Earning Informativeness is Moderating Investment Opportunity, Return on Asset, and Leverage on Prudence Measurement

Abstract

This study aims to analyze whether earning informativeness can moderate the effect investment opportunity, return on asset, and leverage on the prudence measurement. The method used in this study is a panel regression analysis. The sample used in the study was 500 observations using data from manufacturing companies for the period 2014-2018. The results of the first model show that investment opportunity has a significant positive effect on prudence. Return on asset has a significant positive effect on prudence. Leverage has a significant positive effect on prudence. The results of the second model show earning informativeness strengthens the effect of investment opportunity on prudence. Earning informativeness strengthens the effect of return on asset on prudence. Earning informativeness strengthens the effect of leverage on prudence. The implication of this study that funding decisions made inaccurately will cause fixed costs and subsequently result in a low profitability of a company. High profit quality accurately reflects the company's operational performance.

Are the Environment, Social, and Government Performance Affecting the Firm’s Value?

“…A company's debt-to-equity (D/E) ratio can be used to assess how much leverage it uses by comparing its total liabilities to its shareholder equity (Malau, 2020).…”

“…The ratio of a company's return on assets to its total assets indicates its profitability (Malau, 2020); (Siahaan, Malau, & Sembiring, 2022).…”

PENGARUH FINANCIAL DISTRESS, UKURAN PERUSAHAAN DAN LEVERAGE TERHADAP PRUDENCE PADA PERUSAHAAN PROPERTI & REAL ESTATE YANG TERDAFTAR DI BURSA EFEK INDONESIA TAHUN 2017 - 2021

“…6 No. 2, Juni 2023, 224 -235 Heryadi dan Agustina dan beban bahkan jika mereka belum diakui, asalkan kondisi tertentu terpenuhi (Malau 2020)…”