Earnings Management in the Pre and Post eXtensible Business Reporting Language Period in Indonesia

Abstract

This study aims to determine and analyze the impact of XBRL adoption on earnings management conducted by company management in Indonesia. Earnings management in this study is proxied by discretionary accruals. The population of this research is manufacturing companies listed on the Indonesia Stock Exchange. The research sample was selected using the purposive sampling method, and the resulted total sample of this research is 15 manufacturing companies. This research period includes the period before the adoption of XBRL (2012-2014) and the period after the adoption of XBRL (2015-2017). Hypothesis testing is done by a paired sample t-test. The results of hypothesis testing indicate that there are significant differences between the levels of earnings management in the period before and after the adoption of XBRL. These results reveal that the adoption of XBRL can limit the opportunistic behavior of management in presenting financial reporting. These results also reveal that the adoption of XBRL can improve the quality of financial reporting.

هل یؤدی التطبیق الإلزامی لـ XBRL إلى تحسین جودة الأرباح المبلغ عنها؟ دراسة تطبیقیة على الشركات المدرجة فی سوق الأوراق المالیة السعودیة(باللغة الانجلیزیة)

“…Although the literature on XBRL is vast, to the best of our knowledge not much attention has been paid to investigating the effect of XBRL adoption on earnings management. Chen, Guo, Liu, and Tong (2021) Peng, Shon, and Tan (2011) found that adoption of XBRL encourage companies to engage less in earnings manipulations; Kim, Kim, and Lim (2019) found that absolute discretionary accruals decrease significantly from the pre-XBRL period to the post-XBRL period, indicating that adoption of XBRL restricts earnings management and significantly reduces the levels of discretionary accruals; Mayapada, Afdhal, and Syafitri (2020) found that adoption of XBRL reduces the level of earnings management, and thus reduces opportunistic behavior of management in financial reporting. Furthermore, Hsieh, Wang, & Abdolmohammadi (2019) found that the implementation of XBRL is positively related to earnings release efficiency of companies with good news.…”

A Decade of XBRL Research in Accounting in Indonesia: A Literature Study

“…The implementation of XBRL utilization in Indonesia has generally been mandated by several government agencies such as the Bank of Indonesia (BI) as well as and the Financial Services Authority (FSA) and Indonesia Stock Exchange (ISE) (see, e.g., Wijanarko and Moedjiono, 2015;Mayapada et al, 2020). The existence of XBRL in Indonesia was first carried out by the Bank of Indonesia (BI).…”

“…The Indonesian Journal of Accounting Research -May, Vol. 24, No.2, 2021 the sub-cluster of the influence of XBRL in accounting and corporate governance, there is information related to earnings management, information asymmetry, financial information environment, and information risk (see, e.g., Mayapada et al, 2020;Pamungkas and Kristanto, 2019;Tohang et al, 2020;Zamroni and Aryani, 2018), on XBRL sub-cluster in auditing (see, e.g., Saputro and Achjari, 2020), and in the XBRL sub-cluster on the factors of decision-making or related to market reaction (see, e.g., Jayani et al, 2020;Junus and Irwanto, 2021).…”

“…Meanwhile, a recent study explained that the application of XBRL could minimize the level of earnings management (Mayapada et al, 2020). XBRL enables improved financial reporting transparency and quality, and in turn, it also increases investor confidence in the capital markets.…”

“…However, research related to this topic has not had a significant trend in Indonesia compared to other countries. In fact, regulators such as the Bank of Indonesia (BI) as well as the Financial Services Authority (FSA), and Indonesia Stock Exchange (ISE) have imposed the use of XBRL format for firms' financial reporting (see, e.g., Wijanarko and Moedjiono, 2015;Mayapada et al, 2020). This paper aims to present a literature review of research related to XBRL implementation in Indonesia.…”