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Earnings management, board of directors, and earnings persistence: Indonesian evidence

Author

Listed:
  • Wing Wahyu Winarno
  • Krismiaji Krismiaji
  • Handayani Handayani
  • Maria Purwantini

Abstract

This research investigates the impacts of earnings management, both accrual earnings management (AEM) and real earnings management (REM), as well as Board of Directors (BOD) on earnings persistence. Accrual earnings management was measured using Modified Jone's Model, and real earnings manage­ment was assessed by three measures: abnormal cash flow, abnormal production expenditure, and abnormal discretionary expenditure. In addition, Board of Directors was measured using BOD size and BOD independence. Earnings persistence was measured based on the current year earnings to following year earnings regression coefficients. Using the samples consisting of the manufacturing companies listed at the Indonesia Stock Exchange 2016-2020, the study finds the evidence that accrual earnings management and cash flow of real earnings management negatively affect earnings persistence, while production expenditure, earnings management, discretionary expen­diture, BOD size, and BOD independence positively affect earnings persistence.

Suggested Citation

  • Wing Wahyu Winarno & Krismiaji Krismiaji & Handayani Handayani & Maria Purwantini, 2022. "Earnings management, board of directors, and earnings persistence: Indonesian evidence," Jurnal Akuntansi dan Auditing Indonesia, Accounting Department, Faculty of Business and Economics, Universitas Islam Indonesia, vol. 26(1), pages 41-53.
    • Handle: RePEc:uii:jaaife:v:26:y:2022:i:1:p:41-53:id:23295
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    Cited by:

    1. Comporek Michal, 2023. "Earnings quality among high-share liquidity companies: evidence from Central and Eastern European firms," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 59(4), pages 315-332, December.

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