Effect of Earnings Management on Cost of Debt Before and After International Standard Financial Reporting Implementation

Abstract

A business environment with high competition requires higher efficiency, not just operating efficiency but also the funding efficiency. One of the causes of funding inefficiency is the high cost of debt as a result of earnings management practices that can reduce investor confidence in the company's financial statements. The practice of earnings management has attracted practitioners, researchers, and regulators by develop various detecting models and develop standards such as International Financial Reporting Standard (IFRS). To analyze influence the effect of earnings management on cost of debt, this study uses three approaches: competing-component model, business model, and discretionary revenue model. The approach used is to review the capability of the linear regression model that is formed and to perform comparative analysis among the regression models formed by data from manufacturing companies listed in the Indonesia Stock Exchange for the years 2007-2011 as data before the IFRS implementation and 2012-2015 for data after the IFRS implementation. Based on the results of data processing obtained evidence that earnings management negatively affect the cost of debt using the three approaches but the model formed with business model approach has stronger than the regression equation formed with other models. When compared to the period before and after the implementation of IFRS, seen earnings management practices have decreased and the effect on the cost of debt becomes smaller.

Pengaruh Cost of Debt, Beban Pajak Penghasilan Dan Kebijakan Dividen Terhadap Manajemen Laba Pada Perusahaan Consumer Non Cyclicals Yang Terdaftar Di Bursa Efek Indonesia Tahun 2017-2021

“…Penelitian terkait kebijakan dividen dilakukan oleh, (Hasty & Herawaty, 2017) yang menyatakan kebijakan dividen berpengaruh positif dan signifikan terhadap manajemen laba. Sedangkan untuk penelitian terkait cost of debt masih jarang ditemui sebagai variabel independen, namun pada penelitian, (Situmeang, Maksum, & Supriana, 2018) menyatakan bahwa Manajemen Laba Berpengaruh Negatif Terhadap Biaya Utang Dengan Menggunakan Ketiga Pendekatan (model komponen bersaing, model bisnis, dan model pendapatan diskresioner. Penelitian ini mencoba untuk mengatasi kesenjangan penelitian tersebut dengan menguji dan menganalisi apakah cost of debt, beban pajak penghasilan dan kebijakan dividen berpengaruh terhadap manajemen laba pada perusahaan consumer non cyclicals yang terdaftar di Bursa Efek Indonesia tahun 2017-2021.…”

“…Penelitian Cost of Debt terhadap manajemen laba masih jarang ditemui dalam literatur nasional. Namun pada penelitian yang dilakukan, (Situmeang et al, 2018)…”

The Effect of Profitability and Financial Leverage on Cost of Debt Moderated Earnings Management

“…Earning management actions in a negative perspective are carried out by management by making decisions that change financial statement information, so that published reports describe the company in a consistent condition as expected by external parties where conditions tend to be favorable. In this perspective, earnings management has violated the objective of financial reporting, which is to provide useful information for the decision-making of interested parties (Situmeang et al, 2017).…”

Corporate Governance and Cost of Equity: Evidence from Tehran Stock Exchange

“…The relationship between corporate governance and the cost of equity has always been at the center of several research studies (Lemmon and Lins, 2003), but this relationship is still questionable, as it depends on how corporate governance differences bring about quantifiable variation in market risk across companies and countries (Chen et al, 2009). The gaps that arise from the actual business practices and the results of extant literature make researchers interested in analyzing the relationship between the implementation of corporate governance and the cost of equity (Situmeang et al, 2018).…”