Conservatism as a moderating variable on the determinants of earnings management


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This study aims to provide empirical evidence about the determinants that can impact earnings management, through board diligence, ownership concentration, CEO ownership, and CEO tenure, as well as testing conservatism as a moderating variable. Secondary data, specifically information derived from annual financial reports, are utilized in this study. Information for financial reports is acquired from the Indonesia Stock Exchange (IDX) data stream and website from 2013 to 2022, the population of this study comprises all banking institutions listed on the Indonesia Stock Exchange. This study’s findings demonstrate that the presence of board diligence significantly hinders earnings management. Moreover, the findings of this study demonstrate that organizations characterized by a significant concentration of ownership will have the capacity to mitigate the prevalence of earnings management practices. Additionally, this study’s findings demonstrate that a reduction in earnings management activities is associated with greater CEO ownership. The findings of this study offer a practical illustration for stakeholders regarding the responsibilities of shareholders, which may prove beneficial in overseeing an organization’s operations. This study shows that high conservatism in companies actually mitigates the good effects of the ownership concentration and CEO ownership variables on earnings management. In summary, this study establishes that companies characterized by elevated levels of conservatism do not actively engage in earnings management practices that are beneficial to the organization.

This research received no specific grant from any funding agency in the public, commercial, or non-profit sectors.

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    • Table 1. Model regression results
    • Table A1. Descriptive statistics
    • Table B1. CEO tenure dummy percentage
    • Data curation
      Yuli Ardiany
    • Formal Analysis
      Yuli Ardiany
    • Funding acquisition
      Yuli Ardiany
    • Writing – original draft
      Yuli Ardiany
    • Conceptualization
      Niki Lukviarman
    • Supervision
      Niki Lukviarman, Elvira Luthan
    • Validation
      Niki Lukviarman
    • Writing – review & editing
      Niki Lukviarman, Masyhuri Hamidi, Elvira Luthan
    • Investigation
      Masyhuri Hamidi
    • Methodology
      Masyhuri Hamidi
    • Software
      Masyhuri Hamidi
    • Resources
      Elvira Luthan
    • Visualization
      Elvira Luthan