Board Structure and Earnings Management: Evidence of South East Asia Countries Categorised by Agency Cost Level

Abstract

Agency theory infers that investors will incur cost to make alignment on principal-agent interest. A critic, however, has pointed out that the conflict of interest between principal and agent is not the only cause for agency cost. Cultural context (Johnson & Droege, 2004) and legal system (La Porta, et al., 2000) are also found as contributing factors. This study is to empirically investigate how board size, board independency, audit committee size and audit committee independency affect the earnings quality in the context of low or high level agency cost country according to Transparency International’s corruption level and Hofstede’s cultural values. 538 firm-year across 6 South East Asian countries (Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam) are observed in this research. Five Different accrual models (Jones, 1991; Dechow, Sloan, & Sweeney, Detecting Earnings Management, 1995; Kasznik, 1999; Dechow, Richardson, & Tuna, Earnings management and costs to investors from firms meeting or slightly exceeding benchmarks, 2002; Dechow & Dichev, The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors, 2002) are used to generate abnormal accruals which will be used as proxy for earnings management while to generate suitable factors from corporate governance variables, principal component analysis (PCA) is employed. Results indicate that (1) earnings management is efficient; (2) size and independency of Board of Director and audit committee are effective in reducing earnings management behaviour; (3) the management of firms operating in higher agency cost context will take advantage from the structure of corporate governance (size and independency of Board of Directors and audit committee) to conduct earnings management. Additionally, it is also found that bigger size (higher leverage) firms perform less (more) accounting discretion compared to their counterparts.

Pergantian Dewan Komisaris Dan Dewan Direksi Terhadap Pengungkapan Laporan Keberlanjutan

“…Teori agensi diperkenalkan oleh Jensen & Meckling (1976) yang memaparkan hubungan keagenan sebagai kontrak kerja pendelegasian wewenang dari pemilik perusahaan (principal) kepada pihak lain yang dipekerjakan (agent). Di negara-negara berkembang kepemilikan saham cenderung terkonsentrasi dan konflik tata kelola perusahaan sebagian besar timbul kepada pemegang saham mayoritas dengan pemegang saham minoritas (Banchit Novitasari, Putra & Locke, 2016;Chen & Young, 2010;Putra & Arif, 2017;Young et al, 2008). Konflik principal-principal tersebut terjadi ketika pemegang saham mayoritas menggunakan kekuatan suara mereka untuk mengontrol perusahaan dan mengambil manfaat pribadi dari kontrol tersebut (Banchit & Locke, 2016;Renders & Gaeremynck, 2012).…”

The Urgency of Classification of the Voter List as a Fulfillment of Political Rights

“…Several studies have shown the problem of the Permanent Voter List (Kolamban et al, 2019;Putra & Hasanuddin, 2017;Sari et al, 2019;Supranto, 2021). These three studies found the fact that the problem of DPT in various regions in Indonesia was caused by the KPU's performance that had not been maximized.…”

“…In the 2018 West Kalimantan gubernatorial election, there was also a DPT technical error (Supranto, 2021). Furthermore, in the 2015 Bengkalis Regency Regent election, it was also found that there was a problem with the negligence of the voter list updating officer so that the DPT was problematic (Putra & Hasanuddin, 2017).…”

“…Elections as a general practice of power and governance must be based on the principles of fair law and opportunistic values. One of the basic principles of democracy and the rule of law is equal protection of the exercise of citizen sovereignty (Putra & Hasanuddin, 2017). Democracy gives citizens the opportunity to actively participate in the political process, including elections and other activities.…”

“…As representatives of people's sovereignty in the context of democratization, the election of members of parliament in principle must be carried out freely, directly, openly and secretly (Bagijo, 2010). Elections are also a constitutional power that must be exercised by the government, in this case the government has the responsibility to guarantee and protect the implementation of the political rights of the people who are sovereign in elections (Putra & Hasanuddin, 2017) The problems mentioned above need to be studied neatly and in depth, therefore the researchers formulated the research theme, namely the urgency of classification of Permanent Voter Data (DPT) as an effort to create a model of voter data accuracy in Riau Province. It is hoped that the research that examines the problem of classifying voter data can make a significant contribution in strengthening democracy, and the problems that occur do not interfere with the stability of the holding of elections and regional elections in the future, both in Riau Province and in Indonesia.…”