Elements influencing company worth and the role of earnings management as a moderating factor insight from Islamic banking

Harsono Edwin Puspita (), Wahidah Shari () and Nurul Huda Abdul Majid ()

Journal of Asian Scientific Research, 2025, vol. 15, issue 1, 147-161

Abstract: This study examines factors affecting firms’ value (FV) and earnings management (EM) as moderating variables. In analyzing data, this study used discretionary accruals according to the modified Jones model to measure earnings management. ROA is used to measure the firm value. Sharia supervisory board (SSB) as a proxy for corporate governance, acting as an independent variable, while firm characteristics and institutional ownership serve as control variables. This study used firm characteristics involving Asset Growth (AG), Capital Adequacy Ratio (CAR); Non-Performing Financing Ratio (NPFR), and institutional ownership as control variables. This research employed panel data regression analysis covering on 33 Islamic Banks that were active in Indonesia between the years 2012 and 2020. In analyzing data, STATA (software for statistics and data science) application is used. We use STATA because it is a complete, integrated software package that provides all our data science needs as well as data manipulation, visualization, statistics, and automated reporting. The results showed that the relationship between SSB size and FV was not further controlled by earning management. Thus, smaller SSBs are superior to larger ones when it comes to monitoring the behavior of managers. The other finding shows that asset growth and non-performing financing significantly influence firm value. These mean that investors consider an investment to be successful if it can improve the book value of the investment and have a low rate of debtor default. This study suggests that asset growth (AG) and a drop in non-performing financing ratio (NPFR) can increase a firm’s value. These findings have important implications for excellent corporate governance, investment financing, and determining the level of credit risk. The main limitation is data availability. The maximum number of Islamic banks that disclose financial data covering the period of 2014-2022 limited the scope of the study to 34 Islamic banks in Indonesia. The findings of this study can also significantly impact public trust in investing in Islamic banking. Beside that, the findings of this study provide valuable insights that are advantageous to current and prospective investors, as well as other relevant stakeholders.

Keywords: Earning management; Firm characteristic; Firm value; Islamich supervisory boards; Ownership. (search for similar items in EconPapers)
Date: 2025
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