Implication of Liquidation Method to Recovery Rate and Residual Asset: The Case of Rural Banks in Indonesia

Hasan Ashari, Trinandari P. Nugrahanti

Abstract


Bank liquidation is one method of bank resolution conducted by resolution authority. The bank's resolution occurs when the authority establishes a bank declared/tends to fail and there is no private sector intervention that can restore the bank's ability in a short time for normal procedures. This study aims to explain the application of liquidation on rural banks liquidated by Deposit Insurance Corporation. Indonesia (IDIC) as well as its implications for recovery rate and residual assets resulting from the liquidation process. The methodology in this research is qualitative and the nature of this research is descriptive analysis. The authors used two different types of sources. First, direct observations to IDIC office. Second, Semi-structured interviews were conducted with the chairman of liquidation team of rural banks, the official of IDIC and Auditors who engage audit on or attestation on the liquidated bank, which time informal interviews were conducted, and documents were also collected. Based on the result of this research, it is concluded that with the implementation of liquidation method, there are critical issues that require IDIC attention, such as the fraud rate that occurred before the bank was liquidated, time of submission of problem banks from Bank Supervisory Authority (BSA) to IDIC, and decrease of asset quality and flow of documentation and information of failed bank, personnel readiness, supervision, handling of liquidation assets and limitations of liquidation guidelines. The critical problem faced above will ultimately affect the recovery rate and residual assets after the liquidation process ends.

Keywords


Liquidation; Recovery Rate; Residual Asset

Full Text:

PDF

References


Nugrahanti TP, 2016, Risk Assessment and Earning Management in Banking of Indonesia: Corporate Governance Mechanisms, Global Journal of Business and Social Science Review, 4(1), 1-9.

World Bank, 2007, World Development Indicators 2007, Washington DC, World Bank, available at: https://openknowledge.worldbank.org/handle/10986/8150

Couwenberg O and De Jong A, 2008, Costs and recovery rates in the Dutch liquidation-based bankruptcy system, European Journal of Law and Economics, 26(2), 105–127. http://doi.org/10.1007/ s10657-008-9058-6

Staubus GJ, 1959, The Residual Equity Point of View in Accounting, The Accounting Review, 34(1).

Chatfield MA and Vangermeersch R, (eds.), 1996, The History of Accounting: An International Encyclopedia, New York and London: Garland Publishing

Van Mourik C, 2010, Equity theories and financial reporting: past, present and future, Annual Conference on Accounting, Business & Financial History, 22(1), 17–34.

Blessing A and Onoja EE, 2015, The role of financial statements on investment decision making: a case of the united bank for africa plc (2004-2013), European Journal of Business, Economics and Accountancy, 3(2), 12–37. http://doi.org/10.1080/00014788. 2015.1044495

Grunert J and Weber M, 2005, Recovery rates of bank loans: empirical evidence for Germany, University of Mannheim working paper. Available at: https://ub-madoc.bib.uni-mannheim.de/1073/1/ abwl_WP_124.pdf.

Jayne G and Allan Hodgson A, 2010, Accounting Theory 7th edition John Wiley & Sons Australia.

Kieso DE, Jerry JW and Terry DW, 2007, Intermediate Accounting Twelfth Edition, John Willey & Sons, Inc

Indonesian Institute of Accountants (IAI), 2017, Financial Accounting Standard per Effective 1 January 2017, Jakarta: Financial Accounting Standards Board of Indonesia

Beams FA, Brozovsky JA, Shoulders CD, 2000, Advanced Accounting (7th ed.), New York: Prentice-Hall

Parigi BM, 2014, The economics of bank resolution, University of Padova Italy and CESIFO Germany in UFSP Finanzmarket-regulierung, Zurich

Mason JR, 1999, Evidence on Direct Bankruptcy Costs: Liquidation Rates, Opportunity Costs, and the Value of Inter-temporal Asset Storage, Drexel University, Working Paper No. 9906

Warner JB, 1977, Bankruptcy costs: Some evidence, Journal of Finance, 32(2), p.337-347

Weiss L, 1990, Bankruptcy resolution: Direct costs and violation of priority of claims, Journal of Financial Economics, 27(2), p.285-314

Hoskin K and Woolford I, 2011, A Primer on Open Bank Resolution, Reserve Bank of New Zealand Bulletin 74(3), 5–10.

De Luna Martinez J, 2000, Management and Resolution of Banking Crises: Lessons from the Republic of Korea and Mexico, World Bank Discussion Paper 413.

Act Number 24 of 2004 concerning the Deposit Insurance Corporation, Indonesia (IDIC).

Thomson JB, 1991, Predicting Bank Failures in the 1980s, Federal Reserve Bank of Cleveland Economic Review, 27(1), 9-20.

International Association of Deposit Insurers (IADI), 2005, General Guidance for the Resolution of Bank Failures, The Research and Guidance Committee International Association of Deposit Insurers Working Paper.

Umar H, 2016, Corruption The Devil, Jakarta: Trisakti University Publisher

Ragalevsky SV and Ricardi SJ, 2009, Anatomy of a bank failure, Banking Law Journal, 126, p.867

White P and Yorulmazer T, 2014, Bank Resolution Concepts, Tradeoffs, and Changes in Practices, Federal Reserve Bank of New York Economic Policy Review, 20(2), 1–37.

Allen F and Gale D, 2000, Financial Contagion, Journal of Political Economy, 108(1):1-13.

Acharya V and Yorulmazer T, 2008, Information contagion and bank herding, Journal of Money, Credit and Banking, 40(1), 215–231.

Brunnermeier MK and Pedersen LH, 2009, ìMarket Liquidity and Funding Liquidity, Review of Financial Studies, 22(6), p.2201-2238

Macey JR and Miller GP, 1988, Bank Failures, Risk Monitoring and the Market for Bank Control, Faculty Scholarship Series, Paper 1741.

Uche OB, 2015, The Relation between Liquidation and Banking Industry in Nigeria. International Journal of Small Business and Entrepreneurship Research, 3 (7), 88-99.

Mayes DG, 2005, Who pays for bank insolvency in transition and emerging economies? Journal of Banking and Finance, 29(1), 161–181. http://doi.org/10.1016/j.jbankfin.2004.06.020

Bennett RL and Unal H, 2014, The effects of resolution methods and industry stress on the loss of assets from bank failures, Journal of Financial Stability, 15, 18–31. http://doi.org/10.1016/j.jfs. 2014.06.007

Benneth RL, 2001, Failure Resolution and Assets Liquidation: Result of an International Survey of Deposit Insurance, FDIC Banking Review 14(1), 1–28.

Creswell JW, 2009, Research design: Qualitative, quantitative, and mixed methods approach (3rd eds.), Thousand Oaks, CA: Sage Publication.

Cooper DR and Schindler PS, 2006, Business Research Methods, Eleventh Edition, McGraw Hill, Retrieved from http://130.209.236.149/headocs/31businessresearch.pdf

Wahyuni S, 2015, Qualitative Research Method-Theory and Practice, Second Edition, Jakarta: Salemba Empat Publisher

Arikunto S, 1992, Prosedur Penelitian, Jakarta: Rineka Cipta.

Sumanto, 2014, Theory and Application of Research Methods, Yogyakarta: Caps Publishing Publisher

Moleong LJ, 2013, Qualitative Research Methodology, Revised Edition. Bandung: PT Remaja Rosdakarya Offset Publisher.

Sugiyono, 2013, Management Research Methods, Bandung: Alfabeta Publisher

Bernstein D, 1996, Asset Quality and Scale Economies in Banking. Journal of Economics and Business, 48(2), 157–166. http://doi.org/ 10.1016/0148-6195(96)00074-4


Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

e-ISSN No: 2356-2536
p-ISSN No: 2528-6854

Supported by :


Jurnal Online
Management Jurnal Elektronik


Pusat Dokumentasi dan Informasi Ilmiah
Lembaga Ilmu Pengetahuan Indonesia



Indexed by :