Abstract
<p><em>This research examines the phenomena of loan restructuring decision behavior carried out by BPRs’ actors (loan officers or loan managers) in West Java Province. It is aimed to answer the research questions: why rural banks (BPRs) as institutional fields pay less attention to loan restructuring to recover the accounting losses from the provision of problem loans. According to Otoritas Jasa Keuangan (2017), 94 out of 290 BPRs in West Java Province did not feel eager to restructure the problem loans despite having a ratio of Non-Performing Loans (NPL) more than 5% threshold. The behavior itself could be motivated by both symbolic factors and material factors as carriers for their behavior. Two prior studies conducted by Micucci and Rossi (2010), Dardac, Barbu, and Boitan (2011) examined loan restructuring based on policies and its impact on banks as institutional but did not reveal the behavioral side of the restructuring decision-making proceed by an individual of loan managers and loan officers. Thus, this study is aimed at observing the individual motivation of actors symbolized by loan managers and loan officers in rural banks (BPRs) in West Java Province. The analysis of decision taken by loan officers or loan managers in this study uses an institutional logic basis which theory focuses on the logic of actors both individually or collectively in such a particular economic sector. The results explain that symbolic carriers (regulations and accounting standards) and material carriers (informal practices, routines, individual target, accounting practice difficulties) revealed the phenomena related the behaviour of actors’ (loan managers and loan officers) in BPR which put less attention on loan restructuring - as one of the credit risk mitigation for troubled debt. Second, there is similarity for actors to avoid the troubled debt restructuring due to some difficulties in recognizing loss occurred in the beginning period of restructuring.</em><em></em></p><strong><em>Keywords</em></strong>: <em>And Accounting Practice, Behavior, Institutional Logics, Loss On Restructuring, Material Carriers, Motivation, Symbolic Carriers.</em>
Highlights
The banking industry in Indonesia has its uniqueness
Otoritas Jasa Keuangan, Bank Indonesia, and Ikatan Akuntan Indonesia issued the regulations and standard which applied for Bank Perkreditan Rakyat (BPR) as guidance in loan restructuring
The response of respondents showed that 100% of total respondents carrying external and internal regulations as a topic related to loan restructuring, namely the Otoritas Jasa Keuangan (OJK) Regulation, Bank Indonesia Regulations, and accounting standards. b
Summary
Banking Act Number 10 the year 1998 concerning Amendments to Banking Act Number 7 the year 1992 classifies banks in Indonesia into Commercial Banks and Bank Perkreditan Rakyat (BPR). According to these Acts, Rural Banks have similar business entities as Commercial Banks in raising funds from public and lending money to improve the lives of people. There are restrictions in BPR business activities, such as opening branches prohibited outside one province and product services are only permitted to take deposits in the form of time deposits, savings, and/or other similar forms. The region which has the highest number of BPRs is West Java Province by 290 BPRs and 1,054 BPR offices operating actively. Business activities of BPRs (OJK, 2017) are dominated by loans, which its portion approximately 71% of the total assets of BPRs concentrating on micro and small lending segments
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