The Effect of Specific Factors on Sukuk Ratings in Indonesia: Earnings Management Mediation Analysis

Abstract

This study aims to analyze the mediating role of earnings management on the effect of specific factors on sukuk ratings. The sample of this research is all sukuk issuing companies listed on the Indonesia Stock Exchange (IDX) which are rated by PT. PEFINDO during 2010-2020. The data was analyzed using Partial Least Square-Structural Equation Modeling (PLS SEM). The results show that liquidity, leverage and activity ratio variables have no effect on earnings management, but firm size does affect earnings management. Furthermore, the findings suggest that leverage, activity ratio, company size, and earnings management all have an impact on the sukuk rating, whilst liquidity does not affect the sukuk rating. Furthermore, earnings management does not mediate the effect of liquidity, leverage, activity ratio and firm size on the sukuk rating. The results of this study can add insight for the company's management and investors. This study can be used as a reference for firm management in raising the sukuk rating and as a factor for investors in deciding whether or not to invest in sukuk.