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Essay: Research proposal: The efficiency of stockbroking companies in Indonesia

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  • Published: 5 October 2015*
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1.1.1 SHARE
Share a wealth channel capital providers of the most popular and it is a sign of the participation of individuals or a company. Share issue also is the selection of a company when the company needs capital or funding to launch a business. Stocks are investments that greatly favored by investors because earnings are very high profits. Shares can be seen as a very important sector in boosting economic growth of a country.
The stock exchange is an institution or center transacting securities transactions and also the main base for easy drain of wealth or property to individuals, institutions and various sectors to help expand the wealth and boost investment to ensure rapid economic growth of a country. Bursa is a special place to buy and sell securities such as bonds, share certificates and so on. The establishment of stock exchanges has several objectives, including providing the market place that allows those in need of capital to capital through the purchase of listed securities. Provide relevant services and investment business stock information to investors and to create interest in the securities market among investors and the public. Among the importance and role of the stock exchange on the economy is melt currency and channeled to investment projects. provides general index of price movements, property and investments, reflecting the country’s economic position. Contribute to improving the economic viability of various development projects. Medan countries achieve currency stability of securities transactions in order to avoid inflation. In the process of buying and selling shares of affairs, there are middlemen who arrange the share purchase between buyer and seller. Middleman known as a broker. Broker is an agent who buys and sells on behalf of another person (Hawkins, 2006).
The stock broker is a company that manages the share purchase transaction that connects between the seller and buyer at a time or as a middle man. This broker companies registered with the Securities and Exchange Commission. Stockbroking companies will receive a commission every time there is a transaction stocks.
The development of the capital market in Indonesia has increased very rapidly, especially after the government introduced several regulations in the banking and financial sector including capital market. The actors in the capital market has realized that stock trading can provide a good return and provide a significant contribution to the economic development of their country.
Capital market activities in Indonesia have long established that since 1912, when it was still done entirely by the Dutch. At that time, the stock is traded stocks and bonds owned by the Dutch East Indies government. While the capital markets have been in existence since 1912, the development and growth of the Indonesian capital market did not go smoothly as expected because due to several factors such as World War I and II, the transfer of power and so on. After independence, the government of Indonesia took over and continued trading of shares has been led by the Dutch East Indies. Indonesia’s government to reactivate successful capital market in 1977 and it is well developed every year. Their success is due to the provision of various incentives and regulations issued by the government.
In addition, Indonesia’s rapid economic development led company requires a large capital investment to boost the country’s economy. To obtain a large capital, they do restructuring to ensure the launch of the affairs of their investment. The restructuring undertaken by the investment company shares is in terms of financial and non-financial factors. Restructuring of non-financial factors are involved strengthening the professionalism, reducing internal ownership and increase the level of confidence of the various parties. In terms of the financial position, involving an increase in financial capital, raising substantial funds to the company or firm, increased opportunities for the development of the company and improve the financial structure of the company.
After Indonesia experienced economic growth, there are many stockbrokers. Stockbroking company is a financial institution that facilitates the purchase and sale of financial securities between buyers and sellers. Full-service brokerage firms or traditional usually carry more than just trading stocks or bonds. This type of brokerage firm employees entrusted with the responsibility to research the market to provide appropriate recommendations and by doing so they direct the actions of pension fund managers and portfolio managers alike. These companies also offer margin loans to customers who were approved for the purchase of investment credit, subject to the terms and conditions agreed upon. Traditional brokerage firms have also been a source of recent stock price and quote.
Role of stockbroking companies is to support the capital market, in terms of launching the round of funding and information, support systems and exchange activities as part of the capital market and as a business unit. It is also responsible for investing activities Increase in capital markets to support the economy. Stockbroking firm, very important and serves as an intermediary that channel the flow of funds and information between investors and financiers and investors with a publisher. In addition, the company is also a pillar of the exchange (capital markets) in improving mobility and total investment.
Efficiency is the most important factor for every sector of the economy throughout the country. Efficiency refers to the ability of managers and workers to do all the activities or organizations working in the best possible way beyond what was planned (Salman, 2014). The concept of efficiency is where there is a department or organization using the resources or inputs that are optimized to produce the output. Output refers to the input or output of services resulting from an organization. In other words, the concept of efficiency explains the relationship between the output produced by an organization with input used.
According to Solomon (2007), the study found that efficiency plays an important factor in the management of a company and the company said most frequently encountered problems such as lack of capital, lack of skills, using old technology and limited marketing channels. It is one of inefficiencies in the company.
In the study of organizational efficiency, Data Envelopment Analysis (DEA) is used to measure a company’s efficiency and productivity in all sectors of the organization. DEA is used to analyze the efficiency and productivity of the company and then make comparisons between companies to identify the efficiency and productivity of a company whether there are efficiency and productivity or vice versa (Talib, 2009). In an article that represents the DEA, Farrell (1957) compelled to develop methods and better models to assess the productivity and recommend the use of DEA to study the efficiency. Research conducted by Fare, Grosskopf and Lovell (1985) promote the use of DEA. Since then, many studies efficiency in other sectors have been using this technique. Within the framework of the DEA, the performance of individual firms evaluated with respect to the efficient frontier, which was built by a linear combination of existing firms.
DEA also widely used in various fields such as education, banking, public services, and so on. The DEA method can help researchers compare the company’s performance in terms of efficiency and productivity and to assess which companies are more efficient among the companies surveyed. The main point is to give the DEA efficiency score for each decision making unit (DMU). Set data in DEA comprising DMU defines a set of production which is the boundary points that form the boundaries of efficiency. The main objective DEA method is used to determine the relative position in the set of production units.
Therefore, the aim of this study was to determine the efficiency and productivity of the stock broking companies in the securities industry in Indonesia by using DEA and compare the companies to see the extent of continuity in their services and see which companies are most efficient and productive.
Securities companies to broker mediation between capital providers and businesses with low cost and with maximum efficiency involving shares traded on the secondary market in Indonesia. These companies usually receive the largest percentage of their income from brokerage commissions for transactions in shares. Therefore, how to maximize the shares in the stock market is the main objective of any securities firm in Indonesia. In addition, the use of modern technology has become a tool for trading or stock transactions over the phone or Internet, it encourages companies to invest in securities electronic trading technology to seize more shares traded. Therefore, a securities firm in Indonesia to pursue the maximization of the market in terms of dealing in shares and broker to rake in more revenue and capture market share from brokers and dealers. Could securities industry in Indonesia has become increasingly competitive in line with developments in the economy. Therefore, securities companies trying to expand their market share with their investment.
Institutional stockbrokers seen facing increasing pressure to lower trading costs, which was driven by a decline in commissions. However, traditional full service broker remains authorities and commissions they are still higher than the marginal cost of trade execution. It can be seen that the commission is an easy way to charge fixed prearranged for long-term earnings premium to the broker’s services.
In addition, due to the rapid pressure prevailing in the securities industry, causing a dumping stockbroking firm or company from within and outside the country to apply competition between domestic companies and foreign companies and there are companies stockbroker Indonesia which had closed as a result of problems -Problem limited in their organizations. Among the problems that occur are in terms of service, administration and reliability. In terms of service and reliability, stockbrokers are not effectively provide services to customers where they do not provide accurate information, deceive customers regarding investment scheme company and falsifying the name of the company selling shares to profit. In terms of administration, there are companies who do not trust in the performance of their duties and the exercise of an inefficient system. Eg company PT Signature Capital Indonesia stock exchange suspended by Indonesia as a result of problems in the administrative system inefficient organization (Antique, 2008).
Apart from that, there is also the problem of irregularities in the company’s investment in Indonesia and sometimes companies will twist the stock price for stock investors misleading. When there is such a thing, then it will affect the role of stockbrokers and brokerage firms also cause performance shares to fall. Deviations in the investment company is absolutely unavoidable and the risk is enormous.
Next, the manipulation of financial statements is an ongoing problem in Indonesia. There are three main reasons why management manipulate financial statements. First, there are many cases of corporate executive compensation directly tied to the financial performance of the company. As a result, management has an incentive to continue in creating a positive performance in the financial condition of the company to meet the performance expectations set and enhance their personal compensation. The problem occurs because it is difficult to detect by investors as a result of the relationship between the independent auditor and corporate clients. In addition, auditors usually receive a large amount of money (bribes) of companies that audited Therefore, there is an implicit pressure to confirm the company’s financial statements in order to maintain their business.
In conclusion, active securities industry and this thriving allow stockbroking companies are at an optimum level if it is sufficiently profitable. Instead, it can be seen that the efficiency of the stockbroking company performance is influenced by many factors, internal and external environment. The negative effects of the existence of the organization’s internal problems, issues and problems of distortion of competition in the stockbroking company which lead to an unfavorable impression. Therefore, the results from the above description, the objectives of the research to be undertaken is to analyze the efficiency of stockbrokers Indonesia and compare the efficiency between companies stockbroking Indonesia to look at factors influence the size of the organization and efficiency of each company.
– What factors affect the efficiency of stockbrokers Indonesia?
– Does Stockbroking Companies in Indonesia has high efficiency compared to foreign companies?
– Are all stockbrokers Indonesia performed efficiently?
1.4.1 General Objective
– Evaluate the efficiency of stockbroking companies in Indonesia using DEA approach.
1.4.2 Specific Objectives
– To study the factors that affect the level of efficiency.
– To identify the performance, efficiency, stockbrokers Indonesia and efficiency comparisons between companies stockbroking Indonesia.
– To determine the position of the stockbroking company in Indonesia.
– To apply the knowledge and data in cellophane analysis (DEA).
– To increase knowledge about the securities industry in Indonesia through data processing and information gathering.
– Can be used as information material to be used for the development of economic science.
– Hopefully the results of this study are useful and can be used as a reference for parties or for policy formulation and decision making related to the problems existing in this study.
This field of research focused on the efficiency of stock broking companies in Indonesia. The main focus is elected stockbroking company in Indonesia. This study will use more than one hundred stockbroking companies and each company data taken from a period of seven years beginning in 2007 until 2013. The brokerage firms choice is based on full information and taking into consideration the input and output of the company. Information annual data obtained are of Indonesian stock exchange. The aim of this study is to provide an approach to the interests of efficiency that can be used as a step in the management of the company’s strategy and applying analytical methods cellophane data (DEA)..

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