Free cash flow and earnings management: board of commissioner, board independence and audit quality

Susanto, Yulius Kurnia; Pradipta, Arya; Djashan, Indra Arifin

doi:10.22495/cocv14i4c1art10

Cited by 18 publications

(11 citation statements)

References 19 publications

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“…The free cash flow from operations had a negative relationship, which means the more cash flow free from operation, the less earnings management from discretional accruals. This finding is in support of H2 and similar to the studies made by Susanto, Pradipta, and Djashan (2017), Agustia (2013); Winingsih (2017); Yogi and Damayanthi (2016). For financial leverage, the increase in financial leverage caused earnings management to decrease as the relationship is negative.…”

Section: Multiple Regression Analysissupporting

confidence: 91%

Concealing Financial Distress With Earnings Management: A Perspective on Malaysian Public Listed Companies

Kamal

Khazalle²

2021

IJFR

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Earnings Management is prevalent among corporations, resulting to misleading information disclosed on financial statements. By adopting agency theory argument, in line with fulfilling shareholders expectations on financial performance while securing their position and interest within the company, management may be influenced to engage earnings management when the actual financial outcome is in financial distress. Hence, this study attempts to identify whether companies listed on Industrial Product sector of Malaysian Bourse experienced financial distress condition and embark on earnings management. It also examines potential relationship between financial distress conditions and earnings management within the context of companies listed within Industrial Product sector of Malaysian Bourse in 2016 and 2017. Industrial Product sector was chosen as focus of this study due to its critical position in nation’s transformation to become developed country and as the main contributor to the nation’s GDP with largest market capitalization value in local bourse. Financial distress was proxied by Altman Z score and earnings management by discretionary accruals as per Kothari (2005). The study was conducted using the quantitative statistical method by running multiple regressions in SPSS version 23. The study also included three control variables, such as firm size, financial leverage and free cash flow from operation. The sample of this study comprised of 454 firms of Industrial Products Sector, listed on Malaysian Bourse from 2016 to 2017. The result revealed significant negative relationship between financial distress and earnings management by companies within Industrial Product sector. Financial leverage and free cash flow from operation have inverse relationship with earnings management, while firm size has a positive relationship with earnings management. This also means management of Industrial Product Sector companies engage earnings management when their financial condition is not in distress, hence they are not using earnings management to conceal financial distress condition. Instead they may use earnings management to leverage on their non-distress financial condition to attain better share price performance and financing arrangement.

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Section: Multiple Regression Analysissupporting

confidence: 91%

Concealing Financial Distress With Earnings Management: A Perspective on Malaysian Public Listed Companies

Kamal

Khazalle²

2021

IJFR

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“…Ha4: The size of an Audit Committee has a negative influence on earnings management. Commissioners should not be involved in management duties and cannot represent the company when dealing with the third parties (Susanto et al, 2017). Independent commissioners have a duty to monitor the management of a company, including its board of directors, when making decisions for the company (Machmuddah, 2015).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…Based on __________________ Paper info: Revised: February 3, 2018 Accepted: March 11, 2018 the Indonesian Institute of Accountants (2009) in research conducted by Nurdiniah and Herlina (2015), financial statements are the result of accounting processes that aim to provide information concerning the financial performance of a company, to enable internal and external users to make economic decisions. Earnings information can be used as a benchmark of the success or failure of a company (Susanto et al, 2017). Earnings information also be considered by investors when making investment decisions.…”

Section: Introductionmentioning

confidence: 99%

Opportunistic Behavior, External Monitoring Mechanisms, Corporate Governance, and Earnings Management

Wimelda

Chandra

2018

Acc. Fin. Review

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Objective - The purpose of this research is to analyze the effect of motivational bonus, leverage, firm size, corporate governance (audit committee's size, the proportion of independent commissioners, institutional ownership, managerial ownership) and free cash flow on earnings management. Methodology/Technique - Earnings management is analyzed in this research using the modified Jones model. The population for the research consists of manufacturing companies listed on the Indonesian Stock Exchange (IDX) between 2013-2015. The final sample includes 60 manufacturing companies. Findings - The result of this study indicate that motivational bonus, leverage, firm size and free cash flow have an influence on earnings management practices. Motivational bonuses and free cash flow as opportunistic behavior also influence earnings management. In addition, leverage and firm size as external monitoring mechanism influence earnings management practices while audit committee size, the proportion of independent commissioners, institutional ownership and managerial ownership as corporate governance practices in companies has no significant effect on earnings management practices. Hence, it is concluded that corporate governance has no effect on earnings management practices in Indonesia. Type of Paper: Empirical Keywords: Opportunistic Behavior; External Monitoring Mechanisms; Corporate Governance; Earnings Management. JEL Classification: G34, G02.

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“…However, many investors are deceived by very high profits. This happens because of the weak control in the company and causes the company not to be managed efficiently, in the long run it affects the performance and growth of the company (Susanto, Pradipta, & Djashan 2017).…”

Section: Introductionmentioning

confidence: 99%

Can Audit Committee Reduce Real Earnings Management?

Susanto

Pradipta

2020

JBA

Self Cite

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The objective of research was to give empirial evidence the influence of audit committee and directors on real earnings management (REM). The samples of this research consist of 336 data from 84 public manufacturing companies from 2013 until 2016 and selected by purposive sampling method. The result showed that the audit committee expertise and independence directors have significantly and postive influence on REM. The board of directors have significantly and negative influence on REM. The influence of audit committee tenure, size, meeting on REM is not significantly. The results of this reasearch shows that outsider of the firm like audit committee and independence directors can’t detect REM. The chance for management doing REM. While, board of directors as insider of the firm can detect and reduce REM.

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Free cash flow and earnings management: board of commissioner, board independence and audit quality

Cited by 18 publications

References 19 publications

Concealing Financial Distress With Earnings Management: A Perspective on Malaysian Public Listed Companies

Concealing Financial Distress With Earnings Management: A Perspective on Malaysian Public Listed Companies

Opportunistic Behavior, External Monitoring Mechanisms, Corporate Governance, and Earnings Management

Can Audit Committee Reduce Real Earnings Management?

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