The Role of Integrated Reporting in Emerging Market: Earnings Quality and Debt Maturity

Abstract

The maturity structure of debt can have financial and operational consequences for a firm as debt maturity is a key aspect of financial flexibility. Moreover, debt maturity can impact a firm’s ability to undertake long-term productive investments and, as a result, affect economic activity. This study aims to examine the effect of earnings quality on debt maturity and the role of Integrated Reporting (IR) in moderating these effects. This study's methodology is a quantitative approach with multiple linear regression models and panel data. The sample employed in this study is manufacturing companies listed on the Indonesia Stock Exchange (IDX). The type of data employed in this study is secondary data sourced from financial statements and annual reports from 2016 to 2020. The sample selection using a purposive sampling method with the number of samples amounted to 595 firm-year observations. The results of this study suggest that earnings quality does not affect debt maturity. Additional tests show that income maximization companies tend to have shorter debt maturity. However, IR failed to moderate the effect of earnings quality on debt maturity. This study indicates that the Financial Services Authority (OJK) needs to conduct better monitoring and regulation to increase creditor protection through optimal debt policy disclosure from the companies.

Pengungkapan Tata Kelola Perusahaan, Kompetensi Auditor Internal, Manajemen Laba: Peran Moderasi Penghindaran Pajak

“…Proksi ini juga digunakan oleh Firmansyah & Irawan (2018), Firmansyah & Ardiansyah (2020) dan Park et al (2021). Nilai akrual diskresioner didapatkan dengan menggunakan persamaan: Dimana: Accruals : net income after taxcash from operation TA t-1 : total aset perusahaan tahun sebelumnya ∆ REV : perubahan pendapatan dari periode sebelumnya ∆ REC : perubahan piutang dari periode sebelumnya PPE : net plant, property, dan equipment ROA : net income after tax dibagi total asset 𝜀 : residual regresi yang merupakan estimasi akrual diskresioner Perhitungan nilai residual dari persamaan diatas dilakukan setiap tahun, setelah itu nilai residual yang diperoleh tersebut diabsolutkan untuk melihat aktivitas manajemen laba baik menaikan laba atau menurunkan laba (Pamungkas et al, 2021).…”

Do Fair Value Decisions Increase Idiosyncratic Risk?

“…The variable in this study is the proportion of fair-value financial assets to total assets at the end of fiscal year t for company I. It is the model described below by Adwan et al (2020) and Pamungkas et al (2021):…”

“…The control variable in this study is leverage because companies with higher leverage are more likely to disclose more information to persuade debt holders that their interests are protected. In this study, the company's leverage variable is measured by proxy according to research conducted by Pamungkas et al (2021), as follows:…”

Financial Leverage and Idiosyncratic Risk in Indonesia: Does Integrated Reporting Matter?

“…Integrated Reporting Framework is a principles-based document and does not set standards for integrated reporting or integrated thinking (IIRC, 2013). Therefore, this study will assess the elements in the integrated reporting index by following the integrated reporting checklist by El-Deeb (2019), Lee & Yeo (2016), Pamungkas et al (2021Pamungkas et al ( , 2022, and Stent & Dowler (2015). To arrive at the IR index, the following model is employed:…”

“…This study also includes implementing integrated reporting elements as moderating variables in the association between financial leverage and idiosyncratic risk, which were rarely used in previous studies. In Indonesia, an integrated reporting approach is neither an obligation nor a voluntary disclosure (Bhimantara & Dinarjito, 2021;Chariri, 2019;Kustiani, 2016;Pamungkas et al, 2021Pamungkas et al, , 2022 because there is no official rule confirming that the integrated reporting framework must guide the report companies. However, the annual report concept that has been applied in Indonesia is closer to the idea of integrated reporting because it combines elements of integrated reporting, including strategy, performance, and organizational prospects, management records, corporate governance, financial reports, as well as reports on social and environmental activities.…”