The Influence of Real and Accrual Earnings Management on Idiosyncratic Risk With Good Corporate Governance as A Moderating Variable
Keywords:
Agency Theory, Positive Accounting Theory, Real Earnings Management, Accrual Earnings Management, Idiosyncratic Risk, Good Corporate GovernanceAbstract
This study investigates the impact of real and accrual earnings management on idiosyncratic risk, with a focus on the moderating role of good corporate governance, proxied by managerial ownership, in manufacturing firms listed on the Indonesia Stock Exchange from 2020 to 2022. Using moderated regression analysis, the findings reveal that both real and accrual earnings management practices negatively affect idiosyncratic risk, suggesting that earnings management may serve as a risk mitigation tool under efficient contracting perspectives. However, managerial ownership exhibits divergent effects: while it strengthens the risk-reducing impact of real earnings management, it unexpectedly amplifies the idiosyncratic risk associated with accrual earnings management, potentially due to managerial motivations to meet financial targets. These results highlight the complex role of corporate governance in earnings management, as it may act as both a stabilizing and risk-amplifying factor depending on the type of earnings management practiced. The study underscores the need for stakeholders to critically evaluate earnings management and corporate governance practices, while encouraging future research to include additional variables to further explain idiosyncratic risk determinants. The study's Adjusted R Square value of 8.1% indicates that other significant factors affecting idiosyncratic risk were not captured in this analysis.
Downloads
References
Afriyeni., Marlius, D. (2019). Analysis of Return and Investment Risk Levels (Study on the Manufacturing Industry Listed on the Indonesia Stock Exchange). Osfpreprints, 1–14.
Arlita, R., Bone, H., Kesuma, A.I. (2019). The Influence of Good Corporate Governance and Leverage on Earnings Management Practices. Journal Akuntabel, 16(2), 238–248. http://journal.feb.unmul.ac.id/index.php/AKUNTABEL
Arthawan, P.T., Wirasedana, I.W.P., (2018). The Influence of Managerial Ownership, Debt Policy, and Company Size on Earnings Management. E-Jurnal Akuntansi, 22(1), 1–29. https://doi.org/10.24843/eja.2018.v22.i01.p01
Aryanti, I., Kristanti, F.T., Hendratno., (2017). Institutional Ownership, Managerial Ownership, and Audit Quality on Earnings Management. Jurnal Riset Akuntansi Kontemporer, 9(2), 66–70. https://doi.org/10.23969/jrak.v9i2.580
Ayem, S., Ongirwalu, S.N., (2020). The Influence of IFRS Adoption, Tax Avoidance, and Managerial Ownership on Earnings Management. JIA (Jurnal Ilmiah Akuntansi), 5(2), 360–376.
Azmi, Z., Fianto, B.A., (2019). Performance Measurement of Mutual Funds in Sharia and Conventional Mutual Funds in Indonesia for the Period 2008–2018. Jurnal Ekonomi Syariah Teori Dan Terapan, 6(9), 1851–1861. https://doi.org/10.20473/vol6iss20199pp1851-1861
Cahyadi, I.M.K., Mertha, I.M., (2019). The Influence of Good Corporate Governance and Company Size on Earnings Management. E-Jurnal Akuntansi, 27(1), 173–200. https://doi.org/10.24843/eja.2019.v27.i01.p07
Chen, C., Huang, A.G., Jha, R., (2012). Idiosyncratic return volatility and the information quality underlying managerial discretion. Journal of Financial and Quantitative Analysis, 47(4), 873–899. https://doi.org/10.1017/S002210901200018X
Darmawan, I.P.E., et al. (2019). Accrual Earnings Management and Real Earnings Management: Increase or Destroy Firm Value? International Journal of Multicultural and Multireligious Understanding, 6(2), 8–19. https://doi.org/10.18415/ijmmu.v6i2.551
Fathussalmi., Darmayanti, Y., Fauziati, P., (2019). The Influence of Investment Opportunity Set and Corporate Governance on Earnings Quality (An Empirical Study on Manufacturing Companies Listed on the Indonesia Stock Exchange in 2011-2015). Reviu Akuntansi Dan Bisnis Indonesia, 3(2), 124–138. https://doi.org/10.18196/rab.030240
Febria, D. (2020). The Influence of Leverage, Profitability, and Managerial Ownership on Earnings Management. SEIKO : Journal of Management & Business, 3(2), 65–77. https://doi.org/10.37531/sejaman.v3i2.568
Firmansyah, A., Irawan, F. (2018). IFRS Adoption, Accrual Earnings Management, and Real Earnings Management. Assets: Jurnal Akuntansi Dan Pendidikan, 7(2), 81. https://doi.org/10.25273/jap.v7i2.3310
Firmansyah, A., Suhanda, N.H., (2021). What is the Role of Corporate Governance in the Relationship Between Earnings Management and Idiosyncratic Risk in Indonesia?Jurnal Ekonomi, 26(2), 229. https://doi.org/10.24912/je.v26i2.748
Geno., Much. R.P., Firmansyah, A., Prakosa, D.K., (2022). The Role of Integrated Reporting in Income Smoothing, Tax Avoidance, Idiosyncratic Risk – Case of Manufacturing Sector. Accounting Analysis Journal, 11(2), 104–118. https://doi.org/10.15294/aaj.v11i2.60640
Ghozali, I., (2018). Application of Multivariate Analysis Using SPSS Program. Badan Penerbit Universitas Diponegoro.
Imelda, E., Palauw, A., (2012). Analysis of Earnings Management Through Discretionary Accruals and Real Activity Manipulation in Initial Public Offerings and Its Effect on Long-Term Market Performance. 7823–7830.
Janrosl, V.S.E., Lim, J. (2019). Analysis of the Influence of Good Corporate Governance on Earnings Management in Banking Companies Listed on the Indonesia Stock Exchange. Owner Riset & Jurnal Akuntansi, 3(2), 226–238. https://doi.org/10.33395/owner.v3i2.144
Jensen, M.C., Meckling, W.H., (1976). Theory of The Firm: Manajerial Behavior, Ageny Cost and Ownership structure. Journal of Financial Economics, 3, 305–360.
Kusumawardana, Y., Haryanto, M., (2019). Analysis of the Influence of Company Size, Leverage, Institutional Ownership, and Managerial Ownership on Earnings Management. Diponegoro Journal of Management, 8(2), 148–158.
Majid, M., Lysandra, S., Masri, I., Azizah, W., (2020). The Influence of Managerial Ability on Accrual and Real Earnings Management. Jurnal Ilmiah Akuntansi Dan Manajemen (JIAM), 16(1), 70–84.
Maysani, P., Suaryana, I.G.N.A., (2019). The Influence of Tax Avoidance and Corporate Governance Mechanisms on Earnings Management. E-Jurnal Akuntansi, 28(3), 1886–1903. https://doi.org/10.24843/eja.2019.v28.i03.p16
Muiz, E., Ningsih, H., (2018). The Influence of Tax Planning, Managerial Ownership, and Company Size on Earnings Management Practices. Jurnal Ekobis : Ekonomi Bisnis & Manajemen, 8(2), 102–116. https://doi.org/10.37932/j.e.v8i2.40
Nasiroh, Y., Priyadi, M.P., (2018). The Influence of Good Corporate Governance Implementation on Financial Distress. Jurnal Ilmu Dan Riset Akuntansi, 7(9), 1–15.
Olipyantari, N.P.E., Wirakusuma, M.G., (2024). The Influence of Executive Compensation and Corporate Governance on Earnings Management (An Empirical Study on Property and Real Estate Sector Companies Listed on the Stock Exchange). Jurnal Review Pendidikan Dan Pengajaran, 7(4), 13188–13198.
Prakosa, D.K., et al. (2022). Earnings Management Motives, Idiosyncratic Risk and Corporate Social Responsibility in an Emerging Market. Journal of Governance and Regulation, 11(3), 121–147. https://doi.org/10.22495/jgrv11i3art11
Priantinah, D., (2016). Opportunistic and Efficient Perspectives in the Earnings Management Phenomenon. Jurnal Pendidikan Akuntansi Indonesia, 14(2), 1–12. https://doi.org/10.21831/jpai.v14i2.12865
Purnama, D., (2017). The Influence of Profitability, Leverage, Company Size, Institutional Ownership, and Managerial Ownership on Earnings Management. Jurnal Riset Keuangan Dan Akuntansi, 3(1), 1–14. https://doi.org/10.25134/jrka.v3i1.676
Puspitawati, N.W.J.A., Suryandari, N.N.A., Susandya, A.P.G.B.A., (2019). The Influence of Earnings Growth and Good Corporate Governance Mechanisms on Earnings Quality. Seminar Nasional INOBALI, 580–589.
Ramadhan, M., Suharti, T., Nurhayati, I. (2020). Stock Diversification in Portfolio Formation to Minimize Risk. Manager : Jurnal Ilmu Manajemen, 3(4), 450–458. https://doi.org/10.32832/manager.v3i4.3914
Ratmono, D. (2010). Real and Accrual-Based Earnings Management: Can a Qualified Auditor Detect It? Simposium Nasional Akuntansi XIII, 1, 1–23.
Samsiah, S., Surbakti, L.P., Subur., (2022). Real Earnings Management Practices in Manufacturing Companies on the Indonesia Stock Exchange for the Period 2017-2019. Journal of Economic, Management, Accounting and Technology, 5(2), 146–159.
Scott, R. W. (2015). Financial Accounting Theory (Seventh Ed). Pearson: Toronto.
Scott, W. R. (1997). Fnancial Accounting Theory (Seventh Ed). Pearson: Toronto.
Tamara, M.T., Astuti, S., Sutoyo., (2022). The Influence of Good Corporate Governance, Profitability, and Company Size on Earnings Management in the Property and Real Estate Sector Companies. Jurnal Ilmiah Akuntansi, 20(2), 329–340.
Tanudjaja, M., Susanti, M., (2022). The Influence of Company Size, Leverage, Corporate Governance, and Profitability on Earnings Management . Jurnal Multiparadigma Akuntansi, 4(1), 179–187.
Triyani, A., Setyahuni, S.W., Makwuna, F.D. (2021). The Influence of Non-Financial Performance (Environmental, Social, Governance) on Corporate Investment Risk. JURNAL AKUNTANSI DAN BISNIS : Jurnal Program Studi Akuntansi, 7(2), 155–165. https://doi.org/10.31289/jab.v7i2.5602
Vionita, N.A., Asyik, N.F., (2020). The Influence of Capital Structure, Investment Opportunity Set (IOS), and Earnings Growth on Earnings Quality. Jurnal Ilmu Dan Riset Akuntansi, 9(1), 1–18.
Wijoyo, K., Firmansyah, R., (2021). Are Accrual Earnings Management and Real Earnings Management Related to Total Risk and Idiosyncratic Risk? Riset Akuntansi Dan Keuangan Indonesia, 6(2), 178–197. www.idx.co.id
Zhou, T., Xie, J., Li, X., (2016). Financial Reporting Quality and Idiosyncratic Return Volatility: Evidence from China. Emerging Markets Finance and Trade, 53(4), 835–847. https://doi.org/10.1080/1540496X.2016.1142200
