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Management Compensation and Auditor Reputation on Earnings Management and on Share Returns

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  • Farichah Farichah

Abstract

The purpose of this research is to test whether management compensation and auditor reputation motivate management perform earnings management, its effect on companies stock return. This research use companies size, sales growth and financial leverage as control variables. The research hypotheses were tested using ordinary least square regression.The sample of this research are companies listed in the Indonesia Stock Exchange from year 2011 to 2015. The amount of samples that fulfill the criterion are 134 companies. This research take 54 companies as other samples for process of comparing with criterion that the companies were equal size firm and same industries. The theory that based this research is agency theory and signaling theory. The independent variable of earnings management is proxied by accrual discretionary and calculated by Modified Jones Model.This research reveal indeed the management compensation and auditor reputation motivate companies management performed earnings management, and influence negatively toward earnings management. Furthermore, earnings management influence negatively toward companies stocks return.

Suggested Citation

  • Farichah Farichah, 2017. "Management Compensation and Auditor Reputation on Earnings Management and on Share Returns," European Research Studies Journal, European Research Studies Journal, vol. 0(3A), pages 196-208.
    • Handle: RePEc:ers:journl:v:xx:y:2017:i:3a:p:196-208
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