Earning Management as a Mediator of the Influence of Good Corporate Governance on Company Value in Each Company Life Cycle
Abstract
This research utilizes the capital structure theory to analyze how debt covenants, corporate governance, and firm value interact, focusing on the mediating role of earnings management across different company life stages. It examines manufacturing firms on the Indonesia Stock Exchange from 2018 to 2022, using a purposive sample of 66 companies. The study employs descriptive and inferential statistical analyses to test the hypothesized relationships, revealing that effective corporate governance significantly enhances firm value, especially during maturity. Earnings management is pivotal in the growth phase, mediating the governance-firm value relationship. This work underscores the importance of adapting governance practices to a company's life cycle stage, offering insights for executives to make financial decisions that improve firm value. It also provides empirical support for agency theory, showing how tailored governance practices can influence firm performance and value.
Keywords: earnings management, good corporate governance, company value, company life cycle
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References
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Andini, N. L., & Sukartha, I. M. (2020). The effect of earning management, managerial ownership and firm size in the return of acquisition companies in Indonesia Stock Exchange 2011-2017 period. International Research Journal of Management, IT and Social Sciences, 7(3), 116–125.
Arnas, Y., Lamtiar, S., Kurniawati, Z., Kurnianto, B., & Kalbuana, N. (2021). Factors Affecting Earning Management On Transportation Corporations In Indonesia. International Journal of Economics, Business and Accounting Research (IJEBAR), 5(1), 165–174.
Asghar, A., Sajad, S., Shahzad, A., & Matemilola, B. T. (2020). Role of discretionary earning management in corporate governance-value and corporate governance-risk relationships. Corporate Governance, 20(4), 561-581.
Bakar, I. S. A., Khan, A., Mather, P., & Tanewsky., G. (2020). Board Monitoring and Covenant Restrictiveness in Private Debt Contracts During The Global Financial Crisis. Accounting and Finance., 60(661–692).
Chen, R. C. Y., & Hung, S. (2021). Exploring the impact of corporate social responsibility on real earning management and discretionary accruals. Corporate Social Responsibility and Environmental Management, 28(1), 333–351.
Dovbysh, O. (2019). Commercial or public service actors? Controversies in the nature of Russia’s regional mass media. Russian Journal of Communication, 11(1), 71–87. https://doi.org/10.1080/19409419.2019.1572532
Eisenhardt. (1989). Agency Theory: An Assesment and Review. Accounting of Management Review., 57–74.
Ekayani, N. N. S., Sara, I. M., Sariani, N. K., Jayawarsa, A. A. K., & Saputra, K. A. K. (2020). Implementation of good corporate governance and regulation of the performance of micro financial institutions in village. Journal of Advanced Research in Dynamical and Control Systems, 12(7), 1–7. https://doi.org/10.5373/JARDCS/V12I7/20201977
Ge, F., & Xu, J. (2021). Does intellectual capital investment enhance firm performance? Evidence from pharmaceutical sector in China. Technology Analysis and Strategic Management, 33(9), 1006–1021. https://doi.org/10.1080/09537325.2020.1862414
Ghofir, A., & Yusuf, Y. (2020). Effect of firm size and leverage on earning management. Journal of Industrial Engineering & Management Research, 1(3), 218–225.
Hashed, A., & Almaqtari, F. (2021). The impact of corporate governance mechanisms and IFRS on earning management in Saudi Arabia. Accounting, 7(1), 207–224.
Huang, P., Lua, Y., & Wee, M. (2020). Corporate Governance Analysts and Firm Value: Australian Evidence. Pacific-Basin Finance Journal, 63(C), .
Irawan, F., Kinanti, A., & Suhendra, M. (2020). The impact of transfer pricing and earning management on tax avoidance. Talent Development & Excellence, 12(3), 3203–3216.
Iswanjuni., Manasikana, A., Soetadjo, S., & Et, A. (2018). The effect of enterprise risk management (ERM) on firm value in manufacturing companies listed on Indonesian. Asian Journal of Accounting Research, 3(2), 224-235.
Jensen, M. C., & Meckling, W. H. (1976). Theory of The Firm: Managerial Behavior, Agency Costs, and Ownership Structure. Journal of Financial Economics 3, 305–360.
Kiesnere, A. L., & Baumgartner, R. J. (2019). Sustainability management emergence and integration on different management levels in smaller large-sized companies in Austria. Corporate Social Responsibility and Environmental Management, 26(6), 1607–1626. https://doi.org/10.1002/csr.1854
Kirana, D. J., Wibawaningsih, E. J., & Wijayanti, A. (2020). The Role of Corporate Governance in Constraining Earning Management. Journal of Accounting and Finance Management, 1(3), 138–149.
Livnat, J., Smith, G., Suslava, K., & Tarlie, M. (2021). Board tenure and firm performance. Global Finance Journal, 47(April), 100535. https://doi.org/10.1016/j.gfj.2020.100535
Lu, J., Ren, L., Qiao, J., Yao, S., Strielkowski, W., & Streimikis, J. (2019). Corporate social responsibility and corruption: Implications for the sustainable energy sector. Sustainability (Switzerland), 11(15). https://doi.org/10.3390/su11154128
Mardini, G. H., & Lahyani, F. E. (2022). Impact of firm performance and corporate governance mechanisms on intellectual capital disclosures in CEO statements. Journal of Intellectual Capital, 23(2), 290–312. https://doi.org/10.1108/JIC-02-2020-0053
Mardjono, E. S., & Chen, Y.-S. (2020). Earning management and the effect characteristics of audit committee, independent commissioners: Evidence from Indonesia. International Journal of Business and Society, 21(2), 569–587.
Miller, D., & Friesen, P. H. (1984). A longitudinal study of the corporate life cycle. Management, 30, 1161–1183.
Narindra, A. A. N. M., Saputra, K. A. K., & Dwirandra, A. A. N. B. (2023). Factors Influencing the Performance of Accounting Information Systems University Public Services Agency. International Journal of Social Science and Education Research Studies, 03(07), 1210–1219. https://doi.org/10.55677/ijssers/v03i7y2023-07
Ni, Y., Cheng, Y. R., & Huang, P. (2020). Do intellectual capitals matter to firm value enhancement? Evidences from Taiwan. Journal of Intellectual Capital, 22(4), 725–743. https://doi.org/10.1108/JIC-10-2019-0235
Pedersen, L. H., Fitzgibbons, S., & Pomorski, L. (2021). Responsible investing: The ESG-efficient frontier. Journal of Financial Economics, 142(2), 572–597. https://doi.org/10.1016/j.jfineco.2020.11.001
Prawida, N., & Sutrisno, S. (2021). Leverage, profitability, corporate governance mecanism and earning management: cases in manufacturing company in Indonesia Stock Exchange. Asian Management and Business Review, 35–45.
Putri, P. Y. A., & Saputra, K. A. K. (2021). Oportunist and Efficient Perspective of Management Based on the Motivational Aspects That Based on it. Palarch’s Journal Of Archaeology Of Egypt/Egyptology, 18(8), 1629–1643.
Qureshi, M. J., & Siddiqui, D. A. (2021). The Effect of Intangible Assets on Financial Performance, Financial Policies, and Market Value of Technology Firms: A Global Comparative Analysis. Asian Journal of Finance & Accounting, 12(1), 26. https://doi.org/10.5296/ajfa.v12i1.16655
Rashid, A. (2017). Board Independence and Firm Performance: Evidence From Bangladesh. 2019. Future Business Journal., 4(1), 34-49.
Saeed, A. L. H. G., & Al-Abedi, L. T. K. (2020). The Impact of Quality of Audit on Earning Management. Journal of Administration and Economics, 123, 65–75.
Salvatore, D. (2005). Ekonomi Manajerial Dalam Perekonomian Global (5th ed.). Salemba Empat.
Saputra, K. A. K. (2018). Integration of Accounting Information Systems and Good Corporate Governance in Village Credit Institution in Bali. Research in Management and Accounting, 1(2), 61–72. https://doi.org/10.33508/rima.v1i2.2592
Saputra, K. A. K. (2021). the Effect of Sound Governance and Public Finance Management on the Performance of Local Governments. Russian Journal of Agricultural and Socio-Economic Sciences, 118(10), 32–43. https://doi.org/10.18551/rjoas.2021-10.04
Saputra, K. A. K., Trisnadewi, A. A. A. E., Anggiriawan, P. B., & Kawisana, P. G. W. P. (2019). Kebangkrutan Lembaga Perkreditan Desa (Lpd) Berdasarkan Analisis Berbagai Faktor. Jurnal Ilmiah Akuntansi, 4(1), 1–23. https://doi.org/10.23887/jia.v4i1.17250
Sara, I. M., Adi Kurniawan Saputra, K., & Wayan Kartika Jaya Utama, I. (2020). Improving Economic Development Through The Establishment Of Village-Business Enterprises. Jour of Adv Research in Dynamical & Control Systems, 12(6), 1–8. https://doi.org/10.5373/JARDCS/V12I6/S20201269
Published
2024-01-31
How to Cite
SETIAWAN, Putu Ery et al.
Earning Management as a Mediator of the Influence of Good Corporate Governance on Company Value in Each Company Life Cycle.
Jurnal Ilmiah Akuntansi dan Bisnis, [S.l.], v. 19, n. 1, p. 66-79, jan. 2024.
ISSN 2303-1018.
Available at: <https://ojs.unud.ac.id/index.php/jiab/article/view/109018>. Date accessed: 04 nov. 2024.
doi: https://doi.org/10.24843/JIAB.2024.v19.i01.p05.
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