The Impact of COVID-19 Pandemic and Earnings Management: Does the History of Managerial Ability Have a Role?

Authors

  • Kerinea Estetika Hariadi Universitas Kristen Satya Wacana
  • Ari Budi Kristanto Universitas Kristen Satya Wacana

DOI:

https://doi.org/10.32486/aksi.v7i2.422

Abstract

This research aims to analyze the early impact of the COVID-19 pandemic on the tendency of earnings management in Indonesia, with a history of managerial ability as a moderating variable. The population in this research are manufacturing companies listed on the Indonesia Stock Exchange in 2018-2020. Using the purposive sampling technique, as many as 126 companies can meet the research sample criteria. The data analysis technique used is Moderated Regression Analysis (MRA). The results show that the impact of the COVID-19 pandemic has a positive effect on earnings management tendencies in Indonesia. It can be interpreted that the higher the impact of the COVID-19 pandemic received by the company, the higher the earnings management behavior. However, this can be weakened by the history of managerial ability. Companies with a history of managerial ability can cope with the impact of the COVID-19 pandemic and are more considering improving their performance quality rather than carrying out earnings management, which risks reducing the company's value.

References

Ahmad-Zaluki, N. A., Campbell, K., & Goodacre, A. (2011). Earnings management in Malaysian IPOs: The East Asian crisis, ownership control, and post-IPO performance. International Journal of Accounting, 46(2), 111–137. https://doi.org/10.1016/j.intacc.2011.04.001

Al-Mughrabi, Y. M. (2020). The impact of financial crisis on earnings management in nonfinancial listed firms: Evidence from Jordan. International Journal of Business and Management, 15(5),

https://doi.org/10.5539/ijbm.v15n5p168

Ayedh, A. M., Fatima, A. H., & Mohammad, M. H. S. (2019). Earnings management in Malaysian companies during the global financial crisis and the coincidental effect of IFRS adoption. Australasian Accounting, Business and Finance Journal, 13(1), 4–26. https://doi.org/10.14453/aabfj.v13i1.2

Badan Pusat Statistika. (2020). Analisis Hasil Survei Dampak Covid-19 Terhadap Pelaku Usaha. https://www.bps.go.id/publication/2020/09/15/9efe2fbda7d674c09ffd0978/analisis-hasil-survei-dampak-covid-19-terhadap-pelaku-usaha.html

Charitou, A., Lambertides, N., & Trigeorgis, L. (2007). Earnings behaviour of financially distressed firms: The role of institutional ownership. Abacus, 43(3), 271–296. https://doi.org/10.1111/j.1467-6281.2007.00230.x

Chen, J. J., Liu, X., & Li, W. (2010). The effect of insider control and global benchmarks on Chinese executive compensation. Corporate Governance: An International Review, 18(2), 107–123. https://doi.org/10.1111/j.1467-8683.2010.00788.x

Chia, Y. M., Lapsley, I., & Lee, H. W. (2007). Choice of auditors and earnings management during the Asian financial crisis. Managerial Auditing Journal, 22(2), 177–196. https://doi.org/10.1108/02686900710718672

CNN Indonesia. (2020a). Awal Mei, Modal Asing Keluar dari Pasar Saham Hampir Rp6 T. https://www.cnnindonesia.com/ekonomi/20200528165422-532-507714/awal-mei-modal-asing-keluar-dari-pasar-saham-hampir-rp6-t

CNN Indonesia. (2020b). Modal Asing Keluar Berjamaah Rp1,24 T pada Juni 2020. https://www.cnnindonesia.com/ekonomi/20200623073722-532-516270/modal-asing-keluar-berjamaah-rp124-t-pada-juni-2020

CNN Indonesia. (2020c). Pekerja Dirumahkan dan Kena PHK Akibat Corona Capai 3,05 Juta. https://www.cnnindonesia.com/ekonomi/20200720114203-92-526610/pekerja-dirumahkan-dan-kena-phk-akibat-corona-capai-305-juta

Cohen, D. A., & Zarowin, P. (2010). Accrual-based and real earnings management activities around seasoned equity offerings. Journal of Accounting and Economics, 50(1), 2–19. https://doi.org/10.1016/j.jacceco.2010.01.002

DeAngelo, H., DeAngelo, L., & Skinner, D. J. (1994). Accounting choice in troubled companies. Journal of Accounting and Economics, 17(1–2), 113–143. https://doi.org/10.1016/0165-4101(94)90007-8

Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earning management. In The accounting Review (Vol. 70, Issue 2, pp. 193–225).

Demerjian, P. R., Lev, B., Lewis, M. F., & McVay, S. E. (2013). Managerial ability and earnings quality. The Accounting Review, 88(2), 463–498. https://doi.org/10.2308/accr-50318

Filip, A., & Raffournier, B. (2014). Financial crisis and earnings management: The European evidence. International Journal of Accounting, 49(4), 455–478. https://doi.org/10.1016/j.intacc.2014.10.004

Francis, B., Sun, X., & Wu, Q. (2013). Managerial ability and tax avoidance. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2348695

Francis, J., Huang, A. H., Rajgopal, S., & Zang, A. Y. (2008). CEO reputation and earnings quality. Contemporary Accounting Research, 25(1), 109–147. https://doi.org/10.1506/car.25.1.4

Ghosh, D., & Olsen, L. (2009). Environmental uncertainty and managers’ use of discretionary accruals. Accounting, Organizations and Society, 34(2), 188–205. https://doi.org/10.1016/j.aos.2008.07.001

Gössling, S., Scott, D., & Hall, C. M. (2020). Pandemics, tourism and global change: a rapid assessment of COVID-19. Journal of Sustainable Tourism, 0(0), 1–20. https://doi.org/10.1080/09669582.2020.1758708

Haleem, A., Javaid, M., & Vaishya, R. (2020). Effects of COVID-19 pandemic in daily life. Current Medicine Research and Practice, 10(2), 78–79. https://doi.org/10.1016/j.cmrp.2020.03.011

Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365–383. https://doi.org/10.2139/ssrn.156445

Huang, X. (Sharon), & Sun, L. (2017). Managerial ability and real earnings management. Advances in Accounting, 39(1), 91–104. https://doi.org/10.1016/j.adiac.2017.08.003

Indonesia Stock Exchange. (2020). Keterbukaan informasi. https://www.idx.co.id/perusahaan-tercatat/keterbukaan-informasi/

Kementerian Kesehatan RI. (2020). Kasus COVID-19. https://infeksiemerging.kemkes.go.id/

Kementerian Keuangan RI. (2020a). Hadapi Pandemi, Ekonomi Indonesia Triwulan I Tahun 2020

Tumbuh 2,97%. https://www.kemenkeu.go.id/publikasi/berita/hadapi-pandemi-ekonomi-indonesia-triwulan-i-tahun-2020-tumbuh-2-97/

Kementerian Keuangan RI. (2020b). KSSK Paparkan Kondisi Ekonomi Indonesia Triwulan 1 Tahun 2020. https://www.kemenkeu.go.id/publikasi/berita/kssk-paparkan-kondisi-ekonomi-indonesia-triwulan-1-tahun-2020/

Kementerian Keuangan RI. (2020c). Large-scale Social Restrictions Selected by the President to Prevent the Expansion of the COVID-19 Pandemic. https://www.kemenkeu.go.id/en/publications/news/large-scale-social-restrictions-selected-by-the-president-to-prevent-the-expansion-of-the-covid-19-pandemic/

Kementerian Keuangan RI. (2020d). Perkembangan Ekonomi dan Refocusing Anggaran untuk Penanganan Covid-19 di Indonesia. https://www.kemenkeu.go.id/publikasi/siaran-pers/siaran-pers-perkembangan-ekonomi-dan-refocusing-anggaran-untuk-penanganan-covid-19-di-indonesia/

Lisboa, I., & Kacharava, A. (2018). Does financial crisis impact earnings management? Evidence from Portuguese and UK. European Journal of Applied Business Management, 4(1), 80–100. https://doi.org/10.1002/jcaf.22418

Mollik, A. T., Mir, M., Mclver, R., & Bepari, M. K. (2013). Earnings management during the global financial crisis: Evidence from Australia. Proceedings of International Business and Social Sciences and Research Conference, 16-17 December 2013, 1–19.

Rosner, R. L. (2003). Earnings Manipulation in Failing Firms. Contemporary Accounting Research, 20(2), 361–408. https://doi.org/10.1506/8EVN-9KRB-3AE4-EE81

Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting and Economics, 42(3), 335–370. https://doi.org/10.1016/j.jacceco.2006.01.002

Sari, A. A. S. P. P., & Astika, I. B. P. (2015). Moderasi good corporate governance pada pengaruh antara leverage dan manajemen laba. E-Journal Akuntansi Universitas Udayana, 3, 752–769.

Scott, W. R. (2011). Financial Accounting Theory (6th ed.). United States: Pearson.

Silva, A. F. da, Weffort, E. F. J., Flores, E. da S., & Silva, G. P. da. (2014). Earnings management and economic crisses in the Brazilian capital market. Revista de Administraçao de Empresas, 54(3), 268–283. https://doi.org/https://doi.org/10.1590/S0034-759020140303

Suyoto, H., & Dwimulyani, S. (2019). Pengaruh Leverage dan Perencanaan Pajak Terhadap Manajemen Laba dengan Profitabilitas Sebagai Variabel Moderasi. Prosiding Seminar Nasional Pakar Ke 2, 1–9.

Syarendra, J. D., & Kristanto, A. B. (2020). Environmental Uncertainty, Managerial Ability and Tax Aggressiveness. Jurnal AKSI (Akuntansi Dan Sistem Informasi), 5(1), 30–36. https://doi.org/10.32486/aksi.v5i1.474

Tehupiring, R. (2017). Apakah kecakapan managerial mampu memitigasi manipulasi aktivitas riil? (Studi empiris pada perusahaan manufaktur di BEI periode 2010-2015). Berkala Akuntansi Dan Keuangan Indonesia, 2(1), 63–82. https://doi.org/10.20473/baki.v2i1.3730

Wagner, S. (2008). Managerial Succession and Organizational Performance. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1099338

Wang, Z., & Williams, T. H. (1994). Accounting income smoothing and stockholder wealth. In Journal of Applied Business Research (JABR) (Vol. 10, Issue 3, pp. 96–104). https://doi.org/10.19030/jabr.v10i3.5929

Downloads

Published

2022-09-29

How to Cite

Hariadi, K., & Kristanto, A. (2022). The Impact of COVID-19 Pandemic and Earnings Management: Does the History of Managerial Ability Have a Role?. Jurnal AKSI (Akuntansi Dan Sistem Informasi), 7(2). https://doi.org/10.32486/aksi.v7i2.422

Issue

Section

Articles