Operating Cash Flow, Earning Response Coefficient, and Fixed Asset Revaluation: Study on Manufacturing Company

The purpose of this study to determine the effect of operating cash flow to the abnormal return and the effect of operating cash flow to the abnormal return of companies that conduct the revaluation is higher than that of non revaluation which adopted SFAS No. 16 (2012). The analysis used in this study are multiple regression, for the period 2012-2015. The results showed that operating cash flow has no effect on non-sampled companies revaluation, while the sample of firms that perform revaluation proves that operating cash flow has a positive and significant impact on the abnormal return. Moreover, the effect of revaluation policy can strengthen the influence between operating cash flow to the firm abnormal return than non revaluation.DOI: 10.15408/etk.v16i1.4820


INTRODUCTION
The IFRS convergence into FAS a major impact on the business world, especially in relation to the financial statements and other accounting data. Indonesian Financial Accounting Standards-based IFRS are considered more can improve improve the quality of financial reporting standards and comparability of financial statements (Bank of Indonesia, 2011). One of the changes from SFAS is SFAS 16 on fixed assets, one of which is the difference in the measurement of fixed assets after initial recognition. In SFAS 16, fixed assets are based on the acquisition of such assets less accumulated depreciation. SFAS 16 (Revised 1994) does not permit the revaluation of fixed assets (SAK, 2002). While the measurement after recognition (SFAS No. 16, 2012), "The entity choose either the cost model or the revaluation model as its accounting policy and apply that policy to all fixed assets within the same group. At the cost model, after recognition as assets, fixed assets are recorded at cost less accumulated depreciation and accumulated impairment losses. As for the revaluation model after recognition as an asset, fixed asset fair value can be reliably measured must be recorded on the number revaluasian, that is fair value at the date of revaluation less any accumulated depreciation and accumulated impairment losses after the date of revaluation. Revaluation is done with sufficient regularity regularly to ensure that the carrying amount does not differ materially from the amount determined using the fair value at the end of the reporting period." Upward revaluation of fixed assets into council policy the most controversial accounting standards (Wang, 2006). The fair value (fair value) of fixed assets is more relevant in the economic decisions that must be used in fixed asset reporting. On the other hand, the upward revaluation provide opportunities for managers to manipulate accounting numbers reporting that would destroy investor confidence that this is not permissible (Wang, 2006). After the latest standards regarding fixed assets that allow the use of fair value accounting. The use of fair values for fixed assets will result in more relevant information than the method of cost and this method should be allowed to be used (Wang, 2006).
The financial report is information that summarizes all of the company's activities. (Nikkhah & Mojtahedzade, 1999). One of the elements in the financial report is expected to provide information on the profit achieved by the company in the period, an income statement. Earnings information in the financial statements is seen as an element that is quite rich (comprehensive) to demonstrate the performance of a company so that the DOI: 10.15408/etk.v16i1.4820 Etikonomi Vol. 16 No. 1 April 2017 attention of investors in making decisions. This is caused by the belief of investors that the company that produces a fairly good profit showed a bright prospect and will provide optimal return to investors (Brigham and Houston, 2001).
The success or failure of the company in carrying out its activities, where stakeholders require an overview of the details regarding all the economic resources obtained and used in one period. Information presented in the cash flow statement is to be used by stakeholders to predict cash flows that will be distributed in the form of dividends or interest and repayment of principal as well as assess the risks (Brigham and Houston, 2001). The market reaction is indicated by changes in stock prices. If the market reacts, it can be said that cash flow information is one of the information considered in making investments. The market reaction can be measured by using abnormal return (Tay, 2009). Huang (2009) proved that operating cash flow positive effect on abnormal return.
Operating cash flow is one indicator of the market value of the company, meaning that companies have high cash flow means it has a high market value. A high market value will encourage the interest of investors to invest in the shares of the company. Of course, this gives an effect to the stock prices increase. Martani et al. (2009), has not succeeded in proving the effect of operating cash flow to the abnormal return.
The decline in operating cash flow may cause the lender to worry about the company's liquidity (Seng and Su, 2010;Cotter and Zimmer, 1995). Upward revaluation is a signal of a higher value on the company's assets so as to convince the lender on the company's ability to repay debt. Companies that perform fixed asset revaluation will increase the company's cash flow (Cotter and Zimmer, 1995;Barac and Sodan, 2011).
Fixed asset revaluation to be positive information for external parties of the company, because besides being able to motivate performance improvement companies that reflected in the increase in cash flow and corporate profits (Tay, 2009). Revaluation policy also gives a signal that the investor has the opportunity to make a profit on its investment, either in the form of returns and abnormal returns. The underlying reason for this decision by the

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company is reflected in the financial statements. Revaluation of assets refers to the restatement on the net book value (carrying amount) so that the present value approach (Brown et al, 1992).   Where: ABN_RTN = abnormal return is measured by CAR, CAR calculated Adjusted Market Model approach to CAR, CARit = ((1+ Rit / 1+ RMT) -1); . = constant; = koeefisien regression CFFO = operating cash flow; LEV = a debt to equity ratio is calculated by debt divided by equity; SIZE = the size of the company, measured by the logarithm of total assets; ROE = ratio of net profit after tax divided by total equity; CR_RTO = the measured current ratio of total current assets divided by current liabilities; REV = Log fixed asset revaluation.

RESULT AND DISCUSSION
Descriptive statistics for the number of test samples are 280 companies, the sample is divided into two parts, that is companies that do not fixed asset revaluation as many as 240 companies and 40 manufacturing companies that fixed asset revaluation period of 2012 and 2015. This test includes testing the minimum value, the value of maximum, average and standard deviation. Descriptive statistical results:   Table 3, was obtained that CFFO (operating cash flow) and REV (revaluation) has a positive and significant impact on ABN_RTN (abnormal return). This relationship illustrates that the higher the operating cash flow positively affect the abnormal return Based on the hypothesis results in Table 4, this test sample is separated into two companies namely non revaluation and revaluation. This test directly see the impact of operating cash flow to the abnormal return, as well as the moderating role revaluation operating cash flow to the abnormal return. At the cost model, after recognition as assets, fixed assets are recorded at cost less accumulated depreciation and accumulated impairment losses. As for the revaluation model after recognition as an asset, fixed asset fair value can be reliably measured must be recorded on the revaluation amount.  These findings support the study Huang (2009) (Wang, 2006). These results are in findings Andison (2015), the company doing the revaluation had abnormal return is higher than non revaluation.
Companies that perform fixed asset revaluation will affect the company's cash flow increase (Cotter and Zimmer, 1995;Barac and Sodan, 2011). Fixed asset revaluation be positive information for external parties of the company, because besides being able to motivate performance improvement company that reflected in the increase in cash flow and corporate profits (Tay, 2009). Revaluation policy also gives a signal that the investor has the opportunity to make a profit on its investment, either in the form of returns and abnormal returns. The underlying reasons for this decision by the company's asset revaluation is to ensure that the fair value of the fixed assets of the company reflected in the financial statements. Revaluation of assets refers to the restatement on the net book value (carrying amount) so that the present value approach (Brown et al, 1992 the power and capacity to create new rules that reallocate the resources of the company. In addition, large companies also attract the attention of the union because it is associated with the payment of salaries by the company (Brown et al. 1992;Seng and Su, 2010). Therefore, large companies will use the procedure decline in revenue (reducing income) and reduce the possibility of losses due to regulation (Brown et al. 1992). Because the government wants to reduce the pressure of political or labor unions, large companies will avoid reporting high profits. upward revaluation of assets is an effective way to reduce the reporting earnings through an increase in depreciation costs as a result of increased asset revaluation (Seng and Su, 2010). Table 4, the company's non revalution, operating cash flow does not affect the abnormal return (H1 unacceptable) the significance level is 0.455> 0.05.

Based on the results in
In the sample of companies that perform fixed asset revaluation proves that operating cash flow positive and significant effect on the abnormal return. The results of fixed asset revaluation as a moderating influence which strengthened operating cash flow to the abnormal return (H2 accepted). In concept, the revaluation would make the financial statements more relevant in decision-making, but in practice it is difficult to do.
Limitation of this study is the small number of companies that choosing revaluation. It is advisable in future studies to test in a different period or a different kind of company. In addition further research may also examine other factors that have not been examined in this study as the company's growth factor, takeover, bonus issue.