Factors Affecting Earnings Management in the Indonesian Stock Exchange

Abstract

Objective - The purpose of this research is to analyze the effect of growth, leverage, fixed asset turnover, profitability, firm size, firm age, industry, audit quality, and auditor independence toward earnings management. Methodology/Technique - The population of this research consist of various sectors of non-financial companies that were listed on the Indonesian Stock Exchange (IDX) between 2013 and 2015. The research uses three recent years of data and tests variables that have not been used by prior research. The sample was chosen by using a purposive sampling method. The hypothesis is tested using multiple regression with an SPSS program to investigate the influence of each independent variable to earnings management. Findings - The research results show that return on assets influences earnings management and growth, leverage, fixed asset turnover, profitability, firm size, firm age, industry, audit quality, and auditor independence do not influence earnings management. Novelty - The study supports that the manager in a company will engage in earnings management to receive a bonus from investors because they have received a higher profit. Type of Paper: Empirical Keywords: Earnings Management; Growth; Leverage; Fixed Asset Turnover; Profitability; Firm Size; Firm Age; Audit Quality; Auditor Independence; Industry JEL Classification: L25, M12, M41.

Effect of Bid Ask Spread, Profitability, and Free Cash Flow on Earning Management

“…This study is in line with the results of the study of (Fitri et al, 2018) and (Alexander and Hengky, 2017) that profitability has a positive and significant effect on earnings management. However, it is inversely proportional to the results of research conducted by (Wiyadi et al, 2015) and (Agustia and Suryani, 2018) that profitability has no significant effect on earnings management.…”

“…When profitability is low, management will be encouraged to do earnings management because if the profitability of a company is low or experiences losses, this is in the eyes of investors is a sign that it does not make investments in the company (Mulyana et al, 2018). Research conducted by (Agustia and Suryani, 2018), (Firtri et al, 2018) shows that profitability has a significant effect on earnings management while research conducted by (Alexander and Hengky, 2017) states that profitability does not significantly influence earnings management.…”

Sikap Penghindaran Pajak, Strategi Pendanaan dan Manajemen Laba Perusahaan

“…Di Indonesia, terdapat beberapa penelitian yang membahas mengenai pengaruh tingkat pendanaan utang terhadap praktik manajemen laba secara persial. Alexander & Hengky (2017) membahas mengenai faktor-faktor yang mempengaruhi perusahaan melakukan manajemen laba, namun tingkat pendanaan utang tidak berpengaruh signifikan terhadap manajemen laba, yang paling berpengaruh adalah tingkat probabilitas yang diproksikan dengan Return on Assets (ROA). Di penelitian berikutnya, Astuti et al (2017) membahas mengenai pengaruh ukuran perusahaan dan leverage terhadap manajemen laba khusus untuk perusahaan perbankan di Indonesia.…”

Earnings Management: Evaluation of Audit Committee Activity in Indonesia

“…Previous research done by Craswell et al (1995) found that the audit quality has negative impact on earnings management. Meanwhile, Alexander and Hengky (2017), Arifin and Destriana (2018) and Florencia and Susanty (2019) showed that there is no influence of audit quality on earnings management. Jensen and Meckling (1976) found evidence that managerial ownership succeeded for reducing agency problems from managers by aligning the interests of managers with shareholders.…”