E Earning Management: The Effect of Management Overconfidence and Corporate Governance

Abstract

Many studies have discussed the determinants of earning management. However, most of these studies discuss external factors of management such as audit quality and quality of disclosure and as a determinant of earning management. Study that tries to examine the intrinsic factors such as managerial overconfidence effect on earning management has not been widely conducted, especially in companies listed on IDX, Indonesia. This study aims to examine the effect of managerial overconfidence on earning management in companies listed on IDX. Furthermore, this study also aims to determine the moderating effect of corporate governance mechanisms on the relationship between managerial overconfidence. By using data analysis with the SEMPLS technique, the present study has succeeded to prove that managerial overconfidence affect earning management. Furthermore, this study also successfully provide evidence that corporate governance mechanisms such as independent audit committees and audit committee activities moderate the relationship between managerial overconfidence and earning management.

Is Pakistan's Financial Distress Guilty of Accounting Misrepresentation? A Manager's Mediating Role Due to Overconfidence

“…Whereas TAC it = aggregate accruals; TA it -1 = the book value of total assets of firms i at the end of year t -1, Δ REVit / TA it -1 = sales revenues of firms i in year t fewer revenues in year t -1, scaled by TA it -1; PPE it / TA it -1 = gross property, plant, and equipment of firms i at the end of year t, scaled by TAit -1; α β1 β 2 = estimated parameters; εit = the residual DACit= Discretionary accruals for firm i in year t Some other studies' measurements are made likewise (Ahmadi, Banimahd, Talebnia, & Pourzamani, 2020;Merani & Taheri, 2018;Nanda, Zenita, Salimiah, & Adino, 2022).…”