Abstract
More than often, banks are ranked based on their total assets. The bigger its assets the higher its position in the rank. To maintain its position in a higher rank, a bank may take extra efforts, to maintain its total assets high, whether by increasing its performance or manipulating their financial statement like window dressing. The higher its position in the rank the more likely a bank to perform temporary banking activities at the year end to increase its assets. The examples of the such activities are increasing temporarily customer deposits in the year end. Those temporary activities in are tending toward a window dressing.This paper examines the possibilities of window dressing activities at the year end conducted by high ranked banks by temporarily pushed their assets up through extra efforts in gathering temporary customer deposits at the year end. If those window dressing activities really exist, researchers expect that data will show temporary increase in assets, customer deposits and also cost of funds of high ranked banks in Indonesia. Researcher uses the monthly data and started from January 2006 untill December 2011.This research shows an evidence that bank total assets increase significantly at the year-end and the increase is temporary. Further, the increase in total assets appears to be funded with purchased demand deposit, savings, and time deposits. This research also shows that larger banks are more likely than smaller banks to exhibit window dressing.Keywords: banks, window dressing, asset.
Highlights
In banking industry, it is a common to judge an improvement of a bank performance by its improvement in the rank position of total assets
Based on several conversations with some bankers, the researcher infers that many bankers get pressures to conserve their total assets at the year ends and take special efforts to avoid their assets going down
This research focused on year-end total assets figure, instead of quarter end figure, because it is assumed that the window dressing activities are conducted by big-ten banks to maitain their position in the total asset based rank of banks
Summary
It is a common to judge an improvement of a bank performance by its improvement in the rank position of total assets. Yang and Saffer (2009) at the begining of their paper said that, banks have more opportunities and incentives to perform window dressing, compared to other kind of firms Banks can inrease their total assets temporarily at the year end by making temporary loans from the Central Bank and invest the fund in securities, to increase the bank total assets at the year end balance sheet. This research focused on year-end total assets figure, instead of quarter end figure, because it is assumed that the window dressing activities are conducted by big-ten banks to maitain their position in the total asset based rank of banks. This research followed a theory mentioned by Yang and Saffer (2009) that larger banks are more likely to exhibit upward window dressing in total assets As explained earlier, this is because larger banks have more motivation to keep their high position the total assets based rank of banks
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