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Real Earnings Management in Family Firms in Indonesia

In: Macroeconomic Risk and Growth in the Southeast Asian Countries: Insight from Indonesia

Author

Listed:
  • Reny Damayanti Safitri
  • Tastaftiyan Risfandy
  • Inas Nurfadia Futri
  • Rizky Yudaruddin

Abstract

The practice of real earnings management (REM) or earnings manipulation through the company’s real activities is increasingly widespread. Companies that want to achieve profit targets have switched from accrual-based to REM, especially in the firm family owner, who is an active manager. Our study aims to determine whether family ownership in a company will be a factor in the existence of greater REM practices. The authors collected 2,613 observational data from non-financial companies on the Indonesia Stock Exchange (IDX) during 2013–2018 using a purposive sampling method and then analyzed using panel random effect (RE) regression. The results show that family ownership significantly negatively affects abnormal operating cash flow which means that family firms are more likely to reduce operating cash flow to report higher income than non-family firms. Thus, it can be concluded that family firms in Indonesia are more likely to be involved in REM than non-family firms.

Suggested Citation

  • Reny Damayanti Safitri & Tastaftiyan Risfandy & Inas Nurfadia Futri & Rizky Yudaruddin, 2023. "Real Earnings Management in Family Firms in Indonesia," International Symposia in Economic Theory and Econometrics, in: Macroeconomic Risk and Growth in the Southeast Asian Countries: Insight from Indonesia, volume 33, pages 35-46, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-03862023000033a003
    DOI: 10.1108/S1571-03862023000033A003
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    Keywords

    Real earnings management; family firms; earnings manipulation; family ownership; abnormal operating cash flow; Indonesia; G3; G32; G4;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G4 - Financial Economics - - Behavioral Finance

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