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Are Corporate Governance Mechanisms, Corporate Strategy and Corporate Financial Characteristics Related to Earnings Management?

Author

Listed:
  • Clarissa Tonay

    (Trisakti School of Management, Jakarta, Indonesia Author-2-Name: Paulina Sutrisno Author-2-Workplace-Name: Trisakti School of Management, Jakarta, Indonesia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)

Abstract

Objective - This study aims to examine the effect of corporate governance and several factors of corporate financial characteristics on earnings management. Corporate governance mechanisms such as an independent board, board size, and audit committee size are expected to be able to limit the ability of management to carry out earnings management. Meanwhile, a company's financial characteristics such as corporate strategy, company age, operating cash flow, company growth, profitability, company size and leverage are predicted to affect earnings management. Methodology � Many previous studies have involved the examination of corporate governance mechanisms and corporate financial characteristics of earnings management however, the results of those studies give rise to inconsistencies. Hence, this study seeks to re-examine the existence of corporate governance mechanisms and corporate financial characteristics of earnings management. The sample in this research is non-financial companies listed on the Indonesian Stock Exchange between 2016 and 2018. Findings � This data in this study is analysed using statistical methods such as multiple regression linear. The results of this study indicate that one mechanism of corporate governance, the size of the audit committee, has a positive effect on earnings management, while the financial characteristics of companies such as company size and operating cash flow negatively affect earnings management. Novelty � Other corporate financial characteristics such as corporate strategy, company age, operating cash flow and profitability have a positive effect on earnings management. Meanwhile, the other variables such as board size, leverage and company growth do not have an influence on earnings management. Type of Paper - Empirical.

Suggested Citation

  • Clarissa Tonay, 2020. "Are Corporate Governance Mechanisms, Corporate Strategy and Corporate Financial Characteristics Related to Earnings Management?," GATR Journals jfbr172, Global Academy of Training and Research (GATR) Enterprise.
    • Handle: RePEc:gtr:gatrjs:jfbr172
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    References listed on IDEAS

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    1. Uwalomwa Uwuigbe & Uwuigbe, Olubukunola Ranti & Okorie Bernard, 2015. "Assessment of the Effects of Firms Characteristics on Earnings Management of Listed Firms in Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(2), pages 218-228, February.
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    Cited by:

    1. Idris Gautama So & Hasnah Haron & Anderes Gui & Elfindah Princes & Synthia Atas Sari, 2021. "Sustainability Reporting Disclosure in Islamic Corporates: Do Human Governance, Corporate Governance, and IT Usage Matter?," Sustainability, MDPI, vol. 13(23), pages 1-23, November.

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    More about this item

    Keywords

    Earnings Management; Corporate Strategy; Audit Committee Size; Company Age; Operating Cash Flows.;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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