Institutional Ownership, External Auditor Reputation, Financial Leverage, and Earnings Management

Ngakan Made Kutha, Marcellia Susan and Asian Institute of Research

No a6nye, OSF Preprints from Center for Open Science

Abstract: Profits show the performance of managers before the related parties, such as investors and creditors. Therefore, managers often incorrectly state them in the published annual financial reports to protect their reputation. Undoubtedly, this action needs to be reduced by the governance mechanism, like supervision by institutions as the owner and audit by the external public accountant firm. To control these two effects on profits management, additionally, this study employs financial leverage. This study aims to prove the impact of institutional ownership, the external auditor reputation, and financial leverage on profits management. The population and the samples are the non-financial companies establishing the LQ45 index from 2014 to 2018, getting taken by the simple random sampling technique. Also, the regression model performs as the technique to examine the data. By denoting the testing of the hypothesis results and the discussion section, this study summarizes that institutional ownership and reputable external auditor effectively decrease profits management. Additionally, although firms have much debt, they cut the tendency to manage their profits because of applying transparency.

Date: 2021-02-04
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-cwa and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:a6nye

DOI: 10.31219/osf.io/a6nye

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