Abstract
This research is aimed to examine the effect of oil price on earnings management in Indonesia. Research sample consist of 9 crude oil and gas companies listed in Indonesian Stock Exchange for the 2013-2018 period. Earnings management is measured by discretionary accruals. Analysis data uses regression analysis. Result shows that oil price has negative effect on upward earnings management. Since oil price determines companies' profitability, lower oil price will leads companies to engage in earnings management to achieve higher earnings.Keywords: oil price, earnings management, Indonesian stock exchange.JEL Classifications: M21, M41DOI: https://doi.org/10.32479/ijeep.9431
Highlights
In 2014, global market has been shocked with oil price crash
This research is aimed to examine the effect of oil price on earnings management, especially in emerging market such as Indonesian market
The lowest level of discretionary accruals is −0.47 means companies engage in lowest downward earnings management as 0.47 earnings relative to lagged total assets, while the highest level of discretionary accruals is 0.28 means companies engage in highest upward earnings management as 0.28 earnings relative to lagged total assets
Summary
In 2014, global market has been shocked with oil price crash. The lowest price level is in 2016 since last 10 years. There are fifteen big oil companies fall down and go bankrupt (Helman, 2016). It happens because companies have not enough revenues to be generated because sales price is low. This phenomenon is important to be studied because oil industry is one of the most important basic industries to support other industries as energy supplier
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