THE EFFECT OF GOOD CORPORATE GOVERNANCE ON EARNINGS MANAGEMENT OF MANUFACTURE COMPANIES LISTED IN INDONESIA STOCK EXCHANGE

Abstract

ABSTRACT

This study aims to analyze the effect of implementing good corporate governance in improving the corporate earnings management of manufacturing companies listed on the Indonesia Stock Exchange (IDX). Earnings management is the dependent variable in this study and the independent variables are the size of board commissioners, the independent board of commissioners size, the activities of board commissioners, committee of audit size, the independent audit committee size and the audit firm size. The control variables in this study are audit quality, company size, leverage, and return on assets.

172 manufacturing companies listed on the Indonesia Stock Exchange are involved in this study, during the period from 2013 to 2017. The sample selection was carried out using the purposive sampling method. The data used in this study is in the form of an annual financial report published on the website of www.idx.co.id. The required data is taken from the annual financial statements and then tested by multiple linear regression methods. While statistical software was chosen to test the data in this study.

The results of this study have proved that the board of commissioner size, independent board of commissioners, audit committee size, and the control variable of return on the asset are able to significantly influence earnings management. A variable control, leverage, then board of commissioner activity, audit firm size, are has a negative significant effect on earnings management. While the audit quality and company size were not proven to significantly influence earnings management.