Can the Ethical Orientation Mitigate the Manager’s Earnings Management?

Abstract

Research aims: This study investigates the role of the ethical orientation of management in the relationship of asymmetry information and management status toward an individual's decision-making with respect to earnings management behaviors. Design/Methodology/Approach: This methodology is an experimental method with 2x2 between-subject designs. 55 Accounting students from three private universities participated in 4 scenarios of cases (permanent and contractual management status, high and low asymmetry information) individually. Other side, the ethical orientation is measured, relativist and idealist. The Hypothesis was analyzed by ANOVA. Research findings:The ethical orientation influence managers' earnings management decisions. It can mitigate the influence of asymmetry information toward manager earning management decisions. Theoretical contribution/ Originality: This research explains that earnings management behavior also can be explained by ethical approach, not only by using agency theory. Decision-makers will use ethical considerations when they are faced by the earnings management practices. Practitioner/Policy implication: The results support pro-social theory that ethical orientation can influence the decision making when individuals are exposed to ethical dilemmas to make earning management. Research limitation/Implication: Participants in this study used students, so they did not have experience. future studies can use professional participants and consider management status in more detail.

The Influence of Credit Risk on Company Earnings Management (Empirical Study of Banking Companies Listed on the IDX)

“…In this research, the dependent variable is earnings management. Earnings management is considered management intervention in financial statements, in the form of accounting policy choices, which are permitted in the external financial reporting process to achieve personal goals, thereby reducing the financial credibility of statements (Schipper, 1989in Fatjriyati, 2020. The existence of earnings management carried out by companies This will cause the information obtained by stakeholders to be biased, so that decisions made by stakeholders will be incorrect.…”

“…Management's actions to regulate profits according to its wishes are known as earnings management (Hasibuan and Dwiarti 2019) Earnings management is not a negative action because earnings management is not always oriented towards opportunistic profit manipulation. Earnings management can be considered as a misleading and deceptive action from shareholders (Healy & Wahlen, 1999), or as an action that should be carried out by management (Beneish in Fatjriyati, 2020). Earnings management is a manager's option on accounting policies or measures that may affect profits reporting targets by a certain amount (Paramaratri, Setyorini, and Suparlinah 2023).…”

Unearthing The Contribution of Ethical Orientation and Marketing Strategies in Catalyzing Usage of Locally Made Products: Insights from Sub-Saharan Africa

“…The concept of ethical orientation is perceived in existing literature differently. According to Priyastiwi and Fatjriyati (2020), it entails the understanding of the beliefs, behavior, and practices of what is morally right and wrong. Ethical orientation is also advanced as an individual's moral philosophy of valuing concepts like good and bad, right and wrong, justice, and virtue (Johari et al, 2020).…”