Abstract
This study found new results from the development of previous research. Previous research, earnings management is measured through discreationary accruals by disbursing total accruals with non-discreationary accruals using the Jones Modified model (Dechow et al., 1995) with the formula TA = Nit – CFOit. Previous research and this study were conducted on mining companies listed on the Indonesian stock exchange in the period 2012 to 2015. The results of previous studies that leverage had no effect on earnings management and earnings management is an intervening variable that has a significant influence on earnings quality. (Irene Barus et al., 2018). This study aims to analyze the relationship between leverage ratio and firm size to real earnings management using discretionary accruals through real daily earnings management activities. Managers tend to choose earnings management through real activity manipulation rather than earnings management through accruals (Graham et al. 2005; Roychowdhury (2006: 338). The results of this study indicate leverage variables have a positive and significant effect on real earnings management activities.
Highlights
Some stocks of public company are owned by the society through stock exchange
The way to know whether the data has been in normal distribution or not is by using the normal distribution figure with the histogram graph which has a curve in bell-shaped (Imam Ghozali, 2011: 164)
Besides doing hypothesis testing finding in this research is a significant impact between leverage and real earnings management activities toward firm size in coal mining companies listed on Indonesia’s Stock Exchange (BEI) within 2012-2015
Summary
Some stocks of public company are owned by the society through stock exchange. The company has an obligation to present their financial statement based on the requirements established by an authorized institution in Indonesia i.e., Financial Services Authority (OJK). Most of the users of financial statement more focus on the information on profit that is available in the financial statement without paying attention on the relevancy to principle of accounting standard that is existed. The users only focus on the procedures that are used for generating profit and loss. The profit and loss statement becomes a product of information issued by the company’s management. It becomes one of the company’s performance indicators that cannot be separated from the composing process. The inclination to focus on the company’s profit becomes the basis of the manager’s behavior that tends to perform earnings management practices. The financial statement has become a central issue and
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