Corporate Governance Mechanisms and Real Earnings Management: Evidence from Indonesia

Indarti, Maria Goreti Kentris; Faisal, Faisal; Yuyetta, Etna Nur Afri; Widiatmoko, Jacobus

doi:10.4108/eai.1-10-2020.2304918

Cited by 2 publications

(6 citation statements)

References 31 publications

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“…Richardson (2000) finds that earnings management has a positive relationship with asymmetry information. Indarti and Widiatmoko (2021) find that earnings management increases information risk and the cost of equity capital. Hosseini et al (2016) also find that earnings management can reduce earnings quality.…”

Section: Informative Earnings Management Vs Opportunist Earnings Mana...mentioning

confidence: 92%

Managerial ability and informative earnings management: the role of CEO-commissioner relationship and board independence

Putra

2022

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Purpose The purpose of this study is to examine the effect of managerial ability on informative earnings management (hereafter IEM) and to examine the moderating role of the chief executive officer and board of commissioner relationship (hereafter CEO-commissioner relationship) and board independence between managerial ability and IEM. Design/methodology/approach Sample consists of 864 firm-years listed on the Indonesian Stock Exchange. Informative earnings management is measured by the relationship between discretionary accruals and earnings growth. Managerial ability is measured by data envelopment analysis. This research uses firm-effect logistic regression to perform the data analysis. Findings Based on firm-effect logistic regression, managerial ability increases IEM. It confirms the managers’ stewardship behavior where managers tend to engage in IEM and provide higher quality information for shareholders. The result also shows that the absence of a CEO-commissioner relationship and higher board independence leads higher ability managers to engage more in IEM. It confirms the role of corporate governance to reduce managers-shareholders conflict (in the context of agency theory) or to facilitate higher ability managers to act as both controlling and minority shareholders’ stewards (in the context of stewardship theory) by engaging more in IEM and providing higher-quality information. Originality/value This research contributes to filling the previous studies gap that provides conflicting results on managerial ability and earnings management by considering earnings management motivations, CEO-commissioner relationship and board independence. This research also contributes to providing new evidence of managerial ability, IEM, CEO-commissioner relationship and board independence, especially in Indonesia.

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Section: Informative Earnings Management Vs Opportunist Earnings Mana...mentioning

confidence: 92%

Managerial ability and informative earnings management: the role of CEO-commissioner relationship and board independence

Putra

2022

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“…Independent commissioners provide effective oversight that improves the quality of earnings and prevents internal fraud [9] [2]. The independent commissioners are tasked with balancing the outcome of decisions to protect shareholders and other interested parties.…”

Section: Introductionmentioning

confidence: 99%

“…The independent commissioners are tasked with balancing the outcome of decisions to protect shareholders and other interested parties. The independent commissioners ensures that management uses accounting principles to prepare accurate financial reports by applying conservative accounting [9]. This contention is upheld by a ponder by [10]; [11] prove that independent commissioners have a positive impact conservatism of accounting.…”

Section: Introductionmentioning

confidence: 99%

“…Audit committees can promote and improve the quality of financial reporting by applying accounting conservatism principles. The audit committee may be a committee set up and responsible to it to help it in carrying out its obligations and capacities [9]. The existence of an audit committee ensures that companies that practice good corporate governance will apply accounting standards that provide accurate and quality financial information [12].…”

Section: Introductionmentioning

confidence: 99%

“…Managements is becoming more and more diligent in preparing financial reports. Audit committee could be a committee established by the board to assist in the performance of the board's duties and functions [9]; [13]. Audit committee encourages companies to comply with applicable accounting standards.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Accounting Conservatism: The Implementation of Internal and External Governance

Irmayanti,

Indarti,

Widiatmoko

2023

Proceedings of the 2nd International Conference of Multidisciplinary Studies, ICMS 2023, 12 July 2023, Semarang, Indonesia

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In times of uncertainty a company may consider when preparing its financial statements as a prudent accounting principle. The purpose of this research is to: explore and analyze the impact of independent commissioners, audit committees, and audit quality on accounting conservatism, and to examine the moderating role of audit quality in this role. This study uses control variables, size and return on assets. The study used objects from manufacturing companies listed on the Indonesian Stock Exchange (IDX) in 2019-2021. The hypothesis of this study was tested by ordinary least squares (OLS) regression. The research results show that the audit committee and audit quality have a positive effect on accounting conservatism. The Independent Commission has nothing to do with accounting conservatism. This result indicates that audit quality cannot reconcile the relationship between independent commissioners, audit committee and conservatism in accounting. A control variable test shows return on assets has a positive effect on accounting conservatism. On the other hand, size does not affect conservatism in accounting.

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Corporate Governance Mechanisms and Real Earnings Management: Evidence from Indonesia

Cited by 2 publications

References 31 publications

Managerial ability and informative earnings management: the role of CEO-commissioner relationship and board independence

Managerial ability and informative earnings management: the role of CEO-commissioner relationship and board independence

Accounting Conservatism: The Implementation of Internal and External Governance

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