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The Effect of Top Management Team Expertise on Corporate’s Accrual and Real Earnings Management

In: Advanced Issues in the Economics of Emerging Markets

Author

Listed:
  • Michelle Priscilla
  • Sylvia Veronica Siregar

Abstract

This study aims to analyze the effect of top management team (TMT) expertise on real earnings management (REM) and accrual earnings management (AEM) activities in companies in Indonesia by examining a hand-collected secondary data from non-financial publicly listed companies in Indonesia in 2016 and 2017. The expertise of TMT members is measured by possession of a master’s degree, understanding and experience of managed core functional areas, and possession of accounting certifications such as CA or CPA. The results of the study show that the expertise of the members of the TMT has no influence on the activity of AEM in companies in Indonesia. Meanwhile, understanding and experience on the managed core functional areas have a positive influence on REM activities through abnormal cash flows. Possession of accounting certification has a positive influence on REM activities in companies that are in accordance with managerial entrenchment effects, as well as a negative influence on REM activities in companies through abnormal discretionary expenses that are in line with incentive-reduction effects.

Suggested Citation

  • Michelle Priscilla & Sylvia Veronica Siregar, 2020. "The Effect of Top Management Team Expertise on Corporate’s Accrual and Real Earnings Management," International Symposia in Economic Theory and Econometrics, in: Advanced Issues in the Economics of Emerging Markets, volume 27, pages 79-101, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-038620200000027007
    DOI: 10.1108/S1571-038620200000027007
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    More about this item

    Keywords

    Accrual earnings management; incentive reduction; management team expertise; real earnings management; top management team expertise; managerial entrenchment; M41; G34;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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