is obtained between work stress and job satisfaction in state high school teachers in pematang siantar city. furthermore, the level of coefficient of determination (rsquare) of 0,127 means that the high and low job satisfaction can be explained by 12,7%, while the remaining 87,3% is explained by other variables that are not discussed in this study. work-life balance relationship to job satisfaction at this stage, correlation analysis testing is carried out to calculate the strength of the work-life balance relationship to job satisfaction. the following table is the result of the analysis of the correlation of work-life balance to job satisfaction, as follows: table 4. work-life balance to job satisfaction model r r square adjusted r square std. error of the estimate 1 ,807a ,651 ,649 5,09975 source: results of questionnaire processing using spss (2022) the level of r = 0,807 has been obtained, which means that a very strong relationship is obtained between work-life balance and job satisfaction in state high school teachers in pematang siantar city. furthermore, the level of coefficient of determination (rsquare) of 0,651 means that the high and low job satisfaction can be explained by 65,1%, while the remaining 34,9% is explained by other variables that are not discussed in this study. hypothesis test hypothesis test 1: the effect of work-life balance on job satisfaction in state high school teachers in pematang siantar city this method is done to determine whether the hypothesis is rejected or accepted. in addition, this method is useful for seeing whether the work-life balance is able to affect job satisfaction. if thitung.> ttabel or significance ≤ 0,05 then h0 is rejected. the t-test calculation output is found in the following table. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 29-39 implementation of work-life balance and work stress for job satisfaction during the covid-19 pandemic marisi butarbutar, abdi kurnia lubis, robert tua siregar, supitriyani supitriyani issn 2776-9658 (online) │ 35 table 5. results of the work-life balance t test on job satisfaction model unstandardizedcoefficients standardizedcoefficients t sig. b std.error beta (constant) 18,192 3,026 6,012 ,000 work-life balance 1,039 ,059 ,807 17,606 ,000 source: results of questionnaire processing using spss (2022) it can be seen t-count on the work-life balance element worth 17.606 > ttable with df = n–2 (168– 2=166) worth 1.9744 or significance of 0,000 < α 0,05. thus, h0 was rejected, meaning that work-life balance had a positive and significant effect on job satisfaction in state high school teachers in pematang siantar city. this is in line with the research conducted by (fayyazi and aslani 2015). hypothesis test 2: the effect of work stress on job satisfaction in state high school teachers in pematang siantar city this method is done to determine whether the hypothesis is rejected or accepted. in addition, this method is useful for seeing whether work stress can really affect job satisfaction. if thitung.> ttabel or significance ≤ 0,05, then h0 is rejected. the t-test calculation output is found in the following table: table 6. results of the work stress test on job satisfaction model unstandardizedcoefficients standardizedcoefficients t sig. b std.error beta 1 (constant) 51,907 3,924 13,228 ,000 stres_kerja ,485 ,098 ,357 4,927 ,000 source: results of questionnaire processing using spss (2022) it can be seen tcount on the work stress element worth 4.927 > the ttable with df = n–2 (168–2=166) worth 1.9744 or significance 0,000 < α 0,05. thus, it can be stated that h0 is rejected, meaning that work stress has a positive and significant effect on job satisfaction in state high school teachers in pematang siantar city. this is in line with the research conducted by. hypothesis test 3: the effect of work-life balance and work stress on job satisfaction in state high school teachers in pematang siantar city this method is done to determine whether the hypothesis is rejected or accepted. in addition, this method is useful for seeing whether work-life balance and work stress are able to affect job satisfaction together. if the fcount> ftabel or significance ≤ 0,05, then h0 is rejected. the t-test calculation output is found in the following table: tabel 7. f work-life balance and work stress test results on job satisfaction model sum of squares df mean square f sig. 1 regression 8089,549 2 4044,775 155,299 ,000b residual 4297,445 165 26,045 total 12386,994 167 source: results of questionnaire processing using spss (2022) as per table 7. in that case, it can be seen that f-counts on the elements of work-life balance and work stress worth 155,299 > ftable with df = n–k-1 (168-3-1=164) worth 2,66 or significance of 0,000 < α journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 29-39 implementation of work-life balance and work stress for job satisfaction during the covid-19 pandemic marisi butarbutar, abdi kurnia lubis, robert tua siregar, supitriyani supitriyani issn 2776-9658 (online) 36 │ 0,05. thus, it can be stated that h0 is rejected, meaning that work-life balance and work stress have a positive and significant effect on job satisfaction in state high school teachers in pematang siantar city. this is not in line with the research conducted by (chandra putra et al. 2020). evaluation job satisfaction at a state high school teacher in pematang siantar city according to the findings from the dimensions used in this study, pematang siantar city's state high school teachers can be said to have a satisfactory level of job satisfaction. teachers must be prepared to overcome all challenges during teaching and learning activities during the covid-19 pandemic. in any circumstance, teachers must continue to perform their duties in order to continue educating their students. obstacles that teachers encounter when engaging in online teaching and learning activities, such as unfavorable network conditions that result in subpar material delivery. the learning media offered is monotonous for teachers who do not understand it (information and technology), which prevents the learning from being interactively dominant. another obstacle faced by the teacher is the character or behavior of the students who are difficult to monitor and the tasks given by the students are piled up. assessments carried out by teachers in the form of daily assessment (ph), midterm assessment (pts), end of semester assessment (pas) are less integrated. although teaching and learning activities are carried out online, teachers are also required to provide daily activity reports to be reported every day. so teachers tend to focus on completing the curriculum. without enough planning, conventional learning systems are abruptly switched over to online learning systems. however, everything must still be done in order for the teaching to be effective and for the students to actively participate in the session. online education stutters, as is abundantly clear. the method of online learning needs constant improvement in its most crucial elements. stable internet connectivity, capable hardware, user-friendly platforms for apps, and online sociability that is efficient, effective, and integrated at all educational levels. work-life balance at a state high school teachers in pematang siantar city the work-life balance of state high school teachers in pematang siantar city can be characterized as being good based on the results from the dimensions examined in this study. indicators whose values are below the average level value because of various barriers can still be identified for a number of reasons. many of the teachers felt lazy during the covid-19 pandemic, which required work from home, because they believed there was no need to get ready for class or leave the house. poor time management is the result of this serious error. it is crucial to avoid burnout while working from home by being upfront and honest about your feelings and circumstances. good communication is crucial during times of social isolation because, when working remotely, we can only engage online. our supervisor or coworker can learn whether we are struggling to manage tasks by sharing our sentiments and situations, which will enable us to jointly come up with the ideal solution. in order to avoid family members interfering with business activities, communication with the family must also be established so that they are aware when we are working on vital duties. work stress at a state high school teachers in pematang siantar city based on the findings from the study's dimensions, it can be concluded that the state high school teachers in pematang siantar city experience relatively less work-related stress. indicators whose values are below the average level value because of various barriers can still be identified for a number of journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 29-39 implementation of work-life balance and work stress for job satisfaction during the covid-19 pandemic marisi butarbutar, abdi kurnia lubis, robert tua siregar, supitriyani supitriyani issn 2776-9658 (online) │ 37 reasons. work stress is a barrier to the change in the educational system that instructors experience because they are compelled to swiftly adapt to circumstances and situations, particularly the learning system that is entirely online during the covid-19 pandemic. the globalization period, which is marked by the quick advancement of science and information and communication technology, has brought about numerous changes and is inextricably linked to unrest on the political and economic fronts. this should aid instructors in enhancing their professionalism, but it may be tough to conclude that it is a good opportunity for them to gain more information and insight if the balance offered is far from perfect. you need specialized skills if you wish to be able to adjust to the changes and turbulence that take place. conclusion from the entire discussion, the author claims that a qualitative descriptive analysis of work-life balance is at an average level with good answers, work stress is at an average level with a fair number of answers, and job satisfaction is at an average level with satisfied answers. simple regression results also show a positive relationship between work-life balance and job satisfaction as well as a positive relationship between work stress and job satisfaction, and the results of hypothesis testing show a positive and significant influence between work-life balance on job satisfaction, work stress on job satisfaction, as well as work-life balance and work stress on job satisfaction at state high school teachers in pematang siantar city. this research is important because work-life balance has a positive effect. with the work-life balance, employees finally achieve success at work and outside of work which has an impact on achieving work-life balance which in the end also makes employee satisfaction increase overall. the use of work-life balance positively has an influence on overall employee satisfaction. however, if the worklife balance practice is not monitored properly, it can create difficulties at work and can cause work stress. limitation & further research this research has limitations, namely this study has limitations in the research sample used, namely only using high school civil servant teachers who have been certified in pematang siantar city as research objects, so they cannot represent teachers in pematang siantar city, this research occurred in the midst of the covid-19 pandemic which caused limited space for researchers to move in collecting respondents because the collection of respondents' answers online was considered ineffective, and then the respondents' answers were obtained from an online questionnaire and only examined the influence of 2 variables on job satisfaction, therefore to be able to examine more deeply about what factors can affect job satisfaction, it is hoped that researchers can use other variables as well. acknowledgments researchers thank the funders of research, supporters of facilities, and manuscript reviewers. researchers thanked the ministry of ristekdikti who had financed this research from start to finish, to lppm sultan agung college of economics which had facilitated the team in conducting research. this research is the result of a national competitive research grant for the master's thesis research scheme of the kemenristek dikti. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 29-39 implementation of work-life balance and work stress for job satisfaction during the covid-19 pandemic marisi butarbutar, abdi kurnia lubis, robert tua siregar, supitriyani supitriyani issn 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istiana tadjuddin. 2020. "manajemen stres kerja". pertama. ed. nurul mawaddah syafitri. yogyakarta: cv. deepublish budi utama. sugiyono. 2017. "quantitative, qualitative and r&d research methods". bandung: cv. alfabeta. sutapa, mada. 2017. “stress and conflict in organizations” manajemen pendidikan no. 01/th: 71–77. yasa, i gede redita, and a a sagung kartika dewi. 2019. “work motivation as a mediation variable". fakultas ekonomi dan bisnis universitas udayana, bali , indonesia. e-jurnal manajemen unud, vol. 8, no. 3, 2019:1203 – 1229 8(3): 1203–29 available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 1 number 2 (2021): 61-73 corresponding author antonius sony eko nugroho, antonius.nugroho001@binus.ac.id doi: 10.31098/jgrcs.v1i2.720 research synergy foundation research trend of digital innovation in banking: a bibliometric analysis antonius sony eko nugroho1, mohammad hamsal2 1doctor of research in management, binus business school, bina nusantara university, indonesia 2management department, binus business school doctor of research in management, bina nusantara university, indonesia abstract this paper aims to analyze research trends of digital innovation in banking scientifically through bibliometric studies. initial data were collected using publish or perish from 2011 to 2021 by searching for published papers indexed by crossref, google scholar, microsoft academic, and scopus database. the results show that scientific publications of digital innovation in banking have increased gradually since 2016. the scopus database is used because it contains journals and conference proceedings deemed more relevant by the academic community with detailed dois. vosviewer and microsoft excel were used as the tools to analyze co-authorship, co-occurrence, and citation obtained from the scopus database. the visualization of the research trends of digital innovation in banking resulted in three co-occurrence clusters leading to some of the topic areas mentioned in the results; 1) digital innovation in banking related to the technology implementation and environmental innovations, 2) digital innovation in banking business management in the world, and 3) digital innovation in banking in relating to its effect and benefit to society. technology is rapidly changing the financial services industry, especially banks. digital innovation resulting from the use of digital technology will help banking improve customer experience and maintain banking performance. these study findings will help researchers recognize the research trends of digital innovation in banking globally and suggest future research directions. keywords: digital innovation, banking, bibliometric study, research trend, vosviewer this is an open access article under the cc –by-nc license introduction today's economic and competitive challenges are making the status quo untenable for the banking industry. with fintech attracting millions of new customers, incumbents face a need for bold action that is becoming more urgent by the day (bhapkar et al., 2021). according to a recent mckinsey survey, 65 percent of financial services businesses that made business building a top-five priority saw revenue growth above their competitors. pwc also mentions that great powers are reshaping the banking industry. customer expectations, technological capabilities, regulatory requirements, demographics, and the sharing economy create the imperative for change. banks need to overcome these challenges, radically innovate and transform themselves for the future (pwc, 2020). as the banking industry transitioned from banking 1.0 era to banking 4.0, which saw open banking make way for open ecosystems that enabled an exchange of resources and data to expedite innovation and deliver superior customer experience. open banking is reshaping the banking sector by extending traditional banking services' reach and convenience by opening up and leveraging consumer data (zeller & dahdal, 2021). banking 4.x is an experience-driven, platform-based optimum channel banking resilient to financial and non-financial threats, built around http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-73 research trend of digital innovation in banking: a bibliometric analysis antonius sony eko nugroho, mohammad hamsal issn 2776-9658 (online) 62 │ long-term, sustainable growth where human interactions evolve from servicing to advising (capgemini, 2021). sustainable, innovative banking services will be tailored to meet the needs of today and future stakeholders, as well as environmental and social risks. hence, banks are challenged to integrate the science of sustainability and sustainable development objectives in their business operations and services innovation (ibrahim et al., 2019). sustainable competitive advantage is influenced by continuous business innovation (soebandrija, 2020). there is a lot of competition from outside and within the banking industry itself. nowadays, almost every aspect of business will be activated by the power of information technology. digital technology is essential in achieving business goals and its pervasive effects in the restructuring of entire industries (nylén & holmström, 2015). digital disruption has prompted banks to consider digital transformation as part of their strategy. the banking industry is very close to the development of information technology, developing innovative channels (nazaritehrani & mashali, 2020) in providing the best service to its customers. therefore, every bank always tries to innovate products and services to maintain their performance. this paper focuses on research trends of digital innovation in banking within 2011 to 2021 interval as explained in the research methodology section, with five research questions as follows: a. what is the publication output profile of digital innovation in banking for 2011 to 2021? b. how far is the distribution of digital innovation in banking publications in the world? c. who are the top authors in researching digital innovation in banking in the world? d. what is the publication pattern of digital innovation in banking? e. what is the result of the visualization of research trends in digital innovation in banking? literature review a previous literature study collected from the scopus database found some articles related to digital innovation and banking since 1982, but the similarity has been started from 1996 to 1999. chevron et al. discuss the anticipation of the changes in consumer attitudes and behaviors from the growing importance of digital information technology (chevron, 1996). liberatore investigates the adoption patterns and implementation issues of digital imaging technology within the banking and insurance industries (liberatore, 1997). meanwhile, giannakoudi mentioned internet banking technology as the digital voyage of banking (giannakoudi, 1999). lefebvre and christie are interested in digital money or e-cash transaction (christie, 1999; lefebvre, 1999). many banking, financial products, and services have used ict in their production and delivery processes to achieve effective and efficient ways of tailoring customer satisfaction and experience (beccalli, 2007). digital innovation can be defined as "the creation of (and a consequent change in) business processes, market offerings, or models that result from the use of digital technology" (nambisan, 2020). in recent years every bank has started its journey in digital transformation to improve customer satisfaction with innovative banking experiences that can increase customer retention and acquisition in maintaining banking performance. an organization must immediately transform from traditional processes or services and transform into digital technology-based processes and services. the implementation of digital-based processes and services is expected to increase the effectiveness and efficiency of the company and create new value for all stakeholders (customers, business partners, shareholders, and regulators). financial institutions need to evaluate their current leadership, structures, talent ecosystems, cultures, and ways of working and then invest strategically to improve the areas that fall short (kaufman et al., 2015). journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-73 research trend of digital innovation in banking: a bibliometric analysis antonius sony eko nugroho, mohammad hamsal issn 2776-9658 (online) │ 63 the financial services industry, especially the bank, is currently facing a change in the form of traditional interpersonal services to digital financial services, which are being driven by rapid technological changes. (niemand, 2021). with the rapid development of it, digital technology changes how banks translate new customer demands into new products and services (lestari & rahmanto, 2021). the use of innovation and advanced technologies to benefit development will build an efficient and competitive banking system (diener, 2021). banking is experiencing disruptive innovation that requires them to be adaptive in almost all cooperative processes in their digitalization process. digital transformation offer opportunities for business model innovation (sund, 2021). there's also disruptive technology called blockchain which can be the disruption of banking business. as growing innovation technology, blockchain allows individuals to record transactions on a decentralized, distributed ledger, an advanced technology with no central controlling authority as of financial banking systems (muralidhara, 2021; rahman & dawood, 2019). disruptive artificial intelligence (ai) technologies can dramatically improve banks' performance in four key areas: higher profits, at-scale personalization, smart omnichannel experiences, and rapid innovation cycles (carson et al., 2021). modern applications of ai are collectively creating a more inclusive and equitable financial services ecosystem. these innovations will help deliver new value on top of evolving service platforms to create symbiotic relationships between health and wealth that could have significant multigenerational impacts (lau & leimer, 2018). the authors intend to observe keywords, correlation, and insightful topics of digital innovation in banking based on the above phenomena. research method this study follows some references in the paper of bibliometric studies (kulakli & osmanaj, 2020; van oorschot et al., 2018; yang et al., 2017). the bibliometric review will benefit both the academic and public communities. it helps us convert publication metadata into visualizations or maps, which are easier to gain valuable insights. visualizing keywords to identify research themes or clusters in a particular discipline, map author affiliations of a specific journal, map institutional and international collaboration as part of a framework to identify emerging technologies (tanudjaja & kow, 2018). the scopus database was used because it contains journals and conference proceedings deemed more relevant by the academic community with detailed dois. the research was started by conducting an online search on july 29-30th, 2021. the complete steps are illustrated in figure 1, following the five steps in conducting bibliometric analysis (ari masitoh et al., 2021; philosophy & suprapto, 2021). the authors conducted an online search by entering "digital innovation" + banking in the title, keywords, and abstract from 2011 to 2021. figure 1. five steps in conducting a bibliometric study. the initial exploration used publish or perish (pop) by searching for published papers indexed by crossref, google scholar, microsoft academic, and scopus databases to get the publication trends, as shown in the following summary figure 2. the result was documented in the form of (.ris) and (.csv). furthermore, these records are processed in different bibliometric and network analysis programs: microsoft excel and vosviewer. vosviewer software was used to find out research trends on digital innovation in banking. the initial data collection investigated the research trend analysis, including the characteristics of publication output, document sources, output distribution in subject categories, top authors, top citations, and publication trends from 2011 to 2021. keyword co-occurrence analysis was journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-73 research trend of digital innovation in banking: a bibliometric analysis antonius sony eko nugroho, mohammad hamsal issn 2776-9658 (online) 64 │ carried out using vosviewer. it uses an algorithm visualization of similarities (vos) as an alternative to multidimensional scaling (van eck & waltman, 2020). figure 2. research publication summary of digital innovation in banking 2011 to 2021. findings and discussion publication output pop was used to search the "digital innovation" + banking keyword and the result that meet criteria obtained for the past ten years (2011 – 2021) in the scopus database are 245 papers. the result of the term given includes 5 document sources (journal, conference proceeding, book, chapter, and review). the number of articles based on sources indicated the dominance of articles in the journal (119 documents) and conference (73 documents). the publications with the keyword of digital innovation in banking research throughout 2011 to 2021 are illustrated in figure 3, extracted from the scopus database. figure 3. the number of articles on digital innovation in banking is based on source categories. publication distribution in journal data collected using pop indicate the most cited authors, as we can see in the top 20 authors most cited from 2011 to 2021 presented in table 1. interestingly, two authors (anagnostopoulos and drasch) have the most cited from the other authors published in the same journal (journal of economics and business). the published paper with the title "fintech and regtech impact on regulators and banks" and "integrating the 'troublemakers': a taxonomy for cooperation between banks and fintech" (b j drasch et al., 2018) may become an intriguing topic from both of them. we can verify the h-index of each journal from the scimago, which shows in figure 4, so we can see the impact of each journal on the academic and public communities. h-index rank is strongly influenced by the number of published papers on each journal. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-73 research trend of digital innovation in banking: a bibliometric analysis antonius sony eko nugroho, mohammad hamsal issn 2776-9658 (online) │ 65 figure 4. h-index of top 20 journals from scimago. scimago journal rank (sjr), as presented in figure 5, measured the scientific influence of scholarly journals that accounts for the number of citations received by a journal and indicates the average number of weighted citations received during a selected year per document published. higher scimago journal ranks are meant to exhibit greater journal prestige (thomas, 2021). figure 5. scimago journal rank of top 20 journals. top authors the most productive authors presented in figure 6 indicate the top eight authors researching digital innovation in banking from 2011 to 2021 indexed by scopus. it consists of riyanto, bataev, ciriello, diener, ilankumaran, mahalle, niemand, and solms. data was generated using vosviewer with 226 authors and filtered by two documents per author, and eight authors are selected. on average, the authors had two documents, and riyanto from indonesia already has four papers. but if we compare to the most cited author in table 1, it's not the most author with documents has the most cited. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-73 research trend of digital innovation in banking: a bibliometric analysis antonius sony eko nugroho, mohammad hamsal issn 2776-9658 (online) 66 │ figure 6. top eight authors who are researching digital innovation in banking from 2011 to 2021. publication patterns of source journal we may see the most cited author and journals cited by authors indexed by scopus in table 1, i.e., a yip (2018) in journal of cleaner production, c lehrer (2018) in journal of management information system, and i anagnostopoulos (2018) with b.j. drasch (2018) in journal of economics and business. table 1. top 20 authors most cited from 2011 to 2021 authors journal cites/year cites a. yip, 2018 journal of cleaner production 31 93 c. lehrer, 2018 journal of management information systems 29.67 89 i. anagnostopoulos, 2018 journal of economics and business 21.67 65 b.j. drasch, 2018 journal of economics and business 12.33 37 v. kandpal, 2019 indian journal of economics and business 18 36 m. avital, 2014 35th icis 2014 "building a better world through information systems." 4.71 33 r. van loo, 2018 ucla law review 9 27 y. li, 2017 financial innovation 6.25 25 p. sposato, 2017 environmental engineering and management journal 5.75 23 y.v. rao, 2015 indian journal of science and technology 3.67 22 s. reydet, 2017 journal of retailing and consumer services 5.5 22 y.m. akatkin, 2017 business informatics 4.75 19 a. shaikh, 2017 research in international business and finance 4.75 19 t. niemand, 2017 proceedings of the 25th ecis 2017 2.75 11 a.r. bayanova, 2020 contemporary educational technology 11 11 j. gruin, 2020 new political economy 11 11 c. popescu, 2011 informatica 1 10 j. hedman, 2017 international journal of bank marketing 2.25 9 c. clarke, 2019 review of international political economy 4.5 9 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-73 research trend of digital innovation in banking: a bibliometric analysis antonius sony eko nugroho, mohammad hamsal issn 2776-9658 (online) │ 67 t. yigitcanlar, 2020 journal of open innovation: technology, market, and complexity 9 9 visualization of research trend co-occurrence analysis can reveal the research topic statistically. co-occurrence analysis is simply counting paired data in the collection unit. these methods are helpful for researchers to study an overview of digital innovation in the banking domain. map analysis is based on text data that created a term cooccurrence map, and terms are extracted from the title and abstract fields with binary counting. only keywords in the document matter, filtering the minimum number of term occurrences to four. among the 174 papers related to digital innovation in banking research in the scopus database from 2011-2021, we found 2004 terms in total and 99 terms meet the threshold. after the relevance score is calculated based on the default choice to choose 60%, the most relevant keywords are 59. figure 7 shows the overall picture of research on digital innovation in banking within the scopus database. figure 7. the co-occurrence network visualization mapped based on text data of abstract and title field from the co-occurrence network visualization of the scopus database shown in figure 7, researchers worldwide produced three primary clusters indicated by red, green, and blue. the first cluster (red color) is grouped by keywords such as digitalization, digital technology, digital innovation, transformation, competitive advantage, banking sector, fintech ecosystem, and prospect leading to the topic of digital innovation in banking related to the technology implementation and environmental innovations. the second cluster (blue) is grouped by keywords such as digital disruption, banking industry, application, fintech, industry, blockchain, ai, and business, leading to the topic of digital innovation in banking business management in the world. finally, the third cluster (green) is grouped by keywords such as cases study, research, context, perception, adoption, and design methodology approach indicated digital innovation in banking relating to its effect and benefit to society. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-73 research trend of digital innovation in banking: a bibliometric analysis antonius sony eko nugroho, mohammad hamsal issn 2776-9658 (online) 68 │ figure 8. density visualization of citation analysis. citation analysis based on scientific research databases can be legally implemented in applied and technical sciences, social sciences, and humanities. therefore the most practical level of aggregation is citation analysis because scientific research is the teamwork’s result. based on the data collected from pop, there is a total of 174 documents retrieved by its valid dois, using citation type of analysis with documents as the unit of analysis. we found the density of the author in figure 8, which shows the top-cited author as presented in the previous section. co-authorship analysis is used to find relationships between various studies based on research documents produced by researchers. a co-authorship network is a tool for uncovering the direction of collaboration and identifying researchers and institutions leading research. analysis of co-authorship networks can help overcome, make a substantial contribution to academic development. based on 174 documents resulting in 449 authors from the type of analysis co-authorship with authors as the unit of analysis. figure 9 presents top authors and their cluster in researching digital innovation in the banking domain. there are four dominant groups of authorships: riyanto, azis, yunizar, and primiana; yong, jianming, mahalle, abhishek, tao, and xiaohui; ritcher, alexander ciriello, and raffaele; diener and florian. the first group is the most influenced in the cluster, with the most citation and total link strength indicated by vosviewer. from the figures of network overlay visualization, we can discover the author from the year of their existence to identify the paper related from 2011 to 2021. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-73 research trend of digital innovation in banking: a bibliometric analysis antonius sony eko nugroho, mohammad hamsal issn 2776-9658 (online) │ 69 figure 9. co-authorship network overlay visualization. discussion digital innovation in banking may become a widely studied area of research. previous literature already has an interest in the topic with a different term, as mentioned in the background section. based on the research result, we may try to explore the idea from top authors. at the same time, sustainable business model innovation in the banking industry is increasingly seen as a lever for sustainable system change across businesses and industries (yip & bocken, 2018). big data analytics, as growing digital technologies, enable service innovation in the banking organization (lehrer et al., 2018). banking has been subject to enables technology-driven banking services as a fundamental of digitalization and creates new customer demands. while some bank has slow innovation processes, fintech takes advantage of the digital era, delivering customer-centric solutions (benedict j. drasch et al., 2018). disruptive innovation has the potential outcomes for consumers, supervisory, regulatory, and reputational gains for the financial service industry (fsi) and becomes even more critical as the fsi evolves (anagnostopoulos, 2018). the cashless transaction system is achieving its growth day by day; as soon as the market becomes globalized and the development of the banking sector, more and more people moves from cash to a cashless system (kandpal, 2019). how digital technologies enable it, and how the massive sociotechnical systems embodied in these new peer platforms may evolve in response to the market and social forces that drive this emerging ecosystem (avital et al., 2014). research planning and evaluation is essential activity for researchers today. using references quoted from articles with at least 100 references can be seen as an excellent standard for finding taxonomies of research fields. we can compare the accuracy of topic-level taxonomies based on grouping documents using direct citations, bibliographic coupling, and co-citation. research efforts should focus on value differences between stable taxonomic subjects and incorporate historical records with areas of research that can change rapidly. the innovation of research articles, researchers, institutions, and countries must be more accurate if one uses more accurate methods to detect topics. direct citations produce a very accurate taxonomy, and it is recommended that this taxonomy be a suitable basis for decision-making (philosophy & suprapto, 2021). the current bibliometric analysis technique was employed on published documents in the scopus database only, and we did not use other databases. further, it only focused on examining digital collections, digital resources, e-books, using the bibliometric analysis technique of published documents indexed in scopus from 2011 to 2021. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-73 research trend of digital innovation in banking: a bibliometric analysis antonius sony eko nugroho, mohammad hamsal issn 2776-9658 (online) 70 │ conclusion the overall conclusion that we reached based on the bibliometric analysis enabled us to gain more in-depth insights into the digital resources and support to recognize variables used during research on the subject. the topic development of digital innovation in banking identifies the primary sources from which research papers are published. the most cited journal where the research is published, the top active author, the most cited author in the field, and the main topics of interest in digital innovation in banking that the research focuses on. the authors point out several essential points regarding research on digital innovation in banking from 2011 to 2021. the number of digital innovation in banking documents throughout the year increased, dominated by articles in journals. then, the visualization of research trends on digital innovation in banking also resulted in three clusters of co-occurrences from the scopus database, which lead into some topic areas mentioned in the result; 1. digital innovation in banking in relating to the technology implementation and environmental innovations. 2. digital innovation in banking in relating to business management in the world. 3. digital innovation in banking in relating to its effect and benefit to society. technology is rapidly changing the financial services industry, especially banks. digital innovation resulting from the use of digital technology will help banking improve customer experience and maintain banking performance. disruptive technologies such as blockchain, big data, ai, and machine learning can disrupt the banking business or provide new value. through research on the topics and analysis of the works listed in the previous section, it is possible to identify which authors are more active and can be used as references when the subject to be researched is related to digital innovation in banking. in addition, it is possible to identify which works are the most cited on the subject, and the authors can use the works consequently to baseline new studies and research on the subjects. research findings can help related researchers recognize trends in digital innovation in banking research globally. the study also suggested that different bibliometric analysis techniques may be employed from other databases. references anagnostopoulos, i. 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(2023) corresponding author’s email: 21041001@student.uwp.ac.id journal of governance risk management compliance and sustainability, vol. 3 no. 1 (2023) https://doi.org/10.31098/jgrcs.v3i1.1378 legal protection for outsourced workers/laborers towards diploma detention policy committed by the employer nobella indradjaja1* , chamdani chamdani2 1,2 wijaya putra university, indonesia received : february 23, 2023 revised : april 14, 2023 accepted : april 28, 2023 online : april 30, 2023 abstract the massive development in business and the economy has provided new opportunities for the people in indonesia, especially with the dream of improving careers and wages. however, at the same time, the recruiting system aiming to get the best workers is so complex that even it creates a new system called outsourcing. unfortunately, this system has a few disadvantages for workers, especially concerning diploma detention cases. this study aims to analyze the legal protection for outsourced workers/laborers in indonesia. this research uses the normative legal research method. the legal material secondary to this study is literature dealing with research problems. for processing the data, a conceptual approach and a statutory approach are used, and then descriptive research is used to produce a descriptive analysis. although the issue of diploma detention is not commonly discussed in indonesia, it can be said that the core of this problem is the minimum knowledge of the law and regulations. thus, legal protection based on indonesian law and regulation for the outsourced workers/laborers should be openly socialized to all outsourced workers/laborers. to limit the scope of this study, the analysis concerns to analyze the legal protection for outsourced workers/laborers in indonesia based on the applicable law. the novelty of this research study is to provide a better idea and understand the possibility of criminal sanction for employers as one legal protection form for outsourced workers/laborers. keywords: employment agreement; legal protection; outsourced workers introduction outsourcing workers/laborers in the globalization era are highly needed by all business segments to support their business flows. these changes occur not only in the sector of commodity demand but also in forming new business terms. outsourcing is often discussed and disputed. outsourcing is a term that combines the word "out" and "source" (kunarti, 2009). black's law dictionary defines an outsourcing agreement as "an agreement to handle substantially all of a party's business requirement, especially in the areas of data processing and information management" (bryan a. garner, 1999). outsourcing is an alternative for many corporations, considering the increasingly competitive environment, especially with the market (customer's) demand for a quick and flexible response. these types of demands often overwhelm the companies due to the lacking competence of the staff and human resources. therefore, outsourcing becomes a great solution for some people, especially business owners. outsourcing is a business sector that assigns a job previously handled internally to another company (a company that provides outsourcing laborers), as a means to achieve results from the needed service/job. based on muhaimin iskandar, the minister of manpower and transmigration, there are approximately 6.239 outsourcing companies with 338.505 workers in indonesia (detikfinance, 2012). most of these companies are members of the indonesian outsourcing association (known as asosiasi bisnis alih daya indonesia or abadi). these emerging numbers of outsourcing companies represent not only the huge demands for outsourcing manpower but also the positive outlook for business growth in indonesia. this kind of practice is even reviewed by the harvard business review as the most important idea and management practice in the last 75 years. looking back, in indonesia, this system was introduced by megawati soekarnoputri, the fifth president of indonesia, through the manpower act number 13, 2003 (idris, 2020). the recent regulation that articles review https://creativecommons.org/licenses/by-nc/4.0/ https://crossmark.crossref.org/dialog/?doi=10.31098/jgrcs.v3i1.1378&domain=pdf https://orcid.org/0000-0002-9203-1677 https://orcid.org/0000-0002-9842-5941 j. of gov. risk management compliance and sustainability 2 regulates this matter can now be seen in government regulation in lieu of law no. 2 of 2022, a law amended by president jokowi, the former president of indonesia. in indonesia, outsourcing manpower is widely known as outsourced workers/laborers (hutabarat et al., 2021). however, the knowledge of outsourced manpower is only practical, mostly seen from the perspective of companies or businessmen who need it. on one side, establishing companies or factories in this era brings such profits for the government, especially in investments and the uptake of manpower. for the company itself, there are several benefits of hiring through outsourcing companies such as optimizing the budget for other sectors, setting the time-allocating for essential works, and reducing the risks in the recruiting process. it somehow needs to be done by the company because such establishment is not counterpoised by the ability to recruit the expected number of workers at once due to challenges in other sectors. many companies also find it difficult to focus on employee recruitment since they also need to manage the sectors of production, permit, and so forth. because of these incapabilities, many companies need general service providers or agencies that can ensure the numbers of manpower needed. regardless, organizations (companies in this context) are responsible for their personnel staffing decisions (russell cropanzano, 2003). to answer this demand described above, a new business sector arises specializing in providing competent manpower (elok hikmawati, 2018). budiartha states that this phenomenon leads to new problems because of indefinite norms or unclear regulations that regulate outsourcing. as a result, there are many opinions and self-formulated understanding about outsourcing, which eventually causes misunderstanding in the employment system while also worsening the relations between the company and workers regarding the mode of outsourcing labor relations (putu, 2016). there are two parties within the mode of outsourcing labor relations: outsourced workers/laborers and the outsourcing agency (staffing agency). there are regulations in this area, as can be seen in act number 13 of 2003 (which was later amended with act number 11 of 2010 concerning job creation related to fixed term employment agreement (pkwt) and/or indefinite term work agreement (pkwtt) as in articles 56, 58, and 59). yet it contains a lot of obscurities. in the employment agreement regulation in an outsourcing agency, there are many types of labor agreements concerning the contract's length. in short, pkwt (perjanjian kerja waktu tertentu – fixed term work agreement) is an agreement that establishes a labor relationship within the length as agreed (signed) by both parties (satria, 2020). meanwhile, pkwtt (perjanjian kerja waktu tidak tertentu indefinite term work agreement) is an agreement that establishes a labor relationship within an indefinite period (permanent employment). there are many discrepancies between the rights received by pkwt and pkwtt employees. surely, it creates a huge gap and dissatisfaction because of the outsourcing system, which from the two perspectives, is profitable for the employers but not as much for the workers. the lack of productivity, motivation, commitment and loyalty of the workers are some of the negative impacts arising from the stigma of outsourcing practices. moreover, a study suggests that pay status matters (outsourced status in this context), and plays a significant role in the design of work, satisfaction and career development (rogers et al., 2021). these practices also increase industrial disputes, often leading to labor strikes and demonstrations. according to adrian sutedi, it is undeniable that development in the business world is highly influenced by the situation and condition of industrial relations, especially the involvement of parties of interest in that business field (stakeholders). the better the industrial relations, the better the business development ( yuanitasari, 2020). cicero even states the phrase "ubi societas ibi ius" which means "wherever there is society, there is law" (sebastian, 2018). in society, the law has the power to ensure the orderliness of relationships between people. the relationship between workers and business j. of gov. risk management compliance and sustainability 3 owners is a relationship of dependence, yet this relationship of dependence is always imbalanced. in the employment context that unequally weighs the offering and demand for manpower, the discrepancy is tremendous. with such illustrations, it can be understood that current industrial relations are prone to conflicts. the arising conflict can actually be avoided if the human resource management really pays attention to the training, performance appraisal and commitment given by the workers (shiferaw, 2022). however, this is not an easy task as the conflicts between the workers and employers can be triggered by many causes, such as the delay of normative right fulfilment, the frequent unfulfillment of management commitment, and the lack of communication between the management and the labor union (sunarto, 2021). one conflict that creates such tension is the practice of diploma detention. to fulfil company requirements due to standardization, the recruitment process is often identified with a diploma. to be seen as 'qualified' to work at a company, a person needs to undergo a certain educational process and achieve a diploma as 'proof' that they have completed the study. the diploma itself includes the evidence that someone has completed their study. in its practice, when someone applies for a job at a company, the person is asked to attach a copy of a legalized diploma. the legalized diploma proves that the submitted copy is legitimate and the same as the original. in some companies, legalized copies of diplomas are not sufficient. some companies apply a system in which workers should submit their original diplomas, which the company will hold. this system is implemented differently in different companies: some determine the original diploma's return time, and some do not. the diploma detention is implemented by business owners because of several reasons, one of which is to stop workers seeing the company as a stepping stone in their career. there are several cases in which workers suddenly stopped working without any reason, causing a manpower loss on the company's side. it certainly results in a drastic decline performance of a company. from the workers' perspective, diploma detention indirectly hinders their opportunities to work at other workplaces. it can also mean that business owners only prioritize their own interests and hold someone from searching for and getting a more satisfying job. there are also many violations of workers' normative rights, such as salary, severance, and one-sided layoffs (sjaiful, 2021). for the salary violations themselves, the unfulfilling income contributes to the "poverty mentality", a perspective that the laborers will never have enough money, food and wealth, which also makes bad financial decisions (henry, 2022). thus, the workers deservedly search for a working environment that serves their rights fairly. a system must be developed by the government, non-governmental institutions and private citizens to ensure economic output, protecting laborers from such violations (musa et al., 2022). there are many conflicts that are caused by the practice of diploma detention, but only a few reported to the responsible institution. two of those happened in central java and east java. in a case that happened in central java, specifically in semarang city, a worker reported this practice to the ministry of law and human rights, which later became one reason for the making of the governor handbill no. 560/00/9350 circulated on november 23rd, 2016 (kanwil jateng, 2021). in the same way, the department of labor in tulung agung (east java) received eight reports by workers whose rights are violated caused of diploma detention. one of the reports stated that the company did not give the diploma back even after this worker had resigned, according to the regulation. local government regulation no. 8 of 2016, concerning employment, clearly writes that diploma detention is strictly prohibited (hidayah, 2023). however, since this practice has somehow become a custom for several companies, many workers are willing to do that to get the job. despite the diploma detention, workers also have to face different problems such as one-sided dismissal, no clarity for the continued contracts, let alone the proper salary that many outsourcing companies often promise. j. of gov. risk management compliance and sustainability 4 a previous discussion has mentioned several types of research conducted regarding issues in employment, especially in the context of the outsourcing act. this research is conducted to determine its originality by comparing itself to the previous research concerning outsourcing labor relationships from the perspective of civil code. the protection of the law for parties in outsourcing labor relationships, especially to outsourced workers/laborers, can be seen as adequate and is stated in an employment act as a concrete manifestation to measure justice according to the criminal code of the employment act. based on the above-mentioned issues, several questions arise: how can a labor agreement protect outsourced workers/laborers in indonesia? moreover, can criminal sanctions be implemented in the law concerning the practice of diploma detention? research method this research uses the normative legal research method, where the published material becomes a reference in legal research. this method is used to find the basis, principles and doctrines of law as an effort to bring legal issues to light. the data collected and processed is secondary data from existing literature. in this research method, data is processed to find information as well as theoretical and legal foundations. the legal material that is secondary to this study is literature that deals with research problems. additional materials (tertiary) come from newspapers, legal dictionaries, the internet and the kbbi (bahasa indonesia dictionary). a conceptual approach and a statutory approach are used to process the above data. furthermore, the data is also processed to provide descriptive research results so that the descriptive analysis method is used to observe the legal protection for outsourced workers in indonesia and the sanction for diploma detention policy practiced by the employer. findings and discussion labor protection through legal acts is needed to protect employees' legitimate rights and interests. a case in china shows that after the government (through the national people's congress) adopted the labor contract law of the people's republic of china, there was an increase in employee's cohesion, sense of responsibility and passion for work which positively contributes to the firm's value of workforce (zheng et al., 2022). moreover, study shows that emotional supports from their surroundings are significant to better manage their stressors (melika shirmohammadi, 2023). these then raise a question: how can a labor agreement protect outsourced workers/laborers in indonesia? outsourced worker/laborer the definition of an outsourced worker/laborer, from an operational perspective, refers to a form of a labor agreement between two parties: company a as a service user and company b as a service provider. in this case, company a expects company b to provide the necessary human resources (workers) to work at company a. company a agrees to provide an amount of money or salary later paid by company b. this process involves 3 (three) parties: the company that provides the human resources, the company that uses the outsourcing service, and the outsourced workers. nevertheless, not all work in the service user company can be assigned to an outsourcing service provider. based on the regulation of the minister of manpower and transmigration no. 19 of 2012 article 3, several regulations exist for a job to be transferred to outsourced staffing agencies. those regulations are as follows: 1. the employer company may assign partial work to the contractor company. 2. the work that may be assigned to the contractor company, as referred to in section (1), must j. of gov. risk management compliance and sustainability 5 meet the following requirements: a. the work is carried out separately from the core activities of both management and work implementation; b. the work is carried out by direct or indirect orders from the employer company to provide an explanation of how to perform the work to be in line with the standards set by the employer company; c. the work constitutes supporting activities of the company as a whole, meaning that the work constitutes activities that support and accommodate the implementation of core activities in accordance with the flow of the work implementation process established by business sector associations that are formed in accordance with legislation; and d. the work does not impede the production process directly, meaning that the work is an additional activity, that if it is not carried out by the employer company, the work process continues as it should. civil law article 1313 states that an agreement is an act that involves one, several, or more parties who bind themselves with other parties. this type of bond creates obligations and rights that can be enforced through law (jurist., 2002). several laws can be used to define 'labor agreement.' article 1601a of the civil law states the first one, "a labor agreement is an agreement in which one party, the laborer, agrees to bind himself/herself to be under the direction of another person, the employer, for a specific term, performing work in return for remuneration." a labor agreement is "the agreement between the laborer and employer which states the work requirements of rights and obligations between the two parties." lastly, law no. 11 of 2020 enforces labor agreement as "the agreement between the laborers/workers with the employer which includes requirements of rights and obligations between the parties." the labor agreement determines several articles, especially those that are based on article 1320 of the civil law. besides referring to article 1320 of the civil law, there are also other elements that regulate labor agreements that need to be noticed and complied with. meanwhile, a more general definition of labor agreement can also be found in law no. 13 of 2003 concerning employment. it is considered general as it contains the rights and obligations as well as work conditions for the parties involved. the labor agreement includes the following elements: 1. the relations between the workers and employers 2. the work requirements 3. the rights and obligations of the parties. a labor agreement must also fulfill the conditions of a legitimate agreement as regulated under civil law article 1320. this regulation is also written in article 52 section (1) of law no. 13 of 2003 concerning employment, which states that a labor agreement must be made under: 1. the agreement of both parties; 2. the capability or competence to take legal actions; 3. the availability/existence of the job which the parties have agreed about; 4. the notion that the parties have agreed about the job is not against public order, morality, and provisions of the prevailing laws and regulations. the ability and eligibility of each party who agrees and makes the agreement shows that both parties can comply. the work discussed in the agreement is the object of law in the labor agreement between the workers and employer, of which the legal consequences cover the rights and obligations of the parties. the object of the agreement, or the work, must not violate the prevailing j. of gov. risk management compliance and sustainability 6 laws and regulations' public order, morality, and provisions. the labor agreement for outsourced workers/laborers is a bond between the outsourcing service provider and the workers due to an agreement between the two parties. a written agreement is mandatory, made in a minimum of two copies. both are equally legitimate and protected by law. each party (worker and employer) holds one copy of that agreement. that agreement must include several points as follows: 1. company name, address, business sector 2. name, sex, age, and address of the worker 3. position or job description 4. place of work 5. the nominal remuneration and the methods of payment 6. work conditions, containing the rights and obligations of the employer and worker 7. the date when the work starts and the validity period of the labor agreement 8. the place and date where the labor agreement is made 9. the signatures of both parties in the labor agreement the labor agreement for the outsourced workers/laborers can be in the form of an indefinite term work agreement (pkwtt) and a fixed term work agreement (pkwt) with different definitions and requirements. the practice of detaining diplomas of workers/labors in outsourcing service providers a diploma certificate is an object owned by a person that states that the person has completed their education. in everyday context, when a company recruits someone, they submit a legitimate copy of the diploma as a statement of his/her educational qualification. however, some cases show that many outsourcing agencies/companies withhold the original diplomas of their workers, with or without stating when the original diploma will be returned to its owner. there are many reasons stated to explain diploma detention practice; one of them is to prevent workers who see the company as stepping stones for their careers. in many cases, employers lose their workers if there is no collateral. losing manpower means declining company performance, considering how a worker is the core element that drives the company. without manpower, it is impossible for a company to operate its business. the employment discussed in the law of the republic of indonesia no. 13 of 2003 article 1 section 1601a regulates labor relations, stating that "labor relation is a relation between employer and labor based on a labor agreement, with the notions of work, remuneration, and order" (law no. 13 of 2003). meanwhile, the diploma detention practices of the workers are usually agreed upon by the parties both orally and on paper. the time to return a diploma is regulated in this agreement. the law or company's convention (policy) becomes the base of law, and the civil law becomes the legal base that regulates the agreement. the protection for outsourced workers/laborers ideally, the employee protection should be reinforced in stagged layers within the social, organizational and political forces to ensure their rights (andrew et al., 2022). protection for outsourced workers or laborers departs from the normative regulations that discuss the type of work that can be assigned to outsourcing service providers. therefore, the outsourcing service provider must be lawfully registered as a legal entity. the labor agreement between the business owners and labors that complies with the regulations and the prevailing laws and provisions is also expected to provide security for parties bound by the agreement. unfortunately, there is a status j. of gov. risk management compliance and sustainability 7 change from the work relationship between the laborers and the outsourcing service provider (outsourcing agency) to a work relationship between the laborers and the company if several requirements stated in the law are not fulfilled. the type of labor agreement tends to be a fixed time work agreement (pkwt); thus,t is easy for the company to lay the workers off when they are not needed anymore (putu, 2016). there are many consequences in these types of agreement, especially in the case of noncompliance with the laws and regulations or labor agreements by the company. in this case, it is difficult for the workers to take legal action. it is due to article 66 section (2), which assumes the absence of a labor relationship between the company and the outsourced workers (law no. 13 of 2003). in the case of workers' diploma detention by the outsourcing agency, it is difficult for workers to apply to other companies that may provide better income. the diploma is notably one of the main requirements in accommodating the applicant selection process. concerning that, the diploma detention by the agency is not in line with article 27 section (2) in the law as it hinders and takes away better opportunities for the workers in the future. the law does not state any regulations of diploma detention, which practices are often found in outsourcing contexts. the general conventions in the professional world and the custom of detaining the diploma itself become the basis of this practice. this practice indirectly regulates the work requirements in a company. in the case of imposing sanction (criminal) in law as a policy to legally protect outsourced workers/laborers, edwin h. sutherland, henderson, edward alsworth ross, and other experts suggest that one of the violations of law committed by a corporation is the violations to labors' rights. corporate crime has now become a massively developing issue, even in indonesia. corporate crime is regulated by articles of indonesian laws and regulations (chamdani, 2022). the violations of law or crime committed by corporations are not in line with the characteristics and idealism of law and bring great losses to the laborers, society, and the state. there must be an urgency that pushes the effort to make these laws and regulations a legal protection that shields all parties' interests (rights and obligations) without any discrimination. the diploma detention practice by the agency robs one's right to earn the maximum salary. it can also be said that the stakeholders in the company strip the laborers' right to get working experience as well as better severance and salaries. based on the employment law (law of the republic of indonesia no. 13 of 2003) and its implementation, no law regulates the practice of diploma detention. the absence of regulations creates obscurity in determining whether diploma detention is legally valid. for this reason, the practice of original diploma detention as a requirement for work is based on conventions occurring in the professional world and the freedom to create contracts. although the legislation does not regulate this practice, from the perspective of human rights, this practice violates human rights, as regulated and stated in the state constitution article 27 section (2). this law indirectly states that the practice of detaining original diplomas hinders the laborers' rights to earn good things that are rightly theirs due to work. because of this practice, the business owners stripped the workers' right to actualize themselves through work as they believe. ideally, the company considers complying with article 62 of the law of the republic of indonesia no. 13 of 2003, which states that outsourced laborers who violate the labor agreement before their contract expires must pay the penalty to the company. satjipto rahardjo argues that there are two weaknesses in the legislation. the first one is its rigidity which arises from the hope that the laws and regulations ensure certainty. if certainty becomes the ideal hope that must be fulfilled, it must be followed, at least, with firm, detailed, and clear standards, with the risk that they become unchangeable norms. secondly, there should be an j. of gov. risk management compliance and sustainability 8 expectation that the legislation can form general standards, despite the risk of ignoring and stripping specific differences and characteristics that cannot be generalized. mainly, in the recent time of complexity and distinction, it is not easy for us to generalize (soesilo, 1996). conclusions as stated in previous chapters, it can be concluded that the regulation in law no. 13 of 2003 concerning employment as amended by law no. 11 of 2020 concerning job creation as well as the regulation of the ministry of manpower and transmigration no. 19 of 2012 concerning the requirements of assigning partial work implementation to other companies, is normatively sufficient to protect outsourced workers. however, to protect the laborers fully in an outsourcing system, there must be firm supervision by the government to minimize the violations of the provisions mentioned above. the diploma detention practice that has been implemented is a part of the agreement between the parties, namely the laborers or workers and the company, both orally and on paper, stating the details on the submission of the original diploma by the worker and the time for the original diploma to be returned. the legislation in civil law and corporate customs becomes the basis of the labor agreement. however, this kind of practice shows a weakness in the legislation that potentially creates negative impacts if not being improved immediately, such as the concern of unfair verdicts that fail to meet the expectation of involved parties. a verdict made in a court ideally considers the legal, social, and moral aspects. simultaneously, these three aspects or perspectives become factors in making a lawful verdict. if the judge comprehends law theories well, including law establishment theories, the combination of the three perspectives of justice can be manifested in a verdict. in terms of the sources of law, whether it is a convention or an agreement, diploma detention that is practiced by a company is feasible. however, from the perspective of the state constitution of the republic of indonesia concerning human rights for proper jobs and livelihood, this practice is unacceptable. this action directly impedes a human's right to work and get experiences and better remuneration. thus, a legal regulation that regulates diploma detention is urgently needed to clarify whether business owners or companies' practices are fair. furthermore, suppose a dispute concerning the detention of a worker's original diploma arises and leads to a lawsuit. in that case, the court verdict with a legal force can be used as a basis (source of law) on whether it is acceptable for a company to withhold a worker's original diploma in the existing labor relations. in the same way, there is an absence of law in the employment legislation regarding the practices of detaining a worker's original diploma. because of the obscurity of legal standards, the agency chooses to detain the diploma under conventions and agreements as its source of law. from the perspective of the freedom of contract, this practice is doable. however, this kind of freedom does not refer to an unregulated state. the laws and regulations have not completely discussed the issue of original diploma detention. still, the principles of human rights emphasize that the practice is considered hindering a person to get a better job and right fulfillment. limitation & further research this research uses the normative legal research method, where the published material becomes a reference in legal research. the limitation of this research is only to analyze the data gathered from literature reviews of indonesian applicable laws and regulations. by using the conceptual approach, this research focuses on the issues related to fixed term work agreement and indefinite term work agreement and the policy of diploma detention. due to the limitation of this research, there are topics that can be discussed based on this research, such as 'how the legal protection for workers/laborers based on the manpower law no. j. of gov. risk management compliance and sustainability 9 13 of 2003 (labor law, 2003) and job creation law no. 11 of 2020 can help to protect the outsourced workers/laborers?' and 'can criminal sanction be considered as one of the ways to uphold the legal protection towards the outsourced workers/laborers? references andrew f. johnson, k. j. r. s. l. b. f. a. 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(2022). labor protection, information disclosure and analyst forecasts: evidence from china's labor contract law. china journal of accounting research, 15(3). https://doi.org/10.1016/j.cjar.2022.100251 microsoft word 909 babatunde bunmi osifalujo (1-14) available online at: https://journals.researchsynergypress.com/index.php/jgrcs journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 2 number 2 (2022): 1-14 corresponding author babatunde bunmi osifalujo, osifalujobabatunde@gmail.com doi: https://doi.org/10.31098/jgrcs.v2i2.909 research synergy foundation foreign debts and exchange rate in nigeria: the stepwise regression babatunde bunmi osifalujo1, najeem ayodeji isiaka2, oluwaseun kayode taiwo3 1,3department of accountancy, moshood abiola polytechnic, nigeria 2department of banking and finance, federal polytechnic ilaro, nigeria abstract the considerable argument on the relationship between foreign debt and exchange rate remains debatable among the researchers. various conclusions had been drawn with different methodology and variables considered in the existing studies. therefore, this study investigated the relationship between foreign trade and exchange rate in nigeria for the period of 30years between 1990 and 2019. the study relied on a secondary source of data gathered through cbn statistical bulletin 2020 version. foreign debt was strictly represented with multilateral debt, bilateral debt, paris club and london club debt while exchange rate was considered as a dependent variable. stepwise regression and vargranger were considered for the analysis and revealed that multilateral debt, paris club and london club debt are the major debt positively influencing exchange rate fluctuation while bilateral debt has a negative relationship. also, multilateral debt, bilateral debt and london club debt have a significant impact on exchange rate compared to paris club debt with insignificant impact on exchange rate. various models analyzed in the study show multilateral debt remains significant in the entire model while bilateral debt became insignificant in model 4 and paris club debt is not significant in model 4 and 5. the granger causality test revealed that exchange rate does not influence multilateral debt but multilateral debt influences exchange rate. the study concluded that foreign debt has a significant relationship with the exchange rate. therefore, the study recommends the government should maintain a favorable and controlled public external debt in order to reduce the exchange rate in nigeria. keywords: exchange rate; multilateral debt; bilateral debt; paris club debt; london club debt this is an open access article under the cc–by-nc license. introduction the functionality of government across the world depends solely on the various revenue sources and budgeting strategies. however, the inability to meet the expenditure aspects of the budget forced many governments to borrow domestically and internationally. borrowing bridges the wider gap between expected revenue and proposed expenditure of the government which is known as budget deficit. in the literature, borrowing is referred debt which means the obligations or promises to be fulfilled in the nearest future. meanwhile, the privilege to enjoy certain amount of funds and make repayment in the future is referred debt but absolutely different from deferred payment that is related to goods and services. debt could be contacted by different economic agents such as firms, household and government or simply put private and public sector of the economy for different purposes. in this paper the focus is in the debt contacted by the public sector or journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 1-14 foreign debts and exchange rate in nigeria: the stepwise regression babatunde bunmi osifalujo, najeem ayodeji isiaka, oluwaseun kayode taiwo 2 │ issn 2776-9658 (online) government. relative to public sector, debt can be classified into internal and external debt that is fully repay by the successive government in the nearest future (cbn, 2018). this serves as financial obligations of government that pay interest rate on redemption. in his work, ugwu (2011) opined that borrowing internationally is necessary to revitalize the slow economic growth and enhance productivity in the economy. it was further stated that foreign debt which also known as international loan are used to finance wars and solve the problem of unemployment. this situation could be traced to the revolutionary war of the united states from england in the earlier years where colonies have accumulated huge debt to finance war. in addition, the funds raised in the domestic economic are referred to internal debt which is to improve the existing capital formation and contribute to the gross fixed capital formation of a country. the issue of debt occurs from two major activities such as government obligations to provide adequate infrastructure and capital projects for economic development which leads to the borrowing and the imbalance between revenues and expenditures which is referred to as budget deficits. the latter arises when the government financed the difference by issuing debt to either internal or external investors. recently, there has been an increase in the level of public debt in many developing countries especially nigeria being a lower-middle income country. this has spurred the interest of many finance experts on the management of public debt, and the implication on the economic growth which become the significant public finance issues. the problem of nigeria’s foreign debt has become a more important issue because of its magnitude and the high amount required to service such foreign debts due to disparities and misalignment in rate of exchange between naira and dollars. it has been recorded that foreign debt owned by nigeria follows an upwards trend since 1981 till date. for instance, the n8.8billion owned in 1982 grew to about n17.3billion and n41.4 billion between 1985 and 1986 respectively. the foreign debt reached n100 billion in 1987 as a result of federal government guarantees obtained by the state government to secure foreign loans which further raise the debt burden in nigeria (cbn,2015). between 1988 and 2000, the foreign debt has risen to n3 trillion, surprisingly; the debt repudiation enjoyed from paris club reduced the nigeria debt by 13% declining from n3 trillion to n2.5trillion in 2005 and further reduces n451.46billion in the 2006 upwards (cbn,2018). however, in 2017, 2018, 2019 and 2020, the foreign debt has risen to n18, 376.99b, n7,759,229b, n9,022.42b and n12,705.62b respectively (dmo, 2020). meanwhile, the exchange rate pattern during this period has not been completely favorable due to low exportation and overreliance on importation. some economic growth scholars have attributed the exchange rate fluctuations to various factors and mainly economic management factors such as low trades and high bills, and policy issues. but little attention has been directed towards the influence of high foreign debt. it is noted that the persistent fluctuations of exchange rate is a major concern of policy makers and efforts have been channeled to reduce the fluctuation or balance the purchasing power, however, the rate of exchange between naira and other developed currency such as dollar, pounds and other dollars is deteriorating. it was reported by the monetary authority that since 1981 till 2020 the exchange rate has fluctuated and depreciated from n2 to a dollar to n358 /$1. theoretically, the relationship between foreign debt and exchange rate depreciation is positive. it was revealed by the imf, 2015 that accumulation of foreign liability is translated to the recent depreciation in the currency of developing economies and further translated to financial journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 1-14 foreign debts and exchange rate in nigeria: the stepwise regression babatunde bunmi osifalujo, najeem ayodeji isiaka, oluwaseun kayode taiwo │ 3 issn 2776-9658 (online) vulnerabilities. upon this assumption, the reflection of it in the empirical strands is debatable. there are various arguments against the conclusion that foreign debt is a major factor causing significant depreciation in the exchange rate of developing economies. however, a sect of the literature agreed completely that heavy foreign debt contributes hugely towards the adjustment of exchange rate in developing economies. for instance, the study conducted by aderemi, fagbola, sokunbi, and ebere (2019, 2020), blessy and lakshmi (2020), aigbedion, iyakwari, and mairana (2020), mehta and hatim (2014), confirmed that foreign debt positively influences exchange rate instability, which means as public foreign debt increases, the exchange rate decreases in value. meanwhile, odera (2012), onafowora and owoye (2014), found a negative relationship between foreign debt and exchange rate fluctuation. however, as the debate continues empirically, it was observed that methodology and estimation techniques adapted by various researchers contributed to the mixed results deduced from the existing studies. the previous studies overemphasized the nature ardl model to measure the short-run and long run influence of regressors on regresands, however, this current study argued that inability to identify out of all the various foreign debt leads to the lingering problem of exchange rate fluctuations in developing countries. in order to contribute to the body of the literature, this current study adapts stepwise regression for identification of most effective and less effective of all foreign debt in nigeria and its impact and relationship with the exchange rate fluctuations. since then, the foreign debts had been increasing and amounted to n2,111.51b in 2015 and n3,478.91b in 2016. in 2018, 2019 and 2020 nigeria's foreign debt stood at n7,759,229b, n9,022.42b and n12,705.62b. in view of this, the study aimed to find out the implication of foreign debt on the exchange rate in nigeria. this study employed paris club debt, multilateral debt, london club debt, bilateral debt and exchange rate which will cover the period of 30years ranging from 1990 to 2019. this will bridge the research gap of previous study that has lent their contribution on public foreign debt in nigeria. literature review despite the issues attached with foreign debt, its importance in government activities cannot be overemphasized. it was noted that many developing countries are faced with huge budget deficits characterized with low sources of income and persistent increase in government expenditures. therefore, to meet the ever-increasing population’s need, the government resulted into borrowing both locally and internationally. the adverse effect of using monetary policy and fiscal policy to eliminate economic problems leads to the external borrowing to provide adequate funds without causing inflationary pressure or further deteriorating the economic situation through increase in taxes. however, the use of foreign debt does not come without its resultant effect as economic scholars continually link the exchange rate depreciation to the huge foreign debt (kouladounm,2018). the link between foreign debt and exchange rate has long been established since the inception of macroeconomic variables assessment in developed economies. the funds made available for foreign borrowers by the lenders such as developed government and international banks or clubs categorized as foreign debt (focus economics, 2019). however, the loan granted by some countries like japan and china attract a certain rate of interest and the payment must be done through the country's currency. this process requires the demand of foreign currency to make the payment and leads to the pressure of the exchange rate. this is another channel where foreign debt journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 1-14 foreign debts and exchange rate in nigeria: the stepwise regression babatunde bunmi osifalujo, najeem ayodeji isiaka, oluwaseun kayode taiwo 4 │ issn 2776-9658 (online) influences exchange rate fluctuation. this influence is direct and easily transmitted because many of the developing economies operate a floating exchange rate regime which responds swiftly to any shocks in the system. meanwhile, in order for the borrower’s country to earn the foreign currency, there is a need to improve exports of goods and services to the various countries involved. this will equally enhance a unit of currency rate against the other foreign currency. fosu (2010) further stated that heavy foreign debt may pose a huge disaster on the economy or expose it to greater shocks. it is noted in most developing countries like nigeria that one of the important macroeconomic variables is exchange rate that requires closer monitoring and management (nelasco, 2012). the mismanagement of exchange rate may positively or negatively affect the level of export, import and inflation in the economy; therefore, it becomes imperative to identify direct or indirect factors that are likely to outburst the rate of exchange rate. in addition, bergen (2017) in his study tries to explain the relationship between foreign debt and exchange rate. the explanation is based on the fact that though the country financed a huge project with debt my experienced high productivity in the long-run, however, the huge debt exposed the nation to fewer foreign investors. this was further explained that inflationary pressures will be encouraged by the debt because the government tends to print more money to be converted to foreign currency and paid off which threaten the rate of money supply and subsequently leading to inflation. also, the foreign investor may be wary of a country with huge foreign debt, especially if the risk of repayment is very high, therefore, it has been established that a country's debt rating is a significant determinant of exchange rate in developing countries. theoretical review to this very end, there is still a missing theory in the economics literature that links directly external debt and the responses of exchange rate. however, there are fundamental theories that explain the importance of external and exchange rate behavior respectively. this study hinged on the idea postulated by one of the classical economists david ricardo in 1821 called ricardo equivalence theorem. the assumption of ricardo was that the consumers are affected when the government engages in borrowing either raising funds through bonds, direct borrowing or tax increment to finance its budget deficits. since raising funds through bonds is equally a debt, the expectation of the economic agent is that it would be repaid both by paying higher taxes now or later and the agents’ responds by saving and reducing their consumption today. this means that the deficits created by the tax cuts today will be paid by the tax collected tomorrow from the economic agents. meanwhile, fund raising or loan is referred to public debt which could be categorized into foreign or domestic debt but this study emphasized on the foreign debt. since foreign borrowing requires prompt servicing, it is often expected to be repaid with foreign currency. therefore, the constant demand for foreign currency in the market for the repayment tends to affect the exchange rate between the countries involved. empirical review in their study conducted in 2019, “impact of external debt and exchange rate volatility on domestic consumption in pakistan between 1980 and 2014. kumar, bhutto, mangrio and kalhoro, adapted cointegration and error correction modeling and found out that interest rate, exchange rate, its volatility and external debt have a long run and short run relationship and the error journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 1-14 foreign debts and exchange rate in nigeria: the stepwise regression babatunde bunmi osifalujo, najeem ayodeji isiaka, oluwaseun kayode taiwo │ 5 issn 2776-9658 (online) observed in the short-run will be adjusted very quickly in the long-run. ranging between 1975 and 2014, kouladoum (2018) used gmm to analyze the effect of external debt on the real exchange rate in chad . the study opined that external debt positively and significantly affects the real exchange rate at 5% significance level. also, muhammad and masaru (2018) used ols and vecm to reexamined the relationship between foreign currency borrowings and foreign exchange rate volatility. it was shown in their study that both in the long –run and short run, external debt influences exchange rate volatility. and also, government and corporate foreign debt have a significant impact on the exchange rate through ols results. anidiobu and okolie (2016) examined responsiveness of foreign exchange rate to foreign debt in nigeria. ordinary least squares method was used to estimate the variables and the result shows that the response of exchange rate to foreign debt is positive but insignificant. also, the research carried out by saheed, sani and idakwoji (2015) in nigeria using ols revealed that all the explanatory variables significantly influence the exchange rate. nwanne and eze (2015) investigated the relationship between external public debt servicing and receipt and exchange rate fluctuations in nigeria from 1981 to 2013. the study agreed that external debt positively influenced the exchange rate while debt servicing enhanced the exchange rate negatively. research method this study used ex-post facto research design because it allows already computed data for the analysis. the study relied on secondary data sources and was gathered from cbn statistical bulletin for the period of 30 years between 1990 and 2019. it uses ordinary least square method of estimation, computed with stata 12. the variables considered for this study include exchange rate (dependent variable) and the explanatory variables include; paris club debt, multilateral debt, london club debt and bilateral debt. model specification the model for the study is given below: mathematically, y = f(x1, x2, x3, x4,………………… xn) -----------------equ(1) where y denotes dependent variable and x1, x2, x3 and x4 represent explanatory variables exc = f (mld,) exc = f (mld, bld,) exc = f (, mld, bld, pcd) exc = f (mld, bld, pcd, lcd) in econometric term exc = β0 + β1mld + β2 bld + β3pcd + β4lcd4 + µ--------------equ(2) where: exc = exchange rate, mld = multilateral debt, bld = bilateral debt, pcd= paris club debt lcd = london club debt, β0 = constant term, β1 – β4 = coefficient of explanatory variables, µ = error term. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 1-14 foreign debts and exchange rate in nigeria: the stepwise regression babatunde bunmi osifalujo, najeem ayodeji isiaka, oluwaseun kayode taiwo 6 │ issn 2776-9658 (online) findings and discussion table 1. descriptive statistics the table 1 above shows the descriptive analysis that was conducted on the data employed for the basis of assessing the behavior of variables. the mean value shows the average figure, for instance the average figure of exchange rate for the period under review is #122, while paris debt club has the highest figure among the various debts compiled with $1443 compared with multilateral debt of $795, bilateral with $218 and london club debt $114. the next on the table is standard deviation which further explains how the deviated from the actual mean of the data or expected value. a figure of standard deviation is said to be low when it’s very close to mean value and a high standard deviation means that the numbers are spread out and not close to mean value. for instance, the standard deviation of exchange rate and london club debt is low because it's relatively close to mean value while multilateral debt and bilateral debt is very high because the figures are highly deviated from the mean value. table 2. correlation matrix from table 2, it was revealed that there is a strong correlation which connotes a strong linear dependence among the variables employed. for instance, exchange rate strongly correlated with multilateral debt at 97%, paris club debt at 94%, bilateral debt at 82% and london club debt at journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 1-14 foreign debts and exchange rate in nigeria: the stepwise regression babatunde bunmi osifalujo, najeem ayodeji isiaka, oluwaseun kayode taiwo │ 7 issn 2776-9658 (online) 95%. meanwhile, since the model was undertaken with stepwise regression, the problem of multicollinearity is limited but not completely averted. table 3. unit root test unit root test results table (adf) null hypothesis: the variable has a unit root at level exc lcd mld pcd with constant t-statistic 0.6608 -0.8123 4.9662 -1.1651 prob. 0.9890 0.7861 1.0000 0.6599 n0 n0 n0 n0 with constant & trend t-statistic -2.3898 -1.8632 3.9008 -1.8353 prob. 0.3764 0.6232 1.0000 0.6368 n0 n0 n0 n0 without constant & trend t-statistic 2.6870 0.2634 4.8415 -0.3416 prob. 0.9974 0.7488 1.0000 0.5447 n0 n0 n0 n0 at first difference d(exc) d(lcd) d(mld) d(pcd) with constant t-statistic -3.7086 -3.0347 1.0664 -1.8556 prob. 0.0096 0.0559 0.9960 0.3412 *** * n0 n0 with constant & trend t-statistic -3.7314 -2.9073 -0.3280 -1.2329 prob. 0.0366 0.1893 0.9851 0.8612 ** n0 n0 n0 without constant & trend t-statistic -3.1285 -3.0069 1.7745 -1.9817 prob. 0.0029 0.0056 0.9786 0.0487 *** *** n0 ** in the table 3 above, the stationarity of the variables are determined. it was shown that at level, exchange rate, multilateral debt, bilateral debt, paris club debt and london club debt are not stationary, which is an indication of the presence of unit root. however, the data were subjected to the first difference, and the result shows that exchange rate, multilateral debt, bilateral debt, paris club debt and london club debt are stationary and indicated that no unit root was present at first difference. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 1-14 foreign debts and exchange rate in nigeria: the stepwise regression babatunde bunmi osifalujo, najeem ayodeji isiaka, oluwaseun kayode taiwo 8 │ issn 2776-9658 (online) table 4. baseline regression the value in table 4 reveals the baseline regression model for the analysis. the value of the intercept (dependent variable) which is 2.0678 shows that the exchange rate will increase at 2.067 units while keeping other variables constant. the coefficient of multilateral debt is 0.1848, this means that for every unit increase in multilateral debt will increase the exchange rate by 0.18 units. also, the coefficient of bilateral debt is -0.2957 which means that for every unit increase in bilateral debt there will be the same unit decrease in exchange rate. the paris club debt coefficient is 0.0089 which shows that for every unit increase in paris club debt corresponding increases in exchange rate will occur. furthermore, london club debt has a coefficient value of 0.2997 which connotes that for every unit increase in london club debt, exchange rate will also increase at the same value. the t-statistics result indicates that all independent variables have a positive relationship with the dependent except bilateral debt. also, the probability values revealed that all independent variables multilateral debt, bilateral debt and london club debt are significant with p-value of 0.0039,0.043, and 0.016 except for paris club debt that revealed insignificant effect on exchange rate with p-value 0.108. generally, the f-statistics revealed that public debt has a significant influence on the exchange rate in nigeria. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 1-14 foreign debts and exchange rate in nigeria: the stepwise regression babatunde bunmi osifalujo, najeem ayodeji isiaka, oluwaseun kayode taiwo │ 9 issn 2776-9658 (online) table 5. stepwise regression the result in the table 5 above presents adequate information about each step and contribution of each variable considered in the study. it further explains if variables in the baseline regression are correctly fitted in the model. each report shows the inferential statistics after the specified action of step by step entry was conducted. initially, table 4 revealed that multilateral debt has a strong impact on exchange rate and a positive relationship to influence exchange rate. the reason for the effect on exchange rate remains an issue in the literature which necessitates stepwise analysis. the stepwise analysis revealed that despite the presence of other variables in model 2, 3 and 4, multilateral debt remains a significant factor influencing exchange rate in the country. this may be attributed to the stringent condition given by the lender to repay the loan and favor personal interest. in the model 3, the presence of bilateral debt increases the degree in which multilateral debt influences exchange rate from 0.0746 units to 0.159 units. also, it was revealed that bilateral debt shows a negative relationship in the entire model and posed significant impact except in model 4 where it shows an insignificant impact. this means that the presence of paris club debt changes the effect of bilateral debt on exchange rate though remains negative. the inclusion of paris club debt in the model 4 increases the extent of multilateral debt to 0.316 while the extent in which bilateral debt reduces from -0.314 to -0.180, however, the effect of paris club debt shows insignificant impact on exchange rate but indicates a positive relationship with exchange rate. in the model 5, the inclusion of london debt reduces the magnitude in which multilateral debt influences exchange rate from 0.316 to 0.185 but increases the bilateral debt from -0.180 to -0.296 but remains significant. it increases the paris club debt influence but with little journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 1-14 foreign debts and exchange rate in nigeria: the stepwise regression babatunde bunmi osifalujo, najeem ayodeji isiaka, oluwaseun kayode taiwo 10 │ issn 2776-9658 (online) changes and remains an insignificant effect on exchange rate, but london club debt shows significant level with positive relationship with exchange rate in nigeria. the value of r-square is an indication of the best model. therefore, it increments as more independent variables are added indicating the importance of all the added variables. the regression output above also shows that adjusted r2 which measures the overall goodness of fit of the entire regression is 0.9782 = 98% approximately. this indicates multilateral debt, bilateral debt paris club and london club debt accounts for about 98% of the variation in exchange rate fluctuation in nigeria. the remaining 2% variation is caused by other factors which are highly insignificant in this case. table 6. cointegration analysis the table 6 revealed the co integrating equations in the model, the trace test indicates 3 co integrating equations as the maximum eigenvalue test is usually preferred for trying to pin down the number of co integrating vectors, we conclude that there are 3 co integrating equation among the variables based on this test, which further indicates a long-run relationship in the model. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 1-14 foreign debts and exchange rate in nigeria: the stepwise regression babatunde bunmi osifalujo, najeem ayodeji isiaka, oluwaseun kayode taiwo │ 11 issn 2776-9658 (online) table 7. granger causality from the table 7 above, it was revealed jointly that the exchange rate has a causal relationship with paris club debt, bilateral debt and except multilateral debt and london debt. also, the paris club has a causal relationship with exchange rate only but not with multilateral debt, bilateral debt and london club debt. in addition, multilateral debt has a causal influence on exchange rate, paris club debt, and london club debt which indicates the importance of multilateral debt in an economy. also, bilateral debt has a direct relationship and influence on exchange rate, paris club debt except multilateral debt and london club debt. finally, london club debt has a direct relationship with exchange rate, paris club debt and bilateral debt except for multilateral debt. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 1-14 foreign debts and exchange rate in nigeria: the stepwise regression babatunde bunmi osifalujo, najeem ayodeji isiaka, oluwaseun kayode taiwo 12 │ issn 2776-9658 (online) conclusion the study investigated the impact of public debt on the exchange rate in nigeria for the period of 30 years between 1990 and 2019. the study considered the major debt contracted by the country in the last 30 years which are multilateral debt, bilateral debt, paris club and london club debt as the factors contributing to the exchange rate depreciation in nigeria. although the influence of public debt has been established in various empirical studies, low attention was given to the debt mentioned above. the study employed different analysis from the existing studies for new evidence, and the results show in the stepwise regression adopted that multilateral debt, paris club and london club debt are the major debt positively influencing exchange rate fluctuation while bilateral debt has a negative relationship. also, multilateral debt, bilateral debt and london club debt have a significant impact on exchange rate compared to paris club debt with insignificant impact on exchange rate. various models analyzed in the study show multilateral debt remains significant in the entire model while bilateral debt became insignificant in model 4 and paris club debt is not significant in model 4 and 5. the granger causality test revealed that exchange rate does not influence multilateral debt but multilateral debt influences exchange rate. also, there is a bilateral relationship between exchange rate and bilateral debt and same goes with paris club debt. in addition, the exchange rate does not influence london club debt but london club debt influences exchange rate. jointly, public debt has a significant impact on exchange rate fluctuation in nigeria. based on these findings, the study recommends that the government should rely more on paris club debt and reduce multilateral and bilateral debt to reduce the influence on exchange rate fluctuation. government should maintain a favorable and controlled public external debt to reduce the exchange rate in nigeria. limitation & further research the unavailability of balanced data on paris club debt and london debt club poses a greater challenge to the analysis to be more reliable than other variables in the study. lack of data on exchange rate variation is still a major concern despite the acceptability of real exchange rate in other existing studies. however, the study suggests inclusion of macroeconomic environment factors that will further help to understand the behavior of exchange rate and policy required to manage it favorably. a more robust analysis should be carried out on the topic for different results and authenticity of the existing studies and conclusions. references aderemi t. a., fagbola, l.o, sokunbi, g.m, ebere, c.e. 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(2023) corresponding author’s email: badruszaman@lecturer.undip.ac.id journal of governance risk management compliance and sustainability, vol. 3 no. 1 (2023) https://doi.org/10.31098/jgrcs.v3i1.1501 determining the illegal waste disposal in coastal area using transect walk approach badrus zaman1 , anik sarminingsih2 , ika bagus priyambada3 , mochamad arief budihardjo4 , bimastyaji surya ramadan5 , uus uswatun hasanah6 1,2,3,4,5,6 universitas diponegoro, indonesia 5 the university of kitakyushu, japan received : april 12, 2023 revised : april 28, 2023 accepted : april 29, 2023 online : april 30, 2023 abstract the increasing population and anthropogenic activities in cities/regencies in indonesia have caused many waste-related problems, which can trigger environmental and human health. in addition to population growth, rapid economic development has resulted in an increasing amount and type of waste. the coastal area is one area that still needs to get adequate solid waste services. there have been many studies on waste management. however, research has yet to examine the amount and composition of waste generation in coastal areas that have not been served by waste management.. this study shows the waste generation and composition trend in coastal areas that must be served in waste management and determines the appropriate waste management strategy. this research method uses a transect walk survey carried out by following a predetermined route in the area. paths are made randomly by forming circles or straight lines for 10 km. the composition of illegal waste dumps found included leaves (69.02%), plastic (15.24%), branches and twigs (9.93%), paper and cardboard (3.75%), food waste (1.97%), and rubber (0.1%). at least 1.59 tonnes/day of illegal waste is estimated in sidorejo village. while this figure increases at the district level, the amount of unaccommodated waste is estimated at 19.85 tonnes/day. efforts to handle waste that can be done are changing the mindset and paradigm of the community through an educational approach, improving the waste management system by providing waste facilities and reducing the amount of waste collected through a simple program (reuses, reduces, recycle) that involves the community. keywords: transect walk, waste generation and composition, waste management, coastal area introduction environmental problems are one of the main issues in indonesia; an example of an ecological crisis is unmanaged waste (hadi et al., 2021). the increase in population and the diversity of activities in both cities/regencies in indonesia have resulted in many related waste issues. in addition to population growth, rapid economic development has resulted in an increasing amount and variety of waste (sailer et al., 2021). the waste problem is one of the city's problems. currently, it cannot be processed, especially in coastal areas. because the number of waste increases with altitude, the level of public consumption is related to the people's awareness of protecting the environment. waste accumulation in coastal areas is from household waste and downstream waste that ends up in the sea. according to the people's coalition for fishing rights, 1.29 million tons of waste is dumped into rivers and ends up in the ocean. it is estimated that around 13,000 pieces of plastic float yearly, increasingly threatening marine ecosystems' sustainability. although the threat of damage does not only come from plastic waste, the impact caused by plastic waste is also very dangerous. one of the most hazardous pollutants for health is heavy metal. we know that one of the most harmful pollutants is heavy metals. according to the world health organization and the food agriculture organization, it is recommended not to eat foods that contain heavy metals. it is because heavy metals have toxins that can accumulate in human organs, resulting in death. so it is necessary to hold services in the area. some residents who do not receive this service will dispose of their waste by burning it in the field or yard of the house, burial, and indiscriminate disposal (ramadan et al., 2022). research paper https://creativecommons.org/licenses/by-nc/4.0/ https://crossmark.crossref.org/dialog/?doi=10.31098/jgrcs.v3i1.1501&domain=pdf https://orcid.org/0000-0002-5439-9681 https://orcid.org/0000-0002-8550-5803 https://orcid.org/0000-0003-4356-9208 https://orcid.org/0000-0002-1256-3076 https://orcid.org/0000-0002-5194-0743 j. of gov. risk management compliance and sustainability 32 research conducted by (ramadan et al., 2022) uses the transect walk method to determine the incineration point of waste and the amount of waste generated that was burned. besides they also conducted the burning test using an incinerator to determine the emissions of burning waste. this study stated that open burning of waste produces carbon monoxide (co), carbon dioxide (co2) emissions, hydrocarbons (hc), and nitrous oxide (nox). (maziya, 2017), in his research stated that carbon dioxide (co2), methane (ch4), ozone (o3), nitrous oxide (n2o), methyl chloride and water vapor are greenhouse gases. greenhouse gases (ghg) are gases in the atmosphere that absorb and re-emit infrared radiation. the side effects of accumulated greenhouse gases can cause extreme climate change that affects land productivity (jatmiko et al., 2019). in addition, research conducted by (reyna-bensusan et al., 2019) states that uncontrolled waste burning produces black carbon (bc) emissions. black carbon is an umbrella term for various carbonaceous substances ranging from partially burnt plant residues to soot (shrestha et al., 2010). black carbon has a global warming potential of up to 5000 times greater than carbon dioxide (co2) and has an impact on human health and the environment. the composition of the waste produced in sidorejo village, indonesia, is the same as in other areas, namely organic waste (food scraps, leaves, wood, paper, cardboard.) and inorganic waste such as cans, plastic, iron and other metals (simandjuntak, 2004). this waste will cause environmental pollution if it is not managed correctly. for example, plastic waste, a recent study informs that plastic disposed of on or below the soil surface will pollute the environment. the disposal of plastic bags will also turn into nano plastics and have an impact on decreasing soil quality (park et al., 2013). this situation will hurt aquatic biota and reduce their aesthetic value. nanoor micro-plastic is very dangerous for living things. a recent study also found this microplastic polluted the seas, rivers, and beaches worldwide (ng et al., 2018). therefore, waste must be appropriately managed, reduced, and minimized. determining the number of illegal waste disposal in the environment may give important information for the policymakers to make an appropriate waste management system in a region. as said before, a waste management system can be planned appropriately by robust baseline data such as the amount of generation and composition of waste generated in an area (yusuf et al., 2019). the characteristics and design of this waste depended upon various factors, such as the topography of the site, different seasons, food habits, and the commercial status of the city (thitame et al., 2010). there have been many studies on waste management. however, research has yet to examine the amount and composition of waste generation in coastal areas that waste management has not served. this study shows the waste generation and composition trend in coastal areas that must be served in waste management and determines the appropriate waste management strategy. the information presented in this study will be necessary for evaluating policy and legal interventions and the potential benefit of other future research related to detecting unmanaged waste in the coastal area. literature review meaning of waste waste, in general, can be interpreted as all that waste resulting from human activity or unwanted animals or reused, either in solid form or half solid (tchobanoglous, g, theisen, h., dan vigil, 1998). law number 18 of 2008 concerning waste management states that waste is the residue of daily human activities and natural processes in solid form. the managed waste consists of household waste, household-like waste (originating from commercial, industrial, public facilities, and social), and specific waste containing hazardous and toxic materials. according to morrissey (2004), there are several models in waste management; the first is an optimization model that j. of gov. risk management compliance and sustainability 33 handles certain aspects of the problem. the newer model is a compromise model, focusing on integrated waste management with sustainable waste management (morrissey et al., 2004) waste generation according to (standar nasional indonesia, 2002), concerning operational engineering procedures for urban waste management, waste generation is the amount of waste arising from the community in units of volume or weight per capita, per day, per building area, or per long way. meanwhile, what is meant by the rate of waste generation is the total amount of waste generated per person every day expressed in volume and weight units. the generated waste has different specific gravity according to the characteristics of the waste. the specific waste gravity is expressed as weight per unit (kg/m3). in measuring the specific waste gravity, it must be stated where and under what circumstances the waste is taken as a sampling to calculate the specific weight of waste. the specific waste weight is influenced by geographic location, season, and storage time. it is essential to know the volume of waste processed. the following is table 1 regarding the specific gravity of each waste characteristic according to (sulistyoweni, 2022). table 1. specific gravity of each waste characteristic no waste characteristics specific gravity (kg/m3) range typical 1 food waste 120 480 290 2 paper 30 130 85 3 cardboard 30 80 50 4 plastic 30 -130 65 5 cloth 30 100 65 6 rubber 90 200 130 7 skin 90 260 160 8 garden waste 60 225 105 9 misc. organic 120 320 240 10 glass 90 360 140 11 tin 160 480 195 12 nonferrous metal 45 160 90 13 ferrous metal 60 240 160 14 urban solid waste 120 2000 320 15 dust, ash and others 320 960 480 16 urban solid waste (unncompacted compacted) 90 180 180 450 130 300 17 in landfills (normal solid) 350 550 475 18 in landfills (well compact) 600 750 600 source: sulistyoweni, 2022 data on the specific gravity of waste in table 1 was used to determine the volume of waste generation found. when carrying out a transect walk survey, the total amount of waste that was not managed would be known. table 2 presents the density of solid waste in several countries based on books ("arab repub. egypt ctry. environ. anal.," 2005). as with the specific waste gravity, the waste density also determines the waste weight found during the transect walk survey. j. of gov. risk management compliance and sustainability 34 table 2. the density of solid waste country the density of solid waste (kg/m3) developed countries united state 100 united kingdom 150 developing countries tunisia 175 nigeria 250 thailand 250 indonesia 250 egypt 300 pakistan 500 indis 500 source: arab republic of egypt, national environmental action plan, cairo, 1992 waste composition composition is the physical waste components such as food scraps, cardboard, wood, textiles, rubber, leather, plastic, ferrous-non-ferrous metals, glass and others (e.g., soil, sand, stone, ceramics). the most common grouping of waste is based on its composition, expressed as % by weight or % by volume of paper, wood, rubber, plastic, metal, glass, cloth, food and other waste (damanhuri, 2010). according to (tchobanoglous, g, theisen, h., dan vigil, 1998), the waste composition can be divided into two groups, namely: 1. physical composition of waste physically it consists of wet waste, yard waste, garden waste, paper, cardboard, cloth, rubber, plastic, wood, glass, metal, dust, and others. information on the physical composition of waste is needed to select and determine how to operate each piece of equipment and other facilities, estimate the feasibility of recovering resources and energy from waste and plan final disposal facilities. 2. chemical composition of waste in general, the chemical composition of waste consists of the elements carbon, hydrogen, oxygen, nitrogen, sulfur, phosphorus, and other elements found in proteins, carbohydrates and fats. waste management according to the law of the republic of indonesia number 18 of 2008 concerning waste management, waste management is a systematic, comprehensive and sustainable activity, including waste reduction and handling. waste management aims to improve public health and environmental quality and convert waste into resources. factors influencing the urban waste management system according to sni 19-2454 concerning operational and technical procedures for municipal waste management 2002, namely population density and distribution, physical environmental and socio-economic characteristics, waste generation and characteristics, cultural attitudes and behavior of the community, distance from the source of waste to the final disposal site, spatial planning and city development, facilities for collecting, transporting, processing and final disposal of waste, financing, and applicable local regulations. indonesia is famous for its two waste management models: landfill and piles. this landfill model is generally carried out in areas that produce a manageable volume of waste. in this model, waste is disposed of in valleys or basins without further treatment, meaning that it is thrown away and abandoned (kahfi, 2017). this model is a very simple waste management model that slightly changes the initial paradigm of the general public towards waste. j. of gov. risk management compliance and sustainability 35 the second model is piled, which tends to be more advanced. the waste management model with piles is equipped with drainage units for exhaust, air exhaust for exhaust (leachate) and access to the combustion of methane gas (flora). a model like this already meets environmental requirements and is widely applied in big cities. still, unfortunately, this stack model is only partially dependent on financial conditions and associations of local officials for environmental and community health (kahfi, 2017). the transect walk method transect walk is one of the field sampling methods by exploring the research area to obtain some information. in addition, these transect walks can provide excellent information that can be used for specific review and evaluation purposes (zeeuw et al., 2004). before the survey, transect walk routes are determined randomly, with routes approximately 10 km long and can be either loops or straight lines. repeated roads are not counted anymore, and distance calculations are only done once (nagpure et al., 2015). the volumetric transect results are converted into weight units after determining the specific gravity of the pile. the estimated waste weight for each route is divided by the transect area to determine the density, as seen in the following equation (see eqs. 1, 2, 3) (han et al., 2015; remigios, 2016; velis et al., 2021a). ∑ 𝑀𝑎 = ∑ 𝑉𝑎 × 𝜌𝑎 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ (1) 𝑇𝑟𝐴𝑎 = 𝑇𝑟𝐿𝑎 × 𝑆𝑆 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ (2) 𝑀𝑏 = ∑ 𝑀𝑎 𝑇𝑟𝐴𝑎×1000 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ (3) 𝑀𝑎 = weight of waste in each sub-district representing each sub-district (kg) 𝑉𝑎 = waste volume in each sub-district representing each sub-district (m3) 𝜌𝑎 = solid waste compaction density (kg/m3) 𝑇𝑟𝐴𝑎 = transect area (m2) 𝑇𝑟𝐿𝑎 = transect path length (m) 𝑆𝑆 = maximum sightseeing distance (m) 1000 = conversion factor from kg to tons 𝑀𝑏 = estimated specific gravity of waste (tonnes/km2) the waste density for each cluster (mc) is determined by dividing the total estimated thickness of the surveyed area (mb), representing the number of sub-districts in each collection. research method this study seeks to estimate the generation and composition of waste in coastal areas not served by sub-district waste management in sidorejo village, indonesia. the transect walk survey method was modified from the previous method used in india (nagpure et al., 2015), mexico (das et al., 2018), nepal (reyna-bensusan et al., 2018), and indonesia (ramadan et al., 2022). tools and materials in the implementation stage of this research, several tools are needed, including the application of map markers, meters, scales, and sacks. the map marker application is used to mark the points of open burning of waste that are found along the transect walk route. the meter measures the unmanaged waste pile's dimensions or length, height and width. scales are used to get the weight of an unmanaged pile of waste—sacks to collect and transport waste samples from one of the heaps found. in addition to using the tools to obtain the data mentioned above, several other things need to be done during the transect walk, namely estimating the distance of j. of gov. risk management compliance and sustainability 36 unmanaged piles of waste from the road and conducting short interviews with residents who dump waste indiscriminately. short interviews were conducted to obtain information regarding the reasons and objectives of the residents for carrying out the practice of haphazard waste disposal. study area sidorejo village is one of the villages in sayung district. sidorejo village is bounded by banjarsari village to the north, batu village to the south, tugu village to the west, and rejosari village to the east. the sidorejo village is 6.33 km2, consisting of six community units and 31 neighbourhood units. the population of sidorejo village is 5,454 people. figure 1. research location since this district is located remotely, people still do illegal waste disposal, such as open burning, burial, or waste disposal anywhere. the data relating to the amount and composition of uncollected waste generation in sidorejo village has yet to be discovered, so further research is needed. a transect walk was employed to determine the amount and composition of uncollected waste generation in an area. a village or sub-district, sidorejo village, was chosen as the study area since it is included in the coastal area that has not been served by waste management. it also does not yet have inventory data regarding the composition and generation of waste. then, the results of the transect walk were scaled up to a district level representing the coastal area in java province. figure 1 shows the research location. preparation of field surveyors the surveyors selected for this study received an orientation from the research team. a trial survey is conducted and repeated until the surveyor is knowledgeable and skilled enough to collect field data independently. a field study was conducted from september to october 2022 in sidorejo village. the survey was carried out in the morning and evening. one of the waste piles found in the j. of gov. risk management compliance and sustainability 37 study area will be taken as a sample to determine the generation and composition of the piece. estimation of the pile density the waste pile samples are characterized based on their composition. first, the design of each waste pile was recorded by visual inspection. second, the initial mass of the debris was weighed using digital scales. third, measurement of the volume of each bank was done and measured by using a ruler (e.g., length, width, and height) transect walk survey method the transect walk survey method followed the method used in the previous case study by (das et al., 2018; nagpure et al., 2015; ramadan et al., 2022). a transect walk survey is carried out by following a predetermined route in the area. this survey area was conducted in the sidorejo village. courses are made randomly by forming loops or straight lines along 10 km in each village. the survey was done through the main road and residential areas at that location. the route made will not go through the same road repeatedly; even if it must be passed more than once, it will only be counted once. courses are made using the google earth application using the existing maps in the application as a guide. figure 2 shows the transect walk survey route. the sampling activity lasted 14 days, from 21 september to 4 october 2022. sampling was carried out in the morning and evening with the assumption that the burning of waste was higher than during the day, considering that the community was working or carrying out other activities. sampling was repeated one week apart to obtain data validation. the survey team records the geographic coordinates of the pile and measures the dimensions (i.e., length, width, and height) of all the stacks so that the total volume can be estimated. the number of waste piles is the sum from the beginning to the end of the transect walk survey. findings and discussion transect walk results the recapitulation of the transect walk's result in the form of unmanageable waste points and waste pile samples is calculated and analyzed to determine the characteristics of the waste. visual observations were made during the transect walk activities to assess the waste composition. after the waste samples were sorted and grouped according to their design, the pile's density was obtained. waste density is determined to be approximately 60 kg/m3. table 3 shows the waste pile characteristics. based on the transect walk survey results, the waste composition consisted of food waste, branches and twigs, paper and cardboard, plastic, metal, textiles, rubber, glass, leaves, hazardous waste, and others. table 3. composition of waste from the transect walk survey composition weight (grams) % food waste 123 1.97 branch and twig 620 9.93 paper and cardboard 234 3.75 plastic 952 15.24 metal 0 0 textiles 0 0 rubber 6 0,1 glass 0 0 leaves 4.310 69,02 hazardous waste 0 0 others 0 0 j. of gov. risk management compliance and sustainability 38 table 3 shows the leaves' waste composition dominates the unmanaged waste sample in sidorejo village by 69.02%. in contrast, the most plastic, textiles, glass, and hazardous waste is the least found during the transect walk survey with a value of 0%. it happens because if we see from the geographical aspect of the sidorejo village area, there is still a lot of land cover and trees. in addition, residential areas are still dominated by large yards, so leaf litter is often found. the following is an example of calculating the proportion of waste weight in the type of leaf waste. leaf waste weight = 4.310 (grams) total waste = 6,245 (grams) so that, percentage (%) = weight of leaf waste x total waste x 100% = 4.310 (grams) x 6.245 (grams) x 100 = 69.02% scale-up of transect walk results during the transect walk activities, visual observations were made to determine the composition of the unmanaged waste. in addition to knowing the composition of the unmanaged waste, a transect walk survey was conducted to determine the status of the number of people living in the lanes not served by waste management and whether they participate in the rubbish collection. a total of 16 points of waste piles were identified during the transect walk survey (see table 4 and figure 2). table 4. location points of the waste pile latitude longitude pile dimensions sightseeing (cm) length width height -6.90041 110.56021 90 65 15 10 -6.90007 110.55992 65 40 20 15 -6.89752 110.55992 105 60 10 45 -6.89751 110.55891 70 35 5 20 -6.89017 110.55549 80 50 10 140 -6.88987 110.55536 75 40 5 140 -6.88912 110.55508 80 35 25 120 -6.88549 110.55355 50 25 15 150 -6.88521 110.55347 40 20 10 25 -6.88446 110.55324 55 45 15 105 -6.88388 110.55306 40 25 20 10 -6.89053 110.55557 55 35 20 80 -6.89159 110.55473 25 35 15 15 -6.89328 110.55306 85 50 10 10 -6.89679 110.54378 75 55 20 50 -6.89733 110.54337 75 45 25 60 j. of gov. risk management compliance and sustainability 39 figure 2. dumping points and transect walk survey route figure 2 shows the number of points and the location of the waste mounds at the transect walk survey conducted in sidorejo village. sidorejo village is one of the villages in sayung district, demak regency. sidorejo village has an area of 6.33, which was used as a survey area because of its strategic location and easy passage. the number of waste mounds found during the survey was 16 different sizes. later, the transect walk survey results in the sidorejo village will be calculated to determine the amount of unmanaged waste generation in other areas, in sayung district. unmanaged waste generation in sayung district the unmanaged waste point data obtained through the transect walk survey in sidorejo village is then calculated to estimate the total unmanaged waste in sayung district. the composition of the waste generated based on the transect walk survey is mainly found in food scraps, branches and twigs. therefore, plastic waste is the third largest illegal waste accumulation accounting for around 15.24%. the estimated littering by the sidorejo sub-district is 1.59 tons/day. thus, the number of illegal waste disposal in other sub-districts in the sayung district can be estimated, as shown in table 5. the total illicit disposal waste generated in sayung district is 19,85 tons/day. since illegal waste generation is high, several strategies must be developed to reduce the amount of waste disposed of illegally. waste collection services must be improved to serve all waste generation in sayung district. the absence of waste management services encourages people to throw their waste anywhere and burn it (velis et al., 2021b). therefore, a policy may be required to provide decentralized waste management services in rural and coastal areas (orhorhoro et al., 2017). all sizes should support proper waste recycling because the high service area limits domestic waste collection recycling activities such as composting, waste bank, or other practices. tabel 5. total waste generation in sayung district villages area (ha) sub-district area (km2) piles (tons) jetaksari 142 1.42 0,36 dombo 132 1.32 0,33 bulusari 263 2.63 0,66 j. of gov. risk management compliance and sustainability 40 villages area (ha) sub-district area (km2) piles (tons) perampelan 223 2.23 0,56 karangasem 154 1.54 0,39 kalisari 343 3.43 0,86 sayung 456 4.56 1,15 tambakroto 345 3.45 0,87 pilangsari 294 2.94 0,74 loireng 315 3.15 0,79 gemulak 412 4.12 1,04 sidogemah 544 5.44 1,37 purwosari 393 3.93 0,99 sriwulan 402 4.02 1,01 bedono 739 7.39 1,86 timbulsloko 461 4.61 1,16 tugu 513 5.13 1,29 sidorejo 633 6.33 1,59 banjarsari 606 6.06 1,53 surodadi 510 5.10 1,28 total 19,85 after calculating all the unmanaged waste in each area, it can be seen that the bedono village area is the largest contributor to unmanaged waste, namely 1.86 tons of the total unmanaged waste in sayung district. the lowest estimate point for unmanaged waste was found in dombo village, which was 0.33 tonnes of the total unmanaged waste in the sayung district. the following is an example of calculating unmanaged piles of waste in sidorejo village is known: pile density = 0,25 (tons/km2) sub-district area = 6,33 (km2) so that, ∑ 𝑀𝑎 = ∑ 𝑉𝑎 × 𝜌𝑎 = 0,25 (tons/km2) x 6,33 (km2) = 1,59 tons waste management framework most waste management based on transect walk surveys is open burning activities in the field or yard of the house, burial and random disposal. it is linear to research conducted by (ramadan et al., 2022) that some residents who do not get waste management services will carry out simple management such as open burning, burial and dumping. if this activity continues, it will negatively impact environmental and human health. the following presents a waste management framework that can be applied in sidorejo village. j. of gov. risk management compliance and sustainability 41 figure 3. waste management framework based on figure 3 above, it is clear that the waste management that can be carried out in sidorejo village is by holding containers. it is better if the community has applied the 3r principles (reuse, reduce, recycle) before waste generation can be reduced. it is supported by the study of riswan, which states that active community participation in waste management dramatically determines the success of its implementation (riswan et al., 2015). after that, the collection is carried out at the tws (temporary waste collection site), which is then transferred to the tpst and transported to the tpa for processing. so, implementing this waste management system can reduce the indiscriminate disposal of waste, which can harm the health of the environment and society. recommendations for addressing unmanaged waste in sayung district are by looking at waste management and processing conditions in sayung district. inadequate facilities and infrastructure, wrong people's mindset in processing waste, and low public awareness of environmental hygiene and health. based on these considerations, efforts that can be made, according to (octavia et al., 2001), are: 1. provision of waste facility services providing waste facilities in an area is also necessary to support a change. the main facility is a container tub or tws, a temporary waste storage area. the results of field observations show that several areas still need tws. so it is necessary to add a container tub facility to accommodate waste. in addition, retribution services with a consistent transportation schedule are also required so that waste can be transported properly. this form of procuring solid waste services can be carried out by related agencies such as the demak regency environmental service. 2. implementation of 3r (reuse, reduce, recycle) / simple recycling culture an important point in dealing with unmanaged waste is reducing the waste generated at the source. this effort can be carried out through the simple application of 3r (reuse, reduce, recycle) by involving the community. if you want to avoid making reuse and reducing efforts personally, other processing strategies can be applied to each village by creating a waste bank. j. of gov. risk management compliance and sustainability 42 3. educative approach this type of countermeasure can be implemented by providing various environmental knowledge to improve understanding and change behavior. several approaches can be taken, such as providing socialization regarding waste and the impact of burning waste on the environment, as well as educating the community about the application of 3r in daily life. various parties, including the government, environmental activists, researchers, or institutions working in the environmental field, can take this approach. conclusions the highest composition of illegal waste disposal found during the transect walk was branches, twigs, food waste, and garden waste. plastic waste was also found, indicating the potential for higher emissions into water. therefore, most of it is burned, and a small part is dumped directly into the environment. according to the findings in this study, around 1.59 tons/day in the sidorejo village, out of 19.85 tons/day of waste generated in sayung district, pollutes the environment significantly. the recommendations for addressing unmanaged waste in sayung district are as follows: changing the mindset and paradigm of the community through an educational approach, improving the waste management system by providing waste facilities and reducing the amount of waste generated through a simple program (reuse, reduce, recycle) that involves the community. limitation & further research the limitation of this study is that it only uses the 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(2004). pra tools for studying. available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 1 number 1 (2021): 50-61 corresponding author rizwan ali memon, rizwanmuistd@gmail.com doi: 10.31098/jgrcs.v1i1.508 research synergy foundation a comparative study on women perception and condition in the event of natural disaster and migration: a qualitative study from sindh – pakistan flood 2010 rizwan ali memon mehran university of engineering and technology jamshoro sindh, pakistan abstract in this study, we want to compare previous and current perception and condition of migrant’s women after completing ten years of emigrant at their new residential. in province of sindh, district jamshoro tehsil kotri our samples, the migrant’s families from jacobabad, shikarpur, kashmore-kandhkot, qambershahdadkot and dadu districts were migrating to adjacent areas of kotri during 2010 due to flood. many of them returned back to their area when recovered but a significant number from them are permanently settled in adjacent areas of kotri. comparing their perception and condition, we use a new technique of comparative twin questions with conceded closed and open-ended characteristics, and a qualitatively 94 migrants’ women were interviewed. results reveal high populated families are more motivated about their employment and health concerns and these facilities force them to settle permanently. further study divulges that participation of migrants’ women in socio-eco and domestic decision-making process was recorded unchanged, due to resemblance of their previous and current life standards. our results recommend that the state intervention for the purpose migrant’s processing of passports, computer national identity cards (cnics), and issuance of domicile and permanent residence certificates (prcs) from their current residential addresses. their job of nature changed from agriculture to industrial that ultimately knocking the door of long-term opportunities. hence, government should make friendly policies to facilitate migrants’ families, which is essential for development of any society. keywords: migrants’ women; new residential; flood 2010 this is an open access article under the cc –by-nc license introduction pakistan assumed 3rd rank in frequently flood affected countries, because of a massive part of the population living in low lying flood plains(abbas, amjath-babu, kächele, & müller, 2015). the indus flood of 2010 was the direct cause of over 1800 deaths, nearly 1.7 million homes were completely damaged and displacement was occurred of 17.8 million people across the pakistan (purakayastha, singh, narwal, & chhonkar, 2011).the flood of 2010 was the past’s ever shocking flood experience in sindh. economic dent estimated from $8.50bn to $10.80bn, which comprise the estimated costs destroyed infrastructure, standing crops, livestock, initial recovery and relief process and other economic losses to communities as well as individual properties(hashmi, siddiqui, ghumman, & kamal, 2012; tariq & van de giesen, 2012). the major portion of this loss was materialized in sindh province. the sindh province has been extremely affected in flood of 2010. the main causes of this huge damage considered an ineffective warning system and lack of preparedness, the same is still widely been practiced (haq, akhtar, muhammad, paras, & rahmatullah, 2012). this study suggests the amendment in current policies of public institutions who are http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 50-61 a comparative study on women perception and condition in the event of natural disaster and migration: a qualitative study from sindh – pakistan flood 2010 rizwan ali memon issn 2776-9658 (online) │ 51 issuing the national identification documents that ultimately encourage migrant families to settle permanently and not to repeat the same situation they faced in flood 2010. present comparative study was carried out in tehsil kotri district jamshoro of province sindh. the families who migrants from jacobabad, shikarpur, kashmore-kandh kot, qamber-shahdad kot and dadu to tahsil kotri of district jamshoro during flood 2010. many of them returned back when their area retrieved and recovered but some of them are still survived can say permanently settled in different areas of kotri, including khuda ki basti, khurshed colony, telegraph colony and bhirya village jamshoro. this study compares previous and current condition of migrant’s women after completing ten years of flood 2010 at their new residential. qualitatively a new technique used of comparative twin questions containing closed and open ended characteristics. literature review geography of sindh province sindh province is situated in the south eastern part of the country (lat 23-45 and lat 28-39 n). the boundaries of sindh province are connected with arabian sea in south, baluchistan in west, india in east and punjab is in north. administratively province of sindh is distributed in 29 districts (nasir & akbar, 2012). sindh’s economy is mainly concerned with agriculture however; this province has some good industrial structure include textile, chemical, cement, steel and others. most of the industries are situated in karachi and kotri/hyderabad region (amanullah & ahmed, 2015; memon, lohana, & naqvi, 2021). figure 1. sindh province source: google/encyclopeida/sindhmap disaster risk in the province sindh province has a high risk of floods, heavy rains, sea intrusion, epidemics and droughts. floods/rains are the most expected annual phenomenon, because topographically the land of sindh province is flat and sited at the bottom of indus basin (tagar & shah, 2013; tariq, van de giesen, janjua, shahid, & farooq, 2020). the excess water of indus river, monsoon and hill torrents comes from balochistan which offers extra pressure in flood. the flood of 2010 was the history’s ever devastating flood experience in sindh (ali, 2013). journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 50-61 a comparative study on women perception and condition in the event of natural disaster and migration: a qualitative study from sindh – pakistan flood 2010 rizwan ali memon issn 2776-9658 (online) 52 │ review of literature natural vulnerabilities floods, rainfall, wind and storm are not occasional phenomena with unfortunate consequences (fomby, ikeda, & loayza, 2013). each time natural hazards brings masses of population disturbance, children were excluded from schools, and increases infant mortality rate (jonkman, 2005). moreover, in bangladesh and india diarrheal and aids diseases were reported high due to floods (rahman, singh arya, goel, & mitra, 2012). according to ndma (2010) and un (2012) many children of flood affectees’ in pakistan, never returned back to school and couldn’t resume their study. education for all (efa) accredited that flood disaster pretense many challenges to country and compel international rank support. in pakistan, flood 2010 made devastating destruction, millions of people displaced and one fifth land of the country was drowned (iqbal, 2018). actually, vulnerability asks state intervention to do actions and make policies learn from the experiences (jamshed, birkmann, mcmillan, rana, & lauer, 2020). vulnerabilities also lead significant challenges that may lead towards the opportunities. furthermore, the repeated disasters lessen the ability to cope situation again and again (uzun, kim, & karanfil, 2015). masses that displaced during the flood of 2010, some of them are trying to shift their job of nature from agriculture to industrial posture because they can’t afford any other exercise that made them sound-asleep (ainuddin, aldrich, routray, ainuddin, & achkazai, 2013). existing studies encapsulates some engineers and bureaucrats also placed a role in their miss judgments and poor policies that creates spillways and failure of irrigation system which cause of vulnerabilities like supra flood of 2010 in pakistan. literature on women and natural disasters existing literature suggests that women bear the more burden of natural disasters as compare to men and having more capabilities of bitter pill to swallow (ajibade, mcbean, & bezner-kerr, 2013). significant population of women is playing key roles in the production of food. in pakistan majority of women are related with informal economy and mainly depend on natural resources such as; crops, energy and water (mustafa et al., 2015). more focused on climate change, women face more degradation and deterioration (ullah, nihei, nafees, zaman, & ali, 2018). degradation refers power in decision making as men is mostly dominates in all parts of decision making. whereas, deterioration reflects disparity on control over their wish and will of doing anything, women often sacrifice her wish for the sake of her spouse, family or community (zakar, zakar, & kraemer, 2013). a booklet issued by united nations proves women acquire more affected by climate change as compare men, especially, rural women undergo hard disparities in access of information and decision making, which multiplies their obscurity (watch, 2009). poverty is connected with vulnerability and marginalization of women. in developing countries 75 percent women are living below the line of poverty (manorom, baird, & shoemaker, 2017; shah, ye, abid, & ullah, 2017). in pakistan, man is considered as primary breadwinner and women are mainly responsible for household chores, child and elderly care (mumtaz, shahid, & levay, 2013). some researchers explain inequality in legal and social privileges, imbalance labor division and insufficient access to information and resources lead them more vulnerable as compare to men (kolachi et al., 2013). some studies suggest environmental change in resultant permanent migration is important factor for long term development of the economies (cohen, 2005; murrugarra, larrison, & sasin, 2010). thus, we want to investigate the perception and condition of women, who emigrant during 2010 in flood. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 50-61 a comparative study on women perception and condition in the event of natural disaster and migration: a qualitative study from sindh – pakistan flood 2010 rizwan ali memon issn 2776-9658 (online) │ 53 research method the study was conducted in tehsil kotri district jamshoro province of sindh. a qualitative methodology semi-structure questionnaire used; 94 interviews has been taken to investigate the phenomenon. total participants selected from the four different colonies defined in table.1. table.1 selected sample of area and respondents. s.no name of residence area selected respondents date from to 1 khurshed colony 17 19-22 oct, 2020 2 khuda ki basti 26 22-26 oct, 2020 3 telegraph colony 21 27-31 oct, 2020 4 bhirya village jamshoro 30 02-05 nov, 2020 initially, average 30 respondents were targeted from four selected colonies and total sample of 120 was decided but due to similarity in responses from the communities and smaller amount availability of migrant population especially in khurshed colony and telegraph colony, it was concluded at 94 respondents as defined in table.1. for the purpose of data collection two professional researchers’ female enumerators were hired for the period of one month from 9th oct, 2020 to 8th nov, 2020. two training session was conducted on dated 12th and 14th oct, at mehran university institute of science and technology department (muistd) meeting hall. author trained them properly about research instruments before their start of field visit process. this study is based on first hand information, which gathered through the interviews and some existing literature by international and national agencies, government and non-governmental organizations, provincial disaster management authority (pdma) and national disaster management authority (ndma). the focus of the study is to provide a concrete assessment of comparison between previous residency and current residency socio-economic condition of women after completing their 10 years. snow ball sample technique was used in data collection process. research instrument the questionnaire contains 3 sections. all are relevant with the theme of comparison their current and previous living standards and asking about challenges they are facing. first section carried 5 questions related with migrant women’s personal information such as; previous/current location name, age, marital status, education and total family members. second section contains 3 comparative twin questions. the first twin question asks: “what factors influence to settle permanently in new residential?” this question was enclosed with 4 options: 1. my family can’t afford another loss (lives and finance) as in flood 2010. 2. my children are getting quality education as compare to previous residency. 3. i am more comfortable in health facilities as compare to previous residency. 4. we have good opportunities of employment here as compare to previous residency. after selection of respondent choice, enumerator has to inquire second open ended question to justify its selection, which filled in one or two open ended line. likewise, second twin question was practiced: “what are the differences in your role and responsibilities at domestic level?” question comprised with the degree of changed or unchanged in their new residential settings as compare to previous residential. question conceded with the closed options: journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 50-61 a comparative study on women perception and condition in the event of natural disaster and migration: a qualitative study from sindh – pakistan flood 2010 rizwan ali memon issn 2776-9658 (online) 54 │ 1. i don’t know 2. unchanged 3. somehow 4. changed a lot after opting the option, questionnaire contain an open ended few lines for justification of their selection. similarly, third and last twin question: “what are the changes in your participation of decision making process?” this comparative question asking women’s participation in decision making process with the intensity of increased or decreased in new residential settings as compare to previous settings. question closed with 4 options: 1. decreased 2. i don’t know 3. unchanged 4. increased after respondent’s selection, enumerator requests for justification in next open ended question with her professionalism. this middle section is carried a central purpose of the study. final third section contains 5 questions, related to migrants’ families processing of identity documents from their current residential and inviting migrants’ to suggest any favor they ought from the state at the current scenario for their betterment. purpose of the study current study’s main objective is to compare and investigate the previous and current socioeconomic conditions of migrants’ women, who settled and still survived in adjacent areas of kotri. the change in their socio-economic conditions as reflected with the change in job of nature that interrelates with the change in contribution and participation in decision making and their socio-economic role. whole study revolves around its comparative purpose and that mission was carried with the help of research instrument. study’s focus is on migrants’ women of flood 2010, who are migrants and settled in adjacent areas of kotri city. they have completed the tenure of 10 years in their new residency. they initially shifted on momentary purpose till their areas were recovered. according to the assistant commissioner kotri, district jamshoro, from the total migrants’ population of 2010 flood; 72 percent population returned back their homes and 28 percent settled permanently here, beside kotri city. they had started journey from flood migrants’ camps and then they purchased house started dwell on rent (ali, 2013). the aim at providing overall image of women in their new adopted settings. there are so many other queries contain current study’s research instrument. sindh rural women, like those in other provinces of country, are even poorer than men. further, their participation and contribution towards socio-economic activities endure unrecognized, that lead women 10 times more vulnerable as compare to other gender (demetriades & esplen, 2010). natural disasters can be considered as one of the main factors for this susceptibility. communities were mainly survived on livestock and agriculture sector and the flood of 2010 changed their work of nature from agriculture sector to daily wages labor and daily wages cheap industrial worker. no doubt close industries have taken advantage of this phenomenon. the focus of the study is to highlight the challenges and opportunities of women, belongs to migrants’ communities, those were affected by flood of 2010 in pakistan. this study was undertaken entirely in tehsil kotri, district jamshoro. using snowball sampling journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 50-61 a comparative study on women perception and condition in the event of natural disaster and migration: a qualitative study from sindh – pakistan flood 2010 rizwan ali memon issn 2776-9658 (online) │ 55 technique, a data set of triangulation was proceeded with twin technique, 94 women were interviewed from the four different resident colonies, adjacent to kotri city. findings and discussion this study investigates the changing occurred in their current living principles, values and their job of nature as compare with previous life standard and their socio-economic conditions from where they basically belong before the migration of flood 2010. the families found here are mostly come from the eastern districts of sindh, including jacobabad, shikarpur, kashmore-kandhkot, qamber-shahdadkot and dadu. many of them returned back as their area recovered but one fourth ratio is still survived can say permanently settled in different areas of adjacent kotri, including khuda ki basti, khurshed colony, telegraph colony and bhirya village jamshoro. now they have completed of 10 years their migration and they are not willing to go back their previous areas/villages. in simple words, can say they are more comfortable at their new residential. table 2. respondent’s age study’s primary obligation is required a large population at their mature stage. the reason behind this is to investigate more deepen of experience of migrants’ women from their previous living principles. major portion of population is at their middle-aged. analysis of the data reveal the differences in responses is not depends upon the age group of the women; however marital status has a significant impact on their differences in approaches and ideas. marital status of respondents was documented. table 3. respondent’s marital status marital status and level of education are very close and interrelated. classifying education of respondents. table 4. respondent’s level of education normal education of migrant’s women is mainly depends upon their marital status. majority of unmarried women were found literate. they could read and write. last question of first section was a numeric asking the total family members group, documented as. no of migrant’s women respondents age 33 18-35 47 36-50 14 51 or above no of migrant’s women respondents marital status 19 unmarried 68 married 07 window/divorced no of migrant’s women respondents level of education 73 uneducated 16 read & write 05 middle or above journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 50-61 a comparative study on women perception and condition in the event of natural disaster and migration: a qualitative study from sindh – pakistan flood 2010 rizwan ali memon issn 2776-9658 (online) 56 │ table 4. respondent’s total family member majority of migrants’ families are settled having more family members. flood 2010 created a panic in their minds and most of them don’t want experience it again. at their previous location their job of nature was mainly concern agriculture field but at their new location they have a multiple option of employment. this leads positive sign to permanently settle at new residential. analysis of the second section of the questionnaire contained 3 comparative twin questions. first closed ended and then justification with open ended. first twin question asked regarding their permanent settlement to 94 women participants. “why you were not given priority to go back and resettlement in your paternal area?” after this question, second open ended question asked to justify their selection. table 5. respondent’s response to second section of the questionnaire why you were not given priority to go back and resettlement in your paternal area? responses 1 our family can’t afford another loss (lives and finance) as in flood 2010. 18 2 our children are getting good education as compare to previous residency 07 3 we are more comfortable in health facilities as compare to previous residency. 44 4 we have good opportunities of employment here as compare to previous residency. 20 5 i don’t know 05 analyses of the first and second question showed most of the respondents are happy with the health facilities are available at their new residential and this is the reason they given priority to settle permanent over here. mrs. allah bachayo said: “in 2008, my daughter in law was died in pregnancy; there was no any separate gynecological hospital or ward till the flood of 2010 happened”. few of them point out they had hospital but in city area and takes about more than 2-hour time to access. they are more comfortable and safer here as compare to previous locations. existing literature also suggest health facilities are important determinants for life survival. tehsil kotri contains some good reputation in health facilities, namely government hospitals are taulika kotri hospital, t.b hospital bihar colony, nimra cancer hospital jamshoro and lumhs hospital jamshoro. second highest 20 responses recorded towards the different opportunities of employment is available over here. miss. bhagbhari said: “i have 5 brothers and 4 sisters, all brothers are employed in different fields, two are working in textile industry kotri, one selling newspapers and two are working on their own fruit thella, father remained ill stays at home”. whereas, in comparison of their previous living place her whole family was mainly concerned with agricultural field and now they have multiple choices of employments, additionally have easy access for employment to different industries of sindh industrial trading estate (site) area kotri, there are about 104 small to large scale industrial units and catering about more than 20 thousands employees regular basis. no of migrant’s women respondents total family members 16 1-5 47 6-10 31 11 or above journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 50-61 a comparative study on women perception and condition in the event of natural disaster and migration: a qualitative study from sindh – pakistan flood 2010 rizwan ali memon issn 2776-9658 (online) │ 57 it is observed that the result of first twin question is depends on quantity of total family members. the family responses to different employment and health facilities, containing 10 or more than 10 family members as compare to 07 responses of women, who opted children education is the main cause of permanent settlement in new residential, catered less than 5 family members. 18 respondents opted they can’t afford another shock like flood of 2010 and justified their answer they don’t want to let their and their loves one’s life again in danger. analyses of another twin question first was closed ended and then justify with open ended comparison of their role and responsibility at domestic level, with the degree of changed or unchanged in their new socio-economic settings. results reveal majority of responses are unchanged and showed the domestic activities like house hold chores remain the same as per previous location. mrs. jumo justifying her unchanged response that: “i think my house hold chores such as, sweeping, laundry work, preparing meals, dusting and cleaning bathroom and other child and elderly care are as same as i was in my previous residential”. majority of women who opted unchanged option argues their role and responsibilities are unchanged, however their job in formal industrial setting is harder as compare to their previous agricultural field job. additionally, they find difficulty to carry household chores along with their jobs, resultant violent behavior from their copartners. a short time, they have to choose one from them and mostly they decided to remain unemployed. 15 women out of 94 opted opposite answer of a lot change option. mrs. ghulam shabbir justified: “since the migration in current place i started work in garment factory at site area kotri, and the household chores was shifted to my sister in-laws, although my two daughters are also able to take care of household chores”. in sindh or more generally in pakistan, women are characteristically the primary caregivers and spend many hours on household work than men. in rural areas, women traditionally assigned for looking after children, elderly care and house hold tasks. similarly, the result of the twins’ questions regarding the comparison of women’s participation in decision making processes in home increased or decreased in new residential. it is measured again with the same technique, first closed ended options and then asked to justify. enumerators were professionally trained, how to handle these twins’ technique to sparse the reality. further this question was carefully assessed with the powers or rights of women at current and previous residential. question was simple comprise of small other questions which were verbally communicated: as your job of nature changed; and family norms, roles and regulation are also modified at somehow level. do you observe your participation in decisions of what to eat? take care of your children school matters? take care of family budget? and decisions of your children’s marriages? increased or decreased as compare with your previous residential. result of this question disclose that 41 out of 94 women’s participation in decision making is unchanged as it was on their previous residential. 25 respondents said that their participation increased and 10 respondents indicate their participation decreased as compare with previous residential. mrs. juryo justified her opted decrease option as she said that: “my spouse did not allow me to work here, my connections with my relatives like my parents and siblings are disconnected since the time, so i feel myself alone and my husband is not letting me to participate in any decision, still i am hoping to go back and i may join my field, friends and relatives, who make me stronger to participate in house hold decisions”. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 50-61 a comparative study on women perception and condition in the event of natural disaster and migration: a qualitative study from sindh – pakistan flood 2010 rizwan ali memon issn 2776-9658 (online) 58 │ it is hard to write her emotions, she half of the cried at the moment. study also found some good gesture as 25 respondents said their participation increased in decision making process. according to mrs. khan mohd: “i am happy as i am contributing financially in my family’s budget and my spouse also giving me priority in all household decisions from meal to our children clothes, so my participation rise in new residential”. analyses of data also denote there is varies in living standards as per different communities. the families settled in adjacent colonies of city kotri like khurshed colony, telegraph colony and khuda ki basti are mostly depend on industrial employment. women belong to bhirya village jamshoro is mainly concern with daily wages laborer. majority of migrants communities are belong to sindhi and baloachi nations. both nations contain strong socio-cultural perception of women. a woman has a great respect in all relations mother, wife, sister or daughter. according to mrs. rahim: “it was hardest decision for my husband to let me allow for work as a maid “masi” in any other house for the sake of few bucks to survive our one or two times food, it was my first experience to work in any other family of different community and i don’t want repeat those days in any cost”. it was very odd in both culture women go outside and participate in any labor work. according to mrs. jamil: “flood 2010, consequence of rising prices and inflation, stemming poverty pressure, it was necessary to contribute my share in household expenditure and initial two years (2010-11) we faced battle of our life”. results and data analysis of the third and last section of the questionnaire uncover coldness from the state towards migrants’ basic need of identity documents process. question asked: “do you feel difficulty in processing of your identity documents from your current residential?” table 6. respondent’s response to third section of the questionnaire documents authoritarian not experience yet no, easy to process yes, in somehow difficulty yes, a lot of difficulty total responses passports impass 92 00 00 02 94 cnics nadra 11 04 23 56 94 cbrcs, mc, dc and rcs. union councils 35 16 24 19 94 domicile and prcs revenue office 82 01 03 08 94 a large number of migrants’ women complain against the processing of their identity documents, 56 from 83 who experience of their close nadra office kotri, stated a lot of difficulty in processing of their cnics either in fresh category or renewal. whereas only 2 women out of 94 sample populations, experienced to visit in impass office for their fresh passport but they totally denied to process and they had to go their previous locations for processing of their passports. same behavior from the deputy commissioner office (revenue office) for their processing of domiciles and prcs 12 women experienced to visit dc office out of 94 women 8 of them confirmed very difficulty in processing of their domiciles and prcs and 3 said yes difficulty in somehow but got processed. similarly, as expected from the union councils journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 50-61 a comparative study on women perception and condition in the event of natural disaster and migration: a qualitative study from sindh – pakistan flood 2010 rizwan ali memon issn 2776-9658 (online) │ 59 59 migrant’s women experienced to visit out of which 43 felt difficulty in somehow and a lot during the process. flood 2010 hardly hit and destroyed the nature of life survival of affect tees’ families and the destruction force them to not come back again in same flood jurisdictions, that is not safe at any cost. they faced so many challenges to precede these documents. conclusion & further research conclusion this comparative study was carried out in sindh province, district jamshoro tehsil kotri. the families who migrants from jacobabad, shikarpur, kashmore-kandh kot, qamber-shahdad kot and dadu to tahsilkotri of district jamshoro during flood 2010. many of them returned back as their area recovered and 28 percent of them are permanently settled in adjacent areas of kotri, including khuda ki basti, khurshed colony, telegraph colony and bhirya village jamshoro. this study compared previous and current condition of migrant’s women after completing ten years of flood 2010. more populated families are more concern their health and this is the main reason they decided to settle permanently. migrant’s families job of nature totally changed from agriculture to industrial posture but all other socio-cultural and their domestic role and responsibilities remain unchanged because of similarity in their current and previous living standards. migrants’ families are still facing so many challenges in processing of their computerized national identity cards (cnics), benazir income support program (bisp) cards, domiciles, permanent residence certificates (prcs) and registration in voting. national as well as local government should play their role to support and make friendly policies for the sake of migrants’ families. technique used of comparative twin questions containing closed and open ended characteristics. results reveal less populated families are more focused on their children’s education. high populated families are worried about their employment and health concerns. further study counts the job of nature totally changed from agriculture to industrial posture and majority of migrant are more comfortable at new location due to good health facilities and multiple employment opportunities. state intervention is required to make them more stable as they have completed their 10 years but still facing lots of challenges to survive. recommendations the process of migration due to any natural disaster, is takes a lot impact on migrants’ lives, have more chances of being illiterate and poor. at the hard time of flood 2010 women proved their participation shoulder to shoulder with men, and contribute in all parts of social and economic perspectives as they survived and looking this incident into opportunity. results reveal they can’t process their identity documents easily. their processing of cnics and domiciles are taking so many efforts. government should deliver a friendly policy based on an effective monitoring mechanism. policies might be available to facilitate all applicant from all over the country but due to less vigilance apparatus and huge rushes over public offices, authoritarian of issuance of identity documents neglect migrants’ families taking the advantage of their addresses, who are concern their previous locations. national as well as local government should play their role to support and make friendly policies for the sake of migrants’ families. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 50-61 a comparative study on women perception and condition in the event of natural disaster and migration: a qualitative study from sindh – pakistan flood 2010 rizwan ali memon issn 2776-9658 (online) 60 │ limitation of the study the study was undertaken entirely in “kachi abadi’s” colony’s women including khuda ki basti, khurshed colony, telegraph colony and bhirya village jamshoro, all these allocated in tehsil kotri, district jamshoro, and was limited to women who had migrated from district dadu, kashmore, shikarpur, shahdad kot and jacobabad settled in the research sample area. the study therefore reflects on relevant women’s condition. it does not reflect the women’s condition who migrated from the flood affected area to hyderabad and karachi because these districts are considered in urban parts of the country and migrated communities may feel different challenges and opportunities as compare to sample colonies of this research. in addition, this study does not look in detail at the existing social and cultural (welfare) issues of women workers. references abbas, a., amjath-babu, t., kächele, h., & müller, k. 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(2013). men’s beliefs and attitudes toward intimate partner violence against women in pakistan. violence against women, 19(2), 246-268. copyright holder: this article is licensed under: © yves roi y. sibug (2023) corresponding author’s email: yvessibug2@gmail.com journal of governance risk management compliance and sustainability, vol. 3 no. 1 (2023) https://doi.org/10.31098/jgrcs.v3i1.1227 role of calamba city local school board in good governance yves roi y. sibug1 1laguna college of business and arts, philippines received: december 12, 2022 revised: april 28, 2023 accepted: april 29, 2023 online: april 30, 2023 abstract local governments offer personalized and localized governance to their constituents. the local school board (lsb) is one of the ways to promote effective and good local governance. this study looked into the lived experiences of seven members of the calamba local school board (lsb) in regard to their role in good governance. this study proposed a proposal to reformulate the lsb clause in the local government code as a guide for policymakers to adopt reforms in the body. this study used a qualitative research approach based on phenomenology. the ten superordinate themes identified through thematic analysis were constituent needs, external motivators, different people providing assistance, various perceptions on helpful inputs, roles of lsb members, good governance practices, positive feelings, different challenges, and varied solutions. the first theme explored the role of the lsb members in ensuring transparency and accountability. the second theme showed how the members of the lsb ensured that the constituents' needs were responded to. as for the third theme, it enumerated what made them motivated to ensure good governance. the fourth theme elaborated on who helped them in ensuring good governance. the fifth theme elaborated on how they perceived their help in ensuring good local governance. the sixth and seventh theme revealed their roles in the lsb in ensuring good and effective governance. the eighth theme revealed the positive feelings of the members of the lsb when they were able to provide good governance. the ninth and tenth themes revealed various challenges faced by the lsb and steps taken by its members to solve those challenges. the main takeaways from this study suggest that members of the local school board (lsb) should take action to improve their good governance practices, with a specific focus on transparency and engaging in more intensive consultations with all stakeholders in education. keywords: good governance; local government; local school board; role; phenomenological introduction local governments provide tailored and localized governance to residents. local government units (lgus) serve as a vehicle for effecting change and making decisions at the local level. one of the measures to provide effective good local governance is the local school board (lsb). the local school board (lsb) is a critical component in ensuring quality education at the local level. it is responsible for overseeing the development and implementation of educationrelated policies in the local community. the lsb plays a crucial role in delivering education services, such as ensuring equitable access to quality education and providing support for schools in the community. education is critical to a country's development. it has the potential to help people get out of poverty. the united nations (2017), through the united nations educational, scientific, and cultural organization (unesco), noted that education has both direct and indirect effects, stating that 420 million people potentially lifted out of poverty if all adults completed secondary school. recognizing the importance of education, it is not only the responsibility of the central government to provide equitable access to education, but it is also the responsibility of local governments to provide effective governance. even while there is a push to ensure strong local governance processes, many municipalities encounter problems in doing so. inequality in education in california, the united states of america, has prompted farmworker moms to fight for their children's education in a system where tyranny is visible. deeb-sossa and manzo (2018) found that "local government officials' corrupt behaviors and ineffectiveness increase the local inhabitants' probability of experiencing challenges in their local public schools, even after controlling for government expenditure on education" in 33 african articles review https://creativecommons.org/licenses/by-nc/4.0/ https://crossmark.crossref.org/dialog/?doi=10.31098/jgrcs.v3i1.1227&domain=pdf j. of gov. risk management compliance and sustainability 46 countries studied by konte, (2021). in nepal, a unique education governance model exists in which the federal government and local governments, in collaboration with the private sector, create effective education governance in the country. (winther-schmidt and shrestha, 2020). in the philippines, the education system is extremely centralized, with decisions made by the department of education (deped). the local government code of 1991 makes participation in local government mandatory. the lsb is responsible for allocating the special education fund (sef), which is meant to augment the requirements of public schools in a particular lgu, according to republic act no. 7160 (1991). the money comes from a one-percentage-point increase in the city's real property tax. according to robredo (2008), decisions are generally focused among the two co-chairmen of the board, focusing on the problems of the lsb in the city of naga, resulting in the limited involvement of other members of the lsb. he further mentioned that the lsb supports infrastructure projects and other potentially fraudulent operations. the world bank group (2016) found inequitable funding and a lack of local participation in basic education support in the philippines. in light of this, the purpose of this study is to shed light on the role of the members of the lsb in effective governance in the city of calamba. specifically, the study aims to answer the central question, what is the essence of the lived experience of calamba city local school board members as regards their role in effective local good governance? literature review this study is based upon the good governance framework developed by the (united nations economic and social commission for asia and the pacific, (2009) as cited by ekundayo (2017). further, ekundayo (2017) and addink (2018) stated that good governance facilitacountries' economic and social development, and its promotion can lead to a more democratic and open society. the framework developed by unescap consisted of eight major characteristics, namely, that governments should be (1) participatory, (2) consensus-oriented, (3) accountable, (4) transparent, (5) responsive, (6) effective and efficient, (7) equitable and inclusive and (8) follows the rule of law. these principles ensure that corruption in government is minimized, views of the minority are considered, and the voices of the most vulnerable in society are considered. this study is also based on the department of interior and local government’s (dilg) program, seal of good local governance (sglg). (department of interior and local government, 2021) enacted to law by virtue of republic act 11292, known as the seal of good local governance act of 2019. the principal aim of the law is to recognize lgus in performing their functions, specifically emulating integrity and good performance as pillars of meaningful local autonomy and development (republic of the philippines, 2019). the state acknowledges lgus in the performance of their responsibilities in ensuring transparency and accountability of public funds, preparing lgus for the challenges brought by natural calamities, providing for the needs of the poor and marginalized in society, promoting ease of doing business and consumer welfare, ensuring peace and order, safeguarding the environment, conserving local culture, and the criteria relevant to this study, instituting reforms and programs in improving education in the country. lgus are evaluated under the education pillar for their implementation of education reforms to ensure quality education for all. ra 11292 expanded on this pillar by including the promotion of lifelong learning, the development of sports, and the instilling of leadership and patriotism, as evidenced by changes in behavior as individual citizens and members of the community. the lsb should be guided by the following indicators: (1) increased student participation rate, (2) decreased a number of drop-outs and out-of-school youths, (3) increased cohort survival rates, (4) increased achievement scores as measured by national tests or assessment tools, and (5) establishment of child development centers, support for special education, alternative learning system, and parent effectiveness service program. j. of gov. risk management compliance and sustainability 47 decisions of government should always be based on the needs of the constituents, thus ensuring that citizens are given an effective feedback mechanism for government programs and projects are essential. this is apparent in the constitution of the republic of the philippines (1987) which gives some sectors of society a voice to directly voice their concerns. citizen participation proves important in ensuring governance, as pointed out by gustafson and hertting (2017), which stated that opportunities where citizens are given a voice to empower themselves and become representatives of the citizens in order to advocate for their communities. in addition, kübler et al. (2019) further elaborated that participatory governance increases governability in local governments. the need for the citizens' voices to be heard is essential, as stated by bala (2017), who emphasized the importance of local governments in responding to student demands, stating that local governments were the closest type of government to which they could interact with. they provided the essential services that the residents of the area required. as a result, local governments needed to be responsive, and citizen-official partnerships should be formed. understanding people's demands was thus critical for responsive governance. without first understanding the needs of its constituents, it was nearly impossible to establish a responsive government that met their needs. further, there is still the need to consider the voices of minorities. according to olanipekun (2020) argued in support of consensus-driven governance in an african context that consensual democracy ensured minority interests were taken into account and allowed substantive representation. thus, democracy plays an important part in ensuring transparency. according to erkkilä, (2020) transparency improves government efficiency and democracy, but too much transparency in governance and public administration can lead to commodification and concerns about data privacy. to bring about good governance, people in government should remember who they are working for. qualitative research by reljac (2016) noted that members of the school board in the state of pennsylvania in the united states are motivated to join the board to represent their communities and see this as an opportunity to give back to their communities' localities. this motivation to help their communities is also supported by jindra and vaz (2019), who stated that positive feelings are evident in ensuring good governance. even with this thrust for good governance, it is apparent that challenges happen, as pointed out by robredo (2008) who noted that the lsb in the city of naga in the philippines, the two co-chairmen of the lsb has been all too powerful that the voices of other members were left behind. further, a dysfunctional government can result in lawlessness, according to imran and nordin (2018). thus, these challenges must be solved through collaboration between the citizenry and the decision-makers, as pointed out by moralde, ubungen and armas (2018) which emphasize the importance of participatory governance to bring about positive change in their communities. research method to bring forth the real lived experiences of the members of the lsb in the city of calamba, this study used a qualitative research design with a phenomenological approach. according to creswell and david creswell (2018), the phenomenological approach aims to understand how individuals of groups of individuals attribute a certain condition or phenomenon. purposeful sampling was used to determine the participants of the study. considering that there are only eight members in the lsb, all members are invited, considering their diverse backgrounds coming from different sectors of society. the city mayor, the schools division superintendent of the schools division office (sdo) of calamba city, the councillor-in-charge of education in the sangguniang panglungsod (city council), j. of gov. risk management compliance and sustainability 48 the city treasurer, the president of the federation of parent-teacher-community associations (fptca), a representative from the teaching staff of the sdo, and the representative from the nonteaching staff of the sdo were able to participate in the study. based on prior commitments, the youth sector member could not attend the interview. an interview guide with ten open-ended questions was employed in the study. three professionals in the field of public administration have validated this instrument. the following are the ten open-ended questions used in the interview: 1. what is your role in making the lsb transparent and accountable to the constituents? 2. how does your role in the lsb ensure that the allocation of the fund is responsive to the needs of the school children in the city? 3. what motivates you to provide effective local good governance for the citizens of the city of calamba? 4. who helps you in providing effective good local governance? 5. what does he/she do to help? how helpful is their input as regards providing effective good local governance? 6. what is your role as a local school board (lsb) member in ensuring effective good local governance? 7. how do you ensure effective good local governance is upheld as a member of the lsb? 8. how do you feel when you provide effective good local governance to the city of calamba? 9. what challenges do you encounter in providing good local governance as a member of the lsb? 10. how do you solve these challenges you encounter as members of the lsb? before conducting the study, the mayor and the superintendent of schools division were informed through a letter mailed to both of them before conducting interviews with the participants. once permission was obtained, letters were sent to the participants informing them of the study's goal and requesting their approval to participate. the interviewees were also asked about the interview format. the members' interviews were taped, transcribed, and coded using theme analysis. the responses of the participants are then analyzed and interpreted appropriately. findings and discussion the following thematic charts explain the members of the lsb and their role in good governance, followed by a debate and reflection with supporting material. table 1. transparency and accountability participant responses subordinate themes lsb member 1 “… lahat ng uh ginagawa ng local school board mayrong mga resolution na ginagawa muna tapos nandoon lahat...” through board resolution lsb member 6 “by providing the ah the details in every transaction they made. of course, we have to show them to the constituents.” providing transaction details lsb member 7 “… pagdating naman doon sa details nandyan naman ang accounting department, nadyan naman ang treasury department, nadyan naman yung bac…” presence of accounting and treasury departments and bac lsb member 2 “… in calamba, they always receive something from the local school board, so they are very well aware of the things the local school board is providing” receive provisions lsb member 3 … may nakikita naman na may pinapagawa. lsb member 4 “…i make sure that when i have the opportunity to speak with the school heads, teachers, and the dissemination of information to j. of gov. risk management compliance and sustainability 49 participant responses subordinate themes parents, i discuss with them the plans and programs concerning their respective schools.” stakeholders lsb member 2 “we mention of our lsb activities in our mancom our regular management committee meetings and um we also post our expenditures in our website yung ating deped calamba website and also in our bulletin board. ...” mention activities in meetings, post expenditures in relevant sites lsb member 5 “a lot of meeting....” conducting meetings the theme of transparency and accountability is depicted in table 1. transparency and accountability are critical in democratic governments with numerous checks and balances. it means that all financial transactions involving the government must adhere to applicable rules and regulations, and those in positions of authority must be held accountable for any wrongdoing. as a result, citizens will have more faith in their government. according to erkkilä (2020), openness in public administration meant that the democratic nature of governance and efficiency were trademarks of effective good governance. transparency was also vital in the government's role of accountability. though the function of transparency in governance may seem paradoxical to good governance aims when too much information is disclosed, governments should be aware of the consequences of transparency. table 2. needs of the constituents participant responses subordinate themes lsb member 1 “for example, buildings, priority yan, for example si principal nag request ng school building ibig-sabihin nag i-increase ang kanyang enrollment …” school needs lsb member 3 “based din naman yun sa sinasabi ng mga local school board na ano pangangailangan nila….” lsb member 6 “ah by checking kung ah kung ano ang needs ng mga bata or ng school. ….” lsb member 2 “… we do a consultation with our school heads and uh we go about and monitor schools we also listen to uh our student…and the parents.” consultation with school head, listening to students and parents lsb member 5 … magkaron lang ng kaunting um paguusap bago mag desisyon... consultation lsb member 7 “… we ask questions... if you put a project without asking these people what they need, that is not being responsive.” ask questions lsb member 4 “… usually we conduct po ahm committee hearings that could evaluate if the program or project has been effective for a certain school.” oversight the subject of the constituents' needs is clear in table 2. being responsive implies that a government project or policy can fulfil the needs of citizens. the lsb ensures that the demands of education stakeholders are met by prioritizing citizen needs. bala (2017) highlighted the importance of local governments responding to students' demands, stating that local governments were the closest type of government they got to connect with. they offered the basic services that residents in the area required. as a result, it was critical for local governments to be responsive, and citizen-official partnerships should be formed. understanding people's demands was thus critical for responsive governance. without first j. of gov. risk management compliance and sustainability 50 understanding the needs of its constituents, it was nearly impossible to establish a responsive government that met their needs. table 3. external motivators participant responses subordinate themes lsb member 1 “… mutual uh cooperation at monitoring uh evaluation para mas effective yung ahh transparency mas effective yung uh local government.” mutual cooperation, monitoring, and evaluation lsb member 2 “the students themselves. ….” students lsb member 3 “… yun ang purpose natin ma-service ang ating citizens, ang ating constituents... kaya sila talaga. ...” serving the constituents lsb member 4 “having the trust and confidence of the people who put me in this position …” having the trust and confidence of the people lsb member 5 “… first and foremost bumabalik ako sa bata. sa school, and then i really try my best to find someone to help them...” students and school lsb member 6 “ahm… how can i lend my helping hand, giving my best to perform my duties yun po.” drive to help lsb member 7 “… my job is to provide services to all, especially the educational sector ….” providing service to educational sector the motivations of government officials are critical in ensuring that good governance practices are implemented in their respective communities. according to reljac (2016), who conducted a qualitative research study on the motivation of elected members of the school board in the state of pennsylvania in the united states, they were inspired to join the board to give back to the community they represented. according to the themes that emerged from this study, these members demonstrated signs of effective governance, such as obtaining information from decisionmaking to ensure that their decisions reflect the requirements of their school district. motivation guarantees that decision-makers in government know everything they need to know to maintain good governance. as a result, incentives can assist lsb members in providing for their residents. table 4. different people providing assistance participant responses subordinate themes lsb member 1 “…yung mga mga requisition hinihingi namin madalas sa mga teachers palagi. ...” teachers providing requisitions lsb member 6 “currently, the… my principal who is helping me. he guides me in everything i do...” principal guiding in everything lsb member 7 “administrative assistant from deped…so kapag may inutos ako dyan. papaano, ginagawa naman niya…” deped administrative assistant’s help lsb member 2 “umm all the members of the lsb helps us in providing good local governance …” assistance of the lgu lsb member 5 “actually… na some of the local government especially from the city councilor and then from the division office as well.” lsb member 3 “syempre ang unang tumutulong sa akin si mayor si admin ayan. ibang mga department heads, na na co-contribute din sila kasi kinakausap ko sila ...” j. of gov. risk management compliance and sustainability 51 participant responses subordinate themes lsb member 4 “uhm… i would say that our city mayor help me a lot. ..he also provides us with whatever we need in order to help and give assistance to our constituents. ” in a democratic society, people are encouraged to provide input into government policy. in the case of the local school board, this includes representation from various educational stakeholders, such as teaching and non-teaching staff, parents, and students. it can result in diverse perspectives and an impasse if no one can agree on resolving the issues at hand. consensus among the members can aid in the achievement of decision-making objectives. olanipekun (2020) claimed that consensual democracy meant that the interests of minorities were considered and that substantive representation was possible. despite divergent viewpoints, consensus plays a critical role in ensuring a conclusion is reached with everyone on board and standing unified. table 5. various perceptions of helpful inputs participant responses subordinate themes lsb member 1 “ano naman yan ah kung baga um organized naman kasi lahat naman ng principal nagsusubmit naman ng kanilang reports …” organized activities, timely submission of reports lsb member 7 “….being responsive. if you put a project without asking these people what they need, that is not being responsive.” being responsive lsb member 2 “… we support each other in providing good local governance.” supporting each other lsb member 3 “si mayor lagi nila akong kinakausap tsaka lagi ako kay admin para alam nya yung mga nangyayari. then pangalawa of course the local school board, mga members yan sila. then aking mga staff.” constant communication lsb member 4 “city mayor… well, the continuous communication helps a lot but um hmmmm i think the feedback from him and as part of the executive branch…” lsb member 6 “by ah giving his (the school principal) giving his inputs in his experience… lsb member 5 “sometimes not enough. hindi yung yung input mo hindi mo talaga makikita eh. ….” not enough the assistance given to the lsb was an example of participatory government, in which citizen participation was aided in good governance. gustafson and hertting (2017) discovered that people in marginalized sectors welcomed the opportunity to empower themselves, whereas more privileged groups used it to act as "citizen representatives" to advocate for their communities. according to kübler et al. (2019), participatory governance in small swiss towns increased the local units' governability in the face of antagonistic pressures. table 6. roles of lsb members participant responses subordinate themes lsb member 1 “… i always jot down the minutes um yung mga suggestion .. most of the time priority ng teachers ang nao-open ko …” take minutes, open teachers’ priority lsb member 5 “… naipaparating namin kung ano yung mga deliver information j. of gov. risk management compliance and sustainability 52 kakulangan ng eskwelahan, ng estudyante, at ng para sa parents. ...” about the needs of school, students, and parents lsb member 6 “… we are the approving authority in every resolution that the ah that the will be made in the local school board. approving authority lsb member 2 “… i am entrusted with the the task of making sure the needs of the schools are provided thru the funding of the local school board which is known as the special education fund ...” provide the needs of the school lsb member 3 “… i try to make sure na ma-meet naming yung ah estimated budget for the local school board...” ensure to meet estimated budget lsb member 4 “… it is my duty to see to it that the budget appropriations for educational purposes are spent properly and the needs of the school, teachers, and learners are provided for...” proper spending of budget, provide the needs of the school, teachers, and learners lsb member 7 “… determines the budget coming from special education fund (sef) and of course before doing that budget, we have to set first the guidelines because the sef funds have limitation also. ...” determines budget from sef, set guidelines the unescap (2009 as cited in ekundayo, 2017) in the un's good governance framework and the department of interior and local government, (2021), which aimed to encourage local governments to ensure good governance practices, must ensure that the principles of good governance, as stipulated by the unescap (2009 as cited in ekundayo, 2017) in the un's good governance framework and the department of interior and local government, (2021) are upheld. upholding equal education was one of these good governance ideals. this can be accomplished by proper synergy and a positive working connection among the members. the way the members of the lsb work together to complement each other while also providing a feeling of monitoring and checks and balances, guarantees successful good local governance. table 7. good governance practices participant responses subordinate themes lsb member 1 “… ah yung member ng local school board kung magpatawag ng meeting lahat uma-attend palaging may quorum yan. pag hindi um madedelay ang priority projects...” ensuring attendance in meetings lsb member 2 “i try to take a stand when it comes to the need of the teachers. yun nga we do consultation with our school heads and uh we go about and monitor schools we also listen to uh our student, …” taking a stand, consultation and monitoring schools, listening to students lsb member 4 “… we encourage specially those members who are not in the bureaucracy per se to give their inputs and to share what they really feel or what they see as the school in the city needs.” encouraging nonbureaucracy members to share inputs lsb member 5 “first and most recognize and hear and feel all the needs of the school and the student as representative of the parents. …” recognize, hear, and feel the needs of school and students lsb member 6 “by being transparent in every transaction made by the board.” transparency j. of gov. risk management compliance and sustainability 53 participant responses subordinate themes lsb member 7 “well, just making yourself transparent. tell them what you want. ask what they need. …”. lsb member 3 “… lagi namang, lagi namang tayong nasunod sa patakaran ng gobyerno kung ano talaga yun um… hindi tayo pwedeng hindi sumunood doon...” following government regulations according to the department of interior and local government (2021), local governments must prioritize good governance to achieve good service performance. it led to a more transparent and accountable local government and proactive solutions to various difficulties by local governments, ensuring that lgus would be agents in achieving national and international development goals. good governance comprises meeting residents' demands as well as developing proactive governance solutions that benefit the citizenry and improve their standard of living. good governance ensures citizens' needs are acknowledged in the public sector. it also implies that funding is transparent and will not be questioned due to unethical behavior. table 8. positive feelings participant responses lsb member 1 “masaya naman dahil maraming maraming natutulungan especially teachers ...” lsb member 5 “.. magiging masaya ka if you provide it of course...” lsb member 6 “… i will feel happy …” lsb member 7 “of course, i will be happy. ah that’s the measure of satisfaction. … lsb member 2 “syempre um your gratified, your uh thankful to the lord …” lsb member 3 “syempre parang fulfilled … lsb member 4 “well, yeah i feel very happy and fulfilled…” governments that can provide for their inhabitants are the sources of these favorable feelings. assuring local governments can mimic excellent governance methods means that the lives of those governed will be better, and governments will do more to make constituents happy. according to jindra and vaz (2019), adopting good governance principles has aided in decreasing poverty for most of the world but can have a mixed outcomes for other countries. table 9. different challenges participant responses subordinate themes lsb member 1 “… the instructional needs of the school especially the physical building … school building tapos ah instructional materials, equipment ...” instructional needs of school lsb member 5 “the challenges… to fully recognize us. that’s it.” full recognition lsb member 2 “…ang tingin nila sa sa sef sa local school board ay limitless source of fund. ...” source of limitless fund lsb member 3 “… nga-ngayong pandemic kasi syempre we cannot control the uh yung perseverance ng taong mag persevere magbayad ng uh uh real property taxes …” reluctance to pay real property taxes lsb member 4 “… the quarantine restrictions… we are not allowed to go out and be on the ground to get inputs and suggestions of our teachers and learners.” quarantine restrictions to get inputs and suggestions lsb member 6 “i have not yet been involved in any meeting yet.” non-involvement in meetings j. of gov. risk management compliance and sustainability 54 participant responses subordinate themes lsb member 7 “…sometimes what is needed is not in those within the regulations under utilization per se... needs beyond regulations the lsb's various challenges are depicted in table 9. the lsb's main issue needed that exceeded regulations, which refers to the sef's limited allowed expenditures, as described by robredo (2008). as a result, the lsb was unable to support certain initiatives. although some may regard the sef as an infinite fund, given the limited resources and never-ending needs of the constituents, the lsb should keep the approved project in mind. citizens' refusal to pay real property taxes contributed to the scarcity of resources. the sef is supported by 1% of the lgu's collected real property tax. the lsb was able to be funded and assist with school instructional needs by ensuring that residents could pay their taxes. the quarantine restrictions for obtaining inputs and suggestions made it difficult to hear constituent sentiments and transmit their requirements to the lsb in light of the covid-19 pandemic that afflicted the entire planet. another issue was meeting non-participation and full recognition. to provide excellent governance, it was critical to ensure the engagement of all stakeholders. challenges in governance are an unavoidable part of the governance process. imran and nordin (2018) state that weak administration can lead to anarchy and widespread socioeconomic disparity. as a result, governments must tackle the issues that the people face and ensure their prosperity and well-being. table 10. varied solutions participant responses subordinate themes lsb member 1 “…smooth dito sa atin, wala naming challenges na nae-encounter dito …” no challenges lsb member 2 “we do consultations so that we would be able to have a bigger grasp of their needs in the schools.” consultations lsb member 4 “… we have to increase the coordination and the interaction between the lsb and the school heads...” coordination and interaction between lsb and school heads lsb member 5 “a lot of meetings. hindi enough yung isang meeting then hindi ka rin pakikinggan. ….” lots of meetings lsb member 3 “… meron kasi kaming workplan. pupunta kami sa mga different barangay. bababa talaga kami doon uh kakausapin ang mga council, mga barangay council, the chairman…” implementation of workplan lsb member 6 “… syempre. i have to look first kung ano ba ang sitwasyon sa mga ginagawa nila.” looking into the situation lsb member 7 “by asking questions. i try to verify the information. sometimes i ask them. sometimes i do my research…” asking questions table 10 depicts the superordinate theme of various solutions presented by lsb members in dealing with their issues. some members stated that there were no challenges in the lsb because the lsb provided an easy environment in which ideas could be easily adopted. regarding the excellent government, residents' priorities should constantly be considered. consultations, questions, several meetings, coordination and interaction between the lsb and school heads, and an investigation of the situation should all be explored. investigating the issues and obstacles that schoolchildren and other educational stakeholders face will ensure that j. of gov. risk management compliance and sustainability 55 solutions are tailored to their requirements. it also allowed for greater transparency. by implementing a work plan, the lsb can ensure that the plan to address the lsb's difficulties was carried out. public participation in government policies is also a feature of excellent local governance. in addition, moralde, ubungen and armas (2018) conducted a descriptive-qualitative research study to examine the bottom-up budgeting (bub) and assistance to disadvantaged municipalities (adm) programs in various municipalities in nueva ecija, philippines. it emphasized the benefits of citizen participation in governance, which led to citizens participating more actively, especially if they thoroughly comprehended the government's procedures and empowered civil society organizations. it also pushed local governments to have greater direct interaction with their constituents, making them more aware of grassroots issues and empowering them to obtain information from citizens. conclusions the lsb's duties in ensuring effective good governance were explored in this study. it provided policymakers with information that helped them ensure that their efforts to improve good governance practices were not in vain. the key takeaways from this study are to ensure that members of the lsb take steps to strengthen good governance practices, particularly transparency and more intensive consultation with all education stakeholders, to ensure that the lsb's decisions truly reflect the needs of all stakeholders in the education sector. this can be accomplished by offering more opportunities for dialogue, such as holding additional meetings between members. the co-chairmen of the lsb should intensify activities toward transparency, accountability, and responsiveness through regular and periodic meetings of the members, not just when the lsb's budget needs to be approved, to ensure the needs of the stakeholders are reflected in the approved budget, according to the findings of this study. furthermore, more outlets for other stakeholders, such as teaching staff, non-teaching staff, parents, and youth, to consult with their sectors should be provided so that lsb members can recommend projects that would greatly benefit them. the lsb co-chairmen should organize orientation events for new members so that they may better understand how the lsb operates and ensure that they can effectively represent the sectors they represent. the lsb should engage legislators to change the lsb law so that the goods that can be sponsored by the sef are clearer. it is also recommended that more members of the lsb be added to ensure that varied inputs from other educational stakeholders can be obtained. this can be accomplished using the study's restructuring technique. limitation & further research this study is focused on the lsb in the lgu of calamba city, and thus, the results reflect the specific condition and context of the city of calamba. determining the perception of good governance in different localities may be explored. further, since this study is qualitive in nature, future researchers may explore using other methods of research in measuring good governance among localities. furthermore, future researchers looking into the study of good governance among lgus, especially among local school boards or related committees in local governments may also consider the perspective of constituents of a locality to further determine the extent of good governance practices specifically on the perception of the citizens on good governance in their local government. j. of gov. risk management compliance and sustainability 56 references addink, g.h. 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(2020) “governance and power-sharing in tvet in nepal: sharing of practical experiences,” journal of education and research, 10(1), pp. 100–119. available at: https://doi.org/10.3126/jer.v10i1.31901. world bank group (2016) assessing the role played by local government in supporting basic education in the philippines. world bank, washington, dc. available at: https://openknowledge.worldbank.org/handle/10986/24747 (accessed: may 2, 2021). microsoft word 451 rianti rozalina available online at: https://journals.researchsynergypress.com/index.php/jgrcs journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 2 number 2 (2022): 15-28 corresponding author rianti rozalina, rianti.rozalina@bri-institute.ac.id doi: https://doi.org/10.31098/jgrcs.v2i2.451 research synergy foundation software cost estimation practices using rasch measurement model: an indonesian regional government evidence rianti rozalina1, zulkefli mansor2 1 program study of digital business technology, institut teknologi dan bisnis bank rakyat indonesia, 12550, south jakarta, daerah khusus ibukota jakarta, indonesia 2center for software technology and management, faculty of information science and technology, universiti kebangsaan malaysia, 43600, bangi, selangor, malaysia abstract software cost estimation (sce) can be substantial challenges in software development as it could yield inaccurate results. the sce failure influences project sustainability which might lead to additional costs and times to complete the project. previous research has provided empirical evidence that the unsuccessfulness of software cost estimation in public sectors is higher than in private sectors. this is due to the actual cost not in line with the estimation cost. the objective of this paper is to determine the sce practices in the regional government of indonesia. this research adopts both quantitative and qualitative approaches. the quantitative approach was conducted by distributing questionnaires to government employees who are involved in cost estimation. rasch model software was used to analyze the data. the qualitative approach involved interviewing personnel in the cost estimation process in regional government. this research involved seven government agencies in west sumatera province, indonesia. the findings of this study show that current practices of sce in the regional government of indonesia are not effective although there is a budget ceiling (pagu anggaran) and owner estimate cost (harga perkiraan sendiri). this paper highlights the reasons for inaccurate results of sce in public sector due to five factors which are: people who have authority to estimate the software cost, time of the estimation, no tool to estimate the software cost, the frequency of changing the scope and requirements of the project, and the number of changes of scope and requirements. however, this research may not include all the factors that influence software cost estimation in government projects yet. there might be other factors that might influence sce in the public sector. these factors can assist the regional government of indonesia to effectively and quantitatively analyze the factors that significantly impact software development in indonesian regional government context. those factors can be included as parameters in estimating the software cost and also to enhance the software cost estimation process. thus, it can reduce the risk of the project from overrunning and over budget. keywords software cost estimation practice; public sector; indonesian regional government this is an open access article under the cc–by-nc license. introduction rosmala & akbar (2010) defines that the software cost estimation is a process of predicting human resources, time and cost requirements to complete a project. huang et al. (2007), software cost estimation consists of predicting the cost, quality, risk analysis and other factors that influence software cost estimation. furthermore, according to sharma, bajpai & litoriya (2012) stated that software cost estimation is a process to estimate the resources, schedule, software size, effort and the whole cost of the project. hence, many factors influence software cost estimation results. likewise, cost estimation process is a substantial challenge in software development although there is a great understanding of software journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 15-28 software cost estimation practices using rasch measurement model: an indonesian regional government evidence rianti rozalina, zulkefli mansor issn 2776-9658 (online) 16 │ project performance and software development method selection (ramasubbu & balan 2012; rajkumar & alagarsamy 2013; ramesh & reddy 2016). besides, the difficulty in estimating the software cost is due to the intangible nature of software, making the cost estimation process even more complex (kumari & pushkar 2013). software cost estimation process is correlated with the software development process to make an adequate plan so that the project is completed in particular time, budget and resources. in addition, one of the causes of the software development failure is due to inaccurate software cost estimation results rajkumar & alargarsamy (2013). mensah (2003) stated that software development failures could happen in any organization regardless of their organizational size, geographic region, industry, and market group. thus, it could occur in private sectors, public sectors or any government institutions. according to mensah (2003), the public and the private sectors are often forced to cancel software projects because the cost and the dateline far exceeded the initial schedule planning. for instance, one of main issues in software development in indonesia companies in 2013 due to the actual budget required to complete a project is higher than the estimation cost (imam & arry 2015). in addition, due to ineffective cost estimates, the government ict project failure in the malaysian context was high. it can be seen that the number of successful projects is less than 31%, while the rest of projects are over budget and canceled (haslindah, azizah, othman 2014). this issue is also faced by companies and the government of usa whereby more than 50% of projects required additional cost for the projects to be completed (chaos report (2014). also, in finland, the ministry of justice developed a prison information system. the project was a huge overrun in terms of schedule and budget. they have to pay four times more than the "original fix price." the project was unsuccessful due to the users not participating in the development process (isbg 2004). based on standish group report on 25,000 software projects data in 2011-2015 reveal that 2731% of the project is successful (project completed within time and budget estimate), and 17-22% of the project is failed (project canceled or terminated). there is also 49%-56% that falls into a challenging project which means that the project is completed with overrun and over budget. these occurred due to lack of cross-checking of the judgment given by experts in the input and output estimation. besides that, the organization might not use or misuse the existing models or techniques (boehm 2017). due to ongoing reports on the inaccuracy of software cost estimation and the important role of software cost estimation in software development, this paper is to determine the software cost estimation practices as well as the factors that influence software cost estimation especially in public sectors. literature review a. software cost estimation in public sector the common cost estimation technique used by the government is an expert judgment which depends on the experts. the weaknesses of this technique are that the method still cannot be measured because it is hard to document the parameters used by the experts. the experts may be biased, optimistic and pessimistic (holgeid & thompson 2013); rajkumar & alagarsamy 2013; whitfiled 20070. when software cost is unquantifiable, it can lead the estimation to be potentially highly biased and unjustified due to it being difficult to verify and validate it (phongpaibul & aroonvatanaporn 2014). in addition, gao (2009) stated that there are many factors influencing the project overrun which are detailed documentation availability, risk analysis conducted, historical data of the previous projects, well trained journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 15-28 software cost estimation practices using rasch measurement model: an indonesian regional government evidence rianti rozalina, zulkefli mansor issn 2776-9658 (online) │ 17 and experienced analyst, adequate budget, adequate cost reserve, unrealistic assumptions and overoptimism. as stated by rozalina & zulkefli (2018), five critical factors affecting sce in public sectors are under “people factor” which are programmer capability significance towards the successful project, top management support is essential for the project to be successful, top management is understood the objective of the project, the project manager is knowledgeable and competence in ict and top management is involved and committed to the project. while another factor under “process factor”, specifically under risk management which is risks that occur during the software development project manage well. people involved in estimating the software cost are usually a project manager, top management and programmer has an important role in estimating the software cost as well as in software development. first, a project manager is the one who has responsibility managing and controlling the whole project. hence, the project manager has to control the project and cost so that it is in line with the estimation results. if anything happens in the project which includes the estimation cost, the project manager has to take responsibility to the top management because the project manager reports and explains the progress of project to top management. on the other hand, the decision making for the project relied on top management approval. therefore, top management requires understanding the objectives of the project. it is significant for the top management to support by giving participation and commitment from the first process of software development till the project is completed. likewise, risk management is vital for the project due to the many risks that might occur in the project. it can happen anytime during software development. so, if risk can be managed well, the software cost estimation should be in line with the software cost estimation. on the other hand, as stated by haslindah, azizah & othman (2014); phongpaibul & aroonvatanapoorn (2014); chaos report (2014) that the project manager and top management are lack of knowledge, skill, experience, and familiarity in ict. meanwhile, ict knowledge is significant to define the scope and requirements of the project. therefore, the scope and requirement are significant in estimating the cost because it encompasses entire activities of software development which is used to estimate the size of the project (medvedska & berzisa 2015). according to rajkumar & alagarsamy (2013), many uncertainty factors influence software cost estimation as shown in figure 1. the most affecting factors are management (23%) and project design (21%). management commitment is very important for the sustainability of the project because the management is the one who is responsible to manage the whole project. the project design is associated with the project planning and project variables which are significant to identify the requirements and outcome of the project. renny et al. (2015) & (zulkefli et al. 2016), number of failures in it projects is high caused by several factors which include less support by top management, lack of user involvement, the objectives of project unclear and the maturity of organization. singh and dwivedi (2014) also stated that the success of a software project depends on various factors that are interrelated to each other. the success of a project is identified by fulfilling all the project requirements within the schedule and cost that has been estimated before. there is no warranty for technology or standard procedure for the development process that would prevent software projects from failures, cost overrun, late delivery, logical errors and incorrect design. the most significant factor that influences the success of a project is management ability and people. it is also important to involve customers in project development so that the requirements will be aligned with the user's needs. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 15-28 software cost estimation practices using rasch measurement model: an indonesian regional government evidence rianti rozalina, zulkefli mansor issn 2776-9658 (online) 18 │ figure 1. the major uncertainty factors affecting software cost estimation source: rajkumar & alagarsamy (2013) furthermore, software cost estimation in government is complicated as the estimation has to be conducted in the initial stage of the project. hence, in the first stage of a project, the government is required to prepare detailed scope and requirements of the project; unfortunately, the project team is not equipped in preparing it (imam & arry 2015). according to gumaei, almaslukh & tagoug (2015), the organization that estimates the software cost at early phases of a project tends to produce inaccurate results. however, it is necessary to estimate the software cost at early phases due to preparing the project proposal in order to get the budget. the estimation at early phase has high risk due to many uncertainties and risks on the scope and project requirements. as stated by kumari & pushkar (2013), there is no detailed information on the scope and requirements during the early phase of the software development. zulkefli et al. (2011) also explain that the requirements of the project are essential so that the result is accurate. therefore, it is difficult to estimate the software cost at an early phase of the project because of changes made on requirements. the estimation could be done in a later phase. the later phases refer to the design, implementation and testing stage. attarzadeh & hock (2011) stated that the incomplete information on the software causes the difficulties in software cost estimation which led to producing an inaccurate result. lack of the historical government project records, as the impact of the data availability is not effective and efficient regarding quantity and quality of data. it is caused by the data not centralized, collected and maintained consistently. as for the impact, the historical data is not effective in estimating the cost (raffo, pfahl & wang 2007). historical data quality would affect estimation too. thus, the information determines the success of the project due to incomplete and incorrect information would lead to the estimation failure (ministry of transportation and infrastructure 2013; gao 2009). so, the better quality the data are, the better-quality estimation would be. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 15-28 software cost estimation practices using rasch measurement model: an indonesian regional government evidence rianti rozalina, zulkefli mansor issn 2776-9658 (online) │ 19 likewise, lack of communications also affects the software cost estimation because it causes misunderstanding and conflict in the project. as the impact, the project may delay or fail (rajkumar & alagarsamy (2013). furthermore, the experience, knowledge, skills, and commitment of staff also influence the software cost estimation since they have an important role also in a development process. other factors are the financial issues and user responses. the financial issues contribute to the project completion because the budget constraints can delay the project. the user responses mean how the users react toward a new system because most of the end users do not have the training to use the new system and it is difficult for them to adapt themselves to using that system (rajkumar & alagarsamy (2013). cost evaluation is often calculated by people who are inexperienced using the estimating methods and tools. although they are good in financial and accounting methods, it does not mean they are good in software estimating because it requires specific skills and training (jensen 2003). according to gao (2009), the cost estimator has to be multi-talented in analyzing high-quality data. cost estimation is a difficult task, but yet it is very important. it takes time to develop which cannot be done in a hurry. hence, the cost analyst needs to be well-trained and have experience because they are not only estimating the cost but also to predict the risk that might occur. as a cost analyst, it requires having knowledge of different disciplines such as accounting, budgeting, computer sciences, economics, engineering, and mathematics as shown in table 1. however, the individual who does not have skills as a cost analyst are often involved in estimating the cost. table 1. disciplines and concept in cost analysis cost analysis disciplines concept economics break-even analysis foreign exchange rates industrial base analysis inflation labor agreements present value analysis budgeting budgeting budget appropriations internal company (industry) program specific engineering design materials performance parameters production engineering program development test scheduling system integration computer science / mathematics analysis of commercial models analysis of proposals development of cost estimating relationship model development programming statistics forecasting learning curve applications journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 15-28 software cost estimation practices using rasch measurement model: an indonesian regional government evidence rianti rozalina, zulkefli mansor issn 2776-9658 (online) 20 │ cost analysis disciplines concept regression analysis risk/uncertainty analysis sensitivity analysis accounting cost data analysis financial analysis overhead analysis proposal analysis interpersonal skills approach estimate knowledge public and government affairs appropriations process auditors legislative issues outside factors source: gao 2009 selecting the tool and technique to perform software cost estimation is substantial for cost estimation accuracy. therefore, it is important to decide the right proper tool that is used for estimating the software cost. however, the common traditional tools used are microsoft excel and microsoft project which have challenges in terms of the accuracy (rajkumar & alagarsamy (2013). zulkefli et al. (2016) stated that most of the project managers used the manual method to perform the calculation due to unavailability of computerized tools. the tools that are usually selected for performing the calculation are evm, cash flow statement, wbs statement burndown charts, and gantt charts by using the microsoft excel. they also used hp quality center which is an automation method. unfortunately, it does not have all the functionality that supports cost estimation. the availability of computerized tools is essential for a project which can increase the effectiveness and the efficiency in managing the project cost. however, other difficulties in software cost estimation are novel application software, changing technology and lack of homogeneity of project experience. the novel application of software means each software has its own uniqueness which causes the uncertainty in estimation. the software can be implemented in different environments, but at the same time, it needs to line with technological development. as a result, it will have different project estimates. lastly, lack of homogeneity of project experience means the software cost estimation should be done based on the previous information of a project. in this case, it requires experience on the similar previous projects (suharjito & budi 2013). moreover, many software cost estimation models have been established by previous researchers. however, those existing models developed are based on a large number of historical projects from the usa. hence, it is necessary to adapt those models to the environment in which they are to be used. the software cost estimation model which is developed based on the local project data has higher accuracy compared to the existing model as it reflects on the software development in a particular organization. not all the parameters of the existing models are applicable with the local software development environment (javed et. al 2013; xuang et. al 2007; suharjito & budi 2006; dillibabu & krisnaiah 2005). besides that, the existing models commonly use lines of code (loc) and function points for measuring the software size. the primary problem is the lack of a universally accepted definition of loc. as the impact, many variations of counting the loc exist. some models include the comment lines, while other models do not calculate it. loc is language dependent; the calculations are varied as it depends on the journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 15-28 software cost estimation practices using rasch measurement model: an indonesian regional government evidence rianti rozalina, zulkefli mansor issn 2776-9658 (online) │ 21 programming language used for the software development. while the function point does not consider the tools, methodologies, programming languages, database management systems, processing hardware or any data processing technology in the estimation. it really depends on the functionalities of the system requirement (matson et. al 1994). it is very difficult to be implemented at the early stages of the project (patil, badjate & joshi 2014). therefore, it is difficult to implement those existing models in government due to the software cost estimation is performed at an early phase of the project whereby the scope and requirements of the project are not detailed yet. as stated by ramesh & reddy (2016); shekar & kumar (2016); patil, badjate & joshi (2014); rajkumar & alagarsamy (2013); khatibi & jawawi (2012) that the common existing model used is cocomo models which ignored other important parameters such as customer skills, cooperation, knowledge, hardware issues, personnel turnover levels and all documentation (ramesh & reddy 2016; shekar & kumar 2016; patil, badjate & joshi (2014); rajkumar & alagarsamy (2013); khatibi & jawawi (2012). basically, those factors are significant due to having a big impact on the estimation result. consequently, there is a need to have a model which describes the software cost estimation complexity from various factors. as mentioned by kaur & salaria (2012) that the difficulties in estimating the software cost are influenced by many factors such as lack of historical data, lack of project plan, poor management, project team ability, the pressure to lower estimation and project uncertainty. b. software cost estimation in indonesia indonesia spending on information technology has increased by 15% in 2015 which is around 176.3 trillion idr. one of the expenditures is for a software development project (bmi 2015). before implementing a project, each government institution requires preparing the budget plan (penyusunan rencana anggaran biaya / rab). rencana anggara biaya (rab) is a budget estimate plan on the activities of the institutions in indonesia hence, the first stage needs to be done estimating the project cost that requires project development (adi nugroho et al. 2009). according to the presidential regulation of the republic indonesia number 70 of 2012 on procurement goods or services, the government agencies have to make its cost estimation (harga perkiraan sendiri) (subsection 66 number (5) item a). the purpose of the cost estimation is to ensure the project cost within reasonable cost (ziyad et al. 2014). however, according to sosa star web (2017), there is no specification technique used to estimate the software cost. they perform the owner's estimated cost based on pagu anggaran. besides that, the government often changes the scope and requirements of a project which causes project delay based on the presidential regulation no. 4 of 2015, every procurement process of goods and services that are conducted by public sectors and private sectors of indonesia must make the owner estimate cost (oec) or harga perkiraan sendiri (hps) (inkindo 2017). harga perkiraan sendiri (hps) is the estimation of price goods and services of a project which use as the highest bidding limit offered by consultants or software providers. according to the presidential regulation no. 70 of 2012, the software is considered as a good which requires the owner to estimate the cost in the planning stage. before estimating the owner's estimated cost, the committing officer (co) requires identifying the requirements and specification. unfortunately, the oec is very difficult for the software cost estimation due to there are no standard techniques for reference and guidance (sholiq et al. 2016). the oec is used to estimate the cost and state the technical specification of the project. however, most of the private sectors and the public sectors are finding it difficult to make a request or to offer the software development project due to facing difficulties in performing their own price estimate (oec). if the estimation is too high for the fair price, the companies or the government will be potential losses. if the journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 15-28 software cost estimation practices using rasch measurement model: an indonesian regional government evidence rianti rozalina, zulkefli mansor issn 2776-9658 (online) 22 │ estimation is lower than the fair price, then it will have the potential for the software procurement failures due to the software providers not being interested in doing the project (imam & arry 2015). research method the research methodology used a combination of quantitative and qualitative approaches. the quantitative is conducted by distributing the questionnaires to the respondents. the purpose is to gather the information related to the current practice of software cost estimation in a regional government agency from 96 sample respondents that were calculated by using lemeshow approach due the exact know of population unknown. likewise, a qualitative approach was done through interviews of respondents from the different agents in west sumatera province. the respondents are government employees who are involved in software cost estimation in west sumatera province. the government employees chosen are from three agencies which are diskominfo, bappeda, and lpse. diskominfo (dinas komunikasi dan informatika) is a communications and informatics agency. bappeda (badan perencanaan pembangunan daerah) is a regional agency for planning and development. lpse (lembaga pengadaan secara elektronik) is a provider of electronic procurement systems for government goods or services which operates by using electronic procurement systems. the respondents are from four cities and three agencies in west sumatera province. the cities are padang, pakumbuh, solok and bukittinggi, while the regencies are sinjunjung, tanah datar, and lima puluh kota. the rasch model is used to analyze the data. the rasch model allows researchers to determine the participant, item and correlation between participant and item (engelhard & stefanie 2013). hence, rasch analysis is an instrument measurement to measure for what is supposed to measure which include to identify the competence respondents. this will determine the capability of respondents towards software cost estimation results. this can be seen through the person map in figure 2. it revealed that 40.62% of the most competent respondents, 45.83% of the moderate competence and 13.54% of the less competent respondent. as a conclusion, based on the instrument validity analysis, it is proved that the participants involved were capable of being a respondent to answers related to software cost estimation issues. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 15-28 software cost estimation practices using rasch measurement model: an indonesian regional government evidence rianti rozalina, zulkefli mansor issn 2776-9658 (online) │ 23 figure 2. person map findings and discussion based on findings, the regional government of indonesia requires an owner estimate cost which refers to pagu angaran. the problem is there is no standard to calculate owner estimate cost, for instance the elements that should be included in owner estimate cost and there is no method for calculating it. although the estimator can refer to pagu anggaran, it does not solve the difficulties in estimating the software cost due to pagu anggaran use as reference for the limited amount (the highest and the lowest amount) allowed for the project. in this case, the parameters used to estimate the software cost is not clear. thus, it causes underestimation or overestimation which affect the project. moreover, the software cost estimation is conducted one year before the project starts whereby the scope and requirements are not defined clearly. this is connected with previous research which says that overestimation occurs due journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 15-28 software cost estimation practices using rasch measurement model: an indonesian regional government evidence rianti rozalina, zulkefli mansor issn 2776-9658 (online) 24 │ to the software cost estimation performed during the early phase of the project which lacks detailed scope and requirements during that phase. as the impact, based on the empirical study results, scope and requirements sometimes change. however, even though the change made is not much, it still gives impact on the software development process. thus, the critical factor of the software cost estimation is influenced by “people factor” and “process factor”. moreover, the results of a survey on software cost estimation practices are described in table 2. it revealed that the person who has authority to estimate the software cost is information and technology (it) staff with a ratio 38.54%. hence, most of the estimation is done by it officers. then, followed by a cost analyst, project manager, others and accountant. thus, it might cause the issue in software cost estimation results, especially the sce looks from many aspects which requires experience and knowledge from multi-disciplines of the estimator. in terms of the software cost estimation time, it is indicated that the software cost estimation in the public sector conducted during the project proposal phase with a ratio 86.45%. only a few projects estimated during the feasibility study, scope and requirement analysis as well as the later phases. hence, based on the result above most of the public sectors conducted the estimation at the early phase of the project which is during the project proposal phase whereby the scope and requirements are not complete. in this case, the software requirement will still develop in general. so, in order to produce an accurate result, the estimation should be done when the project scope and requirements are completed which has its detailed information. this also can be seen based on the frequency of changing the scope and requirements of a project which is more than 50% of a project that often changes the scope and requirements. in addition, the number of changes made in scope and requirements are a little with ratio 68.75%. then, 8.33% of the project has substantially changed the scope and requirements and 19.80% of the project is moderately changing the project scope and requirements. meanwhile, the number of projects that never change the scope and requirements are only 3.12%. although the number of changed scope and requirements of a software project is a little, yet it also influences the software development process. the most influential factors of the inaccuracy of software cost are no proper tool to estimate the software cost (37.5%) and lack of experiences in previous related projects (29.16%). the public sector should have a computerized tool that supports the software cost estimation process. besides having a proper tool, it requires the experience and information of the previous projects. table 2. result on the practice of software cost estimation survey no questions frequency percentage (%) 1 people who have authority to estimate the software cost: it officer 37 38.54% accountant 3 3.12% project manager 17 17.70% cost analyst 26 27.08% others 13 13.54% 2 the software cost estimation is conducted during: project proposal phase 83 86.45% feasibility study 5 5.20% scope and requirement analysis 5 5.20% later phases 3 3.12% 3 the most influential factor of the inaccuracy of software cost estimation. scope and requirements are not clear 15 15.62% journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 15-28 software cost estimation practices using rasch measurement model: an indonesian regional government evidence rianti rozalina, zulkefli mansor issn 2776-9658 (online) │ 25 no questions frequency percentage (%) there is no tool to estimate the software cost 36 37.5% not using an available software cost estimation 12 12.5% lack of experiences in previous related projects 28 29.16% lack of top management support 5 5.20% 4 the frequency of changing the scope and requirements of the project. never 3 3.12% seldom 23 23.95% sometimes 52 54.16% often 18 18.75% 5 the number of changed scope and requirements of a software project. no 3 3.12% a little 66 68.75% moderately 19 19.80% substantially 8 8.33% moreover, according to qualitative result, people who involve in estimating the software cost is lack of understanding on the software cost estimation concept because based on their understanding, software cost estimation is about predicting the cost require for software project development. despite predicting the cost, the most important thing is to understand the related elements that should include in software cost estimation. furthermore, the current technique apply in public sector of indonesia is expert judgment and estimation by analogy. the weaknesses of the expert judgment technique are difficult to identify the parameters use by the experts due to it relies on the expert knowledge and experience. while estimation by analogy technique is related with historical data in order to make the assumptions. the difficulties of the technique are lack of historical data of related projects. therefore, in estimation often involve it consultant and it staff. however, another challenge is people who involve in estimating the software cost do not have it background. in addition, the cost estimators in regional government of indonesia are not familiar with any model since the estimation is done by using owner estimate cost which refers to pagu anggaran. however, there are some parameters of software cost estimation included in estimating the software cost such as: project complexity, the number of users, the level of difficulties the programming language, hardware, man-months, transportation, tax and the project requirements. hence, the main factors of the software cost estimation are technology, people, process dan organizational factors. conclusion software cost estimation is a substantial challenge in software development even though there are techniques or models of software cost estimation have been proposed for the last thirty years. the result of this study shows that the current technique of the software cost estimation in regional government of indonesia is not effective because the result of software cost estimation is inaccurate. as the impact, the software development required additional cost in order to complete the project. the problem is no clear measurement in preparing the estimation. the public sectors have to perform owner estimate cost, however there is no criteria or standard measurement to estimate the software cost. therefore, it is becoming more complicated. it still has many uncertainties that give an inaccurate result. in fact, indonesia has a standard in goods and services procurement which refers to pagu anggaran, but it is still not efficient. the reason is due to pagu anggaran that is just a reference for the maximum amount of journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 15-28 software cost estimation practices using rasch measurement model: an indonesian regional government evidence rianti rozalina, zulkefli mansor issn 2776-9658 (online) 26 │ budget allocated for each program that was produced by the ministry of planning and the ministry of finance of indonesia. components required to estimate the software cost is not available. therefore, there is a need to have a criterion that can be used to prepare to estimate the software cost so that the software cost estimation process is more effective and efficient as well as to get a better estimation result. limitation & further research thus, future research should focus on developing a proper tool of the software cost estimation in the regional government of indonesia. besides, the value components in the proposed model are not measured yet; hence it considers defining the value based on the historical data in the government. like, cocomo models the value of multipliers are defined based on the historical data of the software cost estimation in the usa. therefore, the model should be calibrated before using it in a particular place. moreover, the current reference to measure the salary of a person month is based on the national association of indonesian consultants. the future research should try to identify whether the salary is compatible with the regional government condition. besides that, the future research should also identify other factors that might have a significant impact on the software cost estimation in public sectors. references adi nugroho et al. 2009. perancangan aplikasi rencana anggaran biaya (rab) (studi kasus pada dinas pekerjaan umum kota salatiga. jurnal informatika, 1(10), 10-18. attarzadeh, i. & hock, s. i. 2011. improving estimation accuracy of the cocomo ii using an adaptive fuzzy logic model. institute of electrical and electronics engineers, (2458-2464). boehm, b. w. 2017. 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software sistem informasi bisnis. risalah lokakarya komputasi dalam sains dan teknologi nuklir xvii, (337358). whitfield, d. 2007. cost overruns, delays and terminations:105 outsourced publicsector ict projects. european services strategy unit, research report. 3(3). ziyad, t. et al. 2014. a variant of cocomo ii for improved software effort estimation. international journal of computer & electrical engineering, 4(6). zulkefli mansor et al. 2016. issues and challenges of cost management in agile software development projects. advanced science letters. http://doi.org/10.1166/asl.2016.7752 zulkefli mansor et al. 2011. current practices of software cost estimation technique in malaysia context. communications in computer and information science, 566-574. available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 1 number 1 (2021): 76-90 corresponding author dr. arnold v. salcedo, cpa, dbm, asalcedo@hau.edu.ph; shane s. salcedo, cpa, ssalcedo@hau.edu.ph doi: 10.31098/jgrcs.v1i1.452 research synergy foundation towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm1, shane s. salcedo, cpa1 1 holy angel university, angeles city, philippines abstract while most of the sustainability studies focused are on areas of engineering and architecture, sustainability accounting and reporting are concepts that need to be introduced among people nowadays, specifically accountancy students, with the belief that the students today, will become the workforce and leaders of tomorrow. the study focused on promoting the various concepts among ninety-six (n=96) accountancy students who are in their terminal year. the students were subjected to a pre-test & post-test experimental design group with viewing video presentations on triple bottom-line, sustainability reporting, true cost accounting and a sample of global reporting initiative report (gri) as intervention activities, that aimed to provide an overview and a level of understanding on the targeted concepts. results show a significant difference on the level of awareness before and after the three concepts were introduced. the participants were willing to learn more about sustainability accounting while half of them would consider to enroll in a graduate program that specializes on leadership in a sustainable enterprise along with management courses concentrating on sustainability. as a conclusion, sustainability accounting and reporting in the philippines, still has a long way to go and currently at its infancy stage before becoming a distinguished program or a course that will be embedded in the academic curricula or be fully recognized by businesses and industries from both national and local levels. the study can be further enhanced to include the level of commitment and motivation of students to such concepts. keywords: sustainability accounting and reporting; sustainable enterprise; green accounting; sustainability; triple bottom line this is an open access article under the cc –by-nc license introduction sustainability have been introduced in various disciplines of engineering and architecture. in pujol and tomás (2020), the concepts of sustainability and sustainable development introduced among robotic engineering degree students by reflecting about the impact of robotic engineering to the planet through designing an environmentally friendly robot that integrates the social, environmental and economic aspects. in shields, verga and blengini (2014), incorporating sustainability into mining and petroleum engineering education can also be achieved through distance education a way to education practicing engineers about sustainability concepts. in sanganyado and nkomo (2018), e-learning activities are perfect venues of sustainability concepts and practices among engineering and chemical education students. in gucyeter (2016), architecture students must be exposed to various sustainability approaches that establishes a balanced comprehension between creativity and integration of sustainability approaches. while most of the sustainability studies focused are on areas of engineering and architecture, sustainability in business disciplines, particularly sustainability accounting and reporting, are concepts that are needed to be introduced among people nowadays, most especially to business students. http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) │ 77 specifically, accountancy students, with the belief that the students today, will be the business leaders of tomorrow. introducing the basic concepts from the diverse definitions of sustainability, however, remain as a challenge, while capturing the student’s interest is another. according to index mundi (2016), about 16.16%, estimating at around 1.18 billion of the 7.323 billion world population account for people belonging to the 15to 24-year-old age group. out of the 102 million filipinos, 19.17% fall between the 15-to 24-year old age group or nearly 20 million, which remains significant. central intelligence agency [cia] (2016) also presents the philippines’ literacy rate of 96.30% age 15 and over can read and write. this segment of the population can be tapped in increasing sustainability awareness and understanding among people. in martens and carvalho (2016), firms are concerned about sustainability in project management; the only challenge is there exists a gap between the perception of importance and the actual use in practice of sustainability . particularly in public sector firms in which are more concerned about the social dimension compared to others. mckenna and biloslavo (2011) emphasized the role of business education and it must be reoriented to include economic sustainability as the core while economic sustainability as the one of its components. through the development of the intellectual aspects, affective and moral virtues, business students are able to develop a sense of wisdom or intelligence. this practical sense of wisdom can become the basis of the proposed curriculum. hence, accounting, which translates language of business in layman’s terms, must also be part of sustainability. filling up this gap can be first addressed through building awareness and education of future sustainability professionals. united nations educational, scientific and cultural organization [unesco] (2017), emphasizes on this need: “education and awareness-raising enable informed decision-making, play an essential role in increasing adaptation and mitigation capacities of communities, and empower women and men to adopt sustainable lifestyles.” building the understanding, specifically among college students will help introduce and allow to delineate the concept of sustainability from other related concepts which has broader or narrower scope, such as corporate social responsibility, sustainable development, corporate citizenship and conscious capitalism. this can also help spark the interest of students which may promise to pursue careers in business areas that promote sustainability. the purpose of this study therefore is to build understanding, by introducing the concepts of sustainability and sustainability accounting and reporting, through a selected audiovisual presentation and determine the level of interest, particularly in the area of sustainability accounting and reporting, among accountancy students of holy angel university as future proponents of this advocacy. this attempts to determine which areas sparked their interest, in which of the current subjects such concepts can be introduced and what activities can be used to promote and build awareness among students. in addition, the study aims to answer the following questions: 1. what is the current level of awareness on sustainability accounting and reporting among accountancy students before introducing such concepts to them? 2. what is the current level of interest on sustainability accounting and reporting among accountancy students after introducing such concepts to them? 3. in what areas the concept of sustainability accounting and reporting impacts the most according to accountancy students? 4. in which subject, according to the accountancy students, sustainability accounting and reporting maybe incorporated based on the current curriculum? journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) 78 │ 5. what are the recommendations for improvement in order that sustainability accounting and reporting would increase the interest among accountancy students? the main stakeholders who will benefit from this study are the students, because this research serves as a gate way on how basic concepts of sustainability accounting and reporting will increase their interest and hopefully will influence their decisions on deciding on business issues involving sustainability in the future. schools, colleges and universities with accountancy programs can learn from this research as this may serve as a starting point and a gauge to introduce the program, concepts and practices on sustainability accounting and reporting. the academicians may also find ways on how to incorporate this in the current accountancy program and may become one of the courses being offered in the curriculum, giving an option to revise their syllabi. faculty members are also given a chance to incorporate in their current teachings, the ideas of sustainability accounting and reporting since students are considered the most salient stakeholder may have the option to include this as a future topic for discussion. government agencies such as department of education and commission on higher education may also issue a ched memorandum order to add sustainability accounting and reporting as part of the accountancy curriculum. accountancy regulating bodies may also push for sustainability accounting and reporting in the near future and adopt certain standards that will account for activities that will consider not only the economic, but also the social and environmental impacts of businesses. future researchers may also use this study as a reference in their future studies. this may serve as a baseline that will help accountancy and future accounting professionals about sustainability accounting and reporting. literature review sustainability students must be given a gist of what sustainability by translating it into a layman’s terms and key words which may be derived according of the world commission on environment and development [wced] (1987) on sustainability, which is the ability to meet the present needs without compromising the ability of the future generations to meet their needs without permanently damaging, altering or depleting the natural environment, ecosystems, species or natural resources. the three pillars consisting of the key words: economic, social and environmental may increase the interest if shared among accountancy students. by recalling the main thrust of the triple bottom line, puts consideration on the environmental, social and economic impacts within the organization and such impacts could either be positive or negative with the goal to maximize prosperity, planet and people. university of alberta (2012), defined the triple bottom line using the following: “environmental sustainability means ecological integrity is maintained, all of earth’s environmental systems are kept in balance while natural resources within them are consumed by humans at a rate where they are able to replenish themselves. economic sustainability is where human communities across the globe are able to maintain their independence and have access to the resources that they require, financial and other, to meet their needs. while economic systems are intact and activities are available to everyone, such as secure sources of livelihood. and social sustainability pertains to the universal human rights and basic necessities are attainable by all people, who have access to enough resources in order to keep their families and communities healthy and secure. healthy communities have just leaders who ensure personal, labor and cultural rights are respected, and all people are protected from discrimination”. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) │ 79 accountancy students must also be briefed with the difference between sustainability accounting and sustainability reporting such that, on one hand, sustainability accounting as defined by constructing excellence (2004), provides a useful tool in identifying, evaluating and managing the social and environmental risks through the identification of efficient resources and cost savings that will link improvements between financial opportunities and environmental issues. bench marking of performance and identification of best practices are additional services to be offered to businesses. on the other hand, sustainability reporting according to boston college (2004) deals with how organizations disclose and communicate environmental, social and economic objectives of an organization. some of the benefits of sustainability reporting is to building consumer confidence, improving risk management and encouraging innovation. topics of interest may also include the global reporting initiative [gri] (2017) serving as a reporting guideline on sustainability. using the framework of reporting allows organization to have the opportunity to take hard look on their daily activities and take into account the economic, social and environmental categories. to enumerate, some of the disclosures required are strategy and analysis, organizational profile, identification of material aspects and boundaries, stakeholder engagement, governance, ethics and integrity. sustainability reporting is also a key in communicating performances on sustainability, which includes the positive or negative impacts. informing students of a professional organization for accountancy and its role in sustainability accounting particularly the role of certified public accountants, businesses, industries and governments in sustainability according to american institute of certified public accountants [aicpa] (2017), may provide current trends in sustainability practices. the cpa role is the provision of services that specifically relates to creating sustainable strategies, assistance in the preparation of sustainability accounting and reporting reports, and assurance. while businesses, industries and the governments are expected to perform an integrative role in helping organizations create value. this can be achieved by forming links with organizations strategic objectives with sustainability, evaluating opportunities and threats and provide assistance in measuring, accounting and reporting sustainability issues. sustainability accounting students may also be reminded of the benefits of maintaining sustainability accounts based on constructing excellence (2004) also enumerates the benefits which can be taught to students. one of which is the sustainability report’s ability to bridge financial benefits with expenditures through the collection environmental and social information. sustainable reports can also present how environmental and social external costs can be managed and reduced over time as a commitment to sustainability. sustainability accounting and reporting may highlight the risks associated with social and environmental dimensions that is associated to financial performance. another benefit derived from is the ability to map stakeholder relationships, risks and benefits which later on encourages partnerships between stakeholders and organizations. another interesting concept that maybe introduced to students is the concept of true cost accounting, which according to gayeton (2017) is an accounting that includes the cost of negative externalities and accounts for environmental, social and economic costs. external costs as mentioned by gayeton (2014) are costs or benefits that are forgone by giving up an activity or transaction. true cost accounting also will require time, will power and support and identifies loopholes, losses and risks that will offset cost with benefits. true cost accounting also accounts for the true net income, after all true costs are considered. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) 80 │ one of the related studies in sustainability accounting and reporting is with azapagic, perdan and shallcross (2005) that talks about the role of engineering education for sustainable development specifically on how sustainability can be integrated into the curriculum. the study focused in measuring the level of background the engineering students have in sustainable developments with the use of the survey. determining the knowledge gaps and determining the best approach to educate engineering students about sustainable development were the objects. based on the results, the level of knowledge, overall, is not satisfactory, which proved that a significant knowledge gap exists. characterizing the understanding of undergraduate students about sustainability was done by carew and michell (2003) using the structured learning outcomes taxonomy. using a theoretical synthesis of literature, understanding and empirical investigations regarding sustainability, revealed that students had different variations with the way engineering students understood sustainability. sanchez (2016) attempted to document the effects of sustainability and corporate social responsibility in an accounting by introducing the concept by presenting a video and an exercise on a global reporting initiative of starbucks among accountancy students of rider university in spring of 2013, and later on measured the effects of presentation and exercise using survey. the accountancy students’ understanding on corporate social responsibility and sustainability accounting and reporting increased after the video presentation. an interesting study that is close to sustainability accounting is environmental accounting. as defined by fleishman and schuele (2006), environmental accounting is a tool for managerial accounting used in reporting and decision making. businesses are required to define environmental costs that the organization incurs to manufacture goods or provide services. these costs must be incorporated in the annual reports, corporate sustainability reports, corporate social responsibility reports and other related reports. the research framework of the study as depicted in figure 1, is focused on developing awareness of the concepts of sustainability and sustainability accounting and reporting. the inputs of the study are the descriptive responses of participants of the study who will be viewing the audio-visual presentation, answering a case activity on true cost accounting and listening to a global reporting initiative sample report presentation. after which, the selected participants will undergo a pre-test and post-test by answering survey before and after the activities. mean rating, frequency distribution and analysis of variance will be used to analyze the results. the expected output is the assessed level of understanding on sustainability accounting and reporting from which the inferences and recommendations will be derived. the hypothesis that was developed from this study may test whether there is significant difference on the level of understanding before and after the activities have been provided. thus, ho 1: there is no significant difference in the level of awareness of the respondents before and after the sustainability concepts were introduced to them. ha 1: there is a significant difference in the level of awareness of the respondents before and after the sustainability concepts were introduced to them. a priori journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) │ 81 figure 1 research framework the study was limited in discussing building concepts of sustainability particularly the triple bottom line business model, in order to stimulate understanding. the concept of true cost accounting will be the sole focus for sustainability accounting and one sample of global reporting initiative report was presented. the participants of the study are the fifthyear accountancy students of holy angel university as of the first semester for the academic year 2017-2018. the three activities lasted for one hour with twenty minutes time allotted for each activity. research method research design the research is qualitative and quantitative in terms of type and descriptive in design because the study focuses on the generating basic attributes of the participants of the study such as level of awareness or interest of the participants at a given period of time. in order to fully understand, statistical techniques were used in the study. the unit of analysis of the study are individuals since and involved the participation of students as the subject of the study. the point of focus of the study are orientations measured through the level of interest and awareness on sustainability accounting and reporting. the study is cross-sectional since the study is for a given period of time. the research design is considered as experimental particularly social science experiment, because interventions were made to modify the level of interest or awareness of the study, which tried to change the behavior of the participants (mendoza, 2012). a pre-test and post-test survey were provided among the participants of the study to explain the difference in the level of awareness or interest of the participant. according to mendoza (2012), it is possible to conduct experiment with all one group by providing all treatments to all subjects, leaving one control group only. sampling and participants the participants of the study are samples coming from one-hundred twenty-six (126) fifth year accountancy students of holy angel university who are in their terminal year for the undergraduate and are currently enrolled in the first semester for the academic year 2017-2018. raosoft software was used to compute for the sample size. the margin of error was set at 5% having a 95% level of confidence form the one-hundred twenty-six students given a 50% response rate. as computed, a ninety-six (96) fifth year accountancy student were the participants of the study because these students have completed all the required management subjects such as strategic management and has a firm grasp of almost the entire core accounting courses compered to their junior year levels. a priori knowledge on sustainability accounting and reporting a priori knowledge on sustainability accounting and reporting interventions in promoting sustainability accounting and reporting journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) 82 │ data gathering instruments selfadministered survey closely patterned but a modified version of sanchez (2016) before and after the intervention activities that showcased the a gist of the concepts of sustainability and sustainability accounting and reporting using the following: a short clip of an audio-visual presentation regarding the (triple-bottom line), case activity on true cost accounting (case of two farmers) and sample presentation of the global report initiative on sustainability (starbucks’ global responsibility report) all for one hour. the first part of the survey would require information on the demographic information of the respondent and the second part of the survey responded to the statements using a four-point likert scale for before and after the interventions were made to the students. the last part of the survey is follow-up questions related to the study in which the participants were free to choose between yes or no questions. a cronbach alpha test was run to determine the reliability and validity of the adopted instrumentbased form the responses of the 96 respondents. the instrument with ten (10) statements before the interventions were applied resulted to a cronbach’s alpha on standardized items of 0.78, which is acceptable and have exceeded the 0.70 standard. the statements after the intervetions were made likewise resulted to a very high internal consistency coefficient (cronbach’s alpha) of the scale was 0.974, indicating a high degree of reliability and validity (yavuzalap & bacivanb, 2019) of the instrument used. data collection procedures this section describes in detail the data-collection procedures. the primary sources of information were the results of the surveys after the series of activities have been implemented. secondary sources of information quotes came from publications, such sources include comments on, interpretations of, or discussions about the original research conducted abroad. academic research works using electronic source will be used as a related study. data analysis the study was analyzed using statistical tools used on this study include frequency and percentage distribution, mean rating, and analysis of variance. they were used to describe and assess the data gathered by the researchers through the survey questionnaires and interview guide conducted. since the survey adopted, the survey form was not subjected to reliability test. frequency and percentage distribution is an arrangement of the values that one or more variables take in a sample. the demographic profile of examinees was used in this process. mean rating before and after the activities was determined in order to determine the “balance point” in a set of data, it was used to determine the descriptive rating of the responses. this were used to determine the results on the level of awareness after the participants were involved in three different activities. ethical considerations the consent of the dean, chairperson and department coordinator of the accountancy program of the school of business and accountancy, holy angel university in angeles city, pampanga, philippines were obtained for the permission to conduct the study. permission to partially adopt the survey instrument of sanchez (2016) was also be obtained through email. results of the research were used for academic purposes only. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) │ 83 findings and discussion the following tables summarizes the results of the study. table 1 provides information on the gender profile of the respondents where most of the participants are composed of female students (n=68) in their terminal year. while table 2 provides a summary in which sustainability accounting and reporting may be assigned in the current undergraduate curriculum. good governance (n=58), accountancy research (n=7), management services (n=6) and auditing (n=10) are courses in which topics in sustainability may be incorporated. these may also include discussions of environmental accounting, corporate social responsibility and business ethics. only a few respondents (n=13) have considered it as a possible separate course which indicates that sustainability accounting and reporting is not seen as a major course in the undergraduate and may only be a part of the topic for discussion. this may also imply that sustainability accounting and reporting may be pursued in the graduate school. table 1. gender of participants participants frequency percent valid percent cumulative percent male 28 28.9 29.2 29.2 female 68 69.1 69.8 100 total 96 100 100 table 2. suggested course for sustainability accounting and reporting subject or course frequency percent valid percent cumulative percent fundamentals of accounting 1 1 1 1 management services 6 6.2 6.2 7.2 taxation 1 1 1 8.2 good governance 58 59.8 59.8 68 financial accounting 3 3.1 3.1 71.1 audit theory 4 4.1 4.1 76.3 audit problems 3 3.1 3.1 79.4 accountancy research 7 7.2 7.2 86.6 separate subject 13 13.4 13.4 100 total 96 100 100 tables 3 and table 4 show a significant change in the level of awareness for accountancy students when it comes to sustainability accounting and reporting. after the concepts where introduced, there were obvious changes in the responses of the students which increased the current level of interest. this is also measured based on the result shown using the one-sample t-test (.050 > sig .000) in table 5 which implies the impact created on both the a priori and posteriori knowledge of the respondents as a result of the three intervention activities done in the study. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) 84 │ table 3. summarized statements before sustainability activities statements mean rating 1. i am aware of the role of sustainability and sustainability accounting and reporting in business. 1.50 = strongly disagree 2. i am familiar with the concept of triple bottom line. 1.09 = strongly disagree 3. i understand that sustainability and sustainability accounting and reporting in business are important for business leaders. 1.70 = strongly disagree 4. i believe that sustainability practices will make businesses profitable in the long run. 2.11 = disagree 5. it is important to have reporting standards in place for sustainability measures. 2.27 = disagree 6. it is important to have assurance standards in place for independent accountants on sustainability accounting and reporting. 2.28 = disagree 7. i have a background of true cost accounting. 2.00 = disagree 8. there will be significant growth in the area of sustainability accounting and reporting 1.93 = strongly disagree 9. sustainability in businesses is not a waste of time. 2.29 = disagree 10. i am aware of the role of independent accountants in sustainability accounting and reporting. 1.72 = strongly disagree table 4. summarized statements after sustainability activities statements mean rating 1. my understanding of the role of sustainability and sustainability accounting and reporting in business increased after the activities. 3.44 = agree 2. my understanding of the concept of triple bottom line has increased after the activities. 3.41 = agree 3. i understand that sustainability and sustainability accounting and reporting in business are important for business leaders. 3.58 = agree 4. i believe that sustainability practices will make businesses profitable in the long run. 3.53 = agree 5. it is important to have reporting standards in place for sustainability measures. 3.55 = agree 6. it is important to have assurance standards in place for independent accountants on sustainability accounting and reporting. 3.46 = agree 7. i have now a background of true cost accounting. 3.51 = agree 8. there will be significant growth in the area of sustainability accounting and reporting 3.41 = agree 9. sustainability in businesses is not a waste of time. 3.68 = agree 10. i am now aware of the role of independent accountants in sustainability accounting and reporting. 3.48 = agree journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) │ 85 table 5. one-sample test timing t df sig. (2tailed) mean 95% confidence interval difference of the difference lower upper before 28.467 96 0.000 1.89 1.76 2.02 after 78.855 96 0.000 3.482 3.39 3.57 further results of the study are shown from table 6 to table 10 showing an increased level of awareness and interest among students after the sustainability concepts have been introduce to them. mostly, if not all of the student believes that there is a need to understand sustainability accounting and reporting as seen on table 6. in troducing such concepts to the undergraduate level through captured their interest and provided opportunities among institutions to look into their curricula in order to address the results of these studies. academic institutions may also initiate the proliferation of awareness of sustainability, sustainability accounting and sustainability reporting now that a possible market (i.e., undergraduate students) are somehow willing to accept these new concepts. faculty members and administrators, composed of professional accountants, may respond to these results through by setting meeting initiatives with academic regulators, professional and business organizations to fill this gap to allow sustainability concepts reach the realms of academic institutions. table 6. summary of statement “i believe college students like me need to understand sustainability accounting and reporting.” yes or no frequency percent valid percent cumulative percent yes 96 100.0 100.0 100.0 no 0 0.0 0.0 100.0 total 96 100.0 100.0 0.0 there is is a growing interest of students to enroll in the programs that put emphasis on sustainability which is leadership in sustainable enterprise or green mba as presented on table 7. in higher education (2021), offering of green mba is very important because having environmentally and socially sustainable management policies are now becoming more important for both large and small businesses establishments. such programs help to develop sustainable leaders who can look beyond immediate and short-term profits to a larger context, such as setting strategies ensuring the delivery of results that meet the triple bottom line model of economic, social and environmental performance (russel reynolds associates, 2015). table 7. summary of statement “i am interested to enroll in graduate degree programs that have emphasis on sustainability such as green mba.” yes or no frequency percent valid percent cumulative percent yes 54 55.7 56.3 56.3 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) 86 │ no 42 43.3 43.3 100.0 total 96 100.0 100.0 the increased level of understanding in the advocacy of sustainability by simply participating in the provided activities are shown on table 8. in niemotko (2017), sustainability accounting and are important areas for future cpas to become familiar particularly the millennial professionals in order to determine the qualitative value that businesses add to the society today. companies should not only be responsible for financial data reporting but also to the communities and environment that surround them. millennials may consider becoming loyal to companies that care and provide qualitative data in addition to quantitative data; thus, sustainability data provides a sense of “personal” connection. table 8. summary of statement “i somehow now understand the advocacies of sustainability.” yes or no frequency percent valid percent cumulative percent yes 94 96.9 97.9 97.9 no 2 2.1 2.1 100.0 total 96 100.0 100.0 accountancy students see a pressing need to include standards of sustainability looking at table 9, considering accounting is the language of business, sustainability accounting and reporting may not only appliable among larger corporations. in report asap (2017), there exists a knowledge gap between best sustainability practices and the reality of sustainability reporting literacy for small and medium enterprises (smes) where future professional accountants maybe deployed. table 9. summary of statement “i think there is a need for developing and adopting standards on sustainability.” yes or no frequency percent valid percent cumulative percent yes 95 97.9 97.9 97.9 no 1 1.0 1.0 100.0 total 96 100.0 100.0 more interesting is how accountancy students see the pressing need to include the standards of sustainability as reported on table 10. since consumers interest in sustainability is now gradually increasing consumption factors are now extending beyond the environment, including affordable food, fair wages and humanely raised animals (sosland publishing company, 2021). sustainability accounting standards standards must now encompass social, economic and environmental dimensions. table 10. summary of statement “i would like to learn more about sustainability accounting and reporting.” yes or no frequency percent valid percent cumulative percent yes 94 96.9 97.9 97.9 no 2 2.1 2.1 100.0 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) │ 87 total 96 100.0 100.0 conclusion & further research sustainability accounting and reporting is a concept that needs to be raised in terms of level of awareness among the students at this time and age. this can be inferred from the responses based on the activities participated by students. the level of interest goes to show that introducing concepts of sustainability, sustainability accounting and sustainability reporting among students, spark their current level of interest. these concepts can be introduced at an earlier stage because currently, these courses are being offered to students in the graduate school or to those who are taking graduate degrees or specialization course, where the time and attention required to finishing the degree would require a completion of a capstone project. in order to advance the concepts of sustainability accounting and reporting, it is crucial that these concepts are also included in the course syllabus of the students currently taking up an accounting degree or related course in business. in aznar., martinez‐agut, palacios, pinero, and ull (2011) even if there is a widespread support for introducing sustainability across the university's curricula; there will still be significant differences across various disciplines including how they relate to departmental perceptions, most especially when it comes to interpretations and performance of sustainability‐related teaching. therefore, standards for concepts in different disciplines must be established. a challenge to presenting such concept is the incorporating and relating these to practice subjects such auditing and taxation and how professors would include them in classroom discussions. the level of awareness must reach a higher level that it will reach the regulatory bodies (i.e. commission on higher education) of academic institutions in order to initiate standards and promulgate laws in the advancement of sustainability accounting and reporting also remains imperative. these business courses must be developed around the principles of sustainability demonstrating the link between competitive actions and outcomes (marshall and harry, 2005). as a conclusion, the sustainability accounting and reporting in the philippines, still has a long way to go and still, at its infancy stage when it comes to sustainability and to be recognized with full distinction, a program or a course that will be embedded and recognized among institutions and businesses. the stronghold that will continue to uplift these concepts are coming from the future generations who are ready to accept changes in the business models into landscapes and implement these changes with the businesses they will lead in the future. unique contributions, originality, value and managerial implications this study contributes to the body of knowledge of accountancy since the perspective of accountancy of the students have been the focused of the study. the study is original in a sense that three unique activities were incorporated to introduce the concepts among accountancy students, through selected audio video presentations. the originality and value of this study lies on its participants as most studies on introducing sustainability concepts involve mostly engineering, architectural, or business students but not accountancy students. some implications of the study would include looking into the various learning styles and approaches in teaching sustainability, sustainability accounting and reporting. in mac vaughn and norton (2012), introducing sustainability into business education using active learning approaches allow learners to move away from dependence on educators and towards a personal responsibility approach. using a journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) 88 │ global “global” sense approach instead of the “business as usual” applications, may help address the legitimacy and practicability in introducing sustainability education in business degree programs. for example, introducing the creation of standards in the sustainability accounting standards board [sasb] (2018), will enable businesses in the identification, management and communication of financiallymaterial sustainable information for investors. with 77 globally applicable industry specific standards set the financially material sustainability topics along with the activity metrics which will serve as the unit of measure to properly account for every business undertaking. the standards, likewise, provide the necessary guidelines and disclosure requirements. another implication is the level of commitment, participation and motivation which could be another focus of study to be compared with the results of students of other disciplines. in pujol and tomas, (2020) high level of commitment was demonstrated by students with respect to sustainability, however, was coupled with lack of active participation and awareness as to their impact of future robotic engineers was also revealed . as a recommendation, the following steps may be taken to build the level of awareness on sustainability accounting and reporting: 1. conduct of seminars and fora among students and faculty members in the academe to initially become aware and be informed of the concepts of sustainability, sustainability accounting and sustainability reporting. 2. review of the current curricula and syllabi of schools, colleges and universities and position the course sustainability, sustainability accounting and sustainability reporting in the suitable subject such as good governance or auditing theory. 3. expose academic institutions to capstone projects on sustainability, these to include corporate social responsibility and environmental programs of businesses and organizations that makes it sustainable. these are some of the steps on how sustainability accounting and reporting can be further advanced as course or program among business and accountancy students. and these will serve as a springboard among students who will be molded into forming and managing businesses that put emphasis not only for economic gains, but also consider people and the environment towards a sustainable future. research limitations and future research directions this study is limited to accountancy students who are on their terminal year in a university in the philippines. the learning styles, behaviour, levels of commitment, acceptance, participation and motivation are not included in the study. getting the perspectives of faculty members who will be teaching the sustainability concepts and those engaged in the public practice of accountancy, can be another future direction of the study. most importantly, are the salient stakeholders are business owners who have not yet reached the level of full awareness, particularly micro, small and medium enterprises in which introducing the sustainability concepts can also be prioritized. acknowledgement we extend our gratitude to those who supported our study, from the school administrators to faculty members of the school of business and accountancy, holy angel university, angeles city in pampanga, philippines. our sincerest thank you to the fifth year students bs accountancy for the school journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 76-90 towards a sustainable future: promoting sustainability, sustainability accounting and reporting among future professional accountants dr. arnold v. salcedo, cpa, dbm, shane s. salcedo, cpa issn 2776-9658 (online) │ 89 year 2017-2018 (batch vicimus) who are now professional accountants today and became participants of our study. lastly, we thank our families salcedo and sigua who supported us on this endeavor. references american institute of certified public accountants [aicpa] (2017). central intelligence agency (2016). world factbook.. retrieved from: https://www.cia.gov/library/publications/the-worldfactbook/fields/2103.html azapagic, a., perdan, s., & shallcross, d. 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(2020). the online learning self-efficacy scale: its adaptation into turkish and interpretation according to various variables. turkish online journal of distance education, 21(1), 31-44. available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 2 number 1 (2022): 36-53 corresponding author dr. arnold v. salcedo, cpa, dbm, asalcedo@hau.edu.ph doi: 10.31098/jgrcs.v2i1.885 research synergy foundation msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm school of business and accountancy, holy angel university, philippines abstract even at the time of pandemic, tax services rendered by accounting firms remain essential in every country as it facilitates business owners comply with the strict requirements set by tax regulatory agencies. while most studies involve large and complex business organizations in determining the prescribed factors that affect the quality of tax services (dinh and do, 2020), the perceptions of micro, small and medium enterprises (msmes) are as equally important. with thirty-one (31) selected msmes in angeles city, central luzon, philippines as respondents, it was found out that effectiveness yielded the highest tax service quality component, followed by professionalism, tangibles and lastly, empathy. further, annova tests revealed that there is no significant difference on the perceptions of msmes based on their profile except on the quality component of effectiveness (.05>.049) where there is a significant difference based on the form of business organization with higher level of perceptions coming from corporations compared to sole proprietors. likewise, significant differences were found in terms of the number of years having tax engagement with an accounting firm. those with more than five years of engagement have slightly lower perception on both professionalism (.05>.029) and effectiveness (.05>.012) compared to those having five years or less. business owners who also perform administrative functions perceived both professionalism (.05>.002) and empathy (.05>.000) higher compared to those who are only owners. as suggested, effectiveness can be further demonstrated through establishing strategic busy season plans and maintaining clear and consistent communication lines with clients. tax practitioners must also be able to empathize with their clients specially in difficult times such as the pandemic such that accounting firms must also invest in virtual platforms and latest software technology, while occupying a physical office fosters legitimacy of the firm. keywords: accounting firms, msmes, quality of tax services, perceived quality, accounting firms this is an open access article under the cc–by-nc license introduction ellrich et al. (2017) asserted that choosing the right firm and the quality of service can make or break an organization. as public and private companies expand, the need for selecting the right accounting firm becomes indispensable. given that every company’s needs are different, far too many organizations, particularly micro small and medium sized entities (msmes), underestimate the role that an accounting firm plays in the overall business growth. because of this, it is critical to recognize the value of selecting the right tax or accounting firm when it comes to tax services. at this time of pandemic, several countries in the asia and pacific including the philippines, are experiencing a decline in economic growth which is 2.2% creating a significant impact on tax policies across the region, tax agencies and firms should continue to support the operations of businesses in terms of taxpayer registration, tax services, tax return filing and payment processing, together with data and cyber security (suzuki, 2021). http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) │ 37 for a business taxpayer, choosing the wrong firm without a proper basis or retaining a firm with poor quality service might result to inferior or no results coupled with unnecessary cost and expenses; that is why it is essential to make sure that the chosen firm reputable and results oriented. identifying the factors for choosing the right firm will help serve as a guide among individuals and business organizations (huckleberry branding, 2019). the need to address the research gap that msmes do not recognize the value of accounting and auditing firm in terms of quality of services they provide remains imperative. in kenton (2018), one of these service firms are audit and accounting firms and across the globe, there are big four globally recognized firms deloitte touche tomatsu limited, pricewaterhousecoopers (pwc), klynveld peat marwick goerdeler (kpmg) and ernst & young. these firms are also present in the firm with local affiliates. there are also those small-business audit and accounting firms present in every locality. in ogunjimi (2018), audit and accounting firms provide different types of services, which are basic financial statements preparation, auditing, management consultancy and taxation services. one of the outputs of these firms provide are financial statements, which means they may assist companies in the generation of financial statements, such as the income statement, balance sheet, statement of changes in retained earnings, cashflow statement and with the notes to financial statements that gives a picture of the financial health of the company. in addition, in dhillion & associates (2020), accounting firms can also conduct audit by examining not only the financial records, but also the processes and controls in place to ensure that records are being properly kept, policies are being conformed with, and established financial practices are followed to ensure operations are running efficiently. the goal of an audit is to form an opinion on whether the financial statements are presented fairly and accurately, and in accordance with generally accepted accounting practices. further, in boyd (2020) another area of service is management consulting where audit and accounting firms offer are business advisory services to help run their businesses effectively. this is where firms provide advice, that will help businesses analyze the environment and financial standing. this is achieved by helping them with the development of business plans, evaluate current operations, identify new opportunities, respond to changes in the business or regulatory environments, and by offering practical advice to make better financial decisions. other services also include business registration for newly established businesses and business valuation, which helps determine the worth of a business before considering a merger, acquisition, or sale. nowadays, accounting firms also offer information system services, which examine the integrity and security of computer systems and the practices of the organization to process and protect information. fraud and forensic accounting services can also be offered to investigate complicated financial documents to uncover any illegal or fraudulent activity to settle legal disputes (ogunjimi, 2018). despite the presence of technology, some taxpayers in afolabi (2010) still prefer the use of manual filing system rather than the online tax payment. to encapsulate, the tax services of accounting or audit firms are needed. in hothx (2019), one of the accounting firms’ purposes is to help with tax returns and act as tax agents. while the quality of tax services is certainly an important aspect, accounting firms often assist in long-term tax planning, facilitate networking opportunities, provide business planning, and in some cases, help with personal tax planning. tax filing and tax planning in martinez (2014) are services in which the firm helps in interpreting current and new tax laws to help ensure that financial reporting practices follow the current internal revenue regulations. computing and determining company's tax liability, and filing requirements and deadlines are also added services. firms also assist in the preparation of national and local tax returns and assist in the legal minimization of tax payments to regulatory bodies. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) 38 │ failure to comply to tax authorities may result to imposition of surcharges, compromise penalties, and interests. the department of trade and industry [dti] (2018) provided a list of establishments totaling to 1,003,111 business enterprises that are operating in the country. this is composed of 998,342 (99.52%) are msmes and 4,769 (0.48%) are large enterprises. the micro enterprises constitute 88.45% (887,272) of total msme establishments, followed by small enterprises at 10.58% (106,175) and medium enterprises at 0.49% (4,895). in terms of industry sector, msmes in the wholesale and retail trade; repair of motor vehicles and motorcycles sector generated the greatest number of jobs with 2,040,774 followed by accommodation and food service activities (882,455), manufacturing (767,831), financial and insurance activities (316,226), and education (301,970). this can be further broken down into msme sector contributing 35.7% of the total with manufacturing contributing the largest share of 6.87%. while wholesale and retail trade and repair contributed 6.58% followed by financial intermediation with a share of 6%. region 3 or central luzon contributes with 605,056 of these msmes. the mico-small-medium development [msmed] (2019), reported that registered businesses in the country have increased from 1.39 million in december 2018 to 1.42 million in may 2019 which is a good timing indicator to do business in the philippines now that the country is considered as the second fastest growing economy in the asean region. this study aims to benefit several stakeholders as it intends to contribute to the existing body of knowledge in the accountancy profession. accounting firms, being the service providers while micro, small and medium enterprises, as clients will now both have the criteria, that may serve as a guide in measuring the quality of the services being provided. organizations that regulate the registration and activities of msmes, such as department of trade and industry and bureau of internal revenue may also use this study as a reference. the professional accountants among different sectors such as public practice, academe & education, commerce & industry and government may use the results as a guide in assessing the current and prospective services tax firms. the professional regulation commission particularly the board of accountancy can be provided with meaningful information on how the practice of the profession can be strengthened by improving by incorporating the results of the study standards of tax quality. lastly, this research may benefit future researchers by having it as an additional source of data in conducting the same or related study. literature review service quality and quality of tax service a lot of studies have revealed the major factors influencing from individuals up to the biggest companies with their decision to select firms, that will serve their personal and business needs for the first time, if not for the long term. these decisions are determined by the quality of services that may be provided by several accounting firms. these major decisions are also mostly heavily affected by the ability of a firm's personnel to deliver such services, as well as the technical abilities of the firm and many other factors. availing these services could either be individuals or businesses. one of the challenges of a business aside from earning a profit is to ensure that the services it offers to its clients are considered of high quality. as stressed in the american society for quality [asq] (2020), this special challenge is to be able to meet customers’ or clients’ needs, while remaining economically competitive. while it is true that there are already automated processes, the provision of some services is still labor-intensive. that is why, there can be no substitute for high-quality personal interaction between journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) │ 39 firm personnel and customers or clients. results of empirical studies suggest that improved service quality contributes to the increased profitability and long-term economic competitiveness. in yarimoglu (2014) agrees that service quality is the ability to coordinate with, match, or override the desires of customers or clients which leads to improved customer satisfaction and increased profitmaking quality of tax service should be a priority. typically, accounting firms provide various services such as accounting, audit, bookkeeping, consultation, and tax services. the quality of tax services may raise expectations from clients or customers. in bojuwon and normala (2015), the quality of tax service has been defined as the gap between the taxpayer’s expectations and outcome of these expectations if they are met. in zeithaml, parasurama, and malhotra (2002) also defined quality as the ability of an organization to meet or exceed customer expectation. some researchers also define tax service quality of tax service as entire taxpayers' perceptions or evaluation relating to an electronic service connection with the internet (zeithaml, (parasuraman & malhotra, 2002). however, not all taxpayers can do the online tax system alone and will still need the assistance or services of accounting firms. burgess & stern, (1993) also explained that tax service quality is more than the just the effectiveness of the internet online tax system, instead these may refer to the taxpayer’s assessment of the level of tax services administration. quality of tax service in caroko, heru and dan zahroh (2015) which is a process of assistance to taxpayers that may require sensitivity and interpersonal relationships to create satisfaction and success. service quality helps in the implementation of services that can provide optimal satisfaction for taxpayers. in rauch et al. (2015), companies must be able to assess its performance with customers' expectations and including its performance with other companies in the same industry. the challenge is on how tax or accounting firms meet or exceed customers or client’s expectations. in chen (2010), service quality antecedents strongly influenced taxpayer satisfaction with the online tax-filing system. moreover, factors of information and system quality are found to be more important than service quality in measuring taxpayer satisfaction, demonstrating the importance to taxpayers of system outputs and processing ability. service quality models there are various service quality models being used as a frame of reference nowadays particularly for marketing purposes. and it can be said that servqual was the most used model when measuring service quality. in parasuraman, berry and zeithaml (1985) and as recommended in parasuraman, berry and zeithaml (1988) that servqual model, is a service quality model that measures the scale of difference between consumers’ expectation and consumers’ perceptions. parasuraman et al. (1988) also proposed the ten (10) dimensions for service quality which are tangibles, reliability, responsiveness, competence, courtesy, credibility, security, access, communication and understanding the customer. since service quality is considered to have several dimensions the servqual model has been used to measure service quality and customer satisfaction. siddiqi (2011) further stated that the servqual model is still an appropriate assessment tool to measure service quality perceptions. according to parasuraman et al. (1985) in awaluddin and tamburaka (2017), service quality in the servqual model consists of five dimensions: reliability, responsiveness, assurance, empathy, and tangibles. tangibles or physical evidence focus on goods or services, which concern the appearance of physical facilities, equipment, personal, and communication tools used in the business while reliability refers to the fulfillment of prompt and satisfactory service, delivering the service accurately as promised. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) 40 │ responsiveness refers to the ability of employees to help consumers provide services immediately in accordance based on the requests and desires of clients and customers. assurance refers to the knowledge given to and ability of employees to serve the customers or clients in a cordial and polite manner and lastly, empathy refers to the attention given by employees to consumers and the level of understanding the needs of consumers. the original servqual mode used a likert-type item scale that will measure the perceived level of service provided against the expected level of service quality. the servqual model, however, underwent several changes from the which the original ten (10) dimensions were reduced to five (5) (parasuraman et al., 1985). as highlighted in parasuraman, berry and zeithaml (1991), these five dimensions are being used as a basis to address the service quality gap, which implies that for some businesses there is a difference between the expectations of customers and perception of services. in other words, as described in mauri, minazzi and muccio (2013), service quality is a multi-dimensional concept, assessed and perceived by consumers, pertaining to a set of essential parts, and grouped based on the five categories. according to yarimoglu, (2014) the servqual has received a lot of criticisms in the past years, however, it has become the most widely applied scale in various research. another variation of the model is in frost and kumar (2000) who developed intservqual which is an internal service quality model, an adaptation from the gap model (parasuraman et al., 1985) and the servqual (parasuraman et al., 1988). the model focused on the service quality based on the assessment of internal customers that included front-line staff and support staff in the airline industry. based on the model, it was found out that internal service quality was affected by responsiveness while reliability was found as the most important influencer using the servqual. these service quality models are still found to be useful and will be used as a frame of reference for this study. related studies there are a few related studies that focus on the factors or determinants affecting the service quality when it comes to the possible various services that could be provided by accounting firms. dinh and do (2020), investigated the impact of determinants of accounting service quality. with data collected from accounting service firms in hanoi from 2017 to 2018 the results of the study through the implementation of multiple regression method showed that four determinants: tangibles, effectiveness, empathy, and professionalism have positive correlations at different levels with the quality among accounting service firms in hanoi, vietnam. aside from audit, there are literatures that specifically refer to tax service quality. the citizens’ tendency to use e-governmental based website services was examined in chen et al. (2015). using the information system success model as a quality framework within the philippine context and the online tax filing system as the subject of the study. attributes such as trust in technology, trust in government, trust in e-government websites, and prior experience with government services were considered as the antecedents in the study. based on the results, the three antecedents directly influence the trust in egovernment websites. information quality was found to be the most consistently and renders significant influence on the three dimensions. in mustapha (2017) the perceptions of the self-employed taxpayers on tax service quality for tax administration effectiveness in nigeria are analyzed. with one hundred eighty-one (181) respondents assessing the five-tax service quality factor for tax administration effectiveness: responsiveness, reliability, informativeness, assurance and usability. the results explained that tax service provided by the tax authority for tax administrative effectiveness are influenced by reliability, informativeness, assurance and journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) │ 41 usage of the online tax system. moreover, the presence of these factors will lead to increase in tax administrative effectiveness. in mustapha and obid (2015), the mediating effect of the perceived ease of use on the relationship between tax service quality and online tax system focused on two-hundred six (206) self-employed taxpayers coming from the corporate affair commission (cac) and the federal inland revenue service board (firsb) in nigeria as respondents. it revealed that the perceived ease of use has a significant mediating effect on the relationship between tax service quality and online tax system. moreover, the tax service quality has a significant positive relationship on the online tax system. it is suggested that by understanding the effective usage of the online tax system through self-employed taxpayers may lead to an increase in tax compliance and revenue generation in the country of nigeria. some studies tried to relate other variables with tax service quality specifically in fadlizah et al. (2017), that examined the possible effects of the level of tax understanding, awareness to pay taxes, tax services quality and tax penalties among sixty (60) smes level of tax compliance. the research found out that the level of tax understanding, awareness to pay taxes, tax services quality and tax penalties have both positive and significant effects on smes tax compliance. closely in qian and qing (2017) also considered the tax service quality and efficiency of tax collection and administration in aksu, china. by analyzing how to improve the efficiency of tax collection across china, it is suggested in the study that tax authorities should take actions to improve tax service quality. these could be attained by optimizing the tax service environment, changing the concept of tax services among clients, innovating tax services, diversifying modes of tax payments, simplifying accessibility, and widening the tax consultation channels. the service quality in alabede, affrin and idris (2011) is critical given the numerous services tax firms provide to the nigerian taxpayers. ironically, prior statistical evidence is revealed that tax compliance level in nigeria is dropping. investigating on the influence of perceived tax service quality and the moderating effect of financial condition and risk preference on taxpayer’s compliance which are composed of perception, opinion, and behavior. it was indicated that the perceived tax service quality is positively and significantly related with tax compliance behavior. in addition, both taxpayer’ financial condition and risk preference moderate the relationship between perceived tax service quality and compliance behavior among taxpayers research questions and hypotheses currently, most of the studies on quality-of-service focus on the perspective coming from external or internal auditors, while there are only few studies that tackle the perceived quality being provided by accounting firms based on the assessment of clients. given the local context, it is in the interest of this study to focus on determining and differentiating the perceived quality of tax services rendered by accounting firms factors among clients particularly micro small and medium entities (msmes). the study also aims to answer the following questions: 1. how may the business owners be described in terms of the following: a. position in the business other than the being the owner; b. size of business; c. type of business; d. form of organization; and, e. number of years having tax engagement with the accounting firm? journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) 42 │ 2. how may the business owners describe the perceived quality of services rendered by an accounting firm in terms of: a. tangibles; b. effectiveness; c. empathy; and, d. professionalism? 3. is there a significant difference on the perceived quality of services rendered by an accounting firm based on the profile of business owners? consequently, the study would like to test the following: ho: there is no significant difference on the perceived quality of services rendered by an accounting firm based on the profile of business owners. ha: there is a significant difference on the perceived quality of services rendered by an accounting firm based on the profile of business owners. research method purposive sampling method was employed which means a target of thirty-one (31) micro small and medium entities (msmes), based in angeles city, central luzon, philippines as of june 2020 willing to disclose information and to float the instrument directly to them. these msmes are those that have hired or are currently engaged with the tax services accounting firms. the participants of the study aside from being business owners, hold other positions and engage and interact with the accounting firms in terms of tax services, representing the business can assess the factors or determinants of the quality of tax services. since the instrument used is adapted and has already undergone reliability test passing the cronbach alpha test (dinh & do, 2020), that all cronbach’s alpha coefficients of population are above 0.6; with the total correlation of observed variables are above 0.3. this means, all variables of research model are reliable and can be used for further analyses (hair, anderson, tatham and black, 2006). the results of the study also have undergone a test of variation on the quality of tax services in which the analysis of variance (anova) statistical test was utilized. as such, predictors such as tangibles, effectiveness, empathy, and professionalism, were used to check if the total variation could be explained by the anova results. findings and discussion the results of the study show that most of the participants are sole owners of the business, while some are in the form of corporation as shown on table 2. this means that most of the respondents are into small businesses with annual revenue not exceeding p10 million pesos. presented on table 3 are the positions held by the respondents who participated in the survey where more than half occupy management positions aside from being owners. this means that the respondents of the study are likewise hands on in managing the business as business owners or by performing administrative tasks. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) │ 43 table 2. frequency as to form of business organization form of business frequency percent percent cumulative percent valid sole proprietor 18 58.1 58.1 58.1 corporation 13 41.9 41.9 100.0 total 31 100.0 100.0 table 3. frequency as to other position in the business aside from being a business owner position frequency percent percent cumulative percent valid managing owner 6 19.4 19.4 19.4 ceo / coo 9 29.0 29.0 48.4 senior management 16 51.6 51.6 100.0 total 31 100.0 100.0 most of the participants are small and micro businesses as shown on table 4, while most respondents are under the service business type as presented on table 5. such services include restaurants and fast food. table 4. frequency as to size of the business business size frequency percent percent cumulative percent valid micro 11 35.5 35.5 35.5 small 17 54.8 54.8 90.3 medium 3 9.7 9.7 100.0 total 31 100.0 100.0 another important profile of the participants is presented on table 6. about one third of respondents have tax engagements with accounting or audit firms for one year. this means that most of the business are initially starting up when they hired the services of an accounting or audit firm. other businesses have engaged tax the services of accounting firms and may have changed or extended their contracts during the life of the business. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) 44 │ table 5. frequency as to type of business type of business frequency percent percent cumulative percent valid service 14 45.2 45.2 45.2 merchandising 5 16.1 16.1 61.3 gaming and amusement 4 12.9 12.9 74.2 wholesaling and retailing 4 12.9 12.9 87.1 lending 1 3.2 3.2 90.3 engineering 1 3.2 3.2 93.5 leasing 2 6.5 6.5 100.0 total 31 100.0 100.0 table 6. frequency as to number of years having tax engagement with the accounting firm no of years frequency percent percent cumulative percent valid 1 10 32.3 32.3 32.3 2 4 12.9 12.9 45.2 3 2 6.5 6.5 51.6 4 3 9.7 9.7 61.3 5 2 6.5 6.5 67.7 6 1 3.2 3.2 71.0 10 5 16.1 16.1 87.1 11 1 3.2 3.2 90.3 15 1 3.2 3.2 93.5 20 1 3.2 3.2 96.8 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) │ 45 26 1 3.2 3.2 100.0 total 31 100.0 100.0 looking closely at the various components of service quality found on table 7 (dinh and do, 2020). based on the perceptions of msmes effectiveness (mean = 5.65) yielded with the highest service quality component in terms of assessment, followed by professionalism (mean = 5.53) tangibles (mean = 5.50), and finally empathy (mean = 5.35) at these times of pandemic. company’s profile looking at tables 9 and 10, except on the component of effectiveness where there is a significant difference (.05>.049) based on the form of business organization as shown on table 8 and based on the number of years as tax agent (.05>.012) also presented on table 11. table 7. anova results based on form of business organization service quality component sum of squares df mean square f sig. mean tangbiles between groups .098 1 .098 .574 .455 within groups 4.932 29 .170 total 5.030 30 mean effectiveness between groups .352 1 .352 4.203 .049 within groups 2.426 29 .084 total 2.777 30 mean empathy between groups .296 1 .296 1.453 .238 within groups 5.899 29 .203 total 6.194 30 mean professionalism between groups .277 1 .277 1.816 .188 within groups 4.419 29 .152 total 4.695 30 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) 46 │ table 8. anova results based on the size of business service quality component sum of squares df mean square f sig. mean tangbiles between groups .038 2 .019 .108 .898 within groups 4.991 28 .178 total 5.030 30 mean effectiveness between groups .048 2 .024 .247 .783 within groups 2.729 28 .097 total 2.777 30 mean empathy between groups .483 2 .242 1.184 .321 within groups 5.711 28 .204 total 6.194 30 mean professionalism between groups .709 2 .355 2.492 .101 within groups 3.986 28 .142 total 4.695 30 table 9. anova results based on the type of business service quality component sum of squares df mean square f sig. mean tangbiles between groups 1.068 6 .178 1.078 .403 within groups 3.962 24 .165 total 5.030 30 mean effectiveness between groups .368 6 .061 .611 .719 within groups 2.409 24 .100 total 2.777 30 mean empathy between groups 1.798 6 .300 1.635 .181 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) │ 47 within groups 4.397 24 .183 total 6.194 30 mean professionalism between groups 1.345 6 .224 1.606 .189 within groups 3.351 24 .140 total 4.695 30 table 10. anova results based on number of years having tax engagement with the accounting firm service quality component sum of squares df mean square f sig. mean tangbiles between groups 2.239 10 .224 1.605 .177 within groups 2.791 20 .140 total 5.030 30 mean effectiveness between groups 1.715 10 .171 3.227 .012 within groups 1.063 20 .053 total 2.777 30 mean empathy between groups 2.624 10 .262 1.470 .222 within groups 3.570 20 .178 total 6.194 30 mean professionalism between groups 2.687 10 .269 2.675 .029 within groups 2.009 20 .100 total 4.695 30 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) 48 │ table 11. anova results based on position held other than being the business owner also a significant difference is apparent on the component of professionalism (.05>.029) if the respondents are grouped according the number of years of tax agent. likewise, there is a significant difference on the components of empathy (.05>.00) and professionalism (.05> .002) based on the position held other than being the business owner as presented on table 11. with the results presented it is very clear that clients whether micro, small or medium enterprises set very high expectations to the services being rendered by tax firms. likewise, tax services rendered by accounting and audit firms remain essential among businesses big or small. in the case of micro, small and medium enterprises, it is very important that the tax firms look closely on the components of service quality to ensure customer satisfaction. in summary, the quality component of effectiveness (.05>.049) based on the form of business organization presented higher level of perceptions coming corporations compared to sole proprietors. likewise, a significant difference was found on the component of professionalism (.05>.029) as they are grouped according to the number of years engaged with an accounting firm. those with more than five years engagement have slightly lower perception on professionalism compared to less than five-year engagements. business owners who also perform administrative functions perceived both factors professionalism (.05>.002) and empathy (.05>.000) higher compared to those who are only owners. service quality component sum of squares df mean square f sig. mean tangbiles between groups .310 2 .155 .919 .411 within groups 4.720 28 .169 total 5.030 30 mean effectiveness between groups .487 2 .244 2.980 .067 within groups 2.290 28 .082 total 2.777 30 mean empathy between groups 2.762 2 1.381 11.264 .000 within groups 3.432 28 .123 total 6.194 30 mean professionalism between groups 1.709 2 .855 8.012 .002 within groups 2.986 28 .107 total 4.695 30 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) │ 49 conclusion & further research conclusion quality accounting services are those that customers use frequently as a measure and consider as important because quality service is equivalent to high level customer satisfaction (walker & johnson, 2006). with the right service quality component(s) in mind, tax service firms will be able to change its strategies to better serve their clients. with very minimal differences, the four components (dinh & do, 2020) as perceived by the msmes are found to be very essential components of tax service quality which must be carefully considered by tax firms at these changing times. while effectiveness remains the most important study, professionalism, tangibles, and empathy are as equally important. the following recommendations can be applied to tax firms. since accountants deal with the nation’s lifeblood of various clients’ businesses – their clients finances, including tax compliances– professional accountants owe a sense of responsibility or fiduciary duty to act professionally to balance the interests of their clients (ingram, 2021). to meet the quality of professionalism, tax firms must abide by and adopt the professional code of ethics for professional accountants as set forth by the professional regulation commission [prc] (2018) that provides guidance among professional accountants to ensure that ethical dilemmas are likewise resolved when dealing with tax clients particularly msme’s. this can be further demonstrated by sticking to tax practices and applications that will create reliable tax filings and tax submissions for clients. due diligence, likewise, comes into play in tax accounting as tax firms are expected to be proactive in the tax planning of the clients to minimize tax liabilities without defrauding taxing authorities through tax evasion. to be a consummate professional in the field of tax, firms must be updated with latest tax rulings set by the national and local tax authorities to be able to offer top quality, fully informed tax services to clients. this can be achieved through continuing education and professional development by reading tax pronouncements and publications, attending industry seminars or webinars, and reading books and memos on tax and other related matters (ingram, 2021). the pandemic somehow has changed how service firms render their services in consideration of the health and safety protocols set by various regulatory bodies. tax firms must be able to empathize with their clients most especially during difficult times such as pandemic. khanna (2020) enumerated how to practice empathy wherein one must be able to stay calm and be able to find peace which will help continue the conversation with the client and become fully devoted to their needs. likewise, it is important to keep in touch and have a consistent communication with the clients. it is very important to take imitative and reach out personally to clients that is why online communication platforms such as zoom, google meet and facebook are other venues for online meetings and conversations with the clients. in as much as the tax firms are expected to be accommodating to answer all the queries and concerns of their clients, it is also very important to acknowledge some questions that cannot be answered by tax firms such as the possible impact of the pandemic to businesses that will need verification from regulatory bodies, other professionals, or resource persons. being empathic is achieved by having the ability to listen to difficult clients, acknowledging their issues or concerns, thoroughly understanding by asking questions, coming up with creative solutions and engaging through follow ups (satish, 2021). tax firms’ personnel may also be engaging and enthusiastic because other msmes owners are looking for amicable instead of intimidating encounters. in terms of tangibles, having a clean, adequately furnished and professionally interiored office space for tax firms creates a good impression for clients as it gives a sense of image and creates a sense of journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) 50 │ legitimacy for the business. for younger tax practitioners, it is also very important to invest in new tools i.e. tax apps or software to better serve clients (satish, 2021). procuring third generation computers with strong wifi connection may also help tax firms efficiently render 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(2021). how can tax agencies tackle the impact of covid-19?. adb blog. https://blogs.adb.org/blog/how-can-tax-agencies-tackle-impact-covid-19 thompson, c. (2018). the case for six point likert scale. https://www.quantumworkplace.com/future-of-work/the-case-for-the-six-point-likert-scale journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 36-53 msme business owners: determining and differentiating their perceived quality of tax services rendered by accounting firms dr. arnold v. salcedo, cpa, dbm issn 2776-9658 (online) │ 53 walker, kenton & johnson, eric. (2006). delivering quality accounting services. management accounting quarterly. 7. 9-17. yarimoglu, e.k (2014). a review on dimensions of service quality models. j. mark. manag. 2, 79–93. https://s3.amazonaws.com/academia.edu.documents/37371418/serv.qual.models.pdf? zeithaml, v. a., parasuraman, a., & malhotra, a. (2002). service quality delivery through web sites: a critical review of extant knowledge. journal of the academy of marketing science, 30(4), 362-375. available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 1 number 1 (2021): 61-74 corresponding author ng ching yat david, ngcy@utar.edu.my doi: 10.31098/jgrcs.v1i1.511 research synergy foundation corporate governance mechanisms with firm performance: a study on malaysia's and hong kong's real estate investment trust (reits) public listed companies ng ching yat david1 , yen wen chang1, and suet cheng low1 1 department of accounting, faculty of accountancy and management, universiti tunku abdul rahman, malaysia abstract corporate governance (cg) mechanisms might have a significant effect on firm performance (fp). the purpose of this study was to evaluate if cg mechanisms impact the fp among malaysia's reits (m-reits) and hong kong's reits (h-reits). the effect of cg's variable on fp can be analyzed by using panel data analysis. return on assets (roa), return on equity (roe) and tobin's q were employed to measure the fp. data were collected from the annual report available on bursa malaysia and the stock exchange of hong kong limited for 2010 until 2019. the finding suggests that h-reits were more significantly affected by cg mechanisms as compared to m-reits. keywords: corporate governance ; real estate investment trust (reits), panel data analysis this is an open access article under the cc –by-nc license introduction according to talukdar, soyeh and parhizgari (2021), reits (real estate investment trusts) own, operate, and commerce income-producing real estate across a variety of equity segments such as healthcare, residential, retail, and office. reits can also act as a trust fund whereby the appointed investment institutions will generate and distribute investment income to investors by pooling investors' fund through stock issuance or income certificate, which usually be done by appointed and specialized finance institutions (liu, cheng, yang, yan, & lai, 2019). therefore, reits are real estate companies that own a range of property sectors that trade on major stock exchanges while providing benefits to the investors (schrand, freybote, & schaefers, 2021). after the rescue of the global financial trouble that happened back in year 2008/2009, asian reits have shown a humongous growth and eventually contributed a significant amount of change among the asian economy through domestic and international investors (chong, ting, & cheng, 2017). the performance of asian reits would differ from others because it was externally managed instead of internally managed. according to khan (2011), corporate governance (cg) is how organizations and corporations are being directed to act, administer and control their operations under the processes, customs, policies, laws and institutions. it can also be used to govern and control business operations to increase the transparency of the management. the cg structure emphasized the allocation of responsibilities and rights among the board of directors (bods) and shareholders (mansur & tangl, 2018). cg can allow the goals, missions, or visions of an organization to be achieved simultaneously, managing relationships among. a wellperformed cg enables a firm to improve its fp and secure its properties by engaging capital and potential http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-74 corporate governance mechanisms with firm performance: a study on malaysia's and hong kong's real estate investment trust (reits) public listed companies ng ching yat david, yen wen chang, and suet cheng low issn 2776-9658 (online) │ 63 investors. it can further monitor the firm's management by acting as an internal governance mechanism (ghabayen, 2012). for the past decades, the global financial crisis has further proven and highlighted the importance of promoting good cg practices among firms. since then, many research types have been showed to examine the effect of cg on reits' performance. cg plays a vital role in asian reits. due to this, many asian countries have enthusiastic significant amounts of cg attempt into their country's reits to enable capital inflows that help their real estate industries (ramachandran, chen, subramanian, yeoh, & khong, 2018). also, according to ooi, newell, and sing (2006), they stated that asian reits required better governance and greater transparency that help to achieve better future development; therefore, many real estate investors started to pay attention to the practice of cg performed by asian reits (lecomte & ooi, 2012). according to nicholson and stevens (2021), it highlighted that since asian reits are mostly externally managed, it somehow presents credit risk where the abuse of power and control might happen among the external managers, so they were able to extract value from the reits. thus, it is crucial to evaluate the impact of cg mechanisms on fp among asian reits. development of malaysia reits in the early 2000s, m-reits was known as listed property trusts (lpt). according to newell and osmadi (2009), the antecedent country to introduce the perception of real estate or property trust to be listed in the stock exchange was malaysia. however, the poor regulatory and local structural circumstance, for instance, unattractive properties and lack of tax incentives were the main cause for the decline in the growth of lpts (choo, hussain, muhammad, & chan, 2021). by the end of 2004, only three lpts managed to survive in malaysia (wong, 2015). in 2005, a reconstructed guidelines on reits (rg) was introduced by the securities commission of malaysia (sc) (wong, 2015). after submitting rg, the first m-reit (axis reit) was recognized (wong, 2015). in the year 2006, malaysia has also established the world's first largest stapled islamic reits (al-aqar kpj reit) and at the same time, the world's first islamic rg was also created by sc which is specifically tailored for islamic reits (wong, 2015). until the year 2020, 18 reits registered in the bursa malaysia stock market (bursa malaysia, 2020). table 1. list of m-reits. 1. amanah harta tanah pnb 9. hektar reit 18. ytl hospitality reit 2. al-`aqar healthcare reit 10. igb reit 3. al-salam reit 11. kip reit 4. amfirst reit 13. mrcb-quill reit 5. amanahraya reit 14. pavilion reit 6. atrium reit 15. sunway reit 7. axis reit 16. tower reit 8. capitaland malaysia mall trust 17. uoa reit development of hong kong reits hk-reits were established during the same year as m-reits. its first hk-reits, link reits, was established in november 2005. however, due to link reit's property portfolio composition's legal challenges, the establishment was delayed (wong, 2016). in august 2003, reit code was issued by the hong kong securities and futures commission (hksfc) that was then updated in 2005 and 2007 to regulate hk-reits' operation. according to the stock exchange of hong kong limited (hkex) (2017), the journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-74 corporate governance mechanisms with firm performance: a study on malaysia's and hong kong's real estate investment trust (reits) public listed companies ng ching yat david, yen wen chang, and suet cheng low issn 2776-9658 (online) 64 │ purpose of hong kong reits is to provide periodic income to investors through focused investment via income-generating properties in hong kong and overseas, and are mainly regulated and authorized by the sfc. after that, they will be governed by the sfc's code with related listing regulations imposed by hkex. until the year 2020, there is a total of 11 listed reits in hong kong. table 2. list of h-reits. 1. link reit 7. hui xian reit 2. fortune reit 8. cmc reit 3. champion reit 9. regal reit 4. yue xiu reit 10. spring reit 5. sunlight reit 11. new cent reit 6. prosperity reit hypothesis development a conceptual framework was developed as fig. 1 according to the research objectives. this framework was being used to evaluate how cg mechanisms affect the fp among m-reits and h-reits. fig. 1. proposed theoretical framework. relationship between ceo duality and firm performance when the chairman of the board and the chief executive director (ceo) was holds by the same individual, this situation was known as ceo duality (ceod). according to wu (2021), ceod can increase decision-making effectiveness by creating command unity. this ability to help the management and bods have better communication simultaneously enhanced the stability of a firm. however, the ceo might make a highly biased decision and this duality could also lead to monopolization that causes the board powerless to regulate and monitor the behaviour of the ceo forcefully (wu, 2021). this weakened the fp, and board members might lack confidence in decision-making (khan, jabri, & saif, 2019). as stated in mccg 2017, paragraph 1.3, listed companies should prevent the chairman and ceo's combination from promoting journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-74 corporate governance mechanisms with firm performance: a study on malaysia's and hong kong's real estate investment trust (reits) public listed companies ng ching yat david, yen wen chang, and suet cheng low issn 2776-9658 (online) │ 65 authority and encouraging the separating of accountabilities (mccg, 2017). and according to hkex (2017), it stated that there must be a clear and compelling division of accountability and responsibility between the chairman and the ceo where each individual plays a different role but at the same time complementing with each other to ensure the equality of authority and power and no individual has freedom of control power and decision. a previous study by ghazali (2010) mentioned that there is no significant effect between ceod and a company's profitability (ghazali, 2010). however, there were some inconsistent results where a study by hussin and othman (2012) have concluded that firms with independent chairman have a significant effect on the fp. according to norazian & radiah (2012), ceo duality was found to affect performance in terms of roa only significantly. in light of the past researches, the hypotheses that formed were: h1a: ceod has a significant relationship with fp (roa). h1b: ceod has a significant relationship with fp (tobin's q). h1c: ceod has a significant relationship with fp (roe). relationship between number of independent directors on board and firm performance according to gurusamy (2017), board independence act as an essential tool in enhancing fp. the term "independent" referred to a director independent of management and free from conflicts of interest (souther, 2021). furthermore, bansal and singh (2021) stated that the board's independence played an essential role in cg as it will make better and unbiased decisions when its board is independent. pitcher, chreim and kisfalvi (2000) suggested that independent directors were supposed to be more autonomous than dependent directors because of they can encounter the ceo with fewer suspect of gave up their positions. firms with their board as independent tend to face lesser financial pressure (waheed & malik, 2021). bebchuk and weisbach (2010) showed that a board with more independent directors increased the board independence and has positively affected the fp. moreover, some studies have also reported a direct association between higher noid and better fp (ameer, ramli, & zakaria, 2010). these positive relationships indicated that independent directors could energetically supervise the behaviour of managers. on the contrary, it was argued by bhagat and black (2002) that no evidence could support higher board independence could increase the fp. it was then supported by the study of brown and caylor (2004), where they found that higher noid does not necessarily perform better. in light of the past researches, the hypotheses that formed were: h2a: noid has a significant relationship with fp (roa). h2b: noid has a significant relationship with fp (tobin's q). h2c: noid has a significant relationship with fp (roe). relationship between board size and firm performance one of the significant board characteristics that used to examine the corporate performance was a board size (bs). according to kanakriyah (2021), the fp will be raised in a high complexity board with a larger bs; however, the fp will be declined in a low complexity board with a larger bs. according to chbib and page (2020), to guarantee the effectiveness of the fp, the optimal bs shall form by at least 7 to 8 bs and the maximum bs is 10. plus, larger bs will bring more opportunities and resources, enhancing a firm's finances (rashid, 2020). this confirms the resource enrichment theory (rashid, 2020). according to a study by badu and appiah (2017), they mentioned a positively significant relationship between bs and fp. hence, their findings supported the agency theory, which stated that large bs improved fp. weterings and swagerman (2012) found that there was a positive significant relationship between bs and fp among journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-74 corporate governance mechanisms with firm performance: a study on malaysia's and hong kong's real estate investment trust (reits) public listed companies ng ching yat david, yen wen chang, and suet cheng low issn 2776-9658 (online) 66 │ asian reits. however, according to malik and makhdoom (2016) research, they found out that there is a negatively relationship between bs and fp. in their research, they found that large bs could lead to a decrease in fp. therefore, malik and makhdoom (2016) recommended that emerging firms should control the bs within an optimal size, this is because the larger bs will decline the cohesiveness and agreement while board members are making resolutions. in light of the past researches, the hypotheses that formed were: h3a: bs has a significant relationship with fp (roa). h3b: bs has a significant relationship with fp (tobin's q). h3c: bs has a significant relationship with fp (roe). relationship between number of women directors and firm performance gender diversity on the board has become a popular topic of cg lately (brahma, nwafor, & boateng, 2020). according to song, yoon and kang (2020), women directors also share distinct values, norms, and understanding besides having valuable skills and knowledge. this shows that the participation of women directors can enhance decision-making quality. zhang (2020) believed that a company with more women directors would have better oversight of management reports, thus improving a firm's earnings performance. saeed, mukarram and belghitar (2021) concluded that women directors on board could improve a firm's reputation as they can act as linkage to create a better connection with the stakeholders. according to mccg 2017, the increase in board diversity will lead to greater depth and breadth, which the board can offer compared to non-diverse boards. therefore, it stated that large companies are required to have 30% women directors on board. according to herli, tjahjadi and hafidhah (2021), they have concluded a significant positive relationship between nowd and fp. another research by conyon and he (2017) has also proven that having women on board led to a better understanding as women have a better quantitative impact on a firm's profitability. however, according to adams and ferriera (2009), they concluded that nowd do not have a significant correlation with the firm's financial performance. their research showed that an immoderate level of nowd varied board monitoring might cause to decline in fp. another research by farell and hersch (2005) has stated that more women on the boards leave no significant impact on fp. in light of the past researches, the hypotheses that formed were: h4a: nowd has a significant relationship with fp (roa). h4b: nowd has a significant relationship with fp (tobin's q). h4c: nowd has a significant relationship with fp (roe). relationship between numbers of board meeting and firm performance according to (ji, talavera, & yin, 2020), bm was also known as the most easily practised board activity and it was mandatory in public companies to enhance the board's effectiveness. in other words, the board can practice its supervisory role through bm (puni & anlesinya, 2020). besides, bm had a significant impact on fp because of strategic guidance about investment chances (wang, abbasi, & babajide, 2020). ullah and kamal (2020) proposed that bm can use to identify the effectiveness of the board's accountability and roles. according to hkex (2020), the board should meet twice quarterly with an additional meeting if or when it is required. during the bm, the director members could freely voice their alternative views during the meetings, and major decisions would only be made after going through long and careful consideration or discussion. according to a study conducted by khaleel, siti and abidin (2016), the survey's findings show that bm is positively significant impact on fp. they suggest that through meetings, operational issues could be determined while engaging and discussing with other board journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-74 corporate governance mechanisms with firm performance: a study on malaysia's and hong kong's real estate investment trust (reits) public listed companies ng ching yat david, yen wen chang, and suet cheng low issn 2776-9658 (online) │ 67 members. bm can also allow board members to obtain continuous reports and make timely strategic decisions about the organization (ganguli & deb, 2021). however, according to bhatt and bhattacharya (2015), there is no significant relationship between the boards meeting with fp, but attendance at the board meeting was significantly associated to better fp. in light of the past researches, the hypotheses that formed were: h5a: bm has a significant relationship with fp (roa). h5b: bm has a significant relationship with fp (tobin's q). h5c: bm has a significant relationship with fp (roe). relationship between proportion of independent directors in the audit committee and firm performance according to norziaton and hafizah (2019), a competent audit committee is where its composition should be independent of the company's management. this is because a firm with more idac can sustain its integrity as the members of the audit committee will not hold any personal interests in the firm and all the decision-making will be based on the best interests of shareholders (nor, nawawi, & salin, 2018). this is very important to asian reits as most asian reits were externally managed, integrity and truthfulness are essential elements for international and domestic investors when it comes to decision making. fp can be improved and shareholder's wealth can be maximized through idac because of the more the idac, the better the supervising functions (astami & rusmin, 2020). according to the study done by hassan, caren and jeremiah (2019), they showed that idac were positively significant with roa and roe of the 55 insurance firms in kenya. dakhlallh, rashid and abdullah (2021) found that the supportive and significant connection between idac and tobin's q results with the agency theory and resource dependency theory. however, (almoneef & samontaray, 2019) indicated that idac did not affect roa and tobin's q in the saudi banking industry. according to koutoupis and bekiaris (2019), idac negatively affected roa, which means the higher the idac, the lower the fp. hence, it was needed to identify the relationship between idac and fp. in light of the past researches, the hypotheses that formed were: h6a: idac has a significant relationship with fp (roa). h6b: idac has a significant relationship with fp (tobin's q). h6c: idac has a significant relationship with fp (roe). measurement of firm performance return on assets (roa), return on equity (roe) and tobin's q were used to measure the fp in this study. according to samiloglu, oztop & kahraman (2017), roa indicates how a bod utilizes its assets or resources to generate earning and achieve its management's overall effectiveness. according to zabri, ahmad and wah (2016), the roe formula is profit before interest expense divided by total shareholders' equity for a particular financial period. heenetigala and aemstrong (2011) mentioned that the company’s level of efficiency to make earnings from each $1 of shareholders’ equity. in 1967, james tobin has developed a market-based measure, known as tobin’s q (ishaq & ghouse, 2021). it was referred to as the company's total market value sum with liabilities divided by total book value. tobin's q able to reflect a firm's current and prospective performance by showing a continuous measure of the importance of a corporate (dakhallh, rashid, abdullah, & shehab, 2020). research method journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-74 corporate governance mechanisms with firm performance: a study on malaysia's and hong kong's real estate investment trust (reits) public listed companies ng ching yat david, yen wen chang, and suet cheng low issn 2776-9658 (online) 68 │ this research anticipated evaluating how cg mechanisms affect fp among m-reits and h-reits during the ten years from 2010 to 2019. all the data involved in this research were gathered from the annual reports and bloomberg. the total sample size was 19 reits, which included 12 m-reits and 7 hreits. all of these reits were the public listed companies in malaysia and hong kong. panel data analysis was used to determining the effect of cg mechanisms (ceod, idob, bs, nowd, bm, and idac) on fp (roa, roe and tobin's q). the equation of dependent variables for panel data analysis was as follow: 𝑅𝑂𝐴𝑖,𝑡 = 𝛽0 + 𝛽1𝐶𝐸𝑂𝐷𝑖,𝑡 + 𝛽2𝐼𝐷𝑂𝐵𝑖,𝑡 + 𝛽3𝐵𝑆𝑖,𝑡 + 𝛽4𝑁𝑂𝑊𝐷𝑖,𝑡 + 𝛽5𝐵𝑀𝑖,𝑡 + 𝛽6𝐼𝐷𝐴𝐶𝑖,𝑡 + 𝜀𝑖,𝑡 (1) 𝑅𝑂𝐸𝑖,𝑡 = 𝛽0 + 𝛽1𝐶𝐸𝑂𝐷𝑖,𝑡 + 𝛽2𝐼𝐷𝑂𝐵𝑖,𝑡 + 𝛽3𝐵𝑆𝑖,𝑡 + 𝛽4𝑁𝑂𝑊𝐷𝑖,𝑡 + 𝛽5𝐵𝑀𝑖,𝑡 + 𝛽6𝐼𝐷𝐴𝐶𝑖,𝑡 + 𝜀𝑖,𝑡 (2) 𝑇𝑄𝑖,𝑡 = 𝛽0 + 𝛽1𝐶𝐸𝑂𝐷𝑖,𝑡 + 𝛽2𝐼𝐷𝑂𝐵𝑖,𝑡 + 𝛽3𝐵𝑆𝑖,𝑡 + 𝛽4𝑁𝑂𝑊𝐷𝑖,𝑡 + 𝛽5𝐵𝑀𝑖,𝑡 + 𝛽6𝐼𝐷𝐴𝐶𝑖,𝑡 + 𝜀𝑖,𝑡 β_0=intercept for the regression model β_1,β_2,β_3,β_4,β_(5,) β_6,β_7,β_8,β_9,β_10,β_11 =partial regression coefficients i=observation number in a cross-sectional data set t=observation number in a time-series data set ε=error terms of the regression model table 3. dependent, independent and control variables constructed showing the formula used for each of the constructs dependent variable formula sources roa net income total asset farhat (2014) azeez (2015) johl et al., (2015) chong et al., (2016) roe net income total equity heenetigala (2011) oguz et al., (2016) chong et al., (2018) tobin's q total market value of company + liabilities total assets value + liabilities kao et al., (2004) singh et al., (2018) independent variable formula sources ceod 0= no ceo duality; 1= ceo duality ali (2016) mohamaddi et al., (2010) bs total number of directors chugh et al., (2011) hidayatet al., (2012) oguz et al., (2016) idob number of independent directors goh et al. (2014) ali (2016) nowd number of female directors on board ruigrok et al., (2007), srindhi et al., (2011) luckerath-rovers (2013) bm total numbers of board meetings ji et al., (2020) puni et al.,2020 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-74 corporate governance mechanisms with firm performance: a study on malaysia's and hong kong's real estate investment trust (reits) public listed companies ng ching yat david, yen wen chang, and suet cheng low issn 2776-9658 (online) │ 69 idac number of independent directors total members in audit committee x 100% norziaton et al., (2019) salin et al., (2018) astami et al., (2020). khudair et al., (2019) findings and discussion table 4. hypothesis testing summary of roa results. roa mreits h-reits (10 years study) (10 years study) (constant) 0.8356 0.0659 ceod 0.4062 0.3046 bs 0.0312** (+) 0.0778* (+) idob 0.2255 0.3424 nobm 0.2865 0.1687 nowd 0.5582 0.1650 idac 0.0114** (-) 0.0286** (+) **. correlation is significant at the 0.05 level. *. correlation is significant at the 0.1 level. table 5. hypothesis testing summary of roe results. roe mreits h-reits (10 years study) (10 years study) (constant) 0.6961 0.1648 ceod 0.1525 0.2834 bs 0.0139** (+) 0.1815 idob 0.2723 0.8423 nobm 0.9483 0.3979 nowd 0.9946 0.1712 idac 0.0423** (-) 0.0286** (+) **. correlation is significant at the 0.05 level. table 6. hypothesis testing summary of eps results. tobin's q mreits h-reits (10 years study) (10 years study) (constant) 0.0000 0.9075 ceod 0.1325 0.1511 bs 0.0000*** (+) 0.0002*** (+) idob 0.0214** (-) 0.0914* (+) nobm 0.4220 0.0385** (+) nowd 0.3309 0.0590* (-) idac 0.1749 0.0027*** (+) ***. correlation is significant at the 0.01 level. **. correlation is significant at the 0.05 level. *. correlation is significant at the 0.1 level. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-74 corporate governance mechanisms with firm performance: a study on malaysia's and hong kong's real estate investment trust (reits) public listed companies ng ching yat david, yen wen chang, and suet cheng low issn 2776-9658 (online) 70 │ hypothesis 1 in malaysia, the outcomes from panel data rejected h1a, h1b and h1c. nonetheless, in hong kong, all the outcomes from panel data also do not support h1a, h1b and h1c. hence, it could be decided that ceod does not have a negatively significant relationship with fp (roe, roa and tobin's q). the finding was constant with earlier studies, for instance ghazali (2010). in conclusion, ceod has no significant relationship with the fp of both hk-reits and m-reits. hypothesis 2 in malaysia, the outcomes from panel data accepted h2a, h2b and h2c. consequently, it could be summarized that bs has a significant relationship with fp. in hong kong, the outcomes from panel data rejected h2a and h2b. nevertheless, the outcome from panel data accepted h2c. thus, it could be decided that bs has a significant relationship with fp (tobin's q). the finding was constant with earlier studies, for instance gurusamy (2017). in conclusion, bs has a significant relationship with the fp of both m-reits and hk-reits. hypothesis 3 in malaysia, the outcomes from panel data rejected h3a and h3b. however, the output from panel data accepted h3c. therefore, it could be confirmed that noid has a positively significant relationship with fp (tobin's q). this finding is constant with the earlier study (bedchuk & weisbach, 2010). in hong kong, the results from panel data rejected h3a, h2b and h3c. thus, it could be confirmed that bs has no significant relationship with fp. in conclusion, noid has a significant relationship with m-reits' fp, while there is no significant relationship between idob with the fp of hk-reits. hypothesis 4 in malaysia, the outcomes from panel data rejected h4a, h4b and h4c. thus, it could be decided that nobm has no significant relationship with fp. this outcome is dependable with the previous research conducted by bhatt and bhattacharya (2015) where they stated that the board meeting was not found to have any relationship with fp, but attendance at the board meeting was significantly related to better understanding. in hong kong, the outcomes from panel data rejected h4a and h4b. nevertheless, the impact from panel data accepted h4c. thus, it could be confirmed that nobm has a significant relationship with fp (tobin's q). this finding is consistent with the previous study by khaleel, siti, & shamharir (2016). in conclusion, nobm has a significant relationship with hk-reits' fp, while there is no significant relationship between nobm and m-reits' fp. hypothesis 5 in malaysia, the outcomes from panel data rejected h4a, h4b and h4c. thus, it could be decided that nobm has no significant relationship with fp. the finding is dependable with the previous study conducted by farell et al., (2005) and adams et al., (2009). in hong kong, the outcomes from panel data rejected h5a and h5b however, the result from panel data accepted h5c. therefore, it could be summarized that nowd has a significant relationship with fp (tobin's q). the finding is similar with the previous study carried up by conyon & he (2017). in summary, nowd has a significant relationship with hk-reits' fp, while there is no significant relationship between nowd with the fp of m-reits. hypothesis 6 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 61-74 corporate governance mechanisms with firm performance: a study on malaysia's and hong kong's real estate investment trust (reits) public listed companies ng ching yat david, yen wen chang, and suet cheng low issn 2776-9658 (online) │ 71 in malaysia, the outcomes from panel data accepted h6a and h6b. nevertheless, the result from panel data accepted h6c. thus, it could be decided that idac has a significant relationship with fp (roa and roe). in hong kong, the outcomes from panel data accepted h6a, h6b and h6c. consequently, it could be summarized that idac has a significant relationship with fp. in short, idac has a significant impact on fp of both hk-reits and m-reits. this outcome is also similar with previous researches by hassan et al., (2019) and dakhlallh et al., (2020). hassan's research showed that the idac of the 55 insurance firms in kenya was positively significant with roa and roe, while dakhlallh's study found a supportive and significant connection between idac and tobin's q. the outcomes were consistent with the agency theory and resource dependency theory. conclusion & recommendation the objective of this study was to evaluate if cg mechanisms impact fp among m-reits and hreits. in short, half of the variables were suggested not significant with the m-reits' fp. referring to the findings, only bs (roa, roe, tobin's q), idob (tobin's q) and idac (roa and roe) was found to be significant with fp. meanwhile, for hreits, most of the cg mechanisms were found to be significant to their firm's performance. except for ceod and idob. according to the panel data analysis findings, it can be summarized that cg mechanisms have a significant relationship to h-reits rather than m-reits. this might be due to the cultural difference between these two countries that affect how the management's behavior manages the companies. apart from that, this research identified several restrictions that may have affected the research findings. thus, several recommendations were suggested so that future research papers would be able to cope with this research's limitations to help improve the results of the related research field. for instance, future studies can include other fp measurements such as price-to-earnings ratio, net asset value, or market-to-book ratio as they could better describe the firms' performance. besides, future researchers might further expand on the research scope of the asian reits rather than focusing on the us and european reits. even 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(2020). an institutional approach to gender diversity and firm performance. organization science, 1-19. doi:10.1287/orsc.2019.1297 available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 2 number 1 (2022): 10-24 corresponding author dewi hargiyanti, dewihargiyantii@gmail.com; eva herianti, eva.herianti@umj.ac.id doi: 10.31098/jgrcs.v2i1.862 research synergy foundation determinant taxpayers’ compliance among micro, small, and mediumscale enterprises in jakarta, indonesia dewi hargiyanti1, eva herianti1, amor marundha2 1faculty of economics and business, university of muhammadiyah jakarta, indonesia 2 faculty of economics and business, university of bhayangkara jakarta raya, indonesia abstract micro, small, and medium-scale enterprises (msmes) are business sectors known to significantly contribute to employment. therefore, it is necessary to enhance tax compliance among msme players as they are reported to contribute to gdp by 60%. this study aims to analyze the effect of the tax fairness dimensions, self-assessment system, and income level on tax compliance among msmes in thamrin city, southeast asia’s largest shopping center located in jakarta, indonesia. this research is a quantitative study using primary data by distributing questionnaires from may until august 2021 to taxpayers. to this end, a quantitative method was applied by collecting primary data from taxpayers then respondents in this study were recruited using the purposive sampling technique (n=95). the data were analyzed using sem pls with smartpls 3.0, showing that tax fairness dimensions (p-value of 0,014), self-assessment system (pvalue of 0,019), and income level (p-value of 0,000). these results explain that the tax fairness dimension has a significant effect on taxpayers' compliance, the self-assessment system has a significant effect on taxpayers' compliance, a self-assessment system has a significant effect on taxpayers' compliance. keywords: tax fairness, self-assessment system, income level, taxpayers compliance this is an open access article under the cc–by-nc license introduction tax phenomena in 2020-2021 did not occur due to a lack of taxpayers' awareness, but it occurred due to the poor economic condition caused by the pandemic, as it is reported that micro, small, and medium scale enterprises suffered an 87.5% drop in 2021 (ekonomi.bisnis.com). the covid-19 pandemic significantly affects the survival of micro, small, and medium-scale enterprises (msmes) in indonesia. during the covid-19 pandemic, entrepreneurs face challenges to survive unexpected conditions. amid this condition, the taxes directorate general (djp) put its efforts to enhance tax compliance through effective tax education and dissemination. effective tax dissemination is believed to improve taxpayers’ compliance, including msme taxpayers (pajak.go.id). while 2019 witnessed an increase in tax revenue realization from 1,518.8 trillion to 1,546.1 trillion, a significant drop was reported in 2020 where only 1.282,77 trillion revenue was obtained due to the covid-19 pandemic. as per april 2021, the country reported 453,63 trillion revenue where 374,9 trillion were obtained from taxes, showing a 0,5% drop compared to april 2020 (376,6%) (kemenkeu.go.id). the tax revenue still heavily depends on the economic development and the covid-19 pandemic progress. in controlling taxpayer payments effectively, government authorities need the trust of taxpayers in every social stratum so that taxpayer compliance degree could increase. sinaga (2020) suggested that micro, small, and medium enterprises (msmes) can potentially give a significant contribution to the state revenue and increase the community income due to their ability to http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 10-24 determinant taxpayers’ compliance among micro, small, and medium-scale enterprises in jakarta, indonesia dewi hargiyanti, eva herianti, amor marundha issn 2776-9658 (online) │ 11 absorb employment. increased sales were reported by msmes in 2021 as they began to engage with digital transactions through e-commerce (alfin, 2021). many business actors attempt to open small to mediumscale businesses (wartaekonomi.co.id). taxpayers’ compliance can be affected by their perception of tax fairness (kurniawan & hudayati, 2020). in other words, they are likely to be tax compliant if they perceive the tax system is fair (utama & setiawan, 2019). in this regard, tax fairness dimensions play pivotal roles in determining taxpayers’ compliance because, as reported, they are likely to commit tax avoidance when they consider the system unfair. taxpayers are likely to be compliant if they perceive general fairness, i.e., the imposed tax is proportional to their ability to pay. tax policies play an important role in developing taxpayers’ awareness (rahayu, 2019). micro, small, and medium-scale enterprises (msmes) can potentially contribute significantly to employment absorption. they are also reported to give a 60% contribution to the gross domestic product (gdp), yet the tax payment is still minimum. the present study explores the underresearched five dimensions of tax fairness, namely general fairness, exchange with the government, tax rate structure, special provision, and self-interest. the tax rate structure is reported to affect the taxpayers' compliance behavior (purnaningsih & noviari, 2019). jurisdiction in tax sectors in indonesia has not been able to meet the sense of fairness due to incompetent law enforcement and legal misconceptions. the principle of fairness in tax law and its implementation should be enforced although the truth is relative (wahyuni, 2019). the tax fairness system in indonesia is basically administered from, by, and for the people. this democratic system serves as the government’s basis to formulate and implement policies, particularly on tax fairness (pajak.go.id). a tax system is considered fair when taxpayers perceive the imposed tax is proportional to their ability to pay and the benefit they may receive from the tax they pay (udayana, 2017b). in this regard, taxpayers' compliance plays a central role in indonesia's self-assessment tax system. a self-assessment system is a system that provides the taxpayers with authority, trust, and responsibility to calculate, estimate, pay, and report their taxes (listiyowati, 2021). the present study depicts how msme taxpayers’ abilities and roles in fulfilling their tax obligation is closely associated with their income level. one of the factors to consider in tax collection is the taxpayers’ income. msmes taxpayers with adequate income do not find it difficult to meet their needs, increasing their probability to perform their tax obligation (megantara, 2017). taxpayers' income reported through annual tax returns is used as the reference in tax collection. existing literature also shows that income level can affect taxpayers' compliance. they view tax as a burden on their economic activities (udayana, 2017a). a higher income can serve as a factor in improving taxpayers' compliance behavior (yuliyanah, 2019). the government regulates tax as an obligatory contribution to the state from individuals or entities, including msmes (mozart, 2018). micro, small, and medium-scale enterprises cover about 40,5% of business in jakarta (cnnindonesia.com). it is also reported that msmes contribute 5,7 trillion rupiahs to the 2018 state revenue. the present study is different from the previous studies as it attempts to analyze the msmes taxpayer compliance by collecting deeper data from msme taxpayers located in thamrin city, the largest shopping center in southeast asia. to be more specific, this study aims to examine and analyze the factors affecting tax compliance among msmes in thamrin city, jakarta, indonesia. based on the phenomena described previously and the results of previous studies, it is necessary to research determinant taxpayer compliance among micro, small and medium scale enterprises to conduct an empirical study on taxpayer compliance among micro, small and medium scale enterprises. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 10-24 determinant taxpayers’ compliance among micro, small, and medium-scale enterprises in jakarta, indonesia dewi hargiyanti, eva herianti, amor marundha issn 2776-9658 (online) 12 │ literature review legitimacy theory the legitimacy theory denotes a condition in which an institution's value is consistent with the value system. this theory has been widely used in the accounting field to develop a theory of csr disclosure (badjuri et all, 2021). the legitimacy theory explains that for every company that wants to be well received by the surrounding environment, the company must strive to run in harmony with the norms that already exist in the environment and society around the company (deegan, rankin, & tobin, 2002). the survival of a company will be threatened if the public perceives that the company violates the social contract or that the activities of micro, small, and medium-scale enterprises are not carried out according to the expectations of the community (lanis and richardson, 2013). legitimacy can be seen as leveling one's perceptions that an entity's act is as expected and fit the value, norms, belief, and socially developed definitions. this theory is highly relevant to the taxpayers' compliance in which taxpayers should adhere to the government rules and policies on the social system. compliance theory compliance theory defines taxpayers’ compliance with the determined regulation. taxpayers’ compliance with the regulation stems from tax obligations stipulated by law (kunarti, 2019). it refers to taxpayers' compliance with policies, regulations, and the prevailing law (arifiani, 2019). taxpayers' compliance is known to affect the effectiveness of the regulation. it encourages individuals to fulfill their obligations, for example, to pay the tax on time. an on-time tax payment prevents individuals from being imposed by sanctions, in addition, to contributing to the state revenue and public service development (puteri, 2019). from a normative perspective, compliance behavior is viewed as a moral different from personal interest (sella & pusposari, 2020). taxpayers compliance taxpayers' compliance constitutes the awareness of fulfilling obligations stipulated by the tax law and regulations. a tax system that demands taxpayers' active involvement should be supported by taxpayers' compliance (putri et all, 2019). taxpayers' compliance can be divided into two categories, namely formal and material compliance (susyanti, 2020). studies on taxpayers' compliance report a range of factors affecting compliance behavior, including economic, social, psychological, and demographic factors, among others (redae, 2017). compliance is affected by social factors as they are significantly influential in determining one’s behaviors and activities (nabila & isroah, 2019). tax fairness dimensions taxpayers’ compliance can be affected by the taxpayers' perception of tax fairness (kurniawan & hudayati, 2020). these dimensions constitute taxpayer perception of tax system fairness, which can be affected by internal and external factors. while the former is related to individuals' characteristics, the latter deals with individuals' surroundings (rosmawati, 2021). taxpayers are likely to consider the tax fair when it is proportional to their ability to pay and the benefit they receive. the principle of tax justice is seen as fair by the taxpayer if the tax charged is proportional to the ability to pay and the benefits to be received by the taxpayer (faizal, 2017). tax fairness is pivotal as it can affect taxpayers’ compliance behavior, the fairness of the taxation system can increase public confidence in the government because taxpayers feel that the tax burden paid has the benefits provided by the government. then the taxpayer will continue to carry out his tax obligations and will increase the tax compliance. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 10-24 determinant taxpayers’ compliance among micro, small, and medium-scale enterprises in jakarta, indonesia dewi hargiyanti, eva herianti, amor marundha issn 2776-9658 (online) │ 13 self-assessment system a self-assessment system refers to a tax collection system that allows taxpayers to determine the amount of tax they should pay (putri, 2018). applying this system, taxpayers' role significantly determines the tax revenue (latofah & harjo, 2020). it requires taxpayers to play active roles in fulfilling their tax obligation (anjanni, 2019). it is believed that an appropriate application of the self-assessment system requires taxpayers' high compliance. this system imposes administrative sanctions and a fine for income tax (lasmaya & fitriani, 2017). directorate general of taxes performs tax audits to minimize tax fraud committed by taxpayers (setiawan, 2017). the audit mainly aims to develop taxpayer compliance behavior in fulfilling their tax obligation. since taxpayers' compliance is pivotal in the self-assessment system, performing a fiscal audit is necessary to ensure taxpayers' compliance (susena, 2018). taxpayers' honesty in providing correct information (examples, identity, business activity, and any tax-related wealth) is also fundamental in the self-assessment system (aryanti & andayani, 2020). taxpayers income level income, as stipulated by article 4 paragraph (1) of the indonesian income tax law, refers to a taxpayer’s any form of economic ability obtained in indonesia or outside indonesia, which can be used for a consumptive purpose or to increase wealth (kemenkeu.go.id). taxpayer income is reported annually through an annual tax return and is used as the reference for tax collection. taxpayers' ability to fulfill tax obligations is closely associated with their income level (cahayani, 2018). it serves as an important factor to consider in performing their tax obligation (rachmawati & haryati, 2021). the higher-income level is likely to lead to a higher compliance level. msme players with higher income levels, together with high tax awareness, tend to exhibit higher compliance due to their financial ability (amran, 2018). from a theoretical perspective, individuals with higher incomes can fulfill their personal needs, allowing them to perform their tax obligation (nasirin, 2018). tax represents citizens' obligatory contribution to the state from their business activities, including msmes activities (mozart, 2018). based on the description above, a research framework is developed and presented in the following figure: figure 1. conceptual framework tax fairness dimensions self-assessment system taxpayers compliance taxpayers income level h1 h2 h3 journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 10-24 determinant taxpayers’ compliance among micro, small, and medium-scale enterprises in jakarta, indonesia dewi hargiyanti, eva herianti, amor marundha issn 2776-9658 (online) 14 │ hypotheses the effect of tax fairness dimensions on taxpayers compliance among msmes tax fairness dimensions represent taxpayers' perception of the tax fairness of a country. it is related to a country's tax system and significantly affects tax compliance (wahyuni, 2019). a country's tax system is known to affect taxpayers’ compliance with the prevailing tax regulation. one’s perception is likely to be affected by internal and external factors associated with individuals’ characteristics and surroundings, respectively (rosmawati, 2021). the legitimacy theory is relevant to the tax fairness dimensions as the government holds the legitimacy to oblige taxpayers to adhere to the regulation and policies of a social system (kunarti, 2019). a positive response to these dimensions may enhance taxpayers’ compliance behavior. taxpayers who perceive high tax fairness tend to have higher awareness to exhibit compliant behaviors. as mentioned in the previous studies, tax fairness dimensions can affect individuals’ tax compliance behavior (wahyuni, 2019; kurniawan, 2021) a different finding was reported by wulandari and budiaji (2018) who found that fairness dimensions did not affect taxpayer compliance. justice is a condition when the results that a person receives from a relationship are proportional to what they have contributed, robbins and judge (2016) also argue that the theory of justice is a theory that states that individuals compare the inputs and outcomes of their efforts. robbins and judge (2016) mention justice into three types of justice, namely distributive justice, procedural justice, and interactional justice. based on the description above, it is expected that: h1: tax fairness dimensions affect msmes' taxpayer compliance. the effect of self-assessment system on taxpayers compliance among msmes the self-assessment tax collection system provides taxpayers the authority, trust, and responsibility to determine the amount of tax according to the prevailing tax law. this system requires taxpayer initiative to register a tax identification number and perform their tax obligation. the selfassessment system requires taxpayers to be able to play an active role in fulfilling their tax obligations. for the implementation of the self-assessment system to run well, high tax compliance is required from taxpayers (anjanni, 2019). this system is expected to improve taxpayers’ compliance (lasmaya, 2017). applying this system, taxpayers’ role significantly determines the tax revenue (latofah & harjo, 2020). compliance theory is relevant to the self-assessment system, in which individuals perform their tax obligation autonomously. hence, taxpayers should be accountable for their tax arrears so that this system can be implemented properly (susena, 2018). a compliant taxpayer is likely to be aware of their tax responsibility in order to avoid administrative sanctions. in one of the previous studies studi, (2017) report a positive, significant effect of the self-assessment system on taxpayers' compliance because the system allows taxpayers to calculate and report their obligation themselves. however, this system causes the taxpayers to bear a large burden as they should perform all tax-related activities themselves while the tax agency only functions to oversee their compliance. lasmaya and fitriam (2017) explained that the awareness and compliance of taxpayers is a very important factor in the implementation of a selfassessment system where taxpayers are required to be active in calculating, playing a role in calculating, depositing, and reporting the tax payable. based on the description above, it is expected that: h2: self-assessment system affects taxpayer compliance among msmes. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 10-24 determinant taxpayers’ compliance among micro, small, and medium-scale enterprises in jakarta, indonesia dewi hargiyanti, eva herianti, amor marundha issn 2776-9658 (online) │ 15 the effect of income level on taxpayers compliance among msmes taxpayer income is reported annually through an annual tax return and is used as the reference for tax collection. taxpayers' ability to fulfill tax obligations is closely associated with their income level (cahayani et all, 2018). it plays a central role in determining one's tax compliance. one of the factors affecting taxpayer compliance is the income level. the compliance theory is deemed relevant to the taxpayer income level. it holds that higher income levels may lead to increases in taxpayer compliance, encouraged by either voluntary or enforced compliance (kirchler & wahl, 2010). msme players with higher income are likely to have a higher compliance behavior as they do not find it difficult to fulfill their tax obligation (amran, 2018). in the same vein, studies conducted by wiranatha et all (2017) and fadilah (2021) also report that taxpayers’ income positively relates to their compliance. a taxpayer will not have difficulty in fulfilling his tax obligations if the value to be paid is below the actual income they earn on a regular basis. cynthia and djauhari (2020) explained that the more and more levels the income of the taxpayer, the higher compliance in paying property tax. because it's mandatory taxes that have income enough not to burden in payment of taxes. based on the description above, it is expected that: h3: taxpayers’ income level positively affects their compliance. research method this quantitative survey study collected primary data from msmes in thamrin city shopping center, jakarta, indonesia. a questionnaire was distributed to 104 msmes that already had npwp. however, only 95 responses met the criteria determined in this study. smart pls version 3.0 was used to see the effect of the tax fairness dimension, self-assessment system, and income level on the taxpayer's compliance. applying a cross-sectional design, this study examined the object, condition, and taxpayers' perception of an event in order to provide a systematic depiction of facts and relationships among the phenomena in question. the taxpayer compliance variable is measured using 6 indicators. the variable of tax fairness dimensions is measured using 6 indicators. furthermore, the self-assessment system variable is measured using 5 indicators, and the taxpayers' income level variable is measured using 4 indicators. the present study applied partial least square (pls) using smart pls 3,0 to process the data obtained from the questionnaire. smartpls was used to analyze the effect of the independent variables (examples, tax fairness dimensions, self-assessment system, and income level) on the dependent variable (tax compliance among msmes in thamrin city, jakarta, indonesia). four respondent characteristics were applied in this study, including gender, age, tax identification number, and annual turnover. pls-sem is a statistical tool utilized to analyze a set of a relationship relatively difficult to be measured simultaneously (sani & habibie, 2017). this study applied pls because it used a latent variable that can be measured based on its manifest variables, and it simultaneously involved measurement error. the pls method in this study was divided into two, namely the outer and inner models. a hypothesis test was performed to confirm the proposed hypothesis by considering the t-statistic and p-values. in this study, the p-value is significant at 0,05. findings and discussion the measurement model in this study aims to find out the validity of each indicator. three types of validity were employed, namely convergent validity, discriminant validity, and composite reliability. convergent validity indicates that the set of indicators used in this study represents one latent variable. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 10-24 determinant taxpayers’ compliance among micro, small, and medium-scale enterprises in jakarta, indonesia dewi hargiyanti, eva herianti, amor marundha issn 2776-9658 (online) 16 │ the convergent validity is associated with the principle stating that indicators of a construct should be highly correlated. in this study, a factor loading of 0,05 was considered satisfactory and for loadings greater than 0.05, it is considered practically significant, thus the higher the loading factor value, the more important the role of loading in interpreting the factor matrix. (hair et all, 2008). table 1. factor loading-validity convergent variables indicators factor loading parameter description tax fairness dimensions dkp1 0,725 0,50 valid dkp2 0,817 0,50 valid dkp3 0,793 0,50 valid dkp4 0,819 0,50 valid dkp5 0,720 0,50 valid dkp6 0,785 0,50 valid self-assessment system sas1 0,789 0,50 valid sas2 0,742 0,50 valid sas3 0,741 0,50 valid sas4 0,750 0,50 valid sas5 0,781 0,50 valid taxpayers income level tpwp1 0,665 0,50 valid tpwp2 0,764 0,50 valid tpwp3 0,612 0,50 valid tpwp4 0,837 0,50 valid taxpayers compliance kwp1 0,770 0,50 valid kwp2 0,692 0,50 valid kwp3 0,817 0,50 valid kwp4 0,803 0,50 valid kwp5 0,818 0,50 valid source: primary data processed, 2022 table 1 shows that the results of the convergent validity test for all variables are met. this condition can be identified through the loading factor value of all indicators on the variable tax fairness dimensions, self-assessment system, taxpayers' income level, and taxpayers' compliance > 0,50. discriminant validity discriminant validity signifies two conceptually different concepts that should exhibit adequate differences. discriminant validity is related to the principles in which the indicators of different constructs should not be highly correlated. cross loading is used to test the discriminant validity. the indicator is deemed valid if its cross-loadings value is higher than other constructs. the discriminant validity can also be determined by comparing the square root of the average variance extracted. table 2. cross loading-discriminant validity tax fairness dimensions self-assessment system taxpayers income level taxpayers’ compliance dkp1 0,725 0.644 0.626 0.817 dkp2 0,817 0.628 0.539 0.589 journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 10-24 determinant taxpayers’ compliance among micro, small, and medium-scale enterprises in jakarta, indonesia dewi hargiyanti, eva herianti, amor marundha issn 2776-9658 (online) │ 17 dkp3 0,793 0.655 0.493 0.553 dkp4 0,819 0.716 0.564 0.591 dkp5 0,720 0.665 0.444 0.529 dkp6 0,785 0.710 0.452 0.565 sas1 0.724 0,789 0.619 0.745 sas2 0.604 0,742 0.494 0.546 sas3 0.573 0,741 0.439 0.516 sas4 0.682 0,750 0.489 0.583 sas5 0.676 0,781 0.577 0.648 tpwp1 0.457 0.444 0,665 0.483 tpwp2 0.513 0.478 0,764 0.711 tpwp3 0.473 0.445 0,612 0.437 tpwp4 0.547 0.634 0,837 0.804 kwp1 0.635 0.693 0.634 0,770 kwp2 0.642 0.603 0.525 0,692 kwp3 0.725 0.644 0.626 0,817 kwp4 0.619 0.612 0.744 0,803 kwp5 0.542 0.623 0.848 0,818 source: primary data processed, 2022 as shown in table 2, the factor loading value of each latent variable is higher than the loading of other constructs if it is related to the other variables. the indicators of taxpayers’ compliance exhibit factor loading higher than the other constructs. it demonstrates that each latent variable in this study possesses good discriminant validity. in other words, the construct used in this study is unique and able to describe the measured phenomenon. the reliability of this study is determined by the composite reliability and cronbach alpha value of each construct. a construct is considered reliable if it has cronbach's alpha which is higher than 0,60. table 3. composite reliability and cronbach’s alpha variables composite reliability cronbach’s alpha description tax fairness dimensions 0.902 0.870 reliable self-assessment system 0.873 0.820 reliable taxpayers income level 0.814 0.701 reliable taxpayers compliance 0.887 0.840 reliable source: primary data processed, 2022 as shown in the table above, the composite reliability of tax fairness dimensions, self-assessment system, income level, and taxpayers compliance comprised 0,902; 0,873; 0.814; and 0,887; respectively. the value indicates that the four variables used in this study are reliable as they are higher than 0,60. regarding the cronbach alpha, the tax fairness dimensions, self-assessment system, income level, and taxpayer compliance exhibit a score comprising 0,870; 0,20; 0,701, and 0,840, respectively. to sum up, all variables in this study are reliable as they met the composite reliability and cronbach's alpha criteria. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 10-24 determinant taxpayers’ compliance among micro, small, and medium-scale enterprises in jakarta, indonesia dewi hargiyanti, eva herianti, amor marundha issn 2776-9658 (online) 18 │ structural model measurement inner model measurement is used to determine the causal relationship among latent variables. it is carried out by seeing the r-square of each dependent latent variable. the interpretation is similar to that of the regression (saputri, 2021). the structural model of the conceptual framework was calculated using the goodness of fit inner model based on r2 of each endogenous variable. as shown in table 10, the r-square of an endogenous latent variable (for example, taxpayers’ compliance) comprised 0,854 (85.4%). the score indicates that the taxpayer compliance is affected by tax fairness dimensions, self-assessment system, and income level by 85.4%, while the rest (14.6%) was affected by the other factors outside this study. hypotheses testing the hypothesis test was conducted to confirm the proposed hypotheses. in this study, the hypotheses were tested using the resampling bootstrap method by geiser and stone. t-test was used as the statistical test. the t-statistic value was then compared to the t-table value. this study applied a 90% confidence level and 10% inaccuracy limit (α), while the t-table was 1,64. the p-value of 0,05 (alpha 5%) indicated the significant effect. meanwhile, the p-value 0,05 (alpha 5%) indicated insignificant effect. table 4. hypotheses testing independent variables dependent variable: taxpayers' compliance sem-pls coef. t-stat. pvalue tax fairness dimensions -> taxpayers compliance 0,232 2,466 0,014 self-assessment system -> taxpayers compliance 0,219 2,355 0,019 taxpayers income level -> taxpayers compliance 0,562 9,208 0,000 r2 85,4% adjusted r2 85% notes: the value of average variance extracted (ave) variable tax fairness dimensions (0.605), self-assessment system (0.579), taxpayers' income level (0.526), dan taxpayers' compliance (0.611). value of variance inflation factor (vif) variable tax fairness dimensions (4.116), selfassessment system (4,278), dan taxpayers income level (2,047). multicollinearity refers to a situation in which two or more independent variables or exogenous constructs exhibit high correlation, causing poor predictive ability. the multicollinearity test was done by seeing the variance inflation factor (vif). a vif value of higher than 5 indicates multicollinearity. source: primary data processed, 2022 journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 10-24 determinant taxpayers’ compliance among micro, small, and medium-scale enterprises in jakarta, indonesia dewi hargiyanti, eva herianti, amor marundha issn 2776-9658 (online) │ 19 figure 2. partial least square output the effect of tax fairness dimensions on taxpayers' compliance the first hypothesis test result, as displayed in table 4 showed a path coefficient value of 0.232 indicating that each point's increase in tax fairness dimension may lead to a 0.232 increase in taxpayers' compliance, assuming that other variables are constant. meanwhile, the t-statistic value of 2.466 > t-table of 1.64 and p-value of 0.014 < 0.05 indicated that the first hypothesis was accepted. in other words, tax fairness dimensions significantly affected taxpayers' compliance. this result implies that taxpayers with higher perceived tax fairness dimensions may exhibit higher tax compliance, supporting the findings of previous studies conducted on fairness (kurniawan & hudayati, 2020); utama & setiawan (2019); wahyuni (2019); kurniawan & hudayati (2021). this study found that increased tax fairness dimensions can enhance taxpayers’ compliance among msmes in thamrin city. the effect of self-assessment system on taxpayers' compliance the second hypothesis test result, as displayed in table 4 showed a path coefficient value of 0.219, demonstrating that each point increase in the self-assessment system may lead to a 0.219 increase in taxpayers' compliance, assuming that other variables are constant. meanwhile, the t-statistic value of 2.355 > t-table of 1.64 and p-value of 0.019 < 0.05 indicated that the second hypothesis was accepted. the result indicates that the self-assessment system significantly affects taxpayers’ compliance. applying this system, taxpayers are obliged to report the amount of tax arrear as stipulated in tax law. this finding supports previous studies conducted by yuliyanah et al. (2019). the result implies that taxpayer compliance may improve when more individuals take active roles in fulfilling their tax obligation. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 10-24 determinant taxpayers’ compliance among micro, small, and medium-scale enterprises in jakarta, indonesia dewi hargiyanti, eva herianti, amor marundha issn 2776-9658 (online) 20 │ the effect of taxpayers' income level on tax compliance the third hypothesis test result, as displayed in table 4 showed a path coefficient value of 0.562, meaning that each point increase in taxpayer income level may lead to a 0.562 increase in taxpayers' compliance, assuming that other variables are constant. meanwhile, the t-statistic value of 9.208 > t-table of 1.64 and 0.000 < 0.05 indicated that the third hypothesis was accepted. this finding implies that taxpayer income level significantly affects taxpayer compliance. in other words, having a high-income level can encourage individuals to perform their tax obligation as they have the ability to pay. it is consistent with the previous studies conducted by amran (2018); wiranatha et all (2017), and fadilah, (2021). this study found that the increased higher income level can enhance taxpayers’ compliance among msmes in thamrin city. discussion the effect of tax fairness dimensions on taxpayers' compliance the first hypothesis test result showed that tax fairness dimensions significantly affected taxpayers' compliance, implying that taxpayers with higher perceived tax fairness dimensions may exhibit higher tax compliance, supporting the findings of previous studies conducted on fairness (kurniawan & hudayati, 2020); utama & setiawan (2019); wahyuni (2019); kurniawan & hudayati (2021). this study found that increased tax fairness dimensions can enhance taxpayers’ compliance among msmes in thamrin city. kunarti (2019) suggests that tax fairness dimensions belong to the government authority that holds a legitimate basis to oblige taxpayers to adhere to the prevailing regulation and policies on taxes. a positive response to tax fairness dimensions may enhance taxpayers' compliance behavior. tax compliant behaviors exhibited by msme players in thamrin city were accounted for by a fair tax system. the tax imposed on taxpayers was also deemed proportional to their ability to pay. this study is consistent with previous studies conducted by wahyuni (2019); kurniawan & hudayati (2021); and utama & setiawan (2019) that reported a positive, significant relationship between tax fairness dimensions and taxpayer compliance. previous studies agree that a tax system is considered fair when taxpayers perceive that the imposed tax is proportional to their ability to pay and the benefits they may receive from the tax they pay. the effect of self-assessment system on taxpayers' compliance the second hypothesis test results indicate that the self-assessment system significantly affects taxpayer compliance. applying this system, taxpayers are obliged to report the amount of tax arrear as stipulated in tax law. this finding supports previous studies conducted by listiyowati (2021); aryanti (2020); yuliyanah et al. (2019). the result implies that taxpayer compliance may improve when more individuals take active roles in fulfilling their tax obligation. the present study found that the self-assessment system affects taxpayers' compliance. in this regard, most msmes with npwp stated that they believe more in their own calculation system. taxpayers' awareness is the most important factor in the self-assessment system. as susena (2018) suggests, taxpayers should be accountable for their tax arrears to allow this system to work properly. compliance theory is relevant to the self-assessment system, in which journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 10-24 determinant taxpayers’ compliance among micro, small, and medium-scale enterprises in jakarta, indonesia dewi hargiyanti, eva herianti, amor marundha issn 2776-9658 (online) │ 21 individuals perform their tax obligation autonomously. a compliant taxpayer is likely to be aware of their tax responsibility in order to avoid administrative sanctions. this study supports previous studies that found a positive, significant effect of the self-assessment system on taxpayers’ compliance aryanti et all., (2020); yuliyanah et al., (2019). an existing literature agrees that the self-assessment system heavily relies on taxpayer honesty in providing correct information (identity, business activity, and any tax-related wealth). the effect of taxpayers' income level on tax compliance the third hypothesis test result implies that taxpayer income level significantly affects taxpayer compliance. in other words, having a high-income level can encourage individuals to perform their tax obligation as they have the ability to pay. it was consistent with the previous studies conducted by amran (2018); wiranatha et all (2017); and fadilah (2021). this study found that the increased higher income level can enhance taxpayers’ compliance among msmes in thamrin city. this survey found that income level serves as one of the factors in determining taxpayers' compliance. a higher income level is likely to lead to a higher compliance level. together with tax awareness, higher income can encourage individuals to fulfill their tax obligation as they view themselves as financially capable to pay the tax. yuliyanah et all (2019) state that a higher income level can lead to a higher compliance level, which is relevant to the compliance theory. the finding in the present study is also consistent with the previous studies reporting a positive and significant effect of income level on taxpayer compliance (wiranatha et all, 2017; fadilah, 2021). conclusion & further research the present study focuses on the effect of tax fairness dimensions, self-assessment system, and taxpayers’ income level on taxpayer compliance among msme players in thamrin city, jakarta, indonesia. micro, small, and medium-scale enterprises (msmes) are business components potentially resulting in developing employment. therefore, it is necessary to improve taxpayer compliance in this sector as msmes are reported to give a 60% contribution to the gdp, yet the tax payment rate is still low. this study presents empirical evidence of the significant effect of tax fairness dimension, selfassessment system, and income level on taxpayer compliance. the present study provides theoretical, methodological, and policy contributions. this study gives a theoretical contribution by showing that taxpayers' compliance can be determined by their perceived tax fairness dimension. in this regard, taxpayers are likely to be compliant when they perceive the tax system as a tax collection system that provides taxpayers with authority, trust, and responsibility to calculate, estimate, pay, and report their tax requires taxpayers to have sufficient tax knowledge, moral and discipline. concerning the methodological contribution, the present study surveyed taxpayers among msmes in thamrin city by employing a purposive sampling technique, resulting in 95 respondents who met the predetermined criteria and applied pls-sem using smartpls 3.0. the findings of the study also contribute to the indonesian government policies by showing that tax fairness dimensions, tax collection system, and income level can affect the taxpayers' compliance. in general, low tax revenue can be accounted for by taxpayers' lack of compliance, which may be affected by tax fairness. taxpayers perceived unfair treatment as likely to result in lower tax compliance. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (1), 10-24 determinant taxpayers’ compliance among micro, small, and medium-scale enterprises in jakarta, indonesia dewi hargiyanti, eva herianti, amor marundha issn 2776-9658 (online) 22 │ despite its contribution, several limitations are noticed. first, the data collection process was quite time-consuming when using google forms. therefore, we distributed a hard copy of the questionnaires to the respondents. second, this study used smartpls program with a non-original sample of fewer than 100 respondents. third, this study did not specify the gender of the respondents. fourth, this study was conducted during the covid-19 pandemic, preventing the researchers to collect the data every day. future studies are recommended to modify the research model according to the phenomena in order to provide a greater contribution to the government and the msme taxpayers. references amran, a. 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(2023) corresponding author’s email: rezisudimas407@gmail.com journal of governance risk management compliance and sustainability, vol. 3 no. 1 (2023) https://doi.org/10.31098/jgrcs.v3i1.1487 does financial performance mediate the impact of green accounting and environmental performance on firm value? muhammad rezi sudimas1* , ramdany ramdany2 , heri ispriyahadi3 1,2 universitas teknologi muhammadiyah jakarta, indonesia received : april 5, 2023 revised : april 28, 2023 accepted : april 29, 2023 online : april 30, 2023 abstract various environmental problems in the world because business activities are not responsible for their activities and their impact on the environment. the responsibility of companies make by paying for their environmental costs can help reduce future costs. this paper aims to examine whether financial performance mediates the impact of green accounting and environmental performance on firm value. the method used is quantitative with a causality design. the sampling method uses purposive sampling to test the relationship between variables. the data used is panel data with a total of 83 companies during 2016 2021. the method of analysis in this study uses path analysis. the authors find that green accounting and environmental performance affect financial performance. while green accounting, environmental and financial performance affect firm value. the relationship between green accounting, environmental performance, and firm value is not mediated by financial performance. it shows that the business is increasing environmental costs and participating in the proper award can carry out activities that do not directly harm the environment, and the company is environmentally conscious. this condition fits the legitimacy and stakeholder theory. if the business can focus on environmental management, the community will accept it well, and the company will have a good reputation. high trust and loyalty enhance the company's profits and value. this study varies from other research in that it comprehensively examines the effects of green accounting and environmental performance, both direct and indirect, on financial performance and firm value. keywords: green accounting; environmental performance; financial performance; firm value introduction currently, indonesia is experiencing a social and environmental crisis that threatens the lives of living things, including humans, on earth. the results of the activities of business organizations on the environment have caused scarcity of resources, environmental degradation, oil spills, water pollution, air and noise pollution, health hazards, and societal pollution and thus cause an imbalance in the environmental system. businesses focus on the environment and the social environment in addition to the economic benefits (chinedu & ogochukwu, 2020; lako, 2018; zhang et al., 2022). the indonesian government has strengthened corporate responsibility towards the environment, especially for companies engaged in the natural resources sector, through law number 40 of 2007 concerning limited liability companies (republic indonesia law, 2007). law number 32 of 2009 concerning environmental protection and management (republic indonesia law, 2009). environmental policies that are carefully crafted can boost competitive advantage. environmental rules and fines are expensive and will have an impact on competitiveness, even though companies who adhere to them will have a good influence on the environment (romero et al., 2018). environmental costs are included as one of the acceptable costs in the economy, and the environment is integrated as a source of capital in green accounting (chinedu & ogochukwu, 2020; c. h. cho & patten, 2013; rounaghi, 2019). for users to evaluate both economic and non-economic decisions, integrated accounting information is necessary. environmental and social disclosure comes with costs, but increasingly large public companies are increasingly making higher and better quality disclosures (lako, 2019; qiu et al., 2016). with people's deepening concern for articles review https://creativecommons.org/licenses/by-nc/4.0/ https://crossmark.crossref.org/dialog/?doi=10.31098/jgrcs.v3i1.1487&domain=pdf https://orcid.org/0000-0001-6707-3704 https://orcid.org/0009-0009-6452-232x https://orcid.org/0000-0001-8919-198x j. of gov. risk management compliance and sustainability 59 environmental protection awareness, people no longer only pay attention to the authenticity of accounting information but start paying attention to whether companies make appropriate contributions to environmental protection (lusiana et al., 2021; nor et al., 2016). a company's efforts to create a comfortable environment are referred to as "environmental performance". environmental performance is a concept that expresses the degree of environmental destruction caused by business activities. better environmental performance due to less damage to the environment. the financial performance, on the other hand, declines as environmental damage increases. implementing environmental impact certification is a challenge in and of itself, though. it is due to the possibility of stakeholder conflicts of interest. environmental impacts concern companies and are why a company implements environmental awards (lee et al., 2016; wiengarten et al., 2017). the performance rating program (proper), often known as the rating program, can be used to measure how well indonesian companies manage their environmental impact. an evaluation program for the actions taken by persons in charge of businesses and/or activities to prevent environmental harm or pollution is proper (ministry of environment, 2002). the ministry of environment periodically checks companies' compliance level in implementing environmentally friendly production processes. test results are reported to the company in the form of a proper award, ranging from the worst black rating to the best gold rating (utama, 2011). investors will respond favorably to companies that do well in terms of the environment, which will boost the company's worth by driving up the price of its stocks. companies must also perform financially in their operations or processes to have high corporate value. (abdi et al., 2020). the financial performance will show whether the company's financial condition is good or bad. measuring a company's financial performance using financial ratios shows changes in the company's financial condition and the company's potential to manage company assets in increasing company value (lusiana et al., 2021). the high corporate value will have an impact on investor confidence in current and future financial performance. to achieve good corporate value, of course, a company must be able to optimize its operational activities to generate targeted profits (chabachib et al., 2019; s. j. cho et al., 2019; santosa et al., 2020). this article summarizes various research studies on the relationship between green accounting, environmental performance, financial performance, and firm value. some studies, such as those (emmanuel, 2021; lusiana et al., 2021; pedron et al., 2021; riyadh et al., 2020), support the idea that green accounting has a positive effect on financial performance, while others, such as those by (igbekoyi et al., 2022; setiawan et al., 2020), green accounting has no effect on financial performance. research that supports environmental performance affects financial performance (clarkson et al., 2011; hanjani & kusumadewi, 2022; iwata & okada, 2011; manrique, 2017; sara et al., 2022). however, it differs from a study by (abdullah et al., 2019; gull et al., 2022; lu & taylor, 2018; pintea et al., 2014; rokhmawati et al., 2015), environmental performance does not affect financial performance. research that supports green accounting has an effect on firm value (dewi & edward narayana, 2020; radhouane et al., 2020); however, it differs from a study by (carandang & ferrer, 2020; qiu et al., 2016), green accounting has no effect on firm value. research that supports environmental performance influences firm value (lestari & restuningdiah, 2021; sapulette & limba, 2021; wahidahwati & ardini, 2021); however, it differs from a study by (ratri & dewi, 2017; rinsman & prasetyo, 2020; soedjatmiko et al., 2021), environmental performance has no effect on firm value. research that supports the effect of financial performance on firm value (abdi et al., 2020; dianawati & fuadati, 2016; salehi et al., 2021; santosa et al., 2020), however, it differs from a study by (angelina & nursasi, 2021; astuti et al., 2022), financial performance has no effect on firm value. j. of gov. risk management compliance and sustainability 60 the study of (ramadhany et al., 2021) supports the relationship between green accounting and firm value is mediated by financial performance; however, it differs from a study by (erlangga et al., 2021; febriani et al., 2021), the relationship between green accounting and firm value is not mediated by financial performance. similarly, some studies suggest that financial performance mediates the relationship between environmental performance and firm value, such as (fauzi, 2022; khairiyani et al., 2019); however, it differs from a study by (deswanto & siregar, 2018; rinsman & prasetyo, 2020), the relationship between environmental performance and firm value is not mediated by financial performance. therefore, this study fills in the gaps left by earlier studies that used alternative concepts to examine the flypaper effect in natural settings. based on the above description of the phenomena and research gaps, this topic is interesting to learn more about: does financial performance mediate the impact of green accounting and environmental performance on firm value. the remainder of this essay is structured as follows: after the introduction, it reviews relevant literature, looks at applicable theories, and hypotheses development, and then elaborates on the study methodology. the following sections provide the analysis of the empirical data, the results and discussion, the conclusion, the limitations, and suggestions for further research. literature review stakeholder theory according to the principle of stakeholders, businesses are accountable to more than just their owners and have the authority to request information from management to report on their operations to stakeholders (gull et al., 2022; yoon & chung, 2018). in today's business environment, frequent and transparent corporate engagement with stakeholders is no longer optional but necessary to obtain stakeholder approval (singh et al., 2017). corporate social and environmental responsibility strengthens the relationship between companies and the communities in which companies operate (devie et al., 2019). legitimacy theory this theory emerges from the social science paradigm. it emphasizes this notion that companies should order their social functions by fulfilling social needs and contributing to society having a higher good image (pedron et al., 2021; riyadh et al., 2020). legitimacy has its role in facilitating the relationship between the company and stakeholders. companies use their social reporting to maintain healthier relationships with related parties to continue to earn more profits (mahrani & soewarno, 2018). firm value firm value is the perception of capital owners on the company's success, which is often associated with stock prices. high corporate value is the desire of the company owner, which shows the prosperity of the shareholders (abdi et al., 2020; sukamulja, 2021). companies expect financial managers to take the best actions for the company by maximizing company value to achieve prosperity owners or shareholders. firm value can provide maximum shareholder wealth if stock prices increase, it will generate wealth for shareholders (soewarno et al., 2020). financial performance financial performance is a company goal, which describes the company's ability to increase company profits by generating profits. financial reports are made to describe past financial conditions and are used for future financial forecasts (fahmi, 2016). the ability of a business to turn a profit using sales, total assets, and capital is known as profitability. profitability ratios are j. of gov. risk management compliance and sustainability 61 crucial for a firm's longevity since they enable an analysis of the contribution of shortand longterm corporate earnings (santosa et al., 2020). green accounting green accounting or environmental accounting involves identifying, measuring, and allocating environmental expenses. these costs are then integrated into business decision-making and disclosed to stakeholders (lako, 2019; lusiana et al., 2021). accounting reports integrate social and environmental data with the presentation of financial data (astuti et al., 2022). costing, investment analysis, and strategic management decisions are just a few of the areas where environmental accounting is being used more and more. many companies are currently dealing with environmental problems and looking for appropriate ways to inform the public and use this information to protect the environment better. consequently, environmental accounting is a method of environmental preservation (rounaghi, 2019). environmental performance the regulation of environmental components is a crucial aspect of an organization's environmental management system, as it directly affects the quantifiable outcome of the system's environmental performance. the degree of environmental harm resulting from business operations is a key metric for measuring an organization's environmental performance. a corporation with less environmental damage is considered to have better environmental performance. on the other hand, the environmental performance of a corporation is likely to deteriorate as the amount of environmental damage caused by its operations increases. therefore, it is essential for companies to prioritize effective regulation of their environmental components to ensure optimal environmental performance (hanjani & kusumadewi, 2022). in indonesia, the implementation of environmental performance is measured by the achievements of companies participating in the corporate performance rating assessment program in environmental management (proper). the basis for this assessment is then translated into a ranking of results symbolized by color categories starting from gold as the most/very good rating, then green as a good rating, blue as a moderate rating, red as a bad rating, and black as the most/very bad rating (ministry of environment, 2002). firm size an indicator of a company's size based on its total assets is called the firm size. firm size plays an important role in presenting financial statements (seth & mahenthiran, 2022). companies with large sizes have more opportunities to expand their activities to earn revenue. the bigger the size, the greater the company's value (surjandari et al., 2020; younis & sundarakani, 2020). hypothesis development 1. green accounting on financial performance green accounting is proof that a company cares about the environment through environmental costs in the financial statements issued by the company for the environment. green accounting can increase potential revenue and boost cost efficiency by being used more frequently (wang et al., 2019). increasing the social trust of stakeholders like the public and consumers will enhance financial performance, such as achieving maximum company profitability (endiana et al., 2020). research that supports green accounting has an effect on financial performance (emmanuel, 2021; lusiana et al., 2021; pedron et al., 2021; riyadh et al., 2020). however, it differs from a study by (igbekoyi et al., 2022; setiawan et al., 2020), green accounting has no effect on financial performance. based on the explanation above, the following hypothesis is formulated: h1 : green accounting has an effect on financial performance. j. of gov. risk management compliance and sustainability 62 2. environmental performance on financial performance companies implementing environmental performance are also evidence of corporate responsibility towards stakeholders. corporate social and environmental responsibility strengthens the relationship between the company and the communities in which it operates. ignoring the interests of stakeholders can tarnish the company's public image, which will have a negative impact on its financial performance (aggarwal, 2018). the company's environmental performance is influenced by several factors, including customers or consumers who want cleaner products without damaging the environment as well as environmentally friendly use and disposal. it means that businesses with strong environmental performance will undoubtedly attract more consumer attention, which will boost sales of the business's products and positively affect its business performance. research that supports environmental performance affects financial performance (clarkson et al., 2011; hanjani & kusumadewi, 2022; iwata & okada, 2011; manrique, 2017; sara et al., 2022). however, it differs from a study by (abdullah et al., 2019; gull et al., 2022; lu & taylor, 2018; pintea et al., 2014; rokhmawati et al., 2015) environmental performance does not affect financial performance. based on the explanation above, the following hypothesis is formulated: h2 : environmental performance has an effect on financial performance. 3. green accounting on firm value green accounting focuses not only on financial transactions and their objects, but also on social and environmental accounting. the company's value increases and its reputation improves with greater disclosure of corporate social responsibility (chen & lee, 2017). therefore, companies with a positive reputation will have an impact on the value of the business. research that supports green accounting has an effect on firm value (dewi & edward narayana, 2020; radhouane et al., 2020); however, it differs from a study by (carandang & ferrer, 2020; qiu et al., 2016), green accounting has no effect on firm value. based on the explanation above, the following hypothesis is formulated: h3 : green accounting has an effect on firm value. 4. environmental performance on firm value the state of the environment can affect how the public perceives a company and how well it performs. investors and the community will benefit if the business pays attention to ethical environmental concerns in order to boost the firm value (fauzi, 2022). research that supports environmental performance influences firm value (lestari & restuningdiah, 2021; sapulette & limba, 2021; wahidahwati & ardini, 2021); however, it differs from a study by (ratri & dewi, 2017; rinsman & prasetyo, 2020; soedjatmiko et al., 2021) environmental performance has no effect on firm value. based on the explanation above, the following hypothesis is formulated: h4 : environmental performance has an effect on firm value. 5. financial performance on firm value every company certainly wants to get a high value. for businesses to be able to continue operating, strong financial performance is crucial. a rise in financial performance, as indicated by the rise and fall of the profitability ratio, will affect the company's value, whether it is for better or worse, which suggests that shareholder prosperity is very high (nuryaman, 2015; pamungkas., 2020). research that supports the effect of financial performance on firm value (abdi et al., 2020; dianawati & fuadati, 2016; salehi et al., 2021; santosa et al., 2020); however, it differs from a study by (angelina & nursasi, 2021; astuti et al., 2022), financial performance has no effect on firm value. based on the explanation above, the following hypothesis is formulated: h5 : financial performance an effect on firm value. j. of gov. risk management compliance and sustainability 63 6. financial performance mediate the effect of green accounting on firm value the costs incurred to carry out environmental management activities will affect public perception of the company as favorable. companies that carry out environmental conservation programs will positively impact public trust, which will generate high trust and loyalty to the company (lusiana et al., 2021). so that it can improve financial performance, which has an impact on company value. the greater the application of green accounting can affect the financial performance and value of the company. research that supports the relationship between green accounting and firm value is mediated by financial performance (ramadhany et al., 2021); however, it differs from a study by (erlangga et al., 2021; febriani et al., 2021), the relationship between green accounting and firm value is not mediated by financial performance. based on the explanation above, the following hypothesis is formulated: h6 : green accounting and firm value are mediated by financial performance. 7. financial performance mediates the effect of environmental performance on firm value due to the company's production activities' disruption and even destruction of the environment as well as their effects on society, various environmental issues that arise in indonesia can give rise to demands from the community. companies use their social reporting to maintain healthier relationships with related parties to continue to earn more profits and grow (hardiyansah et al., 2021). because a variety of factors will affect the organization's goals, including financial performance and firm value, the company's environmental concern will be valuable. research that supports the relationship between environmental performance and firm value is mediated by financial performance (fauzi, 2022; khairiyani et al., 2019); however, it differs from a study by (deswanto & siregar, 2018; rinsman & prasetyo, 2020), the relationship between environmental performance and firm value is not mediated by financial performance. based on the explanation above, the following hypothesis is formulated: h7 : environmental performance and firm value are mediated by financial performance. conceptual framework green accounting and the environment are two independent variables examined in this study on firm value through finance and tested using firm size as a control variable. based on this relationship, the following describes the research methodology applied in this study: source: authors' elaboration figure 1. conceptual framework j. of gov. risk management compliance and sustainability 64 research method this study uses secondary data based on published annual reports. the sample for this study is all companies listed on the indonesia stock exchange for the period 2016 – 2021. the method used in this research is quantitative with a causality design. the sampling method uses purposive sampling to test the interrelationships between variables. based on these criteria, 83 companies were obtained as a research sample (2016 – 2021), so the total sample observed in this study was 498. table 1. description of variables variables indicator source dependent variable: firm value tobins q = (market value + total debt)/ total assets (sukamulja, 2021), (abdi et al., 2020) financial performance return on assets = earning after tax/total assets (fahmi, 2016), (santosa et al., 2020) independent variable: dummy variabel green accounting 1 = environment cost, 0 = nonenvironment cost (lusiana et al., 2021), (astuti et al., 2022) environment performance proper rating = gold score 5, green score 4, blue score 3, red score 2, black score 1. (ministry of environment, 2002), (hanjani & kusumadewi, 2022) control variable: firm size log of total assets (seth & mahenthiran, 2022) source: authors' elaboration the data analysis method in this study is path analysis with two regression models. the direct and indirect influences of the independent variables on the dependent variable are calculated by path analysis (wati, 2018). model 1 𝑅𝑂𝐴 = 𝛼 + 𝛽1𝐺𝐴 + 𝛽2𝐸𝑃 + 𝛽3𝑆𝑖𝑧𝑒 + 𝜀 1…..(1) model ii 𝑇𝑜𝑏𝑖𝑛′𝑠 𝑄 = 𝛼 + 𝛽4𝐺𝐴+ 𝛽5𝐸𝑃 + 𝛽6𝑆𝑖𝑧𝑒 + 𝛽7𝑅𝑂𝐴 + 𝜀 2……(2) findings and discussion descriptive statistical analysis the data description that is seen from each variable's average (mean), maximum, minimum, and standard deviation is described by the descriptive statistical test result. table 2. the summary of descriptive statistic test result variable tobin's q roa ga ep size mean 1.979116 5.787249 0.604418 3.267068 12.92841 maximum 23.29 53.22 1 5 14.57 minimum 0.08 -230.29 0 2 11.81 std. dev. 2.45148 15.52625 0.489467 0.580501 0.615011 observations 498 498 498 498 498 source: authors' calculation table 2 found that the firm value proxied by tobin's q obtains a mean value is 1.979116. the j. of gov. risk management compliance and sustainability 65 maximum value of 23.29. the minimum value of 0.08 and the standard deviation value of 2.45148. for financial performance proxied by roa obtains mean value is 5.787249. the maximum value of 53.22. the minimum value of -230.29 and the standard deviation value of 15.52625. green accounting (ga) obtains a mean value of 0.604418. the maximum value of 1. the minimum is 0, and the standard deviation is 0.489467. environmental performance (ef) obtains a mean value of 3.267068. the maximum value of 5. the minimum value of 2, and the standard deviation value of 0.5850501. the control variable proxied by firm size (size) obtains a mean value of 12.92841. the maximum value of 14.57. the minimum value of 11.81 and the standard deviation value of 0.615011. hypothesis test result based on model testing with panel data. by providing "cross section-weight," the appropriate model is utilized to test this hypothesis using a common effect model. as shown in the table below: table 3. testing results of model 1 variable prediction main model result robust model result constant -21.018088 -6.523431 ga 𝛽+ 1.849960*** accepted 1.945448*** accepted (5.711152) (6.287802) ep 𝛽+ 2.064992*** accepted 3.352873*** accepted (5.146931) (12.80612) size 𝛽+ 1.422726*** accepted (5.801458) r2 0.302963 0.309611 adjusted r2 0.298730 0.306822 f-statistic 71.57123 110.9936 note: ***significant a 1%. **significant a 5%. *significant a 10% source: authors' calculation the effect of green accounting on financial performance based on table 3, the results of the first hypothesis test show that green accounting significantly affects financial performance. therefore h1 is accepted. the higher the implementation of green accounting in a company, the higher its financial performance as evidenced by the analysis of financial ratios based on reporting by the company. a good company will disclose all relevant financial, social, and environmental data. the benefits a business can experience on the cost front include improving efficiency, avoiding potential liabilities, being better positioned to meet or exceed standards, and erecting barriers to entry for potential competitors. as a result, stakeholders like the public and consumers will have more social trust in the company, which will help it perform better financially. the study's findings are consistent with research done by (emmanuel, 2021; lusiana et al., 2021; pedron et al., 2021; riyadh et al., 2020). j. of gov. risk management compliance and sustainability 66 the effect of environment performance on financial performance based on the results of the second hypothesis test show that environmental performance has a significant effect on financial performance. therefore h2 is accepted. the proper award outcomes were successful in luring investors to the business. the higher the environmental performance rating, the better the company's performance. the company's awareness that determines good environmental performance is a form of corporate accountability to society and the environment. a good reputation can increase public interest in buying its products, which will increase financial performance. environmental performance can be taken into account when assessing a business's financial performance. the study's findings are consistent with research done by (clarkson et al., 2011; iwata & okada, 2011; manrique, 2017; sara et al., 2022). table 4. testing results of model 2 variable prediction main model hypothesis robust model hypothesis constant 4.573135 1.57501 ga 𝛽+ 0.136895** accepted 0.168553** accepted (2.284477) (2.566987) ep 𝛽+ 0.134285** accepted -0.107797* accepted (2.344579) (-1911114) roa 𝛽+ 0.052068*** accepted 0.047188*** accepted (16.00307) (13.81052) size 𝛽+ -0.290406*** (-6.728975) r2 0.421346 0.356665 adjusted r2 0.416651 0.352758 f.stat 89.74438 91.29119 note: ***significant a 1%. **significant a 5%. *significant a 10% source: authors' calculation the effect of green accounting on firm value based on table 4, the results of the third hypothesis test show that green accounting has a significant effect on firm value. therefore h3 is accepted. the allocation costs will have a big impact on investors, so investor confidence will be high in the company. the allocation of environmental costs will increase the firm value and assist in realizing sustainable development so that investors and the public will receive a positive image and increase firm value. the study's findings are consistent with research done by (dewi & edward narayana, 2020; radhouane et al., 2020). the effect of environment performance on firm value based on the results of the fourth hypothesis test show that environmental performance has a significant impact on firm value. therefore h4 is accepted. proper stands for corporate social responsibility, particularly in the context of environmental issues. it is because the business will j. of gov. risk management compliance and sustainability 67 pay closer attention to its surroundings. environmental disclosure made by companies is an obligation that must be carried out to comply with public rules and regulations. when a company has fulfilled its obligations in disclosing its environmental performance, it will influence investor perceptions. the more investors who place their shares in a company with a good image, it will certainly increase the company's progress so that it has an impact on increasing firm value. the study's findings are consistent with research done by (lestari & restuningdiah, 2021; sapulette & limba, 2021; wahidahwati & ardini, 2021). the effect of financial performance on firm value based on the results of the fifth hypothesis test show that financial performance has a significant effect on firm value. therefore h5 is accepted. when the company's financial performance is good, the future prospects are also good. the higher the company's prospects, the more investors will want to invest in the company so that the stock price rises and the firm value increases. good financial performance will increase the interest of investors to invest in order to increase the firm's value. the study's findings are consistent with research done by (abdi et al., 2020; dianawati & fuadati, 2016; salehi et al., 2021; santosa et al., 2020). path analysis the path analysis model is used to show the direction of the relationship between research variables that are influenced by the existence of a mediating or intervening variable in the path of variable influence. the results of the path coefficient are sought first by the indirect path coefficient value by multiplying the estimated value of the x to y variable with the estimated value of the y to z variable and then compared with the sobel value obtained. table 4. testing results of sobel variable direct indirect t-count t-table information ga > roa > tobins q 0.136895 1.096324 0.878780 1.66412 t-count < t-table ep > roa > tobins q 0.134285 0.107520 0.878971 1.66437 t-count < t-table source: authors' compilation. 2022 financial performance mediates the relationship between green accounting on firm value based on table 4, the results of the sixth hypothesis test show that the t-count is 0.878780 and the value is smaller than the t-table 1.66412, so it can be concluded that the relationship between green accounting and firm value is not mediated by financial performance therefore h6 is rejected. if the company can implement and increase the disclosure of environmental costs. then it will be included as one of the efforts to implement green accounting, which will indirectly increase profitability because it can provide a good reputation for products or services for both the environment and social. conversely, if it is not implemented it will reduce the product's selling power so that profits will decrease. the application of green accounting will have a big impact on investors so that investor confidence will be high in the company. the allocation of environmental costs will increase the value of the company and assist in realizing sustainable development so that investors and the public will receive a positive impression. investors will have more faith in the company's stability in the future because this is being done to avoid the negative sanctions that the business will experience as a result of environmental issues. this will add to society's good image and increase the company's value. the study's findings are consistent with research done by (erlangga et al., 2021; febriani et al., 2021). j. of gov. risk management compliance and sustainability 68 financial performance mediates the relationship between environmental performance on firm value the results of the seventh hypothesis test show that the t-count is the t-count is 0.878971, and the value is smaller than the t table 1.66437, so it can be concluded that the relationship between environmental performance and firm value is not mediated by financial performance. therefore h7 is rejected. for investment decisions to have no bearing on environmental performance, which is disclosed in environmental disclosures, and therefore have no bearing on the company's financial performance, environmental performance still has not yet become a disclosure of relevant information for investors. not a review of the company by investors that takes into account how it performs in terms of the environment, but good or bad reporting of environmental performance in the company has no effect on financial performance because investors only pay attention to the company's condition in the market whether it is profitable or not when investing in increasing the firm value. the study's findings are consistent with research done by (deswanto & siregar. 2018). based on the results that have been obtained. then it can be seen that the hypotheses can be accepted and rejected, as shown in the table below. table 6. hypothesis test summary hypothesis explanations result h1 the effect of green accounting on financial performance accept h2 the effect of environment performance on finance performance accept h3 the effect of green accounting on firm value accept h4 the effect of environment performance on firm value accept h5 the effect financial performance on firm value accept h6 financial performance mediates the relationship between green accounting on firm value reject h7 financial performance mediates the relationship between environmental performance on firm value reject source: author’s compilation, 2022 conclusions this study shows that green accounting and environmental performance had an impact on financial performance. while green accounting, environmental and financial performance affect firm value. the relationship between green accounting, environmental performance, and firm value is not mediated by financial performance. accordingly, companies that allocation of environmental costs and participate in the proper award can carry out activities that do not directly harm the environment, and the company is environmentally conscious. the proper program aims to provide a more comprehensive and in-depth assessment of the company's movements in developing programs that care for the environment and are proven to comply with applicable laws and regulations. so that the company's priorities include not only financial success but also a consideration for the environment, this condition fits the legitimacy and stakeholder theory. if companies could pay attention to environmental management. its presence will be well received by the community, and the business will enjoy a positive reputation. high trust and loyalty enhance the company's profits and value. limitation & further research the scope of this research is limited to companies that publish company annual reports and obtain a performance rating program (proper) certificate. based on the findings of the studies j. of gov. risk management compliance and sustainability 69 mentioned, it is recommended for further research to explore the conditions that may contribute to the differences observed in the results. it could involve increasing the sample population and describing businesses on a global scale rather than just focusing on local or indonesian companies. additionally, it may be beneficial to investigate the use of mediating variables other than environmental disclosure, as well as apply more general assessments of environmental performance. finally, extending the research time to collect more samples could provide a more comprehensive understanding of the relationship between green accounting, environmental performance, financial performance, and firm value. acknowledgments we would like to express our sincere gratitude to muhammadiyah university of technology jakarta and all other parties that contributed significantly to the success of this study. we thank the editors and two anonymous referees for their critical comments and suggestions. we also thank participants at the 2nd international conference on multidisciplinary conference theme: "toward innovation excellence; 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(2022). coordinated development between green finance and environmental performance in china: the spatial-temporal difference and driving factors. journal of cleaner production, 346, 131150. https://doi.org/https://doi.org/10.1016/j.jclepro.2022.131150 available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 1 number 2 (2021): 01-06 corresponding author atty. prackie jay t. acaylar, prackiejay_acaylar@yahoo.com doi: 10.31098/jgrcs.v1i2.686 research synergy foundation effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill1 1 technological institute of the philippines, manila abstract excessive exemption is detrimental to the effectiveness of the whole value added tax system. this research is primarily focused on vat exemption affecting the business industry as it influences the gross domestic product of the three (3) selected asean countries, namely, the philippines, indonesia, and singapore. the result of the study showed a negative relationship between vat exemption policy and gdp growth rate among the selected asean economies. although the vat collections among the selected asean countries are significantly increasing with the course of time, the results showed that as the number of vat exemptions increases by one unit, the degree of growth of the gdp is expected to decrease at a rate of 0.900 units. thus, a conducive business environment may be achieved by decreasing the number of vat exemptions and, accordingly, increasing the gdp growth rate. keywords: value added tax, gross domestic product, vat exemption policy, asean economies, gdp growth rate this is an open access article under the cc –by-nc license introduction taxation is important to society and to the country as a whole. the tax collected is utilized to finance programs of the government relating to the general welfare of the people; it can be used to improve employee benefits, provide pensions, and other social services and benefits for its citizens. taxation is fundamental and imperative to the economy of the country. it is used to help businesses and push the economy in cases of pandemic and financial recession. taxation, therefore, plays a better prospect for the country as it buildups its economic welfare. there are several kinds of taxes imposed by the bureau of internal revenue (bir), the tax administrator of the country. this study is focused on a particular kind of taxation, which is the value added tax (vat), highlighting the crucial roles of vat exemptions. vat is a consumption tax imposed on the sale, barter, exchange, or lease of goods or properties and services. it is an indirect tax, which may be transferred on to the consumer, transferee, or lessee of goods, properties, or services. it is also a type of indirect tax gathered at different phases of the productiondistribution series. if correctly planned and executed, the vat is efficiently collected on the genuine enhanced value produced at that phase; as such, the vat may be treated as a distinct retail sales tax applied in a distinctive style. the vat affects all persons who sell, barter, exchange, or lease goods or properties or renders services in the pursuit of a trade or business, provided that the total sales or receipts surpass the maximum http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) 2 │ limit. the term “in the pursuit of trade or business” refers to the ordinary and habitual conduct of the business activity, including dealings incidental thereto. one of the roles of vat in the country is its influence on fiscal development. in developing countries like the philippines, vat contributes to the gross domestic product (gdp) of the economy, leading to fiscal development. gdp is one of the most commonly employed instruments of the country’s economy. it is the entire worth of products manufactured within a country’s boundaries in a particular period. it is one of the main gauges utilized to evaluate the wellbeing of a particular economy. this study primarily focused on vat exemption affecting the business industry as it influences the gdp of the three (3) selected countries in the association of southeast asian nations (asean), namely, the philippines, indonesia, and singapore. it should be emphasized that excessive vat exemptions are injurious to the effectiveness of the entire vat policy, augment unintentional misrepresentations, and inflict bigger inconvenience on the tax management. multiple exemptions inescapably diminish the vat output and would shrink the resources required to aid the underprivileged, push governments to formulate an impromptu amendment in the tax system and generate ambiguity in the commercial milieu. this study focused on the many loopholes of the vat exemptions. evidently, the philippine vat system has too many exemptions and loopholes. thus, fewer exemptions and loopholes will result in more collections for the government. the stumpy percentage of vat collection to gdp is caused by profuse exemptions under the philippine vat system. prior to ra 10963 or the tax reform for acceleration and inclusion (train) law, it is noted that there were 59 vat exemptions in the philippine tax code; indonesia has 37 exemptions, thailand 37, vietnam 25, and singapore 7. on top of the 59 vat exemptions, under special laws, there are more than 80 entities/individuals who are afforded vat exemptions in the philippines. some special laws provide for explicit vat exemption, while others provide for exemption from all taxes, including vat, or a certain tax rate in lieu of all taxes, including vat (jurado, 2017). under the train law, the philippines reduced the exemptions from 139 to 53. this study showed how and why, in the face of innumerable modification endeavors for the past decades, the vat policy of the philippines persists to deteriorate from lingering flaws. based on the study conducted by the world bank (2015), it was estimated that the median vat variance from 2006 to 2013 denoted nearly 63% of possible vat income. of this, 28% was a consequence of permissible exclusions and distinctive treatment, while 35% may be concomitant with nonfulfillment. the same research observed that some exclusions under the existing vat policy have a tendency to generate fiscal misrepresentations (manasan, 2017). the enactment of the train law on january 1, 2018, has reduced the number of vat exemptions; nevertheless, some vat exemptions under the new train law tend to create economic distortions and redundancy. this is because the vat exemption under the train law did not totally remove those unreasonable exemptions. thus, the base of vat has to turn out to be too restricted because of copious exemptions (manasan, 2017). consequently, the tax policy has and will persistently fall short of reaching the recognized income collection and forced government’s competence to fund comprehensive development. based on the study conducted by the national tax research center (ntrc), six (6) countries of the ten (10) members of the asean are levying the vat, viz., philippines, cambodia, lao people’s democratic republic (pdr), thailand, vietnam, and indonesia. the three (3) countries, namely singapore, myanmar, and malaysia levy the vat-like consumption tax, which is the goods and services tax (gst). brunei, on the other hand, does not impose vat or its counterpart consumption tax (jurado, 2017). journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) │ 3 the research effected by the organisation for economic co-operation and development (oecd) presents that vat was at the beginning established to simplify the commercial transaction, predominantly among the european union. it was developed to apply at the border on imports and refunded at the border on exports, avoiding taxes from increasing whenever goods moved through a country. vat does this by putting on gradual taxes at every phase of production, with invoice marks itemizing how much tax was entrenched in the selling price. another study conducted by the world bank (2005) on tax policy in developing countries reveals that vat is more intricate to manage than other forms of consumption tax, and the intricacy normally points to high collection costs. however, the taxes superseded by the vat in some countries, like the philippines, are commonly complicated in their outline and pierced with constricted tax base, compound rates, and copious exclusions. this study evaluated the vat exemption with the end view of eliminating double or redundant benefits that the laws or statutes may have accorded to selected unqualified corporations. the same study reveals that a non-exemption vat would prevent the spilling issues and thus would not breed misrepresentation in production. in addition, a comprehensive-based vat reduces burden loss intrinsic in any form of consumption tax. these enviable attributes of the vat are, however, foregone if the tax is pierced with several exclusions. thus, too much exemption in vat leans to wear down the vat base, diminish the income collection, on the one hand, split the vat sequence and in so doing stimulate spilling issue on the other. this study used the harrod-domar theory of economic growth to establish the conditions of wealth to attain a specified rate of fiscal growth (harrod, 1939; domar, 1946). harrod-domar theory is used since it is useful in designing models to raise resources (chetty and pradhan, 2015) and justifying how economies would need to grow (or would be left to stagnate) over time. moreover, since this study determined the significant relationship between vat exemption and growth rate in asean region and proposed a model for the conducive business environment, it used the growth rate theory developed by walt whitman rostow. rostow's growth rate theory is a structuralist paradigm of fiscal growth. it is a function of the liberal school of economics placing importance on the effectiveness of contemporary thoughts of free trade. it is a theory of growth that is primarily concerned with the national economy (parr, 2001), and it is one of the foremost historical paradigms of fiscal growth (henegedara, 2016). rostow growth theory was accepted as a governmental concept as well as an illustrative fiscal study of progress and development. (thirlwall, 2002) figure 1. research framework journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) 4 │ as shown in figure 1, the input is the secondary data on vat collection of the selected asean countries and the percentage to gdp for the years 2000-2015. the process is the identification of a significant relationship between vat exemption and growth rate in the asean region. the output is the proposed conducive business environment model. research method documents were employed since this study deals with documents. the analysis and interpretation of data were made in light of the general vision of the vat exemption policy using the directed approach specific to this method. the secondary data used in this study are total vat collection and its percentage to gdp and the list of vat exemptions from the selected asean countries. vat collection, as a percentage of gdp, was used to investigate trends in vat collection in asean region. to confine the focal point of this research, statistics throughout the period of 2000-2015 are used to analyze the trend of vat collection as a percentage to gdp on three (3) selected asean countries. accordingly, analysis on vat exemption policy will be limited only to the three (3) selected asean countries. in order to determine the extent of the effect of vat exemption on the growth rate, as well as their significant relationship, the list of vat exemptions from the selected asean countries was analyzed. this study used the least square method, regression, simple regression, multiple regression, and analysis of variance (anova) as statistical tools in analyzing the secondary data. data gathering procedures the main foundations of secondary data for this study are the collection from the libraries of bir, ntrc, international monetary fund (imf), department of finance (dof), and bangko sentral ng pilipinas (bsp); websites of indonesian, singapore, and philippine government departments/agencies; and other websites with prevailing quantitative figures and statistics linked to vat system of the asean countries being deliberated. the vat rates statistics gathered from klynveld peat marwick goerdeler’s (kpmg) records were ascertained by comparing it with taxation data from big local and international auditing firms such as price waterhouse coopers (pwc), deloitte touche tohmatsu, binder dicker otte (bdo), isla lipana & co., and sycip gorres & velayo (svg). statistics on tax income were obtained from precise source such as the ministry of finance or the tax department of the selected asean countries. findings and discussion tax-to-gdp shares are affected by an array of local and international components. aizenman et al. (2015) observed that in asia, government efficiency and organization value are definitely associated with the level of relationship between tax and gdp. the geographic position is also significant: closed-in countries are inept at levying taxes on goods and services moving in the country than island countries (unescap, 2014). in addition, international issues, comprising the tax system of other countries, can influence tax-to-gdp relations. several studies have been conducted showing that low vat collection may be attributable to numerous vat exemptions. thus, for a vat system to be effective, the government must lessen the number of exemptions to a certain degree possible. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) │ 5 trend of vat collection in selected asean countries within the last sixteen (16) years. figure 2. total vat collections among selected asean economies 2000-2015 (values are in million us dollars) the figure above shows the historical trend of vat collections among asean economies such as the philippines, indonesia, and singapore based on the secondary data gathered. except for a few years (2005, 2009, 2014, and 2015), there has been a consistent increase in the number of vat collections in the last 16 years. results of the linear regression provide further analyses on the trend of vat collections in the last 16 years. table 1 – linear trend model results for vat collections among selected asean economies 2000-2015 the table above summarizes the trend results of the vat collections for the selected asean economies. the r-squared, which serves as the coefficient of determination, provides a measure of how much of the vat collections are accounted for from the element of time. the value of the r-squared relates that 97.2% of the variations in the vat collections are explained by the element of time. the f-ratio provides a measure of the model's overall significance. the computed f-ratio (241.871) has a p-value of 0.000, less than the level of significance of 0.05. this, in effect, relates that the formulated linear trend model is significant. the t-statistics provide a measure of the beta coefficients' individual journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) 6 │ significance. between the 2 predictors, the constant generated a t-statistic, with p-value (0.788) greater than the level of significance of 0.05. this, in effect, relates that the constant is not a significant predictor in the linear trend model. however, results are different for the time variable. the time variable generated a t-statistic with p-value (0.000), less than the level of significance of 0.05. this, in effect, relates that time is a significant predictor of the number of vat collections in the last 16 years. the regression (beta) coefficient of time particularly relates that, on average, the amount of vat collections increases at a rate of usd 3,270.713 million every year. when the regression result is summarized to an equation, the resulting linear trend model is shown below. vat collections = -557.420 + 3,270.713 time for comparison purposes, figures for the 3 selected asean countries are heretofore presented on a per-country basis. trend of vat collections: per country figure 3. total vat collections of the philippines : 2000-2015 (values are in million us dollars) figure 4 – total vat collections of indonesia : 2000-2015 (values are in million us dollars) journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) │ 7 figure 5 – total vat collections of singapore : 2000-2015 (values are in million us dollars) consistent with the overall trend, the philippines, indonesia and singapore recorded continuously increasing trend in vat collections. however, it should be emphasized that there were a few noted years when collections posted a decline. philippines : trend of vat collections in the case of the philippines, collections posted a decline in 2004 and 2008. the decline of vat collection may be caused by several factors like vulnerable tax management, failure to link the excises to price increases, and the vain attempt to merge trade liberalization with counterbalancing income measures, as well as the government’s decisiveness in 2002 to restraint buildups in electricity tariffs and vat exemption. in 2004, philippines long advocated increasing the vat rate from 10% to 12%, which was relatively tolerant given the exemption of small companies and unrefined food (imf, 2005). thus, when ra 9337 was implemented in 2005, which raised the vat rate from 10% to 12%, total vat collections increased from php156.7 billion in 2005 to php259.8 billion in 2006. another reason for the increase of vat collection in 2006 is the expanded coverage of the vat, courtesy of ra 9337, by including the energy and power sectors, nonfood agricultural, marine and forest products, importation of coal and natural gas, services of doctors and lawyers, common domestic carriers by air and sea, among others (obias, jr., 2010). hence, it could be said that the increase in 2006 vat collection is partly caused by the removal of the vat exemption of the aforesaid products, groups, and individuals. moreover, it was during 2004 that imf (2005) proposed various initiatives to eradicate motivations from a substantial amount of incongruent economic laws, comprising those given to cooperatives (bearing a possibly considerable quantity of income) and eliminating unusual vat exemptions such as for petroleum products (generating 0.2% to 0.3% of gdp). the imf saw that the concern in the decline of vat collection might be minimized by the repeal of several nonstandard special vat exclusions, such as the vat exclusion of petroleum, which also embody a valuable prospective basis of income. the decline in 2008 vat collection was due to the lifting of the 70% cap on the quantity of input taxes that may be claimed against output tax pursuant to ra 9361, utilization of available excess input tax that accumulated in 2006, and claim of higher input taxes brought about by high prices of raw materials and utilities and additional purchases of capital goods (obias, jr., 2010). the negative growth in vat was due, among others, to (a) amplified input tax asserted by importers and taxpayers with more than php1 journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) 8 │ million capital expenditures in 2007, amortized in 2008; (b) slowdown in cement industry, (c) decrease in overall hotel occupancy; and (d) lower growth in the construction industry (bir, 2008). indonesia : trend of vat collections indonesia also recorded a continuous increase in the number of vat collections in the last sixteen (16) years. however, there were also years when it recorded a slight decline in collections. the said years include 2005, 2009, and the recent years of 2014 and 2015. the decline in vat collection in the said years was caused by several factors. for instance, 2004 was an election year in indonesia that led to the election of president yudhoyono in october 2004 (imf, 2005). the skepticism of the business and investors caused by-election had contributed to the decline in vat collection. moreover, december 26, 2004 earthquake and tsunamis—and the earthquake that struck in march 2005—wreaked a massive toll on indonesia in terms of loss of life and destruction to infrastructure and homes in the province of nanggroe aceh darussalam. this catastrophic event contributed to the decline in vat collection. it was also during this taxable year that the tax policy stayed behind, tarnished by depleted non-oil income collection instigated by significant vat exemptions, stumpy excise tax levels, and weak implementation, and prevalent dishonesty. the decline can also be attributed to vat exemptions granted to capital goods, the mining sector, and hotel and restaurant services. lastly, one dominant reason caused for the decline is the large informal sector of the indonesian economy, making the tax base of registered taxpayers in indonesia remains one of the lowest in the world (indonesia focus, 2018). the decline in vat collection in 2009 may be caused by various factors affecting investors’ conviction, comprising of plunging product
prices, cash issues in some
sectors of the banking industry, nonpayment
by an enormous corporation on its
 duties, and overall worldwide threat aversion. based on 1994 to 2009 statistics, world bank research categorized indonesia as a country with little tax attempt and tax collection. this indicates that income is accumulated less than the utmost capability, and world bank recommended that importance should be placed on income improvement by way of system and management restructurings. in 2014, the decline in vat collection was partially brought about by too much exemption. hence, indonesian authorities were urged to pursue tax reforms focusing on initially widening the base, restructuring exemptions (notably the vat), and enhancing risk-based tax administration. this proposal resulted in harmonizing improvements, comprising of leveling corporate tax rates, reinforcing the property tax regime, and enhancing the vat rate and select excises. another factor resulting in a decrease in vat collection in 2014 was the mid-year election. further, the research conducted by deloitte (2014) observed that indiscriminate and partial tax valuations in indonesia were still widespread, further wearing down the taxpayers’ faith in the capability of the tax administration to decide disputes in a reasonable way. this insight of partiality might operate as a basic obstacle to developing broader confidence between the citizens and government. moreover, there are many exemptions on products and services. these include mining and drilling products, food and drinks distributed in hotels and restaurants, various services, including healthcare, social welfare, postal delivery, financial services, religion, education, culture, and entertainment (ibfd, 2017). imf (2017) estimated that the vat revenue loss due to exemptions on the final consumption of goods and services in indonesia amounted to 0.8% of gdp. many exemptions in indonesia relate to intermediate consumption leading to a cascading effect. imf (2017) estimated that this amounted to around 0.9% of gdp. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) │ 9 the decline in 2015 vat collection may be caused by the abrupt decrease in international oil prices, occurrences of capital outflows, and blustery worldwide financial markets. government revenues, including vat, decreased by 1.7 percentage points to 13% of gdp, mainly due to the quick reduction in oil prices. on revenue mobilization, the authorities viewed that indonesia’s low tax-to-gdp ratio stems mainly from problems in tax administration and compliance, including arising from a complex vat refund system and the strict bank secrecy rule that prevents access to taxpayers’ financial data. in their view, indonesia will need to enhance the menu of tax incentives in line with those offered by other asean countries. further, compliance level was also little and minimal, an issue already observed by the world bank in the 1990s. nearly half of the taxpayers who were compelled to file tax returns did so. it should be emphasized that the self-assessment policy as used in indonesia depends on voluntary obedience. supposedly, voluntary obedience is expected to occur if the revenue authority is able to establish a service-client approach causing an improved faith in the authority. in 2015, an expected 44 million people should be paying taxes. however, only 27 million were registered, and less than 40% paid the full amount of tax. revenues from each tax category as a percentage of gdp decreased in indonesia, with corporate income tax and vat revenues most affected over this period (basri and rahardja, 2011). singapore : trend of vat collections compared with the philippines and indonesia, singapore's amount of vat collections posted more fluctuations. though in general, its level of collections still posted an increasing trend. the taxable year 2015 posted a decline in vat collection. the decline in vat collection is caused by several factors relating to economic recession and expansion of vat exemption. in 2015, as an extremely accessible and free economy, singapore was subjected to outside risks, including a prolonged sluggish development in progressive and developing economies and unpredictability in worldwide monetary markets. domestic vulnerabilities amplified the impact of external shocks. consumption growth slackened significantly, and aggregate fixed investment influenced undesirably to development, apprehended by the indecisive financial viewpoint and its influence on investor assurance. these events also affected the vat collection. for better understanding and comparison, figures are heretofore presented on a per-country basis. thus, the succeeding tables, namely tables 2, 3, and 4, will present the individual results for the philippines, indonesia, and singapore, respectively. analysis : per country table 2. linear trend model results for vat collections in the philippines vat collections in the philippines = 0.315 + 389.437 time journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) 10 │ table 3. linear trend model results for vat collections in indonesia vat collections in indonesia = 319 + 2,346.202 time table 4. linear trend model results for vat collections in singapore vat collections in singapore = 238.105 + 535.073 time results of the linear regression showed that the philippines, indonesia and singapore have an rsquared value of 0.973, 0.928 and 0.955, respectively. this relates that 97.3%, 92.8%, and 95.5% of the variations in the number of vat collections in the philippines, indonesia, and singapore, respectively, are explained by the element of time. time is always an imperative subject for countless subjects like philosophy, literature, arts but also for science, being also a basis of deviations associated with the time characterization, time insight, or time dimension. time is valuable, and never has this been accurate than when endeavoring to thread data components mutually to foresee the fascination and objective of the spectators that one pursued to motivate. it is one of the most significant capitals for individuals, companies, and for the national economy. it should be emphasized that the cost of time is very difficult to quantify. due to the time attributes – rarity and irreversibility – time could be thought of as a vital political, environmental, socio-cultural, and economic value essential to attain a favorable and conducive business environment. the importance of the element of time underlines the aforesaid factors in achieving the proposed business environment model. it is distinct that time turns out to be a financial resource, and as a variable, it has to be enhanced, justified, and contained. the element of time contributed greatly to the increase in the vat collection during the period under study. the core of time incident is transformation; transformation in predilections, transformation in technology, transformation in population, transformation in the economy, society, environment, politics, taxes, etc. the importance of time is that it contributes to the growth and development of a nation's economy, society, and politics. furthermore, the process by which politics, society, and economy grow is, in itself, time-dependent. by implication, then, time plays a crucial part in the progress and growth of the economy, politics, environment, and society as a whole. time, therefore, contributed to the flourishing of socio-cultural, political, environmental, and economic thought. thus, it can be said that the aforesaid factors proceeds through time. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) │ 11 in this perspective, it can be concluded that a conducive business environment changes over time, as does the vat collection, as it is greatly affected by the political, socio-cultural, environmental, and economic downpour or growth. it should be emphasized that economic, political, socio-cultural, and environmental issues speak about the business environment in line with time. this is because the negative relationship can be explained in terms of time based on the economic, political, socio-cultural, and environmental situation of the country. for instance, negative growth in gdp in 2007 was brought about by the worldwide monetary predicament, which greatly affected the economic situation of the asean countries. this global financial crisis affected the business environment because there was an economic failure as well as socio-cultural, environmental, and political instability. in other words, time as a predictor affects the conducive business environment. and as such, a conducive business environment is only possible depending on the time. the f-ratio of the philippines (241.114), indonesia (179.713), and singapore (297.534) generated a p-value (0.000) less than the level of significance of 0.05. this relates to the overall significance of the linear trend model. the p-value of the t-statistics of the three (3) selected asean countries showed that the constant is not a significant predictor. however, the time variable transpired to be significant, as evidenced by the p-value (0.000) of the t-statistic of the philippines (15.572), indonesia (13.406), and singapore (17.249). the beta/regression coefficients of time provide the critical indicator of the formulated linear trend model. the equation specifically relates that, on average, the amount of vat collections in the philippines increases at a rate of usd 389.437 million every year. indonesia and singapore showed an increase at a rate of usd 2,346.202 million and usd 535.073 million every year, respectively. effects of vat exemption policy on growth rate in selected asean countries this research also explored whether the number of vat exemptions of a country can cause significant differences to its gdp growth rate and amount of vat collections. the researcher particularly used anova to determine the presence of significant differences. below is table 5 showing the result for gdp growth rate and vat collections of the philippines, indonesia, and singapore. table 5. anova results for gdp growth rate and vat collections among philippines, indonesia, and singapore among the 3 countries, the philippines has the most number of commodities exempted under the vat policy. the philippines has 53 exempted commodities, indonesia has 37, and singapore has 7. when the average vat collections for each country are explored, results showed that indonesia has the highest amount of vat collections, singapore has the second, and philippines with the least. the differences in the vat collections of each country transpired to be statistically significant. this is particularly evident in the p-value (0.000) of the f-ratio (27.693). this, in effect leads to the finding that the vat collections of each country are statistically different from each other. the same case was observed in the gdp growth rate. as observed, the f-ratio (90.332) has a p-value of 0.000. this relates that there are significant differences observed among the gdp growth rates of the 3 countries. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) 12 │ the effects of vat exemption policy on gdp growth rate on selected asean countries can be shown in the regression result shown in table 6 below. table 6. regression results: effects of vat exemption policy on gdp growth rate in selected asean countries gdp growth rate = 4.354 0.900 vat exemption policy the researcher used the number of exempted commodities declared by each country in order to measure the effects of vat exemption policy on the growth rate of gdp. results of the formulated regression model are as follows: in terms of r-squared, figures relate that 66% of the variations in the gdp growth rate are accounted for from the vat exemption policy of the three (3) economies. the f-ratio (89.385) has a pvalue of 0.000, signifying that the entire regression model is significant. the t-statistics of both the constant and vat exemption policy have p-values less than the level of significance of 0.05. this, in effect, relates that both the constant and vat exemption policies are significant predictors of gdp growth rate. given that the beta/regression coefficients are significant, the results of the formulated regression model show that as the number of vat exempted commodities increases by one unit, the progress rate of the gdp is expected to decrease at a rate of 0.900 units. as results suggest, increasing the number of vat exempt commodities lowers the gdp growth rate of the considered asean economies. for better understanding and comparison, the succeeding tables, namely, tables 7, 8, and 9, will present the individual regression results for the philippines, indonesia, and singapore, respectively. regression: per country table 7. regression results: effects of vat exemption policy on gdp growth rate in the philippines gdp growth rate = 1.478 + 0.000 vat exemption policy journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) │ 13 table 8. regression results: effects of vat exemption policy on gdp growth rate in indonesia gdp growth rate = 3.456 + 0.000 vat exemption policy table 9. regression results: effects of vat exemption policy on gdp growth rate in singapore gdp growth rate = 1.310 + 0.000 vat exemption policy to measure the effects of the vat exemption policy on the growth rate of gdp in the philippines, indonesia, and singapore, the researcher used the number of exempted commodities declared by each country. results of the formulated regression model on a per-country basis are as follows: in terms of r-squared, the philippines, indonesia, and singapore showed figures of 84.4%, 32.2%, and 92.5%, respectively. this means that the variations in the gdp growth rate in the philippines, indonesia, and singapore are accounted for from the vat exemption policy. the f-ratio of the philippines (34.661) and singapore (82.759) has a p-value of 0.000 (philippines) and 0.000 (singapore), signifying that their regression model is significant. the f-ratio of indonesia, on the other hand, is 1.618 has a p-value of 0.224. with the exception of indonesia, the t-statistics of both the constant and vat exemption policy have p-values less than the level of significance of 0.05 for the philippines and singapore. this, in effect, relates that both the constant and vat exemption policies are significant predictors of gdp growth rate for both countries. significant relationship between vat exemption and growth rate in asean region gdp growth rate = 4.354 0.900 vat exemption policy using the regression model result, a negative relationship was observed between vat exemption policy and gdp growth rate among the selected asean economies. it specifically shows that more vatexempt commodities lead to a lower gdp growth rate. although vat exemption favors consumers and some sectors of the economy, it appears, more exemptions, fewer earnings/collections, lower gdp growth rate. thus, tax exemptions can reduce the levels of tax ratios (ernst and young, 2015). jack (1996) studied vat collection occurrence in five (5) financial systems in central and eastern europe by assessing income that would have been accumulated when there is no income leak. he maintained that disparities in income performance between countries in the model were possibly to be journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) 14 │ the consequence of vat exemptions. hence, irrespective of the problems of circumvention or management efficiency, when a country excludes some goods and transactions from taxation, then its revenue may be lower than another country that did not exclude them. these consequences may indicate that attempts to enhance the revenue collection of vat could be focused in the direction of diminishing the tax system which exempts goods and services from vat. since the key source for this difference may correlate to the presence of vat exemptions, regulating and controlling the scope of exemptions in the vat policy may be imperative because exemptions could ensue in difficult and frequently unfavorable consequences. on the basis of the foregoing presentation, analysis, and interpretation of results, below is figure 6 depicting the proposed conducive business environment model: figure 6. proposed conducive business environment model figure 6 presents the proposed conducive business environment model as an output of this study based on the results and conclusions. the circle in the upper extreme left shows the vat exemption policy of the selected asean countries. the study shows that in order for asean countries to increase their vat collection, these countries must broaden their vat base by reducing the number of vat exemptions and limiting these exemptions to raw food and other necessities. moreover, the conclusion of limiting the vat to raw food and other necessities is in consonance with the very concept by which vat was formulated. the circle in the lower extreme left of the model is the gdp. based on the study, an increase in gdp would highly contribute to the development of a conducive business environment. it can be noticed that the vat exemption policy is a significant predictor of gdp growth rate. although the vat collections of the selected asean economies are significantly increasing with the course of time, the results of the formulated regression model also showed that as the number of vat exempted commodities increases by one unit, the growth rate of the gdp is expected to decrease at a rate of 0.900 units. thus, increasing the number of vat-exempt commodities lowers the gdp growth rate of the considered asean economies. in other words, a negative relationship was observed between vat exemption policy and gdp growth rate among the selected asean economies, and more vat exempt commodities lead to lower gdp growth rate. the box in the middle left shows the time element of this study. the importance of time is a tacit assumption in many accounts of financial and fiscal growth. in a time-dependent setting, as in this study, the passage of time implies the improvement and growth of politics, environment, and economy. thus, journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) │ 15 the passage of time implies growth and development to achieve the conducive business environment model. and since growth and development occur across time, it is necessary to contemplate the impact of time in vat collection and on economic efficiency. thus, the four (4) ovals in the middle right of the model show the four (4) factors that were greatly affected by the time element, namely, economic, political, socio-cultural, and environmental. these four (4) factors speak about the business environment in line with time. thus, the negative relationship can be explained in terms of time based on the economic, political, socio-cultural, and environmental situation of the country. and as a predictor, time greatly affects the conducive business environment. conclusion & further research future directions and implication the vat collections of the selected asean economies are significantly increasing over the course of time. the philippines, indonesia, and singapore showed significant differences in the degree of vat collections and growth rate. the vat exemption policy can significantly decrease the gdp growth rate of an economy. prudence dictates that one way to increase the vat collection is to expand the vat base by limiting exemptions to raw food and other necessities. hence, low vat collection may be attributable to numerous vat exemptions because vat-exempt transactions lean towards disrupting the vat series, which gives rise to high costs and prices and income losses to the government. based on the findings and conclusion of the study, the government should take into consideration the removal of vat exemption on cooperatives. it is noted that exempting cooperatives from the vat does not protect its buyers because cooperatives will be selling their goods at higher prices to recover the input vat that they paid when they bought their supplies from a vat-registered entity. on the other hand, subjecting them to the vat would allow them to credit the vat they paid on their inputs against their output vat. likewise, the proposed removal of exemption on cooperatives will minimize leakages, especially those cooperatives who are dealing with both members and non-members (jurado, 2017). in other countries, the paraguay ministry of finance extended vat to cooperatives as part of their economic and structural reforms to broaden the vat base and to increase tax collection starting november 1, 2016 (world bank, 2017). prior to the vat imposition, cooperatives were already paying vat on products and services offered to third parties, but not to those provided to their members (international co-operative alliance, 2017). likewise, in usa, cooperatives typically shell out all the special levies on commercial dealings, including real and property taxes, sales tax (vat-like tax), employment taxes, gasoline, and diesel fuel taxes, license fees, motor vehicle registration fees, and excise taxes on the telephone, power, and other utility services (usda, 2017). from the legal perspective, the status quo will encourage other companies to reorganize as cooperatives. with the removal of vat exemption of the cooperative, companies will be focusing on the business operation instead of creating an identity of a cooperative. moreover, the government should also consider the removal of the vat exemption on real property developed for low-cost and socialized housing. under the existing law, a real property developed for low cost and socialized housing is exempt from vat. the removal of this exemption would discontinue the habit of big real estate businesses and condominium developers of splitting their properties into smaller units or parts, or take advantage of transfer pricing schemes and systems so that their properties will fall below the vat threshold, and, thus, circumventing vat legal responsibility. from a social viewpoint, government assistance to focus recipients of socialized and low-cost housing seems to be journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) 16 │ reasonable and justified. however, the lingering query that may be posed: what is the more fitting form of government assistance in this respect – vat exemption or direct funding? furthermore, future research may focus on the appropriate vat threshold amount in the philippines, and other asean countries since the setting of threshold may also be considered as setting vat exemption. acknowledgment while this research was mainly developed as an individual endeavor for academic purposes, it was, however, made possible through the collaborative assistance of my friends and colleagues in the academe. moreover, i could not have written this research without the ardent and fervent encouragement of my family (julie, paolo juan, and lucho alfonso), who supported me with love, affection, and understanding. i am grateful to my students for persuading me to finish this research and pushing me to complete it on a timely basis. further, i am grateful to my parents for their unwavering support. and, finally, i thank god almighty, for the strength and “enlightenment” in completing this research. ad majorem dei gloriam. references aizenman, j., & jinjarak, y., kim, j. and park d., “tax revenue trends in asia and latin america: a comparative analysis”, nber, working paper no. 21755, 2015. basri, m. and rahardja, s., “mild crisis, half hearted fiscal stimulus: indonesia during the gfc”, in ito, t. and f. parulian (eds.), “assessment on the impact of stimulus, fiscal transparency and fiscal risk”, eria research project report 2010-01, pp.169-211, eria, www.eria.org/publications/ research_projectreports/images/pdf/y2010/no1/ch5basri_andrahardjaindonesia.pdf, 2011. bureau of internal revenue (bir) annual report 2008. chetty, v. and pradhan, b., “harrod-domar formula for two sector growth models,” institute of economic growth, boston university, 2015. deloitte, “risk, uncertainty and opportunity in a changing tax landscape”, deloitte touche tohmatsu ltd., 2014. domar, e., “capital expansion, rate of growth, and employment,” econometrica, 14(2):pp. 
137– 147, 1946. ernst and young, “indirect taxes in 2015”, eyg no. dl1195, www.ey.com/publication/vwluassets/ey-indirect-tax-developments-in-2015/%24file/ey-indirecttax-developments-in-2015.pdf, 2015. harrod, r., “an essay in dynamic theory,” the economic journal, 49 (193): pp. 14–33, 1939. henegadara, g., “rostow’s stages of economic growth,” university of kelaniya, 2016. ibfd, “international bureau of fiscal documentation (website)”, https://www.ibfd.org/, 2017. imf, “indonesia, selected issues”, imf country report no. 17/48, international monetary fund, washington, dc, https://www.imf.org/~/media/files/publications/cr/2017/cr1748.ashx, 2017. indonesia focus, “achieiving fiscal sustainability key to fostering higher economic growth”, uob global economics & markets research, quarterly global outlook 2q, 2018. international co-operative alliance, “paraguay will apply vat tax on services co-operatives provide to their members”, https://ica.coop/en/media/news/paraguay-will-apply-vat-tax-services-cooperativesprovide-their-members, viewed january 27, 2017. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 01-17 effectiveness of the value added tax exemption policy on gross domestic product in selected asean countries towards a conducive business environment model atty. prackie jay t. acaylar, cpa, jd, mpa, phd-bm, frill issn 2776-9658 (online) │ 17 international monetary fund, “philippines: 2004 article iv consultation and post-program monitoring discussions— staff report; staff statement; statement by the executive director for the philippines; and public information notice on the executive board discussion”, imf country report no. 05/105, 2005. jack, w., “the efficiency of vat implementation: a comparative study of central and eastern european countries in transition”, 1996. jurado, f., “proposed reforms on value added tax”, ntrc tax research journal, vol. xxix.3, 2017. manasan, r., “assessment of the 2017 tax reform for acceleration and inclusion,” philippine institute for development studies, 2017. obias, jr., “estimates of the value added tax gap: 2009”, ntrc tax research journal, vol. xxii.5, 2010. parr, j., “on the regional dimensons of rostow’s theory of growth,” the applied regional science conference, blackwell publishers ltd., 2001. the world bank, “paraguay overview", http://www.worldbank.org/en/country/ paraguay/overview, and the international monetary fund (imf), "paraguay: 2016 article iv consultation – press release and staff report", 2017. thirlwall, a., “the nature of economic growth: an alternative framework for understanding the performance of nations,” e. elgar, 2002. unescap, “economic and social survey of asia and the pacific 2014”, regional connectivity for shared prosperity, united nations, https://www.unescap.org/sites/default/files/economic%20and %20social%20survey%20of%20asia%20and%20the%20pacific%202014.pdf, 2014. united states department of agriculture (usda), “understanding cooperatives: income tax treatment of cooperatives”, cooperative information report 45, section 8, http://www.uwcc.wisc.edu/pdf/cir45-8.pdf, viewed january 27, 2017. world bank, “east asia pacific economic update, october 2015: staying the course”, washington, d.c.: world bank, 2015. world bank, “community driven development and social capital: designing a baseline survey in the philippines”, world bank report no. 32405-ph, may 2005. available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 1 number 2 (2021): 37-52 corresponding author endah meiria, endah.meiria@uinjkt.ac.id doi: 10.31098/jgrcs.v1i2.718 research synergy foundation financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati1, endah meiria1 1 feb uin syarif hidayatullah jakarta, indonesia abstract background – during the pandemic, the global economy was greatly affected, including indonesia. currently, indonesian government expenditure is focused on overcoming the impact of the pandemic by implementing policies in various sectors that have a major impact on vulnerable communities. this causes widespread poverty, which is indicated by the occurrence of income inequality due to government policies through financial repression that possibly affects economic growth. purpose – this study aims, first, to analyze the financial repression policies carried out by the indonesian government during the pandemic (2019-2021 period) on indonesia's economic growth as a developing country. the second objective is that the impact of financial repression carried out as a government policy will be studied more deeply on income inequality because most of the indonesian population works in the informal sector. the third objective is to further analyze the relationship and impact of the two macroeconomic factors (financial repression and income inequality) simultaneously in the midst of a pandemic that affects economic growth in indonesia. design/methodology/approach – this study uses a quantitative and descriptive exploratory approach with secondary data. data analysis used simultaneous equations with 2 stage least square. findings – the results of this study prove that income inequality and financial repression have no significant effect on the level of economic growth in indonesia. however, in the opposite relationship, if the rate of economic growth is associated with the death rate of the population, which represents the condition of the covid-19 pandemic, it shows a significant negative effect on the rate of economic growth and income inequality, as well as financial repression. research limitations – this study is limited by the data period during the pandemic (late 2019 to july 2021) and the availability of data from the badan pusat statistik (central bureau of statistics) and the world bank. originality/value – the measurement of financial repression by the money supply and others, as a component of equation 1, and measurement of inequality using the gini ratio or other poverty index as a component of equation 2. both equations are linked to indonesia's economic growth rate. keywords: financial repression, inequality, economic growth, pandemic, simultaneous equation this is an open access article under the cc –by-nc license introduction since march 2015, the trend of changes in the national poverty rate has consistently declined and shows the achievement of a single-digit poverty prevalence of 9.82% in 2018. this achievement is the first time in indonesia's history and is politically assessed as an extraordinary development achievement. the slowdown in poverty reduction shows that poverty reduction is increasingly difficult (the last mile problem), but the sustainable development strategy implemented by the government is considered successful (abdullah 2020; tarigan et al. 2019). however, the number of indonesians who suffer from poverty is still quite large, reaching 25.67 million people or 9.66% of the total population in september http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) 38 │ 2018. one of the causes of poverty that is not often discussed is disasters or disease outbreaks. the outbreak of the coronavirus, better known as the covid-19 pandemic, has shaken the world since the end of 2019. the implementation of various policies in order to overcome the spread or efforts to break the chain of the spread of covid-19 resulted in many economic activities contracting and even stopping production. this results in an increase in unemployment, a decrease in the productivity level of individuals and companies, and encourages the emergence of new poor people who, in aggregate, increase the number of poor people (izzati 2020; suryahadi et al. 2020). this study emphasizes the government to always strive for poverty alleviation in the community, throughout the country, for short, medium, and long-term programs. the central bureau of statistics noted that the number of poor people in indonesia increased in 2020. the impact of the pandemic began to emerge in the first quarter of 2020. the percentage of poor people rose to 9.78% or an increase of 0.37% from march 2019. then in september 2020, the number of poor people increased by 0.97%, or 2.76 million people annually. the total number of people classified as poor is 10.79% of the total population of 27.55 million. the pandemic also has an impact on poverty levels through employment. the central bureau of statistics stated that 29.12 million people, or 14.28% of the total working-age population, were affected. of this total, 2.56 million people are unemployed, while 1.77 million are unemployed. in addition, a total of 24.03 million people work with reduced working hours. the increasing percentage of the poor is also accompanied by a worsening of the depth and severity of poverty. the poverty depth index increased from 1.61 in march 2020 to 1.75 in september 2020. the poverty depth describes the average distance between the expenditure of the poor and the poverty line. meanwhile, the poverty severity index increased from 0.38 to 0.47. the poverty severity index describes the disparity of expenditure among the poor, indicating that poverty conditions are getting worse. as the number of poor people increases, the gap also widens. this can be seen from the gini ratio or the level of inequality in spending by the indonesian population, which widened to 0.385 in september 2020. this figure increased by 0.004 points compared to march's position of 0.381. the position of the gini ratio in march also increased by 0.005 points compared to september 2019, which was 0.380. the covid-19 pandemic has had an impact on all levels of society, especially the low-income group, through a combination of supply and demand shocks that lead to a decline in productive activities, a reduction in income, and ultimately suppression of economic growth. this macroeconomic impact has resulted in a decrease in the average per capita expenditure at the household level. gradually the family loses income and affects the purchasing power or household consumption (bappenas 2020). bps noted that the vulnerable population working in the informal sector fell into poverty with a total of 12.15 million people (bps 2020b). as a result of the loss of jobs and income, many urban dwellers have moved back to the villages. this impact gets bigger and wider when a pandemic occurs and spreads quickly. several times the government-issued social restrictions and even locked down several offices, shopping centers, and a number of other clusters. this condition has suppressed most of the economic activities. financial repression refers to policy steps taken by governments in developing countries to place some restrictions on channeling funds to intermediary institutions in the money market as a deregulation measure (nezhad et al., 2012). currently, developing countries are starting to develop financial systems by reducing the level of reserves and barriers to entering financial markets (mckinnon, 1973). developing countries, including indonesia, have begun to gradually reduce government intervention in modifying credit allocations. and began to transfer ownership of large state-owned banks to the private sector. marked by the emergence of several private banks, the development of capital markets, as well as the journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) │ 39 application of persuasive policies and facilities for foreign financial intermediaries to enter the financial markets of developing countries (gupta, 2004). financial distortion triggers the imposition of financial repression but because of the wrong allocation of resources. as a result, hampering the growth of the financial sector also has a negative impact on economic development (king & levine, 1993; mckinnon, 1973; shaw, 1973; roubini & sala-i-martin, 1992). on the other hand, according to stiglitz (2000), financial repression policies in the early stages of development are actually needed to support economic growth. where repressive financial policies help effectively convert savings into investments also support financial stability. the different effects of repressive financial policies on growth depend on the level of economic development as well as the institutional arrangements of the country. in developing countries with transitional economic periods, where financial markets and regulatory systems have not yet developed, a certain level of financial pressure helps policies of financial repression because free-market mechanisms remain seriously constrained in the financial system, including in pricing and allocation of financial resources, and help for economic growth (stiglitz, 2000). some government intervention through repressive financial policies can help improve the efficiency of financial transactions. repressive financial policies may still cause some efficiency losses, but the benefits may be far greater. because underdeveloped financial systems can easily suffer from financial crises and capital account controls can help protect the economy from internal and external financial shocks so as to maintain financial stability (huang & ge, 2019). however, when the economy reaches a growth stage, financial policy should rely more on innovation and industrial improvement rather than large input mobilization, as the effects of these repressive financial policies can turn negative (chan, 2021). this study uses a measurement of the relationship between repressive financial policies and inequality as an independent variable on economic growth as the dependent variable. previous studies have shown that there is a negative and significant coefficient on inequality, so it can be concluded that inequality has a negative impact on growth. however, there is a direct relationship between repressive financial policies and economic growth. generally, the development of a strong financial sector plays an important role in promoting economic growth and reducing income inequality and poverty. however, the reality is that the important role that finances and sound financial systems play is evident in their great contribution to economic development through increasing total productivity, promoting economic competitiveness, and promoting market-driven dynamics (mckinnon, 1973; shaw, 1973). ; levine, 1997; levine et al., 2000). based on the explanation above, this study aims: first, to analyze the financial repression policies carried out by the indonesian government during the pandemic (2019-2021 period) on indonesia's economic growth as a developing country. this is because the liberalization policy in the financial sector plays a major role in the economy of developing countries such as indonesia. the second objective is that the impact of financial repression carried out as a government policy will be studied more deeply on income inequality because most of the indonesian population works in the informal sector. the third objective is to further analyze the relationship and impact of the two macroeconomic factors (financial repression and income inequality) simultaneously in the midst of a pandemic that affects economic growth in indonesia. literature review financial repression mckinnon (1973) first used the dictum of financial repression to describe conditions in developing countries where the government intervened widely. according to him, developing countries generally journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) 40 │ have a less developed monetary system, the private sector is less active, and foreign capital is a substitute for domestic capital. as a result, the government was forced to "repress" the market system, international trade, and the monetary system. the assumptions used in the "financial repression" model are: first, the government is considering having a realistic estimate of the budget deficit that must be financed by the central bank by printing new money (adding base money). second, the monetary authority is considered capable of choosing a combination of policies relating to foreign exchange trade supervision, interest rate ceilings, and determination of bank reserves that are expected to minimize the use of inflation taxes without disrupting the formation of private capital. third, high tariffs suppressed foreign trade flows, licenses, and quota systems. if the above assumptions are fulfilled, the country shows the characteristics of a developing country that is experiencing a repressed economy. the definition of financial repression is the notion of a set of government regulations, laws, and other non-market restrictions preventing economic-financial intermediaries from functioning at the full capacity of government (ito, 2008). policies that cause financial repression include; control of interest rates, liquidity ratio requirements, high bank reserve requirements, capital controls, restrictions on market entry into the financial sector, credit limits or restrictions on the direction of credit allocation, and government ownership or control over banks. financial repression on interest rate distortion, the results of his research show that there is a negative influence between interest rate repression and several basic macroeconomic variables, such as the level of savings, investment, and economic growth (xu & gue, 2013). in addition, other repressive policies are also considered detrimental to financial development as entry restrictions in order to stabilize banks and protect the economy from the negative effects of bank failures and rental costs from competing for new entrants (barth, caprio, & levine, 2006). income inequality the definition of income inequality is the unequal distribution of income among a population. the measurement of income inequality used is the gini index as proposed by the world income inequality database (wiid) and the organization for economic cooperation and development oecd. inequality is a sign of people's lack of mobility and income opportunities. due to income inequality, a small part of the population holds power, so that human resources are not used optimally, consequently triggering economic instability and the risk of an economic crisis (dabla-norris et al., 2015). in addition, economies that experience high levels of income inequality usually tend to have lower levels of social mobility (corak, 2013). inequality is the difference in outcomes and opportunities measured between people's income, wealth, and expenditure. inequality of opportunity is difficult to measure because conditions are beyond one's control, such as gender and family background. making it difficult to separate outcomes from opportunities (dabla-norris et al., 2015). furthermore, the distribution of opportunities and outcomes is critical to understanding the nature and amplitude of income inequality. social costs arise because of the high opportunity disparity. thus, high-income variation weakens individual educational and occupational choices. in addition, inequality of results leads to misallocation of resources, increases corruption, and also a loss of trust in institutions, thereby worsening social cohesion and trust in the future, and even leading to financial crises (rajan, 2010). there is a considerable difference in developing countries compared to other developed countries, where infant and female mortality rates are higher in poor households due to access to health, education, and financial services that are affected by inequality of opportunity due to income inequality (murray et, journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) │ 41 al., 2013; mokdad et al., 2018). on the other hand, when income inequality decreases in developing countries, access to better education for low-income households actually increases. while in developed countries, educational inequality, on average, is not influenced by income inequality (caous & huarng, 2020). previous research has shown that the dominant factor in income inequality to create a wider income gap between the poor and the rich is the education factor with a strong and significant contribution (chongvilaivan and kim 2015; contreras et al. 2009; de silva and sumarto 2013; santos and da cruz vieira 2013; morduch and sicular 2002; and sapelli 2011). another research related to income inequality is access to finance as a very important explanatory variable (wan and zhou 2004; bae, han, and son 2012). further other factors that influence income inequality, such as; unequal access to education, are because people with low education tend to do low-paying jobs, which are usually done in the informal sector. the next factor is health services due to differences in wealth accumulation that determine (wicaksono et al., 2017). the relation between inequality and economic growth the relationship between financial development and inequality demonstrated through underdeveloped financial systems can increase the persistence of the gap between rich and poor. in addition, financial developments or the quality of the financial system, in general, can also affect the allocation of capital, thus having an impact on economic growth in general, as well as on labor demand across sectors. consequently, it affects the income level of society as a whole (demirguc-kunt and levine, 2009). levels of inequality and poverty vary widely between countries and regions, as well as the distribution of income and poverty, which varies significantly over time (beck et al., 2007). milanovic (2012) articulates inequality into three concepts. the first concept of inequality (inequality 1) focuses on inequality between countries in the world. this inequality is calculated statistically based on differences in income (gross domestic products/gdp) of each country, using the gini coefficient. the calculation is not based on population, but each country is positioned the same as its position in the united nations general assembly, which is one state with one vote. inequality 2, the same as inequality 1, but the population is considered. the more the population of a country, the fewer samples taken from that country, and vice versa. inequality 3, which is referred to as global inequality. unlike the first two concepts, calculations in inequality 3 are individual-based. people in every country in the world are calculated based on their income. thus, it will appear that residents in one country are equal to other residents in the same country, and residents in one country are equal to residents in other countries. the relation between financial repression and economic growth according to mckinnon (1973) and shaw (1973), the theory of financial repression explains the stereotype of state finances, where the financial system in a country is weak, underdeveloped, and depressed, which then the government takes control through interest rate policy. then it has an impact on credit allocation, which is strongly influenced by political factors rather than commercial motives. thus raising questions in the theory of financial repression about its dangers to economic growth. referring to the studies mentioned above, this study measures the level of financial repression following the model of battilossi (2004). with an explanation of each parameter in the model according to the context of this study, as follows: journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) 42 │ 1. requirement reserves one of the standards of financial repression measurement is the ratio of bank reserves to deposits. to some extent, this standard is a determinant of monetary policy instruction. by definition, it is the ratio of required reserves. factors such as required reserves may characterize some constituents of financial development. in countries which their financial system is undeveloped, banks may keep more reserves than the ratio of required reserves for responding to liquidity needs (battilossi, 2004; and glenn et al., 2002). 2. real interest rate a classic mechanism for repression of the financial system is that the interest rate is kept under a balanced level or be proportionate to the inflation rate. since keeping the interest rate low reduces the government loan expenditures in the bank sector, governments that allocate most of their bank credits with legal restrictions to the government sector try to keep the interest rate low. according to mckinnon (1973) and shaw (1973), the credit supply allocated to the supported sectors and specific factories, as well as to the recommended people by political authorities, lead to the interest rate is lower than its balanced level. this kind of interference in financial flow represents financial repression. the main idea on the back of this index is that controlling the nominal interest rate avoids its feedback in contrast to expected inflation alterations. the long duration of negative interest rate is evidence of strong financial repression (gupta, 2004, battiliossi 2004). 3. financial intermediation financial intermediation level is also another standard of financial repression measurement. it is measured by the ratio of m2/gdp . the experimental literature showed that this ratio is generally low in economies facing financial repression and high otherwise. 4. government debts government debts to the banking system can be a replacement for measuring government ability in financial interference. this parameter may be defined as the ratio of mercantile banks' debts from government to mercantile banks' debts to the private sector is definable. the greater the ratio, the more financial repression it shows. the government by special coding instructions, obliges the bank sector to allocate credits to special loaners, central government, or general institutions. the parameter to measure financial repression is the ratio of credit allocation from the government sector to credit allocated to the private sector, where the larger this ratio, the worse the financial repression (battilossi, 2004). 5. the ratio of total credit presented to the private sector to gross national product. financial repression occurs by allocating government credit to the private sector. and private credit is the most expensive activity index for financial intermediaries (glenn et al. 2002). hypothesis and conceptual map from the explanation above, the hypothesis for this research are as follow: h1: the relationship between financial repression to growth of gdp h2: the relationship between inequality to growth of gdp h3: the relationship between financial repression and inequality to the growth of gdp journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) │ 43 figure 1. conceptual map research method data set this study demonstrates the importance of a new equation model for economic growth related to financial repression and income inequality using 11 macroeconomic variables for inequality, financial repression, and economic growth. this measuring variable is divided into three types, namely: a. four proxies for measuring financial repression index (fri) are as follows: 1. rir real interest rate, the interest rate proxy, is used to observe government policies in raising and lowering interest rates over the past decade. 2. rr requirement reserves rate, the proxy for the minimum statutory reserve requirement in banks used in relation to interest rate instruments as a means for the government to issue policies in the financial sector. 3. govgt is the average real government consumption to real gdp; this proxy is used because government consumption is filled with government debt and is closely related to the interest rate on loans where the government has the authority to act liberally on these debts. 4. deft variable as the gdp deflator ratio, this proxy used in this study because of its ability to measure price changes in aggregate whose measurement results are an indicator of inflation that has an impact on economic growth. b. three proxies that explain income inequality related to assumptions in financial repression are as follows: 1. ggdp is per capita income growth, is a proxy for measuring the level of economic growth in indonesia during the observation period (2010-2021) associated with income inequality and government policies in the financial sector or financial repression. 2. inf is the inflation rate. 3. fri is the financial repression index, which is a proxy that represents the government's policy in suppressing interest rates in the financial sector, especially deposit rates to below the inflation rate. this aimed at lowering loan interest rates so that the government's liberalization behavior was carried out through policies in liquidating its debts. this will have an impact on economic growth through the population's per capita income and income inequality. h1 h3 h2 financial repression growth of gdp inequality journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) 44 │ c. four proxies of economic growth, as follows: 1. ginit is income inequality, is a proxy used to determine the level of income inequality of the population during this observation period, namely from 2010-2021. 2. rgdpt per capita income (gdp real), used to measure income per indonesian population at constant prices without involving the inflation rate. the variable is used because most of the indonesian population is working in the informal sector and not a fixed income. residents who work in the informal sector or non-fixed income are not familiar with the calculation of periodic salary increases (applied to residents with fixed income and working in the formal sector because it takes into account the level of cost of living caused by inflation). 3. fet, is formal education, the level of formal education in indonesia is used in the study to support observations on the level of income inequality as one of the determining factors. formal education will have an impact on better job opportunities, so it will affect the total income level of the population and ultimately have an impact on economic growth. 4. cdt is number of crude death rates; this proxy is used to represent the assessment caused by the covid-19 pandemic, where the change in the crude death rate is very clear in 2019, 2020, until mid-2021. this change in the crude death rate is a fact that proves the influence on the rate of economic growth in indonesia. the data taken from the central bureau of statistics, indonesian banking statistics, and determination of the data set based on the statistical description, shows the information on the characteristics of the data as follows. this table provides a detailed data description of all variables considered in this study. table 1. data description variables description date no. of obs. frit ten-year financial repression index 2010-2021m7 11 rrt ten-year requirement reserves rate 2010-2021m7 11 rirt ten-year real interest rate 2010-2021m7 11 govgt ten-year average real government consumption to real gdp 2010-2021m7 11 deft ten -year gdp deflator ratio 2010-2021m7 11 ginit ten – year income inequality 2010-2021m7 11 ggdpt ten-year gdp growth 2010-2021m7 11 inflt ten-year inflation rate 2010-2021m7 11 rgdpt ten -year per capita income (gdp real) 2010-2021m7 11 fet ten -year formal education 2010-2021m7 11 cdt ten -year number of crude death rate 2010-2021m7 11 source: authors’ (2021) variables operational definition the variables used in the research on the two simultaneous equations to be tested are as follows: journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) │ 45 table 2. variables operational definition type variables and definition source endogenous 1. gini coefficient: a variable that measures the income inequality of the population per year. central bureau of statistics 2. gdp growth: variables that measure indonesia's economic growth during the observation period. central bureau of statistics exogenous 3. inflation rate: the explanatory variable to determine the effect on the gini variable. central bureau of statistics 4. financial repression index: variables that measure the implementation of government policies in the financial sector are also explanatory variables on the gini variable. central bureau of statistics & indonesian banking statistics 5. gdp real: variable income per capita of the indonesian population without involving the inflation rate as an explanatory variable of economic growth. central bureau of statistics 6. formal education rate: education level variable which is the explanatory variable for economic growth related to population income. central bureau of statistics 7. crude death rate: the crude mortality rate variable for the indonesian population per year is to represent the measurable condition of the covid-19 pandemic as an explanatory variable of economic growth. central bureau of statistics source: authors’ (2021) research hypothesis 1. hypothesis 1: financial repression has a significant effect on indonesia's economic growth during the covid-19 pandemic period. h1.1: economic growth has a significant effect on inequality at a significance level of 5%. h1.2: inflation has a significant effect on inequality at a significance level of 5%. h1.3: financial repression has a significant effect on inequality at a significance level of 5%. 2. hypothesis 2: income inequality has a significant effect on indonesia's economic growth during the covid-19 pandemic period. h2.1: the population's per capita income has a significant effect on indonesia's economic growth during the covid-19 pandemic period. h2.2: the level of formal education has a significant effect on indonesia's economic growth during the covid-19 pandemic period. h2.3: the crude death rate of the population has a significant effect on indonesia's economic growth during the covid-19 pandemic period. 3. hypothesis 3: financial repression and income inequality simultaneously have a significant effect on indonesia's economic growth during the covid-19 pandemic period. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) 46 │ research models and method the starting point for developing a system of simultaneous equations for the macro model on the assumption of an open economy determined by 4 equations, namely: 1. based on the battilossi (2004) model on the financial repression model using the beim and colominos index (2001), the equation model is as follows : fri = a + 50 * fr (1) frit = a + 50frt (2) a =  − b (mean (frt)) (3) b = 20 𝑠𝑑(𝐹𝑅) (4) 𝐹𝑅t = rr + 𝐺𝑂𝑉𝐺t − 𝑅𝐼𝑅t − 𝐷𝐸𝐹t (5) where frit indicates the financial repression index, rirt real interest rate, rrt requirement reserves rate. for the next variable, because it is related to economic growth, this research model uses the govgt is the average real government consumption to real gdp, and the deft variable, which is the gdp deflator ratio. 2. to examine the relationship between economic growth, financial repression, and income inequality, we consider the baseline model as follows: 𝐺𝑖𝑛𝑖t = α˳ + β₁ 𝐺𝐺𝐷𝑃t + 𝛽₂𝐼𝑁𝐹𝐿t +β₃ 𝐹𝑅𝐼t + et (6) where; the periods t = 1,…, t, gini is the gini coefficient which measures income inequality, ggdp is per capita income growth, inf is the inflation rate, fri is the financial repression index, and εt is the error term. the gini ratio or coefficient is a tool to measure the degree of inequality in the distribution of the population. it is based on the lorenz curve, which is a cumulative expenditure curve that compares the distribution of a certain variable (e.g., income) with a uniform distribution that represents the cumulative percentage of the population. 3. the formula for the economic growth equation shown by annual growth gdp is associated with inequality and financial repression. then the equation formula is: 𝐺𝐺𝐷𝑃t = α˳ + β₁ 𝐺𝑖𝑛𝑖t + 𝛽₂𝑅𝐺𝐷𝑃t +β₃ 𝐹𝐸t + β₄ 𝐶𝐷t + et (7) where t represents each time period (with t = 1, 2 ... t); ggdp is average annual growth during period t; ginit, rgdpt, fet, and cdt, are respectively, inequality, per capita income (gdp real), formal education, and number of crude death rate during observation with pandemic period t; and eit is the error term. the estimation method used is 2sls. this research uses this method to obtain a simultaneous equation model and find out the factors that significantly affect financial repression, inequality, and economic growth. • endogenous variables consist of inequality (gini) and economic growth (gdp growth). • exogenous variables are inflation (infl), financial repression (fri), income per capita (real gdp), formal education (fe), and the number of crude death of rates (cd). journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) │ 47 findings and discussion descriptive analysis the characteristics of the financial repression index (fri), income inequality, gdp growth, inflation, real gdp, formal education rate, and crude death in indonesia from 2010 to mid-2021 are presented in table 2 as follows: table 2. characteristics of financial repression, inequality, and economic growth in the period 2010 2021 with the covid19 pandemic in indonesia characteristics financial repression index gini growth gdp inflation real gdp formal education rate crude death rate n 12 12 12 12 12 12 12 mean -71.6978 0.3947 4.7219 4.1758 6.3547 2.4462 6.7917 minimum -87.45 0.38 -0.62 0.81 6.23 2.40 6.40 maximum -56.24 0.41 6.24 8.38 6.44 2.46 8.50 standard deviation 10.9857 0.01246 1.8732 2.4533 0.07080 0.02189 0.79938 total indonesia -860.37 4.74 56.66 50.11 76.26 29.35 81.50 note: *) data is very temporary, and without data with a value of 0 the mean for fri in indonesia for a decade (2010 to 2020) has a value of 71.70%, with a minimum value of -87.45% and a maximum value of -56.24%. with a standard deviation of 10.99%, it means that government liberalization in the financial sector is very high considering that indonesia is included in the category of developing countries where government intervention in the financial sector plays a very high role. the very real role of the government in indonesia is the interest rate policy, both the bi rate, deposit rates, and loan interest rates. this can be seen in the total fri, which is the number of policies that have been issued by the government in the financial sector in order to suppress interest rates (financial repression) for a decade (2010-2021 period) of -860.37%. this is a fairly large value for the value of a financial sector policy that is full of government intervention because it is close to 1000%. the variable level of income inequality, which is proxied by the gini coefficient, shows characteristics with a mean of 0.3947, a minimum value of 0.38, and a maximum value of 0.41 with an observation error rate or standard deviation of only 0.01246. this means that the level of income inequality is still far from reaching the severity of poverty which has a relative value of 1 (one), and to be included in the category of severe poverty with a level of income inequality in society. indonesia in this observational decade is still safe as a country that has not yet entered the category with the severity of poverty. the characteristics of gdp growth describe indonesia's economic growth rate for a decade (ten years of observation) from 2010 to mid-2021. indonesia's economic growth rate has an average value (mean) of 4.7219%. this is because it has a minimum value of -0.62% and a maximum value of 6.24%. during the observation period, economic growth experienced a decline of up to -5% in 2019-2020. the total economic growth of indonesia for a decade is 56.66%, meaning that indonesia still has a growth rate that is sufficient and safe for the survival of this country. the inflation rate in indonesia during the observation period has characteristics with an average (mean) of 4.1758%, where the minimum value of inflation in indonesia is 0.81%, and the maximum value of inflation is 8.38%. this means that indonesia is able to control the inflation rate that has almost reached journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) 48 │ double digits. this is because of the government's liberalizing attitude in carrying out its financial policies. for a decade, indonesia's total inflation was under control at 50.11%, so that indonesia's economic growth remained optimistic that it would increase. the characteristics of real gdp in indonesia show a mean value of 6.3547% with a minimum value of 6.23% and a maximum value of 6.44%. this means that the increase in real gdp without taking into account inflation is not high, and the total real gdp in indonesia during the observation period (2010 to 2021) is 76.26%. at the level of formal education in indonesia during the period 2010 to 2021, it has a mean value of 2.4462%, with a minimum value of 2.40% and a maximum value of 2.46%. this means that the growth of the level of formal education of the indonesian population tends to be low and slow, it can be seen that the total value of the level of formal education during the observation period is only 29.35%. the characteristics of the crude death rate of the indonesian population for the decade, for 8 years consecutively have been stagnant at 6.5%. however, from the end of 2019 to mid-2021, there was an increase of 2.1%, so that the mean crude death rate in indonesia for a decade was 6.7917%, with a minimum value of 6.40% and a maximum value of 8.50%. the increase of up to 8.50% was due to the rampant outbreak of the covid-19 pandemic that hit indonesia from the end of 2019 until the middle of 2021 at this time. the sum of the crude mortality rates of the indonesian population during the observation period was 81.50%. this significant change has become one of the focuses of this research as part of the journey of indonesia's economic growth period. simultaneous model with estimation 2sls the estimation results of simultaneous modeling on the gini equation model are for measuring income inequality and the gdp growth equation for measuring economic growth shown in equations (1) and (2) based on the 2sls test calculations presented in table 3. simultaneous equation models in the two equations during the period observations from 2010 to 2021 is to include the pandemic variable as proxied by the crude death rate per year (crude death rate cdr), which presented as follows: equation model 1, for income inequality (gini coefficient): gini = 0,388 + 0,001gdpgrowth + 0,002inflasi rate – 9,178 x 105financial repression equation 2 model, economic growth with the covid19 pandemic (gdp growth): gdpgrowth = 82,412 + 1,256gini + 4,764gdpreal – 39,018educationrate – 1,916 crude death rate in the gini model for the income inequality equation, there are no variables that significantly affect the income inequality (gini) with =5%. be it economic growth (gdp growth), inflation rate, or financial repression index. this result proves that the income inequality of the population is not caused by the level of economic growth, inflation rate, or government policies through liberalism in the financial sector by carrying out financial repression. the advantage of simultaneous equations is that they can perform tests in two directions. this is proven in the next equation, where the results show the equation of economic growth as proxied by gdp growth as the next endogenous variable. the results prove that income inequality, income per capita of the population at constant prices, and the level of formal education of the population have no significant journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) │ 49 effect on the level of economic growth in indonesia. however, the gross mortality rate of the population that is a proxy for the situation and condition of the covid-19 pandemic with changes in the crude death rate that increases shows a significant influence on indonesia's economic growth rate during the observation period with the covid-19 pandemic period. this study has a calculation result on the covid19 pandemic variable that has a negative and significant effect of 1.916 on the rate of economic growth. that is, if there is an increase in the crude death rate by 1, it will reduce indonesia's economic growth rate by 1.910 and so on. table 3. simultaneous model estimation results with 2sls model variables parameter estimation t count p-value r square model 1 (gini) constant 0.388 12.719 0.000 26.6% income inequality gdp growth 0.001 0.344 0.740 inflation 0.002 0.981 0.355 financial repression 8.178e-5 0.214 0.836 model 2 (gdp growth) constant 82.412 2.195 0.064 82.0% economic growth gini 1.256 0.030 0.977 gdp real 4.764 0.244 0.814 education rate -39.018 -0.712 0.500 crude death rate -1.916 -3.940 0.006 source: authors’ (2021) in model 1, namely income inequality (gini coefficient), there is no single variable that significantly affects income inequality with =5%. hypothesis testing on h1.1, h1.2, and h1.3, the results rejected ha or the alternative hypothesis (initial guess) but accepted ho or the null hypothesis. these three variables have no significant effect on income inequality (gini) at a significant level of =5%. this means that income inequality during this observation period is not influenced by the level of economic growth, inflation rate, or financial repression index, which represents many government policies in the financial sector. the coefficient of determination of 26.6% indicates that the economic growth rate, inflation rate, and financial repression index are able to explain the variability in model 1, where the three variables have a joint influence of 26.6%. testing the h31 hypothesis proves that ha accepted, while h0 rejected. at the same time, 73.4% is the influence of other variables that are not observed variables in this model research. this means there are still many things that affect income inequality in indonesia. simultaneous model 2, namely economic growth, shows that the income inequality (gini), per capita income of the population at constant prices (gdp real), and the education level of the population have no and no significant effect on the level of economic growth in indonesia during the observation period (2010 to 2021). therefore, the results of testing the h2.1 and h2.2 hypotheses reject ha and accept h0 on the three hypotheses. however, testing the h2.3 hypothesis on the crude mortality rate variable (a journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 37-52 financial repression and inequality towards economic growth during the pandemic in indonesia riris aishah prasetyowati, endah meiria issn 2776-9658 (online) 50 │ proxy for the covid-19 pandemic condition variable) showed a negative and significant effect on the rate of economic growth in indonesia at =5%, so that the results of the hypothesis rejected h0 and accepted ha. this means that the level of economic growth in indonesia during the period 2010 to mid-2021, during which the covid-19 pandemic occurred, was not affected by income inequality, the population's per capita income (gdp real), the education level of the population, the inflation rate, and the financial repression index. however, the covid-19 pandemic, as indicated by the crude death rate of the indonesian population, which has increased rapidly for a decade, has a negative and significant effect at a significance level of =5%. the coefficient of determination of 82.0% indicates that income inequality, real gdp, education level of the population, and crude death rate are able to explain the variability in model 2, where the four variables have a joint effect of 18.0%, which is the influence of other variables that is not a variable observed in this model 2 research. this means there are still many things that affect the level of economic growth in indonesia. conclusion the result of simultaneous modeling 1 with 2sls estimation is income inequality = 0.388 + 0.001gdp growth + 0.002inflation – 8.178 x 105 financial repression. on the simultaneous model 2 economic growth = 82.412 + 1.256gini + 4.764 gdp real – 39.018 education rate – 1.916 crude death rate. at the level of income inequality as the estimation model 1, the determinant variables consisting of the level of economic growth, the inflation rate, and the financial repression index have no effect and are not significant at the significance level of =5% on income inequality. in the simultaneous model 2 on the level of economic growth with a significance level of =5%, the determining variables such as income inequality, per capita income of the population at constant prices (gdp real), and the education level of the population have no and no significant effect on the level of economic growth in indonesia. indonesia for a decade of observation, namely 2010 to mid-2021, due to the emergence of the covid-19 pandemic from late 2019 to 2021. meanwhile, the crude death rate that describes the impact of the covid-19 pandemic in this study has a negative and significant effect of 1,916 on the level of economic growth in indonesia. indonesia at a significance of =5%. the factors of income inequality and financial repression do not have a significant influence on the level of economic growth in indonesia. however, in the opposite relationship, if the level of economic 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gui, binwei. 2013. the connection between financial repression and economic growth: the case of china, journal of comparative asian development, 12:3, 385-410 yusuf aa. 2020. poverty and distributional impact of covid-19 crisis in indonesia. presented at wider webinar series: how is covid-19 changing development? 2020 may 12. bandung (id): sdgs center, universitas padjadjaran. microsoft word 1167 md ashraful islam available online at: https://journals.researchsynergypress.com/index.php/jgrcs journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 2 number 2 (2022): 40-55 corresponding author md ashraful islam, ashraful.5776@gmail.com doi: https://doi.org/10.31098/jgrcs.v2i2.1167 research synergy foundation role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam1 1pabna university of science and technology, pabna, bangladesh abstract the advent of social media opened up a new window of opportunity for crisis communication. these platforms hold great promise as emergency communication tools. it is essential to understand the potential of these platforms in reaching people during an unknown circumstance like the covid-19 pandemic. this study aims to assess the role of facebook in covid-19 awareness-building efforts and its relevance for crisis communication in the public sector of bangladesh. posts and comments from the facebook page of the directorate general of health service (dghs) were extracted from january 1 to june 8, 2020. government efforts were classified and categorized by different themes based on the content of the posts made by the dghs. citizen response and the effort of the dghs were evaluated by sentiment analysis on english comments made by facebook users. the results show that the dghs actively initiated posts from the first covid-19 case with a significant increase in citizen engagement over time. nine significant themes from the content of the dghs’s post were identified, among which facebook live bulletin (28%) and awareness and preventive measures (26%) were the most prevalent themes. sentiment analysis found the prevalence of positive sentiment in over 20% of the comments. the findings suggest that the dghs significantly draws public attention through the active use of its facebook page. through an official source, facebook played a key role in facilitating emergency communication during the pandemic and delivering awareness campaigns on behalf of the government. keywords: social media; crisis communication; sentiment analysis; bangladesh this is an open access article under the cc–by-nc license. introduction “if anything kills over 10 million people in the next few decades, it’s most likely to be a highly infectious virus rather than a war” bill gates, the co-founder of microsoft, stated during a youtube ted talk in april of 2015 (ted, 2015). he pointed out that the world is not ready to stop an epidemic at all. a lot of pieces are missing and these things are a global failure. he added, “this is a serious problem we should be concerned. in fact, we can build a really good response system. we have the benefits of all science and technology – we’ve got cell phone to get information from the public and get information out to them. we have satellite maps where we can see where they are and they are moving. we have advances in biology that should dramatically change the turnaround time to look at a pathogen and be able to make drugs and vaccines that fit for that pathogen. so, we can have tool but those tool needs to be put into an overall global health system and we need preparedness” (ted, 2015). four years later, prescient forecast of bill gates on ted come true, and the world has been plagued by a catastrophic viral pandemic known as coronavirus (or covid-19). this new disease quickly spread throughout europe and then around the world, prompting the world health organization (who) to issue a pandemic alert in march 2020 (checchi et al., 2021; liu et al., 2020). it is a novel virus that causes an acute respiratory syndrome characterized by asymptomatic but potentially deadly interstitial bilateral pneumonia and is very contagious, particularly by airborne transmission (checchi et al., 2021). journal of governance risk management compliance and sustainability (jgrcs),, vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) │ 41 following a rise in the number of reported cases, each country after another imposed social distancing laws affecting the education system, shops, offices, transportation, and a wide range of other sectors (gkiotsalitis & cats, 2021). more than half of the world's population was socially isolated, with more than 90 nations in lockdown to combat the covid-19 outbreak (di domenico et al., 2020). scientists warn that the r0 or reproductive number of covid-19 is exceptionally high to reach any age group quickly (liu et al., 2020). on june 27, 2022, the virus had infected an estimated 539 million people worldwide, with around 6 million fatalities and constant mutation in the form of new variants such as delta and omicron (who, 2022). most nations have begun to report infections by the second half of january 2020. the united states reported the first incidence on january 20, 2020, whereas england, as part of the united kingdom, recorded its first case on january 31, 2020. the first instance in singapore was reported on january 23, 2020 (raamkumar et al., 2020). in bangladesh, confirmed by the institute of epidemiology, disease control and research (iedcr), the first case of covid-19 was identified on march 8, 2020. due to its high population density (about 170 million people in 147,570 km2), inadequate health-care institutions, poverty, and a weak economy, bangladesh was one of the most vulnerable states (islam et al., 2020). from the beginning of the outbreak in bangladesh, the government implemented several covid-19 prevention measures, including closing schools, colleges, and universities, prohibition of public gatherings, countrywide travel restrictions, and a national holiday (lockdown), among other measures. on march 23, 2020, the government declared nationwide home confinement (public holiday), which lasted until may 27, 2020. between march and may 2020, the number of covid-19 cases remained low; however, when the countrywide public holiday was ceased at the end of may 2020 for the sake of people's economic survival, the number of reported cases soared sharply between june and august 2020 (wikipedia, 2021). in response to covid-19, the government of bangladesh, along with the directorate general of health services (dghs) and the institute of epidemiology, disease control, and research (iedcr), issued a nationwide warning and deployed multiagency public health initiatives in accordance with who guidance to combat the pandemic. to completely involve the general citizens in learning and recognizing the gravity of the outbreak, as well as their duties and responsibilities in mitigating the severity, bangladesh urgently needed an extensive awareness-raising program through mass media, as well as the internet and social media (islam et al., 2020). raising public awareness and maintaining hygienic guidelines was the most fundamental approach to minimizing coronavirus's community transmission or avoiding rapid infection, especially in developing countries where a large number of people cannot bear the minimum standards of healthcare facilities. realizing the significance of the massive awareness campaign, in addition to traditional mass media, the bangladesh government has chosen social media platforms such as facebook as a means of communication in times of pandemic emergency. the directorate general of health services (dghs) aggressively communicated critical information about pandemic crises and provided a live bulletin update on its facebook page. during a pandemic, social media technologies like facebook can be a powerful tool for spreading health information to the general population. emerging highly contagious diseases, including covid-19, most often lead to greater utilization and consumption of media of all kinds by the wider populace for information (simon et al., 2015; tsao et al., 2021). due to the disease's highly contagious nature, reporters and journalists from traditional media like radio, television, and newspapers confront a significant challenge in gathering information from the government and disseminating it throughout bangladesh. many news reporters and journalists found positive of covid-19 while collecting information, resulting in the isolation of the whole production unit (bdnews24, 2020; dhaka tribiune, journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) 42 │ 2020). as a result, social media has become the go-to venue for public opinions, perceptions, and attitudes on covid-19-related events and policy. for governments, organizations, and institutions to distribute critical information to the public, social media has become a critical communication tool. therefore, social media has a vital role in people’s perception of disease exposure and government efforts to reach citizens in time of pandemic emergencies in bangladesh (tsao et al., 2021). hence, it is critical to comprehend how social media technologies contributed as a distinct communication channels during a pandemic. this study aims to address three research questions about the use of facebook during covid-19 emergency in bangladesh. first, how government agency utilised facebook as an emergency communication tool during the covid-19 pandemic in bangladesh? second, what is the role facebook played in an effort of pandemic awareness building in bangladesh? third, bangladesh has always been threatened by natural disasters as a result of global warming. natural disasters such as floods, cyclones, and tsunamis force the government to issue nationwide public emergencies every year. they are required to send a message of heightened awareness to the people who live in the most remote parts of the country. so, what is the relevance of adopting facebook as an official prospective emergency communication tool during an emerging situation in bangladesh? based on the review of previous research (section 2), we present the method of our study (section 3) and show both quantitative and qualitative results (section 4). the conclusion describes the role of facebook in the context of emergency social media use. the outcomes of the study should understand the probable link between the use of facebook and its role in response to the covid-19 in bangladesh. literature review social media is defined as a “group of internet based applications that build on the ideological and technological foundations of web 2.0, and that allows the creation and exchange of user-generated content” (kaplan & haenlein, 2010). social media applications are designed to enable users to create, communicate, collaborate and share the process of creating and consuming content. these tools offer a large number of internet users access to an array of user-centric spaces they could populate with usergenerated content and an equally broad range of options for connecting these spaces to build virtual social networks (obar & wildman, 2015). with more than 2.85 billion monthly active users worldwide, facebook is the most popular social media network today (statista, 2021). other social media networks, including twitter, youtube, whatsapp, instagram, and reddit, each have over >300 million active users monthly and are widely distributed (reuter & spielhofer, 2017). the use of social media in emergencies has evolved into its study topic, to the point where the phrase "crisis informatics" is now widely used. it considers emergency response to be part of a broader social system in which information is disseminated via official and public channels and organizations (reuter & spielhofer, 2017). many studies (i.e. bird et al., 2012; peary et al., 2012; simon et al., 2015; wang & ye, 2018) have shown that social media can be a powerful tool for crisis management. in a research based on prior disasters and emergencies stricken globally, simon et al. (2015) observe social media technologies as essential and significant components of crisis management. in emergencies and natural disasters, social media fosters a sense of connectivity by providing access to vital and timely information from both official and non-official sources. the quantity of information transmitted between vulnerable persons and emergency personnel considerably increases when traditional communication methods such as phones are supplemented with social media. in addition, this supplemented communication results in increased situational awareness, which leads to quicker and more informed journal of governance risk management compliance and sustainability (jgrcs),, vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) │ 43 judgments and actions (yin et al., 2015). by distributing information to the public and receiving input from them, social media allows individuals to participate in disaster management. these tools have been using to increase preparedness by providing daily, real-time information to the public, as demonstrated during the 2009h1n1 pandemic (simon et al., 2015). alexander (2014) shows social media can be used as an important technology for natural disaster management. for example, following the march 2011 earthquake and tsunami in japan, social media helped with public warnings, searching for missing people, and mapping facets of the disaster. similarly, bird et al. (2012) surveyed on the use of social media in disaster like floods and the results indicate that most respondents began using the facebook community groups on the floods to get information about their community and most of the people found the medium an effective means of communicating with family or friends. peary et al. (2012) observed that social media is sometimes the only functioning communication method in disasters. in an extensive online questionnaire survey, they found that during the 2011 earthquake and tsunami in japan, social media was the most reliable source of information. around 94% of respondents evaluated social media as a highly beneficial tool in an emergency. during emergencies, social media facilitates safety identification, identifying displaced people, providing damage information, providing support for disabled people, volunteer organization, fund-raising, and moral support systems (peary et al., 2012). social media data can also be a potential source of public health surveillance. public health professionals may use social media data to track information, detect possible outbreaks, forecast infection trends, monitor emergencies, and assess disease awareness and responses to official health communications. fung et al. (2015) summarise the application of social media in public health surveillance into three different stages.  epidemiologic monitoring and surveillance – can be used for three specific functions. first, to monitor official information by foreign authorities and domestic accounts. second, to detect outbreaks information via syndromic surveillance and event-based surveillance. syndromic surveillance includes detecting symptoms shared by users on social media by either human readers or a computer algorithm for non-public health purposes. event-based surveillance includes detecting outbreaks via unofficial information or rumours about the new disease on social media, print media, radio, and television. third, to provide timely estimates and forecasts of disease incidence.  situational awareness to increase situational awareness of humanitarian crises, e.g., typhoons and earthquakes.  communication surveillance – to measure public reactions to an outbreak to monitor the general public’s awareness and perception on social media. also, to monitor people’s reaction to specific public health messages by measuring health promotion messages or events on social media. moreover, attempts to classify the usage pattern of social media have also been made in response to various emergency circumstances and reactions. reuter & kaufhold (2018) described four different patterns of communication using social media during emergencies.  citizens to citizens (c2c) – citizens and digital volunteers communicate with each other and become a part of extensive rescue and response work via social media networks.  authorities to citizens (a2c) – authorities use social media as part of their disaster communication endeavours to educate the general public concerning how to mitigate fatalities and respond correctly in an emergency.  citizens to authorities (c2a) – using data mining to analyse citizen-generated content in social media to measure public awareness by crisis response authorities. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) 44 │  authorities to authorities (a2a) the inter-and intra-organizational collaboration (a2a) of authorities via social media to facilitate organizational awareness and informal processes. therefore, social media platforms can be helpful in emergency management efforts by facilitating instantaneous communication with the general public. during crises, government agencies can employ social media networks to disseminate information from official sources. these tools can create new and innovative ways of connecting with citizens during emergencies and raise government responses in crisis management. however, previous studies on crisis communication through social media in the public institutions was mostly focused on developed countries (alexander, 2014; peary et al., 2012; y. wang et al., 2021). additionally, facebook is the most widely exploited social media site worldwide (statista, 2021). in contrast to other social media sites its worldwide reach, promptness, and dialogic potential make it ideal for emergency communication in events like covid-19. nonetheless, there is a significant literature gap in the use of facebook as a crisis communication tool, particularly in developing countries. the present study intends to shed the light of existing literature and investigates the role of facebook in covid-19 crisis management and awareness building campaign with the reference of bangladesh. research method data collection data were collected from the official facebook page of the directorate general of health services (dghs) on 7 june 2022 (https://web.facebook.com/dghsbd?_rdc=1&_rdr). data from facebook are acceptable for study since it is extremely rich and valuable. during the covid-19 pandemic, the dghs was one of the primary sources of information in bangladesh. through their official facebook channel, the dghs actively disseminates vital information related to the infection rate, symptoms, fatality, guidelines, and different policy actions from the very beginning. it is one of the agencies of the ministry of health & family welfare of bangladesh that implement various health programs, health management, and the development and execution of multiple policies via administration. the facebook page of the dghs is verified with more than 2 million followers (see figure 1). source: author collected, 2022 figure 1. facebook page of the directorate general of health services journal of governance risk management compliance and sustainability (jgrcs),, vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) │ 45 during any pandemic or emergency, information dissemination is not of mere importance. information from reliable sources is also vital. facebook has an embraced record of spreading rumours, panic, and misinformation in the previous history. therefore, information flow from the official facebook page of the dghs would have been the best avenue for the government to distribute authentic information to a large fanbase within a short period of time. to meet the requirements of this paper, we collected data in three different phases from the official facebook page of the dghs. phase-i started from 1 january to 7 march 2020 when the covid-19 pandemic began to spread all over the globe, and this stage will be considered the emergency preparedness stage for bangladesh. phase ii started on 8 march, when the first case of covid-19 was identified in bangladesh, and ended three months later (8 june 2020) when the nature, precautions, and most of the symptoms were known to the people through rapid information streaming by the government. it will be termed as the pandemic response stage. from 9 june 2020 to the rest will be considered as the mitigation and post pandemic stage (phase-iii) when covid-19 affected almost all the countries. for the research convenient data only from phase-i and phase-ii were counted for the study to explore the real scenario concerning pandemic awareness building by the public health department. thus, overall facebook activities from 1 january to 8 june 2020 by the dghs were counted for the study. throughout this period, all the relevant data, i.e., posts, shares, reactions, comments, and replies, were collected through the facepager tool. comments and replies other than this specific time period was filtered out for a better understanding of the study. data analysis data analysis was performed through three basic steps. first, collected data was analysed to understand government response in a pandemic emergency. in this case, post per day (ppd) on the dghs facebook page was calculated to understand the response rate in a given circumstance. comparisons of two different stages (phase-i and ii) were also performed to evaluate government efforts to raise public awareness, given that covid-19 is an airborne disease and highly contagious. this step further investigates the efficacy of social media technology to connect citizens in pandemic times by measuring citizen engagement by counting share per post (spp), comments per post (cpp), and reactions per post (rpp) on the dghs’s facebook page. views per post (vpp) were also counted in the case of video content. in the next step, the underlying subject of each covid-19 post was discovered using thematic analysis through nvivo 12. nvivo is a software that enables users to electronically code texts or images in order to synchronize data and build more statistically rich intersections (oliveira et al., 2013). analysis began with data cleansing by reviewing and re-reading the retrieved data to identify emergent patterns and themes. then data were classified and organized into groups or "nodes" based on the theoretical foundation, and research questions were created. for more than one theme on a single post, each was coded into its own theming unit. finally, nvivo encoded nodes were reviewed and re-read to find meaningful broader patterns of the theme. following the preliminary study, nine major categories were identified. detailed coding categories are provided in table 1. journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) 46 │ table 1. list of themes coded from the textual content of facebook posts label sample of translated sentence frequency appreciation salute to those of you who are working day and night in the hospitals for the wellbeing of the country and the people 4 awareness and preventive measure avoid coughing and spitting everywhere to prevent coronavirus. be careful not to panic 77 disease information no evidence has been found so far that the virus can be transmitted from the dead body of a patient infected with covid-19 5 emergency communication guidelines in case of emergency, call 333 or 16263 and get health care 66 facebook live bulletin online briefing on the latest status of coronavirus 83 update first death recorded today by covid-19 infection 22 public reassurance stay home, we are always at your service 4 response initiatives many organizations and volunteers have already come forward to tackle covid-19 15 others are you aware of the prevention of dengue and chikungunya? 16 source: processed by researcher (2022) finally, sentiment analysis of users’ comments written in the english language was conducted to understand initial responses and emotions expressed by the citizen on the dghs’s facebook posts. a total of 2019 (27.29 per post) comments from march 08 to april 08, 2020, were selected through simple random sampling and screened to remove unnecessary words, characters, emojis, urls, white spaces, etc. data processing started with tokenization and removal of stop words. tokenization is a way of breaking chunks of data into an individual group of words to make sure proper execution of text mining application and stop words are those which carry very little helpful information or polarity of sentences (such as a, the, is, are etc). for sentiment analysis syuzhet package (jockers, 2017) is considered as the most popular and efficient package of r. also, ‘bing’, ‘afinn’ and ‘nrc’ dictionaries are widely accepted approach of sentiment analysis (jockers, 2017). nrc lexicon is amongst the most extensive dictionaries for sentiment analysis (mohammad & turney, 2010). with the help of syuzhet the sentiment analysis of this study was performed using the nrc (national research council) lexicon resources of r. additionally, the wordcloud package of r was applied to justify the most frequent word linked with each sentiment group of user’s comments. the entire analysis was performed through the rstudio windows version of 2022.02.3+492. journal of governance risk management compliance and sustainability (jgrcs),, vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) │ 47 results government responses figure 2 shows that from january 01 to march 07, 2020, there were only three posts made by the public health department. during this period, the usage statistics of the facebook page were deficient as a pandemic preparedness stage. from march 08, when the first case was confirmed, the dghs began to accelerate their presence on its facebook page and produced at least 1 covid-19 related post every day. from march 08 to 31, the dghs made overall 66 posts on an average of 2.21 posts per day (see table 02). the highest amount of posts published in a single day was six on march 26, 2020. the day government-imposed movement restriction declaring a public holiday throughout the country. also, the study finds an increase in facebook usage in the following month of april by the agency. the dghs made an average of 3.6 posts per day (108 posts) throughout april. on april 14, the number of infection cases crossed 1000 for the first time and showed the sign of community transmission within the country. right after then, the average post per day peaked at 5 in the next ten days. the highest number of posts in that month was 8, created on april 22. however, the average post in the next month (may) significantly dropped to 1.77 with a total post of 55. at the beginning of the month, the dghs seemed to create two posts per day related to covid-19. the trend continues to fall at the end of the month with an average of 1.1 ppd. thus, the finding shows government responses, representing the high intensity of initiating posts about covid-19 on facebook in the first period of the first case to its peak in the second phase of april. source: processed by researcher (2022) figure 2. post per day (ppd) on the dghs facebook page between 08 march to 07 june, 2020 citizen engagement table 2 indicates that the dghs seeks a high range of citizen engagement on their facebook page in the post related to covid-19. from january 01 to february 29, the highest number of citizen 0 1 2 3 4 5 6 7 8 9 (b la nk ) 16 -f eb 11 -m ar 14 -m ar 17 -m ar 20 -m ar 23 -m ar 26 -m ar 29 -m ar 02 -a pr 05 -a pr 08 -a pr 11 -a pr 14 -a pr 17 -a pr 20 -a pr 23 -a pr 26 -a pr 29 -a pr 02 -m ay 05 -m ay 08 -m ay 11 -m ay 14 -m ay 17 -m ay 20 -m ay 23 -m ay 26 -m ay 29 -m ay 01 -j un 04 -j un 07 -j un ppd first confirmed case general holiday began crossed 1000 cases of infection 100 death crossed journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) 48 │ engagement was extremely poor, with being average rpp of 370. however, the average rpp during march was 3,987.51, following a considerable increase for the rest of the given period. for instance, the average rpp in april and may increased more than four and 10-fold, respectively, that of the march period. the highest average rpp was 43,321.1 during may. similarly, cpp follows a sharp increase throughout the second phase, and vice versa – the average cpp of march increased 14 times during may being the highest at 1090.236. the number of shares made to individual content published on organizations' facebook pages is another metric of facebook engagement (jukić & merlak, 2017). in that case, the average spp in the march were 1847.62, which increased to 2954.96 during april. however, the trend falls to 1965.8 during may on average. perhaps it is due to a decrease in initiating posts during may, providing the followers with less scope to share. table 2. facebook usage trend and citizen engagement on the dghs facebook page month ppd rpp spp cpp january 0.66 370 365.5 9.5 february 0.32 43 2 0 march 2.21 3,987.51 1,847.62 76.66 april 3.6 15,191.54 2,954.96 207.08 may 1.77 43,321.65 1,965.8 1,090.236 source: processed by researcher (2022) considering engagement trend, the result shows that citizen engagement began to increase unpredictably on the dghs’s facebook page from the beginning of march. at the pandemic preparedness stage, the dghs’s activities on the facebook page were minimal; thus, citizen engagement was very low. since the first case of covid-19, the dghs began to utilise their facebook platform following an unheard amount of citizen engagement on their facebook post. the trends continue to grow throughout the first wave. even though the dghs significantly dropped their facebook responses in may, citizen engagement continues to grow multiple times faster than in previous months. it may indicate a persistent tendency to connect with the dghs, which is considered a valuable source of pandemic emergency information by the facebook page followers. the higher the number of fans, the higher the government response, the higher the reach and the higher the potential for engagement. thematic analysis thematic analysis of the post on the dghs facebook page was dispersed diversely. as shown in figure 03, around eight types of themes were identified on the posts related to covid-19. facebook live bulletin was the highest frequent theme (28%). the dghs was found to be outreaching covid-19 information by the live streaming feature of facebook regularly. each live streaming post was entitled with a virtual health bulletin of the health department on the covid-19 situation. the dghs disseminated information about daily infection cases, situation updates, testing capacity, symptoms, and death per day on these live streaming. the study finds a considerable number of viewers of those live feeds on facebook. moreover, the following highest frequent theme topic was found to be awareness and preventive measures (26%). from the very beginning, the dghs seems actively creating posts related to maintaining social distancing, staying home, washing hands with sanitizer, and so on through textual and video content. on the other hand, around 23% of the content addressed communication issues regarding the covid-19 journal of governance risk management compliance and sustainability (jgrcs),, vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) │ 49 emergency. many posts suggest an emergency communication system providing phone numbers, email, and other active internet-based communication platforms. figure 3. thematic analysis of the post made by the dghs on facebook page during march 08 to may 31 additionally, the theme related to situation update as textual content rather than live feed was incorporated in around 8% of the posts. also, the study noted a few extant (less than 5%) other themes related to covid-19 (i.e., appreciation, disease information, public reassurance, responsive initiative, etc.). around 6% of the total post was found to be other than the topic of covid-19. sentiment analysis sentiment analysis using the nrc sentiment lexicon allows us to express each document as comprising eight basic emotions: anger, anticipation, disgust, fear, joy, sadness, surprise, trust and two sentiments: positive and negative. the results of applying this sentiment analysis to comments on the dghs’s covid19 related posts on facebook during the first 31 days are displayed in figure 4. source: processed by researcher (2022) figure 4. bar plot showing the count of words associated with each sentiment group expressed as a percentage 1% 26% 2% 23% 28% 8% 1% 5% 6% source: processed by researcher (2022) appreciation awareness and preventive measure disease information emergency communication guidelines facebook live bulletin journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) 50 │ positivity was the dominant sentiment exhibited in the posts, making up over 20% of the emotions carrying words. on the other hand, negative sentiment contributed only 12% of the comments. it signifies that the dghs had a positive outlook during pandemic outreach efforts. moreover, it is worth noting that trust emotion exceeds negative sentiment, indicating that the dghs is gaining public credibility as an official source of covid-19 information. among eight emotions, trust was the prevalent emotion being 15.8% words from the comments. anticipation and sadness were the following emotions categories associated with around 10% of the comments, respectively. negative emotions such as fear, disgust, and anger were expressed in many comments, accounting for 8.5%, 8%, and 3.5% of words, respectively. emotions such as joy were 8%, and surprise was 5% of the comments. source: processed by researcher (2022) figure 5. plot depicting the variation in emotions and sentiments carrying words for each sentiment group over the first 31 days of the covid-19 timeline figure 5 expresses surprise, sadness, negative, fear, disgust, and anger contain a steep curve in the mid of march, which follows declining for the rest of the time. it may happen due to an increased number of cases, fatalities, and initiation of facebook posts in the mid of march by the dghs. from the beginning of april, joy, surprise and trust have seen a sharp increase in positive emotion in comments. as government initiatives and more information on covid-19 became accessible, the public's favourable feelings took centre stage. journal of governance risk management compliance and sustainability (jgrcs),, vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) │ 51 source: processed by researcher (2022) figure 6. word cloud showing the most frequent keywords as illustrated in figure 6, most frequent keywords in comments are thank, good, nice, like, right, wow etc. which are supporting positive sentiment and emotions like trust, anticipation, surprise and joy. this suggests that citizens are actively using the dghs facebook page to learn more about the situation while also praising and looking forward to the dghs's timely information sharing on the social media platform. also, a large number of positive responses from citizens demonstrated facebook's significant value as an official source of information in times of emergency. similarly, keywords such as sick, death, depression, wrong, virus, covid, contributing negative sentiment and emotions like fear, anger, disgust, sadness at a few extant. this exemplifies the general citizen's worry and advice in response to a rising crisis. keywords like bangladesh, ppe (personal protective equipment a clothing or equipment designed to reduce exposure to hazards), mask, cases, kits, corona, death, virus, please, total, situation, rational, covid representing the eagerness of citizen to know the information about covid-19 and sharing their perception on facebook posts which could either be positive or negative. discussion the dghs exclusively exploited social media platform like facebook since the first case of covid19 in bangladesh. from the very beginning, they started sharing information with a wide range of facebook posts relating to the awareness efforts during the first wave of covid-19. previously, the dghs's facebook page usage rate was significantly low. only three posts were initiated from january 01 to march 07, 2020. realising the importance of disseminating information related to covid-19 and raising public awareness to stay safe and educate them, the dghs started using their official facebook page to share information on a regular basis. an abrupt increasing push of posts per day on the dghs's facebook post suggests that the public health department choose its facebook page as an informationsharing device during the first wave of covid-19 in bangladesh. the finding supports boon-itt and journal of governance risk management compliance and sustainability (jgrcs), vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) 52 │ skunkan's (2020) view that social media in many countries has been extensively used as a public communication tool to learn about the covid-19 pandemic. citizen engagement on the dghs's facebook post was extremely high. at the beginning phase of covid-19 in bangladesh, the nature and trend were unknown to people; thus, they were looking for information from different sources. as the dghs started utilising their facebook platform frequently, citizens engagement increased rapidly and continued to grow throughout the rest of the period. as a result, it can be concluded that the dghs's built a large audience base on its facebook page to get their voices heard during pandemic times and has become a source of authentic information to the public. these findings are comparable with those of raamkumar et, al. (2020) who measures public response of covid-19 pandemic in facebook and found a significance rise in the engagement metric resulted the covid-19 pandemic. the thematic analysis indicates the prevalence of awareness and preventive measures and live bulletin to the posts created by the public health department. they actively broadcast live information about daily infection and fatality cases, danger zone, transmission rates, and test kits capacity through daily live bulleting situation updates on their facebook page. many famous actors, celebrities, and politicians were also found to educate citizens through video content heading the public awareness campaign against covid-19. the dghs was found to be stressing the safety concern of the citizen and disseminating the awareness information like washing hands, wearing masks, staying home, and maintaining social distancing on their facebook page. this is consistent with the research by baye (2020) and güner et al. (2020) both of which found social distancing, frequent hand wash, sanitization etc. is the required approach to prevent covid-19 infection. they perceived most effective weapon that society has against this virus is the prevention of its spread. the theme related to the emergency communication guidelines was also sufficient. many posts were found to be addressing the communication guideline in case of emergencies during pandemic times, providing contact addresses, mobile/telephone numbers, active communication portals etc. these findings are comparable with the research of malik et al. (2021) who discovered that social media platform can be an effective tool for health organizations to convey their guidelines during crisis communication. eventually, from the thematic analysis, the dghs seem utilised their facebook page to disseminate pandemic information, where the messages were primarily focused on public awareness, situation updates, emergency communication, and preventive measures. this is in line with the research of raamkumar et al. (2020). however, the study finds a lack of diversity in the content types of the post. most of the content was found to be video content in type. the content related to audio, picture and text was comparatively low; also, given that the covid-19 is highly infectious and an airborne disease in nature, it is crucial to understand how covid-19 works, the symptoms, and how contagious it is as an airborne disease. a central theme related to the disease information was substantially low in the form of textual content on the posts. sentiment analysis enhanced the findings by identifying negative and positive topics on covid-19. it shows a high range of positive sentiment and emotions in the comment section made by the followers on posts related to covid-19. with the help of word cloud, the study corroborated sentiment analysis that the citizen felt glad for getting information in time from the dghs's facebook page and feeling sad about getting the situation worse every day. also, the level of trust emotions was relatively high, which suggests that dghs's facebook page is an authentic source of information. trust is essential for the journal of governance risk management compliance and sustainability (jgrcs),, vol. 2 (2), 40-55 role of facebook in covid-19 crisis management and awareness raising efforts in bangladesh: sentiment and thematic analysis md ashraful islam issn 2776-9658 (online) │ 53 implementation of a wide range of public policies that rely on public responses. according to cooper et al. (2008) public institutions with a higher level of public trust can govern effectively. conclusion in short, rapid information dissemination is critical in an emerging situation. the government worldwide has been widely adopting the social media platform to facilitate public communication. it is essential to understand the possibility of these platforms reaching people during an unknown circumstance like the covid-19 pandemic. the findings of this study demonstrate the potential of facebook as a formal setting for reaching people in situations like panic, fear and demanding. primarily to connect with the citizens where they can reach representatives instantly at a lower cost. facebook has a great promise to enhance citizen engagement and raise public awareness in a short time as a prospective emergency communication platform. given how widely used facebook is in bangladesh, it is highly likely that this social media network would prove to be an effective means of communication during emergencies. since the technology and innovation is becoming the next big thing, bangladesh must be prepared to fully harness the potential of such platforms in order to mitigate consequences before another wave of unforeseen circumstances strikes. there is a strong need for proper plan and policies regarding social media use in public institutions for an effective and interactive communication medium in emergencies. using the insights gained from this study and discovering the power of social media, policymakers and relevant organizations can choose which areas to emphasize to mitigate the implications of an emergent situation. future studies should focus on developing a legal framework regarding the social media consumption in public institutions having a pre-planned approach to deal with unknown circumstances avoiding ethical dilemma of rapid and appropriate information sharing to acquire massive public awareness. limitation & further research the study contains some limitations. first, the data were collected from the dghs’s facebook page only. other government agencies may utilize social media platform to disseminate covid-19 information along with the dghs. so, it's conceivable that this study's findings do not generalise the social media outreach efforts taken during the covid-19 outbreak. the fact that the study was only conducted using comments written in english is another drawback of the research. due to the large number of comments written in languages other than english, it might be helpful to do research that takes into account all of the languages in analysis and does so in an in-depth means. moreover, young people use social media more often than older people, who still use traditional mass media in a variety of ways. this means that covid-19 communication can be judged by how it affects other channels of behaviour or practice. hence, additional research is needed to determine the relative impact of traditional media and social media, with the goal of conducting an in-depth investigation into widespread public awareness across a wide range of demographics. references alexander, d. e. 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(2023) corresponding author’s email: gbadebo.adedejidaniel@gmail.com journal of governance risk management compliance and sustainability, vol. 3 no. 1 (2023) https://doi.org/10.31098/jgrcs.v3i1.1197 the estimation and power of alternative discretionary accruals models adedeji daniel gbadebo1 , ahmed oluwatobi adekunle2 , joseph olorunfemi akande3 1,2,3 walter sisulu university, south africa received: november 10, 2022 revised: april 28, 2023 accepted: april 29, 2023 online: april 30, 2023 abstract discretionary accruals remain decade’s long measures to detect earnings management in empirical accounting research. the correctness of the specifications and test power of the information content for the models remains unexplored based on samples of most emerging market firms. yet, country’s-based researchers have increasingly used different jones-based discretionary accruals to proxy earnings management. the paper aims to evaluate four discretionary accruals models and to decide the most appropriate one for the detection of earnings management. for the aim, we apply regression methods to estimate and evaluate four jones-type discretionary accruals models – simple jones, modified jones, extended jones cash flow model and working capital accruals – based on evidence of a final sample of 1,852 firm-year of 102 firms in nigeria during 2001–2020. the results disclose that all models are well-specified such that the likelihood of type i errors is minimum and below the significance level of 5%. in order to demonstrate the power of the test, the simulations completed identify that the modified jones model exhibits the highest power capability. the implication of this finding is that the modified jones model is the most appropriate model to detect earnings management based on the nigerian sample. keywords: earnings management; discretionary accruals; jones model; modified jones; extended jones cash flow; working capital accruals introduction accounting accruals remain decades long instrument to represent the accounting quality of the performance and overall financial status of firms (balboa, lópez-espinos, & rubia; fairfield, whisenant & yohn, 2003; mcnichols, 2002). usually, managers that pursue short-term maximising incentives against long-term growth adapt accruals to manipulate their earnings. they capitalise on accruals flexibility to manage earnings downward, reporting losses when they are unable to meet profitability targets or reporting lower profits when gross earnings are insufficient to reach reference bonuses to enhance future earnings upward. accruals management is the best channel for earnings manipulation due to their low cost and unobservability (byzalov & basu, 2019). the impacts of accruals are reversible due to timing effects with potential implications on future reported earnings. the manipulation of accruals, at any current period, would reverse in future (dechow, hutton, kim & sloan, 2012). increasing earnings now through revenue overestimation (e.g., extending asset lifespan to decrease depreciation cost) would necessarily lead to future earnings decline, resulting from understating revenues. previous researches propose several methods to estimate accruals representing firms’ performance (dechow & dichev, 2002; peasnell, pope & young, 2000; dechow, kothari & watt 1998; dechow, sloan & sweeney, 1995; jones, 1991). ball and shivakumar (2006) examine three accrual models: the cash flow model (dechow et al., 1998), the dechow-dichev model (dechow & dichev, 2002), and the jones-type models (larcker & richardson, 2004; dechow et al., 1995; jones, 1991). dechow (1995) shows that accruals earnings models have been tested to be superior performance measures relative to cash flow methods. aside, only the jones model and its alternative modifications are widely considered in the literature to detect evidence of earnings management (balboa et al., 2013). the models are associated with detecting the tendency for firms to manipulate earnings in pursuing short-term price incentives. they contain incremental information that exhibits higher reliability of test power (algharaballi & albuloushi, 2008; teoh, welch & wong, 1998). research article https://creativecommons.org/licenses/by-nc/4.0/ https://www.sciencedirect.com/science/article/abs/pii/s0165410119300618#! https://www.sciencedirect.com/science/article/abs/pii/s0165410119300618#! https://crossmark.crossref.org/dialog/?doi=10.31098/jgrcs.v3i1.1197&domain=pdf https://orcid.org/0000-0003-1603-6705 https://orcid.org/0000-0002-1929-3291 https://orcid.org/0000-0001-8445-8905 j. of gov. risk management compliance and sustainability 75 the estimation and power of the information content of earnings test for the different discretionary accruals models remain unexplored in nigeria. whereas algharaballi and albuloushi (2008) present the first evidence to investigate emerging economies based on the kuwait sample, this study is the first to offer evidence for nigeria. the study is important because there has been an increasing focus on research on the use of discretionary accruals to measure earnings management (ozili & outa, 2019). yet, no paper has evaluated the power capability to proffer the most appropriate models for a sample of nigerian firms. it provides a literature gap for the current research. this paper offers a new insight to establish if accrual models are appropriate to depict earnings manipulations in nigeria. we pursue two specific objectives. the first specifies and evaluates four standard discretionary accruals models to detect earnings management – the jones model (1991), the modified jones (1995), the working capital accruals model (1998) and the jones cash flow operating model (1999). for a sample of 102 firms, we estimate the firm-specific linear regressions based on the specification for the particular model. we present robust evidence to show which accrual model has the highest explanatory prowess and which is adjudged most powerful. we perform specification correctness tests according to the procedure in teoh et al. (1998). the test confirms the sensitivity of the different accrual models to the samples, evaluating the extent to which each model falsely refutes the assumption of no systematic earnings management. if evidence indicates that a particular model is incorrectly specified to fit accruals expectations, empirical research validates alternatives to detect prevalent earnings management. the second examines the test's power according to the procedure in peasnell et al. (2000). we test the models’ capability to detect earnings management by inducing pseudo-induced accruals manipulations to demonstrate the dynamics of economically plausible levels of manipulations. according to algharaballi and albuloushi (2008), we implement (artificially) both ‘expense’ and ‘revenue’ manipulations. we completed 1,000 simulations of 555 repeated samples (from a total of 1,852) to verify each model rate of the null’s rejections for each distinct accruals manipulation. the most powerful model offers the best alternative for empirical tests for the evidence of systemic earnings management. the outcome would be useful for auditors, regulators and the capital market. if a strong power is established, the implication is that management may tend to maximise future earnings to increase stock prices during proposals for initial public offerings. it enables a comparison based on relative firms from other emerging market studies. the remainder of the paper is structured as an underscore. section two describes the specification of alternative discretionary accruals models. section three discusses the method, including data construction and estimations procedures. section four provides the results, including basic statistical descriptions and a summary of reports earnings, total accruals, cash flows, other accruals components, alternative discretionary accruals measures, and the 102 estimates of the different discretionary accruals models. the simulations of the specificationcorrectness test are reported in tables, while that of the power function test is graphically depicted, following standard practice. lastly, section five is the conclusions. literature review the literature presents several discretionary accruals models in different functional forms that measure earnings management. to estimate the models, we need a measure of total accruals to be identified from earnings. the total accruals can be verified from either periodic financial statements or income and cash flow statements; however, researchers mostly use financial statement accounts (teoh et al., 1998; dechow et al., 1995). according to hribar and collins (2002), for firm 𝑖 in year 𝑡, total accruals, 𝑇𝐴𝑖,𝑡, is computed as the difference between operating profit, 𝑃𝐴𝑇𝑖,𝑡 , and the cash flow from operations, 𝐶𝐹𝑂𝑖,𝑡 . this method offers less complexity, provides accruals with the least possible measurement error, and captures a larger portion of managers’ manipulations (hribar & collins, 2002). j. of gov. risk management compliance and sustainability 76 𝑇𝐴𝑖,𝑡 = 𝑃𝐴𝑇𝑖,𝑡 − 𝐶𝐹𝑂𝑖,𝑡 (1) we compare four jones-based accruals models: the simple jones (jones, 1991) model, the modified jones (dechow et al.,1995) model, the extended jones cash flow (kasznik, 1999) model and working capital accrual (teoh et al., 1998) model. for each model, all variables, including the intercept, are scaled by lagged assets to measure against heteroscedasticity. first, the jones model, from pioneered work by jones (1991), separates asset-scaled total accruals into discretionary (unexplained) and non-discretionary (explained) components. the model is advanced on the implicit assumption that managers do not exercise discretion exercised over revenue. for firm 𝑖 in year 𝑡, we regress 𝑇𝐴𝑖,𝑡 on explicative variables connected with the nondiscretionary components as change in revenues and gross-value of property, plant and equipment. the regression provides estimates used to compute the non-discretionary accruals. the nondiscretionary accruals (𝑁𝐷𝐴𝐶𝐽𝑖,𝑡 ) is the expected (estimated) value of the total accruals. after obtaining the estimates, �̂�𝑗,𝑖 ′𝑠 (𝑗 = 0, 1, 2) of equation (2), for each firm. 𝑇𝐴𝑖,𝑡 /𝐴𝑖,𝑡−1 = 𝛼0[1/𝐴𝑖,𝑡−1] + 𝛼1[𝛥𝑅𝐸𝑉𝑖,𝑡 /𝐴𝑖,𝑡−1] + 𝛼2[𝑃𝑃𝐸𝑖,𝑡 /𝐴𝑖,𝑡−1] + 𝑒1𝑖,𝑡 (2) 𝑁𝐷𝐴𝐶𝐽𝑖,𝑡 = �̂�0[1/𝐴𝑖,𝑡−1] + �̂�1[𝛥𝑅𝐸𝑉𝑖,𝑡 /𝐴𝑖,𝑡−1] + �̂�2[𝑃𝑃𝐸𝑖,𝑡 /𝐴𝑖,𝑡−1] (2 ′) for each firm 𝑖, 𝛥𝑅𝐸𝑉𝑖,𝑡 is change in revenues (i.e., revenues in year 𝑡 minus revenues in year 𝑡 − 1), 𝑃𝑃𝐸𝑖,𝑡 is gross property, plant and equipment in year 𝑡, 𝐴𝑖,𝑡−1 is the total assets in year 𝑡 − 1. the estimates of the residuals (i.e., �̂�1𝑖,𝑡 = 𝑇𝐴𝑖,𝑡 /𝐴𝑖,𝑡−1 − 𝑁𝐷𝐴𝐶𝐽𝑖,𝑡 ) is the jones’ discretionary accruals (𝐷𝐴𝐶𝐽𝑖,𝑡 ). the discretionary accruals are a fragment of total accruals that managers exercise discretion in earnings reporting. usually, larger discretionary accruals (in absolute terms) suppose higher earnings management in practice. one criticism of the model is that it eliminates parts of managed earnings from the discretionary accrual if managers exercise real discretion over revenue. second, the modified jones (mj) model from dechow et al. (1995) improves on the limitation of the standard jones model. jones’s principal assumption of ‘no managerial discretion over revenue’ introduces possible endogenous bias. modified jones (equation 3) attempts to control the misspecification in the simple jones model by adjusting and removing associated changes in net receivables from changes in the revenues in other to accommodate wider evidence of earnings management (jeter & shivakumar, 1999). the model assumes that changes in credit sales are likely caused by manipulations of earnings. it regresses the normalised 𝑇𝐴𝑖,𝑡 on scaled (𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 ) and 𝑃𝑃𝐸𝑖,𝑡, for firm 𝑖 in year 𝑡. the non-discretionary component (𝑁𝐷𝐴𝐶𝑀𝐽𝑖,𝑡 ) is the estimate of the total accruals (i.e., the normalised 𝑇�̂�𝑖,𝑡), after obtaining �̂�𝑗,𝑖’s (𝑗 = 0, 1, 2) of equation (3) for each firm. 𝑇𝐴𝑖,𝑡 /𝐴𝑖,𝑡−1 = 𝛽0[1/𝐴𝑖,𝑡−1] + 𝛽1[(𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 )/𝐴𝑖,𝑡−1] +𝛽2[𝑃𝑃𝐸𝑖,𝑡 /𝐴𝑖,𝑡−1] + 𝑒2𝑖,𝑡 (3) 𝑁𝐷𝐴𝐶𝑀𝐽𝑖,𝑡 = �̂�0[1/𝐴𝑖,𝑡−1] + �̂�1[(𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 )/𝐴𝑖,𝑡−1] +�̂�2[𝑃𝑃𝐸𝑖,𝑡 /𝐴𝑖,𝑡−1] (3 ′) the estimates of the residuals (i.e., �̂�2𝑖,𝑡 = 𝑇𝐴𝑖,𝑡 /𝐴𝑖,𝑡−1 − 𝑁𝐷𝐴𝐶𝑀𝐽𝑖,𝑡 ) is the modified jones’ discretionary accruals (𝐷𝐴𝐶𝑀𝐽𝑖,𝑡 ). where 𝛥𝑅𝐸𝐶𝑖,𝑡 are the net receivables in year 𝑡 minus net receivables in year 𝑡 − 1, and all other variables are predetermined. as noted (jeter & shivakumar, 1999), mjm attempts to account for endogenous bias in the standard jones model, but it eventually induces overestimation bias through its assumptions and modification. coulton et al. (2005) note that the assumption that changes in receivables result from manipulations is unproven, likely invalid and may cause over-correction. in addition, such adjustment becomes only suitable in periods when real j. of gov. risk management compliance and sustainability 77 earnings are systematically managed. dechow et al. confirm a negative correlation between accruals and cash flows in the absence of earnings management. third, the extended jones cash flow (ejcf) model, developed by kasnik (1998), controls for endogenous bias from the misspecification's of the modified jones, particularly for firms with extreme cash flows (jeter & shivakumar, 1999; kasnik, 1998; dechow et al., 1995). the model (equation 4) extended jones cash flow by incorporating a change in periodic cash flow from operation to account for the negative correlation between operating cash flow from s and accruals. the non-discretionary component (𝑁𝐷𝐴𝐶𝐸𝐽𝐶𝐹𝑖,𝑡) is the estimate of the total accruals (equation 4′), after obtaining 𝜃𝑗,𝑖’s (𝑗 = 0, 1, 2, 3) of equation (4) for each firm. 𝑇𝐴𝑖,𝑡 /𝐴𝑖,𝑡−1 = 𝜃0[1/𝐴𝑖,𝑡−1] + 𝜃1[(𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 )/𝐴𝑖,𝑡−1] +𝜃2[𝑃𝑃𝐸𝑖,𝑡 /𝐴𝑖,𝑡−1] + 𝜃3𝛥𝐶𝐹𝑂𝑖,𝑡 + 𝑒3𝑖,𝑡 (4) 𝑁𝐷𝐴𝐶𝐸𝐽𝐶𝐹𝑖,𝑡 = 𝜃0[1/𝐴𝑖,𝑡−1] + 𝜃1[(𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 )/𝐴𝑖,𝑡−1] +𝜃2[𝑃𝑃𝐸𝑖,𝑡 /𝐴𝑖,𝑡−1] + 𝜃3𝛥𝐶𝐹𝑂𝑖,𝑡 (4 ′) the estimates of the residuals (i.e., �̂�3𝑖,𝑡 = 𝑇𝐴𝑖,𝑡 /𝐴𝑖,𝑡−1 − 𝑁𝐷𝐴𝐶𝐸𝐽𝐶𝐹𝑖,𝑡) is the extended jones cash flow’ discretionary accruals (𝐷𝐴𝐶𝐸𝐽𝐶𝐹𝑖,𝑡 ). and, 𝛥𝐶𝐹𝑂𝑖,𝑡 is the change in periodic cash flow from operations between year 𝑡 and year 𝑡 − 1. four, the working capital (wa) accruals model, proposed by teoh et al. (1998), is a discretionary model based on wc accruals. the model is an alternative modification of the jones model that splits total accruals into current and long-term accruals. the current accruals are changes in noncash current assets less the change in operating current liabilities. the wc accruals have both discretionary and non-discretionary parts. algharaballi and albuloushi (2008) note that the splitting becomes necessary because managers exercise greater discretion over current compared to long-term accruals. hence, discretionary estimates of wc accruals (𝑊𝐶𝐴𝑖,𝑡 ) may be superior estimates than total accruals. the model regresses the normalised 𝑊𝐶𝐴𝑖,𝑡 on scaled-changes in revenues adjusted for change in receivables (𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 ) and 𝑃𝑃𝐸𝑖,𝑡, for firm 𝑖 in year 𝑡. the non-discretionary part (𝑁𝐷𝐴𝐶𝑊𝐶𝑖,𝑡) is the expected value of the wc accruals (equation 5 ′), after obtaining �̂�𝑖 ’s (𝑗 = 0, 1, 2) of equation (5), for each firm. 𝑊𝐶𝐴𝑖,𝑡 /𝐴𝑖,𝑡−1 = 𝛿0,𝑖 [1/𝐴𝑖,𝑡−1] + 𝛿1,𝑖 [(𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 )/𝐴𝑖,𝑡−1] +𝛿2,𝑖 [𝑃𝑃𝐸𝑖,𝑡 /𝐴𝑖,𝑡−1] + 𝑒4𝑖,𝑡 (5) 𝑁𝐷𝐴𝐶𝑊𝐶𝑖,𝑡 = �̂�0,𝑖 [1/𝐴𝑖,𝑡−1] + �̂�1,𝑖 [(𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 )/𝐴𝑖,𝑡−1] +�̂�2,𝑖 [𝑃𝑃𝐸𝑖,𝑡 /𝐴𝑖,𝑡−1] (5 ′) the estimates of the residuals (i.e., �̂�4𝑖,𝑡 = 𝑊𝐶𝐴𝑖,𝑡 /𝐴𝑖,𝑡−1 − 𝑁𝐷𝐴𝐶𝑊𝐶𝑖,𝑡 ) is the wc accruals model’ discretionary accruals (𝐷𝐴𝐶𝑊𝐶𝑖,𝑡 ). research method data we employ earnings information for listed firms on the nigerian stock exchange (nse) for the 2001–2020 financial periods. data used to complete the specified models are organised from the nse and firms’ consolidated sources. the sample window covered extended periods where reporting regulations permit the use of discretions in the appropriation of accounting information, according to the international framework. appropriate proxies are adopted or computed to represent needed components not directly reported on the consolidated records (ozili & outa, 2019). for instance, the normalised total accruals are from equation (1), being the difference between reported profit 𝑃𝐴𝑇𝑖,𝑡 and operations’ cash flow, 𝐶𝐹𝑂𝑖,𝑡 . the total assets (𝐴𝑖,𝑡 ) and other accruals fragments (𝑅𝐸𝑉𝑖,𝑡 , 𝑅𝐸𝐶𝑖,𝑡 , 𝑃𝑃𝐸𝑖,𝑡 ) are sourced. j. of gov. risk management compliance and sustainability 78 prior studies that use basic descriptions of discretionary accruals to exemplify earnings management dynamics often exclude samples from financial sectors as well as over-regulated sectors (e.g., utilities firms) because their financial reporting in the sectors differs from others. in identifying the sample, we excluded 51 banks and other financial institutions from the initial sample of 162 obtained, leaving a comprehensive sample of 111 non-financial firms and [2,220 firm-year]. we estimate the models cross-sectionally, subject to a minimum sample of 10 observations for individual firms (coulton et al., 2005). in addition, we exclude nine firms due to the significant amount of unavailable information required to compute the accrual models, leaving use with 102 firms [2,040 firm-year]. we eliminated 86 missing observations for all firm-year of some included firms that exceeded the minimum requirement and could not be expunged, leading us to a sample of 1,954. these observations further reduce because we require the lag of total assets to estimate each model. for example, the 2001 total assets are considered lag for 2002, and 2019 as lag for 2020. for firms without 2001 information, we use the assets of the available lag year (e.g., 2005) to normalise the earnings components of the year after (e.g., 2006). the sample reduces by 102 to provide a final sample of 1,852 firm-year. procedures the paper attempts to estimate and evaluate the power to test earnings management of four jones-type accruals models. following the collation of required explicate components of earnings in (1) − (5), the empirical process involves a preliminary stage and two main stages: the first conducts the model-specification correctness tests, and the second completes the model-power capability. the preliminary-stage requires us to perform the estimations of the coefficients of the firms-specific [(2) − (5)] regressions. we control for structural differences between firms and estimate cross-sectionally to reduce the probability of inaccurate estimations, lessen the chance that the coefficients are time invariants, and obtain estimates that are better specified and robust than the time-series counterparts (dechow et al., 1995). identifying the contemporaneous firm-specific differences may induce noise into the estimation process (peasnell et al., 2000). we estimate the regressions for each firm-year combination for the separate models and obtain 102 distributions of estimates for each of the models’ coefficients (�̂�𝑖, �̂�𝑖, 𝜃𝑖, �̂�𝑖 ), as well as the distributions of first-order tests (r̅ 2, f) information, and compute the discretionary accruals (i.e., residual estimates �̂�1𝑖,𝑡 , �̂�2𝑖,𝑡 , �̂�3𝑖,𝑡 , and �̂�4𝑖,𝑡 , denoted as 𝐷𝐴𝐶𝐽𝑖,𝑡 , 𝐷𝐴𝐶𝑀𝐽𝑖,𝑡 𝐷𝐴𝐶𝐸𝐽𝐶𝐹𝑖,𝑡 and, 𝐷𝐴𝐶𝑊𝐶𝑖,𝑡) for all models. because the jones-based models are typically linear, the linearity assumption is enforced by either excluding (using a median interquartile range of residual plots) or trimming (using winsorisation) all extreme values and outliers from the different samples of the discretionary accruals. since ‘excluding’ makes us loose observations, we prefer to winsorise the first (1st) and penultimate (99th) percentiles before we complete the specificationcorrectness and power function test evaluations. the first-stage requires us to establish the specification-correctness of the models to detest systemic earnings management (peasnell et al., 2000). we verify if the models estimated at the preliminary-stage correctly capture the fitted discretionary accruals, otherwise, empirical research would be better performed on validated alternatives, including a non-jones based, approach. we perform a model specification test according to teoh et al. (1998). the test evaluates the extent to which each model likely contains type i error (falsely refuting the null of no systematic earnings management) against the alternative hypothesis. the test confirms the sensitivity of the specified model to the samplings. the procedure requires randomly selecting some samples from the firm-year and performing a 𝑡-test on the estimated coefficient based on each selected sample. the test null follows that since the selected observations are random, we do not expect to find evidence of earnings management in the ergodic realisations. therefore, if the model is well-specified, a significant test on the slope estimates would fail to reject the null. the stage involves four steps (a) – (d): (a) following an optimal sampling-rule and applying 30% (555) observations arbitrarily selected j. of gov. risk management compliance and sustainability 79 (without replacement) from the (preliminary stage) computed discretionary accruals, which in a general context, we denote different fitted value, 𝑚, computed discretionary accruals, 𝐷𝐴𝐶𝑚,𝑖 (for, 𝑚 = 1 𝑡𝑜 4), 𝑚 been the four jones-type models estimated. (b) generate a binary variable denoted 𝑇𝑆𝐷𝑖 (test sample dummy) and coded 1 for 555 selected observations in (a) and 0 for the rest 1,297 samples. (see additional r-code materials to generate sampling without replacement and experiment with monte carlos simulations). (c) estimate the regression (equation 6) for each measure of accruals computed, and perform a 𝑡-test whether �̂�1 (i.e., the estimate of 𝑇𝑆𝐷𝑖) is significantly different from zero. under a one-tail test at a 5% level, we conduct the 𝑡 tests for two cases of alternative hypotheses, each verifying existence of either income-increasing (negative earnings management) or income-decreasing (positive earnings management) of the particular accruals model. 𝐷𝐴𝐶𝑖 = 𝛾0 + 𝛾1𝑇𝑆𝐷𝑖 + 𝑖 (6) (d) repeat steps (a) – (c) 1,000 times for the different, 𝑚, computed discretionary accruals, 𝐷𝐴𝐶𝑚,𝑖 (for, 𝑚 = 1 𝑡𝑜 4). for a well-specified model, �̂�1 would normally be statistically insignificant and null of no earnings management (i.e., 𝛾1 = 0) should not be refuted more than often anticipated in the 1,000 simulations completed under the least possible significance (or probability level) specified. the second-stage requires us to verify the firm-specific accruals models’ power (or ability) to identify earnings management. we demonstrate the dynamics of economically plausible manipulation levels by completing tests that experimentally induced ranges of income-increasing earnings management on the randomly selected samples (where 𝑇𝑆𝐷𝑖 = 1) in step (a) of first-stage. the procedures follow similar steps described in the first-stage. in this context, to execute step (a), we involve the preliminary-stage to augment the required model’s accruals fragments with the ‘artificially induced income-increasing accruals’ for the arbitrarily selected firms. the induced income-increasing accruals are computed as (0 − 100)% of the lagged total assets, 𝐴𝑖,𝑡−1, subject to a 20% increment on each new experimentation for the same accruals model for different manipulation types (peasnell et al., 2000). consistent with algharaballi and albuloushi (2008), we implement two distinct types of accruals manipulations. the first ‘expense manipulation’ is implemented by adding the assumed (artificial) expenses manipulated to the total accruals, 𝑇𝐴𝑖,𝑡−1 (for models 1 − 3) or to the total working capital accruals, 𝑊𝐶𝐴𝑖,𝑡−1 (for model 4). the second ‘revenue manipulation’ is implemented by adding the artificial value of revenues manipulated to the total sales revenue and net receivable (peasnell et al., 2000). after augmenting the required accruals models component for the 𝑇𝑆𝐷𝑖 = 1 subsample, we follow the procedure in the preliminary stage to compute the induced discretionary accruals, 𝐷𝐴𝐶𝑚,𝑖 (for, 𝑚 = 1 𝑡𝑜 4). we simulate with only five ranges (20%, 40%, 60%, 80%, 100%) of firms first lagged total assets for the 𝑚-different models. steps (a) – (c) are repeated 1,000 times for each 𝑚-different discretionary accruals. we compile the null rejection frequencies for the repetitions of each accruals model. the test is benchmarked at a 5% level [one-tailed], record and visibly report the nulls rejection rates. since the selected samples now contain a ‘certain’ level of earnings manipulations, one would normally expect a model with high power to more often reject the null (that 𝛾1 = 0). in a simulated experiment under the endemic existence of earnings management activities, a powerful model would dominate with higher frequencies of the null’s rejection. the higher rejection regularities a model is associated with, the more powerful the model is assumed to detect prevalent manipulations. j. of gov. risk management compliance and sustainability 80 findings and discussion table 1 reports statistical information on all variables: profits, total accruals, working capital accruals and explicative components of the accruals. panel a reports basic statistics for the full sample (n=1,852), whereas panel b (panel c) reports a basic description for the case where 𝑃𝐴𝑇𝑖 ≥ 0, having n=1,343 (𝑃𝐴𝑇𝑖 < 0, n=509). each fragment of the accruals model, including the intercept [1/𝐴𝑖,𝑡−1] is normalised, ensuring only standardised regression estimates, already controlled for heteroscedasticity, are produced. likely due to the sample design and selection criteria, the description slightly favours profitable firms. the non-negative profit constitutes 73% of the total sample. the total and working capital accruals are small but averagely positive. all explicative accruals components disclose positive mean and median, with most medium values lesser than the corresponding average. the mean difference (via welch) tests indicate that profit, total and working capital accruals are significantly different for profits (𝑃𝐴𝑇𝑖 ≥ 0) and losses (𝑃𝐴𝑇𝑖 < 0) reporting firms. a significant difference is reported for total and working capital accruals for the two subsamples. we find significant differences across the profits and losses reporting firm’s subsamples for the control variables. other than the intercept and 𝛥𝑅𝐸𝑉𝑖 , the welch tests indicate significant difference in the means of both groups. table 1. descriptive information of ‘earnings, accruals and accruals components’ variables 𝝁 𝒎𝒆𝒅 𝝈 𝝁 𝒎𝒆𝒅 𝝈 𝝁 𝒎𝒆𝒅 𝝈 mean (𝝁) difference panel a panel b panel c welch tests full sample (n=1,852) 𝑃𝐴𝑇𝑖 ≥ 0, n=1,343 𝑃𝐴𝑇𝑖 < 0, n= 509 𝑝 − 𝑣𝑎𝑙𝑢𝑒 earnings 𝑃𝐴𝑇𝑖 0.21 0.10 0.16 0.13 0.11 0.1 0 0.06 0.10 0.1 5 (0.000) accruals 𝑇𝐴𝑖 0.14 0.03 0.35 0.08 0.04 0.3 5 0.28 0.23 0.2 4 (0.000) 𝑊𝐶𝐴𝑖 0.05 0.01 0.14 0.05 0.02 0.1 3 0.05 0.02 0.1 9 (0.041) explicative fragments of accruals models 1/𝐴𝑖,𝑡−1 0.00 0.00 0.00 0.00 0.00 0.0 0 0.00 0.00 0.0 0 0.5240 𝛥𝑅𝐸𝑉𝑖 0.21 0.08 1.14 0.20 0.08 1.1 6 0.23 0.07 1.0 5 0.0971 𝛥𝑅𝐸𝑉𝑖 − 𝛥𝑅𝐸𝐶𝑖 -0.19 0.07 1.14 0.21 0.07 1.2 5 0.29 0.15 0.4 0 (0.011) 𝑃𝑃𝐸𝑖 0.41 0.27 1.64 0.41 0.26 1.7 3 0.45 0.34 1.2 0 (0.008) 𝐶𝐹𝑂𝑖 0.11 0.08 0.31 0.11 0.08 0.3 3 0.12 0.10 0.1 8 (0.000) source: @authors (2022) table 1 shows basic statistical (n, 𝜇, 𝑚𝑒𝑑, 𝜎) of the annual assets-scaled net profits (𝑃𝐴𝑇𝑖), accruals (𝑇𝐴𝑖 , 𝑊𝐶𝐴𝑖) and the various discretionary accruals model fragments from 2001–2020. n ≡ number of observations, 𝜇 ≡ mean, 𝑚𝑒𝑑 ≡ median, 𝜎 ≡ standard deviation. the firms showing net profit earnings (𝑃𝐴𝑇𝑖 ≥ 0, n=1,343) is about 73% of the total sample. all accruals fragments identify positive mean and median, with most medium values lesser than the associated average. the welch t-test verifies the null that the difference in mean for the 𝑃𝐴𝑇𝑖 ≥ 0 and 𝑃𝐴𝑇𝑖 < 0 subgroups, is 0. the reported p-value (in parenthesis) offers the least likelihood to wrongly refute the j. of gov. risk management compliance and sustainability 81 null, and it indicates significance at either 1% or 5% level (2-tailed), for both subgroups. the results show significant differences across the profits and losses firms for the control variables. other than the intercept and 𝛥𝑅𝐸𝑉𝑖 , the welch tests indicate significant differences in the means of both groups. table 2. descriptive information on ‘estimates’ of different discretionary accruals models accrual comp. 𝑪𝒐𝒆𝒇. 𝝁 𝝁𝐬𝐞 𝝈 �̃�𝟏 𝒎𝒆𝒅 �̃�𝟑 �̃�𝟑 �̃�𝟒 % ≥ 𝟎 simple jones: 𝑇𝐴𝑖,𝑡/𝐴𝑖,𝑡−1 = 𝛼0,𝑖 [1/𝐴𝑖,𝑡−1] + 𝛼1,𝑖 [𝛥𝑅𝐸𝑉𝑖,𝑡/𝐴𝑖,𝑡−1] + 𝛼2,𝑖 [𝑃𝑃𝐸𝑖,𝑡 /𝐴𝑖,𝑡−1] + 𝑒1𝑖,𝑡 1/𝐴𝑖,𝑡−1 �̂�0 0.237 0.242 2.448 -0.432 -0.020 0.340 -5.619 40.596 85 𝛥𝑅𝐸𝑉𝑖,𝑡 �̂�1 0.006 0.029 0.295 -0.161 -0.011 0.162 1.903 9.755 60 𝑃𝑃𝐸𝑖,𝑡 �̂�2 -0.213 0.243 2.455 -0.339 -0.023 0.430 5.433 38.786 15 r̅2 0.265 0.016 0.165 0.071 0.150 0.301 1.063 0.308 𝐹 2.782 0.219 2.209 0.411 0.940 2.302 2.485 7.381 modified jones 𝑇𝐴𝑖,𝑡/𝐴𝑖,𝑡−1 = 𝛽0,𝑖 [1/𝐴𝑖,𝑡−1] + 𝛽1,𝑖 [(𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 )/𝐴𝑖,𝑡−1] + 𝛽2,𝑖 [𝑃𝑃𝐸𝑖,𝑡/𝐴𝑖,𝑡−1] + 𝑒2𝑖,𝑡 1/𝐴𝑖,𝑡−1 �̂�0 0.267 0.227 2.297 -0.429 -0.030 0.255 -5.502 36.154 80 𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 �̂�1 0.017 0.027 0.269 -0.154 0.009 0.144 0.078 1.852 60 𝑃𝑃𝐸𝑖,𝑡 �̂�2 -0.211 0.229 2.313 -0.307 -0.006 0.406 5.471 35.651 15 r̅2 0.281 0.018 0.186 0.081 0.149 0.313 1.219 1.335 𝐹 3.031 1.146 11.570 0.468 0.935 2.425 9.240 87.533 extended jones cash flow: 𝑇𝐴𝑖,𝑡/𝐴𝑖,𝑡−1 = 𝜃0,𝑖 [1/𝐴𝑖,𝑡−1] + 𝜃1,𝑖 [(𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 )/𝐴𝑖,𝑡−1] + 𝜃2,𝑖 [𝑃𝑃𝐸𝑖,𝑡/𝐴𝑖,𝑡−1] + 𝜃3,𝑖 𝛥𝐶𝐹𝑂𝑖,𝑡 + 𝑒3𝑖,𝑡 1/𝐴𝑖,𝑡−1 𝜃0 0.226 0.190 1.920 -0.180 -0.022 0.111 -4.755 32.568 80 𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 𝜃1 -0.004 0.021 0.209 -0.089 0.011 0.100 0.249 1.460 45 𝑃𝑃𝐸𝑖,𝑡 𝜃2 -0.223 0.188 1.898 -0.141 0.005 0.155 4.788 33.512 10 𝐶𝐹𝑂𝑖,𝑡 𝜃3 -0.676 0.031 0.311 -0.929 -0.743 -0.495 0.855 0.078 15 r̅2 0.620 0.028 0.284 0.351 0.702 0.866 -0.408 -1.213 𝐹 56.297 20.820 210.270 2.026 8.846 24.226 7.229 59.146 working capital accruals: 𝑊𝐶𝐴𝑖,𝑡/𝐴𝑖,𝑡−1 = 𝛿0,𝑖 [1/𝐴𝑖,𝑡−1] + 𝛿1,𝑖 [(𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 )/𝐴𝑖,𝑡−1] + 𝛿2,𝑖 [𝑃𝑃𝐸𝑖,𝑡 /𝐴𝑖,𝑡−1] + 𝑒4𝑖,𝑡 1/𝐴𝑖,𝑡−1 �̂�0 0.130 0.193 1.951 -0.361 0.038 0.330 3.006 26.896 85 𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 �̂�1 0.049 0.028 0.284 -0.103 0.010 0.206 0.574 0.774 55 𝑃𝑃𝐸𝑖,𝑡 �̂�2 -0.255 0.192 1.937 -0.345 -0.108 0.190 -3.113 28.143 20 r̅2 0.204 0.018 0.179 0.072 0.149 0.279 1.436 1.852 𝐹 1.803 0.383 3.864 0.417 0.931 2.064 4.660 26.378 source: @authors (2022) table 2 shows the distribution characteristics (𝜇, 𝜇se, 𝜎, �̃�1, 𝑚𝑒𝑑, �̃�3, �̃�3, �̃�4) for 102 coefficient estimates of each explicative fragment as well as the means of the first order tests statistics (r̅2, 𝐹) of the four different accruals models (2) – (5), based on the nse sample, during (2001–2020). r̅2 ≡ coefficient of determination, 𝐹 ≡ f-statistics, 𝜇 ≡ 𝑀ean, 𝑚𝑒𝑑 ≡ median, �̃�1 ≡ 1st (lower) quartile value, �̃�3 ≡ 3rd (upper) quartile value, 𝜇se ≡ standard error of the mean, 𝜎 ≡ standard deviation, �̃�3 ≡ skewness and �̃�4 ≡ for empirical simplicity, kurtosis, %≥0 indicates the percentage of the specific estimated coefficient ≥0, which is approximated in the nearest multiple of 5. the coefficients are obtained based on the cross-sectional version, which offers better specified and robust estimates than the time-series counterparts (dechow et al., 1995). j. of gov. risk management compliance and sustainability 82 the result shows that a greater amount of the average of the coefficients are well-signed – rightly positive for mean estimates of 𝛥𝑅𝐸𝑉𝑖,𝑡 or 𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 , but negative for most mean estimates of the 𝑃𝑃𝐸𝑖,𝑡 . the normalised intercept is averagely positive for all four models. the mean estimate of the change in revenues (i.e., �̂�1, for the simple jones) and the mean estimate of change in receivables and change in the revenue’s differentials (i.e., �̂�1 and �̂�1, for modified jones and wc accruals) is positive but only negative (i.e., 𝜃1 = −0.014 ) for the extended jones cf. the average of the 𝑃𝑃𝐸𝑖,𝑡 estimates are negative for all models and the lowest (�̂�2 = −0.255) for the wc accruals. the explanatory power for the working capital accruals driven by its fragments is highest at 62%, whereas only an average of 20-28% is accounted for by the total accruals models. table 2 reports statistical information on the models’ parameters estimated with linear regressions. the results summarise the 102 different estimates of the coefficients of the profitearnings portions associated with the particular accruals model. the mean estimates show that all four models are significant for the f-test. the smallest mean of the f statistics is 1.803, which is significant at 5%, and others are highly significant. it indicates that the linear relationship between the total or working capital accrual measures (i.e., the dependent variable) and the independent variables does not occur by chance. the variability of the total accruals explained by its fragments ranges around 20-28% average, whereas 62% of the working capital accruals is driven by the explicative components. the extended jones cf, non-surprising, has the highest explanatory power due to the additional controlled variable (i.e., firms’ cash flow) incorporated to augment the modified jones. such an addition makes the models more powerful. generally, except for the mean of estimates for the change in revenue (which differed by both representation and computation for the jones and modified jones), as expected, both jones and modified jones do not identify substantial differences. the greater amount of the average of the coefficients is well-signed – rightly positive for mean estimates of 𝑉𝑖,𝑡 or 𝛥𝑅𝐸𝑉𝑖,𝑡 − 𝛥𝑅𝐸𝐶𝑖,𝑡 , but negative for most mean estimates of the 𝑃𝑃𝐸𝑖,𝑡 . the normalised intercept is averagely positive for all four models. the mean estimate of the change in revenues (i.e., �̂�1, for the simple jones) and the mean estimate of change in receivables and change in the revenues differentials (i.e., �̂�1 and �̂�1, for modified jones and wc accruals) is positive but only negative (i.e., 𝜃1 = −0.014 ) for the extended jones cf. the average of the 𝑃𝑃𝐸𝑖,𝑡 estimates are negative for all models, and the lowest (�̂�2 = −0.255) for the wc accruals. the mean of the parameter estimates of the 𝐶𝐹𝑂𝑖,𝑡 , in the extended jones, cf is negative and consistent with algharaballi and albuloushi (2008). although most estimates identify means higher than the median, we could not establish sufficient evidence that the difference is significant for the majority of the model’s estimates. table 3 reports statistical information on alternative accruals measures. descriptive statistics clarify the mean, standard deviation, median and percentiles. both mean and median values of all the discretionary accruals measures are close to zero, although still positive for jones and modified jones but negative for the other two accruals types. not surprising the extended jones cf discretionary accruals is negatively high (-0.31), likely the result of the large influence of the majority of the negative estimates of the 𝐶𝐹𝑂𝑖,𝑡 components. about 75% of the wc discretionary accruals are negative (% < 0), while larger (55 − 70) percent for others are non-negative (% ≥ 0). j. of gov. risk management compliance and sustainability 83 table 3. descriptive information of the alternative discretionary accruals measures discretionary accruals 𝝁 𝒎𝒆𝒅 𝝈 % ≥ 𝟎 𝝁 𝒎𝒆𝒅 𝝈 𝝁 𝒎𝒆𝒅 𝝈 mean diff. 𝐷𝐴𝐶𝑖,𝑡 : �̂�𝑗𝑖 panel a: full sample panel b: 𝐷𝐴𝐶𝑖 ≥ 0 panel c: 𝐷𝐴𝐶𝑖 < 0 𝑝-𝑣𝑎𝑙𝑢𝑒 𝐷𝐴𝐶𝐽𝑖 (�̂�1𝑖 ) 0.02 0.00 0.32 69.5 0.18 0.07 0.15 -0.25 -0.20 0.09 (0.001) 𝐷𝐴𝐶𝑀𝐽𝑖 (�̂�2𝑖 ) 0.02 0.00 0.31 61.2 0.26 0.07 0.13 -0.21 -0.20 0.08 (0.000) 𝐷𝐴𝐶𝐸𝐽𝐶𝐹𝑖 (�̂�3𝑖 ) -0.31 0.01 0.16 55.3 0.15 0.03 0.10 -0.49 -0.18 0.15 (0.104) 𝐷𝐴𝐶𝑊𝐶𝑖 (�̂�4𝑖 ) -0.09 -0.04 0.23 24.8 0.00 0.04 0.13 -0.11 -0.04 0.19 (0.000) source: @authors (2022) table 3 shows basic statistics (𝜇, 𝑚𝑒𝑑, 𝜎) of the fitted alternative discretionary accruals during (2001–2020). 𝜇 ≡ mean, 𝑚𝑒𝑑 ≡ median, 𝜎 ≡ standard deviation. mean diff.: mean (𝜇) difference (welch-t) tests. the test verifies the null that the difference in mean is 0, for the 𝐷𝐴𝐶𝑖 ≥ 0 (incomeincreasing or negative earnings management) and 𝐷𝐴𝐶𝑖 < 0 (income-decreasing or positive earnings management) subgroups of the particular accruals model. the reported p-value (in parenthesis) offers the least likelihood to wrongly refute the null, and it indicates significance at either 1% or 5% level (2tailed), except for the extended jones cf. 𝐷𝐴𝐶𝑖 mean difference between the two subsamples. both jones and modified jones do not identify substantial differences in the mean (0.02), median (0.00) and even standard deviation, which shows a close spread, likely due to winsorisation adjustment completed to lesson outliers’ influence. we recover a significant difference between the mean of the discretionary accruals for 𝐷𝐴𝐶𝑖 ≥ 0 (income-increasing) and 𝐷𝐴𝐶𝑖 < 0 (incomedecreasing) subgroups of particular accruals model, except for the extended jones cf mean difference of the two subsamples, 𝐷𝐴𝐶𝐸𝐽𝐶𝐹𝑖 (𝑝-𝑣𝑎𝑙𝑢𝑒 = 0.104). discretionary accruals are significantly larger for positive earnings management than negative earnings management, at least at the 5% significant level. it supposes substantial differences in the magnitudes and directions of systematic manipulations across those firms. table 4 presents the pearson correlation coefficients of profits, accruals (total and wc) and accruals models’ fragments variables. unlike the firm-specific adopted for the estimations of each accruals model [in table 2], we estimate the correlation coefficients based on the pooled crosssectional of the associated firms’ data for profits, total and working capital accruals, as well as explicative accruals components, according to dechow et al. (1995). panel a is the correlations for the entire sample, which shows that the discretionary accruals are very highly correlated with each other, but slightly less correlated with specific fragments of the accruals earnings. for instance, the 𝐷𝐴𝐶𝐽𝑖 is highly positive associated with 𝐷𝐴𝐶𝑀𝐽𝑖 and 𝑇𝐴𝑖. panel b represents correlations based on earnings subsamples for small profits, i.e., 𝑃𝐴𝑇𝑖 ≥ 0 (figures below principal diagonals) and small losses, i.e., 𝑃𝐴𝑇𝑖 < 0 (figures above principal diagonals). the correlation is stronger and more significant for variables of the 𝑃𝐴𝑇𝑖 ≥ 0 relatives to those of the 𝑃𝐴𝑇𝑖 < 0 subsamples. the remainder of the control and discretionary fragment variables exhibit some correlation variations across both the small-profits and small-losses subsamples, as expected, which indicates systematic differences across earnings management objectives based on magnitude, purposes and directions. j. of gov. risk management compliance and sustainability 84 table 4. pearson correlation coefficients 𝑃𝐴𝑇𝑖 𝐶𝐹𝑂𝑖 𝑇𝐴𝑖 𝑊𝐶𝐴𝑖 𝐷𝐴𝐶𝐽𝑖 𝐷𝐴𝐶𝑀𝐽𝑖 𝐷𝐴𝐶𝐸𝐽𝐶𝐹𝑖 𝐷𝐴𝐶𝑊𝐶𝑖 1/𝐴𝑖−1 𝛥𝑅𝐸𝑉𝑖 𝛥𝑅𝐸𝑉𝑖 − 𝛥𝑅𝐸𝐶𝑖 𝑃𝑃𝐸𝑖 [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] full sample correlation coefficients [1] 1 [2] -0.013 1 [3] 0.469 -0.889 1 [4] -0.035 0.010 -0.024 1 [5] 0.469 -0.889 1.000 -0.024 1 [6] 0.470 -0.888 0.999 -0.024 0.999 1 [7] 1.000 0.000 0.458 -0.035 0.457 0.458 1 [8] -0.035 0.009 -0.024 1.000 -0.024 -0.024 -0.035 1 [9] -0.023 0.004 -0.014 -0.019 0.000 0.000 0.000 0.000 1 [10] -0.020 -0.002 -0.008 0.014 0.000 -0.008 -0.021 0.013 -0.029 1 [11] 0.002 0.053 -0.046 0.005 -0.046 0.000 0.000 0.000 -0.005 0.011 1 [12] -0.020 -0.004 -0.006 -0.015 0.000 0.000 0.000 0.000 0.760 0.002 -0.001 1 panel b: correlation coefficients for 𝑃𝐴𝑇𝑖 ≥ 0 (lower diagonal) and 𝑃𝐴𝑇𝑖 < 0 (upper diagonal) [1] 1 -0.005 0.655 -0.062 0.655 0.655 1.000 -0.063 -0.081 -0.006 -0.010 -0.037 [2] 0.008 1 -0.759 -0.045 -0.759 -0.758 0.004 -0.044 0.080 0.040 0.030 -0.004 [3] 0.284 -0.956 1 -0.007 1.000 1.000 0.648 -0.008 -0.114 -0.034 -0.029 -0.021 [4] -0.034 0.021 -0.030 1 -0.005 -0.005 -0.063 1.000 0.024 0.078 0.051 -0.033 [5] 0.284 -0.956 1.000 -0.030 1 1.000 0.648 -0.006 -0.099 -0.023 -0.031 -0.030 [6] 0.282 -0.955 0.999 -0.030 0.999 1 0.648 -0.006 -0.100 -0.036 -0.007 -0.028 [7] 0.999 0.031 0.262 -0.035 0.262 0.261 1 -0.063 -0.070 -0.006 -0.011 -0.031 [8] -0.034 0.020 -0.029 1.000 -0.030 -0.030 -0.033 1 0.031 0.078 0.049 -0.031 [9] 0.001 -0.002 0.002 -0.029 0.017 0.017 0.040 -0.006 1 -0.050 -0.045 0.190 [10] -0.023 -0.007 0.000 -0.006 0.008 0.000 -0.024 -0.007 -0.028 1 -0.070 -0.035 [11] -0.045 0.055 -0.066 0.001 -0.066 -0.015 -0.049 -0.005 -0.002 0.018 1 0.032 [12] -0.012 -0.004 0.000 -0.012 0.008 0.008 0.023 0.007 0.809 0.007 -0.002 1 source: @authors (2022) j. of gov. risk management compliance and sustainability 85 table 4 presents the pearson ordinary correlation coefficients (𝑟𝑥1𝑥2) for profits, accruals (total and wc), and other accruals models fragments variables pairs assumed as, 𝑥𝑖 and 𝑥𝑗 having n-set [(𝑥1,1, 𝑥2,1), 𝑥1,2, 𝑥2,2), …, (𝑥1,𝑛 , 𝑥2,𝑛 )] with 𝑟𝑥1𝑥2 = ∑ (𝑥1,𝑡 − �̅�1)(𝑥2,𝑡 − �̅�2) 𝑛 𝑖 [√(𝑥1,𝑡 − �̅�1) 2√(𝑥2,𝑡 − �̅�2) 2] −1 . panel a [b] of table 4 presents the correlations for full samples (subsamples based on 𝑃𝐴𝑇𝑖 ≥ 0 (lower diagonal correlations estimates) and 𝑃𝐴𝑇𝑖 < 0 (upper diagonal correlations estimates). the bold figures disclose statistical significance using probability, p|𝑡| = 0, at 1% or 5% levels only. the variables exhibit varying degree of association across the full samples and the subsamples. the association appears stronger for the positive profits than the negative reporting subsamples. the remainder of the control and discretionary fragment variables exhibit correlation variations across both the small-profits and small-losses subsamples. j. of gov. risk management compliance and sustainability 86 table 5. regularities of the null’s rejection discr. accruals 𝐻0: no earnings management, em = 0 𝐻0: no earnings management, em = 0 𝐻1: 𝑃𝐴𝑇𝑖,𝑡 decreasing accruals, (𝐸𝑀 > 0) 𝐻1: 𝑃𝐴𝑇𝑖,𝑡 increasing accruals (𝐸𝑀 < 0) simple jones 4.20 4.24 modified jones 2.85 4.10 extended jones cf 3.54 3.30 wc accruals 3.49 4.65 source: @authors (2022) table 5 reveals the proportions (%) of the null’ rejection based on the one-tailed test for both 𝑃𝐴𝑇𝑖,𝑡 decreasing accruals (𝐸𝑀 > 0) and 𝑃𝐴𝑇𝑖,𝑡 increasing accruals (𝐸𝑀 < 0). under the null of no earnings management (em = 0), the simulations for the four particular models are completed using a sample of 555 (one-third of the total sampling observations of 1852) at a 5% significance level. the simulations are iterated 1,000 times based on optimal sampling rules. table 5 reports the results of the simulation tests for models specification. we perform a model specification test according to teoh et al. (1998), using (6) and one-tailed t-statistics of wrongly rejecting the estimates (𝛾1) of the test sample dummy (𝑇𝑆𝐷𝑖). according to prior studies (algharaballi & albuloushi, 2008; peasnell et al., 2000), we complete two different tests for the null and compute the likelihood rate of possible type i errors (i.e., the proportion of true null’s rejections) based on one-tailed tests. the first is under the null of no existence of systematic earnings management (i.e., average discretionary accruals equal to zero), with an alternative of the existence of income-decreasing accruals (evidence of positive earnings management). the second has the same null but a different alternative of the existence of income-increasing accruals (i.e., presence of negative earnings management). if any equations (2) – (5) are well-specified, the data, irrespective of sample and resampling, would be less likely to reject the null at the 5% significant level accommodated for the test. the simulations disclose that for all the models, the percentage of the null’s rejection is close to the test levels, indicative that all tested models are rightly specified as applied to the nigerian firm-years samples. this finding is consistent with prior research (algharaballi & albuloushi, 2008; peasnell et al., 2000). finally, we verify the most powerful model (s) for empirical testing of earnings management. we completed the models’ power simulations test for the four models, using a one-tailed test at a 5% level. figure 1 [2] visually depicts the simulation of power functions to test for expenses [revenue] induced manipulation’ earnings management. both display the graphical summary of nulls’ rejections when we implement the manipulation before we compute the different accruals models by adding the assumed amount of ‘expenses (artificial) manipulation’ at levels ranging from 20% to 100% of lagged total assets, 𝑇𝐴𝑖,𝑡−1, (at an interval of 20%). under the null of no existence of systematic earnings management, we simulate only the alternative of income-increasing accruals. j. of gov. risk management compliance and sustainability 87 both plots show that all models indicate relatively powerful tests for plausible parsimonious levels of accruals management. for the four different discretionary accrual models, the proportion of null rejections is approximately 35–50%, even for moderate accruals manipulations on 40% of lagged total assets, contingent on the type of accruals manipulation implemented and the particular accrual model functional. all models have a high percentage of the null (of no earnings management)’s rejection at 5% levels, from 20–100% experimental exercised increasing manipulation. the simulations of the expense-augmented accruals models [figure 1] indicate that the modified jones model produces the most powerful tests. the results identify similar regularities of the null’s rejection at 20–100% of the lagged total assets artificial inducement for the jones, extended jones cf and wc accruals models. only the modified jones evidently have a different as well as the highest rejections at each stage of the expense experimented manipulation, except at the 100% inducement exercise, where all four models report similar levels of null rejections. it supposes that, of all the models, the modified jones is the most powerful model in the detection of expenses augmented income-increasing accruals. the simulations of the revenues’ augmented accruals models [figure 2] indicate that the modified jones maintains the most powerful capability. the simulations generate the null’s rejection around 50–80% for revenue-induced manipulations at 60–100% of lagged total assets. amidst the tested models, modified jones identifies the greatest null rejection at every simulation stage. the result shows that the extended jones cf power test reports rejections consistently below j. of gov. risk management compliance and sustainability 88 the modified jones but has the higher null rejection among the other three models. algharaballi and albuloushi (2008) show for kuwait that the four models record similar power under expense manipulation, but the simple jones has the highest power. conclusions empirical literature recognises the use of accounting accruals as a proxy for accounting quality to measure performance, financial status and plausible evidence of earnings manipulations. research on the use of discretionary accruals to detect earnings management of nigerian firms is increasing (ozili & outa, 2019). yet, evaluating the correct specification and power of the test for the accruals model remains non-tested for nigeria samples. this paper analyses four accruals models' specifications and power capability on a comprehensive sample of listed non-financial firms in nigeria. our objective is to decide the most appropriate one for detecting earnings management. for the aims, we use firm-specific estimations, and complete simulations to evaluate the alternative accruals functions. the result indicates that the different models are correctly specified and fitted for the samples, consistent with extant studies. in addition, we found that the modified jones has the highest power of test capability when both expense and revenue manipulation are simulated to establish the model that best detect evidence of earnings management. the implication of this finding is that the modified jones model is the most appropriate model to detect earnings management based on the nigerian sample. the findings can be useful, when combined with other firm characteristics (cadot, rezaee, & chemama, 2020; 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(1998). earnings management and the underperformance of seasoned equity offerings. j. of financial eco. 50, 63–99. doi: https://doi.org/10.1016/s0304-405x(98)00032-4 https://doi.org/10.31098/jgrcs.v2i1.801 https://doi.org/10.1111/j.1475-679x.2004.t01-1-00143.x https://doi.org/10.1111/j.1475-679x.2004.t01-1-00143.x https://doi.org/10.2308/accr.2002.77.s-1.61 https://doi.org/10.1108/ajems-10-2017-0266 https://doi.org/10.1108/ajems-10-2017-0266 http://dx.doi.org/10.1080/00014788.2000.9728949 https://doi.org/10.1016/s0165-4101(96)00434-x https://doi.org/10.1016/s0304-405x(98)00032-4 available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 1 number 1 (2021): 07-25 corresponding author waznatol widad mohamad ishak, waznatol.widad@gmail.com; siti indati mustapa, indati@uniten.edu.my; norsyahida mohammad, norsyahida_mohammad@yahoo.co.uk; mohamad jais, azlinamj@st.gov.my doi: 10.31098/jgrcs.v1i1.450 research synergy foundation linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak1, siti indati mustapa1, norsyahida mohammad1, azlina mohamad jais2 1 institute of energy policy and research, universiti tenaga national, malaysia 2 energy commission, malaysia abstract sustainable energy development was signified as the global energy transition pathways that drive essential changes in how energy is being generated, transmitted, and consumed. the concept of circular economy (ce) has been proposed to address the environmental problem by minimizing the resource inputs and emission generation, reusing the waste, and refusing the conventional production process to obtain further benefit. however, the contribution of ce to sustainable energy development and its link to quintuple helix (qh) elements is still ambiguous. this paper intends to fulfil this gap by examining the five main elements of the qh that contribute to the ce ecosystem, namely academia, companies, environment, government, and society. innovative technologies from sludge management in urban wastewater sectors are discussed as the case study. a framework relating the qh with ce and innovation are proposed for future research. practical recommendations associated with ce and sustainable energy policies are also provided. keywords: circular economy; sustainable energy; energy transition; quintuple helix; waste-toenergy this is an open access article under the cc –by-nc license introduction the establishment of sustainable energy remains a crucial challenge globally. as civilization continues to be driven by exploiting natural resources for energy generation, energy sustainability is regarded as a necessity to maintain economic growth and prosperity. access to clean, affordable, and reliable energy has been a foundation to create energy transformation that requires a thorough interpretation. according to the united nations (un), sustainability is defined as “meeting the needs of the present without compromising the ability of future generations to meet their own needs” (united nations brundtland commission, 1987). that means sustainable energy can be described as inexhaustible energy whereby the sources renewed rather than left depleted while being harmless toward the environment. the global energy demand had shown remarkable rises, and the majority still relied on fossil fuel resources. however, a recent report by international energy agency (iea) in 2019 stated that global energy demand had declined below the average rate due to sluggish global economic growth, which is caused by the unprecedented covid-19 pandemic (iea, 2019b). in the meantime, the energy demand is eventually expected to rise post-pandemic to meet the needs mainly from industries and households. therefore, sustainable energy systems are crucial to meet future energy demands while reducing undesirable impacts on the environment. for instance, the industrial sector has been incentivized to opt mailto:waznatol.widad@gmail.com mailto:indati@uniten.edu.my mailto:norsyahida_mohammad@yahoo.co.uk mailto:azlinamj@st.gov.my http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) 8 │ for renewable energy (re) and energy efficiency technology to reduce their cost by lowering the demand for coal and fossil fuels. furthermore, global carbon dioxide (co2) and other greenhouse gases (ghg) emissions should be reduced to combat climate change. the integration of re resources and the emphasis on energy efficiency in power generation played a massive role in reducing carbon emission (iea, 2019a). besides, the transition towards zero-carbon energy systems via decarbonization is also considered in attaining sustainable energy technology. sustainable energy technology comprises four main categories: sustainable energy economics and management, re generation and consumption, environmental impacts of energy systems, and electric vehicle and energy storage (chen et al., 2019). a robust strategy is required to boost sustainable energy transition across these four categories. for example, the transition of the transportation sector towards sustainability requires innovation of transportation technology and energy usage. the assessment of transition pathways in the european union’s (eu) transportation sector (dominković et al., 2018) revealed that electric vehicles have more potential than biofuel vehicles. however, the advantages of the electric vehicle may be jeopardized if the electricity used to electric power vehicles is generated from fossil fuels. energy production methods need to be alleviated from conventional approaches to a more sustainable manner. thus, the penetration of this transition either in technology or economic aspect could turn further discussion and potential alternatives. recently, the circular economy (ce) concept has gained considerable popularity. the concept presented strong linkages between the environment and economic activities in evaluating the viability of a process. in turkey, the ce concept conducted has revealed that, as the country focuses on solar energy as a primary electricity source, greater attention is needed to ensure sustainable solar photovoltaic (pv) waste management (erat and telli, 2020). another study in india revealed that penetration of the ce principle enhances the country's sustainable economic development, especially in the integration of re and advancement in the waste management sector (ellen macarthur foundation (emf), 2016). overall, the application of the ce concept demonstrated a positive effect on sustainable energy technology. previous studies related to sustainable energy technology have been focusing on utilizing re resources, energy efficiency, and technological innovation for power generation (chel and kaushik, 2018; qazi et al., 2019; lu et al., 2020). however, there is a gap in linking the ce concept and sustainable energy technology via the quintuple helix (qh) perspective. the qh elements enable broader perspectives in achieving sustainable energy technology, facilitating further improvement in implemented policies. therefore, this paper aims to provide a systematic view of ce and sustainable energy technology from the qh nexus. a theoretical framework utilizing the qh perspective would be developed. a case study in the wastewater sector is included to investigate qh's roles: the government, industry, academia, society, and environment. the initiatives and practical recommendations associated with sustainable energy technology and ce concept are provided, focusing on improving waste management and energy policies. literature review a quintuple helix: a framework for circular economy (ce) and sustainable energy the quintuple helix framework is utilized to identify the interaction between selected elements toward the body of knowledge. historically, the framework has been developed based on the triple helix framework theorized by henry etzkowitz and loet leydesdorff in the 1990s (etzkowitz and leydesdorff, 1995). the triple helix framework has been employed to discuss the relationship between the university, journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) │ 9 industry, and the government toward several subjects such as innovation, policy development, economic concept, and business strategy (galvao et al., 2019). the collaboration of the university, industry and government in the triple helix framework had resulted in effective and efficient innovation in sustainability development (galvao et al., 2019; luengo-valderrey et al., 2020). the culture of innovation has been rigorously studied. however, emerging technology and business transition unreasonably fit the needs of society and the environment. therefore, the triple helix framework was extended to quadruple helix and quintuple helix by adding society and the natural environment as the new elements in 2009 and 2010 (carayannis and campbell, 2010). the society element gives a reasonable interpretation of public understanding and media exploitation where it perceives innovation in dynamic experiences (carayannis and campbell, 2009; carayannis, barth and campbell, 2012; grundel and dahlström, 2016). the natural environment of society has been identified as a spur for production and innovation because it would create synergies between the economy, society, and democracy. the socioecological focuses on interaction, codevelopment, and co-evolution of culture and nature (carayannis and campbell, 2010; carayannis, barth and campbell, 2012). quintuple helix, as shown in figure 1 below, has been claimed to support open innovation and has the potential to be a framework for the transdisciplinary analysis of sustainable development and social ecology by connecting the environment element in the subject of innovation and knowledge (carayannis, barth and campbell, 2012). even though several scholars had surfaced numerous criticisms toward the concept, such as on how to clearly define the public and environment, whether they are a real different element nor extension of the previous element, (leydesdorff, 2012) countered that triple helix could be extended algorithmically to an n-tuple of helices while (höglund and linton, 2018) agreed that social element is a different type of helix despite the other three helixes being discussed. drawing upon this, it looks like more researchers could contribute to exploring the challenges of the quintuple helix from the point of view of sustainable innovation. figure 1: quintuple helix model source: adapted from (carayannis, barth and campbell, 2012) natural environment society academia government industry journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) 10 │ sustainable energy technology is defined as a high-efficiency energy system consisting of sustainable energy resources that are well-managed to balance environmental and social costs, risks, and benefits (chen et al., 2019). components of sustainable energy technology include clean energy generation, transmission, and distribution, storage of chemical and electrical energy, energy efficiency, and smart and efficient energy management systems (chu et al., 2017). the sustainable energy concept has shifted a global paradigm toward how the industry, society, and governmentplay a role in energy generation, transmission, and consumption. for instance, through simple changes in people’s behaviour, energy usage and waste generation could be lowered tremendously. an industry or a firm that engage in a good sustainable practice can result in decreasing the operation cost and preserving the environment via emission reduction. in a study to examine the relevancy of the triple helix as drivers in sustainable innovation, (luengo-valderrey et al., 2020) found that the triple helix concept has a positive and significant impact on the firm. thus, recognizing the triple helix strategy is very valuable. as for the power sector, understanding how to minimize resource scarcity and organization of the supply chain enables establishing a comprehensive plan to generate sound output in the long term (melkonyan et al., 2017). another study had applied the quadruple and quintuple helixes models in the initiative of innovative specialization strategies and smart sustainability in the european union (carayannis and rakhmatullin, 2014). on the other hand, the ce is defined as an industrial system that is restorative and regenerative by intention and design (macarthur and ellen, 2013). the ce enables the establishment of sustainable energy technology. for instance, the waste from industry is utilized as feedstock for another sector, also known as the waste-to-energy system. as established by the european union council in 1999, efficient waste management highlights the waste order of priority starting from prevention, reuse, recycling, energy recovery, and disposal (lausselet et al., 2017). the clean energy produced from re resources, including organic waste and technological advancements in energy generation such as power-to-gas technology, hydrogen energy, and fuel cells, is crucial in achieving sustainable energy technology via the ce concept. therefore, the quintuple helix model comprises five main elements: government, industry, academia, society, and environment have an essential role in connecting the ce and sustainable energy technology. the government is responsible for creating an ecosystem that enhances sustainability in the country’s energy system, including policies, regulations, subsidies, preferential tax treatments, and trade restrictions (pan et al., 2015). these initiatives would then assist energy-related industries in shifting to cleaner energy resources for power generation and enabling competitive electricity pricing for consumers. in the realization of ce, a life-cycle assessment (lca) of the waste to energy system is frequently conducted. the review enables the identification of environmental impacts and cost-competitiveness of every stage of the life cycle. the lca is usually performed by the academic helix, assisted by industries related to the product or services. the lca conducted and reviewed in the literature provides various perceptions of waste-to-energy processes, including combustion, gasification, and anaerobic digestion. waste from agricultural and industrial sectors and solid municipal wastes are utilized to produce energy into biochar, green fuel pellet, bio-gas, and heat or electricity to power industries (pan et al., 2015). this sustainable energy linkages support the ce system where the consumption of primary energy sources is reduced, waste is prevented, or otherwise recycled. every initiative in the transition towards a ce from a linear economy requires support from another basic helix: the environment. although ce drives the shift towards sustainable energy technology, it is evident that the help of the citizen is of its utmost importance, while environmental concerns itself plays a vital role in alleviating the cooperation of citizens. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) │ 11 likewise, technological advancements and innovations usually became the products of integrating qh in sustainable energy technology strategy assisted by ce. the technical aspect is an essential output from the academic helix, brought to realization by the citizen helix, which could be observed as the recent advancements in the energy sector and urban planning revolve around creating smart grids and smart cities. a study on asean smart cities network utilizing the qh model reveals that although smart cities technology produces more manageable cities, the outcome works against the interest in sustainability (crumpton et al., 2020). smart cities are claimed to be complex, while a paradigm shift must support smart cities development in asean member states. therefore, sustainable energy technology is facilitated by technological advancements driven by ce, which requires a thorough analysis via qh to drive the participation of multiple stakeholders associated with sustainable energy technology. as shown in figure 2 below, the proposed framework summarised the inter-relationship between each of the five qh element (i.e., government, industry, academia, society, and environment) and ce through the sustainable technology approaches. figure 2: framework of ce and sustainable energy technology through quintuple helix. source: adapted from (carayannis, barth and campbell, 2012; durán-romero et al., 2020) current practises of ce ecosystem and sustainable energy technology south korea faces environmental resource limitations, and currently, 84% of the energy supply contribute from fossil-based sources (stoev, 2018). the increase in greenhouse gas (ghg) emission, the growing population, and the rapid development of korea’s manufacturing industries have caused huge climate change that will damage up to 20% of global gdp without appropriate mitigation actions (stern, government •legislation •incentive •administrative industry •technology •business model •collaboration academia •capacity building •knowledge •collaboration society •awareness •incentive •collaboration natural environment journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) 12 │ 2006). therefore, it needs to deploy intensive action in addressing the impact through a new paradigm of the linear economic model with a circular approach. since the linear approach has been successful in korea for decades, the circular economic model aims to use fewer resources through efficient processes, waste prevention, reuse, repair, remanufacture, and recycling. according to oecd, south korea had the second highest recycling rate country in oecd countries in 2013 (mccarthy, 2016). therefore, the korean ministry of environment (moe) has announced and enacted the principle of resource circulation as a concrete action to transit into a circular wave (ministry of environment, 2017). the resource circulation strategies include national strategy for green growth, resource efficiency programme (rep), recycling technology programme (rtp) and energy recovery programme (erp) to increase the demand and supply of energy from waste. in other words, the principle contains policies to reduce waste in all processes, including production, distribution, consumption, and disposal of products, and promote recycling. from the perspective of the wastewater and sewerage industry, which consumes extensive energy, korea's government faces tremendous pressure to have independent and sustainable energy and reduce the operation cost (kangyin et al., 2016). therefore, this particular industry can be a crucial part of circular sustainability due to the integration of energy production such as biogas and small hydropower and resource recoveries like nutrient retrieval and clean water (neczaj and grosser, 2018). taking the korean government as an example, it has a good track record in integrated waste management. it has been proved by the high number of small business and external markets related to waste, reduction of landfill space, and cheap public services (oecd, 2017). on the other hand, the modernization of sewerage and wastewater system in korea subsequently led by a virtuous designated policy and the intuitional measure had resulted in a global leader in the water and wastewater services, pollution and water-borne diseases as well as energy independency system (danilenko and bahuguna, 2016; ministry of environment, 2017). table 1 below shows the summary of the relationship of the quintuple helix (qh) toward ce and sustainable energy technology. table 1: summary of quintuple helix capacity: a case study from south korea. main drivers approaches industry advance technology, product development, and environmental concern are the major driving factors triggering korea's industry. monitoring and studying a new method in the technological aspect could lead to improvement measures and increase the system's reliability. additionally, the long-term strategy also would be based on the project cost. thus, carefully select and install the technology suitable for the industry and sufficiently verified by the regulator had secure enough to exercise a sound system. government the ministry prepares laws, standards, guidelines, and regulations. the local authority, private partnership, and public jointly collaborated in improving the policy and strategy. the private partnership making water a more attractive investment opportunity under the build, own, operate, and transfer (boot) mechanism. most policies in korea are set up by establishing long-term goals journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) │ 13 main drivers approaches to ensure consistency in arising the services and other indirect social and environmental impact. funding is mainly made up of national budgetary and expenses. in some cases, allocation may be carried out as private investment projects. the federal budget that supports the project is ensured to follow the standard project cost analyzed by the government, whereby this is to certify that the relevant criteria are met when designing. academia experts from private companies, universities, government-sponsored institutions, and research institutes have collaborated and built partnerships for consultation and deliberation of significant policies and technical advice. additionally, engagement with society will be done to reflect the opinions of residents. society the decision on technology intervention is based on economic efficiency, treatment stability, domestic performance, and public corporations certified by the ministry. improving awareness is vital for selecting facilities with the right technology and evaluate its impact on society. environment the direct effect of the technology and system is to improve the environment, which is periodically analyzed through the total pollution management system. the environmental technology development project is specified in article 5 of the environmental technology and environmental projects supporting act to be promoted by national and public research institutes, government agencies, research institutes, and industrial technology expert. source: author’s elaboration based on questionnaire feedback during a benchmarking visit to south korea. on the other hand, in sweden, the annual energy use is around 600twh, and the sources are from four leading carriers: oil, nuclear power, biofuels, and hydropower. almost 80% of fossil fuels are used in the transport sector. however, currently, sweden has been shifted the focus to use the produced biogas in the transportation sector as vehicle gas. based on the study done by (swedish gas technology ltd, 2012), 1.4twh of biogas is produced annually in sweden from approximately 230 facilities. half of the biogas production is contributed by 135 wastewater treatment plants. since the landfilling of organic waste has been banned in 2005, the sludges in wastewater are converted to biogas and show an extreme reduction of biogas produced in landfills. there is an immense potential for sustainable resources in sweden, and essential technologies are changing rapidly. as a country with strong environmental policies, access to a large amount of domestic natural resources, and a growing population, the priorities of developing a new business model and a sustainable system is paramount. policy intervention in promoting ce models is needed by educating the public with ce knowledge, allowing cross-collaboration to enable infrastructure journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) 14 │ development, and transforming from waste management to resource management approaches (westblom, 2015). urban infrastructure and inefficient resource management are among the factor caused an increase of around 50% in climate emission and more than 90% of the world’s water scarcities and biodiversity deficiencies (ministry of environment and ministry of enterprise and innovation, 2020). in sweden, the ce strategy focused on toxin-free and eco-cycle, business sector, and services area. besides, the world-class swedish companies featured with skilled innovators who enable production and deliverable resources portray a solid aspiration for focus on a fossil-free society (swedish enterprise, 2019). nevertheless, the industry structure in sweden is energy-intensive. the majority of the total energy use in industrial is embedded in high cost and government budgetary. however, the process of adopting innovative technology is a crucial agenda in developing a sustainable system. according to a study done by (bergquist and söderholm, 2016), the finding showed despite developing policy in sustainable energy by emphasizing knowledge and cross-sector collaboration. the government should also improve the existing policy, especially the implementation of energy taxes and fee. doing this shows the government's ability to push the industrial sector to embark on new and sustainable technology. even though (bergquist and söderholm, 2016) had analyzed the transition towards re and increased energy efficiency in the swedish pulp and paper industry only. still, it gives a bigger picture of the swedish energy policy and the energy transition direction. another study pointed out that the supply section in energy policy has been overlooked, especially in governing the municipalities. traditionally, the municipalities act as a supplier of gas, electricity, and heating facilities (palm, 2006). therefore, the policy seems to be an essential indication to embark on the energy transition. with the cooperation from cross-sector and industry, implementing the ce approach and developing sustainable energy technology could meet current increasing energy demand and conserve the environment. while in malaysia, sustainable energy development vigorously concentrated in two areas which are adapting the re and improving current energy efficiency (shafie et al., 2011). the establishment of the national renewable energy policy and action plan (nrepap) in 2008, the national energy efficiency action plan (neeap) in 2015, and the sustainable energy development authority (seda) played an essential role in strengthening the action without leaving the importance of environmental protection. a new paradigm of the ce concept has been practised in several industries to support a low carbon economy (khor and lalchand, 2014). the constitutional framework, industrial management, energy cycle consumption, and wastewater and sludge usage have significantly influenced the implemented ce system in pengerang integrated petroleum complex (pipc) (hishammuddin et al., 2018). however, the engagement with qh, such as the technology availability in the industry, awareness of the society, and feasibility of other stakeholders and authority bodies, must be addressed to understand the impact of the implemented initiative. as a blessed country with abundant natural resources supported by several compromised sectors in producing the raw material for power generation, malaysia strived to provide more clean energy. the residue from crops like palm oil, paddy, and rubber has a vast potential to be used as fuel for electricity generation using the cogeneration system (mokhtar, 2002; shafie et al., 2011). recently, malaysia has actively developed a circular economy roadmap to solve several issues such as unsystematic waste management and unutilized resource (asia-pacific economic cooperation, 2020). this roadmap urged to achieve zero single-use plastic by 2030 and journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) │ 15 embrace the new eco-friendly alternative by practising the ce system (ministry of energy, science, technology, environment & climate change, 2018). table 2 below summarise the key drivers, challenges, and priorities of the three countries discussed relating to the ce and sustainable energy technology. table 2: literature review on adaptation of ce and sustainable energy technology country korea sweden malaysia key drivers climate change retarded of natural resource rapid urbanization systematic structure climate change pollution abundant raw material agriculture and manufacturing dominated challenges ensuring sustainable financing in invested technology. weak cooperation among ministries and society on environmental issues had caused ghg emission to increase rapidly. global climate change appears to be pushing the european climate towards more extreme seasonal variations with more droughts in the dry seasons and more floods in the wet season, calling for more robust resource management. lacking in policy and regulation enforcement. the high cost of investment in sustainable technology. low rate of awareness and acceptance level among society. priorities energy & water recovery climate recovery environmental-friendly technology urban environment resource recovery climate recovery energy recovery energy efficiency waste recovery outlook support government approach related resource management using the circular model. pursue greater cooperation among sectors and establish a reliable information system. increase environmental awareness and monitoring ecological status. emphasize regulatory framework. continuing to improve and support innovation and technology advancement to mitigate sustainable development. highlight a circular approach to explore the potential resource that can be regenerated. develop collaboration with potential industry to establish sustainable energy technology. strengthen policy and regulation on resource journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) 16 │ country korea sweden malaysia strengthen policy and regulation in line with the sustainable development agenda. recovery and technology efficiency. advantage fast economic growth high energy consumption manufacturing technology long term exposure to advance technology fast-growing urban city modest economic growth in asean abundant of potential resource reference (jin, 2016; lopes de sousa jabbour et al., 2018; hong et al., 2019; landsberger, 2019; herrador, cho and park, 2020; nam, hwangbo and yoo, 2020) (ek, 2005; assefa and frostell, 2007; swedish environmental protection agency, 2008; westblom, 2015; wijkman and skånberg, 2015) (mohd din, 2010; shafie et al., 2011; palanisamy k. and shamsuddin a.h., 2013; akademi sains malaysia, 2015; ramli and abdul hamid, 2016; hishammuddin et al., 2018; abdullah et al., 2019) research method in this study, a qualitative method from a primary data source is used. field observation and a questionnaire were conducted for data collection. the choice of this method to be employed was affected by the ease of data standardization, representativeness, time constraints, cost and type of information needed. in comparing questionnaires and interview, it is relatively easy to arrange a questionnaire survey. two sets of questionnaires in the form of a case study are developed to distribute among the related wastewater treatment facilities. for the case study, we select a few designated wastewater facilities in malaysia and south korea based on the size of the plant, technology used, facilities' availability, policy development and governance to be a part of this research study. a mailed questionnaire was used in a descriptive and auditing formatted and not as an analytical cause-effect construct. furthermore, in supporting further our findings, this study also benefits from a vast range of data gathered from various valid references. all the supporting evidence extracted from (mohd din, 2010; abbas et al., 2011; abd, wan and presenter, 2011; tuan mat, shaari and kok how, 2011; rebitanim et al., 2013; akademi sains malaysia, 2015; kumaran, 2016; ellen macarthur foundation (emf), 2016; esa, halog and rigamonti, 2017; mustapa, 2018; sabeen et al., 2018; carayannis et al., 2018; hishammuddin et al., 2018; hanum et al., 2019; iea, 2019b; priyadarshini and abhilash, 2020; durán-romero et al., 2020). journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) │ 17 findings and discussion application of ce in the wastewater sector in malaysia the sustainability agenda is practised in every sector such as agricultural, business, and waste management, including wastewater services. integrating ce into the business chains is to optimize resource usage (raw materials) and minimize wastage from production and emissions, as shown in figure 3. the national sewerage company in malaysia, prominently known as indah water konsortium (iwk), had the initiative to adopt this ce model approach and exploring potential application for the wastewater treatment by-product. the three by-products are clean water (effluent), biosolids (sludge), and methane released by the wastewater treatment process. this initiative framework to reuse the by-products seems promising in mitigating some of the current cost pressures at the iwk. they are a lot of potential for reusing the by-product of wastewater, as mention by iwk. for instance, iwk's entire operation had produced between 5,000 to 6,000 million litres per day (mld) of clean water. however, regulation has prohibited the channelling of effluent directly back into the water supply system. in terms of biosolid byproduct, it has been reported that 120,000 tonnes of sludge are produced by iwk’s treatment plants nationwide annually. the sewage sludge is commonly disposed of either at the landfill and trenching sites or burned in incinerators, which is not good for the environment. it may still contain contaminants that remain as ash and contribute to crucial concern among the service providers and consumers. on the other hand, iwk could generate up to 2,400 mwh by harnessing all the potential methane from its 6745 plants nationwide. on average, a plant could consume electricity of 43,503 kwh/day, equivalent to 40 % of the overall operation and maintenance cost. therefore, generating power through biogas from anaerobic digestion could help reduce the plant’s total energy consumption and sold to neighbouring households. however, the challenge in realizing this initiative is that the iwk plants are too scattered, small, and not transportable for such a plan to be viable. nevertheless, as the third-largest consumer of energy in asean, the dependent on conventional resources and environmental issues gained the attention of the government and researchers to investigate the re coming from bioenergy sources. sludge management has been opted to be a case study to explore the circularity concept on the sewage sludge in malaysia. this case study framed the role in driving sustainable energy within the qh perspective: industry, government, society, academia, and natural environment. in the industrial ecosystem, the creation and dissemination of sustainable energy technology have been based on firms' initiative but limited by governmental regulation. in this case, wastewater operators have the responsibility of providing public services to the local communities. however, maintaining and sustaining the sector with the ageing, malfunction, and failing infrastructure and inefficient technology becomes an enormous challenge. thus, an industry player is suggested to adopt an innovative approach for sustainable growth and develop environmentally-friendly technology that reduces co2 emission and increased firm revenue (carayannis, barth and campbell, 2012). meanwhile, (carayannis, barth and campbell, 2012) stated that the government is a part of the political system in the helix chain. the government should give support in terms of incentive and funding associated with comprehensive regulations and policies in initiating the sustainable transition. policy setting such as 20% re including biogas in the energy mix by 2025, 100% sludge to be recycled by 2030, 60% installation of rainwater harvesting system by 2020, and recycled one-third of treated effluent by 2030, would enable the country’s transitions towards a green economy. on the other hand, the academia helix plays a crucial role as the promoter in changing the understanding and connecting the gap between knowledge and practicality. litardi, fiorani and bara, 2020 found that education has a strong relationship in research application and leading the involvement journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) 18 │ of various entities will strengthen productivity and creating shared value. therefore, establishing a research and development (r&d) and technical training centre in the wastewater sector creates an opportunity to build collaboration with academia. a few partnerships towards green growth have been initiated successfully. for instance, a biogas and micro-hydropower plant project collaborated between iwk’s r&d centre and universiti tenaga nasional (may lim et al., 2013). continuous improvement projects have been an annual program to encourage a culture of innovation throughout the operation. figure 3: ce model for sludge management. source: adopted from (durán-romero et al., 2020) public awareness and acceptance of the importance of the sewerage system have increased over the past years due to the development of fingertip technology and accessible media. various initiatives to educate and raise awareness among society has been accomplished. for example, program indah alam by iwk aimed to inform the importance of desludging individual septic tank, and the greater kuala lumpur project focused on the rehabilitation of 4the public sewer network. the demand for a cleaner environment and the need for environmental protection has driven sustainable technology in the wastewater sector. however, this improvement will consume colossal investment, and the current sewerage tariff still low. promoting the public to pay more on sewerage bills could cause public objection. therefore, the prolongation of the awareness program is a good initiative. this process helps the industry to include public concern, experiences, and preferences in its decision-making (w muhammad abdullah et al., 2021). furthermore, the symbiosis of ce’s knowledge and sustainable energy technology innovation is expected to be cleared by adding the natural environment perspective. this interactive system can support sectoral area of innovation biochar fertilizer biofuel bricks • linear model (extractionprocess-disposal) • green technology initiative • single industry • low interaction between economic sectors key drivers production recycle consumption digestion waste utilization sludge management chain way to circular economy • circular model (recycle-reuseregenerate) • innovation and sustainable technology • cross-sector • new business model raw material sludge by-product journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) │ 19 the development of the wastewater sector in malaysia (harwiki and malet, 2020). the extraction of a resource from nature and making it become a product or service will have an economic value (korhonen, honkasalo and seppälä, 2018). for instance, wastewater is viewed not as waste but rather as a valuable non-conventional resource that should be circulated to sustain scarce life-essential resources that benefited both economic and environmental aspect (lettinga, lens and zeeman, 2001; werner et al., 2003). several studies broaden the perspective of the qh by examining the role of collaboration. this sustainable transition requires efforts from all the institutional helix by intruding the relevant principle in sustainable energy technology agenda and strategies. for instance, the sector needs an effective asset management plan such as transforming into advanced connected decentralized wastewater treatment plant instead scattered treatment plant and individual septic tank to reduce their losses and to meet the increasing demand in coming years (may lim et al., 2013; akademi sains malaysia, 2015). conclusion & further research the paper showcases the contribution of ce to sustainable energy development and its link to the five elements of the qh. in the context of energy sustainability, resource efficiency underscores the execution of actions to enhance transition towards a ce model. the analytical review divulges the importance of qh elements in supporting this transition, underpinning by actions from industry, academia, government, and society for the implementation of sustainable energy technology. in the case of sludge waste management from sewerage, efforts have been mainly oriented to obtain direct benefits through recovered resources from the sludge waste. this model efficiently exploited the resources and byproducts, which presents an economically attractive case for adopting ce pathways in wastewater management. intervention is needed to focus on changing production patterns and improving resource management towards environmental sustainability. a proactive approach and leadership from the internal (i.e., industries, treatment facilities, utilities, environmental awareness, etc.) and external (i.e., government, academia, and societies) sector are essential for a thriving intervention sector. one of the significant roles of the government is to provide financial support and land resources and create a ce enabling environment. the malaysian government has been sustaining significant expenditures in river restoration, water augmentation, and irrigation facilities. these expenditures could be partially reduced by utilizing sludge waste as fertilizers for landscaping or biofuel. thus, there is a major driving force for holistic sludge waste management. based on the research findings, it is strongly recommended that the local government and utility providers in different states work collectively to integrate strategic planning and its implementations. to this end, the concept of industrial symbiosis and public-private partnerships would improve the efficiency of resource utilization and solves environmental issues among industries; through the exchange of raw materials, designing of products and services, and well as extending the resource value by converting the sludge waste into high-value products (i.e. biogas, bricks, biochar, etc.). it has been recognized that public funding in the water supply sector needed to be supplemented by private investments. in korea, for instance, a private partnership under the boot mechanism makes the water sector more appealing for investment opportunities, as the government subsidies focus on meeting the private-sector requirement. in the ce concept, cost recovery is not regarded as the primary objective but rather for pollution management and water augmentation. the wastewater regulations in malaysia require wastewater treatment to comply with a particular specification level before discharging into rivers, trailed by pollution monitoring at sludge disposal sites, which accounted for a substantial operational cost. currently, the sewerage cost in malaysia is highly subsided by the government and journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 07-25 linking circular economy and sustainable energy technology through quintuple helix perspective waznatol widad mohamad ishak, siti indati mustapa, norsyahida mohammad, azlina mohamad jais issn 2776-9658 (online) 20 │ among the lowest in the world. in moving towards circular economy transition, the existing subsidy for consumer sewerage could be relocated to recover operational expenses, benefiting sludge waste treatment in exploiting renewable energy and efficient technology. in term of successful institutional frameworks, a blended finance model of sharing equal risks under boot mode could boost public-private partnerships. it is apparent in korea that wastewater management requires long-term investments to provide multiple benefits in the long run. due to the limited financial resources, it is difficult for local governments to tackle the massive challenge of wastewater management for the entire city at once. instead, as the first phase, local governments could introduce decentralized wastewater treatment with the support of the private sector and other relevant stakeholders. this would require various stakeholders engagement, including non-governmental organizations (ngos), industries, and financial institutions. the ngos could influence society at large through awareness program on the sludge-related impact on health and the benefits of considering the circular economy. while the government can contribute to constructing socially acceptable circular economy solutions, certification, and authorization, the industry can support devising technological interventions. financial institutions can support the initiatives by providing long-term capital. in the context of technological intervention, the changing role of academia from merely research universities to a more entrepreneurial stance is also important in translating knowledge produced within the university into economic and social efficacy. the collaboration with academia can increase confrontation with industry and society to address the sustainability issues and work towards viable technological solutions. to conclude, the framework relating the qh elements with ce proposed in this study has indicated a more collaborative economy that contributes significantly to sustainable energy. as the current research only uncovers the rationales between qh and ce initiatives, further investigation should be carried out in exploring the impact of each qh elements and provide an empirical analysis of the execution of the suggestions associated with ce and sustainable energy policies. 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(2015) ‘the circular economy and benefits for society: jobs and climate clear winners in an economy based on renewable energy and resource efficiency’, the club of rome, p. 59. available at: http://www.clubofrome.org/cms/wp-content/uploads/2015/10/thecircular-economy-and-benefits-for-society.pdf. available online at: https://journals.researchsynergypress.com/index.php/jgrcs/index journal of governance risk management compliance and sustainability (jgrcs) issn 2776-9658 (online) volume 1 number 1 (2021): 26-49 corresponding author arnold v. salcedo; asalcedo@hau.edu.ph doi: 10.31098/jgrcs.v1i1.490 research synergy foundation moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo holy angel university, angeles city, philippines abstract cpa baby boomers, generation x, generation y or millennials and the latest addition, generation z, possess unique characteristics, workplace values and ethics. this study focused on how workplace values and ethical considerations directly and indirectly affect the values of cpas. the participants are five hundred forty-one (n=541) baby boomers, generation x, generation y and generation z filipino professional accountants among four different sectors namely the academe or education, commerce & industry, government and public practice. a partial least square-structural equation modeling (pls-sem) including mediation and moderation analysis were used to determine the direct and indirect effects. using schwartz motivational values, the study revealed that there is a positive and significant relationship between self-transcendence (benevolence and universalism) and openness to change (self-direction and stimulation) as workplace values to the values of practicing cpas. there is a negative but significant relationship between workplace values of conservation (tradition and security) and self-enhancement values (power and achievement) with the cpa values. also, workplace values significantly affect ethical considerations, while ethical considerations (or strict adherence to cpa’s code of ethics) significantly influence the cpa values while in practice. lastly, the moderation analysis further revealed that workforce generation has moderating effect on the relationship between conservation values and the actual practice values. ethical considerations have no mediating effect on the significant positive relationship between individual values and values in practice (benevolence and universalism), while workforce generations have moderating effect in the conservation values of cpas. keywords: workforce generations; certified public accountant;, ethical considerations; workplace values; ethics this is an open access article under the cc –by-nc license introduction a lot of studies have focused on the inter-generational differences. there are a lot of challenges that relate to effectively managing multi-generational workforce as diversity is brought in the workplace. thus, the needs and values must be addressed in order to have high performing organizations (lieber, 2010). the shift in the dynamics in the workplace coupled with the ethical choices of one generation may be similar or vastly different to the cohorats that came before them (inciong, 2019). the baby boomers, generation x, generation y and the latest addition, generation z may each possess unique characteristics, workplace values and practices distinct from one another. interestingly in the philippines, in rodriguez-valdes (2015) gave the big question on how to lead and manage the gap across workforce generations now that various organization’s leadership is shifting towards generation x, y and the generation z. understanding each generation is critical considering the profiles of related workforce in terms of perspectives, motivations, ethics, and communications styles. the http://creativecommons.org/licenses/by-nc/4.0/ journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) │ 27 differences in workforce generation could also emanate from the values and ethics of professionals working for organizations such as certified public accountants. values serve as the foundation, guide and driver of choices and decisions that also explain feelings and emotions. furthermore, they serve as the point of connection between one’s individual beliefs, hopes, fears and expectations with one’s surrounding environment. alignment in personal values with environment at home, work or with the community, may mean a sense of well-being. otherwise, there will be a sense of disengagement which impedes a person to reach fulfillment or meet its full potential (hancock, 2018). thus, values are important and lasting beliefs or ideals which are shared by the members of a culture. they tell what is good or bad, desirable or undesirable which may have major effect on a person's behavior and attitude. individual workplace values are the principles that one person believes, including the personal standards and behavior. an individual having the same workplace values aligned with an organization values leads to a harmonious place. whereas understanding the workplace values may help avoid conflicts and serve as a guide if the organization create the right environment for its employees (weedmark, 2018). whether the organization is old or new, these core values must stay intact as it affects how the business may operate and contribute to the long-term success of the organization. values must flow down from executive level to the business units and put the right values as they are adhered from top to down (hsing, 2012). on the other hand, ethics refers to being critical which involves the examination and critiquing of various moral beliefs and practices which is more than just describing one person’s behavior (mac donald, 2011). abiding with ethics further improve internal relations and interactions with external stakeholders (lozano, 2003). it is an accumulation of values and principles which aim to provide answers to questions of what is good or bad as it also give reasons for acting or refraining from acting. with ethics in mind, one’s conduct will either be approved or disapproved. it also supports and contradicts something about virtuous or vicious in the conduct or good or evil (australian government law commission, 2018). ethical consideration emanates from two words which are ethics and consideration. consideration which involves careful thinking over a period of time or to think about a particular fact before deciding or judging something (cambridge university press, 2018). for professionals, it is pivotal to apply ethical considerations before making decisions. based on other definitions, ethical consideration are recommendations based on a certain model of professional responsibility (merriam-webster, 2018). it will constitute on what would or would not be ethical behavior by a professional under specified circumstances. such concepts of ethical consideration are also applicable in the practice of other professions. in business studies, there are countless opportunities to study the complex relationships among values, ethics and business because values and ethics are believed to be intertwined as they determine one character (yates, 2018). thus, there exists the need to consider various perspectives on business values and ethics, which to include the practice of certain profession. the professional practice of accountancy requires the mandatory adherence to code of ethics for professional accountants as a basis for ethical orientation and decision making of certified public accountants (professional board of accountancy, 2019). the code provides fundamental principles to the general application of the code, including standards for private and public practice. such principles are integrity, objectivity, professional competence and due care, confidentiality and professional behavior. baby boomers are those who were born between 1946-1964 (chappelow, 2019) facing the retirement age and are described to possess a strong work ethic, independent and self-assured, journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) 28 │ competitive, goal-centric, resourceful, mentally focused and team-oriented (pappas, 2016). generation x are those who are born between 1965 to 1981 and is described to be busier, more self-directed, and are approaching the middle of working careers (kagan, 2019), if not, are at the peak of their careers and espouse a work hard/play hard mentality (kane, 2019). millennials or generation y are those born between 1982 to 1994 (iberrola, 2019) and are labeled them as the me-me-me generation (time magazine, 2013). and lastly, generation z who are born between 1995 and 2010 are marked by the internet and was born with awareness of phone and tablet who are known to be multi-taskers, however, with a short attention span (iberdrola, 2019). determining the peculiar characteristics of each workforce based on generation, it is also interesting to know their differences in terms of professional values, ethical considerations and practices in the accountancy profession. regardless of the generation, the challenge, therefore, is adopting workplace values and ethical consideration which prompts people to become professionally committed and consider ethical practices in the conduct of their business, which leads to individual and societal transformation (naidoo 2014). thus, this research problem aims to determine the moderated mediation of ethical considerations between individual values and values in the actual practice of the cpa profession. in line with these, this study seeks to address the research gap by closely studying the link between individual values in the workplace values through the mediation of ethical considerations in the practice of the accountancy profession. the mediation of ethical considerations can further moderated by the possible generational differences of baby boomers, generation x or millennials generation y cpas, and the generation z cpas. the study also aims to answer the following specific questions: 1. what are the individual workplace values (iwv) of cpas categorized based on workforce generations? 2. what is the level of ethical considerations (ec) of workforce generations of cpas. 3. does individual workplace values (iwv) directly influence the values in the actual practice (vap) of the accountancy profession among professional accountants? 4. does ethical considerations (ec) directly influence the values in the actual practice (vap) of the accountancy profession among force generations of cpas? 5. does individual workplace values (iwv) directly influence the ethical considerations (ec) among workforce generations of cpas? 6. does ethical considerations (ec) mediate between individual workplace values (iwv) and the values in the actual practice (vap) of the accountancy profession among cpas? 7. what are the mediating effects of ethical considerations (ec) on the relationship between individual workplace values (iwv) and values in the actual practice (vap) of the accountancy profession among cpas? 8. what are the moderating effects of workforce generations on the relationship between individual workplace values (iwv) and values in the actual practice (vap) of the accountancy profession among cpas? journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) │ 29 literature review selftranscendence, self-enhancement, conservation and openness to change values schwartz (2012) constructed that shows the ten basic values which can be depicted in a table that presents the motivations for each value. the result of findings among eight-two countries (82). this can be used to identify the most important principles within a group of people and related to profession. while simón et al. (2017) explained schwartz model as one of the two most important instruments that are being used to assess the human values and reiterated that values is one that changes overtime. table 1. schwartz values motivational type values types motivational goal higher order values type bipolar group universalism understanding, appreciating, tolerating and protecting the welfare of people and nature self-transcendence first benevolence preserving and enhancing the people’s welfare with one who is frequent and personal encounter tradition respecting, becoming committed and accepting with the ideas and customs conservation second conformity restraining of actions, impulses and inclination likely to upset or harm others and go against expectations and norms security maintaining safety, stability and harmony, relationship with people and with oneself power yielding control or dominance over other people and resources, while maintaining status and prestige self-enhancement first achievement personal success by demonstrating competence by meeting standards hedonism sense of pleasure and gratification for oneself openness to change second note: this table presents simon et al (2017) the portrait values questionnaire: a bibliographic and bibliometric review of the instrument the different motivational values types are presented on table 1, can be classified into four higherorder values that are further grouped into two opposite dimensions: self-transcendence and selfenhancement the first contrasting group, while conservation and openness to change as the next contrasting group (simon et al, 2017). journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) 30 │ self-transcendence values transcendence values involve acknowledging of the importance of having a caring and intimate personal relationship with children. self-transcendence values help in daily interactions with children and help control negative feelings (tal, 2014). self-enhancement includes values which put emphasis on personal achievement and self-interest (e.g., power, achievement, hedonism), contrast to this is self-transcendence which emphasizes on values that promote the welfare of others (e.g., universalism, benevolence, self-direction), thus forming the first bipolar group of values. conservation values represents values that endorse the preservation and instilling of the status quo (e.g., tradition, conformity, security). finally, openness to change reflects values that put importance on independent thought and actions that will favor change (dinh et al, 2012). workplace values the five groups of work environments were addressed in knafo-noam and sagiv (2004) which are enterprising, conventional, social, artistic and investigative working environments. an excerpt of the results of the study is shown on table 2 that presented various occupations and the corresponding values ranked as first, second and third. certified public accountant as a profession is not included in the list. table 2. summary of knafo-noam and sagiv (2004) value profiles in 32 occupations occupation environment first second third laborer realistic benevolence security universalism cleaner realistic benevolence conformity universalism driver realistic benevolence security universalism shopkeeper conventional benevolence security universalism child care social benevolence universalism security carpenter/plumber realistic security benevolence self-direction mechanic realistic benevolence universalism security shop manager enterprising benevolence security universalism secretary conventional benevolence security universalism security realistic benevolence security universalism janitor realistic benevolence security universalism geriatric aide (serving the elderly) social security benevolence universalism clerk conventional benevolence universalism security bookkeeper conventional benevolence security universalism technician realistic benevolence universalism security banker enterprising benevolence security self-direction sales enterprising benevolence security self-direction electrician realistic security benevolence self-direction kindergarten teacher social benevolence universalism security computer specialist investigative benevolence security universalism manager enterprising benevolence security universalism journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) │ 31 social community/ service/ manager social benevolence universalism self-direction nurse social benevolence security universalism financial advisor enterprising benevolence self-direction universalism engineer investigative benevolence self-direction universalism teacher social benevolence self-direction security artist artistic benevolence universalism self-direction school principal social benevolence security universalism social worker social benevolence universalism self-direction doctor investigative benevolence universalism self-direction psychologist / consultant social benevolence universalism self-direction scientist investigative benevolence self-direction universalism table 2 was used in the study of knafo-noam and sagiv (2004) in reference to holland (1996) which concluded that enterprising work environments (e.g. manager and financial advisor) is influenced negatively by universalism values (self-transcendence). social work (e.g. nurse, teacher and social worker) environments is influenced positively by benevolence and universalism values (self-transcendence) and negatively with power and achievement (self-enhancement). the artistic environment occupations correlated negatively with conformity values (conservation). investigative environments (e.g. engineer, doctor and scientist) correlated positively with self-direction values (or self-enhancement) and negatively with traditional values (or conservation). in eliason, guse and gottlieb (2000), family physicians viewed benevolence (helping keep and improve the people’s welfare) as the guiding principle most applicable in their lives; which is coupled with a higher level of professional satisfaction. while in necla (2016) personal values for pre-service teachers in turkey are self-direction was ranked as the highest, followed by universalism and thirdly security. additionally, his research indicated a significant relationship between the teacher’s personal value orientations with their attitudes in the teaching profession, a different variable in the study. in shafer, morris and ketchand (2001) personal values have no influence over auditor’s perceptions of the moral intensity in facing an ethical dilemma. moral intensity on the other hand, is influenced by ethical judgments and different behavioral intentions among aicpas. while in karacaer, gohar, aygün, mehmet & sayin, cem (2009) personal values have an effect in the ethical decision-making processes of pakistani and turkish professional auditors. personal values of managers have always been associated with individual decision behavior (fritzsche and oz, 2007). in steenhaut & kenhove (2006) there is a causal relationship between personal values and ethical dimension in decision making in which conservation or traditional value-priorities directly influences the judgment on questionable ethical practices, while self-enhancement values indirectly influence the same. in waldron & fisher (2016) a significant difference between the structure of personal values and in ethical judgments between practitioners and students and the effect of life-stage differences. while ethics can analyze through the auditors’ commitment to professionalism through two key professional values: public interest and independence enforcement (barrainkua and espinaso-pike, 2017). journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) 32 │ ethics and ethical considerations ethics in mac donald (2011), is to reiterate are moral beliefs, practices, norms, values and behaviors that guides standards of behaviour of an individual. they are very important also for businesses since they set the tone on how to conduct the activities, internal relations and interactions with external stakeholders (lozano, 2003). there are a number of literatures which studied ethics or ethical considerations as a mediator. ethics has a mediating effect on the perceived role of managers to corporate social responsibility practices (godos-díez, fernández-gago, and martínez-campillo, 2011). there is also a significant mediating effect of the implicit institutionalization of ethics between the two variables and in order to curb cheating tendencies, there must be a shared value and ethics system, including an open communication in discussing ethical conflicts and dilemmas. popoola et al. (2017). ethical climate has a mediating role on the relationship between leadership and team identification in cheng and wang (2015). the use use of formal code of ethics between family owned and non-family-owned firm showed that family firms have a lower tendency to present a social responsibility effort than non-family owned firms, and the use of formal code of ethics mediates the relationship between the variables in cuadrado-ballesteros, rodríguez-ariza, garcia-sanchez, and martinez-ferrero (2017). whereas, moral intensity mediates the relationships between the auditors’ ethical orientation as well as auditor self‐interest threat on the auditors’ ethical decision‐making in johari, mohd-sahusi & chong (2017). ethical considerations emanate from academic experiences in alleyne et al. (2013). in young (2006), self-efficacy has found no relationship with ethical decision making while individuals with high in self-enhancement values such as power and achievement, made less ethical decisions. ethical climate in hassanian and shayan (2017) acts a significant mediator between the positive relationship of religious orientation and ethical behavior among professional nurses in iran. ethical climate in the study refers to the ethical values and behavioral expectations with the intent to focus on the nurse’s behavior in educational medical centers which is pivotal in the improvement of the patient conditions. in proence (2004), ethics orientation the mediating effect have influence on organizational integrity through inculcating values and compliance through employees’ code of ethics orientation. a positive and meaningful relationship between professional ethics as well as commitment and audit quality in the practice of professional accountants in nasrabadi and arbabian (2015). a national values system in terms of ethics, has a moderating effect in which ethics from the accountant’s perspective minimizes fraud in nwanyanwu (2018). there is also a significant relationship between professional code of ethics, punitive measures and professional accounting practice in gberegbe al. (2016). punitive measures can also be used to enforce compliance to the professional code of ethics in professional accounting practice. it was also found out that accounting ethics has an impact on the practice of accounting profession in nigeria in akadakpo & enofe (2013) moral intensity has significant relationship to moral recognition, moral judgment and moral intention in relation to moral issues in yang and wu (2009). more so, moral judgment partly mediated the relationship between moral recognition and moral intention. four factors affect which are: presence of ethics code, ethical support by top management, ethical climate and perceptions on success on ethical practices in ki, li and choi (2011). in ochotorena (2018) the attitudes of external auditors that includes their ethical behavior and challenges as they assess creative accounting. it was found out that creative accounting is not illegal as there are various accounting options and techniques to financial statement preparers. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) │ 33 even in tax practice, personal values have an effect on tax culture in vehovar, mumel and hauptman (2018). ethical work climates of accountants in venezia, venezia and hung (2010) such as the rules or use of codes, efficiency, and instrumentalism dimensions showed no significant difference between filipinos and taiwanese; while caring, self-interest, social responsibility, and personal morality dimensions were among those that showed significant. multi-generational workforce donde (2015) described generation x (those born between 1965 and 1981) developed behaviors of independence, flexibility and adaptability compared to previous generations. while millennials or gen y have a greater sense of empowerment that resulted them to have more from companies. despite the differences in work values, in zabel, biermeier-hanson, baltes, early, and shepard (2017), however, found no difference on the work ethics of both generations. in hayes (2013), multigenerational differences have an implication within the workforce attitudes, perspectives and behaviors exhibited by the five generational groups: baby boomers, generation x, generation y or millennials, and generation z). generational characteristics have an influence on lifelong decision making, from career choices to lifestyle. it was also found that generational cycles determine political composition of the society. generation x were found to be reactive while generation y is a civic generation. generation z was considered as the most adaptive generation, while baby boomers are the me group. there are generational gaps on job satisfaction in wilson, squires, widger, cranley and tourange (2008) with baby boomers described as more significantly satisfied than generations x and y in their profession. it was also found out that there is a need to improve the job satisfaction among younger generations. there is also a moderating effect of generational differences in terms of the relationship between workplace fun and outcomes in the individual workplace was carefully studied in lamm (2009). lu and gursoy (2013) found moderating effects of generational differences on the impact of satisfaction and turnover intention. the research found out that the generational difference between baby boomers and the millennials have a significant moderating effect on the influence of emotional job exhaustion and job satisfaction and turnover intention, and the relationship between job satisfaction and turnover intention. hypotheses with limited studies relating to the mediating effect of ethical considerations and moderating effects of generational workforce of cpas on the relationship of variables, this study explores opportunities to address the existing gap on how ideal workplace values influences actual values being applied in practice particularly in the field of accountancy. thus, this study would like to test the following: h1a. self-transcendence (workplace values) directly influences the values in the practice of cpa profession. h1b. conservation (workplace values) directly influences the values in the practice of cpa profession. h1c. self-enhancement (workplace values) directly influences the values in the practice of cpa profession. h1d. openness to change (workplace values) directly influences the values in the practice of cpa profession. h2a. self-transcendence (workplace values) directly influences ethical consideration. h2b. conservation directly (workplace values) influences ethical consideration. h2c. self-enhancement (workplace values) directly influences ethical consideration. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) 34 │ h2d. openness to change (workplace values) directly influences ethical consideration. h3. ethical consideration mediates the direct influence of self-transcendence to the values in the practice of cpa profession. h4. ethical consideration mediates the direct influence of conservation to the values in the practice of cpa profession. h5. ethical consideration mediates the direct influence of self-enhancement to the values in the practice of cpa profession. h6. ethical consideration mediates the direct influence of openness to change to the values in the practice of cpa profession. h7. ethical consideration directly influences the values in the practice of the profession. h8a. workforce generation has moderating effects on the relationship of self-transcendence values and values in the actual practice of the cpa profession among generation groups of cpas (baby boomers, generation x, generation y and generation z). h8b. workforce generation has moderating effects on the relationship of conservation values and values in the actual practice of the cpa profession among workforce generation groups of cpas . h8c. workforce generation has moderating effects on the relationship of self-enhancement values and values in the actual practice of the cpa profession among workforce generation groups of cpas. h8d. workforce generation has moderating effects on the relationship of openness to change values and values in the actual practice of the cpa profession among workforce generation groups of cpas figure 1. research framework figure 1 presents the research framework necessary to execute the research. this aim to test how individual values in the workplace influences ethical consideration. it also studies how ethical consideration affects the values in the practice of the accountancy profession. the mediating effect of ethical consideration between workplace values and values in the practice of the accountancy profession is also considered. the moderating effect of workforce difference among baby boomers, generation x, generation y and generation z cpas will be tackled in the study. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) │ 35 research method research design this study used a cross-sectional descriptive research design since the characteristics of a particular and frequency of the phenomenon on values, workplace values, and ethical considerations of professional accountants are the focus of the study. the units of analysis are individuals, and the point of focus of the research design is the characteristics. characteristics study the state of being for individuals, thereby as units of analysis (mendoza, 2012). the research is considered as analytical, since statistics will be used to explain or give substance to a theory and -non-experimental, since the instrument to be used is a survey. sample and setting purposive sampling method was employed while the sample size was determined using the software warp pls 6.0 particularly, the gamma experimental method using the inverse square root method under the structural equation modelling. the inverse square root method uses the inverse square root of the size of the sample in estimating standard error. the gamma-exponential method uses gamma and exponential smoothing function corrections which will be utilized in estimating standard error. the inverse square root and gamma-exponential methods simulate monte carlo experiments, and the estimates are the respondents of the study while for generation z cpa cohorts who are born 1995 -2010 are the participants of the study. the sample size of the study comprised of certified public accountants among the four different sectors of the accountancy profession namely: academe or education, commerce and industry, government and public practice among certified public accountants based in province of pampanga as of june 2020, were the participants of the study. figure 2. sample size sufficiency computations using inverse-square root and gamma exponential methods thru pls-sem journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) 36 │ figure 2 was illustrated to check the sufficiency of the sample size using the inverse square root method and gamma-exponential methods. in kock and hadaya (2018), one of the most fundamental issues with the use of pls-sem is the minimum sample size estimation, which can be achieved by the use of the of the two aforementioned methods. the inverse square root method uses the inverse square root of a sample size for standard error estimation which is a very important step in minimum sample size estimation. the second method is gamma-exponential method that relies on gamma and exponential smoothing function corrections applied to inverse square method (the first method). the monte carlo experiments showed that both methods are fairly accurate making the first method more attractive because of its simplicity any number beyond the range is still acceptable. with the minimum significant path coefficient 0.11, significance level of 0.05 and power level of .80, the results of sample size estimation are 511 for the inverse square root method and 498 for the gammaexponential method. therefore, the sample size was not less than 498 but can exceed 511. table 3. demographics demographic characteristics frequency percent generation baby boomer 13 2.4 gen x 74 13.7 gen y 384 71 gen z 70 12.9 gender male 185 34.2 female 356 65.8 form of business organization single proprietorship 32 6.1 partnership 71 13.1 corporation 437 80.8 level of position top management 46 8.5 middle management 43 7.9 supervisory 142 26.2 rank and file 310 57.1 sector (full-time) journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) │ 37 academe/education 49 9.1 commerce/industry 312 57.7 government 94 17.4 public practice 86 15.8 length of experience in the profession 10 years – below 433 80 11 – 20 years 74 13.7 21 – 30 years 23 4.3 31 – above years 11 0.2 highest educational attainment bachelor’s degree 468 86.4 master’s degree 69 12.8 doctorate degree 4 0.8 instruments the questionnaire had four parts. the first part contained profile categories such as name, age, sex, sector, highest educational attainment, length of work experience age and highest educational attainment. this provided basic information about the respondents. the second part is a questionnaire which is composed of the abridged version of schwartz’s value survey which aims to identify the values that is in consonance or opposed principles based on varying degrees that the professional accountant or cpa can identify himself or herself. the third part of the questionnaire contains statements that assesses the level of ethical consideration the certified professional accountant which is adapted on the 2018 revised code of ethics for professional accountants, particularly under the general application part of the code. the last part of the survey are statements that relates to the general practice of professional accountants (regardless of the sector) and the level of agreeableness to the given statements. all of the instruments will undergo reliability and validity tests. the instrument used a six-point likert scale preferred by psychometricians. in thompson (2018), in order to generate a force choice if at any point a neutral is desired, the responses, “slightly agree” and “slightly disagree” can be used. additionally, an even number of items in the response scale can generate groupings which are easier to understand and discuss. for example, in many organizations these could be groupings of unfavorable, uncertain, and favorable. a perfect example is favorability which is the combination of responses that are either "agree" or "strongly agree." data collection through an informed consent, survey questionnaires from recruited participants, were provided. the self-administered survey already provides the results because each respondent had the option to selftally the answers. secondary sources of information quotes from publications, such sources include comments on, interpretations of, or discussions about the original research conducted abroad. the analysis primary and secondary sources plus the review of survey results would determine the extent of journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) 38 │ relationship between and among workplace values, ethical consideration and the practice of the professional accountants. data analysis partial least square structural equation modelling (pls-sem) using warp pls 6.0 was used to measure the variables of structural model. pls-sem provides structural model which displays the relationships through paths between or among constructs. the measurement models also display the various relationships between constructs and variables. as the present study also evaluates the mediating effects of ethical consideration, a mediation-based research will be used. in hair, sarstedt, hopkins and kuppelwieser (2014), a mediation model measures how mediator/s, to some extent, absorb the effect of the exogenous construct on an endogenous variable in pls-sem. as to the assessment of the respondent’s on the level of importance of their values as lifeguiding principle, the respondents were asked to rank the values that correspond to the given statement on the questionnaire. for purposes of ranking and analysis, a numerical value was assigned to the dummy values that represents the ordinal ranking presented. ethical considerations the consent of the participants were obtained and assurance not to reveal personal information based on the results will be explained. permission from the author to use the workplace values questionnaire and adapted survey is also requested. results of the research are used for academic and knowledge preservation purposes only. references of the authors are acknowledged by citing them as references of the study. findings and discussion findings on model fit and quality what is unique about pls-sem, particularly with the use of pls, is that it provides users with a number of model-wide fit indices average path coefficient (apc), average r-squared (ars), average adjusted r-squared, average variance inflation factor (afvif), average full collinearity variance inflation factor (afvif) and tenenhaus goodness of fit (gof) according to kock (2010). the p-values of apc, ars and aars must be equal or lower than 0.05 (kock, 2018), in order for the model to become acceptable. having the values of 0.169 for apc, 0.197 for ars and 0.191 for aars as shown on table 4, which reflects an equivalent p values which are less than 0.05, the acceptance is within the acceptable range. according to kock (2018), the corresponding avif and afvif must be equal to or lower than 3.3 in order for the model to become acceptable. tenenhaus good of fit, which serves a measure of the explanatory power of the model, the following thresholds or ranges must be observed: small if equal or more than 0.1, medium if equal or greater than 0.25 and large if equal or larger than 0.36 (kock, 2018; wetzels et al. 2009; tenenhaus et al, 2005). the tenenhaus good of fit is also within the acceptable range particularly medium as presented on table 8. table 2 presents the analysis results of the five emotional intelligence dimensions. four dimensions, i.e. emotional recognition and expression (ere), emotions direct cognition (edc), emotional management (em), and emotional control (ec), had a significant relationship with organisational performance. using the t values as a guide, we found that ere and edc had a significant influence on the employees. this indicates that workers with higher emotional intelligence tend to be better at recognising and expressing their emotions. also, they have better skills in decision making, which is an important responsibility of the executives. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) │ 39 table 4. model fit and quality indices model fit and quality indices coefficients apc 0.169, p<0.001 ars 0.197, p<0.001 aars 0.191, p<0.001 avif 1.139, acceptable if <= 5, ideally <= 3.3 afvif 1.213, acceptable if <= 5, ideally <= 3.3 tenenhaus gof 0.322, small>=0.1, medium >= 0.25, large >= 0.36 findings on the validity and reliability measurements to present the robustness when it comes to the results of the study, the assessment of reliability and validity of the variables used is imperative. reliability is the extent that whatever the instrument measures, it measures consistently (siegle, 2013). according to huck (2007), testing for reliability is very important because refers to the consistency across the parts of a measuring instrument. the scale is said to have a high internal consistency reliability if the items of a scale in the instrument “hang together” and measure the same construct (huck, 2007, robinson, 2009). there are two measures of reliability the cronbach’s alpha and composite reliability (roldan and sanchez-franco, 2012; kock, 2018). comparing the two measures of reliability, the composite reliability generally, is a more acceptable measure that is available (dillon & gold stein, 1984; peterson & yeolib, 2013). moreover, both cronbach alpha and composite reliability coefficients must be higher equal or greater than 0.7 (fornell and larcker, 1981; nunally, 1978; nunnally and bernstein, 1994). table 9 presented that all constructs (after item reduction, where 12 statement items were removed out of the 46 statements) reflects high reliability where composite reliability is greater than 0.7 (even if the some of the cronbach alpha is less than 0.7). again, it is to be noted that the use of composite reliability is more acceptable compared to cronbach alpha. in terms of construct validity, both convergent and discriminant validity checks were executed. according to kock (2018), convergent validity measures the quality of a measurement instrument, that itself contains a set of questions. a good convergent validity is achieved if the question, statements or other measures associated with each latent variable are clearly understood by the respondents from which they are intended by the designer or author of the research. to say that a measurement model has an acceptable construct validity, the p-values of each item must be equal to or lower than 0.05 and the loadings must be equal or greater than 0.5 (hair et al., 1987; 2009; kock, 2018). item loading refers to the correlation between the construct and the item (kock, 2018). table 5 again presents that the factor loadings for each item. all constructs are statistically significant at 0.001 (p<.001) and the item loadings are greater than 0.5. the assessment of the convergent validity includes the measurement of the amount of the variance of each variable from its items in relation to the amount due to measurement error or simply the average variance extracted or (ave). this is a measure that is being used to assess convergent validity which is the average of the variance amount in indicator variables that a construct is able to explain (igi global, 2019). according to fornell and larcker (1981), the ave must be equal or greater than 0.5, but for instances where the ave is less than 0.5 (table 5, values in the actual practice of the profession construct) the composite reliability must be higher than 0.6 in order to for the construct validity to be adequate. therefore, the coefficients of ave were able to satisfy the acceptable validity requirements. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) 40 │ table 9. factor loading, average variance extracted, and reliability measures (after item reduction) note: all item indicators are significant at 0.001 (p<.001). ave = average variance extracted; vif = variance inflation factor; cr = composite reliability; vif – variance inflation factor table 6 shows the correlations among variables which also include the square roots of the ave coefficients, this time to measure the discriminant validity of the instrument. according to kock (2018), discriminant validity is a measure whether the question statements (or other measures) associated with each latent variable are not construed against or confused by the other respondents who are answering the questionnaire with the question-statements associated with the other latent variables. in short, it checks whether the statements that is related to one variable, for example, are not confusing with the statements that are related to other variables. table 9 shows the square root of the ave, which should be greater than any of the correlations involving the variables (fornell and larcker, 1981). based on the results on table 9, the results indicate that the measures used in the instrument has discriminant validity. table 6. square roots of ave coefficients and correlation coefficients selftran conserv enhance openness ethicalc values selftran (0.755) conserv 0.255 (0.769) enhance 0.070 0.148 (0.668) openness 0.362 0.137 0.154 (0.766) journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) │ 41 ethicalc 0.329 0.062 0.013 0.366 (0.708) values 0.054 -0.302 -0.136 0.081 0.197 (0.677) note: diagonal elements are the square root of ave of constructs while the off-diagonal elements are the correlation between constructs. selftran – self-transcendence; conserv – conservation; enhance – self-enhancement; openness – openness to change; ethicalc – ethical consideration; values – values in the actual practice of the cpa profession. findings on linear model hypotheses explanations figure 4 reflects the path model and the corresponding path coefficients. the results are presented in figure 4 revealed that self-transcendence values (β=0.12, p <.01) and openness to change values (β=0.11, p <.01) are significantly and positively related with the values in the actual practice of the cpa profession. while conservation (β= -.037, p <.01) and self-enhancement values (β= -0.17, p <.01) are significantly and negatively related with the values in the actual practice of the cpa profession. moreover, self-transcendence values (β=0.24, p <.01) and openness to change values (β=0.28, p <.01) are significantly and positively related with the ethical considerations. conservation values (β=0.03, p =0.31) are positively and non-significantly related with ethical considerations, and on the other hand, self-enhancement values (β= -0.04, p =.18) are negatively and non-significantly related with ethical considerations. in terms of ethical considerations and the values in the actual practice of the cpa profession, the results showed the they are positively and significantly related (β=0.17, p <.01). figure 4. the pls path model with path coefficients direct and indirect (mediating) effects findings of the study have shown that workplace values particularly self-transcendence values (β=0.118, p= 0.003) and openness to change values (β=0.110, p =0.005) positively affects values in the actual practice of the cpa the profession. the positive beta coefficients indicate that self-transcendence values (cohen's f2 = 0.009) and openness to change values (cohen's f2 = 0.015) augments values in the journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) 42 │ actual practice of the cpa profession with small and medium effect sizes respectively. therefore, hypotheses h1a and h1d are accepted. moreover, conservation values (β= -0.373, p< 0.001) and self-enhancement values (β= -0.169, p< 0.001) negatively affects values in the actual practice of the cpa profession. the negative beta coefficients show that conservation values (cohen's f2 = 0.123) and self-enhancement values (cohen's f2 = 0.043) diminish values in the actual practice of the cpa profession with small effect sizes. thus, hypotheses h1b and h1c are also accepted. in terms of the high-order values type’s relationship with ethical considerations, both self-transcendence values (β= 0.243, p< 0.001) and openness to change (β= 0.284, p< 0.001) values positively affects ethical consideration. an increase in the cpas self-transcendence values (cohen's f2 = 0.084) and openness to change values (cohen's f2 = 0.105) positively affect a cpas ethical consideration. in this case, hypotheses h2a and h2d are accepted. on the other hand, both conservation values (β= 0.034, p=0.215) and self-enhancement values (β= -0.039, p=0.182) are not significantly related to ethical considerations. therefore, h2b and h2c hypotheses are rejected. finally, ethical considerations (β= 0.69, p < 0.001) significantly affects the values of the cpas in the actual practice of the profession. as cpas follow ethics, the values in the actual practice are also enhanced. thus, hypothesis 7 is also accepted. table 7 also shows the indirect effects of the mediation model. the findings of the study revealed that ethical considerations does not mediate the relationship between self-transcendence values (β= 0.041, p = 0.088), conservation values (β= 0.006, p = 0.426) self-enhancement values (β= 0.007, p = 0.002) and openness to change (β= 0.048, p = .028, p = 0.057) with values in the actual practice of the cpa profession. therefore, hypotheses h3, h4, h5 and h6 are rejected. table 7. direct and indirect (moderating) effects of the pls path model hypothesis β se p-valu e f2 decision dir ect e ffects h1a. self-transcendence → cpa values 0.118 0.042 0.003 0.009 accept h1b. conservation → cpa values -0.373 0.041 <0.001 0.123 accept h1c. self-enhancement → cpa values -0.169 0.042 <0.001 0.043 accept h1d. openness to change → cpa values 0.110 0.042 0.005 0.015 accept h2a. self-transcendence → ethical consideration 0.243 0.042 <0.001 0.084 accept h2b. conservation → ethical consideration 0.034 0.043 0.215 0.004 reject h2c. self-enhancement → ethical consideration -0.039 0.043 0.182 0.005 reject h2d. openness to change → ethical consideration 0.284 0.042 <0.001 0.105 accept h7. ethical consideration → cpa values 0.169 0.042 <0.001 0.033 accept indir ect e ffects h3. self-transcendence → ethical consideration → cpa values 0.041 0.030 0.088 0.003 reject h4. conservation → ethical consideration → cpa 0.006 0.030 0.426 0.002 reject h5. self-enhancement → ethical consideration → cpa values -0.007 0.030 0.414 0.002 reject h6. openness to change → ethical consideration → cpa values 0.048 0.30 0.057 0.006 reject journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) │ 43 table 8 presents the moderating effect on the relationship of workplace values and values in the actual practice of the cpa profession among generation bb, x, y and z. using constrained latent growth method, analysis of the data revealed that workforce generations do not moderate the relationship between workplace values such as self-transcendence, self-enhancement and openness to change values with values in the actual practice of the cpa profession except conservation values. the study showed there is a significant difference on the relationship conservation workplace values (β = 0.153 p<.001 and values in the actual practice of the cpas profession. therefore, h8b is accepted while h8a, h8c and h8d hypotheses are rejected. table 8. moderating effect on the relationship of workplace values and values in the actual practice of the cpa profession among generation bb, x, y and z moderating effects of generations (bb, x, y, z) β se pvalue f2 decision h8a. self-transcendence → cpa values 0.058 0.043 0.088 0.006 reject h8b. conservation → cpa values 0.153 0.042 <0.001 0.018 accept h8c. self-enhancement → cpa values 0.007 0.043 0.431 0.001 reject h8d. openness to change → cpa values -0.054 0.043 0.101 0.004 reject note: f2 is the cohen’s (1988) effect size: 0.02 = small, 0.15 = medium, 0.35 = large; se = standard error; β = standardized path coefficient discussion values coupled with ethics are important research topics of various scholars across different disciplines, such as social work and practice (banks, 2012; reamer, 2013), change management (by and oswick, 2012), library information science (koehler, 2003), psychotherapy and counselling (barnes, 2001), healthcare (fulford, 2002) and many others. however, values and ethics have not much been thoroughly discussed in researches in the practice of the accountancy profession, where most of the studies focus on values, ethics and practice separately; if not on the impact of ethics to the practice of accountancy (akadakpo and enofe, 2013). the present study confirmed that self-transcendence values are significantly and positively related with the values in the actual practice of the cpa profession. the results also support the studies of knafonoam and sagiv (2004), where the profession accountancy maybe classified under both social and investigative environments, where social work environments (e.g. nurse, teacher and social worker) is influenced positively by benevolence and universalism values (self-transcendence) and negatively with power and achievement (self-enhancement); and investigative environments (e.g. engineer, doctor and scientist) correlated positively with self-direction values (or self-enhancement) and negatively with traditional values (or conservation). accounting is a social science because it is concerned how technical matters such as accounting accounting principles and reports affect people and its relations; its input and output are human nature (lowe and puxty, 1990). self-transcendence values (benevolence and universalism) and openness to change (stimulation and self-direction) are principal values that drives professional accountants to manifest values in the practice of their profession. benevolence motivational values is the protection of the organizational interest while universalism is to safeguard the public interest (rasouli et al, 2015), contributes positively journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) 44 │ to values in the actual practice of the profession. meanwhile for stimulation and self-direction, the motivational values counterpart for openness to change, are achieved through the exercise and unimpaired independent professional judgment of a cpa (rasouli et al, 2015); thus, are essential in causing values to become apparent while in the cpas practice. however, self-enhancement and conservation values are significantly and negatively related with the values in the actual practice of the profession. workplace values that focus too much on power in order to maintain social status, prestige, or dominance over people and authority (potts, 2015), and the values of achievement that drives one to be ambitious and successful (rasouli et al ,2015) may inhibit values during the practice of accountancy profession. conservation values (tradition and conformity), are likewise negatively related with practice values. tradition promotes sticking to traditional or old methods and the use of customs learned, while conformity promotes obedience and subordination to the organization’s interest (potts, 2015). therefore, possessing workplace values that put emphasis on the continuous update and professional development with the changes in the conventions and standards in the accountancy profession (openness to change), while protecting and considering other stakeholder’s interest in the practice of the profession (self-transcendence) contributes positively to the values of a cpa while practice. these values are opposing to the bipolar counter parts which are self-enhancement and conservation that suggests placing self-interest above the public’s interest and by becoming attached to old conventions in the practice of the profession (simon et al, 2017). the study also reasserts both self-transcendence and openness to change values are significantly and positively related with ethical considerations. furthermore, it affirms that conservation and selfenhancement values have no significant relationship with ethical considerations. moreover, the aforementioned results support and negate the studies of according to fritzsche and oz (2007) there are altruistic or self-less or self-transcendence values (e.g., universalism, benevolence, self-direction) have a positive contribution to ethical decision making, and self-enhancement values have a significant negative contribution (e.g., power, achievement, hedonism) to ethical decision making. this study also validates that ethical consideration is significantly and positively related with the values in the actual practice of the cpa profession which approximates the studies of nasrabadi and arbabian (2015), akadakpo & enofe (2013) and ki, li and choi (2011). being guided with the five fundamental principles of the code of ethics for professional cpas consists of integrity, objectivity, professional competence and due care,confidentiality and professional behavior, positively enhances the values in the actual practice of the cpa profession. the mediation analysis also revealed that ethical considerations do not mediate the relationship between individual workplace values and the values in the cpa practice of the profession. lastly, the study also provided an analysis on the difference on the workplace values and cpa values between the workforce generations (generation baby boomers, x, y and z ) through moderation analysis. the analysis showed that there is a significant difference on the relationship between conservation workplace values with the cpa values compared other values such as self-transcendence, self-enhancement and openness to change values based on the workforce generation. this means that generation senior cpas may have ranked and put higher emphasis on conservation values (tradition and conformity) compared with their younger counterparts, thus affecting the relationship. journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) │ 45 conclusion & further research conclusion and recommendations as a conclusion, ethical considerations have no mediating effect on the significant positive relationship between individual values and values in practice, while workforce generations have moderating effect in the conservation values of cpas. ethical considerations and values in the actual practice of the cpa profession are positively influenced by individual workplace values such as openness to change and self-transcendence. organizations and firms, therefore, must support professional accountants in the pursuit of improving one’s self-direction which focuses on independent thinking and acting. companies must ensure that these professionals are updated with the latest accounting and ethical standards and be constantly guided with trainings, seminars, fora, conventions and conferences. this will allow them to become empowered and draw confidence in the conduct of their profession. cpas must also be reminded of the crucial role their role as they protect the public’s interest (in contrast with the selfish interest of a person, group or firm) where the welfare of the general public is at stake (webfinanceinc., 2019). since ethical considerations enhances cpa values while in practice, the professional board of accountancy must promulgate the mandatory inclusion of ethical training standards as part of the continuous professional development among cpas. this way, ethical practices can be inculcated among generation x and y cpas most especially those in public practice and government sectors. the recital of the abridged version of the code of professional ethics, must not be held during philippine institute of certified public accountants gatherings, but should include local and sectoral activities of the profession. aside from professional accountants, the present study can benefit organizations, businesses and firms during values development process, which begins by identifying the organization’s important workplace values as it relates to professionals such as accountants and the mediating effects of other factors. heathfield (2018) suggested three step process which involved: identifying the values that exists in the workplace, deciding if it is the right values in the workplace and changing the behaviors and actions relative to the values demonstrated when necessary. the management of these organizations, therefore, must start taking a hard look on the values of the organizational workforce and ethical mechanisms both for workforce generations x, y and the newly entered generation z, who will, in a decade’s time or soon dominate in number and in seniority, occupy much of the leadership positions. these espoused or core values and code of ethics must be clearly communicated in an easier manner. implications to the profession and future research directions every individual has a unique workplace values that could set the the tone for an organization or firm’s culture (manktelow, 2019). a professional accountant or cpa is also moulded to become ethical as one is mandated to strictly adehere to the code of professional ethics (professional board of accountancy, 2016). according to tan-torres (2016), the violation of the code may subject an erring cpa into reprimand, suspension of the professional license, imposition of fines and penalties, license revocation and requirement for the submission or resubmission of a corrected or valid certificate to change defective certificate due to the sanctions imposed on the violating cpa. hence being compliant with the regulatory requirements of the board of accountancy, must not only be the motivation for cpas to be aware of the caveats in the profession, but also must include the recognition of essential workplace values. as suggested in this study, these values are openness to change and self-transcendence values that emphasize on self-direction which requires independent thinking, journal of governance risk management compliance and sustainability (jgrcs), vol. 1 (1), 26-49 moderated mediation of ethical considerations between individual values and values in the practice of the cpa profession arnold v. salcedo issn 2776-9658 (online) 46 │ creativity and self-expression from the professional accountant. in addition, the consideration of not only the organization’s or client’s interest but the public interest, as a whole. however, these values only serve as a guide and the final decision to act and behave accordingly, still lies with the professional cpa. now that ethics is relevant in the practice of the profession based on this study, brennan (2016) identified another major challenge for professional accounting regulatory bodies which is the enforcement of ethical standards, thus enforcement mechanisms 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(2023) corresponding author’s email: gbadebo.adedejidaniel@gmail.com journal of governance risk management compliance and sustainability, vol. 3 no. 1 (2023) https://doi.org/10.31098/jgrcs.v3i1.1196 detecting earnings management in the reporting of nigerian banks: the distribution of ratios approach adedeji daniel gbadebo1* , joseph o. akande2 , oluwatobi a. adekunle3 1,2 walter sisulu university, south africa received: november 10, 2022 revised: december 5, 2022 accepted: march 9, 2023 online: april 30, 2023 abstract earnings management (em) practice has raised concerns amongst different stakeholders. analysing financial reports to detect anomalies aims to reduce associated risks to earnings manipulations and safeguard investors’ funds. this study verifies two main issues (a) whether annual reports of the deposit money banks [dmbs] reflect evidence of em and (b) whether the dmbs engage in more manipulations in periods ‘after’ mandatory adoption of ifrs relative to ‘prior’ ifrs periods. the study involves all 19 dmbs in nigeria, but the established selection criteria constrained the final sample to 17 banks. the final sample comprises 319 observations for each bank-ratio form. we compute 14 bank-specific ‘earnings’ ratios for the different years from 2001 to 2020, obtain the distribution of ratios and estimate the kolmogorov-smirnov statistics to address two issues. the finding confirms endemic em but that the manipulations are not consistently a yearly phenomenon. the evidence supposes more em for the banks' financials priorrelative to the post-ifrs adoption. the evidence supposes implications for banks to attenuate earnings misreporting. we offer those bank supervisory agencies should ensure appropriate monitoring and engagement of officials during the reporting of bank financial records to circumvent opportunistic misreporting. keywords: earnings management; dmbs; distribution of ratios; kolmogorov-smirnov test introduction there is a consensus that earnings management (em) affects the credibility of financial statements (fss) reporting. em involves providing earnings information with the potential to alter financial decisions and mislead the users of fss. many research has disclosed such practices among firms in developed countries (bzeouich, lakhal & dammak, 2019; burgstahler & dichev, 1997). these studies provide evidence of em with samples that exclude financial institutions and sometimes other overly regulated firms. burgstahler and dichev (1997) observe that for regulated firms, there are incentives to report consistent earningslosses or decreases to regulators whenever they expect economic benefits. em in the financial sector is of significant concern for the capital market and the financial system. shen and chih (2005) discuss some incentives that drive banks to engage in em. first, the banking system is constrained by illiquidity that may expose them to opportunistic risk of manipulations, contagion and competition. banks often maintain incentives for loss avoidance – keeping ‘reported’ earnings performance far from decreasing to ensure investors’ confidence. second, banks do manage earnings due to uncertainty over their assets and liabilities. the high leverage of banks aggravates this risk over assets, inevitably providing the need to manipulate financials through asset substitution. third, since banking operations are strictly regulated, some banks resort to em in order to evade regulation sanctions (morgan, 2002). in addition, banks operate with public wealth in the form of savings and deposits, so banks run with risks (nasfi et al., 2022). there is reported evidence of fraudulent financial practices perpetuated by top management in the banks in nigeria (kajola sanyaolu, tonade & adeyemi, 2020). despite reports of evident occupational fraud in banking, existing research on em amongst banks in the country focused only on cause-effect examination of the impact of corporate governance on discretionary accruals’ managed earnings (kajola et al., 2020; osemene, adeyele & adinnu, 2018; madugba & ogbonnaya, 2017). no study has investigated banks' annual fss to detect em. we fill this gap by providing a horizon to test em on annual statements. the objective of this study is to verify (a) whether annual reports of the articles review https://creativecommons.org/licenses/by-nc/4.0/ https://crossmark.crossref.org/dialog/?doi=10.31098/jgrcs.v3i1.1196&domain=pdf https://orcid.org/0000-0003-1603-6705 https://orcid.org/0000-0002-1929-3291 https://orcid.org/0000-0001-8445-8905 j. of gov. risk management compliance and sustainability 12 deposit money banks [dmbs] reflect evidence of em and (b) whether the dmbs engage in more manipulations in periods ‘after’ mandatory adoption of ifrs relative to ‘prior’ ifrs periods. in addressing whether the financial report of banks reflects significant em, we apply the distributions of the ratios approach. the method scrutinises em derived from each financial report without imposing symmetric assumptions on earnings (dutta & nezlobin, 2016), as well as allows for broader verification of manipulations in multiple measures (beretka, 2019). we obtain distributions of standardised difference according to burgstahler and dichev (1997) and degeorge, patel and zeckhauser (1999) and compute banks’ ratios from the annual reports. the second issue compares the relative magnitude of the managed earnings ‘before’ and ‘after’ the ifrs adoption in 2012. if significant earnings manipulations are established, we will offer measures to mitigate the risk of such opportunistic behaviour to circumvent future fraud. these frauds can have an effect on the performance of banks, especially non-performing loan (npl) financial ratios, and the bank can ultimately suffer losses (nasfi et al., 2021). the analysis of earnings management based on a single earnings variable may present biased outcomes and misguide policy directions. the distributional approach depends on the bin width. if the sample is small, the optimal bin width would be considerably wide, ipso facto influencing the outcomes (pududu & de-villiers, 2016). for short periods, the analysis based on ratios is more efficient relative to than empirical histogram. the remainder of the paper is structured: section 2 reviews the literature and provides hypotheses, section 3 discusses the data and empirical methodology, while sections 4 and 5 are results and conclusions. literature review brennan (2022) noted that no one explanation is holistic in defining em. academics offered descriptions including that em is a ‘big-bathing’ that occurs via financial reporting through covert practices involving rearrangement of expenditures, revenue items and management of accruals. the managers use discretion in structuring financial transactions to alter earnings reports to mislead targeted stakeholders about the underlying firm's performance as well as influence contractual outcome that largely depends on the report. walker (2013) considered em as sentimental use of managerial discretion over accounting choices, involving making real economic choices to influence underlying economic events, earnings measures and earnings reporting choices. notably, most motivations for em are inconsistent (dichev et al., 2013). literature classifies em into three: accruals management, involving choices within the generally accepted accounting principles (gaap) that either ‘obscure’ or ‘mask’ the true financial performance; fraudulent accounting, involving accounting practices that violate the gaap; and cash flow em or real em (rem), involving firms’ actions that change its underlying ‘economic’ activities to increase current earnings. some authors (dichev et al., 2016; libby et al., 2015) note that most em research employs archival methods of financial information, with the unavoidable restriction of interpreting unobservable management incentive that drives earnings quality decisions. conventional approaches to detect em two approaches are followed to detect em in accounting reports. the first approach focuses on em estimated with discretionary accruals models. the models detect the opportunistic behaviour of smoothing earnings by quantifying managers’ discretion on earnings managed. according to the different models [jones model (1991), modified jones model and others], the models measure the extent of managers’ strategic reporting of overestimated (underestimated) cash flows to generate momentous hedge returns. they rely on identifying accounting noise based on the assumptions made about the earnings’ series generating process. the second approach links em to cross-sectional observations of firms through standard earnings discontinuity models without recourse to the timeseries characterization. j. of gov. risk management compliance and sustainability 13 1. the distributional approach burgstahler and dichev (1997) pioneered the distributional approach using cross-sectional earnings (histogram). they argue that the distribution of earnings is characterised by a jump, in which bin frequency distributions include what is likely to be too few observations nearest the neighbourhood (just) below the benchmark and too higher observations immediately above the same benchmark. they depicted the distribution of equity-scaled income for non-financial firms (figure 1) and earnings change (figure 2), revealing discontinuities (kinks) in the distribution. they suggest that the kink is triggered due to firms’ manipulation of their cash flow to boost earnings. degeorge et al. (1999) observe that earnings that fall closely below the threshold are boosted upwards, while earnings far above the threshold are trimmed downward. they argue that if the manager’s remuneration is just a single bonus conditioned on the firm attaining an earning threshold, he would more likely manipulate reports to meet (and surpass) the threshold but any downward manipulation far from the bonus threshold. they interpret the asymmetric histogram pattern of earnings as analogous to the management theory that managers employ economic (real) and accounting (discretionary) decisions to avoid losses and decreases. source: burgstahler & dichev (1997) figure 1. equity-scaled net income figure 2. equity-scaled net income-change figure 1 (2) provides evidence of the prevalence of small losses (earnings decreases) amongst the us non-financial service. the histograms for earnings and earnings change depict the presence of a break at zero. they show the existence of a noticeable peak in the earnings interval to just the immediate right of zero, implying the prevalence of small profits (earnings increases). the distributions exhibit a significant jump in the smooth interval to the neighbourhood immediately left of point zero (arrowhead), indicating the existence of small losses (earnings decreases). they estimate that about 30–40% of firms with small losses do manage earnings to attain small profits, while about 8–12% of firms with small decreases adjust their earnings to create earnings increases. 2. standardised difference approach some authors (leuz et al., 2003; degeorge et al., 1999; burgstahler & dichev, 1997) used statistical constructs to meet or beat thresholds. they suggested that the pattern on the histogram, even if visibly depicted em, needs to be verified with a standardised difference test under the null of no em. three indicators (equations 1–3) capture earnings just close below or above an observed kink. first, burgstahler and dichev (1997) use the 𝐸𝑀1 statistics. em1 is the difference between the actual (𝐴𝑄𝑖) and expected (𝐸𝑄𝑖 ) number of firm-years in period i for the interval just right (left) of zero divided by the standard deviation of the difference. 𝐸𝑀1 = (𝐴𝑄𝑖 − 𝐸𝑄𝑖 ) 𝑆𝐷𝑖⁄ (1) j. of gov. risk management compliance and sustainability 14 in (1), 𝑆𝐷𝑖 = [𝑁𝑝𝑖 (1 − 𝑝𝑖 ) + 0.25𝑁(𝑝𝑖−1 + 𝑝𝑖+1)(1 − 𝑝𝑖−1 − 𝑝𝑖+1)] 1/2 is the estimated standard deviation of the difference between 𝐴𝑄𝑖 and 𝐸𝑄𝑖 around interval i; 𝐸𝑄𝑖 = (𝐴𝑄𝑖−1 + 𝐴𝑄𝑖+1)/2; 𝑁 is the unrestricted (total) number of firm-years samples or observations; 𝑁𝑝𝑖 = the total estimated standard deviation or 𝑆𝐷𝑖 in interval 𝑖, 𝑝𝑖+1= lag of 𝑖 or the number in interval 𝑖 − 1; 𝑝𝑖+1= lead of 𝑖 or the number in interval 𝑖 + 1. 𝑝𝑖 = 𝐴𝑄/𝑁 is the ratio of the actual observations for interval 𝑖 to the total firm-years, which represents the probability of observation in interval 𝑖; 𝐴𝑄𝑖−1/𝑁 = 𝑝𝑖−1 and 𝑝+1 = 𝐴𝑄+1/𝑁. second, degeorge et al. (1999) used a meat-or-beat threshold test, refer as 𝐸𝑀2 statistics, to detect em. under the null of no em, the distribution is smooth and continuous at any zero thresholds. assume 𝑝𝑖 is the proportion of an actual number of observations for interval 𝑖 to firm‐years [𝛥𝑝𝑗 = 𝑝𝑗 − 𝑝𝑗−1] and e(𝛥𝑝−𝑖 ) is the expected (average) value of 𝛥𝑝, excluding 𝑝𝑖 , and 𝑆𝐷(𝛥𝑝−𝑖 ) is the standard deviation of (change in 𝑝𝑖 ) 𝛥𝑝, excluding 𝛥𝑝𝑖, em2 is: 𝐸𝑀2 = [𝛥𝑝𝑖 − 𝐸(𝛥𝑝−𝑖 )] 𝑆𝐷(𝛥𝑝−𝑖 )⁄ (2) third, leuz et al. (2003) used a ratio, 𝐸𝑀3, to test earnings manipulations to exceed thresholds. the measure, which is not statistics, is the ratio of the frequency of smallprofits to losses. it is the actual number of observations for interval 𝑖 for smallprofits (earnings increase) over observations for interval 𝑖 − 1 smalllosses (earnings decrease). 𝐸𝑀3 = 𝐴𝑄𝑖 𝐴𝑄𝑖−1⁄ (3) both em1 and em2 are standardised difference measures, representing appropriate statistics to evaluate the null hypothesis. on the contrary, em3 is only a ratio that cannot evaluate the null hypothesis. higher em3 (above unity) is indicative of greater manipulations by the firms. a fourth measure (shen & chih, 2005; leuz et al., 2003), the aggregate earnings management (aem) metric, uses the average ranks of em1, em2 and em3 vis: 𝐸𝑀4 = [𝑅𝑎𝑛𝑘𝑠(𝐸𝑀1) + 𝑅𝑎𝑛𝑘𝑠(𝐸𝑀3) + 𝑅𝑎𝑛𝑘𝑠(𝐸𝑀3)] 3⁄ (4) this is computed for em to avoid losses and has a version for earnings decrease avoidance. distributions of the ratio method the conventional approach applies discontinuity models to capture the evidence of em while testing accrual for one or just a few variables. the hypothetical underpinning that anchored such an approach to manipulations is limited (beretka, 2019). an alternative approach is ‘the distributions of the ratio’, which can be used to examine em for financial firms by testing ‘all’ available variables on the reported annual fss. this method identifies apriori by supposing that reported earnings approximate firms’ true economics such that earnings-ratio are explained without appealing to manipulation (beretka, 2019). the approach is based on distributional and statistical analysis of all computable ratios from reported statements (beretka, 2019). the ratios are first standardised based on em1 and em2. nigerian background and hypotheses banking operations in nigeria can be traced back to the colonial periods when the bank of british west africa was established in 1892. the periods between 1892 and 1951 marked tremendous j. of gov. risk management compliance and sustainability 15 failures of banks, as they operated under a free banking system with the absence of legislation until 1952, when the banking ordinance was formulated for bank supervision and control. the central bank of nigeria (cbn) created the platform for strict regulations, ethics, corporate governance and prevention of fraud. despite these efforts, there is evidence of earnings malpractices as some banks use accounting skills to conceal misreporting. the cbn exposed some malicious acts by top management, leading to the liquidation or sanctions of some reputable banks. these scandals have raised concerns about the reliability of banks’ fss. prior research on em of the dmbs in nigeria has only focused on cause-effect models to examine how corporate governance explains defined discretionary accruals’ earnings (kajola et al., 2020; osemene et al., 2018; madugba & ogbonnaya, 2017). kajola et al. (2020) used the jones model to obtain an estimate for em and examine the effect of board attributes on the measures for some banks. they revealed that board meetings and gender diversity have no significant effect on em. osemene et al. (2018) examined how ownership structure and board characteristics of dmbs influence campaigns for em. they found that directors’ tenures and shareholdings significantly negatively affect em, while gender, boardand firmsize have no significant effects. madugba and ogbonnaya (2017) noted that corporate governance enhances superior financial performance to stakeholders. they investigated the liaison between corporate governance and em in banks. they found that corporate governance has a significant positive influence on earnings per share. we follow beretka (2019) to test for evidence of em. the hypotheses tested are: a. 𝑯𝟎: nigeria’s dmbs do not manage financial reports. b. 𝑯𝟎: nigeria’s dmbs do not manage financial reports more after ifrs adoption. research method sample selection we use annual records from the nigerian stock exchange as well as the consolidated and separate interim statements of the dmbs during 2001–2020. the initial sample for each bankratio is 380 (= 19 × 20) firm-year, but to assemble the final sample, we set two criteria. first, the bank must have records of at least 45% scope coverage. only 17 selected dmbs satisfied this condition; hence we eliminated 2 banks established in 2018 and 2019. second, we consider only earning information that contains all observations in the coverage periods. this criterion decides the number of ratios to examine from the reports. the record obtained excludes some observations for some of the banks’ financials [equity funds, total assets, total deposit, gross loans, profit after tax] needed to construct the empirical bank ratios. hence, we compute 14 bankratios for 17 dmbs. table 1 presents the breakdown and distributions of the sample. table a1 [a2] in the appendix presents a list of banks analysed [discloses the measurement for each bank-specific ratio]. the final sample comprises 319 observations for each bank ratio, except for gmi, been an ‘index’ variable containing missing observations for each year. table 1. breakdown and distributions of a sample (bdos) panel a: breakdown of the sample (bos) sample nobs total 380 less: excluded banks 40 less: missing observations [11 for hbl] & [10 for kb] 21 final [= n] 319 panel b: distributions of the sample (dos) s/n bank-specific ratio nobs #miss %miss 1 cad 319 j. of gov. risk management compliance and sustainability 16 2 cof 319 3 eta 319 4 etl 319 5 gmi 302 17 5.33% 6 gya 319 7 lqy 319 8 lta 319 9 ltd 319 10 nim 319 11 npl 319 12 patm 319 13 roa 319 14 roe 319 nobs: number of observations. #miss: number of missing observations. %miss: the per cent of missing nobs. source: @authors (2022) estimation procedure we compute the 14 bank ratios from the fss. next, we compute the base ratios (i.e., descriptive) statistics for the bank-specific ratios. according to beretka (2019), we employ two testing designs for ‘the distribution of ratios method’ and compute the earnings-management metrics for the 14 bank ratios for only 𝑡ℎ𝑒 𝐸𝑀1 and 𝐸𝑀2 models. we ignore 𝐸𝑀3, which is a ratio indicator rather than a standardised measure, therefore cannot evaluate the null. we do not consider 𝐸𝑀4 in order to keep things simple. we calculate the correlation between the bank ratios and the em metrics as well as the correlations between each bank ratio’ based on the em1 and em2 metrics (see shen & chih, 2005). next, we use one-sample kolmogorov-smirnov (ks) test to evaluate the distributions of the ratios from 𝐸𝑀1 and 𝐸𝑀2. the statistic quantifies the distance between the observed (empirical) distribution [𝐹𝑛 (𝑥)] and a reference (theoretical) cumulative distribution function, cdf [𝐹(𝑥)] (dimitrova, kaishev & tan, 2020). the test provides the probability that a sample has been drawn from that (reference) distribution. the result gives a chance that 𝐸𝑀1 and 𝐸𝑀2 distributions represent the bank-specific ratios without distortion. the 𝐹𝑛 (𝑥) for 𝑛 independent and identically distributed ordered observations of bank ratio (𝑋𝑖) and the statistic [ks(z)] are (5) and (6), respectively. 𝐹𝑛 (𝑥) = 1 𝑛 ∑ 1[−∞≤𝑥] 𝑛 𝑖=1 (𝑋𝑖 ) , − ∞ < 𝑥 < ∞ (5) ks(z) = sup|𝐹𝑛 (𝑥) − 𝐹(𝑥)| (6) in (5), 1[−∞≤𝑥](𝑋𝑖) is the indicator function which equals 1 if 𝑋𝑖 ≤ 𝑥 and 0 otherwise. the sup (|. |) is the supremum (i.e., largest absolute difference) between the observed (𝐹𝑛) and theoretical [𝐹(𝑥)] cdf for all x. the cdf has mean sample μ = �̅� sample and variance σ2 = s2, with an 𝑛 − 1 denominator. the cdf of the supremum of the brownian bridge for computing the limiting distribution is 𝐻(𝑧) = 1 − 𝛴𝑘=−∞ ∞ (−1)𝑘−1𝑒 −2𝑘 2𝑧2 , for any 𝑧, 𝑛 as, 𝑛 → ∞. in line with beretka (2019), we provide the p-values from (a) monte carlo simulation (2-sided) sampling based on lilliefors statistic for testing against normality with ‘certain’ estimated parameters and (b) asymptotic significance (2-sided) test based on kruskal-wallis h-statistic, for testing nonparametric distributions with a stochastic dominance. lastly, we offer sensitivity checks by extending the simulation to verify the test of each ratio for a 0.95 [0.05] fiducial [critical] level to exhibit stronger statistical linkage to reduce the likelihood of committing type i errors (beretka, 2019). this is important to strengthen the evidence of https://en.wikipedia.org/wiki/supremum j. of gov. risk management compliance and sustainability 17 manipulations for two reasons. (a) it has an effect on how investors, regulators, and scholars interpret em based on the performance measure by exemplifying reasonable dynamics of the investigation (enomoto & yamaguchi, 2017) and (b) it demonstrates greater robustness between theory and alternative research design. findings and discussion base ratio statistics and correlations tables 2 and 3 show descriptive statistics for the base ratios and correlation matrices, while tables a3 and a4 (appendix) present the annual and individual bank statistics for benchmark comparison. all the ratios have positive means. the mean for the cad ratio is within the permissible limits, and that of the ltd ratio is within the rate proposed by the cbn. only eta, etl patm and roe suggest much variability. the distributions for the ratios appear non-normal but positively skewed, except for cad, etl, and nim. lqy, gmi, patm, and roa suggest protruded and asymmetrically heavy-tailed distributions. table 3 [panel a] presents the correlation matrix of the bank ratios. the correlation between cof and other variables is high. in panel b, values above [below] the shaded diagonal indicate the correlation amongst the em1 [em2] metric variables. the values on the diagonal are the correlation coefficients between em1 and em2 for each of the 14 ratios. there is a notable high degree of relationship, which is, in fact, significant for nine ratios. table 2. base statistics ratio n 𝜇 𝜇se 𝑚 𝜎 �̃�3 �̃�4 jb-stat p𝑟 (jb) cad 319 0.217 0.003 0.255 0.049 -0.082 -1.279 20.872 0.000 cof 319 0.020 0.001 0.143 0.341 1.878 2.914 12.625 0.004 eta 319 0.231 0.011 0.280 6.175 0.518 -0.393 15.165 0.001 etl 319 0.539 0.008 0.726 12.25 -0.304 -0.352 16.552 0.001 gmi 302 0.850 0.046 0.974 0.641 0.182 5.330 366.66 0.000 gya 319 0.073 0.003 0.069 0.040 0.437 -0.528 13.050 0.001 lqy 319 0.555 0.025 0.274 0.083 13.53 216.2 15500 0.000 lta 319 0.409 0.013 0.408 0.230 0.213 -0.702 8.763 0.013 ltd 319 0.629 0.012 0.686 0.214 0.118 -0.739 7.686 0.001 nim 319 0.068 0.001 0.074 0.018 -0.014 -1.229 18.528 0.000 npl 319 0.102 0.001 0.054 0.021 0.011 -1.093 10422 0.000 patm 319 2.880 1.668 0.621 2.674 17.58 309.3 35656 0.000 roa 319 0.022 0.002 0.026 0.004 5.375 28.192 24.195 0.000 roe 319 0.231 0.005 0.184 10.45 -0.164 -0.929 116824 0.000 source: @authors (2022) the kolmogorov-smirnov test the kolmogorov-smirnov (ks[z]) test is based on the distribution of the ratios of em1 and em2 models. table 4 [em1] and table 5 [em2] present the results of the one-sample ks tested on an annual basis with the em metrics model indicated in parenthesis. we evaluate at a 0.01 significance level. for the em ratios not significant at the chosen critical level, we asterisk [*] the level of statistical significance with a 5% level. the computation compares the ratio distributions of em1 and em2 with a reference (normal) test distribution. the simulation could not compute valid cases to perform the test for gmi in the split file for 2001. table 4 reveals the likelihood of manipulations of the fss. the ks[z] test shows that the monte carlo and asymptotic sig is highly insignificant for all the years for cad, etl, gmi, ltd [2005*] and j. of gov. risk management compliance and sustainability 18 npl, except for those indicated in parentheses, which is ‘asterisked’ if significant at 0.05 level. the sample cannot establish sufficient evidence of manipulations for these ratios based on the distributions of the em1 metric. the other ratios exhibit highly asymptotic and monte carlo sig for all years except for those indicated in parenthesis, which is ‘asterisked’ if significant at 0.05 critical level: cof [2004], eta [2002, 2003, 2005, 2007–2009, 2013, 2014*, 2017], gya, lqy [2009–2012, 2017, 2018], lta [2001–2003, 2004*, 2005–2009], nim [2001, 2002, 2003*, 2005, 2009, 2018, 2019], patm [2004, 2006, 2008–2012, 2015, 2017–2019], roa, roe [2004–2007, 2009, 2011–2014, 2016, 2017]. results in table 4 exhibit asymptotic but not monte carlo sig in years indicated in parenthesis: cof [2018*], eta [2014*], lqy [2013*], lta [2015*] and monte carlo but not asymptotic significance in years indicated in parenthesis: cof [2020*], lqy [2007*], and nim [2017*]. j. of gov. risk management compliance and sustainability 19 table 3. correlation coefficients bank ratio cad cof eta etl gmi gya lqy lta ltd nim npl patm roa roe panel a: correlation matrix of bank-specific ratios cad 1.000 cof 0.046 1.000 eta -0.052* -0.721*** 1.000 etl -0.072 -0.242*** 0.411*** 1.000 gmi -0.084* -0.045* 0.007 -0.023 1.000 gya -0.051 -0.727*** 0.985*** 0.408*** 0.019 1.000 lqy 0.076* -0.024 0.028 0.067 -0.046 0.013 1.000 lta -0.042 -0.749*** 0.965*** 0.200*** 0.019 0.953*** 0.010** 1.000 ltd -0.047 -0.406*** 0.701*** 0.244*** -0.040 0.681*** -0.049 0.678*** 1.000 nim 0.009 -0.014 0.050 -0.064 -0.053 0.027 -0.036 0.071 0.027 1.000 npl -0.090* 0.086* -0.062 0.041 -0.073 -0.060** 0.003 -0.079 -0.047 0.003 1.000 patm -0.011** -0.027** 0.047** 0.044* -0.034** 0.027** 0.026** 0.033** 0.109* -0.013*** -0.090* 1.000 roa -0.008 -0.031 0.006 -0.021 -0.028 0.008 0.083 0.033 -0.069 -0.053 -0.021 -0.013 1.000 roe 0.080 0.002 -0.009 -0.035 -0.025 -0.008 0.050 0.011 0.001 0.015 0.002 -0.059 -0.023 1.000 em ratio panel b: correlation matrix of em1 and em2 metrics cad 0.103*** 0.046 -0.052 -0.072 -0.084 -0.051 0.076 -0.042 -0.047 0.009 -0.090 -0.011 -0.008 0.080 cof -0.033 0.003 -0.721 -0.242 -0.045 -0.727 -0.024 -0.749 -0.406 -0.014 0.086 -0.027 -0.031 0.002 eta -0.004 0.053 0.002* 0.411 0.007 0.985 0.028 0.965 0.701 0.050 -0.062 0.047 0.006 -0.009 etl 0.014 0.023 -0.010 0.049*** -0.023 0.408 0.067 0.200 0.244 -0.064 0.041 0.044 -0.021 -0.035 gmi 0.050 -0.020 0.009 -0.013 0.084*** 0.019 -0.046 0.019 -0.040 -0.053 -0.073 -0.034 -0.028 -0.025 gya -0.012 -0.049 0.128 -0.036 0.025 -0.025 0.013 0.953 0.681 0.027 -0.060 0.027 0.008 -0.008 lqy 0.012 0.069 -0.046 -0.028 0.046 0.129 0.064*** 0.010 -0.049 -0.036 0.003 0.026 0.083 0.050 lta -0.025 0.047 0.024 -0.067 0.009 0.011 -0.038 -0.042 0.678 0.071 -0.079 0.033 0.033 0.011 ltd 0.035 -0.009 0.146 -0.053 0.030 -0.077 0.054 0.051 -0.012 0.027 -0.047 0.109 -0.069 0.001 nim -0.010 -0.047 0.003 0.032 -0.040 -0.047 0.034 -0.071 0.070 -0.104*** 0.003 -0.003 -0.053 0.015 npl -0.050 0.061 0.014 -0.082 0.003 -0.042 0.024 0.031 -0.019 0.099 0.058*** -0.090 -0.021 0.002 patm 0.034 -0.032 -0.034 -0.077 0.068 -0.107 -0.078 -0.081 0.010 -0.008 -0.001 0.097*** -0.013 -0.059 roa 0.101 0.017 0.080 -0.135 -0.001 0.034 -0.022 0.044 0.032 0.050 0.135 -0.052 0.086** -0.023 roe -0.051 0.009 -0.067 0.036 -0.013 0.004 -0.083 0.026 -0.019 0.037 0.022 0.056 0.068 -0.014 table 3 presents the pearson ordinary correlation coefficient of the bank ratios ratio pairs for the periods. the asterisk (***, **, *) indicates statistical significance using probability, p|𝑡| = 0, at 1%, 5% or 10% levels. the (shaded) diagonal in panel b shows the correlation between em1 and em2, values above [below] the shaded diagonal indicate the correlation amongst the earnings management em1 [em2] metric. the bold figure discloses statistical significance. source: @authors (2022) j. of gov. risk management compliance and sustainability 20 the results for the em1 suggest that bank managers may have employed sophisticated skills to outplay strict financial standards such that outcome is difficult to unilaterally assert on one financial information on reported consolidated and interim statements, but some results arise in diverse areas of the fss and across several time frames, similar to findings by beretka (2019) for credit and banking institutions in hungary. this evidence is in accordance with practice, as managers would most likely engage discretion and manipulations not in parallel periods but in a manner that would see them evade high financial sanctions from regulators. table 5 presents the results for the same ratios based on the em2. the outputs based on em2 are nearly identical in years relative to those provided by em1. several studies (beretka, 2019; shen & chih, 2005; leuz et al., 2003) with other approaches have reported closely significant evidence for em1 and em2. the ks[z] reveals both monte carlo and asymptotic insignificance for almost all the years for gmi, ltd and npl ratios with few exceptions, based on selected differences in the years of significance. the results suppose that at chosen periods, the manager's smooth financial information in diverse areas of the bank reported statements (beretka, 2019). the evidence suggests we may refute the first ‘null’ for the significant periods. only two ratios (gmi and npl) show overall highly statistically insignificant for all the financial years; therefore, the first ‘null’ holds for gmi and npl ratios in all the years. our findings for gmi and cof, considered as rate paid on funds in beretka (2019), are consistent with the evidence for the hungarian banks. the outcomes for lta and nim ratios are inconsistent with beretka (2019). the ltd was only significant for em1 [2005, at 5%] and em2 [2002, 2009, and 2005, at 5%] in the years indicated in parenthesis but highly insignificant for other years. gya and roa [em1], and roa [em2] are highly significant for all years based on both metrics, hence supposing sufficient evidence to refute the null for the variables. both pieces of evidence do not align with the reported evidence by beretka (2019). the insignificance of the capital adequacy, equity to loan, gross margin index, and nonperforming loan coverage ratios indicates that these banks’ earnings are well managed without the likelihood of misreporting. appropriate capital adequacy presumes a minimal risk of insolvency. this may be connected to the strict regulations by the cbn, which ensures banks operate with adequate capital that guarantees efficiency and stability of the financial system. the coverage of the nonperforming loan is evidently well-reported. sufficient and timely coverage is necessary to harness credit losses and bank failure (bhattarai, 2020). some indexes’ statistical output may conflict with the reality of the nigerian dmbs’ operations. for instance, while the coverage of the non-performing loan (all years) and the loan to the asset (since 2011) ratios exhibit evidence of statistical insignificance, in reality, the banks still have issues with their npl and have high lending that is discouraging, hence reduces the lta ratio. nwosu, okedigba and anih (2020) reference that the bank's financials may indicate that outstanding loans are nearest minimal since the 2010's asset management corporation of nigeria absorption of the dmbs' npls. that, in addition to the bank's restructuring of its risk management teams, may have justified the evidence we obtained. the evidence calls for more policy intervention to ensure a sound and safe system that guarantees banks’ capacity to meet financial obligations and protect investors’ funds. j. of gov. risk management compliance and sustainability 21 table 4. one-sample kolmogorov-smirnov test (based on em1) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 cad n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 μ 0.00 0.00 -0.02 -0.07 0.01 0.01 0.05 0.04 0.01 0.02 0.03 0.00 0.04 -0.02 -0.03 0.00 0.01 -0.03 -0.03 -0.02 σ 1.03 0.96 1.07 0.93 0.84 1.05 0.83 0.98 0.91 1.25 0.79 0.97 1.12 0.97 0.91 0.91 0.97 0.95 1.09 1.15 ks[z] 0.120 0.127 0.670 0.207 0.982 0.862 0.174 0.126 1.192 0.209 0.209 0.130 0.179 0.142 0.134 1.199 0.110 0.158 1.018 1.020 asymp. 0.766 0.800 0.590 0.682 0.396 0.320 0.810 0.837 0.244 0.878 0.861 0.800 0.749 0.800 0.682 0.071 0.680 1.100 0.211 0.216 m.c. 0.893 0.988 0.443 0.695 0.327 0.253 0.937 0.973 0.237 0.793 0.686 0.880 0.816 0.765 0.875 0.089 0.794 0.085 0.196 0.188 cof n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 μ -0.01 -0.01 0.03 0.06 0.04 0.04 0.04 0.02 0.06 0.01 -0.04 -0.02 -0.04 -0.03 -0.02 -0.03 -0.03 -0.03 0.00 -0.02 σ 0.84 1.01 0.83 1.27 1.47 1.16 1.45 1.17 1.47 1.09 0.41 0.82 0.58 0.62 1.00 0.55 0.54 0.51 0.89 1.06 ks[z] 1.895 2.569 1.997 1.325 2.089 2.038 2.287 2.126 1.725 1.999 2.453 1.868 2.159 2.546 2.376 2.019 1.872 1.121 1.773 1.360 asymp. 0.000 0.000 0.002 0.092 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.001 0.010 0.000 0.061 m.c. 0.001 0.000 0.000 0.089 0.000 0.000 0.000 0.000 0.000 0.001 0.000 0.007 0.000 0.000 0.000 0.000 0.000 0.080 0.000 0.033 eta n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 μ 0.00 0.02 -0.04 -0.04 -0.04 -0.04 -0.01 0.00 -0.03 0.00 0.02 0.02 0.03 0.01 0.02 0.01 0.01 0.00 0.01 0.02 σ 0.947 1.187 0.931 1.085 0.970 0.969 1.185 1.295 1.152 1.232 0.909 0.937 1.008 0.949 0.963 0.730 0.853 0.733 1.076 0.875 ks[z] 1.915 0.564 1.129 2.520 0.528 1.970 0.891 1.281 1.250 2.195 2.116 2.894 0.392 1.291 2.449 2.388 0.154 2.538 1.800 2.293 asymp. 0.000 0.240 0.110 0.000 0.298 0.000 0.140 0.168 0.091 0.000 0.000 0.000 0.540 0.027 0.000 0.000 0.640 0.000 0.000 0.000 m.c. 0.000 0.226 0.117 0.000 0.396 0.000 0.142 0.132 0.107 0.000 0.000 0.000 0.472 0.051 0.000 0.000 0.946 0.000 0.000 0.000 etl n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 μ 0.06 -0.05 -0.01 0.03 -0.01 0.02 -0.01 -0.05 0.05 -0.02 -0.06 -0.02 0.04 0.01 0.00 0.01 0.01 0.03 -0.01 0.02 σ 1.045 1.112 1.103 0.877 1.018 0.912 1.162 1.062 0.956 1.285 1.091 1.071 0.927 0.908 1.035 0.811 0.899 1.049 0.928 0.795 ks[z] 0.101 0.171 0.165 0.152 0.145 0.139 0.134 0.203 0.152 0.159 0.095 0.101 0.173 0.148 0.159 0.163 0.154 0.186 0.183 0.101 asymp. 0.803 0.898 0.721 0.992 0.690 0.971 0.863 0.632 0.918 0.915 0.986 0.738 0.898 0.880 0.805 0.730 0.723 0.279 0.772 0.912 m.c. 0.994 0.709 0.749 0.828 0.868 0.893 0.917 0.703 0.826 0.784 0.996 0.986 0.823 0.790 0.722 0.690 0.750 0.532 0.947 0.986 gmi n 14 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 μ 0.07 -0.01 0.00 0.01 0.00 0.01 0.00 -0.01 0.01 -0.01 -0.02 -0.01 0.01 0.00 0.00 0.00 0.00 0.01 0.00 0.01 σ 1.88 1.45 1.09 0.81 0.77 0.90 1.08 1.30 1.35 1.21 0.60 0.57 0.73 0.96 0.82 1.04 0.93 1.13 0.93 0.37 ks[z] 1.144 0.176 0.182 0.291 0.163 0.300 0.192 0.274 0.211 0.180 0.221 0.167 0.269 0.230 0.250 0.125 0.212 0.211 0.143 asymp. 0.213 0.939 0.894 0.505 0.676 0.284 0.740 0.444 0.393 0.998 0.311 0.792 0.773 0.393 0.378 0.820 0.304 0.420 0.862 m.c. 0.239 0.876 0.634 0.625 0.759 0.307 0.870 0.374 0.455 0.649 0.360 0.662 0.840 0.487 0.380 0.918 0.373 0.377 0.823 gya n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 μ 0.00 0.02 -0.04 -0.04 -0.04 -0.04 -0.01 -0.01 -0.04 0.00 0.02 0.02 0.03 0.01 0.02 0.02 0.01 0.00 0.00 0.02 σ 0.97 1.17 0.94 1.00 0.92 0.93 1.16 1.29 1.14 1.16 0.94 0.94 1.13 0.90 0.98 0.73 0.87 0.76 1.04 0.91 ks[z] 2.610 1.993 2.056 2.701 2.523 1.842 2.180 2.067 1.993 3.420 3.187 3.899 2.350 2.091 2.337 2.119 2.148 2.652 2.295 1.868 asymp. 0.000 0.000 0.000 0.000 0.000 0.008 0.000 0.000 0.001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.001 m.c. 0.000 0.000 0.000 0.000 0.000 0.002 0.000 0.000 0.002 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.008 lqy n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 j. of gov. risk management compliance and sustainability 22 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 μ -0.03 -0.01 -0.05 -0.05 -0.04 -0.04 0.04 0.03 0.01 -0.02 0.05 0.01 0.00 0.02 -0.01 -0.03 -0.03 -0.04 -0.02 0.20 σ 0.36 0.46 0.32 0.37 0.30 0.31 0.53 0.46 0.46 0.45 0.66 0.40 0.35 0.34 0.32 0.29 0.33 0.25 0.33 3.95 ks[z] 2.128 1.903 1.968 2.089 1.936 1.933 1.658 2.176 0.180 0.434 0.167 0.117 1.698 2.257 1.748 2.248 0.221 0.171 2.388 2.538 asymp. 0.000 0.003 0.001 0.000 0.000 0.000 0.083 0.000 0.810 0.217 0.620 0.823 0.036 0.000 0.000 0.000 0.427 0.198 0.000 0.000 m.c. 0.000 0.001 0.003 0.000 0.000 0.000 0.050 0.000 0.661 0.186 0.701 0.949 0.051 0.000 0.000 0.000 0.326 0.633 0.000 0.000 lta n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 μ 0.03 0.04 -0.08 -0.02 -0.02 -0.02 -0.02 -0.01 0.00 -0.01 0.00 0.00 0.01 0.01 0.07 0.07 0.03 0.01 0.02 0.05 σ 0.97 1.24 0.91 1.12 0.98 1.10 1.09 1.27 1.16 1.14 0.77 0.90 0.93 1.01 0.92 0.71 0.82 0.73 1.08 0.87 ks[z] 0.146 0.176 0.207 1.427 0.716 0.788 0.635 0.756 0.838 1.649 3.553 1.784 1.958 2.066 1.413 2.068 1.632 2.354 2.084 2.210 asymp. 0.800 0.821 0.884 0.015 0.122 0.157 0.200 0.081 0.131 0.000 0.000 0.000 0.000 0.000 0.058 0.000 0.000 0.000 0.000 0.000 m.c. 0.678 0.739 0.799 0.019 0.112 0.099 0.141 0.098 0.172 0.000 0.000 0.000 0.000 0.000 0.069 0.000 0.000 0.000 0.000 0.000 ltd n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 μ 0.00 0.19 0.06 0.20 0.04 1.09 0.03 0.46 0.12 0.07 1.06 -0.02 0.01 -0.21 0.15 0.20 -0.30 -0.22 0.08 0.03 σ 0.70 1.01 1.08 1.08 1.05 1.07 1.01 1.16 1.11 0.96 0.89 1.15 1.06 1.01 0.93 0.80 1.05 1.00 1.18 0.98 ks[z] 0.088 0.130 0.127 0.168 1.470 0.144 0.211 0.181 0.139 0.212 0.266 0.151 0.182 0.235 0.189 0.119 0.124 0.178 0.134 0.154 asymp. 0.980 0.910 0.800 0.920 0.014 0.852 0.771 0.800 0.800 0.768 0.904 0.900 0.839 0.680 0.909 0.890 0.900 0.856 0.800 0.790 m.c. 0.950 0.933 0.936 0.883 0.067 0.919 0.813 0.861 0.824 0.812 0.864 0.893 0.699 0.718 0.928 0.936 0.832 0.847 0.819 0.689 nim n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 μ 0.00 -0.01 0.03 -0.01 0.02 0.01 -0.02 0.04 -0.03 0.00 -0.02 0.00 0.01 -0.02 -0.01 -0.02 -0.03 0.05 0.00 0.04 σ 1.03 1.00 0.97 1.06 1.02 1.03 1.21 1.05 0.81 1.08 1.30 0.84 1.19 1.02 1.08 1.01 0.76 0.69 0.85 0.99 ks[z] 1.475 1.064 1.636 1.743 1.266 2.136 2.183 1.866 1.295 1.757 1.887 1.855 1.604 1.676 2.110 3.128 1.485 1.411 1.289 2.211 asymp. 0.092 0.222 0.042 0.000 0.232 0.000 0.000 0.000 0.060 0.008 0.000 0.000 0.002 0.000 0.000 0.000 0.062 0.093 0.111 0.000 m.c. 0.058 0.215 0.030 0.000 0.217 0.000 0.000 0.000 0.088 0.003 0.000 0.000 0.001 0.000 0.000 0.000 0.039 0.088 0.140 0.000 npl n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 μ -0.07 0.01 0.20 0.07 0.01 -0.02 0.00 0.00 0.00 0.00 0.01 -0.02 0.01 0.01 -0.31 0.16 0.11 -0.10 -0.02 -0.13 σ 1.18 1.15 0.98 0.85 0.76 1.09 0.99 1.02 0.94 0.88 0.85 0.96 1.02 0.97 1.07 0.96 1.08 1.13 1.09 0.85 ks[z] 0.175 0.122 0.169 0.195 0.120 0.147 0.150 0.103 0.109 0.238 0.101 0.118 0.165 0.188 0.201 0.106 0.124 0.137 0.149 0.136 asymp. 0.706 0.975 0.662 0.706 0.847 0.638 0.313 0.503 0.888 0.579 0.850 0.650 0.612 0.555 0.937 0.930 0.799 0.758 0.840 0.891 m.c. 0.678 0.958 0.723 0.554 0.963 0.857 0.841 0.993 0.986 0.310 0.992 0.949 0.680 0.514 0.439 0.981 0.924 0.861 0.785 0.868 patm n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 μ -0.07 -0.07 -0.08 -0.07 0.11 -0.07 -0.06 -0.03 -0.02 -0.08 -0.05 -0.05 -0.04 -0.08 -0.04 -0.05 -0.03 -0.05 -0.06 -0.05 σ 0.05 0.05 0.03 0.03 4.61 0.03 0.05 0.08 0.10 0.03 0.06 0.06 0.11 0.02 0.07 0.07 0.09 0.03 0.06 0.11 ks[z] 1.718 2.403 1.870 1.306 3.353 1.441 1.970 1.328 1.370 1.663 1.720 1.406 1.918 2.013 1.535 1.954 1.889 0.945 1.094 2.393 asymp. 0.004 0.000 0.013 0.112 0.000 0.034 0.000 0.022 0.055 0.021 0.023 0.024 0.000 0.000 0.018 0.000 0.000 0.160 0.160 0.000 m.c. 0.008 0.000 0.009 0.077 0.000 0.055 0.000 0.025 0.015 0.050 0.012 0.017 0.000 0.000 0.013 0.000 0.076 0.181 0.108 0.000 roa n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 μ 0.00 0.00 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.01 0.01 0.01 0.01 0.01 σ 0.74 0.39 0.74 0.58 0.51 1.13 1.26 0.82 2.71 1.25 0.70 0.26 0.41 0.72 0.42 0.58 0.71 0.78 0.35 0.41 ks[z] 1.606 1.144 1.839 1.840 1.958 1.972 2.273 2.107 2.432 2.036 1.866 1.802 2.048 2.191 1.809 2.119 2.360 2.243 1.683 2.101 j. of gov. risk management compliance and sustainability 23 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 asymp. 0.009 0.117 0.000 0.004 0.001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.002 0.000 0.000 0.000 0.001 0.000 m.c. 0.007 0.110 0.001 0.006 0.002 0.000 0.000 0.000 0.000 0.000 0.001 0.001 0.000 0.000 0.001 0.000 0.000 0.000 0.001 0.000 roe n 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 μ -0.41 -1.19 -0.30 -2.50 -0.50 -0.84 -1.75 -0.53 0.16 -0.58 0.44 -0.56 0.42 -10.35 -0.50 -1.05 -1.49 -1.13 -2.18 -2.80 σ 0.95 1.03 0.95 1.15 1.01 1.04 0.93 0.90 1.00 0.91 1.09 0.81 1.05 1.00 1.06 1.06 1.01 0.97 0.80 1.21 ks[z] 1.738 1.843 1.815 0.175 0.106 0.155 0.127 1.931 0.115 2.586 0.104 0.108 0.104 0.137 2.023 0.121 0.123 1.699 2.021 2.311 asymp. 0.002 0.001 0.001 0.810 0.800 0.834 0.832 0.000 0.800 0.000 0.900 0.900 0.810 0.910 0.000 0.810 0.670 0.008 0.000 0.000 m.c. 0.003 0.001 0.001 0.679 0.990 0.806 0.942 0.000 0.976 0.000 0.990 0.977 0.983 0.863 0.000 0.938 0.930 0.002 0.000 0.000 table 4 presents the number of yearly observations (𝑛), mean (𝜇), standard deviation (𝜎), ks[z] statistic, p-values of monte carlo (2-sided) based on lilliefors [m.c.], and asymptotic significance (2-sided) based on kruskal-wallis [asymp.] outputs of each ratio [2001-2020]. we untabulated the 99% (upper and lower bounds) confidence intervals, most extreme differences [absolute, negative and positive] cases of the outputs. source: @authors (2022) table 5. one-sample kolmogorov-smirnov test (based on em2) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 cad 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 -0.24 -0.29 0.24 0.24 -0.27 0.18 0.23 -0.26 -0.37 -0.21 -0.05 -0.34 0.17 -0.05 -0.02 -0.40 0.06 0.27 0.03 0.25 𝜎 0.74 0.69 0.77 0.66 0.60 0.75 0.59 0.70 0.65 0.90 0.57 0.70 0.81 0.70 0.45 0.58 0.77 0.66 0.83 0.74 ks[𝑧] 1.254 0.671 0.796 2.951 1.588 1.104 0.542 0.736 0.516 0.171 1.822 3.160 0.210 3.141 2.188 0.512 2.151 0.202 1.813 2.220 asymp. 0.153 0.312 0.253 0.006 0.046 0.118 0.519 0.335 0.530 0.907 0.025 0.000 0.717 0.000 0.008 0.415 0.005 0.799 0.047 0.001 m.c. 0.106 0.378 0.294 0.001 0.082 0.144 0.499 0.297 0.626 0.858 0.017 0.000 0.687 0.000 0.032 0.695 0.009 0.687 0.021 0.000 cof 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 -0.11 -0.61 -0.28 -0.17 -0.46 0.81 -0.12 -1.30 0.17 -0.85 -0.15 0.57 0.10 -1.15 -0.62 0.49 1.49 0.38 0.79 0.71 𝜎 1.54 2.45 1.80 2.37 1.99 1.34 2.44 2.42 1.46 1.69 2.16 1.50 1.83 1.84 1.68 1.69 1.56 1.63 1.59 4.87 ks[𝑧] 1.992 3.563 1.672 2.337 2.416 1.914 1.246 2.088 1.462 2.122 1.254 1.444 1.528 1.570 1.861 1.717 2.163 1.630 1.341 1.560 asymp. 0.000 0.000 0.009 0.000 0.000 0.000 0.202 0.000 0.026 0.000 0.213 0.012 0.025 0.023 0.000 0.001 0.005 0.009 0.209 0.016 m.c. 0.001 0.000 0.010 0.000 0.000 0.000 0.230 0.000 0.031 0.000 0.258 0.011 0.030 0.019 0.001 0.000 0.000 0.018 0.182 0.021 eta 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 -0.01 -0.01 -0.01 0.00 -0.04 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 -0.02 0.00 0.01 -0.01 -0.01 0.00 0.01 𝜎 1.33 0.17 0.18 2.74 0.79 2.55 3.27 0.98 1.54 0.72 1.75 5.22 2.47 3.23 3.39 3.52 1.41 2.69 0.49 0.63 ks[𝑧] 1.107 0.620 0.822 1.556 3.034 1.978 2.001 0.646 1.590 2.268 1.400 2.977 1.849 0.398 2.482 2.667 2.345 2.580 1.072 2.293 asymp. 0.281 0.323 0.181 0.080 0.000 0.000 0.000 0.413 0.049 0.000 0.356 0.000 0.023 0.692 0.000 0.000 0.000 0.000 0.311 0.000 m.c. 0.268 0.315 0.166 0.045 0.000 0.000 0.000 0.385 0.066 0.000 0.319 0.000 0.012 0.517 0.000 0.000 0.004 0.000 0.283 0.000 etl 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 0.12 -0.06 0.00 -0.02 -0.01 -0.13 -0.05 0.10 -0.04 -0.06 -0.01 0.00 0.12 0.06 0.03 0.06 0.00 -0.20 0.04 -0.20 𝜎 0.64 0.22 0.16 1.60 0.94 1.11 0.56 1.24 0.42 2.37 0.41 0.96 0.99 0.68 2.97 1.84 3.15 1.94 1.65 1.81 ks[𝑧] 0.101 1.571 0.165 1.152 1.545 0.139 0.134 0.203 0.152 1.159 0.095 0.101 0.173 3.148 1.159 2.163 0.154 1.986 0.183 1.561 asymp. 0.855 0.052 0.776 0.345 0.048 0.988 0.694 0.484 0.531 0.265 0.973 0.799 0.837 0.000 0.268 0.001 0.873 0.036 0.779 0.050 j. of gov. risk management compliance and sustainability 24 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 m.c. 0.994 0.099 0.749 0.298 0.068 0.893 0.917 0.503 0.826 0.284 0.996 0.986 0.923 0.000 0.222 0.005 0.750 0.022 0.847 0.086 gmi 𝑛 14 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 𝜇 -0.07 -0.19 0.02 0.31 -0.46 -0.13 -0.22 0.19 0.09 -0.42 -0.37 0.33 0.34 -0.08 0.31 0.23 -0.45 -0.38 0.26 0.18 𝜎 0.18 1.16 0.87 0.64 0.62 0.72 0.86 1.04 1.08 0.97 0.48 0.45 0.58 0.77 0.66 0.83 0.74 0.91 0.74 0.30 ks[𝑧] 1.134 0.176 0.182 1.229 0.163 0.300 1.192 0.940 1.311 0.180 0.221 0.167 0.269 0.230 1.504 0.125 0.212 0.211 0.143 asymp. 0.231 0.682 0.894 0.221 0.910 0.501 0.182 0.313 0.152 0.832 0.518 0.815 0.703 0.698 0.061 0.676 0.578 0.552 0.770 m.c. 0.198 0.676 0.634 0.165 0.759 0.457 0.201 0.309 0.174 0.649 0.660 0.662 0.640 0.687 0.082 0.918 0.373 0.377 0.823 gya 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 0.09 -0.05 0.00 -0.02 -0.01 -0.10 -0.04 0.08 -0.03 -0.05 -0.01 0.00 0.06 0.03 0.01 0.03 0.00 -0.10 0.02 -0.10 𝜎 1.63 0.35 0.20 1.78 1.16 1.10 1.95 1.36 1.04 1.67 1.05 1.86 1.58 1.30 1.67 1.68 0.66 1.36 1.02 1.34 ks[𝑧] 1.931 1.571 2.251 1.676 2.351 2.611 2.824 1.520 1.158 2.017 1.930 1.953 1.037 1.957 2.023 1.936 1.648 1.307 2.143 3.134 asymp. 0.008 0.086 0.000 0.043 0.000 0.000 0.000 0.084 0.294 0.000 0.000 0.002 0.330 0.001 0.000 0.008 0.064 0.188 0.000 0.000 m.c. 0.003 0.062 0.000 0.038 0.002 0.000 0.000 0.038 0.300 0.000 0.000 0.002 0.268 0.008 0.003 0.003 0.048 0.200 0.004 0000 lqy 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 -0.05 0.00 -0.02 -0.02 -0.01 0.00 0.00 0.02 0.01 -0.02 -0.01 -0.02 -0.03 0.02 -0.01 -0.04 -0.02 0.03 -0.05 0.50 𝜎 0.16 0.21 0.15 0.17 0.14 0.14 0.24 0.21 0.21 0.20 0.30 0.18 0.16 0.15 0.14 0.13 0.15 0.11 0.15 1.78 ks[𝑧] 2.133 1.309 1.994 1.183 1.417 2.005 1.773 2.306 1.985 1.104 0.173 0.172 1.559 2.329 2.750 2.257 0.883 0.243 2.417 2.619 asymp. 0.000 0.090 0.000 0.280 0.081 0.000 0.025 0.000 0.017 0.117 0.822 0.787 0.082 0.000 0.000 0.000 0.227 0.698 0.000 0.000 m.c. 0.000 0.087 0.000 0.239 0.063 0.000 0.013 0.000 0.006 0.186 0.701 0.949 0.066 0.000 0.000 0.000 0.266 0.633 0.000 0.000 lta 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 0.200 0.11 0.16 0.42 -0.16 0.25 0.18 -0.16 -0.14 0.11 -0.16 -0.17 0.13 0.11 0.04 -0.08 0.21 0.12 0.05 0.05 𝜎 0.25 0.12 1.02 1.46 0.92 1.00 1.52 1.08 0.13 1.09 0.18 0.73 1.02 1.37 0.16 0.55 0.97 1.05 0.31 1.22 ks[𝑧] 0.819 0.987 1.157 1.304 1.102 1.213 0.978 1.164 1.490 2.827 4.254 2.858 2.456 2.443 1.909 3.116 2.128 3.017 3.124 1.958 asymp. 0.220 0.120 0.115 0.230 0.012 0.086 0.120 0.128 0.031 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 m.c. 0.186 0.117 0.148 0.229 0.054 0.092 0.168 0.157 0.035 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 ltd 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 -0.06 -0.29 0.05 0.11 -0.14 0.18 0.17 0.18 -0.11 0.32 -0.15 -0.51 0.34 0.30 -0.09 0.12 -0.21 -0.37 0.05 0.64 𝜎 0.08 1.13 0.60 0.63 0.25 1.55 0.16 0.01 0.23 0.19 3.06 0.95 0.19 2.01 2.07 1.05 2.66 0.00 0.40 1.29 ks[𝑧] 0.588 1.871 0.849 1.123 1.736 1.162 1.014 0.521 2.029 0.420 1.183 3.015 0.452 2.503 1.666 0.795 1.628 0.679 0.569 0.073 asymp. 0.309 0.011 0.345 0.212 0.062 0.266 0.130 0.251 0.002 0.538 0.210 0.000 0.597 0.001 0.048 0.373 0.083 0.484 0.526 0.990 m.c. 0.416 0.006 0.394 0.204 0.038 0.224 0.189 0.268 0.000 0.487 0.256 0.000 0.533 0.000 0.043 0.394 0.076 0.384 0.465 0.925 nim 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 -0.12 -0.20 -0.45 0.10 -0.45 0.29 0.11 -0.08 -0.25 0.34 -0.44 -0.24 0.13 0.24 -0.27 0.21 -0.31 -0.38 -0.40 0.03 𝜎 0.44 3.30 4.25 1.95 0.42 0.98 0.73 0.02 0.65 2.46 1.29 0.87 0.42 5.51 2.00 0.51 2.74 0.26 3.04 1.12 ks[𝑧] 1.792 1.210 1.861 1.791 1.954 2.430 2.483 2.122 1.734 1.999 2.147 1.769 1.825 1.907 1.763 1.830 1.902 1.055 0.966 0.902 asymp. 0.015 0.122 0.001 0.009 0.001 0.000 0.000 0.000 0.015 0.001 0.000 0.014 0.004 0.002 0.008 0.003 0.000 0.105 0.120 0.142 m.c. 0.020 0.154 0.008 0.012 0.000 0.000 0.006 0.000 0.001 0.001 0.000 0.011 0.000 0.000 0.005 0.000 0.002 0.112 0.156 0.178 npl 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 -0.43 0.09 -0.32 0.34 0.15 -0.29 0.16 -0.10 -0.29 -0.04 0.22 -0.13 0.23 0.16 0.20 -0.14 0.02 0.04 -0.49 -0.19 j. of gov. risk management compliance and sustainability 25 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 𝜎 0.50 1.83 1.64 1.56 0.20 1.25 0.35 0.17 0.23 1.03 0.80 1.10 0.21 1.65 1.31 1.19 1.95 0.22 1.26 0.57 ks[𝑧] 0.375 0.122 0.169 0.195 0.120 0.147 0.150 0.103 0.109 0.238 0.101 0.111 0.165 0.188 0.201 0.106 0.124 0.137 0.149 0.136 asymp. 0.517 0.509 0.851 0.831 0.686 0.851 0.933 0.864 0.713 0.894 0.977 0.910 0.855 0.802 0.671 0.665 0.802 0.885 0.669 0.895 m.c. 0.565 0.798 0.603 0.862 0.803 0.714 0.701 0.993 0.986 0.610 0.992 0.949 0.680 0.814 0.739 0.981 0.924 0.861 0.785 0.868 patm 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 -0.34 0.19 0.30 -0.30 -0.15 -0.28 -0.04 -0.09 0.21 0.08 -0.12 -0.03 -0.28 -0.09 -0.29 -0.08 -0.17 0.30 -0.37 -0.46 𝜎 1.42 1.53 0.85 1.00 137.25 0.93 1.52 2.37 2.99 0.79 1.85 1.82 3.33 0.61 2.23 1.99 2.76 1.01 1.80 3.20 ks[𝑧] 1.598 1.354 1.607 1.442 1.714 1.622 1.845 2.467 1.564 1.837 1.901 1.983 2.119 2.224 1.695 2.159 1.086 1.044 1.102 2.644 asymp. 0.024 0.213 0.061 0.082 0.086 0.049 0.006 0.000 0.085 0.006 0.002 0.008 0.000 0.000 0.008 0.000 0.189 0.220 0.180 0.000 m.c. 0.062 0.226 0.026 0.085 0.049 0.084 0.005 0.000 0.052 0.000 0.000 0.003 0.000 0.000 0.012 0.000 0.213 0.208 0.321 0.000 roa 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 -0.38 -0.28 0.20 -0.45 -0.34 0.00 -0.37 -0.18 -0.20 0.21 -0.41 -0.09 0.14 0.12 -0.33 0.13 -0.42 0.12 0.54 0.38 𝜎 0.26 0.14 0.26 0.21 0.18 0.40 0.45 0.29 0.96 0.44 0.25 0.09 0.15 0.25 0.15 0.20 0.25 0.28 0.12 0.15 ks[𝑧] 1.627 1.760 1.822 1.990 1.836 2.311 1.911 2.400 1.686 1.953 2.420 1.967 2.361 2.919 1.969 2.508 1.935 1.907 2.280 2.335 asymp. 0.020 0.009 0.004 0.004 0.005 0.000 0.003 0.000 0.006 0.002 0.000 0.007 0.000 0.000 0.002 0.000 0.008 0.000 0.000 0.000 m.c. 0.001 0.008 0.003 0.006 0.001 0.000 0.006 0.000 0.008 0.001 0.001 0.005 0.007 0.000 0.000 0.000 0.002 0.000 0.000 0.000 roe 𝑛 15 15 15 15 15 15 15 15 15 15 16 17 17 17 17 17 17 17 17 17 𝜇 -0.04 0.10 -0.75 0.03 0.54 0.20 0.19 0.15 0.02 0.05 0.95 -0.02 0.01 0.02 0.17 0.19 0.20 -0.03 0.20 -0.03 𝜎 0.287 0.104 0.108 1.99 2.76 0.225 0.121 0.123 0.189 0.113 0.146 0.120 0.113 0.175 0.106 0.155 0.127 0.103 0.07 0.11 ks[𝑧] 1.945 2.049 1.110 2.095 0.113 0.096 0.083 2.191 0.843 2.740 0.107 1.421 0.336 2.275 1.821 1.515 0.285 1.892 2.272 2.460 asymp. 0.000 0.000 0.155 0.000 0.800 0.890 0.880 0.000 0.280 0.000 0.800 0.098 0.260 0.000 0.042 0.810 0.088 0.004 0.000 0.000 m.c. 0.000 0.000 0.135 0.000 0.899 0.996 0.914 0.000 0.276 0.000 0.990 0.077 0.283 0.000 0.009 0.838 0.050 0.009 0.000 0.000 table 5 presents the number of yearly observations (𝑛), mean (𝜇), standard deviation (𝜎), ks[z] statistic, p-values of monte carlo (2-sided) based on lilliefors [m.c.], and asymptotic significance (2-sided) based on kruskal-wallis [asymp.] outputs of each ratio [2001-2020]. we untabulated the 99% (upper and lower bounds) confidence intervals, most extreme differences [absolute, negative and positive] cases of the outputs. source: @authors (2022) j. of gov. risk management compliance and sustainability 26 sensitivity: ifrs and em we analyse em by comparing evidence of manipulations ‘before’ and ‘after’ adopting the international financial reporting standards (ifrs). nigerian banks have reported consolidated fss in line with the ifrs since 2012. the ifrs allows managers to use professional judgment in reporting fss. we verify the second null with the output of the ks[z] statistics [tables 4 and 5] based on the em1 and em2 for ratios with significant years. we could not verify cad, etl, gmi and npl because they show no evidence of manipulations according to em1 as well as gmi and npl, which reveal no manipulations based on em2. we examine other ratios (cof, eta, gya, lqy, lta, nim, patm, roa, and roe) that show at least a year’s evidence of significance, in which the ks[z] statistics refute the nulls in tables 4 and 5. we only consider evidence that exhibits more manipulation strings following the ‘discretion’ based ifrs relative to the ‘rule-based’ gaap of reporting periods. we compare the number of significant years for the prior-ifrs (denoted as np) to the number of significant years for the after-ifrs (denoted as na). the sample periods contain more years of the prior-ifrs. to rectify the biased that this may cause in the comparison, we considered only 2001–2009 for the prior-ifrs, whereas the post-ifrs remains 2012–2020, leaving us a 9 year-regime apiece. no additional simulation was involved in the ‘comparison’ extracted from reports in tables 4 and 5. table 6 reports the years of statistical significance (i.e., evidence of manipulation) based on the ks test for the em1 [panel a] and em2 [panel b]. table 6 [panel a] reveals evidence that most managed ratios (cof, eta, lta, nim) are misreported in more years of the post-ifrs relative to the prior-ifrs regime (𝑁𝑎 > 𝑁𝑝). this is marginal for cof [9 to 8] and nim [7 to 5], moderate for eta [6 to 3], but excessive for lta [8 to 1], as indicated in the parenthesis. both lqy [6 to 8] and patm [7 to 8] exhibit a tendency for lesser, albeit moderate, years of manipulation in the postrelative to the prior-ifrs regime, while gya, roa and roe show equal numbers of manipulation years. kousay (2019) shows that ifrs has no influence on em for listed canadian firms. in panel b of table 6, the ifrs shows more significant evidence of bank ratios (cad, eta, etl, lta and roe). lta reveals excessive evidence of manipulations for almost all post-adoption years. the evidence supposes more manipulations for the banks’ financial information prior-ifrs relative to the post-adoption. this is inconsistent with the accrual-based evidence by ozili and outa (2019) that ifrs lower earnings smoothing of nigerian banks. several studies on accruals-based em (see cadot, rezaee & chemama, 2020; guermazi & khamoussi, 2018) provide evidence of misreporting after ifrs. cadot et al. (2020) disclose that ifrs resulted in more managed earnings for derivatives reporting. the fact that misreporting of some variables has reduced after adoption indicates that managers manipulated components of their fss. an alternative way –the 'relativeness index (ri)'– allows using the default 'prior ifrs' as 2001– 2011 [11 years] and 'after ifrs' as 2012–2020 [9 years]. ri for each ratio compares the years of significance for the prior-adoption relative to after-ifrs under the assumption that both are equal. we circumvent concern about the year differences with an equalising process. the sample indicates for each year of after-ifrs observations, there are 11 9⁄ [= 1.22] years of the prior-ifrs observations. we equalised both by multiplying (scaling up) the numbers of years of after-ifrs with 1.22 to provide the 1:1 ratio needed for a levelled comparison. table 5a [appendix] presents snapshots to examine each ratio's years of significance and misreporting and the computed ri for comparison of the evidence between the priorand afterifrs adoption. this method reveals less evidence of em afterifrs relative to prior-ifrs adoption. this may be due to the unbalance sample observations being biased in favour of the prior-ifrs. we perform another sensitivity test to verify the 0.95 [0.05] confidence interval [significance] level for em1 and em2 models. the results at 0.05 levels [untabulated] provide similar evidence to j. of gov. risk management compliance and sustainability 27 previous findings for the em1 [em2] model. the outcomes collaborate with reported evidence by beretka (2019) for hungarian banks. the outcomes for the em1 and em2 metric of 0.95 fiducial (0.05 critical) limits [untabulated] suppose parallel evidence. table 6. years of statistical significance [manipulation evidence] of bank ratios panel a: based on em1 panel b: based on em2 ratio gaap np ifrs na gaap np ifrs na cad no em 0 no em 0 [2004, 2005*,a] 2 [2012, 2014, 2015*,a, 2017, 2019*,a,m, 2020] 6 cof [2001-2003, 2005-2009] 8 [20122017,2018*,a, 2019, 2020*,m] 9 [2001-2006, 2008, 2009*,a,m] 8 [2012-2017, 2018*,a, 2020*,m] 8 eta [2001, 2004, 2006] 3 [2012, 2015, 2016, 2018-2020 6 [2004*,m, 2005-2007, 2009*,a] 5 [2012, 2013*,a,m, 2015-2017, 2018, 2020] 7 etl no em 0 no em 0 [2005*,a] 1 [2014, 2016, 2018*,a,m, 2020*,a] 4 gmi no em 0 no em 0 no em 0 no em 0 gya [2001-2009] 9 [2012-2020] 9 [2001, 2003, 2004*,a,m, 2005-2007, 2008*,m] 7 [2012, 2014-2016, 2017*,m, 2019, 2020] 7 lqy [2001-2006, 2007*,m, 2008] 8 [2013*,a, 2014-2016, 2019, 2020] 6 [2001, 2003, 2006, 2007*,a,m, 2008, 2009*,a] 6 [ 2014-2016, 2019, 2020] 5 lta [2004*,a,m] 1 [2012-2020] 8 [2005*,a, 2009*,a,m] 2 [2012-2 020] 9 ltd [2005*,a] 1 no em 0 [2002, 2005*,m, 2009] 3 [2012, 2014, 2015*,a,m] 3 nim [2003*,a,m, 2004, 20062008] 5 [2012-2016, 2017*,m, 2020] 7 [2001*,a,m, 2003, 2004*,m, 20052009] 8 [2012*,a,m, 20132017] 6 npl no em 0 no em 0 no em 0 no em 0 patm [2001,2002, 2003*,a,m, 2005, 2006*,a, 2007, 2008*,a,m, 2009*,m] 8 [2012*,a,m, 2013, 2014, 2012*,a,m, 2016, 2017,a, 2020] 7 [2001*,a, 2003*,m, 2005*,m, 2006*,a, 2007, 2008] 6 [2012-2014, 2015*,m, 2016, 2020] 6 roa [2001-2009] 9 [2012-2020] 9 [2001-2009] 9 [2012-2020] 9 roe [2001-2003, 2008] 4 [2015, 2018-2020] 4 [2001, 2002, 2004, 2008] 4 [2014*,a, 2015, 2017*,m, 20182020] 6 table 6 reports the numbers ofand years of statistical significance (i.e., evidence of earnings management, em) for the bank ratios based on the em1 (panel a) and em2 (panel b) metric models. all the reported ratios are significant at 0.01, except where the asterisk (*) indicates, which is statistical significance at 0.05 level. *a, m: both asymptotic and monte carlo sig.; *a: asymptotic but not monte carlo sig.; *m: monte carlo but not asymptotic sig for each ratio in the corresponding year indicated. the shaded cells are for banks ratios which do not have any evidence of manipulations, as reported in tables 4 [em1] and 5 [em2]. both gmi and npl (grey area) show no evidence of manipulations in all the years based on em1 and em2, whereas cad and etl (shaded blue) reveal no manipulation based on only em1. no additional simulation, parametric engagements or restrictions are involved in the ‘enumeration’ of the table. #np and #na denote the numbers of years that the j. of gov. risk management compliance and sustainability 28 ratios are significant for the prior and the after ifrs, respectively. to obtain #np, we considered the prior-ifrs periods as 2001–2009 to have equal numbers of years with the after-ifrs of 2012–2020. generally, the evidence reveals more em for the after-ifrs relative to the prior to ifrs for both the em1 and em2 metrics. an extended version is reported in table 5a (appendix) in which the full sample is considered under a pseudo-scale-up with prior-ifrs set as year-numeraire to equalise, for theoretical purposes, the number of years for the priorand afterifrs. source: @authors (2022) conclusions the thrust of this study is to detect evidence of em amongst nigerian dmbs. the study computes 14 bank-specific ‘earnings’ ratios and obtains the distribution of ratios and the kolmogorov-smirnov statistics, which were applied to verify whether or not the dmbs’ annual reports reflect evidence of em as well as whether the dmbs engage in more manipulations ‘after’ as compare to ‘prior’ the period of ifrs adoption. the evidence identifies that manipulation is not a consistent yearly practice. the banks manipulate in an unpredictable way to evade sanctions. the evidence supposes more em for the banks' financials priorrelative to the post-ifrs adoption. the result has policy importance for regulations. the evidence requires policymakers to tighten efforts to enhance their monitoring role of managers and corporate boards of nigerian banks. earnings management is overtly deceitful and could mislead the users of banks' financial statements, including resulting in economically undesirable outcomes and misguiding optimal investment decisions. since funds are at risk, and if such is allowed to persist, it may ruin the integrity of the capital market and limit foreign investment. policymakers should give the issue more serious concerns, including enforcing zero-tolerance regulations in the banks, owing to the dire consequences it would have on the financial system if the practice becomes endemic over time. banks’ supervisory agencies should ensure appropriate monitoring and engagement of their officials during the reporting of bank records to circumvent misreporting. otherwise, they should always scrutinise banks’ financials according to ratio tests to detect likely em. stricter sanctions, in the form of 'penalty fees for misreporting', should be legislated to discourage misreporting. limitation & further research the study has limitations. bank ratios preclude ‘actual’ values of assets or liabilities. the ratios exclude reversal accrual effects, which may increase the power of the test relative to ‘accrual-based models. any rejection of the null for ratios computed with the assets and/or liabilities has a tendency to admit many types i error. all the ratios investigated are key earnings indicators of the banks’ financials. this opens opportunities for future research to complement our analysis of financial reports by examining other bank ratios covering solvency, profitability, efficiency and financial strength. future studies may include fraud detection involving the analysis of the cash flow statement. references beretka, e. 2019. detecting earnings management. an analysis of credit institutions’ (banks) trading in hungary. research association for interdisciplinary studies. https://doi.org/10.5281/zenodo.3549951. bhattarai, b. p. 2020. effect of non-performing loan on the profitability of commercial banks in nepal. european bus. & mgt. 6(6): 164–70. https://doi.org/10.11648/j.ebm.20200606.15. brennan, n. m. 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(2013). how far can we trust earnings numbers? what research tells us about earnings management. accounting and business research, 43(4), 445–481. https://doi.org/10.1080/00014788.2013.785823 https://www.cbn.gov.ng/out/2021/rsd/non-performing%20loans%20and%20profitability%20of%20the.pdf https://www.cbn.gov.ng/out/2021/rsd/non-performing%20loans%20and%20profitability%20of%20the.pdf https://doi.org/10.5937/ekonhori.8032150 https://doi.org/10.1108/ajems-10-2017-0266 http://dx.doi.org/10.17159/2222-3436/2016/v19n1a2 http://dx.doi.org/10.17159/2222-3436/2016/v19n1a2 https://doi.org/10.1016/j.jbankfin.2004.10.004 https://doi.org/10.1080/00014788.2013.785823 appendix appendix a table a1. list of banks s/n tickers banks data** 1 acb* access bank plc. 2 ctb citibank nigeria limited 3 eb ecobank nigeria 4 fb* fidelity bank plc. 5 fbn first bank of nigeria limited 6 fcmb* first city monument bank limited 7 gtb* guaranty trust holding company plc. 8 hbl heritage bank plc. 2012–2020 9 ibtc stanbic ibtc bank plc. 10 kb keystone bank limited 2011–2020 11 sb sterling bank plc. 12 scb standard chartered bank 13 ub unity bank plc. 14 uba* united bank for africa plc. 15 ubn* union bank of nigeria plc. 16 wb wema bank plc. 17 zb* zenith bank plc. *banks with international authorization, and others are banks with national authorization. ** except as indicated, data used to access each ratio spans 2001–2020 for the individual bank. table a1 provides the tickers to corresponding banks [e.g., acb for access bank plc., fbn for first bank of nigeria, and so on]. table a2: measurement of the bank-specific ratios ratio descriptions measurement [computation formula] cad capital adequacy* eligible capitalt risk⁄ -weighted assets𝑡 cof cost of funds* cost of debtt + cost of equityt eta equity to assets average equityt assetst⁄ etl equity to loan equityt loant⁄ gmi gross margin index gross margint−1 gross margint⁄ gya gross yield on assets total interest incomet total assetst⁄ lqy liquidity ratio* casht + accounts receivablest + marketable securitiest current liabilitiest⁄ lta loans to assets loanst assetst⁄ ltd loans to deposits* loanst depositst⁄ nim net interest margin* (total interest incomet – total interest expenset) total assetst⁄ npl non-performing loan coverage* loan-loss allowancet total non⁄ -performing loanst patm profit margin* patt net interestt⁄ roa return on average assets* patt assetst⁄ roa return on average equity* patt equityt⁄ table a2 contains summary descriptions of each bank-specific ratio. for 2001–2010, n = 15; for 2011, n= 16 (except for gmi, which n=15); for 2012, n= 17 (except for gmi, n=16); and for 2013–2020, n = 17. note: these ratios are also refer as the corresponding name in parenthesis: capital adequacy [capitalto-risk weighted assets] ratio, equity to assets [leverage] ratio, loans to deposits [creditdeposit] ratio, cost of funds [rate paid on funds] and profit margin [cost to income] only gmi is index, others are ratios. total assets were used in the computation; thus, the reference gya instead of gross yield on earning assets, gyea (beretka, 2019). unless otherwise specified, asset [equity] used as denominator in the computation means 'average' assets (equity), while those used on the numerators are 'total' assets (equity). see cbn (2009) for the component of ‘eligible capitals’ of nigerian banks. pat: profit after tax. *obtain from various financial sources: bank reports, nse records, and fitch ratings reports. cof replaces the rate paid on funds (rpf), whereas secondary sourced cost to income is used as a proxy for patm in beretka (2019). as directed by cbn, the dmbs use a stricter test of liquidity (quick ratio) in the computation of liquidity ratio (cbn, 2009). computations: other ratios (eta, etl, gya, lta) are calculated from reported bank financials using the corresponding measurement [defined in column 3]. except otherwise indicated, each ratio is computed for the bank within the same time frame, e.g., bank '𝑖' in the year, 𝑡. where: gross margin = (total interest incomet – total interest expenset) total interest income⁄ average equity = (equityt + equityt−1) 2⁄ . average asset = (asset𝑡 + asset𝑡−1) 2⁄ . cost of debt = interest expenses × (1 − tax rate) total debt⁄ . cost of equity = risk free rate of return + (beta of the stock × market risk premium). where market risk premium = market rate of return − risk free rate of return. market rate of return is the rate of interest, beta of the stock is a measure of the stock’s volatility relative obtained from nse or computed as standard deviation of stock price. the treasury bill rate is predominantly standard for the risk-free rate of return in nigeria. table a3. bank ratios statistics [based on annual statistics] ratio 2001 200 2 200 3 200 4 200 5 2006 200 7 200 8 200 9 201 0 201 1 201 2 201 3 201 4 201 5 201 6 201 7 201 8 201 9 202 0 cad: 𝜇 0.20 0.15 0.14 0.12 0.16 0.18 0.15 0.17 0.22 0.24 0.20 0.22 0.23 0.24 0.34 0.26 0.29 0.32 0.26 0.24 𝜎 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 0.01 0.00 cof: 𝜇 0.01 0.02 0.01 0.00 0.00 0.01 0.03 0.02 0.01 0.02 0.03 0.01 0.02 0.03 0.02 0.02 0.02 0.04 0.03 0.05 𝜎 0.35 0.36 0.10 0.22 0.21 0.25 0.56 0.12 0.41 0.33 0.23 0.02 0.82 0.25 0.20 0.43 0.45 0.39 0.61 0.52 eta: 𝜇 0.20 0.18 0.21 0.14 0.22 0.09 0.19 0.15 0.24 0.20 0.12 0.21 0.19 0.28 0.34 0.32 0.31 0.30 0.38 0.34 𝜎 8.18 3.82 2.18 3.20 9.29 5.18 5.42 3.68 4.02 2.23 1.37 5.18 2.19 14.1 12.1 10.4 6.16 12.4 5.20 7.17 etl: 𝜇 0.46 0.43 0.52 0.48 0.50 0.33 0.42 0.56 0.46 0.48 0.56 0.62 0.52 0.71 0.62 0.66 0.59 0.68 0.62 0.66 𝜎 10.4 24.5 12.5 8.12 8.64 15.3 12.4 6.15 5.39 7.18 9.15 18.3 16.3 14.3 20.1 16.5 9.72 11.2 9.83 8.98 gmi: 𝜇 na 0.82 0.86 0.68 0.57 0.68 0.78 0.98 1.07 1.11 0.88 0.73 0.85 0.75 0.81 0.86 0.89 0.94 0.92 0.88 𝜎 na 0.26 0.57 0.64 0.62 0.52 0.28 0.56 0.61 0.67 0.48 0.95 0.58 0.77 0.66 0.83 0.74 0.91 0.74 0.80 gya: 𝜇 0.07 0.08 0.05 0.05 0.05 0.06 0.07 0.07 0.06 0.07 0.08 0.08 0.09 0.08 0.08 0.08 0.08 0.07 0.07 0.08 𝜎 0.04 0.05 0.04 0.04 0.04 0.04 0.05 0.06 0.05 0.05 0.04 0.04 0.05 0.04 0.04 0.03 0.04 0.03 0.05 0.04 lqy: 𝜇 0.57 0.51 0.52 0.43 0.64 0.65 0.43 0.67 0.56 0.89 0.66 0.66 0.53 0.38 0.52 0.56 0.42 0.54 0.58 0.49 𝜎 0.16 0.09 0.10 0.03 0.00 0.04 0.06 0.13 0.01 0.10 0.09 0.08 0.12 0.05 0.11 0.13 0.02 0.11 0.15 0.08 lta: 𝜇 0.45 0.45 0.31 0.29 0.28 0.31 0.35 0.38 0.33 0.41 0.43 0.44 0.47 0.43 0.48 0.48 0.44 0.41 0.43 0.46 𝜎 0.22 0.29 0.21 0.26 0.23 0.25 0.25 0.29 0.27 0.26 0.18 0.21 0.22 0.23 0.21 0.16 0.19 0.17 0.25 0.20 ltd: 𝜇 0.63 0.67 0.64 0.67 0.64 0.59 0.66 0.68 0.58 0.63 0.61 0.63 0.63 0.59 0.66 0.67 0.57 0.58 0.65 0.64 𝜎 0.13 0.22 0.23 0.23 0.22 0.23 0.22 0.25 0.24 0.21 0.19 0.20 0.23 0.22 0.20 0.17 0.22 0.21 0.25 0.21 nim: 𝜇 0.07 0.07 0.08 0.07 0.08 0.08 0.07 0.08 0.07 0.07 0.07 0.07 0.08 0.07 0.07 0.07 0.07 0.08 0.07 0.07 𝜎 0.01 0.01 0.03 0.04 0.02 0.02 0.02 0.02 0.01 0.02 0.03 0.00 0.02 0.00 0.02 0.02 0.01 0.01 0.03 0.02 npl: 𝜇 0.01 0.05 0.06 0.09 0.05 0.05 1.01 0.02 0.05 0.06 0.05 0.04 0.05 0.05 0.05 0.06 0.06 0.05 0.05 0.05 𝜎 0.03 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 patm: 𝜇 0.78 0.80 0.64 0.99 36.1 0.85 1.05 1.01 0.44 0.63 1.01 1.42 1.78 0.65 1.77 1.63 2.02 1.39 1.35 1.45 𝜎 1.45 1.58 0.85 3.50 4.65 2.93 5.52 2.37 2.99 2.79 1.85 1.82 3.33 2.61 2.23 3.99 2.06 3.01 1.95 1.89 roa: 𝜇 -0.01 0.02 0.01 0.01 0.01 -0.01 0.00 0.00 0.03 0.00 0.04 0.05 0.04 0.04 0.04 0.04 0.04 0.03 0.01 0.02 𝜎 0.00 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.01 0.00 0.00 0.00 0.01 0.00 0.01 0.01 0.00 roe: 𝜇 0.22 0.18 0.20 0.25 0.15 0.20 0.18 0.39 0.20 0.19 0.18 0.19 0.24 0.26 0.27 0.31 0.25 0.20 0.24 0.20 𝜎 11.8 15.9 12.0 9.10 13.9 12.2 11.0 8 9.62 8.99 6.58 8.67 6.07 10.9 9.09 13.6 14.4 10.5 8.08 7.07 9.51 table a3 could serve as a benchmark analysis for yearly comparison against the overall base ratio statistical (deterministic) characterisation in table 2. source: @authors (2022) table a4. [bank ratios statistics: based on individual bank] ratio 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 cad: 𝜇 0.201 0.187 0.205 0.254 0.265 0.253 0.311 0.223 0.231 0.206 0.260 0.147 0.203 0.218 0.156 0.155 0.213 𝜎 0.051 0.047 0.054 0.048 0.048 0.054 0.050 0.055 0.049 0.049 0.041 0.043 0.043 0.046 0.050 0.053 0.054 cof: 𝜇 0.020 0.021 0.024 0.016 0.025 0.018 0.019 0.017 0.014 0.023 0.021 0.013 0.018 0.022 0.017 0.025 0.019 𝜎 0.008 0.036 0.068 0.042 0.009 0.023 0.022 0.011 0.020 0.018 0.044 0.021 0.012 0.001 5.511 0.042 0.006 eta: 𝜇 0.177 0.193 0.213 0.148 0.291 0.265 0.208 0.328 0.314 0.256 0.169 0.154 0.297 0.196 0.245 0.283 0.184 𝜎 5.012 8.153 10.162 2.169 4.189 3.222 2.176 9.144 1.196 15.196 4.213 7.202 2.211 9.155 12.178 6.184 3.211 etl: 𝜇 0.624 0.562 0.641 0.602 0.454 0.696 0.680 0.340 0.652 0.543 0.427 0.531 0.417 0.621 0.381 0.596 0.394 𝜎 13.175 8.140 6.117 10.149 4.127 18.13 6.182 32.49 14.08 12.129 9.131 15.15 3.124 18.13 20.18 8.120 10.14 gmi: 𝜇 0.660 0.649 0.626 0.938 0.814 0.698 0.763 0.838 1.134 0.998 0.818 1.136 0.876 1.194 0.665 0.728 0.920 𝜎 0.581 0.302 0.414 0.595 0.548 1.088 1.168 0.982 0.544 0.653 1.074 0.566 0.603 0.533 0.650 0.217 0.476 gya: 𝜇 0.070 0.074 0.087 0.063 0.069 0.076 0.054 0.076 0.093 0.072 0.063 0.086 0.074 0.073 0.059 0.071 0.085 𝜎 0.053 0.038 0.037 0.044 0.044 0.049 0.041 0.031 0.056 0.045 0.048 0.045 0.053 0.038 0.042 0.047 0.047 lqy: 𝜇 0.689 0.509 0.794 0.610 0.541 0.409 0.684 0.577 0.301 0.387 0.40 0.555 0.706 0.543 0.716 0.354 0.659 𝜎 0.069 0.107 0.051 0.064 0.089 0.064 0.051 0.093 0.109 0.064 0.075 0.019 0.059 0.088 0.068 0.166 0.124 lta: 𝜇 0.366 0.421 0.473 0.364 0.388 0.455 0.325 0.459 0.453 0.391 0.357 0.477 0.399 0.422 0.335 0.397 0.478 𝜎 0.255 0.194 0.193 0.201 0.249 0.267 0.227 0.189 0.248 0.242 0.266 0.231 0.249 0.197 0.235 0.231 0.233 ltd: 𝜇 0.569 0.640 0.686 0.611 0.588 0.646 0.537 0.623 0.566 0.597 0.605 0.685 0.650 0.695 0.635 0.657 0.709 𝜎 0.242 0.185 0.187 0.218 0.222 0.242 0.202 0.153 0.299 0.232 0.232 0.217 0.234 0.157 0.180 0.192 0.230 nim: 𝜇 0.069 0.062 0.083 0.067 0.081 0.073 0.047 0.068 0.055 0.064 0.079 0.053 0.071 0.069 0.073 0.051 0.089 𝜎 0.022 0.021 0.016 0.015 0.020 0.021 0.015 0.019 0.024 0.016 0.020 0.018 0.019 0.017 0.020 0.018 0.016 npl: 𝜇 0.119 0.089 0.113 0.104 0.102 0.107 0.095 0.119 0.088 0.112 0.058 0.102 0.085 0.116 0.100 0.112 0.115 𝜎 0.024 0.022 0.021 0.022 0.017 0.020 0.023 0.015 0.022 0.024 0.017 0.020 0.021 0.021 0.018 0.024 0.029 patm: 𝜇 0.928 0.829 0.771 0.949 0.865 1.474 1.594 1.432 0.807 1.115 1.236 0.890 1.894 1.145 2.128 1.761 29.14 𝜎 1.955 2.359 2.497 1.016 0.829 2.996 1.816 2.313 0.848 1.362 1.664 1.282 1.685 1.090 1.722 1.538 18.48 roa: 𝜇 0.012 0.022 0.032 0.021 0.028 0.025 0.031 0.018 0.015 0.021 0.016 0.031 0.018 0.030 0.022 0.012 0.025 𝜎 0.002 0.008 0.007 0.009 0.004 0.005 0.006 0.004 0.003 0.001 0.001 0.007 0.002 0.000 0.001 0.003 0.007 roe: 𝜇 0.219 0.248 0.175 0.213 0.149 0.241 0.182 0.382 0.172 0.163 0.326 0.211 0.252 0.202 0.336 0.168 0.267 𝜎 4.071 10.50 12.878 8.082 17.13 26.99 5.393 4.115 9.085 8.080 5.347 8.170 14.80 13.95 12.74 5.191 10.81 table a4 provides a report for the bank ratios statistics on the basis of individual banks. the table could serve as a benchmark analysis for each bank's information as compared against the overall base ratio statistical (deterministic) characterisation in table 2. source: @authors (2022) table a5. relative evidence for priorand afterifrs based on em1 and em2 prior-ifrs [gaap] after-ifrs [ias] computations ratio years of significance** nsp years of insignificance*** nip years of significance** nsa years of insignificance*** #nia scale-up nsa**** ri remarks panel a: based on em1 cad nil 0 [2001-2011] 11 nil 0 [2012-2020] 9 0.000 0.000 no em cof [2001-2003, 2005-2011] 10 [2004] 1 [2012-2017,2018*,a,2019, 020*,m] 9 nil 0 10.98 0.911 ifrs eta [2001, 2004, 2006, 2010, 2011] 5 [2002, 2003, 2005, 2007-2009, 2011] 6 [2012, 2015, 2016, 20182020] 6 [2013, 2014, 2017] 3 7.320 0.683 ifrs etl nil 0 [2001 -2011] 11 nil 0 [2012-2020] 9 0.000 0.000 no em gmi nil 0 [2001 -2011] 11 nil 0 [2012-2020] 9 0.000 0.000 no em gya [2001-2011] 11 nil 0 [2012-2020] 9 nil 0 10.98 1.002 gaap lqy [2001-2006, 2007*,m, 2008] 8 [2009-2011] 3 [2013*,a, 2014-2016, 2019, 2020] 6 [2012, 2017, 2018] 3 7.320 1.093 gaap lta [2004*,a,m, 2010, 2011] 3 [2001-2003, 20052009] 8 [2012-2014, 2016-2020] 8 [2015] 1 9.760 0.307 ifrs ltd [2005*,a] 1 [2001-2004, 20062011] 10 nil 0 [2012, 2017, 2018] 9 0.000 0.000 no em nim [2003*,a,m, 2004, 2006-2008, 2010, 2011] 7 [2001, 2002, 2005, 2009] 4 [2012-2016, 2017*,m, 2020] [2018, 2019] 7 8.540 0.820 ifrs npl nil 0 [2001 -2011] 11 nil 0 [2012-2020] 9 0.000 0.000 no em patm [2001, 2002, 2003*,a,m, 2005, 2006*,a, 2007, 2008*,a,m, 2009*,m, 2010*,a,m, 2011*,a,m] 10 [2004] 1 [2012*,a,m, 2013, 2014, 2015*,a,m, 2016, 2017a, 2020] 7 [2018, 2019] 2 8.540 1.171 gaap roa [2001-2011] 11 nil 0 [2012-2020] 9 nil 0 10.98 1.002 gaap roe [2001-2003, 2008, 2010] 5 [2004-2007, 2009, 2011] 6 [2015, 2018-2020] 4 [2012-2014, 2016, 2017] 5 4.880 1.025 gaap panel b: em2 cad [2004, 2005* ,a, 2011*,a,m] 3 [2001-2003, 20062010] 8 [2012, 2014, 2015*,a, 2017, 2019*,a,m, 2020] 6 [2013, 2016, 2018] 3 7.320 0.333 ifrs cof [2001-2006, 2008, 2009*,a,m, 2010] 9 [2007, 2011] 2 [2012-2017, 2018*,a, 2020*,m] 8 [2019] 1 9.760 1.125 gaap eta [2004*,m, 2005-2007, 2009*,a, 2010] 6 [2001-2003, 2008, 2011] 5 [2012, 2013*,a,m, 2015-2017, 2018, 2020] 7 [2014, 2019] 2 8.540 0.857 ifrs etl [2005* ,a] 1 [2001-2004, 20062011] 10 [2014, 2016, 2018*,a,m, 2020*,a] 4 [2012, 2013, 2015, 2017, 2019] 5 4.880 0.205 ifrs gmi nil 0 [2001 -2011] 11 nil 0 [2012 -2020] 9 0.000 0.000 no em prior-ifrs [gaap] after-ifrs [ias] computations ratio years of significance** nsp years of insignificance*** nip years of significance** nsa years of insignificance*** #nia scale-up nsa**** ri remarks gya [2001, 2003, 2004*,a,m, 20052007, 2008*,m, 2010, 2011] 9 [2002, 2009] 3 [2012, 2014-2016, 2017*,m, 2019, 2020] 7 [2013, 2018] 2 8.540 1.286 gaap lqy [2001, 2003, 2006, 2007*,a,m, 2008, 2009,a] 6 [2002, 2005, 2004, 2010, 2011] 5 [ 2014-2016, 2019, 2020] 5 [2012, 2013, 2014, 2017, 2018] 4 6.100 1.200 gaap lta [2005*,a, 2009*,a,m, 2010, 2011] 4 [2001-2003, 20052008] 7 [2012-2020] 9 0 10.98 0.444 ifrs ltd [2002, 2005*,m, 2009] 3 [2001, 2003, 2004, 2006-2008, 2010, 2011] 8 [2012, 2014, 2015*,a,m] 3 [2013, 2016-2020] 6 3.660 1.000 equal nim [2001*,a,m, 2003, 2004*,m, 20052011] 10 [2002] 1 [2012*,a,m, 2013-2017] 6 [2018-2020] 3 7.320 1.667 gaap npl nil 0 [2001-2011] 11 nil 0 [2012 -2020] 9 0.000 0.000 no em patm [2001*,a, 2003*,m, 2005*,m, 2006*,a, 2007, 2008, 2010, 2011] 8 [2002, 2004, 2009] 3 [2012-2014, 2015*,m, 2016, 2020] 6 [2017-2019] 3 7.320 1.333 gaap roa [2001-2011] 11 nil 0 [2012-2020] 9 nil 0 10.98 1.222 gaap roe [2001, 2002, 2004, 2008, 2010] 5 [2003, 2005-2007, 2009, 2011] 6 [2014*,a,2015,2017*,m,,20182020] 6 [2012, 2013, 2016] 3 7.320 0.833 ifrs * indicate sig. @0.05, otherwise 0.01. em is earnings management. **: (statistical) ‘significance’ implies evidence of em, while ***: (statistical) ‘insignificance’ indicates no evidence of em. ****scaling index to equalise sample partition points. we use the prior/after [scale-up] approach, which is read as for ‘every one year of ifrs, there is 1.22 years of gaap'; hence, we multiply the numbers of significance years [column. nsa] by the ratio [1.22]. an alternative approach is the after/prior [scale down] approach, which reads as every one year of gaap in the study corresponds to 0.82 years of ifrs. for significant years, the 'relativeness ratio' for the preto post-ifrs is indicated in the parenthesis against each bank-specific ratio. for instance, the table is read: based on em1, numbers of significance (i.e., em) years for eta are [2001, 2004, 2006, 2010, 2011], the ratio of em years for prior/after is 5/6 = 0.833 (untabulated) but with the scale-up [5/6 × 1.22, i. e. , 5/7.320].