CEO characteristics and earnings management: evidence from Indonesia

Ameila Ameila; Rizky Eriandani

doi:10.24123/jmb.v20i2.517

CEO characteristics and earnings management: evidence from Indonesia

Ameila Ameila⁽¹⁾, Rizky Eriandani^(2*),

(1) Universitas Surabaya
(2) Universitas Surabaya
(*) Corresponding Author

Abstract

The CEO has an important role as a decision maker in the company and is responsible for the company's performance. This study was conducted to measure the effect of CEO on earnings management in 495 samples of non-financial companies listed on the Indonesia Stock Exchange in 2017-2019 using panel regression analysis with classical assumption testing. The results of panel regression examiners show that there is no significant effect between female CEOs and CEO turnover on earnings management proxies with discretionary accruals. Meanwhile, CEO tenure and company size show a significant negative relationship with earnings management. On the other hand, leverage and return on assets have a significant positive effect on earnings management. In addition, there is no significant influence between company age and Market to Book ratio on earnings management.

Keywords

CEO characteristics; gender; tenure; CEO turnover

Full Text:

PDF

References

Agustia, D. (2013). Pengaruh Faktor Corporate Governance, Free Cash Flow, dan Leverage Terhadap Manajemen Laba. Jurnal Akuntansi Dan Keuangan, 15(1), 27–42.

Agustia, Y. P., & Suryani, E. (2018). Pengaruh Ukuran Perusahaan, Leverage, dan Profitabilitas terhadap Manajemen Laba. Jurnal Akuntansi, 10(1), 63–74.

Ali, A., & Zhang, W. (2015). CEO Tenure and Earnings Management. Journal of Accounting and Economics, 59(1), 60–79.

Ali, U., Noor, M. A., Khurshid, M. K., & Mahmood, A. (2015). Impact of Firm Size on Earnings Management: A Study of Textile Sector of Pakistan. Journal of Business and Management, 7(28).

Alqatamin, R. M., Aribi, Z. A., & Arun, T. (2017). The Effect of the CEO’s Characteristics on EM: Evidence from Jordan. International Journal of Accounting and Information Management, 25(3), 356–375.

Amertha, I. S. P. (2013). Pengaruh Return on Asset pada Praktik Manajemen Laba dengan Moderasi Corporate Governance. E-Jurnal Akuntansi, 4(2), 373–387.

An, Z., Li, D., & Yu, J. (2016). Earnings Management, Capital Structure, and the Role of Institutional Environment. Journal of Banking and Finance, 68, 131–152.

Ardison, K. M. M., Galdi, F. C., & Martinez, A. L. (2012). The Effect of Leverage on Earnings Management. Advances in Scientific and Applied Accounting, 305–324.

Arun, Thankom Gopiath, & Aribi, Y. E. A. (2015). Female Directors and Earnings Management: Evidence from UK Companies. International Review of Financial Analysis, 39, 137–146.

Arun, Thankom Gopinath, Almahrog, Y. E., & Aribi, Z. A. (2015). Female Directors and Earning Management: Evidence from UK Companies. International Review If Financial Analysis, 39, 137–146.

Baker, T. A., Collins, D. L., & Reitenga, A. L. (2009). Incentives and Opportunities to Manage Earnings around Option Grants. Contemporary Accounting Research, 26(3), 649–672.

Bergh, D. D. (2001). Executive Retention and Acquisition Outcomes: A Test of Opposing Views on the Influence of Organizational Tenure. Journal of Management, 27(5), 603–622.

Bornemann, S., Kick, T., Pfingsten, A., & Schertler, A. (2015). Earnings Baths by CEOs during Turnovers: Empirical Evidence from German Savings Banks. Journal of Banking and Finance, 53, 188–201.

Bouaziz, D., Salhi, B., & Jarboui, A. (2020). CEO Characteristics and Earnings Management: Empirical Evidence from France. Journal of Financial Reporting and Accounting, 18(1), 77–110.

Chen, K. Y., Elder, R. J., & Hsieh, Y. M. (2007). Corporate Governance and Earnings Management: The Implications of Corporate Governance Best-Practice Principles for Taiwanese Listed Companies. Journal of Contemporary Accounting and Economics, 3(2), 73–105.

Choi, J. S., Kwak, Y. M., & Choe, C. (2014). Earnings Management Surrounding CEO Turnover: Evidence from Korea. Abacus, 50(1), 25–55.

Chou, Y. Y., & Chan, M. L. (2018). The Impact of CEO Characteristics on Real Earning Management: Evidence from the US Banking Industry. Journal of Applied Finance & Banking, 8(2), 17–44.

Cooper, E. (2017). Corporate Social Responsibility, Gender, and CEO Turnover. Managerial Finance, 43(5), 528–544.

Dalton, D. R., & Kesner, I. F. (1995). Organizational Performance as an Antecedent of Inside/Outside Chief Executive Succession: An Empirical Assessment. Academy of Management Journal, 28(4), 749–762.

Das, R. C., Mishra, C. S., & Rajib, P. (2018). Firm-specific parameters and Earnings Management: A Study in the Indian Context. Global Business Review, 19(5), 1240–1260.

Davidson, W. N., Xie, B., Xu, W., & Ning, Y. (2007). The Influence of Executive Age, Career Horizon and Incentives on Pre-turnover Earning Management. Journal of Management and Governance, 11(1), 45–60.

Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting Earnings Management. The Accounting Review, 70(2), 193–225.

Faccio, M., Marchica, M.-T., & Mura, R. (2016). CEO Gender, Corporate Risk-taking, and The Efficiency of Capital Allocation. Journal of Corporate Finance, 193–209.

Gavious, I., Segev, E., & Yosef, R. (2012). Female Directors and Earnings Management in High-Technology Firms. Pacific Accounting Review, 24(1), 4–32.

Ghozali, I. (2016). Aplikasi Analisis Multivariate dengan Program IMB SPSS 23 (8th ed.). Badan Penerbit Universitas Diponegoro.

Gibbons, R., & Murphy, K. J. (1992). Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence. Journal of Political Economy Economy, 100(3), 468–505.

Gujarati. (2003). Basic Econometric (Fifth Edit). McGraw-Hill.

Haw, I. M., Hu, B., Hwang, L. S., & Wu, W. (2004). Ultimate Ownership, Income Management, and Legal and Extra-Legal Institurions. Journal of Accounting Research, 42(2), 423–462.

Herawaty, V., & Solihah, D. (2019). The effect of Ceo Tenure, Managerial Skills and earning power on earnings manipulation with corporate governance as a moderating variable on manufacturing companies in Indonesia Stock Exchange. Academy of Accounting and Financial Studies Journal, 23(Special Issue 1), 2635.

Hu, N., Hao, Q., Liu, L., & Yao, L. J. (2015). Managerial Tenure and Earnings Management. Journal of Accounting and Information Management, 23(1), 42–59.

Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance Matched Discretionary Accrual Measures. Journal of Accounting and Economics, 39(1), 163–197.

Krishnan, H. A., & Park, D. (2005). A Few Woman - On Top Management Teams. Journal of Business Research, 58, 1712–1720.

Lakhal, F., Nekhili, M., & Zouari, Z. (2015). Do CEO’s Characteristics Affect Earnings Management? International Journal of Innovation and Applied Studies, 2(4), 804–819.

Laucereno, S. F. (2019). Terbukti Cacat, Status Laporan Keuangan Garuda Rugi. https://finance.detik.com/bursa-dan-valas/d-4603666/terbukti-cacat-status-laporan-keuangan-garuda-rugi

Lopes, A. P. (2018). Audit Quality and Earnings Management: Evidence from Portugal. Journal of Business and Economics, 4(2), 179–192.

Muchlisin, R. (2016). Pengertian, Indikator, dan Faktor yang Mempengaruhi Kinerja. https://www.kajianpustaka.com/2016/11/pengertian-dan-jenis-jenis-leverage.html

Murphy, K. J., & Zimmerman, J. L. (1993). Financial performance surrounding CEO turnover. Journal of Accounting and Economics, 16(1–3), 273–315. https://doi.org/10.1016/0165-4101(93)90014-7

Muttakin, M. B., Khan, A., & Mihret, D. G. (2017). Business Group Affiliation, Earnings Management and Audit Quality: Evidence from Bangladesh. Managerial Auditing Journal, 32(4/5), 427–444.

Nalarreason, K. M., Sutrisno, T., & Mardiati, E. (2019). Impact of Leverage and Firm Size on Earnings Management in Indonesia. International Journal of Multiciltural and Multireligious Understanding, 6(1), 19–24.

Park, Y. W., & Shin, H. H. (2004). Board composition and earnings management in Canada. Journal of Corporate Finance, 10(3), 431–457. https://doi.org/10.1016/S0929-1199(03)00025-7

Peni, E., & Vahamaa, S. (2010). Female Executives and Earnings Management. Journal of Managerial Finance, 36(7), 629–645.

Powell, M., & Ansic, D. (1997). Gender Differences in Risk Behaviour in FInancial Decision-making: An Experimental Analysis. Journal of Economic Psychology, 18, 605–628.

Puspa, R., & Adhariani, D. (2017). Does the Gender of CEOs and CFOs Affect Earnings Management? Business and Management Research, 55, 162–167.

Raman, K., & Husayn, S. (2008). Relationship-Specific Investment and Earnings Management: Evidence on Corporate Suppiers and Customers. The Accounting Review, 83(4), 1041–1081.

Undang-Undang No. 40 Tahun 2007 tentang Perseroan Terbatas, (2007).

Sari, L. R. (2014). Pengaruh Ukuran Perusahaan dan Skruktur Kepemilikan terhadap Praktik Perataan Laba pada Perusahaan Manufaktur yang Terdaftar di Bursa Efek Indonesia. E-Journal Akuntansi Universitas Negeri Padang.

Setyaningrum, G. C., Sekarsari, P. S. S., & Damayanti, T. W. (2019). Pengaruh Eksekutif Wanita (Female Executive) Terhadap Manajemen Laba. Jurnal Ekonomi Dan Perbankan, 4(1), 98–110.

Wibiksono, R. A., & Rudiawarni, F. A. (2015). Pengaruh Premanaged Earnings dan Dividen yang Diharapkan terhadap Praktik Manajemen Laba. Jurnal Akuntansi Dan Keuangan, 12(1), 1–18.

Wijaya, V. A., & Christiawan, Y. J. (2014). Pengaruh Kompensasi Bonus, Leverage, dan Pajak terhadap Earning Management pada Perusahaan yang Terdaftar di Bursa Efek Indonesia Tahun 2009-2013. Tax and Accounting Review, 4(1).

Zouari, Z., Lakhlal, F., & Nekhili, M. (2012). Do CEO’s Characteristics Affect Earnings Management?

DOI: https://doi.org/10.24123/jmb.v20i2.517

Article Metrics

Abstract view : 1371 times
PDF - 490 times

Refbacks

There are currently no refbacks.

This work is licensed under a Creative Commons Attribution 4.0 International License.

This work is licensed under a Creative Commons Attribution 4.0 International License. ISSN: 1412-3789. e-ISSN: 2477-1783.

Username
Password
Remember me