Abstract
The objectives of this quantitative study are to investigate the practice of earnings management which is proxied by Loan Loss Provision and Loan Loss Allowance and to assess the effect of bonuses on earnings management practices. Using purposive sampling, 102 banks were selected as the sample. The assessment includes one-sample t test and linear regression test. This study finds that banks commit earnings management practices by reducing LLA values and that bonuses negatively influence the practice of earnings management as proxied by LLP.
Highlights
The number of earnings management research topics in the accounting literature that have been reviewed from each period has attracted the attention of investors, financial analysts, and even academics today
Companies are indicated to carry out earnings management if the abnormal Loan Loss Provisions (LLP) and abnormal Loss Allowance (LLA) values are less than the predicted LLP and predicted LLP values
This study uses abnormal LLP and abnormal LLA measurement tools to classify a sample of banks that are indicated or not indicated to be performing earnings management
Summary
The number of earnings management research topics in the accounting literature that have been reviewed from each period has attracted the attention of investors, financial analysts, and even academics today. Earnings management practices have become a fact in the financial statements of companies with various motivations and interests, such as research conducted by Healy and Wahlen, 1998; Achmad, et al, 2007; Subekti, 2010; Abaoub et al, 2013; Habbash and Alghamdi, 2015, and Chhabra, 2016. The phenomenon of earnings management practices, one of which occurs in Indonesia, is the case of Bank Bukopin. According to Yuanhui et al (2018), banks cannot identify real earnings management, as is the case with Dechow et al (1995) stated that banks with higher concentration power can manipulate income through loan terms, fees, margins, and revenues
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