Islamic Mental Accounting towards Relative and Absolute Saving: An Experimental Study Fuad and Imam Ghozali.

Islamic Mental Accounting towards Relative and Absolute

Saving: An Experimental Study

Fuad and Imam Ghozali

WHY THIS ONE?WHY THIS ONE?

• Lack of empirical evidences in Islamic behavioral-based accounting research

• Mental Accounting postulates can not be simply generalized in the Muslim’s society.

• Practicing Muslims are restricted by the sharia laws.

• Mental Accounting: a process of coding, Mental Accounting: a process of coding, categorizing, and evaluating outcomes.categorizing, and evaluating outcomes.

• Islamic Mental Accounting: a process of evaluating Islamic Mental Accounting: a process of evaluating different options and events which is based on the different options and events which is based on the human’s rationality; which is also considering human’s rationality; which is also considering sharia laws.sharia laws.

• Individual may value two identical monetary gains Individual may value two identical monetary gains differently because they are coded and evaluated differently because they are coded and evaluated through distinct mental accounts.through distinct mental accounts.

• We used sharia laws (halal and syubhat) and extra-We used sharia laws (halal and syubhat) and extra-time involved simultaneously to take the savings time involved simultaneously to take the savings to figure out the mental accounting effects.to figure out the mental accounting effects.

Sources of Sharia LawsSources of Sharia Laws• Holy Qur’an: the first and primary element of

sharia law. The final arbritrator and there is no other appeal.

• Sunna: the teachings of the Prophet Muhammad (May peace be upon him), which are not explicitly found in the Holy Qur’an.

• Ijma’: a consensus on an issue reached by ulama.

• Qiyas: new cases or case law which may have already been decided by a higher judge.

EXPERIMENTAL DESIGN AND EXPERIMENTAL DESIGN AND HYPOTHESESHYPOTHESES

3x3 experimental design consist of Rp. 3x3 experimental design consist of Rp. 10,000.-, Rp. 20,000 and Rp. 30,000 absolute 10,000.-, Rp. 20,000 and Rp. 30,000 absolute value and 10%, 25% and 40% relative to the value and 10%, 25% and 40% relative to the price of the broiler at the “store Ali”.price of the broiler at the “store Ali”.

While broiler was treated as both halal and While broiler was treated as both halal and syubhat, fish was only considered as halal.syubhat, fish was only considered as halal.

Thus, there were nine versions of two basic Thus, there were nine versions of two basic scenarios employing two sharia laws.scenarios employing two sharia laws.

Absolute Absolute Saving on Saving on broiler at broiler at Store BStore B

Relative Saving on broiler at Store BRelative Saving on broiler at Store B(in Rp. 000)(in Rp. 000)

10%10% 25%25% 40%40%

Rp. 10,000Rp. 10,000 A1A1100; 400100; 400

A2A240; 46040; 460

A3A325; 47525; 475

Rp. 20,000Rp. 20,000 B1B1200; 300200; 300

B2B280; 42080; 420

B3B350; 45050; 450

Rp. 30.000Rp. 30.000 C1C1300; 200300; 200

C2C2120; 380120; 380

C3C375; 42575; 425

Muslims may act rational, because they are allowed Muslims may act rational, because they are allowed to eat halal (QS 1:173; QS 5:88; QS 6:119) as well as to eat halal (QS 1:173; QS 5:88; QS 6:119) as well as take the savings; thus we posit: “ there is a significant take the savings; thus we posit: “ there is a significant increase in the number of respondents that take the increase in the number of respondents that take the absolute and relative savings (halal)”.absolute and relative savings (halal)”.

Practicing Muslims should prevent themselves from Practicing Muslims should prevent themselves from consuming doubtful food. “ There is no significant consuming doubtful food. “ There is no significant increase in the number of respondents that take the increase in the number of respondents that take the absolute and relative savings (syubhat)absolute and relative savings (syubhat)

InstructionsInstructionsThank you for agreeing to take part in our study. Please read the following paragraph, try to Thank you for agreeing to take part in our study. Please read the following paragraph, try to imagine yourself in the situation described and answer the question below it.imagine yourself in the situation described and answer the question below it.SituationSituationIt’s a week to ‘Idl Fitr and you have nothing yet. To celebrate this blessed day, you are It’s a week to ‘Idl Fitr and you have nothing yet. To celebrate this blessed day, you are deciding to buy the broilerdeciding to buy the broiler and a fish. After conducting some research, you find that two stores and a fish. After conducting some research, you find that two stores have the most attractive prices on the particular brands and models of these items that you have the most attractive prices on the particular brands and models of these items that you wish to purchase. “Store Ali”, which is 5 minute round trip from your home, is offering the wish to purchase. “Store Ali”, which is 5 minute round trip from your home, is offering the broilerbroiler at Rp. 200.000,- and a fish for Rp. 300.000,-. “Store Baba” is offering fish at the same at Rp. 200.000,- and a fish for Rp. 300.000,-. “Store Baba” is offering fish at the same price of Rp. 300.000, but is offering the broilerprice of Rp. 300.000, but is offering the broiler at Rp. 180.000. However, because “Store at Rp. 180.000. However, because “Store Baba” is less conveniently located, it would take you 20 minutes round trip to make your Baba” is less conveniently located, it would take you 20 minutes round trip to make your purchases there. Prior to deciding whether to shop at “Store Ali” or “Store Baba”, you are purchases there. Prior to deciding whether to shop at “Store Ali” or “Store Baba”, you are considering the prices and traveling times involved. Nevertheless, as “Store Baba” is a new considering the prices and traveling times involved. Nevertheless, as “Store Baba” is a new one, you do not understand quite well the process of the boiler; whether the boiler was one, you do not understand quite well the process of the boiler; whether the boiler was slaughtered according to Islamic law or not. However, you don’t know precisely… slaughtered according to Islamic law or not. However, you don’t know precisely… Question:Question:At which store would you choose to purchase the two items?At which store would you choose to purchase the two items?

Store AliStore Ali(Please circle one)(Please circle one)

Store BabaStore BabaPlease write down the prices at which you are purchasing the two items:Please write down the prices at which you are purchasing the two items:Broiler _____________Broiler _____________ Fish _______________Fish _______________

METHODS

360 Muslims respondents from undergraduate students of UNDIP, UNISSULA, USM and UDINUS were volunteered to participate in the experiment.They were randomly allocated to one out of nine treatments in each sharia law. Each cell consist of 40 volunteers.To examine the effect of MA and the role of sharia, we employed 2 and McNemar C.T.

RESULTS (Halal)RESULTS (Halal)Relative Relative savingsaving

Relative saving on broiler at Store BRelative saving on broiler at Store B

10%10% 25%25% 40%40% 2 2 statstatRp. 10,000Rp. 10,000Store AStore AStore BStore BNNStore B/nStore B/n

25251515404037.5%37.5%

22221818404045%45%

23231717404042.5%42.5%

3.3333.333

Rp. 20,000Rp. 20,000Store AStore AStore BStore BNNStore B/nStore B/n

25251515404037.5%37.5%

12122828404070%70%

16162424404060%60%

1.6331.633

Rp. 30,000Rp. 30,000Store AStore AStore BStore BNNStore B/nStore B/n

16162424404060%60%

11112929404072.5%72.5%

17173333404082.5%82.5%

22.533*22.533*

22 1.2001.200 7.500*7.500* 6.533**6.533**

SyubhatSyubhatRelative Relative savingsaving

Relative saving on broiler at Store BRelative saving on broiler at Store B

10%10% 25%25% 40%40% XX2 2 statstatRp. 10,000Rp. 10,000Store AStore AStore BStore BNNStore B/nStore B/n

343466404015%15%

28281212404030%30%

28281212404030%30%

30.000*30.000*

Rp. 20,000Rp. 20,000Store AStore AStore BStore BNNStore B/nStore B/n

29291111404027.5%27.5%

313199404022.5%22.5%

26261414404035%35%

22.533*22.533*

Rp. 30,000Rp. 30,000Store AStore AStore BStore BNNStore B/nStore B/n

28281212404030%30%

25251515404037.5%37.5%

21211919404047.547.5

6.533**6.533**

XX22 32.033*32.033* 19.200*19.200* 7.500*7.500*

DISCUSSIONDISCUSSION The role of sharia in the MAE can be The role of sharia in the MAE can be

explained by the decrease of the number of explained by the decrease of the number of respondents that take the savings from respondents that take the savings from halal into syubhat scenario.halal into syubhat scenario.

Halal case suggests that MA is confirmed Halal case suggests that MA is confirmed when the relative value is higher than when the relative value is higher than threshold value.threshold value.

Although decreasing, the syubhat case Although decreasing, the syubhat case shows the loss of wara’ attitude of shows the loss of wara’ attitude of Muslims’s society.Muslims’s society.

McNamar Change Test reveals that both McNamar Change Test reveals that both halal and syubhat, partially (mostly in the halal and syubhat, partially (mostly in the higher relative value), have the same higher relative value), have the same effectiveness in changing respondents’ effectiveness in changing respondents’ preferences.preferences.

LIMITATIONS AND FURTHER LIMITATIONS AND FURTHER RESEARCHRESEARCH

The absolute value of the The absolute value of the monetary savings was increased monetary savings was increased while keeping the “cost” of those while keeping the “cost” of those savings constant.savings constant.

Syubhat was only appointed to the Syubhat was only appointed to the blind scenario to take the savingblind scenario to take the saving

Different respondents answered Different respondents answered different case might resulting the different case might resulting the inappropriate conclusion.inappropriate conclusion.