Potential Big Bath Accounting Practice in CEO Changes (Study on Manufacturing Companies Listed in Indonesia Stock Exchange)

Ahmad Riyadi,Lucky Nugroho,Wiwik Utami

doi:10.22158/ijafs.v1n2p202

Abstract

This Research aims to compare the earnings management which is big bath accounting model while CEO Changes in Indonesia. This research is using Secondary data which is Financial Statement from the Indonesian Stock Exchange. CEO change is classified either as routine or non-routine based on RUPS (General Shareholders Meeting) and RUPSLB (Extraordinary General Shareholders Meeting) information.The purposive sampling was used in this research by sampling 14 listed company of CEO Change non-routine and 34 listed company of CEO Change routine. These samples are observed from 2004 to 2014. To identify the big bath accounting practice. Although CEO Change non-routine made a high correlation in this study, the study provides there is no difference in earnings management big bath accounting model while CEO Changes between routine and non-routine changes.

Highlights

Earnings information as part of the financial statements is frequently targeted to be managed by management
Chief Executive Officer (CEO) Change non-routine made a high correlation in this study, the study provides there is no difference in earnings management big bath accounting model while CEO Changes between routine and non-routine changes
Based on the calculation above, it can be concluded that there is potential for earnings management of big bath accounting model around the change of the CEO, but there was no significant difference between earnings management of big bath accounting model before the change of the CEO with earnings management of big bath accounting model after change of the CEO both conducted routinely and non-routine

Summary

Introduction

Earnings information as part of the financial statements is frequently targeted to be managed by management. In the case of routine management changes, big bath may occur when (during the year) the resignation of the management such as the manager who resigned have the authority to propose the name of the manager for a period of the year (Otomasa, 1997; Yamaguchi, 2009), the possibility exists that the manager who resigned will do big bath to allow his successor to make a fresh start in his first year in office. (2) Is the period before the non-routine change of management, old management practice big bath accounting? (4) Is the period after the non-routine change of management, new management practice big bath accounting? The formulation of the research questions are as follows: (1) Is the period before the routine change of management, the old management practice significant bath accounting? (2) Is the period before the non-routine change of management, old management practice big bath accounting? (3) Is the period after the routine change of management, new management practice big bath accounting? (4) Is the period after the non-routine change of management, new management practice big bath accounting?

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Results

Conclusion