Abstract
The purpose of this study was to determine the effect of bid ask spread, profitability, and free cash flow on earnings management. The population in this study are manufacturing companies listed on the Indonesia Stock Exchange in 2016-2018. The sampling method used was purposive sampling with predetermined criteria. Earning management is determined by the accruals method. The results of this study stated that the bid ask spread did not have a significant effect on earnings management, while profitability and free cash flow had a significant effect on earnings management.
Highlights
Financial statements are reports that describe the current state of the company in a certain period (Kasmir, 2014)
After carrying out simultaneous tests or F tests to determine whether the regression model is appropriate and appropriate for use, a partial test or t test with a significance of 5% is used to determine the effect of each independent variable bid-ask spread (X1), profitability (X2), and free cash flow (X3) to earnings management
The conclusions drawn from conducting the t test are with the condition: (a) If the probability of the independent variable is 0.05 the independent variable tested does not have a significant effect on the dependent variable
Summary
Financial statements are reports that describe the current state of the company in a certain period (Kasmir, 2014). Management should ensure that the financial statements display the company's condition effectively and efficiently so that it is attractive. This reason drives earnings management to attract external parties to invest in the company. Some cases of earnings management that occurred in Indonesia include PT Kimia Farama's case in 2001 where there was an overstated profit of Rp 32.7 billion because the company reported a profit that was greater than it was (BAPEPAM). The most recent case detected in managing earnings is the case of Garuda Indonesia where Garuda reported a profit of US $ 809.84 thousand, whereas it had previously suffered a loss of US $ 216.58 million
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