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The effect of earnings manipulation based on real activities to the performance of Indonesian SOEs

Author

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  • Surifah Surifah

    (Accounting Study Program,FBPK Yogyakarta University of Technology, Indonesia)

  • Ifah Rofiqoh

    (Accounting Study Program,FBPK Yogyakarta University of Technology, Indonesia)

Abstract

The aim of this research is to examine the effect of real earnings manipulation (REM) on the performance of state-owned enterprises (SOEs) in Indonesia. This research was conducted at a state-owned company listed on the Indonesia Stock Exchange (IDX) in 2013-2017. Data obtained from financial reports and annual reports issued by IDX and the Web of each SOEs. Data also comes from the Indonesian Capital Market Directory. The research variables consist of a dependent variable, which is financial performance, and an independent variable that is REM. Financial performance is proxy by net profit margin (NPM) and returns on equity (ROE). Earnings manipulation is proxy by Roychowdhury's model. The type of ownership is used as a control variable of this research. Generally, the least square regression model is used to test the relationship between earnings manipulation and SOEs performance. This research shows that earnings manipulation based on real activities through production costs negatively affects the performance of Indonesian SOEs, government ownership negatively effects on NPM whereas public ownership has a positive effect on performance, as measured by ROE. Improper government policies can reduce the performance and significant disadvantages of SOEs. Key Words: Earnings Manipulation, Performance, SOEs

Suggested Citation

  • Surifah Surifah & Ifah Rofiqoh, 2020. "The effect of earnings manipulation based on real activities to the performance of Indonesian SOEs," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(5), pages 275-280, September.
    • Handle: RePEc:rbs:ijbrss:v:9:y:2020:i:5:p:275-280
    DOI: 10.20525/ijrbs.v9i5.816
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    References listed on IDEAS

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    1. Wael Mostafa, 2017. "The impact of earnings management on the value relevance of earnings," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 32(1), pages 50-74, January.
    2. Azar Ghyasi, 2017. "An Investigation of the Relationship between Earnings Management and Financial Ratios (Panel Data Approach)," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 608-612.
    3. Roychowdhury, Sugata, 2006. "Earnings management through real activities manipulation," Journal of Accounting and Economics, Elsevier, vol. 42(3), pages 335-370, December.
    Full references (including those not matched with items on IDEAS)

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