Abstract
Earnings management through real activities is a numbers game with the profits made through the activities associated with operational activities. In this study, real earnings management with operating cash flow approach using proxies on firm performance indicators Return on Assets (ROA) and Tobin's Q. The sample used in this study is a manufacturing company using the sample selection criteria. The results of the regression analysis for this study indicate that real earnings management approach to operating cash flow effect on the company's performance indicators Return on Assets (ROA) and no effect on the company's performance indicators Tobin's Q.
Highlights
Earnings management is conducted in two ways, namely the accrual manipulation and real activities manipulation (Agmarina & Yuyetta 2011)
The accrual manipulation has no impact on cash flow and performed at the end of the period, while the real manipulation has impact on cash flow which is directly done in each accounting period with the aim to meet earnings targets in order to avoid losses
Business enterprises often delay the real activity or plan of which an important company aims to reduce costs to increase profits. In relation to such argument, this study focuses on measuring the performance of companies using two indicators: Return on Assets (ROA) and Tobin's Q
Summary
Earnings management is conducted in two ways, namely the accrual manipulation and real activities manipulation (Agmarina & Yuyetta 2011). Real earnings management is conducted by the management showing a good performance in short-term It potentially will reduce the value of the company. Business enterprises often delay the real activity or plan of which an important company aims to reduce costs to increase profits In relation to such argument, this study focuses on measuring the performance of companies using two indicators: Return on Assets (ROA) and Tobin's Q. There are several previous studies that revealed the effect of earnings management on the corporate performance It was a research conducted by Ferdawati (2009) who tested the effect of real earnings management on firm value (Tobin's Q). The researcher wants to return to uncover the real problem with the effect of earnings management operating cash flow approach to company performance. This study deals with the company's performance measurement using indicators Return on Assets (ROA) and Tobin's Q
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