Article: Dynamic linkages between operational activities and financial performance in Indonesia's railway sector company: PT KAI (Persero) Journal: International Journal of Trade and Global Markets (IJTGM) 2026 Vol.22 No.5 pp.325 - 350 Abstract: We aim to investigate the specific operational activities that influence the financial performance of the natural monopoly railway company in Indonesia, namely PT KAI (Persero). We use the vector error correction model (VECM) method to estimate an econometric model using the monthly data from PT KAI (Persero)'s financial report from 2014 to 2023. Our results confirm the principal-agent and X-inefficiency within the company. We found that service management has a long-term relationship with financial performance. We also found that in the short-term, firm size and service management have one-directional relationships with financial performance. Based on these findings, policymakers need to invest in service quality, customer satisfaction, and resource management. It is also important to create competitive incentives and performance-based regulatory frameworks to reduce inefficiencies caused by monopolies and encourage sustainable financial performance in state-owned enterprises. Inderscience Publishers - linking academia, business and industry through research

Title: Dynamic linkages between operational activities and financial performance in Indonesia's railway sector company: PT KAI (Persero)

Authors: Didiek Hartantyo; Wimboh Santoso; Djoko Suhardjanto; Irwan Trinugroho

Addresses: Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir Sutami 36 A, Surakarta, 57126, Indonesia ' Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir Sutami 36 A, Surakarta, 57126, Indonesia ' Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir Sutami 36 A, Surakarta, 57126, Indonesia ' Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir Sutami 36 A, Surakarta, 57126, Indonesia

Abstract: We aim to investigate the specific operational activities that influence the financial performance of the natural monopoly railway company in Indonesia, namely PT KAI (Persero). We use the vector error correction model (VECM) method to estimate an econometric model using the monthly data from PT KAI (Persero)'s financial report from 2014 to 2023. Our results confirm the principal-agent and X-inefficiency within the company. We found that service management has a long-term relationship with financial performance. We also found that in the short-term, firm size and service management have one-directional relationships with financial performance. Based on these findings, policymakers need to invest in service quality, customer satisfaction, and resource management. It is also important to create competitive incentives and performance-based regulatory frameworks to reduce inefficiencies caused by monopolies and encourage sustainable financial performance in state-owned enterprises.

Keywords: operational activities; financial performance; railways; VECM; vector error correction model.

DOI: 10.1504/IJTGM.2026.156297

International Journal of Trade and Global Markets, 2026 Vol.22 No.5, pp.325 - 350

Received: 10 Jul 2025
Accepted: 17 Oct 2025
Published online: 09 Sep 2026 *

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Title: Dynamic linkages between operational activities and financial performance in Indonesia's railway sector company: PT KAI (Persero)

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