Opportunistic Behavior, External Monitoring Mechanisms, Corporate Governance, and Earnings Management

Agustina Chandra ()
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Agustina Chandra: Trisakti School of Management, Jl. Kyai Tapa No. 20, 11440, Jakarta, Indonesia Author-2-Name: Wimelda Author-2-Workplace-Name: Trisakti School of Management, Jl. Kyai Tapa No. 20, 11440, Jakarta, Indonesia

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Abstract: Objective - The purpose of this research is to analyze the effect of motivational bonus, leverage, firm size, corporate governance (audit committee's size, the proportion of independent commissioners, institutional ownership, managerial ownership) and free cash flow on earnings management. Methodology/Techniques - Earnings management is analyzed in this research using the modified Jones model. The population for the research consists of manufacturing companies listed on the Indonesian Stock Exchange (IDX) between 2013-2015. The final sample includes 60 manufacturing companies. Findings - The result of this study indicate that motivational bonus, leverage, firm size and free cash flow have an influence on earnings management practices. Motivational bonuses and free cash flow as opportunistic behavior also influence earnings management. In addition, leverage and firm size as external monitoring mechanism influence earnings management practices while audit committee size, the proportion of independent commissioners, institutional ownership and managerial ownership as corporate governance practices in companies has no significant effect on earnings management practices. Hence, it is concluded that corporate governance has no effect on earnings management practices in Indonesia.

JEL-codes: G02 G34 (search for similar items in EconPapers)
Pages: 9
Date: 2018-03-11
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-sea
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Published in Accounting and Finance Review, Volume 3, Issue 1

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