IMPACT OF WHISTLEBLOWING SYSTEM IMPLEMENTATION LEVEL ON COMPANY’S OPERATIONAL EFFICIENCY IN INDONESIA CONSUMER GOODS SECTOR: MEDIATING ROLE OF FRAUD PREVENTION

• Main Author: Shafitri, Aarum
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/83462
• Institution: Institut Teknologi Bandung

This research analyzes the impact of whistleblowing system implementation levels on operational efficiency, with fraud prevention considered as a mediating variable, in consumer goods companies listed on the Indonesia Stock Exchange (IDX). Indonesia faces high levels of fraud across various business sectors. Occupational fraud, which is the fraud that occurs in a business context, characterized by misuse of company resources for personal gain, is particularly prevalent in industries such as banking, financial services, manufacturing, and government. The manufacturing industry, a significant contributor to Indonesia's GDP with an 18.67% share in 2023, is notably vulnerable to fraud. Within this sector, the consumer goods sector faces unique challenges. The high demand driven by Indonesia’s large population and complex supply chains creates an environment ripe for fraudulent activities, such as falsified sales reports and stock manipulation. This fraud will not only lead to financial losses but also reduce productivity, reduce stock market valuations, and damages company reputations. Using falsified and manipulated reports can cause inaccurate operational decisions, leading to increased costs, wasted resources, and operational inefficiencies. To address these issues, companies can implement various anti-fraud measures, including enhanced internal controls, routine audits, automated transaction technologies, and whistleblowing systems. The ACFE reports consistently highlight whistleblowing systems as a key detection method, uncovering around 40% of fraud cases from 2012 to 2024. These systems have proven effective in discovering and preventing fraud. This research utilizes Data Envelopment Analysis (DEA) to measure operational efficiency and panel data regression analysis to examine relationships between whistleblowing system implementation level, fraud prevention, and operational efficiency. The dataset consists of annual reports and financial statements of IDX-listed consumer goods companies from 2019 to 2023. The findings show that the implementation level of whistleblowing systems has a significant positive impact on operational efficiency. Companies with higher levels of whistleblowing system implementation show increased operational efficiency by 1.95%. However, the research finds no significant relationship between whistleblowing system implementation level and fraud prevention, nor does fraud prevention significantly impact operational efficiency. This suggests that while implementation level of whistleblowing systems enhance operational efficiency, they do not necessarily reduce fraud or influence operational efficiency through fraud prevention. Based on these findings, several recommendations are proposed. For consumer goods companies, increasing the level implementation of whistleblowing system is very important to increase the operational efficiency. For investors, considering the whistleblowing system is can be the strategic decision because company likely to sustain long-term growth. For future research, it is recommended to explore further how whistleblowing systems impact operational efficiency and employ methods such as employee questionnaires and primary data on fraud cases to gain a more comprehensive understanding and reduce bias.