DETERMINANTS OF EARNINGS OPACITY: INDONESIA EVIDENCE

Zuhrohtun and Zaki Baridwan

The International Journal of Business and Finance Research, 2015, vol. 9, issue 3, 95-104

Abstract: The opacity index of Indonesia ranks 35 of 48 countries in the world (Milken Institute, 2009) and 32 of 34 countries (Bhattacharya et al., 2003). It indicates that earnings quality of Indonesian public companies is low. The factors affecting earnings opacity of Indonesian public firms remains a question. This study investigates whether: (1) firms with concentrated ownership have higher earnings opacity compared to those of dispersed ownership, (2) firms audited by Big Four accounting firms have lower earnings opacity relative to those audited by non-big four firms, (3) financial firms have higher earnings opacity compared to non-financial firms, and (4) smaller firms have lower earnings opacity compared to larger firms. The sample for the study consist of all firms listed on the Indonesia Stock Exchange in 2008-2010. This study used independent sample t-test and regression analysis to test the hypotheses. Research findings suggest that: (1) smaller firms tend have greater earnings opacity than larger firms and it is used to maintain their private information from competitors, (2) firms with higher concentrated ownership tend to have lower earnings opacity. This finding suggests that a single majority ownership plays an important role in monitoring the transparency of information

Keywords: Earnings Opacity; Concentrated Ownership; Smaller Firms; Larger Firms; Financial Firms; Big Four; Non Big Four (search for similar items in EconPapers)
JEL-codes: G30 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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