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The Role Of Corporate Governance In Managing Small Income In Indonesian State-Owned Enterprise

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  • NURHAYATI, Puji

    (Universitas PGRI Madiun, Indonesia. Author-Name: HATMAWAN, Aglis Andhita
    Universitas PGRI Madiun, Indonesia.)

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.

Suggested Citation

  • NURHAYATI, Puji, 2021. "The Role Of Corporate Governance In Managing Small Income In Indonesian State-Owned Enterprise," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 25(1), pages 78-94, March.
    • Handle: RePEc:vls:finstu:v:25:y:2021:i:1:p:78-94
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    References listed on IDEAS

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    More about this item

    Keywords

    information asymmetry; board of commissioners; earnings management;
    All these keywords.

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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