Earnings Management in Government Linked Companies: Does Corporate Governance Matter? Siti Rochmah Ika (a), Joko Purwanto Nugroho (a), Hesti Puspitasari (a), Ari Kuncara Widagdo (b)*
(a) Janabadra University Yogyakarta
(b) Sebelas Maret University Surakarta
Abstract
While researches on earnings management in private firms are abundant, minimum studies discuss earnings management in government linked companies. The objective of this study is to examine the impact of corporate governance on earnings management. Corporate governance mechanism used in this study are board of commissioners which consist of board independence, board financial literacy, audit committee characteristics, and size of board of directors. Meanwhile, the dependent variable is earnings management which is measured by discretionary accrual estimated by using Jones modified model. Sixty-five government linked companies listed on Indonesia Stock Exchange in the period 2016 - 2019 were used as a sample. Results of multivariate regression indicate that financial expertise of board commissioners and firm size reduce the likely hood of earnings management. The finding implies that government as the ultimate shareholder in the companies should put the right person in the commissioners that have financial expertise in order to ensure the quality of financial reporting.
