Abstract
The purpose of this study is to determine the effect of earnings management on financial performance. The company's reported profit is not clear because complex interactions include three factors, namely managerial motivation, accounting standards, and the application of accounting standards. Managers have the desire to manage company earnings reports using accrual policies that are permitted by accounting standards with the aim of covering company performance. Accrual accounting aims to help users of corporate financial statements in assessing economic performance during a period through the use of accounting principles, such as the use of accounting for recognition of income and expenses. The unit of analysis in this study is industrial companies in Papua-Indonesia. The results of the study indicate that earnings management has a significant effect on financial performance. Furthermore, it was found that earnings management can change because it affects the financial performance survey of companies of state-owned enterprises in Papua in Indonesian
Highlights
The purpose of this study is to determine the effect of earnings management on financial performance
This can be seen from the number of companies that went public since the Indonesian capital market was reactivated in 1977-1987, namely 24 companies with a total emission value of Rp.679.50 billion, having experienced a large increase to 411 companies in 2004 with emissions total Rp.314.76 trillion
The results of this study provide empirical evidence supporting the allegations of Bowen et al (2004) which states that if managerial opportunism is a trigger for earnings management, it can be estimated that there is a negative relationship between earnings management and the company’s financial performance
Summary
The purpose of this study is to determine the effect of earnings management on financial performance. The development of the capital market has been able to provide a substantial contribution to the development of the national economy (Schipper et al, 1989) This can be seen from the number of companies that went public since the Indonesian capital market was reactivated in 1977-1987, namely 24 companies with a total emission value of Rp.679.50 billion, having experienced a large increase to 411 companies in 2004 with emissions total Rp.314.76 trillion. To realize the optimal allocation of resources in the capital market, companies must provide information that is transparent to the public and useful in making economic decisions (Jensen, 1993; Beasley, 1996). Investors and creditors as users of financial statements use past earnings information to help assess company prospects. Investment and credit decisions reflect the expectations of investors and creditors about the company’s performance in the future, these expectations are usually based at least on evaluating the company’s financial performance in the past (DeFond and Jiambalvo, 1994; Claessen et al, 2000)
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: International Journal of Economics and Financial Issues
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
