The Effect of Good Corporate Governance, Company Size and Financial Performance on Earnings Management (Empirical Studies on State-Owned Enterprises listed on the Indonesia Stock Exchange 2014-2018)

Abstract

This study aims to provide empirical evidence of the effect of good corporate governance, firm size and financial performance on earnings management. Good corporate governance mechanisms are measured by managerial ownership, the proportion of the audit committee and the proportion of the board of commissioners. Earnings management is measured by discretionary accruals using a modified Jones model. The research sample was 10 state-owned companies listed on the Indonesia Stock Exchange which were selected using purposive sampling during the study period, 2014-2018. Data were analyzed using multiple regression. Based on the research results, it is concluded that the effect of good corporate mechanisms, company size and financial performance on earnings management simultaneously has a significant effect of 39.9%. However, only partially managerial ownership and profitability have an effect on earnings management.

Keywords: Good corporate governance, firm size, financial performance, earnings management, discretionary accruals.