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Determinants of Financial Performance of State-owned Enterprises with Government Subsidy as Moderator

Author

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  • Aminullah Assagaf

    (Department of Economics and Business, Dr. Soetomo University, Surabaya Indonesia)

  • Hapzi Ali

    (Department of Mercu Buana University, Jakarta Indonesia)

Abstract

The purpose of this research is intended to study the factors that affect the financial performance of State-owned enterprises (SOE). In this study used purposive sampling method seven SOE with observations during the last 11 years. In the data analysis, this study uses linear regression model and its management using SPSS Software-Amos 23. The results of this study found that the government subsidy variable and significant negative effect on the financial performance of the alpha 0.01, which means that the SOE is difficult to manage the company as a independently if the subsidy program and the additional capital the government continues to do every year. Regression calculation results also found that strategic profitability and significant positive effect on alpha 0.10 to financial performance, which means that the company's management is still likely to perform earnings management practices to affect the company's financial performance. Capital structure variables showed a positive effect and no significant effect on financial performance for the investment decisions SOE financed with debt tend not financially feasible so it does not affect financial performance. Payed on the investment decision is a low economical feasibility of using the size of externalities or social benefit is greater than the social cost. Government subsidy used as independent variables and as a moderator variable, the study found that government subsidy strengthen relationships variable capital structure with financial performance, because the government subsidy strengthen the link between debt with financial performance, because the government encouraged SOE to seek a loan to reduce the burden of government subsidies or additional capital.

Suggested Citation

  • Aminullah Assagaf & Hapzi Ali, 2017. "Determinants of Financial Performance of State-owned Enterprises with Government Subsidy as Moderator," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 330-342.
    • Handle: RePEc:eco:journ1:2017-04-42
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    References listed on IDEAS

    as
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    2. Joshua Abor, 2005. "The effect of capital structure on profitability: an empirical analysis of listed firms in Ghana," Journal of Risk Finance, Emerald Group Publishing, vol. 6(5), pages 438-445, November.
    3. Schreiner, Mark, 1997. "How To Measure The Subsidy Received By A Development Finance Institution," Economics and Sociology Occasional Papers - ESO Series 28323, Ohio State University, Department of Agricultural, Environmental and Development Economics.
    4. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    5. Aminullah Assagaf, 2014. "Influence Policy and Fitness State Electricity Company (PLN) Investment Business Generation," International Journal of Empirical Finance, Research Academy of Social Sciences, vol. 3(5), pages 234-242.
    6. Juniati Gunawan, 2015. "Corporate social disclosures in Indonesia: stakeholders’ influence and motivation," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 11(3), pages 535-552, August.
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    Cited by:

    1. Ahmad Saleh Ghadwan & Wan Marhaini Wan Ahmad & Mohamed Hisham Hanifa, 2023. "Financial Planning for Retirement: The Moderating Role of Government Policy," SAGE Open, , vol. 13(2), pages 21582440231, June.

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    More about this item

    Keywords

    Financial Performance; Strategic Profitability; Financial Indicators; Capital Structure;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G3 - Financial Economics - - Corporate Finance and Governance

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