Effects Of Asymmetric Information, Transaction Cost To Corporate Governance, And Public Organization Performance (Study In Local Water Company In Malang Regency)

Abstract

Governing government sector is not quite different with managing a company. When the purpose of private sector is to corporate stability and long-lasting profit ability, in fact the purpose of public sector is not much different. The purpose of public sector is to improve community welfare and community trust to government. Welfare itself could be accomplished if the implementation of the development program itself gives positive impact for the society. (Sifia from Aswanto, 2010) When regional autonomy law is applied, Regional Government-owned Enterprise (BUMD) has potential which should be developed more through professional management by merging the characteristic of public service and profit orientation. Realizing good BUMD requires commitment from all parties from Regency/City Government as the owner and the manager of BUMD. From profit oriented aspect, BUMD (Malang Regency's PDAM) is one of the support and source of district own revenue (PAD), on the other hand PDAM is one of public organization which function is to provide clean water as one of public's commodity. Corporate governance becomes an important issue in managing PDAM in Malang Regency since PDAM has a role as BUMD, which is given mandate to carry-out task from Malang Regency's Government in performing agency function, is feared to create many discrepancies in public business by asymmetric information which frequently occurs in the connection of some agencies which affects public organization performance in Malang Region PDAM. Using Structural Equation Model (SEM), an analytical tool, using asymmetric information and transaction cost as independent variable, with corporate governance as intervening variable and public organization performance as dependent variable, the result of this research shows that transaction cost variable and asymmetric information has significant influence toward corporate governance, asymmetric information variable and transaction cost has indirect influence toward public organization performance through corporate governance variable, governance variable gives significant influence to public organization performance variable.

The Influence of Transaction Costs on the Business Performances of Tesco Supermarket

“…Tesco supermarket huge loss was a serious issue which would have made Tesco supermarket bankrupt, but the chief executive officer was able to recognize transaction cost theory. Priyanto et al (2014) found out that transaction costs have an indirect influence towards organization performance, positive business performance influence in an organization. Transaction costs analysis can play a significant act of seeing into a situation on possible beginning stages of intervention policy (Ostertag 1999).…”

“…Husmann (2015) noted that high transaction costs are the cause of market failure, in other words, poor business performance. Priyanto et al (2014) argue that outrageous transaction costs will lead to increasing the selling price of the product, which will be a financial responsibility to the consumer. Similarly, Petrović and Krstić (2011) emphasized that the conspicuous of the imperfect functioning of the market is due to a high level of transaction costs, which has a straight consequence on business organization performance as well as efficient operations of the economic.…”

Effect of Network Structure on Transaction Cost of Small Enterprises in Sri Lanka: An Empirical Study

“…Information is unequal among transaction parties i.e. one party has more information than the other (Bwalya, 2013;Priyanto et al, 2014). The partner who has less information fails to make rational decision due to lack of knowledge about the circumstances (bounded rationality).…”

“…These informal and personal connections do not have formal and written agreement but these connections are based on network relationships with family members, relatives, friends, exchange partners, supportive institutions and the others (Bhagavatula, 2009;Lu, 2007;Priyanath and Premaratne, 2017). Literature describes that the network structure facilitates access to information (Adler and Kwon, 2002;Burt, 1992;Granovetter, 1983) and has an ability to access information reducing information asymmetric (Bwalya et al, 2013;Priyanto et al, 2014). Network structure helps SEs to mitigate information asymmetric facilitating to access information which enable to improve rational ability and mitigate the opportunism of exchange partners (Henningsen and Henning, 2013;Richman, 2006).…”

Effect of Information Access through Social Capital on Mitigating Business Opportunism of Small Enterprises in Sri Lanka

“…The key benefit of SC is that it facilitates the reach of information and increases the quality and relevance of information (Adler & Kwon, 2002;Burt, 1992;Granovetter, 1983). Thus, SC facilitates the access of information reducing information asymmetry (Bwalya, Mugisha, & Hyuha, 2013;Priyanto, Mazkie, & Khusaini, 2014) and helps SEs to mitigate information asymmetry enabling the access of information leading to the mitigation of the opportunism of exchange partners (Henningsen & Henning, 2013;Richman, 2006).…”