Examining the bonus mechanisms’ role in real earnings management dynamics in an Indonesian manufacturing company


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Real Earnings Management (REM) and financial success may have different relationships depending on how managers act. Bonus mechanisms are a significant factor that influences management behavior. The study seeks to examine the impact of bonus systems on the correlation between financial performance and REM practices in manufacturing companies in Indonesia. Moderated Regression Analysis (MRA) is employed to evaluate the influence of bonus mechanisms in moderating the association of financial performance on REM. The technique of purposive sampling was used to pick the sample. The study utilized data from manufacturing firms listed on the Indonesian Stock Exchange from 2017 to 2021, including a total of 400 observed data points. The research findings demonstrate that sales growth is the sole factor that significantly influences REM in manufacturing organizations, as indicated by a p-value below 10%. Other financial performance factors, on the other hand, with p-values for each variable above 10%, have not been shown to have a significant impact on REM. These factors include ROA, leverage, operating cash flow, and cash. The findings also demonstrate that, with a p-value for each variable above 10%, the bonus mechanism is a variable that modifies the effect of all financial performance variables on REM.

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    • Table 1. Descriptive statistic results
    • Table 2. Multicollinearity test results
    • Table 3. Regression results
    • Table A1. Variable description
    • Conceptualization
      Taufiq Akbar
    • Data curation
      Taufiq Akbar, Ridarmelli
    • Funding acquisition
      Taufiq Akbar, Ridarmelli, Inung Wijayanti, Septo Pramesworo, Hedwigis Esti Riwayati
    • Investigation
      Taufiq Akbar
    • Methodology
      Taufiq Akbar
    • Formal Analysis
      Ridarmelli, Hedwigis Esti Riwayati
    • Supervision
      Ridarmelli, Hedwigis Esti Riwayati
    • Resources
      Inung Wijayanti
    • Validation
      Inung Wijayanti
    • Writing – review & editing
      Inung Wijayanti, Septo Pramesworo, Hedwigis Esti Riwayati
    • Project administration
      Septo Pramesworo
    • Visualization
      Septo Pramesworo
    • Writing – original draft
      Septo Pramesworo