THE ROLE OF CORPORATE GOVERNANCE IN MANAGING SMALL INCOME IN INDONESIAN STATE-OWNED ENTERPRISE

Puji Nurhayati
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Puji Nurhayati: Universitas PGRI Madiun, Indonesia. Author-Name: HATMAWAN, Aglis Andhita

Studii Financiare (Financial Studies), 2021, vol. 25, issue 1, 78-94

Abstract: Earnings management is a behaviour that is difficult to avoid because of the impact of accruals in preparing financial statements. Earnings management occurs due to information asymmetry in a company. One way to prevent information asymmetry from occurring so as to reduce earnings management is corporate governance. It aims to determine manager accountability through existing mechanisms to reduce problems between agents and principals. The purpose of this study is to examine the effect of information asymmetry on earnings management through the role of corporate governance in State-Owned Enterprise (SOE) in Indonesia. The focus of this study is on information asymmetry, the proportion of the board of commissioners, the size of the board of commissioners and its effect on earnings management. The result showed that information asymmetry has no effect on the earnings management through the proportion of the board of commissioners and the size of the board of commissioners. The result does not significantly affect earnings management since the capital of SOE is dominated by state assets related to public funds. So company’s agent should acknowledge the boundaries of ethical, moral, law, government policies, environmental, social, cultural, political, and economic issues in making decisions. Therefore, earnings management actions in SOE companies in Indonesia cannot be minimized by the proportion of the board of commissioners and the size of the board of commissioners. This study offers the importance of corporate governance to build reputation and strength on SOEs in Indonesia.

Keywords: information asymmetry; board of commissioners; earnings management (search for similar items in EconPapers)
JEL-codes: B26 C22 G38 (search for similar items in EconPapers)
Date: 2021
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