DETECTING OF BOND DEFAULTS INDICATIONS USING FINANCIAL STATEMENT AND SHENANIGANS INDICATORS

Arya Wedha Rieantiari,Ancella Anitawati Hermawan

doi:10.47312/aar.v5i02.310

Abstract

<em>This study aims to detect indications of bond defaults by conducting a thorough analysis of PT Trikomsel Oke, Tbk (TRIO)'s financial statements. TRIO's financial statements show that the company's revenue and profits increased during 2009-2014. However, the Indonesia rating agency (PEFINDO) declared default on the two bonds issued by TRIO in November 2015, even though the signal TRIO gave to its financial statements was an unqualified opinion from one of the big 4 Public Accountants for six consecutive years and PEFINDO's investment grade. This study uses a case study method.. Financial report data are analyzed by financial ratios and financial indicators of shenanigans. Evidence shows that there are indications of creative accounting and shenanigans before bonds were declared defaulted in 2015. With these results, this study suggests investors and creditors be more vigilant in analyzing published annual reports</em>

Highlights

Debt is the primary funding source for companies throughout the world (Burgstahler, Hail, & Leuz, 2004)
The Indonesia rating agency (PEFINDO) declared default on the two bonds issued by TRIO in November 2015, even though the signal TRIO gave to its financial statements was an unqualified opinion from one of the big 4 Public Accountants for six consecutive years and PEFINDO's investment grade
The main objective of this study is to explore more into how TRIO's financial condition will be analyzed using vertical and horizontal financial ratio analysis and want to detect whether there are indications or red flag actions of shenanigans

Summary

Introduction

Debt is the primary funding source for companies throughout the world (Burgstahler, Hail, & Leuz, 2004). TRIO is one of the public entities conducting business expansion by borrowing funds from banks, Initial Public Offering (IPO) in 2009 and issuing bonds amounting to SGD 115,000,000 in 2013 and SGD 100,000,000 in 2014. Both bonds were declared default by Rating Indonesian Securities (PEFINDO) on November 10, 2015 (Budipratama & Dito, 2015). TRIO gets an idA rating from PEFINDO. In December 2015, TRIO stated the inability to pay interest on bonds that had been issued in 2013 and 2014. TRIO's inability to pay its debt obligations affected PT Bank Negara Indonesia Tbk (BNI). According to BNI's 2017 director, Achmad Baiquni, BNI's largest non-performing loan (NPL) contributor in the first quarter of 2017 was TRIO (Republika, 2017)

Objectives

Methods

Results

Discussion

Conclusion