Does Environment Uncertainty Affect Earnings Management?

Abstract

This research is aimed to examine the effect of environment uncertainty towards earnings management. This study is a quantitative study with sample all of manufacturing companies that are listed in Indonesian Stock Exchange (IDX) from period 2013 -2018 and publish the financial statement consecutively during period 2013-2018. The sample is selected by using purposive sampling techniques with total of 455 companies. This study uses secondary data that derived from the financial statements of manufacturing companies during that period. By using regression analysis and SPSS in processing research data, the study finds that environment uncertainty has positive impact to financial distress. It indicates when companies are facing an environment uncertainty, it will impact to their performance especially financial performance which leads to the financial distress condition. Companies in higher financial distress condition are more likely to manage their earnings by using earnings management which are measured by discretionary accruals. This research is useful for investor as one of consideration before making financial decision especially when companies are in uncertain environment.

The Impact of Environmental Uncertainty on the Relationship between Standards Quality, Accounting Estations Quality and Share Prices: An Empirical Study

“…This suggests that a rise in EU level leads to the increasing use of accounting estimates. These results are similar to those obtained by Cui et al (2020), Surbakti and Sudaryati (2021) and Yung and Root (2019). Therefore, H4 is supported.…”

“…Consequently, in cases of increasing EU, increased discretionary accrual is explained as beneficial behaviour. This outcome is similar to the findings inNangih and Anichebe (2021), Rashidi (2021) andSurbakti and Sudaryati (2021). Consequently, H7 is supported.…”

“…Several earlier researchers investigated the effect of EU on discretionary accrual. For example, Cui et al (2020), Surbakti and Sudaryati (2021) and Yung and Root (2019) reported that the level of EU has a positive and significant influence on discretionary accrual. Kim and Yasuda (2021) concluded that the level of EU has a negative and significant impact on discretionary accrual.…”

“…Uncertainty influences management decisions, including those relating to financial reporting (Fatima et al, 2022). In this regard, environmental uncertainty (EU) reflects the variation in environmental events related to the operations of an enterprise (Fomina et al, 2022;Johnston et al, 2018;Surbakti and Sudaryati, 2021).…”

Ketidakpastian Lingkungan Dan Manajemen Laba Dengan Kemampuan Manajerial Sebagai Variabel Moderasi

“…The advent of environmental uncertainty is another external factor that influences earnings management (Surbakti and Sudaryati, 2021). When a firm's management is unable to foresee the effects of continuous environmental changes and is ignorant of the available options, goals, and ramifications for the business, this is known as environmental uncertainty (Milliken, 1987;Duncan, 1972).…”