Voluntary Disclosure, Earnings Response Coefficient and Earnings Persistence

Abstract

One of management credibility aspect showed by extent voluntary information disclosed. Management who more credible do more voluntary disclosure. Management use voluntary disclosure as tools to inform good signal happening to all stakeholders, include good earnings quality. This study examine the association of voluntary disclosure to earnings response coefficient (ERC) and earning persistence as earnings quality. Study uses 274 samples of listed firms across different industries in Indonesia, excluding financial industry for the financial period 2015. Ordinary least square (OLS) cross-sectional method is implemented to test the research hypotheses. The results of hypothesis test of the study exhibit a significant negative association between voluntary disclosure to ERC. This study also found no association statistically between voluntary disclosure to earnings persistence. This research conducted for one period, so for future research should to extent year observations. The study also conducted additional testing of disclosures based on disclosure criteria. This test was conducted to determine the type of voluntary disclosure that has a significant influence on the dependent variable of the study, ERC and earnings persistence.Keywords: Earnings Responses Coefficient, Voluntary Disclosure, Earnings Persistence

Financial Leverage, Firm Size, Company Age, and Earning Persistence: Evidence From Indonesia

“…In their study, Karim and Sarkar (2020) document the positive influence of CS on EP for companies in the years with profits but no relationship for companies in the years with losses. Also, Lestari and Harymawan (2020) and Gong et al (2021) cannot verify this relationship. Regarding the effect of company age on profit persistence, Adegbie et al (2019) show a negative mark; however, Gunawan et al (2020) document an insignificant relationship.…”

“…However, Nurdiniah et al (2021) and Rokhmania and Dewi (2021) demonstrate a positive association. Meanwhile, Lestari and Harymawan (2020) and Sabila et al (2021) cannot prove this relationship. In their study, Ha et al (2020) created three models of earnings persistence (EP).…”

“…Several researchers attempted to associate profits persistence with financial leverage by utilizing the capital market data from China (Gong et al, 2021), Indonesia (Gunawan et al, 2020;Lestari & Harymawan, 2020;Nurdiniah et al, 2021;Sabila et al, 2021), Malaysia (Ha et al, 2020), Malaysia and Indonesia (Rokhmania & Kartika, 2021), the United States (Karim & Sarkar, 2020), and Vietnam (Dang & Vu, 2022;Khuong et al, 2022). Unfortunately, the research evidence to prove the relationship between financial leverage and earnings persistence still conflicts.…”

“…Besides focusing on the effect of financial leverage on earning persistence, these scholars also highlight the association of this persistence with firm size (Abdillah et al, 2021;Adegbie et al, 2019;Canina & Potter, 2019;Dang & Vu, 2022;Gong et al, 2021;Gunawan et al, 2020;Ha et al, 2020;Karim & Sarkar, 2020;Khuong et al, 2022;Lasrya et al, 2021;Lestari & Harymawan, 2020;Nurdiniah et al, 2021;Sabila et al, 2021) and company age (Adegbie et al, 2019;Gunawan et al, 2020;Karim & Sarkar, 2020). However, their result is still contradictory.…”