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Real Earnings Management and Capital Structure Decision: The Role of Minority Interest

In: Proceedings of the International Colloquium on Business and Economics (ICBE 2022)

Author

Listed:
  • Ade Imam Muslim

    (Sekolah Tinggi Ilmu Ekonomi Ekuitas, Economics and Business Faculty)

  • Doddy Setiawan

    (Universitas Sebelas Maret, Economics and Business Faculty)

  • Y. Anni Aryani

    (Universitas Sebelas Maret, Economics and Business Faculty)

  • Evi Gantyowati

    (Universitas Sebelas Maret, Economics and Business Faculty)

Abstract

The corporate governance literature has widely recognized the role of debt contracts as a mechanism that can minimize agency problems arising from conflicts of interest between managers and capital owners and between minority and majority ownership. Our research seeks to investigate capital structure decisions in family firms. Our research involves earnings management proxies and minority interests. The main research question is whether minority interests play a role in influencing the earnings management and financing decisions of family firms. We use the panel data method and involve 90 family companies listed on the Indonesia Stock Exchange for the period 2010–2020. The results of the study prove that minority ownership plays a role in encouraging earnings management practices and capital structure decisions in family companies. The governance of family companies in Indonesia has allowed minority ownership to act as an external control mechanism. Even in family firms, our research proves that the presence of minority ownership remains an important part of family management decision making.

Suggested Citation

  • Ade Imam Muslim & Doddy Setiawan & Y. Anni Aryani & Evi Gantyowati, 2022. "Real Earnings Management and Capital Structure Decision: The Role of Minority Interest," Advances in Economics, Business and Management Research, in: Rahmawati Rahmawati & Mulyaningsih Tri & Arifin Taufiq & Hendarsjah Hidajat (ed.), Proceedings of the International Colloquium on Business and Economics (ICBE 2022), pages 4-12, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-066-4_2
    DOI: 10.2991/978-94-6463-066-4_2
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