IDEAS home Printed from https://ideas.repec.org/a/arp/tjssrr/2018p639-647.html
   My bibliography  Save this article

Does Managerial Ownership Moderate the Effect of Managerial Ability on Earnings Quality? A comparative Study of Manufacturing Companies in Indonesia and Malaysia

Author

Listed:
  • Dody Hapsoro*

    (YKPN School of Business, Yogyakarta, Indonesia)

  • Aghni Mira Shufia

    (YKPN School of Business, Yogyakarta, Indonesia)

Abstract

The purpose of this study is to test the capability of managerial ownership in moderating the effect of managerial ability on earnings quality. The research sample consists of 41 manufacturing companies in Indonesia Stock Exchange and 53 in Malaysia Stock Exchange within the year of 2014–2016. Partial Least Square (PLS) method used for data analysis. The result shows that managerial ability has a positive and significant effect on earnings persistence, both in Indonesia and Malaysia. Managerial ability also has a positive and significant effect on accrual quality in both countries. Managerial ownership strengthens the effect of managerial ability on earnings persistence, but only in Malaysia. However, managerial ownership strengthens the effect of managerial ability on accrual quality in both countries. The results of this study can help investors and creditors in making decisions. Before investors invest in a company or before creditors lend funds to companies, investors and creditors need to first consider the persistence of earnings, not only see the amount of earnings the company gets to ensure that the company’s earnings quality is good and the company has good prospects in the future.

Suggested Citation

  • Dody Hapsoro* & Aghni Mira Shufia, 2018. "Does Managerial Ownership Moderate the Effect of Managerial Ability on Earnings Quality? A comparative Study of Manufacturing Companies in Indonesia and Malaysia," The Journal of Social Sciences Research, Academic Research Publishing Group, pages 639-647:2.
    • Handle: RePEc:arp:tjssrr:2018:p:639-647
    as

    Download full text from publisher

    File URL: https://www.arpgweb.com/pdf-files/spi2.51.639-647.pdf
    Download Restriction: no
    File URL: https://www.arpgweb.com/journal/7/special_issue/11-2018/2/4
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Francis, Jennifer & LaFond, Ryan & Olsson, Per & Schipper, Katherine, 2005. "The market pricing of accruals quality," Journal of Accounting and Economics, Elsevier, vol. 39(2), pages 295-327, June.
    2. Custódio, Cláudia & Ferreira, Miguel A. & Matos, Pedro, 2013. "Generalists versus specialists: Lifetime work experience and chief executive officer pay," Journal of Financial Economics, Elsevier, vol. 108(2), pages 471-492.
    3. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    4. Richardson, Scott A. & Sloan, Richard G. & Soliman, Mark T. & Tuna, Irem, 2005. "Accrual reliability, earnings persistence and stock prices," Journal of Accounting and Economics, Elsevier, vol. 39(3), pages 437-485, September.
    5. Dechow, Patricia & Ge, Weili & Schrand, Catherine, 2010. "Understanding earnings quality: A review of the proxies, their determinants and their consequences," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 344-401, December.
    6. Timothy J. Brailsford & Barry R. Oliver & Sandra L. H. Pua, 2002. "On the relation between ownership structure and capital structure," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 42(1), pages 1-26, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eliwa, Yasser & Haslam, Jim & Abraham, Santhosh, 2021. "Earnings quality and analysts’ information environment: Evidence from the EU market," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 42(C).
    2. Hsu, Audrey Wen-hsin & Liu, Sophia Hsin-Tsai, 2016. "Organizational structure, agency costs, and accrual quality," Journal of Contemporary Accounting and Economics, Elsevier, vol. 12(1), pages 35-60.
    3. Nezlobin, Alexander & Sloan, Richard G. & Giedt, Jenny Zha, 2022. "Construct validity in accruals quality research," LSE Research Online Documents on Economics 112165, London School of Economics and Political Science, LSE Library.
    4. Souad Chaieb, 2021. "The Impact of Cash Holding on Debt Cost," International Journal of Economics and Financial Issues, Econjournals, vol. 11(6), pages 75-93.
    5. Mauricio Jara-Bertin & Jean P. Sepulveda, 2014. "Earnings Management and Performance in Family-Controlled Firms:Evidence from an Emerging Economy," Serie Working Papers 01, Universidad del Desarrollo, School of Business and Economics, revised Nov 2014.
    6. Martin Walker, 2013. "How far can we trust earnings numbers? What research tells us about earnings management," Accounting and Business Research, Taylor & Francis Journals, vol. 43(4), pages 445-481, August.
    7. Aase, Øivind André Strand, 2022. "Effects of Voluntary Audit on Accounting Quality in Small Private Firms," Discussion Papers 2022/1, Norwegian School of Economics, Department of Business and Management Science.
    8. Chen, Changling & Kim, Jeong-Bon & Yao, Li, 2017. "Earnings smoothing: Does it exacerbate or constrain stock price crash risk?," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 36-54.
    9. Liangliang Jiang & Ross Levine & Chen Lin, 2016. "Competition and Bank Opacity," The Review of Financial Studies, Society for Financial Studies, vol. 29(7), pages 1911-1942.
    10. Ye, Zhiwei & Shahab, Yasir & Riaz, Yasir & Ntim, Collins G., 2023. "Strategic deviation and the cost of debt financing," Economic Modelling, Elsevier, vol. 125(C).
    11. Eliwa, Yasser & Haslam, Jim & Abraham, Santhosh, 2016. "The association between earnings quality and the cost of equity capital: Evidence from the UK," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 125-139.
    12. Fargher, Neil & Wee, Marvin, 2019. "The impact of Ball and Brown (1968) on generations of research," Pacific-Basin Finance Journal, Elsevier, vol. 54(C), pages 55-72.
    13. Hyonok Kim & Yukihiro Yasuda, 2019. "Accounting information quality and guaranteed loans: evidence from Japanese SMEs," Small Business Economics, Springer, vol. 53(4), pages 1033-1050, December.
    14. Attig, Najah & Chen, Ruiyuan & El Ghoul, Sadok & Guedhami, Omrane & Kwok, Chuck & Pittman, Jeffrey, 2020. "Are insiders equal? Evidence from earnings management in closely held East Asian firms," Research in International Business and Finance, Elsevier, vol. 54(C).
    15. Adalene Olivia Silvestre & Cristiano Machado Costa & Clóvis Antônio Kronbauer, 2018. "Audit Rotation And Earnings Quality: An Analysis Using Discretionary Accruals," Brazilian Business Review, Fucape Business School, vol. 15(5), pages 410-426, September.
    16. Robert M. Bushman & Alina Lerman & X. Frank Zhang, 2016. "The Changing Landscape of Accrual Accounting," Journal of Accounting Research, Wiley Blackwell, vol. 54(1), pages 41-78, March.
    17. Oyotode-Adebile, Renee & Hibbert, Ann Marie & Shankar, Siddharth, 2022. "The impact of gender-diverse board and institutional investors on accruals management," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    18. Farinha, Jorge & Mateus, Cesario & Soares, Nuno, 2018. "Cash holdings and earnings quality: evidence from the Main and Alternative UK markets," International Review of Financial Analysis, Elsevier, vol. 56(C), pages 238-252.
    19. Wijayana, Singgih & Gray, Sidney J., 2018. "Capital market consequences of cultural influences on earnings: The case of cross-listed firms in the U.S. stock market," International Review of Financial Analysis, Elsevier, vol. 57(C), pages 134-147.
    20. Liu, Huan & Hou, Canran, 2023. "The external effect of institutional cross-ownership on excessive managerial perks," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 483-501.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arp:tjssrr:2018:p:639-647. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Managing Editor (email available below). General contact details of provider: http://arpgweb.com/?ic=journal&journal=7&info=aims .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.