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The Effect of Foreign Ownership and Managerial Ability on Earning Quality with Committee Audit as Moderating Variable

Author

Listed:
  • Sylvia Dwi Lestari

    (Sriwijaya University, Palembang, Indonesia)

  • Azwardi

    (Sriwijaya University, Palembang, Indonesia)

  • Tertiarto Wahyudi

    (Sriwijaya University, Palembang, Indonesia)

Abstract

This study aims to investigate the effect of foreign ownership and managerial ability on earning quality with committee audit as moderating variable. The authors used secondary data that was obtained from annual report. The sample used in this study contains 28 manufacturing companies listed on Indonesian Stock Exchange from 2014 to 2018. The sample was selected using purposive sampling. Earning quality as dependent variable is measured by discretionary accrual Jones Model. Foreign ownership is measured by the number of foreign ownership compared with the number of ownership structure. Managerial ability is measured by efficiency using data envelopment analysis (DEA). Efficiency is used for knowing the managerial ability on manage output and input of the companies. Committee audit as moderating variable is measured by the number of committee audit who has accounting / auditing / finance background / experience compared with the number of committee audit of companies. Data analysis method use panel data regression analysis for testing hypothesis. To find out how the effect of foreign ownership and managerial ability on earning quality is moderated by committee audit using moderated regression analysis (MRA). The result of this study showed that foreign ownership and managerial ability simultaneously have significant effect on earning quality. Partially, foreign ownership has no significant effect on earning quality. While, managerial ability has positive and significant effect on earning quality. Meanwhile, committee audit can moderated the effect of foreign ownership on earning quality, and the effect of managerial ability on earning quality.

Suggested Citation

  • Sylvia Dwi Lestari & Azwardi & Tertiarto Wahyudi, 2020. "The Effect of Foreign Ownership and Managerial Ability on Earning Quality with Committee Audit as Moderating Variable," Oblik i finansi, Institute of Accounting and Finance, issue 2, pages 66-73, June.
    • Handle: RePEc:iaf:journl:y:2020:i:2:p:66-73
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    References listed on IDEAS

    as
    1. Jones, Jj, 1991. "Earnings Management During Import Relief Investigations," Journal of Accounting Research, Wiley Blackwell, vol. 29(2), pages 193-228.
    2. Bilal, & Chen, Songsheng & Komal, Bushra, 2018. "Audit committee financial expertise and earnings quality: A meta-analysis," Journal of Business Research, Elsevier, vol. 84(C), pages 253-270.
    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. Yuanto Kusnadi & Kwong Sin Leong & Themin Suwardy & Jiwei Wang, 2016. "Audit Committees and Financial Reporting Quality in Singapore," Journal of Business Ethics, Springer, vol. 139(1), pages 197-214, November.
    5. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    foreign ownership; managerial ability; committee audit; earning quality; earning management;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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