Analysis Earning Management Practice: Approach Discretionary Loss Loan Provision (Case Study of Islamic Banks di Indonesia tahun 2011-2016)

Abstract

The purpose of the study is to analysis wheter management did Earning Management with approach discretionary loss loan provision and use 5 indicator of bank operation performance at bank sharia for the period 2011 -2016. Based on empirical result from the bank sharia financial report, the study find: (1) the two earnings-related variables, namely earnings before loan loss provisions and one-year-ahead earnings, are significantly related to discretionary loan loss provision; (2) non-performing loans ratio is are not found to be significantly linked to discretionary loan loss provisions, but bad debts coverage ratio and capital adeuqcy ratio are significantly linked to discretionary loan loss provisions. Finally, our findings indicate that bank managers may use discretionary loan loss provisions to engage in earnings management when the earnings before loan loss provisions.