Preventing Earnings Management Research Articles

Pengaruh struktur GCG terhadap manajemen laba dengan koneksi politik sebagai variabel moderasi

This research aimed to determine the influence of good corporate governance structure on earnings management with political connection as a moderating variable. The independent variables were managerial ownership, institutional ownership, board size, and independent commissioners. Earnings management was the dependent variable. The moderating variable was political connection. The research population was non-financial services companies listed on the Indonesia Stock Exchange 2018-2022. The research sample was 562 firm-years. The research results showed that institutional ownership and independent commissioners had a negative influence on earnings management, while managerial ownership and board size had no influence on earnings management. Political connection weakened the negative influence of institutional ownership on earnings management. Political connection was not proven to strengthen the positive influence of managerial ownership on earnings management. Political connection was not proven to weaken the negative influence of board size and independent commissioners on earnings management. Public interest statements This research can increase knowledge regarding GCG structures, political connection and earnings management. The results of this research can also be used as input for regulators in implementing GCG to prevent earnings management.

How Does a Whistleblowing System Prevent Earnings Management? Insights from Corporate Governance Perspective

The whistleblowing system (WBS) is a component of the internal control system that plays a crucial role in preventing irregularities and fraud, as well as reinforcing the implementation of good governance practices. Therefore, this study aims to examine the whistleblowing system's role in moderating the effect of corporate governance (institutional ownership, independent commissioners, and audit committees) on earnings management. The population of this study comprises 147 manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the period from 2017 to 2021. The sample was selected using simple random sampling, resulting in 60 companies per year and a total data observation of 300. Moderated Regression Analysis (MRA) was chosen as the analysis method, and the estimation results indicate that the whistleblowing system strengthens the negative effect of institutional ownership, independent commissioners, and audit committees on earnings management. These results demonstrate that with a whistleblowing system in place, governance functions more effectively in reducing earnings management compared to companies without such a system. This study contributes to the literature by illustrating that the whistleblowing system operates more optimally with the support of corporate governance. Policies are needed to enhance the relationship between corporate governance mechanisms and earnings management activities, with the whistleblowing system policy expected to enhance the effectiveness of functional governance and consequently reduce earnings management activities.

Bank intervention and firms’ earnings management: evidence from debt covenant violations

Earnings management has long been one of the main concerns in accounting and management literature, and the extent to which corporate governance mechanisms can discipline management behaviour and prevent earnings management has attracted increasing interest among policy makers and academic researchers. Differing from previous corporate governance literature that focuses mainly on the board and auditors, we explore the role of creditors in corporate governance. In particular, we examine the effect of bank intervention on earnings management via the lens of debt covenant violations, where control rights are transferred to creditors (banks). Using a Difference-in-Difference approach, we find that firms reduce both their accruals-based and real earnings management following debt covenant violations. The negative effect on earnings management is more prominent when banks possess greater bargaining and monitoring power and when firms are more financially constrained. By identifying a specific channel through which debt providers influence corporate financial reporting, our findings suggest that creditors can play an important role in governing organisations and disciplining management behaviour.

Apakah Komisaris Independen Memoderasi Hubungan Koneksi Politik, Kepemilikan Institusional, Dan Manajemen Laba?

Purpose: This research aims to empirically prove the influence of political connections, institutional ownership and independent commissioners on earnings management in non-cyclical consumer sector manufacturing companies listed on the IDX in 2018 - 2022. Methodology/approach: this research uses quantitative methods whose data is obtained from the official website of the Indonesia Stock Exchange (BEI). The method used in sampling was purposive sampling, so that the sample obtained in this research was 17 companies with 85 observation data. The data analysis method used is multiple regression analysis with the help of SPSS version 25 data processing application software. Findings: The results of this study found that the presence of independent commissioners in the company will create tighter and more objective supervision of the financial reporting process so that it will prevent earnings management actions carried out by politically connected managers and with high institutional ownership within the company the institutions will be able to control company and will avoid earnings management practices. Practical and theoretical contributions/Originality: this research provides benefits for related parties such as investors. The results of this research provide new knowledge and insight for investors when they want to invest in a company. With this research, investors are able to assess and analyze a company whether the company is worthy of investment or not. Research limitations: this research has limitations, namely the difficulty in accessing data on each company's website because there are several companies whose data is incomplete. Apart from that, the sample used was too small due to certain criteria so that the sample was limited and the researcher only focused on one sector.

THE EFFECT OF BOARD SIZE, BOARD INDEPENDENCE, AND THE COMPOSITION OF BOARD INDEPENDENCE ON ACCRUAL AND REAL EARNINGS MANAGEMENT

This paper examines the effect of quantity and quality of board on mitigating accrual and real earnings management by using a sample from companies listed in the S&P 500 index from 2010 to 2019. The study uses random-effect regression analysis and finds evidence that large board size is an ineffective tool for reducing earnings management. In contrast, larger board independence proves to mitigate earnings manipulation. However, when board independence interacts with board size, the favourable influence of board independence to prevent earnings management is reduced as the board size rises. It can be suggested that a small board dominated by independent directors is more effective in reducing both accrual and real earnings management than a larger board with larger outside directors. The findings conclude that board characteristics are not separate individuals but complementary characters. Hence, companies should not only rely on the board's quantity but also pay attention to its quality to develop an effective board to reduce earnings management.

The impact of co-opted executives on earnings management

PurposeThe authors seek to analyze the impact of weak corporate governance by top executives of a firm on the firm's earnings reports. This research is meant to further emphasize the impact of co-opted executives on a firm, primarily through their impact on earnings management.Design/methodology/approachUsing financial data from 11,473 firm-year observations, the authors utilize ordinary least squares (OLS), 2-stage IV regressions, propensity score matching (PSM) and entropy balancing to analyze the impact of a co-opted top management team on discretionary accruals and restatements.FindingsThe authors find empirical evidence that firms with weak corporate governance from top executives are more likely to manipulate reported earnings and have lower financial reporting quality. The authors also find that the effect of co-opted executives on earnings management is weaker when a chief executive officer's (CEO’s) incentives are not aligned with those of top executives, suggesting that executives prevent earnings management due to reputational concerns. Co-opted chief financial officers (CFOs) increase the magnitude of earnings management in a firm but are not solely responsible for the authors' results.Originality/valueThe authors' results suggest that the top executive team provides an important first defense in the prevention of earnings management and corporate wrongdoing. Co-option of the top executive team may be an important consideration when doing research into corporate governance.

Peran Mediasi Manajemen Laba Diantara Struktur Modal Dan Kinerja Keuangan

Purpose: This study aims to analyze the effect of capital structure on financial performance mediated by earnings management. Methodology/approach: The research method used is a quantitative approach with secondary data. Samples were taken using purposive sampling to obtain 22 food and beverage subsector companies registered on the IDX during the 2017-2021 period. So, the total observations data is 110. The research analysis techniques using path analysis consist of statistic-t test and sobel test. Findings: The results showed that capital structure has a significant negative effect on financial performance, capital structure has no effect on earnings management, earnings management has no effect on financial performance, and earnings management cannot mediate between capital structure and financial performance. Practical implications: If the company's debt is getting higher, it will cause a real decrease in financial performance. However, agent financing originating from the capital structure can prevent earnings management actions so that these actions do not sufficiently affect financial performance. Originality/value: There are still limited research references regarding capital structure on financial performance mediated by earnings management. This research develops previous research by exploring earnings management with modified Jones measurements in the mediation model.

Pengujian Manajemen Risiko Sebagai Variabel Moderasi Terhadap Hubungan Manajemen Laba dan Nilai Perusahaan

This study aims to examine the relationship between earnings management practices and firm value with enterprise risk management as a moderating variable. The sample in this research is 50 manufacturing companies listed on the Indonesia Stock Exchange during 2017-2021. The data collection technique was purposive sampling and derived from secondary data, both from the IDX and from the website of each company. The research hypothesis was tested using regression analysis. The results of the study show that earnings management has a significant negative effect on firm value. Risk management, which is expected to weaken the relationship between earnings management and firm value, is not supported in this study. Although risk management has not been significantly proven, this research contributes to stakeholders to encourage managers to maximize and optimize company risk management practices as an effort to prevent earnings management practices.

Pengujian Praktik Manajemen Laba Dengan Kualitas Audit Sebagai Variabel Pemoderasi

This study aims to obtain empirical evidence of the effect of the independence of commissioners and audit committees on earnings management and to test audit quality as a moderating variable can strengthen the relationship between the independence of commissioners and audit committees on earnings management or weaken the relationship between the independence of commissioners and audit committees on earnings management. Audit quality as a moderating variable, because high quality auditors strengthen supervision of management so that the profits reported in the financial statements are more transparant and free from misstatements. Manufacturing companies listed on the Indonesia Stock Exchange from 2017 to 2020 were used as samples and 94 companies were selected using purposive sampling method. This study uses path analysis to test the hypothesis. The results showed that the independence of commissioners and audit committees can reduce earnings management behavior by management. Supervisory activities by independent commissioners and audit committees are more effective in reducing opportunistic behavior by management, so that information can be more transparent and have higher quality. This study also provides results that higher audit quality can strengthen the relationship between audit committee independence and earnings management. This study provides information to investors and companies that to prevent earnings management, they can add commissioners and audit committee members from outside the company and also use qualified auditors in providing opinions.

Manajemen Laba : Good Corporate Governance, Budaya Nasional & Korupsi Dalam Agency Cost

Agency Theory explains that company owners will incur agency costs to maintain the relationship between capital owners and management due to information asymmetry present in the company, one of which is earnings management practices. In line with research by Schwartz (1999) and Lacker & Tayan (2011), the policy of protecting assets owned by investors is determined by the quality of the legal system in force in a country and has direct implications for agency costs that must be incurred by investors. The implementation of Good Corporate Governance through an independent board of directors and audit committee policy provides improved corporate governance and early protection in the company so that the company's objectives are aligned with the objectives of the owners of capital. The purpose of this study is to determine and analyze the effect of the level of agency costs based on national cultural scores and the level of corruption, the role of independent boards of directors and independent audit committees on earnings management practices in companies listed on the Indonesia, Malaysia, Singapore, Philippines and Thailand stock exchanges in 2017 - 2019. The research data were obtained from the annual report reported by each company, and Hofstede's national culture score and the level of corruption perception issued by Tranparency International. This research is quantitative research with data analysis using multiple linear regression analysis. The results showed that the level of agency costs owned by a country had no significant effect on earnings management practices, while the independent board of directors and independent audit committee had a significant effect on earnings management practices and simultaneously agency costs, independent board of directors, and independent audit committee had a significant effect on earnings management practices. So it can be concluded that in dealing with agency problems, companies need to improve good corporate governance to support agency costs incurred by company owners in connection with preventing earnings management practices.

Peran Moderasi Manajemen Risiko Perusahaan Terhadap Hubungan Antara Aktivitas Pendanaan Eksternal Dengan Manajemen Laba

This study examines the relationship between a company's external financing activity and earnings management and enterprise risk management as moderation variable. The sample of the study was 271 companies listed in the Bloomberg database in 2018. The results of this study show that: First, external financing activities of both debt and equity are positively associated with accrual earnings management and real activity earnings management. Second, enterprise risk management has a significant influence on the relationship between external funding activities and earnings management. The results of this study make a significant contribution to stakeholders to strength managers to augment the company's risk management functions in an effort to prevent earnings management practices.

Impact of corporate governance on earnings management – Experimental evidence on listed commercial banks in Vietnam

Earnings management is the practice of adjusting accounting policies to change earnings. It affects the earnings of the banking industry, including listed commercial banks. It also reduces the trust of investors because the information provided is unreasonable for the bank system. Corporate governance as a management organization can prevent earnings management in the banking industry. The paper aims to consider the impact of corporate governance on the earnings management of listed commercial banks in Vietnam. The paper uses a time series of ten years from 2012 to 2021. The research uses experiments to test the hypothesis of the model. The result finds three factors positively affect the earnings management of listed commercial banks, including the number of members, professional qualifications, and meetings of the board of directors. The number of members is the strongest influence on earnings management, while the professional qualifications have the lowest effect. The results also demonstrate that listed commercial banks have practiced earnings management in recent years. From there, the paper proposes some policies to prevent the earnings management of listed commercial banks to improve the quality of information.

Leverage of Firms and Earnings Management Practices in Nigeria Pre and Post IFRS Adoption Periods

It has been argued that taking on more leverage in firm’s capital structure will force managers to disclose more information in line with agency theory and theoretically, this is expected to increase in postIFRS periods. Whether, this theoretical assertion holds in the case of Nigeria is subject to academic debate. Thus, the paper examines the association between leverage and earnings manipulative practice of firms in Nigeria pre and postIFRS periods and attempt to test the assertion of agency theory that higher leverage will be beneficial to improved earnings quality dues to pressure on managers by bondholders. The study incorporated data for 87 listed firms on the floor of the Nigeria Stock Exchange for 10 years, 5 years preIFRS (2007 to 2011) and 5 years postI FRS (2012 to 2016) making 870 firm year observations. It disaggregated the periods into pre and postIFRS to enable the researcher test for the effect of adoption. The panel regressions estimate (Random effect model) was used to test the effect of the association between the independent and dependent variables. The results deviate from norms and show that although taking on leverage in the capital structure of firms could be beneficial to earnings quality in line with agency theory in preIFRS, this benefit had been eroded after Nigeria’s adoption of the global standards. In postIFRS, leverage has a positive association, indicating that more leverage resulted in increased manipulation. Performance of firms proved to be an important factor affecting earnings quality as the results showed that lower performance was likely associated with increased earnings management practice post IFRS. The study is original and deviate from norms, puncturing the beliefs that IFRS adoption would limit managers’ ability to manipulate earnings. It also found, against popular assertion, that increased leverage may not be associated with reduced earnings manipulative practices. Leverage is unlikely to prevent earnings management practices.

Earnings quality, foreign investor and dividends

This study discovers the relation between corporate governance factors and earnings quality and finds that increases in dividends and foreign ownership deter earnings management. The author shows that dividend increases and foreign ownership enhance earnings quality, but they appear to be substitutes in that role. In other words, as foreign ownership increases, the influence of dividends in increasing earnings quality decreases. Improving transparency through dividend increases and monitoring by foreign institutional investors are substitutes in preventing earnings management.

Analisis Pengaruh Karakteristik Dewan Terhadap Manajemen Laba

This study aims to examine the effect of the characteristics of the board of directors on earnings management. Board characteristics are the most important part in the structure or governance of a company and government in limiting or preventing earnings management by a company manager. This study uses data from companies listed on the Indonesia Stock Exchange (IDX) which include annual reports from 2015 to 2019 except insurance companies, financial and banking institutions. Sampling of data was done by purposive sampling technique. This study combined the research object and one time dimension. This research was conducted using panel data regression test based on data that had been collected using SPSS and Eviews 10 software. The best model chosen for this research model was the Fixed Effect Model. The results showed that the board independent, board meeting, board of directors expertise, size of the audit committee, independent audit committee, audit committee meeting, audit committee expertise, leverage and big4 has no influence on the dependent variable earnings management. Then the size of the board of directors has a negative significant on earnings management. Meanwhile, company size and growth have a positive significant on earnings management.

ACCOUNTING STANDARDS FOR FIXED ASSETS OF U.S. GAAP AND IFRS: COVID-19 PANDEMIC AND EARNINGS MANAGEMENT PERSPECTIVES

FASB and IASB have differences in setting the accounting standard for fixed asset. The FASB does not allow firms to restore the asset value that has been written down, while the IASB allow companies to recover the asset values that has been written down. These differences have distinct implication to depict the COVID-19 pandemic phenomenon and prevent earnings management that will affect the qualitative characteristics of the faithful representation. Therefore, this study aims to analyze the fixed asset accounting standards of U.S. GAAP or IFRS which is more optimal to improve the faithful representation in the case of the COVID-19 pandemic and earnings management. Based on an analysis of the theory and literature review, this study conclude that the fixed assets accounting standard of IFRS is more optimal to represent the COVID-19 pandemic faithfully than that of U.S. GAAP. This is because IFRS allows for recovery of impairment losses. In addition, the fixed asset accounting standard of U.S. GAAP is more optimal than that of IFRS for preventing earnings management so as to improve the quality of faithful representation of the fixed asset value. This is because the fair value measurement for fixed assets involves estimation and subjectivity of the asset appraiser enhancing the possibility of earnings management.

Synopsis of the Accounting Research in Hellas

The scope of this paper is to provide a synopsis of the accounting research in the Hellenic corporate environment. In addition, we will examine the quality of audit in publicly listed companies, as prescribed by the term “audit gap”; this term specifies and characterizes the growing public concern regarding the audit report credibility and efficiency.These two topics (Hellenic accounting and auditing environment) have been isolated and examined from the previous researchers in depth; however, the novel think of this study is that it examines this “audit gap”, which is the gap between the expectations the public has from the auditors and what auditors actually do in their reports (Caramanis, 2008). This research is useful for capital market and audit authorities as they should focus more on improving audit work and preparing accounting and auditing standards that prevent earnings management. However, our study has the limitation that it examined the capital market, audit and accounting environment of a single country, i.e. Hellas/Greece.

Analysis of Good Corporate Governance, Free Cash Flow, Leverage towards Earning Management, and Shareholder Wealth in Service Sector Companies Listed on the Indonesia Stock Exchange

The phenomenon of the megadolar case that occurred in Enron Corporation and the profits stated over stated at PT. Kimia Farma caused by earnings management. Earning management results in reporting on financial statements asymmetry with the actual situation. This can bring huge losses to shareholders because financial statements are the main basis for shareholders in conducting business transactions. Utami (2005) in his research stated that Indonesia is the country with the most rice earning management. Thus, it is important for investors and shareholders in Indonesia to look at things that can trigger earnings management and what can prevent earnings management. In this study the researchers tested the effect of good corporate governance, free cash flow, and leverage on wealth earning management and shareholders. The researcher examines the effect of good corporate governance as a variable that can prevent earnings management and test free cash flow and leverage as triggers for earnings management. In this study using a sample of 178 service sector companies taken through the Yamane method with a sampling method namely purposive sampling in the 2016-2018 period. Data analysis and hypothesis testing in this study using the Partial Least Square Path Modeling (PLS-SEM) method. The results showed that good corporate governance proved to have a significant negative effect on earnings management while shareholders in wealth had a significant positive influence. Free cash flow proved to be insignificant to earning management while shareholder wealth had a significant positive effect. The leverage variable proved to have a significant negative relationship to earnings management as well as wealth shareholders.

Corporate governance mechanism and financial performance: role of earnings management

The mechanism of good corporate governance is used to prevent the management of the company from engaging in unethical actions, such as the earnings management. It can be an effective way to control management. This study aims to analyse corporate governance, consisting of the size of the board of commissioners, the size of the sharia supervisory board, and the audit committee on financial performance, measured as return on assets (ROA), with earnings management as the mediating variable. The sample used for the study consists of nine Indonesian shariah banks and the period of analysis is 2013-2017. The results of the path analysis show that the size of the board of commissioners has a negative effect on the company’s ROA. The study also finds that the size of the sharia supervisory board, audit committee and earnings management do not have significant effects on financial performance. Earnings management has a positive mediating role on the relationship between the board of commissioners, the audit committee and ROA. This finding indicates that the existence of the board of commissioners is effective in supervising the management. Thus the mechanism corporate governance can limit the managers’ discretionary behavior and prevent earnings management.

Board independence and earnings management – a study of listed companies on Ho Chi Minh stock exchange

Board independence is reflected in many aspects, the most common of which is the existence of independent non-executive directors and the separation of Chairman and CEO roles. This study examines whether a highly independent board deters earnings management by its managers. Discretionary accruals are used to measure earnings management while current operating cash flow divided by lagged assets of current and future are used to measure manager's incentives. On a sample of 1230 observations from 244 HOSE listed companies that belong to VNX Allshare index in the period 2012-2017, this study provides significant evidence for corporate governance issues of Vietnamese listed companies. Specifically, the experimental results show that when the current period performance is poor and expected future period performance is good, and if one person holds both Chairman and CEO roles, he will carry out the transfer of a part of the future profits to the present to improve current year’s performance to satisfy personal interests. Unfortunately, all variables related to independent directors are statistically insignificant, confirming the fuzzy role of independent directors in monitoring and preventing earnings management in particular and agency problems in general. This study offers implications for the effectiveness and substance of the independent role of the board of directors in Vietnamese enterprises.