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.