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The effect of financial distress using the Altman and Springate Models on stock return in mediated earnings management:A study on textile and garment companies listed on the Indonesia Stock Exchange 2015-2019 period

Author

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  • Faradisa Bachmid

    (Department of Management, Faculty of Economics and Business,University of Brawijaya Jl. MT. Haryono No.165, Malang, Indonesia)

  • Sumiati Sumiati

    (Department of Management, Faculty of Economics and Business,University of Brawijaya Jl. MT. Haryono No.165, Malang, Indonesia)

  • Siti Aisjah

    (Department of Management, Faculty of Economics and Business,University of Brawijaya Jl. MT. Haryono No.165, Malang, Indonesia)

Abstract

This study aims to examine and analyze the effect of financial distress with the Altman and Springate Models on stock returns either directly or indirectly by involving earnings management as a mediation. This study uses secondary data from Textile and Garment Companies listed on the Indonesia Stock Exchange from 2015-2019, with a sample of 20 companies using sampling so that 100 observations are obtained. The data is obtained from the annual financial statements. The data analysis technique used SEM-PLS with the help of WarpPLS 6.0 software. The results of the study provide empirical evidence that financial distress has a positive effect on earnings management, while financial distress and earnings management has a negative effect on stock returns. Earnings management is able to mediate the effect of financial distress on stock returns. Key Words:Financial distress, earnings management, stock returns

Suggested Citation

  • Faradisa Bachmid & Sumiati Sumiati & Siti Aisjah, 2021. "The effect of financial distress using the Altman and Springate Models on stock return in mediated earnings management:A study on textile and garment companies listed on the Indonesia Stock Exchange 2," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(5), pages 119-128, July.
    • Handle: RePEc:rbs:ijbrss:v:10:y:2021:i:5:p:119-128
    DOI: 10.20525/ijrbs.v10i5.1279
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    References listed on IDEAS

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    1. Graham, John R. & Harvey, Campbell R. & Rajgopal, Shiva, 2005. "The economic implications of corporate financial reporting," Journal of Accounting and Economics, Elsevier, vol. 40(1-3), pages 3-73, December.
    2. Roychowdhury, Sugata, 2006. "Earnings management through real activities manipulation," Journal of Accounting and Economics, Elsevier, vol. 42(3), pages 335-370, December.
    3. Dirk Hackbarth & Rainer Haselmann & David Schoenherr, 2015. "Financial Distress, Stock Returns, and the 1978 Bankruptcy Reform Act," The Review of Financial Studies, Society for Financial Studies, vol. 28(6), pages 1810-1847.
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