EFFECTS OF CORPORATE GOVERNANCE VARIABLES ON EARNINGS MANAGEMENT IN INDONESIA
Stephanus Remond Waworuntu
Marko Sebira Hermawan
Sheila Nerissa Hokardi
School of Accounting and Finance BINUS Business School, BINUS University
Jl. Hang Lekir I No.6, Jakarta, 10270.
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To determine the effects of corporate governance on earnings management, this paper analyzed 171 annual reports from issued 2006 to 2009 by 57 non-financial, joint stock companies implementing GCG (Good Corporate Governance) practices, which were listed on the Indonesia Stock Exchange (IDX). Six corporate governance variables (board composition, independent commissioners, separate chairman/CEO roles, audit committee, managerial share ownership, and audit quality) as well as three control variables (leverage, size, and ROA) were used. The results showed that two corporate governance variables significantly influenced earnings management practices (separate chairman/CEO roles and managerial share ownership); the other variables had no effect because these companies used GCG practices only to follow regulations rather than to monitor and control.
Key words: earnings management, working capital accruals, good corporate governance (GCG)