Does Corporate Governance and other Factors Influence Earnings Management? A Study on Indonesia’s Banking Sector

Sigit Handoyo () and Inneke Tri Kusumaningrum ()

Humanities and Social Sciences Letters, 2022, vol. 10, issue 1, 11-26

Abstract: The issue of misreporting financial data and earnings management has become more prominent in recent years. Several studies have been conducted determining the influences of the mechanisms of corporate governance and earnings management in various countries. In this study, it was proven that the existence of a good corporate governance (GCG) mechanism did not suppress earnings management practices in the banking sector industry in Indonesia. However, another factor, dividend policy, can prove effective in suppressing earnings management. The measurement of earnings management in this study was carried out using the Modified Jones model with a population of 43 conventional banks from which research data were taken using a purposive sampling technique sourced from the Indonesia Stock Exchange (IDX). The analysis was carried out using multiple linear regression. The implication of this research is that the implementation of good corporate governance by an entity must be considered given that earnings management practices in Indonesia are still relatively high.

Keywords: Earning management; Mechanism of corporate governance; Dividend policy; Independent board of commissioners; Independent audit committee; Managerial ownership; Indonesia’s banking sector. (search for similar items in EconPapers)
Date: 2022
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