Determinants of Financial Statement Integrity

Abstract

Firms and financial statements are closely related. This study examines whether intellectual capital, managerial ownership, institutional ownership, and firm size affect the integrity of financial statements. This study uses the consumer goods sector firms that have been listed on the Indonesia Stock Exchange (IDX) in 2017-2021. Purposive sampling is used as a method of selecting research samples and analyzed by multiple regression methods. The results show that the integrity of financial statements is influenced by intellectual capital, managerial ownership, and firm size. Institutional ownership does not impact the integrity of financial statements for consumer goods firms listed on the IDX from 2017 to 2021. Intellectual capital serves as a potential tool for optimizing management of intellectual capital in various sectors, including consumer goods firms. Based on the findings, it is recommended that companies prioritize the effective management of intellectual capital, consider enhancing managerial ownership structures, and recognize the impact of firm size on maintaining the integrity of financial statements.

Integrity of Financial Statement Factors: Intellectual Capital, Independent Commissioner, and Company Size

“…This suggests that there is a possibility that it might compromise the accuracy of the financial statement. The results derived by (Hia & Kusumawardhani, 2023) from their previous work correspond to the outcomes of this investigation. This exemplifies how the use of expert knowledge, competency, and talent management enhances the efficiency of human resources.…”

“…Acknowledged as an indicator of knowledge, intellectual capital has transformed the conventional approach to creating value and is now the primary driver of business growth (Dai et al, 2021). According to earlier studies, financial statements are more credible when they include intellectual capital (Hia & Kusumawardhani, 2023). Intellectual capital refers to the investment made in return for work, and it positively affects the accuracy of financial accounts According to (Meiryani et al, 2023), the price-to-book ratio is a statistic used to assess the value of a firm.…”

“…The level of honesty in the company's financial accounts will increase in tandem with its growth (Hoesada & Pradika, 2019). According to the (Hia & Kusumawardhani, 2023), study, a company's size significantly improves the accuracy of its financial accounts. The company's financial records show enhanced integrity in direct correlation with the company's expansion, as evidenced by its total assets.…”