The effect of earnings manipulation based on real activities to the performance of Indonesian SOEs

Abstract

The aim of this research is to examine the effect of real earnings manipulation (REM) on the performance of state-owned enterprises (SOEs) in Indonesia. This research was conducted at a state-owned company listed on the Indonesia Stock Exchange (IDX) in 2013-2017. Data obtained from financial reports and annual reports issued by IDX and the Web of each SOEs. Data also comes from the Indonesian Capital Market Directory. The research variables consist of a dependent variable, which is financial performance, and an independent variable that is REM. Financial performance is proxy by net profit margin (NPM) and returns on equity (ROE). Earnings manipulation is proxy by Roychowdhury's model. The type of ownership is used as a control variable of this research. Generally, the least square regression model is used to test the relationship between earnings manipulation and SOEs performance. This research shows that earnings manipulation based on real activities through production costs negatively affects the performance of Indonesian SOEs, government ownership negatively effects on NPM whereas public ownership has a positive effect on performance, as measured by ROE. Improper government policies can reduce the performance and significant disadvantages of SOEs.

The Impact of Shareholders, Intellectual Capital, Auditor Reputation, and Liabilities Level on Tax Evasion in Indonesian Manufacturing Companies

“…Foreign shareholder is the portion of shares owned by foreign institutional investors (foreign investors) divided by the total outstanding share capital, multiplied by 100%. Government shareholder is the number of shares owned by the Indonesian government divided by the total number of shares outstanding, multiplied by 100% (Surifah & Rofiqoh, 2020). Individual shareholder can be calculated by the number of portions owned by individuals divided by the number of stock outstanding, multiplied by 100%.…”