Title: Understanding window dressing practices among Indonesian construction companies: an effort to minimise investment risks

Authors: Gatot Iwan Kurniawan

Addresses: Sekolah Tinggi Ilmu Ekonomi (STIE) Ekuitas, PH.H. Mustofa Street, No.31, Bandung, Indonesia

Abstract: The current focus of Indonesian government on infrastructure development provides an opportunity for funding agencies to invest in construction and building companies. This opportunity, however, is not always directly proportional to the share performance of these Indonesian building and construction companies. This study examines window dressing practices conducted by some construction and building companies as an attempt to manipulate their financial status. Companies carry out this manipulative practice to attract possible investors and other funding agencies in their business. To detect and avoid this fraudulent practice, investors need to carefully calculate the cash holdings and stock performance of these companies. The study found different result of calculation between the two techniques. Cash holdings technique confirms the fact that most companies perform window dressing to attract investors. Meanwhile, showing the real firm performance, stock performance technique is only adopted by a small number of companies. This finding is expected to contribute to risk management, in relation to identifying a risk.

Keywords: cash holdings; investment risk; stock performance; window dressing; Indonesia.

DOI: 10.1504/IJSSS.2021.115841

International Journal of Society Systems Science, 2021 Vol.13 No.1, pp.3 - 15

Received: 19 Oct 2019
Accepted: 24 Feb 2020
Published online: 25 Jun 2021 *