Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute

Economics and Business

Quarterly Reviews

ISSN 2775-9237 (Online)

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
crossref
doi
open access

Published: 05 August 2022

Factors Affecting Earning Management in Companies on the Indonesia Stock Exchange: Study of Fraud and Corruption Practices

Aminullah Assagaf, Nur Sayidah, Ulul Albab, Hadi Sugiyanto, Alvi Mulyaningtyas

University of Dr. Soetomo Surabaya, Indonesia

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, management journal

Download Full-Text Pdf

doi

10.31014/aior.1992.05.03.439

Pages: 90-101

Keywords: Fraud and Corruption, Earning management, Accounting Management

Abstract

This study examines the phenomenon of corruption fraud proxied by earning management in companies listed on the Indonesia Stock Exchange. This study uses the variables of leverage, capital expenditure, and profitability as key variables influencing earning management practices that lead to fraud and corruption. This study uses time-series data from 2017 to 2021 and selects a sample by purposive sampling of as many as 28 companies listed on the Indonesia Stock Exchange. The study's results found that the key variables of leverage, capital expenditure, and profitability turned out to have a positive and significant effect on corruption fraud proxied by earning management. This research contributes mainly to the management of shareholders, practitioners, and investors to predict the possibility of earning management practices that lead to corruption and fraud committed by the company. The originality of this research is mainly in measuring corruption and fraud projected by earning management, thus providing a reference for future research.

References

  1. Adi, SW, Putri, WAP, & Permatasari, WD (2020). Profitability, Leverage, Firm Size, Liquidity, and Total Assets Turnover on Liquidity, and Total Assets Turnover on Real Earnings Management (An Empirical Real Earnings Management (An Empirical Study on the Mining Company Classification Study on the Mini. Indonesian Accounting and Financial Research, 5(2), 129–140. https://doi.org/10.23917/reaction.v5i2.12403

  2. Ahmad, L., Suhara, E., & Ilyas, Y. (2016). The Effect of Audit Quality on Earning Management within Manufacturing Companies Listed on Indonesian Stock Exchange. Research Journal of Finance and Accounting, 7(8), 132–138. Retrieved from www.iiste.org

  3. Alfina, C., & Sambuaga, EA (2021). The Influence of Opportunistic Behavior, Leverage, Financial Distress on Earnings Management. Ultimaccounting: Journal of Accounting Science, 13(1), 60–74. https://doi.org/10.31937/akuntansi.v13i1.1947

  4. Asim, A., & Ismail, A. (2019). Impact of Leverage on Earning Management: Empirical Evidence from the Manufacturing Sector of Pakistan. Journal of Finance and Accounting Research, 01(01), 70–91. https://doi.org/10.32350/jfar.0101.05

  5. Bangun, N., & Economics, F. (2021). Effect of Corporate Governance, Information Asymmetry, And Firm Size on Earning Management. lköğretim Online, 20(3), 351–365. https://doi.org/10.17051/ilkonline.2021.03.34

  6. Dian Primanita Oktasari. (2020). Effects of Capital Structure, Profitability, and Firm Size Towards Earning Management in Manufacturing Companies. EPRA International Journal of Research & Development (IJRD), 7838(May), 74–83. https://doi.org/10.36713/epra4334

  7. Fadlli, ME, & MM, K. (2020). The Effect of Cash Holding, Firm Size, and Financial Leverage to Earning Management in State-Owned Enterprises (SOEs). Journal of Accounting Auditing and Business, 3(1), 91. https://doi.org/10.24198/jaab.v3i1.25462

  8. Fathihani, F. (2020). The Influences of Capital Structure, Company Growth, Profitability, and Company Sizes on Profit Management. https://doi.org/10.4108/eai.26-9-2020.2302688

  9. Ghofir, A., & Yusuf, Y. (2020). Effect of Firm Size and Leverage on Earning Management. Journal of Industrial Engineering & Management Research, 1(3), 218–225. Retrieved from https://jiemar.org/index.php/jiemar/article/view/81

  10. Haryanto, T., & Retnaningrum, M. (2020). The Effect of Capital Expenditure On Profitability With the Size of Company As The Moderating Variables. https://doi.org/10.4108/eai.5-8-2020.2301085

  11. Irawati, N., Marlina, L., & Sipayung, F. (2019). Analysis of the impact of Leverage, Value Added, and Size on Earning Management and Financial Performance of Indonesian Shariah Banking. 100(Icon), 404–409. https://doi.org/10.2991/icoi-19.2019.69

  12. Kalbuana, N., Suryati, A., & Pertiwi, CPA (2022). Effect of Company Age, Audit Quality, Leverage, and Profitability on Earnings Management. International Journal of Economics, Business, and Accounting Research (IJEBAR), 6(1), 389–399. Retrieved from https://jurnal.stie-aas.ac.id/index.php/IJEBAR/article/view/4796/2057

  13. Louisa SIAHAYA, S., Paulina SANDANAFU, S., Aponno, C., & Lilian Angela SADUBBUN, V. (2021). Factors Affecting Real Earnings Management: Evidence from Indonesia Stock Exchange. Journal of Asian Finance, 8(8), 85–0091. https://doi.org/10.13106/jafeb.2021.vol8.no8.0085

  14. Mudjiyanti, R. (2018). The Effect of Tax Planning, Ownership Structure, and Deferred Tax Expense on Earning Management. 231(Amca), 379–381.  https://doi.org/10.2991/amca-18.2018.104

  15. Nadilla, T., Ulfah, A., Hayati, H., Midesia, S., & Puspita, D. (2019). The Effect Of Leverage And Earning Per Share On Earning Management (A Study Of Companies Listed In Indonesia Stock Exchange). https://doi.org/10.4108/eai.18-7-2019.2288646

  16. Nengsih, N. (2019). The Influence of Corporate Governance, Tax Avoidance, Leverage, and Company Size to Earnings Management: Empirical Study from Indonesia's Banking Companies 2015-2017. Scholars Bulletin, 11650(1), 1–8. https://doi.org/10.21276/sb.2019.5.1.1

  17. Nur Ainun Bangun, VN (2020). Effect of Bid-Ask Spread, Leverage, and Firm Size on Earning Management. Journal of Accounting Paradigm, 2(2), 863. https://doi.org/10.24912/jpa.v2i2.7669

  18. Nuryana, I. (2022). Factors influencing earnings management of manufacturing companies on the IDX. International Journal of Multidisciplinary Research and Growth Evaluation, (2012), 103–110. https://doi.org/10.54660/anfo.2021.3.1.8

  19. Picauly, L., & Sitohang, SA (2017). Determinants of Earning Management with Sales Growth as Moderating Variable in Consumer Goods Companies on the IDX. Journal of Accounting & Management Innovation, 1(1), 26–37. Retrieved from https://ejournal.medan.uph.edu/index.php/jam/article/view/179/52

  20. Prayitno, V. (2020). Factors Affecting Real Earnings Management. Emerging Markets: Business and Management Studies Journal, 6(2), 47–57. https://doi.org/10.33555/ijembm.v6i2.116.

  21. Ramadan, G. R., Alim, M. N., Prasetyono, P., & Sayidah, N. (2021). Market Cosequences and Real Earning Management: Empirical Study in Indonesia. Asia Pacific Fraud Journal, 4(1), 1–15. https://doi.org/10.21532/apfjournal.v7i1.210

  22. Rista NCO. (2020). ASEAN Corporate Governance Scorecard, Financial Performance, and Disclosure of Corporate Social Responsibility on Firm Value. EPRA International Journal of Multidisciplinary Research (IJMR), 191–202. https://doi.org/10.36713/epra4799

  23. Roychowdhury, S. (2006).  Earnings management through real activities manipulation. Journal of Accounting and Economics, 42(3), 335–370. https://doi.org/10.1016/j.jacceco.2006.01.002

  24. Sayidah, N., Assagaf, A., & Faiz, Z. (2020). Does earning management affect financial distress? Evidence from state-owned enterprises in Indonesia. Cogent Business and Management, 7(1), 0–14. https://doi.org/10.1080/23311975.2020.1832826

  25. Sayidah, N., Assagaf, A., & Possumah, B. T. (2019). Determinant of state-owned enterprises financial health: Indonesia empirical evidence. Cogent Business and Management, 6(1). https://doi.org/10.1080/23311975.2019.1600207

  26. Sihombing, T., & Susanto, SA (2021). Analysis of the Effect of Capital Expenditure, Business Risk, and Profitability on the Capital Structure of Companies on Property Industry. 13(2), 257–270.

  27. Suhono, CM, Muslih, M., & Pratama, F. (2021). The Effect Of Profitability, Free Cash Flow, And Liquidity On Earnings Management (Case Study On Non-Banking Bumn Companies Listed On The Indonesia Stock Exchange 2015-2019) The Effect Of Profitability, Free Cash Flow, And Liquidity To. E-Proceedings of Management, 8(5), 5323–5330.

  28. Suhono, Diana, N., & Aini, N. (2021). The Effect of Good Corporate Governance, Company Size, and Financial Performance on Earnings Management (Empirical Studies on State-Owned Enterprises listed on the Indonesia Stock Exchange 2014-2018). Journal of Accounting Tax and Business, 2(1), 1–17. Retrieved from https://journal.unsika.ac.id/index.php/IJATB/article/view/5322

  29. Syaputra, R. (2022). Influence of Profitability, Liquidity, Leverage and Company Size on Earnings Management. Ecosystem Journal, 11, 79–85. https://doi.org/10.35134/ekobistek.v11i2.316

  30. Wahyono, W., Novianto, AN, & Putri, E. (2019). The Effect of CSR Disclosure, Corporate Governance Mechanism, Auditor Independence, Auditor Quality, and Firm Size on Earning Management. Indonesian Accounting and Finance Research, 4(3), 156–170. https://doi.org/10.23917/reaction.v4i3.9339

  31. Widyasmara, A., Andika, F., & Saputri, E. (2021). The effect of financial characteristics on earnings management moderated by corporate governance * El effecto de las características financieras en la gestion de resultados moderado por el gobierno corporativo O efecto de las características financieras sobre. 24(57), 151–170.

  32. Wiyadi, Trisnawati, R., Sasongko, N., & Fauzi, I. (2015). The Effect of Information Asymmetry, Firm Size, Leverage, Profitability and Employee Stock Ownership on Earnings Management With Accrual Model. International Journal of Business, Economics, and Law, 8(2), 21–30.

  33. Wuryani, E. (2013). Company Size in Response To Earnings Management and Company Performance. Journal of Economics, Business, and Accountancy | Ventura, 15(3), 491. https://doi.org/10.14414/jebav.v15i3.117

  34. Yanuarso, M., Wijayanti, DM, & Haryono, S. (2021). The Influence of Ownership Structure, Debt Structure, and Independent Commissioner on Earning Management. Al-Qaeda Journal, 6(2), 29–48. https://doi.org/10.23971/jaq.v6i2.3190

  35. Yimenu, K. A., & Surur, S. A. (2019).  Earning Management: From Agency and Signaling Theory Perspective in Ethiopia. Journal of Economics, Management, and Trade, 24(6), 1–12. https://doi.org/10.9734/jemt/2019/v24i630181

  36. Yuliani, R., & Hadi, D. A. (2020). The Factors of Capital Expenditure, Leverage, Profitability, and Company Value Affect the Property Sector. Solid State Technology, 63(3). Retrieved from www.solidstatetechnology.us