Implication of good corporate governance and leverage on earnings management

Abstract

Company management (agent) is the party most concerned to practice earnings management to deceive the users of financial statements so that management gain private gain (obtaining privat gains). In addition, firms with high leverage ratios are influential in performing earnings management practices because the company is in default. The existence of the principle of good corporate governance is expected to minimize earnings management resulting in financial statements do not describe the fundamental value of the company actually.The study aims at stating wheader is proves significant influence between the institutional ownership, the composition of independent commissioners, the size of the board of directors, the size of the company and the leverage on earnings management.The results of research on non-bank companies listed in LQ 45 in Indonesia Stock Exchange year 2013-2016 show that partially the composition of independent commissioners, firm size and leverage have a positive effect on earnings management. When tested simultaneously indicate that instisional ownership, composition of commissioner independent, the composition of the board of directors, the size of the company and leverage have a significant effect on earnings management. The size of the company is a research variable that has a dominant influence on earnings management, because the larger the size or scale of the company it will be easier for the company in obtaining funding sources, both internal and external.

Firm Size, Market Risk, and Stock Return: Evidence from Indonesian Blue Chip Companies

“…This condition makes the work to find investors for the company much easier. Investors are more interested in large companies because they are more stable and have more access to funding both from internal and external source (Hendra, Koesharjono, & Priantono, 2018).…”

Pengaruh Fixed Asset Turnover, Umur Perusahaan Dan Faktor Lainnya Terhadap Manajemen Laba

“…Kepemilikan institusional adalah saham yang dimiliki oleh suatu institusi eksternal di institusi lainnya, seperti oleh perusahaan asuransi, bank, perusahaan investasi, dan institusi lainnya (Hendra et al 2018). Kepemilikan institusional diyakini dapat mengurangi terjadinya manajemen laba di suatu perusahaan, karena sebagian besar saham perusahaan yang beredar dimiliki oleh investor institusional, sehingga laporan keuangan perusahaan akan diawasi secara intens dan dapat mengurangi peluang terjadinya manajemen laba (Nugraheni et al 2015).…”

“…Institusi selaku investor tidak memberikan jaminan bahwa pengalaman dan pengetahuan yang ia kuasai mampu membantunya untuk memproses informasi yang dimiliki oleh perusahaan, sehingga peluang dilakukannya manajemen laba tidak terpengaruh. Hasil penelitian ini konsisten dengan penelitian yang dilakukan oleh Asitalia dan Trisnawati (2017) serta Hendra et al (2018), namun tidak konsisten dengan penelitian yang dilakukan oleh Nugraheni et al (2015) dan Pambudi (2020).…”

An empirical assessment of corporate governance components and their impact on profitability: evidence of listed banks in Indonesia

“…Greater corporations guarantee performance (Ananda, 2016). Earnings management includes information on financial reports to deceive stakeholders interested in learning about the performance and state of the organization (Hendra et al, 2018). Although large businesses have more financial resources to assist performance, they also experience more agency issues (Nurcahya et al, 2014;Panjaitan & Muslih, 2019).…”