The purpose of this research is to test investors capability to detect earning management after the period of publication, when the information from financial report plays critical role in investment's decision. Given the feedback of investor's reaction, this research provides an empirical model, that point out the earnings management as a message or signal of firm performance, particularly of negative perception on accruals's opportunisties. This research uses path model analysis and multivariate regression, where the data have been collected from 2.560 observations. The unit of analysis of this research was all the listed companies in the period [2001][2002][2003][2004][2005][2006][2007][2008][2009][2010][2011][2012][2013][2014][2015][2016][2017]. The method of sampling was purposive sampling, which based on annual financial report. The findings of this research showed that all public firms have systematic method for earnings management, by distinguishing the positive and negative accruals, the discretionary accruals have the negative influence on the market value significantly, when we used the earning market ratio. When financial report had high accruals quality, it had positive perception from investors, while estimating the future prospect with high accuracy by obtaining usefulness of financial report. The indicator of earnings management, and working capital had been sensitive for investors, because of accruals in reporting firm's performance.
This study provides empirical proof that the positive impact of high accrual quality is the ability to accurately predict the future return with a positive sign. In the capital market, better prospects are commonly indicated by regularly and routinely implementing a high-yield dividend policy. This study uses dividend policy as a moderated multiple regression, which plays a critical role in achieving a high obedience to accounting standards. The causal research involved 154 of the companies listed on the Indonesia Capital Market and 384 observations in the industrial manufacturing sector for 2015–2020. By mulling over the effect of the COVID-19 pandemic in 2020, and predicting the future market using zero growth with no assumed growth in the future, this empirical study shows that dividend policy is critical when minimizing opportunity behavior. This research provides a mapping of the decision tree model as an implication of game theory because of the interactive feedback between the earning quality and future market value. A sign such as “good” news significantly stimulates the perception of optimistic investors, with no negative manipulation and accruals. It paves the way for investors to strictly control and monitor strategic decisions to obtain significant improvement in prospects.
PurposeThe purpose of this study is to test and prove how the quality of innate accruals can make a significant contribution to the prospect of future market value for manufacturing industries.Design/methodology/approachThis research used multiple regression method by gathering all observation data on a go public company in the industrial manufacturing sector.FindingsThe results of this test can show that the dividend policy helps reduce the use of accruals to increase investor perceptions about the prospects of the company's future period, especially the value of earnings informativeness, including valid information about the actual fundamental conditions. These results reflect high innate accruals quality, so the use of low accruals, especially in reporting earnings.Research limitations/implicationsThis test uses a measurement of a constant growth rate with the calculation of the indicator g in the next five-year period, and the proof has secondary data abnormalities reflecting a very high level of variation in the use of accruals. As an implication of the data that is not normal, it causes a large amount of data pruning through outlier tests. Samples that qualify for processing are 180 from 384 data.Originality/valueBy calculating the value of the dividend payout with the growth rate, the estimated future market price can be done with reasonable accuracy.
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