Key Financials Performance Independent versus Integrated: Empirical Evidence from Indonesia Financial Service Industry (2001-2011)

The aims of the paper are to study the financial performance between the independent finance companies and the integrated finance companies over the period 2001-2011. From total 194 finance companies in the industry, the finance companies who affiliate with bank or automotive manufacturer are 65 companies that contribute to 71% of total asset of the industry. The banking industry that provides majority of funding, has made finance companies as part of their integration business model. The automotive manufacturers and dealers that provide the products of financing, have the similar strategy. The acquisition of finance companies has reached more than 30 transactions from 2002 until 2012. We analyzed seven micro key financial ratios (profitability, efficiency, growth, firm size, liquidity, solvability and risk). We use non parametric Mann Whitney and parametric Panel Data Dummy Regression. Our sample consists of 100 finance companies which continuously published their financial statement from 2001 until 2011. The empirical results show that the integrated finance companies are better in efficiency, profitability, size and growth. However, the integrated finance company has higher reserve policy and lower liquidity. On the other side, we also compare between the backward integration with bank and the forward integration with automotive manufacturer.