EARNINGS MANAGEMENT PRACTICES OF FAMILY AND NON-FAMILY ENTITIES

Golrida Karyawati Purba, Veron Beatrix Umboh

Abstract


Abstrak - Praktik Manajemen Laba Perusahaan Keluarga dan Nonkeluarga

Tujuan Utama - Tulisan ini bertujuan menganalis kecenderungan pemilihan praktik manajemen laba perusahaan keluarga/nonkeluarga

Metode – Peneliti mengumpulkan bukti-bukti empiris atas perusahaan yang sahamnya telah tercatat pada Bursa Indonesia, setidaknya tahun 2017-2019. Model regresi logistik digunakan untuk menguji pilihan manajemen laba.

Temuan Utama - Bukti empiris mengungkap bahwa mayoritas perusahaan -perusahaan di Indonesia adalah perusahaan keluarga. Lebih lanjut, studi ini membuktikan bahwa dibanding dengan perusahaan non keluarga, perusahaan keluarga lebih memilih manajemen laba akrual daripada manajemen laba ril. Akan tetapi ketika ukuran perusahaan meningkat, perusahaan keluarga mulai beralih kepada pilihan manajemen laba ril.

Implikasi Teori dan Kebijakan – Hasil pengujian mendukung bahwa teori socioemotional wealth menjelaskan dengan baik praktik manajemen laba dari bisnis keluarga dan nonkeluarga. Hasil studi bermanfaat bagi auditor dalam menilai risiko salah saji laporan keuangan.

Kebaharuan Penelitian - Sejauh diketahui penulis riset mengenai pilihan manajemen laba belum dilakukan di negara-negara berkembang yang didominasi oleh perusahaan keluarga.

                                                         

Abstract - Earnings Management Practices of Family and Non-Family Entities

Main Purpose - This study aims to analyze earnings management preference conducted by family /non-family entities.

Method - The study uses logistic regression as a method. The samples are companies whose shares have been listed on the Indonesia Stock Exchange in 2017-2019.

Main Findings - The findings reveal that most companies in Indonesia are family entities. Furthermore, this study proves that accrual earnings management practices are preferred by family entities compare to non-family entities. However, as size is increased, the family entities increasingly shift to real earnings management.

Theory and Practical Implications - This study suggests that the socio-emotional wealth theory explains well the earnings management practice preferences of family entities and non-family entities. The results of this study are important for the auditor in assessing the risk of misstatement in financial statements.

Novelty - As far as the authors are concerned, a study on earnings management preferences has not been conducted in developing countries dominated by family entities.


Keywords


accrual earnings management; real earnings management; size; socioemotional wealth theory

References


Abdellatif, M., Amann, B., & Jaussaud, J. (2010). Family versus Nonfamily Business: A Comparison of International Strategies. Journal of Family Business Strategy, 1(2), 108–116. https://doi.org/10.1016/j.jfbs.2010.04.004

Abdou, H. A., Ellelly, N. N., Elamer, A. A., Hussainey, K., & Yazdifar, H. (2020). Corporate Governance and Earnings Management Nexus: Evidence from the UK and Egypt Using Neural Networks. International Journal of Finance & Economics, 25(1), 1-31. https://doi.org/10.1002/ijfe.2120

Achleitner, A. K., Günther, N., Kaserer, C., & Siciliano, G. (2014). Real Earnings Management and Accrual-based Earnings Management in Family Firms. European Accounting Review, 23(3), 431-461. https://doi.org/10.1080/09638180.2014.895620

Aharony, J., Wang, J., & Yuan, H. (2010). Tunneling as an Incentive for Earnings Management During the IPO Process in China. Journal of Accounting and Public Policy, 29(1), 1–26. https://doi.org/10.1016/j.jaccpubpol.2009.10.003

Al-Okaily, J., BenYoussef, N., & Chahine, S. (2020). Economic Bonding, Corporate Governance and Earnings Management: Evidence from UK Publicly Traded Family Firms. International Journal of Auditing, 24(2), 185-204. https://doi.org/10.1111/ijau.12186

Alhadab, M. M. (2018). Real and Accrual Earnings Management Around Initial Public Offerings in Jordan. International Business Research, 11(1), 204-216. https://doi.org/10.5539/ibr.v11n1p204

Alhadab, M. M., Abdullatif, M., & Mansour, I. (2020). Related Party Transactions and Earnings Management in Jordan: The Role of Ownership Structure. Journal of Financial Reporting and Accounting, 18(3), 505-531. https://doi.org/10.1108/JFRA-01-2019-0014

Ater, B. & Hansen, T.B. (2020). Earnings Management Prior to Private Debt Issuance, Accounting Research Journal, 33(2), 269-285. https://doi.org/10.1108/ARJ-11-2018-0204

Baatour, K., Othman, H. B., & Hussainey, K. (2017). The Effect of Multiple Directorships on Real and Accrual Based Earnings Management: Evidence from Saudi Listed Firms. Accounting Research Journal, 30(4), 395-412. https://doi.org/10.1108/ARJ-06-2015-0081

Badertscher, B. A. (2011). Overvaluation and the choice of Alternative Earnings Management Mechanisms. The Accounting Review, 86(5), 1491-1518. https://doi.org/10.2308/accr-10092

Barth, M. E., Landsman, W. R., & Lang, M. H. (2008). International Accounting Standards and Accounting Quality. Journal of Accounting Research, 46(3), 467-498. https://doi.org/10.1111/j.1475-679X.2008.00287.x

Bekiris, F. V., & Doukakis, L. C. (2011). Corporate Governance and Accruals Earnings Management. Managerial and Decision Economics, 32(7), 439-456. https://doi.org/10.1002/mde.1541

Berrone, P., Cruz, C., & Gómez-Mejía, L. R. (2012). Socioemotional Wealth in Family Firms: Theoretical Dimensions, Assessment Approaches, and Agenda for Future Research. Family Business Review, 25(3), 258-279. https://doi.org/10.1177%2F0894486511435355

Boujelben, S., Khemakhem-Feki, H., & Alqatan, A. (2020). Real Earnings Management and the Relevance of Operating Cash Flows: A Study of French Listed Firms. International Journal of Disclosure and Governance, 17(4), 218-229. https://doi.org/10.1057/s41310-020-00091-0

Cahyani, K. A. & Sanjaya, I. P. S. (2016). Analisis Perbedaan Dividen pada Perusahaan Keluarga dan Non Keluarga Berdasarkan Kepemilikan Ultimat. Modus Journals, 26(2), 133-144. https://doi.org/10.24002/modus.v26i2.584

Chen, J. J., & Zhang, H. (2012). The Impact of the Corporate Governance Code on Earnings Management - Evidence from Chinese Listed Companies. European Financial Management, 20(3), 596–632. https://doi.org/10.1111/j.1468-036X.2012.00648.x

Chen, T.-Y., Gu, Z., Kubota, K., & Takehara, H. (2015). Accrual-Based and Real Activities Based Earnings Management Behavior of Family Firms in Japan. The Japanese Accounting Review, 5, 21–47. https://doi.org/10.11640/tjar.5.2015.02

Cherif, Z. F., Ayadi, S. D., & Hamad, S. B. B. (2020). The Effect of Family Ownership on Accrual-Based and Real Activities Based Earnings Management: Evidence from the French Context. Accounting and Management Information Systems, 19(2), 283-310. https://doi.org/10.24818/jamis.2020.02004

Chi, C. W., Hung, K., Cheng, H. W., & Lieu, P. T. (2015). Family Firms and Earnings Management in Taiwan: Influence of Corporate Governance. International Review of Economics and Finance, 36, 88–98. https://doi.org/10.1016/j.iref.2014.11.009

Dewi, W. P. & Herusetya, A. (2015). Market Response toward Accrual Earnings Management, Real Transactions, and Strategic Revenue Recognition - Earnings Management. Jurnal Akuntansi dan Keuangan, 17(2), 71-81. http://dx.doi.org/10.9744/jak.17.2.71-81

Ding, S., Qu, B., & Zhuang, Z. (2011). Accounting Properties of Chinese Family Firms. Journal of Accounting, Auditing & Finance, 26(4), 623-640. https://doi.org/10.1177%2F0148558X11409147

Enomoto, M., Kimura, F., & Yamaguchi, T. (2015). Accrual-Based and Real Earnings Management: An International Comparison for Investor Protection. Journal of Contemporary Accounting & Economics, 11(3), 183–198. https://doi.org/10.1016/j.jcae.2015.07.001

Golrida, K. P., Angesty, K., & Joshi, P. L. (2017). A Study of Inverted U-shape Relationship between Firm Size and Corporate Social Responsibility – The Case of Indonesia. International Journal of Accounting, Auditing and Performance Evaluation, 13(3), 308-323. https://doi.org/10.1504/IJAAPE.2017.085185

Gómez-Mejía, L. R., Cruz, C., Berrone, P., & De Castro, J. (2011). The Bind that Ties: Socioemotional Wealth Preservation in Family Firms. Academy of Management Annals, 5(1), 653–707. https://doi.org/10.5465/19416520.2011.593320

González, J. S., & García-Meca, E. (2013). Does Corporate Governance Influence Earnings Management in Latin American Markets? Journal of Business Ethics, 121(3), 419–440. https://doi.org/10.1007/s10551-013-1700-8

Gounopoulos, D., & Pham, H. (2018). Financial Expert CEOs and Earnings Management around Initial Public Offerings. The International Journal of Accounting, 53(2), 102–117. https://doi.org/10.1016/j.intacc.2018.04.002

Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The Economic Implications of Corporate Financial Reporting. Journal of Accounting and Economics, 40(1-3), 3-73. https://doi.org/10.1016/j.jacceco.2005.01.002

Hashmi, M. A., Brahmana, R. K., & Lau, E. (2018). Political Connections, Family Firms and Earnings Quality. Management Research Review, 41(4), 414-432. https://doi.org/10.1108/MRR-05-2017-0136

Herrero, I. (2011). Agency Costs, Family Ties, and Firm Efficiency. Journal of Management, 37(3), 887-904. https://doi.org/10.1177%2F0149206310394866

Hewitt, M., Hodge, F. D., & Pratt, J. H. (2020). Do Shareholders Assess Managers' Use of Accruals to Manage Earnings as a Negative Signal of Trustworthiness even when Its Outcome Serves Shareholders' Interests? Contemporary Accounting Research, 37(4), 2058-2086. https://doi.org/10.1111/1911-3846.12592

Hidayah, N. E. F., & Rahmawati. (2019). Manfaat Laba untuk Menambah Utang dan Mengurangi Pajak. Jurnal Akuntansi Multiparadigma, 10(2), 262-275. https://doi.org/10.18202/jamal.2019.08.10015

Hutagaol-Martowidjojo, Y., Valentincic, A., & Warganegara, D. L. (2019). Earnings Quality and Market Values of Indonesian Listed Firms. Australian Accounting Review, 29(1), 95-111. https://doi.org/10.1111/auar.12234

Jiang, F., Zhu, B., & Huang, J. (2013). CEO’s Financial Experience and Earnings Management. Journal of Multinational Financial Management, 23(3), 134–145. https://doi.org/10.1016/j.mulfin.2013.03.005

Kapoor, N., & Goel, S. (2017). Board Characteristics, Firm Profitability and Earnings Management: Evidence from India. Australian Accounting Review, 27(2), 180-194. https://doi.org/10.1111/auar.12144

Mehdi, I.K. & Seboui, S. (2011). Corporate Diversification and Earnings Management. Review of Accounting and Finance, 10(2), 176-196. https://doi.org/10.1108/14757701111129634

Katmon, N., & Farooque, O. A. (2017). Exploring the Impact of Internal Corporate Governance on the Relation between Disclosure Quality and Earnings Management in the UK Listed Companies. Journal of Business Ethics, 142(2), 345-367. https://doi.org/10.1007/s10551-015-2752-8

Klein, S. B. (2000). Family Businesses in Germany: Significance and Structure. Family Business Review, 13(3), 157–181. https://doi.org/10.1111/j.1741-6248.2000.00157.x

Krismiaji, Aryani, Y. A., & Suhardjanto, D. (2016). International Financial Reporting Standards, Board Governance, and Accounting Quality: A Preliminary Indonesian Evidence. Asian Review of Accounting, 24(4), 474-497. https://doi.org/10.1108/ARA-06-2014-0064

Kristanti, I. N. (2019). Motivasi dan Strategi Manajemen Laba pada Organisasi. Jurnal Ilmiah Akuntansi dan Keuangan, 8(2), 68-80. https://doi.org/10.32639/jiak.v8i2.298

Lang, M., Raedy, J. S., & Yetman, M. H. (2003). How Representative Are Firms That Are Cross-Listed in the United States? An Analysis of Accounting Quality. Journal of Accounting Research, 41(2), 363–386. https://doi.org/10.1111/1475-679X.00108

Lassoued, N., Attia, M. B. R., & Sassi, H. (2018). Earnings Management in Islamic and Conventional Banks: Does Ownership Structure Matter? Evidence from the MENA Region. Journal of International Accounting, Auditing and Taxation, 30, 85-105. https://doi.org/10.1016/j.intaccaudtax.2017.12.003

Lemma, T. T., Negash, M., Mlilo, M., & Lulseged, A. (2018). Institutional Ownership, Product Market Competition, and Earnings Management: Some Evidence from International Data. Journal of Business Research, 90, 151–163. https://doi.org/10.1016/j.jbusres.2018.04.035

Li, V. (2019). The Effect of Real Earnings Management on the Persistence and Informativeness of Earnings. The British Accounting Review, 51(4), 402-423. https://doi.org/10.1016/j.bar.2019.02.005 Informativeness

Li, Y., Li, X., Xiang, E., & Djajadikerta, H. G. (2020). Financial Distress, Internal Control, and Earnings Management: Evidence from China. Journal of Contemporary Accounting & Economics, 16(3), 1-18. https://doi.org/10.1016/j.jcae.2020.100210

Lim, C. Y., Thong, T. Y., & Ding, D. K. (2008). Firm Diversification and Earnings Management: Evidence from Seasoned Equity Offerings. Review of Quantitative Finance and Accounting, 30(1), 69–92. https://doi.org/10.1007/s11156-007-0043-x

Lin, J. W., & Hwang, M. I. (2010). Audit Quality, Corporate Governance, and Earnings Management: A Meta‐Analysis. International journal of auditing, 14(1), 57-77. https://doi.org/10.1111/j.1099-1123.2009.00403.x

Liu, Y., Ning, Y., & Davidson III, W. N. (2010). Earnings Management Surrounding New Debt Issues. Financial Review, 45(3), 659–681. https://doi.org/10.1111/j.1540-6288.2010.00265.x

Madyan, M., Meidiaswati, H., Sasikirono, N., & Herlambang. M. H. (2019). Family Control, Institutional Ownership, dan Kebijakan Dividen Perusahaan Manufaktur yang Terdaftar di Bursa Efek Indonesia. Jurnal Reviu Akuntansi dan Keuangan, 9(1), 97-106. https://doi.org/10.22219/jrak.v9i1.8293

Margono, A. S., Tanujaya, Y. I., Hidayat, A. A., & Yuliati, R. (2019). Pengaruh Kontrol Keluarga terhadap Manajemen Laba. Jurnal Akuntansi, 8(2), 239-250. https://doi.org/10.46806/ja.v8i2.622

Markarian, G., & Santaló, J. (2014). Product Market Competition, Information and Earnings Management. Journal of Business Finance & Accounting, 41(5-6), 572–599. https://doi.org/10.1111/jbfa.12064

Martin, G., Campbell, J. T., & Gomez-Mejia, L. (2014). Family Control, Socioemotional Wealth and Earnings Management in Publicly Traded Firms. Journal of Business Ethics, 133(3), 453-469. https://doi.org/10.1007/s10551-014-2403-5

Masri, I. (2018). The Role of Corporate Governance in the Relationships of Family Company with Real Earnings Management. Jurnal Akuntansi, 22(1), 51-67. http://dx.doi.org/10.24912/ja.v22i1.322

Muljono, D. R., & Suk, K. S. (2018). Impacts of Financial Distress on Real and Accrual Earnings Management. Jurnal Akuntansi, 22(2), 222-238. https://doi.org/10.24912/ja.v22i2.349

Mulyadi, M. S., & Anwar, Y. (2015). Corporate Governance, Earnings Management and Tax Management. Procedia-Social and Behavioral Sciences, 177, 363-366. https://doi.org/10.1016/j.sbspro.2015.02.361

Octavia, E. (2017). Implikasi Corporate Governance dan Ukuran Perusahaan pada Manajemen Laba. Jurnal Akuntansi Multiparadigma, 8(1), 126-136. https://doi.org/10.18202/jamal.2017.04.7044

Ozili, P. K., & Outa, E. (2019). Bank Earnings Management Using Commission and Fee Income: The Role of Investor Protection and Economic Fluctuation. Journal of Applied Accounting Research, 20(2), 172-189. https://doi.org/10.1108/JAAR-02-2018-0030

Paiva, I. S., Lourenço, I. C., & Branco, M. C. (2016). Earnings Management in Family Firms: Current State of Knowledge and Opportunities for Future Research. Review of Accounting and Finance, 15(1), 85-100. https://doi.org/10.1108/RAF-06-2014-0065

Paiva, I. S., Lourenço, I. C., & Curto, J. D. (2019). Earnings Management in Family versus Non-Family Firms: The Influence of Analyst Coverage. Spanish Journal of Finance and Accounting / Revista Española de Financiación y Contabilidad, 48(2), 113-133. https://doi.org/10.1080/02102412.2018.1463764

Peng, M. W., & Jiang, Y. (2010). Institutions Behind Family Ownership and Control in Large Firms. Journal of Management Studies, 47(2), 253–273. https://doi.org/10.1111/j.1467-6486.2009.00890.x

Perwitasari, D. (2015). Struktur Kepemilikan, Karakteristik Perusahaan, dan Manajemen Laba. Jurnal Akuntansi Multiparadigma, 5(3), 432-441. https://doi.org/10.18202/jamal.2014.12.5032

Razzaque, R. M. R., Ali, M. J., & Mather, P. R. (2016). Real Earnings Management in Family Firms: Evidence from an Emerging Economy. Pacific-Basin Finance Journal, 40, 237-250. https://doi.org/10.1016/j.pacfin.2015.12.005

Rosa, F. L., Bernini, F., & Verona, R. (2020). Ownership Structure and the Cost of Equity in the European Context: The Mediating Effect of Earnings Management. Meditari Accountancy Research, 28(3), 485-514. https://doi.org/10.1108/MEDAR-12-2018-0421

Salehi, M., Hoshmand, M., & Rezaei Ranjbar, H. (2020). The Effect of Earnings Management on the Reputation of Family and Non-Family Firms. Journal of Family Business Management, 10(2), 128-143. https://doi.org/10.1108/JFBM-12-2018-0060

Setia-Atmaja, L. (2016). The Impact of Family Control on Dividend Policy: Evidence from Indonesia. International Research Journal of Business Studies, 9(3), 147-156. https://doi.org/10.21632/irjbs.9.2.147-156

Taylor, G. K., & Xu, R. Z. (2010). Consequences of Real Earnings Management on Subsequent Operating Performance. Research in accounting regulation, 22(2), 128-132. https://doi.org/10.1016/j.racreg.2010.07.008

Tian, X., Yang, T., & Yu, T. R. (2018). Real Earnings Management in Family Firms: Evidence from Chinese Listed Firms. International Journal of Revenue Management, 10(2), 77-106. https://doi.org/10.1504/IJRM.2018.091814

Tulcanaza-Prieto, A. B., Lee, Y., & Koo, J. (2020). Leverage, Corporate Governance and Real Earnings Management: Evidence from Korean Market. Global Business and Finance Review, 25(4), 51-72. https://doi.org/10.17549/GBFR.2020.25.4.51

Untoro, W., Permatasari, W., Trinugroho, I., & Setiawan, D. (2017). Past Performance, Family Business and CEO Succession: The Case of Indonesia. International Journal of Trade and Global Markets, 10(2-3), 236-250. https://doi.org/10.1504/IJTGM.2017.086071

Vakilifard, H., & Mortazavi, M. S. (2016). The Impact of Financial Leverage on Accrual-Based and Real Earnings Management. International Journal of Academic Research in Accounting, Finance and Management Sciences, 6(2), 53-60. https://doi.org/10.6007/IJARAFMS/v6-i2/2039

Wang, G., & Hagigi, M. (2019). The Effect of the Need for Subsequent Seasoned Equity Offerings on Earnings Management Motivation. Review of Accounting and Finance, 18(1), 25-52. https://doi.org/10.1108/RAF-01-2018-0019

Wu, P., Gao, L., & Gu, T. (2015). Business Strategy, Market Competition and Earnings Management. Chinese Management Studies, 9(3), 401–424. https://doi.org/10.1108/CMS-12-2014-0225

Wuryani, E. (2012). Company Size in Response to Earnings Management and Company Performance. Journal of Economics, Business, and Accountancy Ventura, 15(3), 491-506. https://doi.org/10.14414/jebav.v15i3.117

Yang, Q., & Wu, D. (2020). Does an Item Change Trigger Earnings Management? Evidence from Asset Disposal Income in China. Accounting and Finance, 60(5), 4593-4619. https://doi.org/10.1111/acfi.12665

Zang, A. Y. (2012). Evidence on the Trade-Off between Real Activities Manipulation and Accrual-Based Earnings Management. The Accounting Review, 87(2), 675–703. https://doi.org/10.2308/accr-10196

Zhang, Y., Uchida, K., & Dong, L. (2020). External Financing and Earnings Management: Evidence from International Data. Research in International Business and Finance, 54, 1-17. https://doi.org/10.1016/j.ribaf.2020.101275




DOI: http://dx.doi.org/10.21776/ub.jamal.2021.12.1.05

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.