Articlediamond2020

THE EFFECT OF CORPORATE GOVERNANCE ON EARNINGS MANAGEMENT

11 citations0/0 files storedESENSI Jurnal Manajemen Bisnis

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Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

This study is conducted to examine the effects of corporate governance on earnings management. The variable used in this study includes accrual-based earnings management (proxied by discretionary accruals), real earnings management (proxied by abnormal cash flow from operations and abnormal overproduction) and corporate governance mechanism of audit committee expertise, audit committee size, managerial ownership, institutional ownership, and foreign ownership. Using purposive sampling method, this study uses a total of 318 firm-year observations of manufacturing companies listed in Indonesia Stock Exchange during the period 2015 – 2017. OLS multiple regression analysis through SPSS 19 is used to analyze the data for the purpose of hypothesis testing. The result of this study reveals that corporate governance mechanism especially, institutional ownership has a negative effect on accrual-based earnings management. On the other hand, corporate governance mechanisms, especially institutional ownership and foreign ownership has a negative effect on real earnings management.

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References

1991Earnings Management During Import Relief Investigations 1995Detecting Earnings Management.2003Earnings Management through Real Activities Manipulation 2011Evidence on the Trade-Off between Real Activities Manipulation and Accrual-Based Earnings Management 2004Audit Committee Characteristics and Restatements 2004The Effect of Audit Committee Expertise, Independence, and Activity on Aggressive Earnings Management 2010The Association Between Accruals Quality and the Characteristics of Accounting Experts and Mix of Expertise on Audit Committees*2014Audit committee financial expertise and earnings management: The role of status

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