EFEK ENTRENCHMENT DAN ALIGNMENT PADA MANAJEMEN LABA

Abstract

The objective of this research is to investigate whether controlling shareholder manages earnings. The issue is most important to be revealed because ownership of public companies is concentrated and low protections for noncontrolling shareholders in Indonesia. Therefore, controlling shareholder is motivated to manage earnings. This research also investigates whether control rights of controlling shareholder positively influence earnings management. The issue relates to entrenchment effect. This research also investigates whether cash flow rights reduce earnings management. The issue relates to alignment effect. This research used data of ultimate ownership and financial statement. The data were collected from Indonesia Stock Exchange during\t2001\tto\t2007. There are\t786\tyear companies during seven years. This study documents that the control rights motivate the controlling shareholder to manage earnings. Control rights entrench controlling shareholder to manage earnings opportunistically. Cash flow rights negatively influence earnings management. To signal good financial condition, controlling shareholder manages earnings efficiently. Cash flow right leverage is an incentive to controlling shareholder to manage earnings. This research also documents that cash flow right leverage entrenches controlling shareholder to manage earnings opportunistically.

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